Gov. Bill Walker wants to impress upon local governments the severity of the state’s financial situation and how it will trickle down to their communities, he said Saturday.

Walker stopped by Kenai’s Industry Appreciation Day and Soup and Supper Auction, both on Saturday, on his tour around the state. Through Homer, Valdez, Anchorage, Seward and many more, he said his message remains the same — the longer you wait to fix something, the worse it’s going to get, “whether you’re taking on water in a boat or whether you’re in an economy of some sort.”

“Local government is really an important part of this because all deficits roll downhill, so I want to make sure they understand and they’re aware,” Walker said.

Walker acknowledged that “everybody was impacted by the vetoes,” which included cuts to the Permanent Fund Dividend program and other areas of the government, including education.

“It’s not a lot of fun to be governor right now, they say, but I love it,” Walker told a crowd gathered in the Kenai Park Strip for Industry Appreciation Day. “I absolutely love being governor, and you know, we’ve had tough times in the past, we’ll have tough times again. But we’ll get through this and we’ll be better Alaskans for it.”

Before making the rounds at the event, Walker said he is “very concerned” with the state’s fiscal situation and approximately $3.5 billion deficit. Part of what he’s impressing on local government leaders on his visits is the need for continued reduction in spending and introduction of new revenues, he said.

“I deal with that day in and day out because if we don’t fix … that hole we’re going to have a very, very, very serious problem in the state in a couple years,” Walker said. “And there will be no dividend program. There will be a whole lot of things that won’t happen, because as … they continue to draw down the savings at about $4 billion a year, (when) those savings are gone, then what?”

Developments of the Alaska LNG Project and its planned liquefaction facility in Nikiski have been of particular interest to Kenai Peninsula residents. Last week, ExxonMobil, one of the four investing partners on the project, announced it would not invest in the next phase.

Walker said the producer partners, including BP and ConocoPhillips, came to him last February to request a transition of the project to the state through the Alaska Gasline Development Corp., the corporation coordinating the state’s participation in the project.

“This is part of that transition that we said was headed this way,” he said. “They said that given the situation of whether or not they could go forward, they all have other projects elsewhere that they have to compete with and we certainly respect that and honor that. We don’t — this is the only project we have in Alaska, so we’re going to continue to look at working collaboratively with the producers as they’ve said in their testimony that they would continue to do in one capacity or the other.”

A study released last week by consulting firm Wood Mackenzie concluded that the AK LNG Project “is one of the least competitive on a cost of supply basis compared with other… LNG developments.”

Walker said he was not discouraged by the report and chose to focus on what he said are some positive aspects of the findings, like the possibility of utilizing third-party investors.

“The report is big enough (that) anybody could take away whatever they choose to take away from it,” he said. “I tend to take away the positive. The positive is sort of a road map of how to … improve on the economics and that’s what we’re going to do.”

The report emphasized giving the project a different structure to reduce its price and make it more economically competitive, Walker said. He met with the presidents of BP Alaska and ConocoPhillips Alaska on Friday to talk about a way to move forward and transition project oversight to the state, he said.

“I’m actually kind of encouraged by where we are, to be honest,” he said. “I know that the spin has been kind of negative, but … I’m pretty anxious to see what the structure — the savings of the state structure brings to it, and that’s what it’s all about is bringing a lower price to the project.”

Walker is also discussing with the producers a process by which to deal with the land set aside in Nikiski for the project.

“The land itself is owned by the LLC, which is owned by the producers themselves, so we’re in the process of discussing with them the process by which it would be transferred over to AK LNG,” he said.

Walker said he is also in the process of looking at next year’s budget and will bring something forward “at an appropriate time.” He said it will be important to look at what is realistic for the budget based on what did and didn’t happen in the Legislature this past year.

“We’ll get through the fiscal situation we’re in,” Walker said. “We have to make some adjustments.”

Reach Megan Pacer at megan.pacer@peninsulaclarion.com.

Photo by Megan Pacer/Peninsula Clarion Gov. Bill Walker speaks to a crowd of area residents during Industry Appreciation Day on Saturday, Aug. 28, 2016 in Kenai, Alaska. Walker is making stops across the state to speak to members of local government about the state’s fiscal situation.

Photo by Megan Pacer/Peninsula Clarion Gov. Bill Walker greets Kenai resident Ron Rust during a trip to Industry Appreciation Day on Saturday, Aug. 27, 2016 in Kenai, Alaska. Walker is making stops all over the state to speak with representatives of local government about the state’s fiscal situation.