By Leigh Armstrong

Gov. Mike Dunleavy revealed his proposed budget on Feb. 13, with cost-cutting measures in multiple areas that could deeply impact residents of Skagway.

Included in the cutbacks is a lack of certainty for any state ferry service after Oct. 1. Sen. Mike Shower, R-Wasilla, told the Senate Finance Committee on Feb. 20 that he had received a letter from the Department of Transportation that “they are planning zero ferry transports from October to June.”

Shower said the lack of service could “strangle” communities that rely on ferries for goods and services, as reported by Anchorage TV station KTUU.

The governor has directed the state transportation commissioner to contract with a marine consultant to help “identify potential reductions of the state’s financial obligations” for ferry service, and report back by Aug. 1 to help determine what level of service might continue past Oct. 1.

The governor’s proposed reductions in state spending would hit hard at schools and the ferry system, and could cost thousands of Alaskans their jobs, said State Sen. Jesse Kiehl, who was in Skagway for a town hall meeting Feb. 17.

“There’s no community where I think they’ll find the governor’s proposal acceptable,” Kiehl said.

Dunleavy has proposed $1.6 billion in reduced services and cost-shifting to municipalities for the state fiscal year that starts July 1. Dunleavy’s budget is more than a 25 percent cut from the proposal left behind in December by outgoing Gov. Bill Walker.

Almost half of the budget deficit that Dunleavy said he needs to fix is because he has shifted more Permanent Fund earnings away from public services so that the state can pay a $3,000-plus Permanent Fund dividend to Alaskans in October.

Dunleavy campaigned in the 2018 election on paying a full dividend under the almost 40-year-old statutory formula, rather than a reduced dividend as approved by Walker and legislators the past three years to help balance the state’s limited finances between the dividend and public services.

“It’s going to be a different way of budgeting, and all Alaska is going to have to pull together to get through this process,” Dunleavy said at a Feb. 13 press conference.

The governor’s office said the budget cuts would eliminate about 700 state jobs. Kiehl, however, said he has talked with economists at the University of Alaska Anchorage Institute of Social and Economic Research who estimate that the significant cuts in state spending would affect public- and private-sector employment statewide, possibly causing the loss of more than 10,000 jobs.

While in Skagway, Kiehl also met with members of the borough assembly and school board.

The Legislature already is reviewing the governor’s budget proposals, taking testimony from the Dunleavy’s budget staff and asking questions about the consequences from taking so much money out of public services.

After the Legislature approves the budget, Dunleavy has the authority to pick and choose which numbers he likes, as the state constitution gives the governor line-item veto authority. Her can accept a budget number or reduce it. It requires a three-quarters vote of all legislators to override a budget veto.

In proposing his budget cuts, Dunleavy said he focused on preserving four core areas for Alaskans: education, public safety, transportation and resource management.

“This budget is going to impact all Alaskans. It’s too big not to,” he said.

Though the governor listed education as one of the state’s core services, he still proposed a 23 percent cut in state funding for local school district operating budgets. The proposed cut in state general fund dollars to the University of Alaska system was around 45 percent.

“The news for the University of Alaska is devastating,” university president Jim Johnson said in a prepared statement after Dunleavy released his budget.

In addition to education cuts, Dunleavy proposes almost a 75 percent cut in state general fund dollars for the Alaska Marine Highway System, slashing the fiscal year 2019 appropriation from $86 million to $22 million for fiscal 2020.

The governor’s budget director, Donna Arduin, said the ferry system is inefficient. She said it is cheaper on a per-mile basis to move a vehicle on a state highway than aboard a ferry. Arduin moved to Alaska last fall after budget-cutting work for governors in Michigan, New York, Florida, California and Illinois.

However, the Alaska state ferries, Kiehl told the Skagway town hall meeting, are essential for Skagway and other coastal communities without other reliable transportation options and connections to each other.

“We need to work on improving (the ferry system), rather than about what weeks we can go without (it),” Kiehl said.

The governor has also said his administration is looking into options to privatize the ferry system.

Many Skagway residents at the town hall raised concerns about reduced ferry service, in particular that it would limit their ability to get to Juneau to catch Alaska Airlines’ flights.

Dunleavy has proposed operating the ferries through the summer, and then making a decision about services for the fall.

The governor’s budget plans also call for closing or selling some state-owned airports in small communities, though which ones is undecided.

One of the biggest cuts in the governor’s proposed budget would hit Medicaid, which pays for health care for low-income households with children, pregnant women, needy, aged and disabled adults. The budget would cut about three-quarters of a billion dollars from Medicaid’s fiscal year spending plan of $2.13 billion. By slicing $262 million in state funding, or 47 percent from last year, the state would lose $478 million in federal dollars.