By Larry Persily

It’s looking likely that the state ferries will have to operate on less funding in the next fiscal year as Alaska lawmakers near the end of the budget process and all the numbers on the negotiating table are smaller than the system received this year.

The state House and Senate have approved different versions of the operating budget for the fiscal year that starts July 1, with the next step underway this week — a conference committee, with three members from each chamber to resolve the differences. 

In the budget conference committee, legislators are limited to choosing either the House or Senate numbers, or something in between.

The Alaska Marine Highway System was budgeted for $140 million in fiscal 2018-2019. As part of his plan to significantly reduce state spending and services, Gov. Mike Dunleavy proposed cutting the appropriation to $44 million for 2019-2020. The House approved a $129 million budget, while the Senate spending plan provides $96 million.

The system has increasingly relied on state funding to cover its operating and maintenance costs. In fiscal 2019, which ends June 30, the budget shows an estimated $48.5 million in fare receipts vs. $86 million in state general fund dollars, plus a small amount of other funds.

The Legislature faces a constitutional adjournment deadline of May 15.

Even after the House and Senate agree on a budget, the governor has the power to reduce the dollar amount — called a line-item veto authority. It requires a three-quarters majority of the entire Legislature, or 45 votes of the 60 members, to override a budget veto. 

If lawmakers get the budget bill to the governor while they are still in session, he has 15 days (not counting Sundays) to make his veto decisions. If he receives the bill after lawmakers adjourn, he has 20 days to sign the measure and make any vetoes.

Ferry system supporters fear the governor will use his veto power to significantly reduce whatever number lawmakers eventually approve.

If Dunleavy uses his veto pen on the budget, lawmakers can bring themselves back to work in a special session to vote on overrides. The Legislature last took that step in 2009 to override a veto by Gov. Sarah Palin of $28 million in federal funds for energy-efficiency efforts.

Counting calendar days, it could be early to mid-June before the ferry system knows how much money it will have to keep the vessels operating. Until then, the ferry system is unable to set a schedule, Aurah Landau, spokeswoman for the ferry system, said May 3. 

The system continues taking reservations for travel through the end of its summer schedule on Sept. 30, but travelers looking to the marine highway website will find no sailings starting Oct. 1.

Juneau Sen. Jesse Kiehl, whose district includes Skagway and Haines, tried to amend the budget in the Senate on May 1 to add back $25 million for the ferry system, but his effort failed 8-12. 

“We’ve been around this mountain several times,” Sen. Shelley Hughes, a Palmer Republican, said during floor debate against Kiehl’s amendment. Hughes, a member of the Senate budget subcommittee that recommended the steep reduction in funding for the ferries, said the system would not restructure itself to reduce operating expenses if lawmakers “only trim a little.”

Separate from the ongoing budget process, the Alaska Marine Highway System is contracting with a consultant “to identify potential reductions of the state’s financial obligation and/or liability” for the Alaska Marine Highway System, according to the state’s March 19 bid notice. “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 further explained the long-term issue: “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 state in April selected Anchorage-based Northern Economics, which bid $249,887 for the consulting work, but a protest by an unsuccessful bidder delayed the contract award until May 3. Under terms of the bid document, the contractor’s preliminary draft report and recommendations are due by Aug. 1, with the final report due by Oct. 15.