Almost one-quarter of the total cut to next year’s state operating budget is coming out of the Alaska Marine Highway System. The ferry system was docked $44 million in the state spending plan approved by legislators this week, with coastal communities fearful of significant cutbacks in fall and winter sailings.
The last step in the budget process will be the governor’s veto decisions.
Lawmakers appropriated about $96 million for the ferries for the fiscal year that starts July 1, a steep drop from a budget of almost $140 million this year in state funds and ticket revenues. Gov. Mike Dunleavy had proposed an even deeper cut, down to less than $45 million, but a majority of legislators were unwilling to go that far.
The House approved the operating budget on Sunday; the Senate passed it on Monday; and the governor is expected to make his veto decisions and sign the authorization before the start of the new fiscal year. Under the state constitution, governors have the authority to eliminate or partially reduce any budget item.
Lawmakers cut about $190 million from the overall state budget, about 4 percent of general fund spending, far short of the hundreds of millions proposed by the governor, who has not said what or how much he might veto to bring spending closer to his proposal.
In addition to the big reduction in ferry system funding, legislators cut $87 million from Medicaid, about 13 percent less in state general fund dollars than the current budget year. That is about one-third the 36 percent cut in state funding for Medicaid the governor proposed in February.
If the governor exercises his veto power to eliminate or reduce a legislative appropriation, it would require a three-quarters majority of lawmakers — 45 of the 60 members — to override any vetoes.
Until ferry system management knows the final budget numbers, they cannot begin to set a schedule and take reservations for the fall-winter season that starts Oct. 1, creating problems for travelers who want to make plans, such as school and community groups and freight companies.
The 56-year-old Alaska Marine Highway System has increasingly relied on state funding to cover its operating and maintenance costs. In the fiscal year that ends June 30, state general funds covered more than 60 percent of ferry service spending.
While waiting on final budget numbers so that the ferry system can set its fall/winter schedule, the state also is waiting for a consultant’s draft report, due by Aug. 1, “to identify potential reductions of the state’s financial obligation and/or liability” for the Alaska Marine Highway System (AMHS).
“The project will include an analysis of options available for reshaping the system, such as through a public/private partnership, and a determination of the various options’ feasibility, with targeted implementation by July 1, 2020,” the bid notice said.
“The ongoing trend of a less than 35 percent fare box recovery rate coupled with low passenger and vehicle ridership has contributed to making the AMHS an increasingly expensive system to operate,” the ferry system said in its contractor bid notice.
After it issues the draft report, Anchorage-based Northern Economics, which bid $249,887 for the consulting work, has until Oct. 15 to complete its final report.