By Larry Persily


Gov. Mike Dunleavy on April 7 vetoed two-thirds of the additional funding appropriated by lawmakers for state ferry operations.

The Legislature last month approved an increase for Alaska Marine Highway System operations of about $23.5 million, restoring a little more than half of last year’s budget cut instigated by the governor.

Dunleavy used his veto power April 7 to slice $15.5 million from the ferry system appropriation for the 2020-2021 budget year that starts July 1, leaving the marine highway with about $8 million more than this year. That’s enough to add about 10% more service to the schedule next winter, according to state Transportation Department Commissioner John MacKinnon, who participated in Dunleavy’s budget-veto press conference.

The Legislature’s full appropriation would have added about 30% more service to the fall/winter schedule, according to a Transportation Department presentation to lawmakers last month. The Legislature’s version of the budget would have restored most of the service cuts coastal communities endured this past winter.

The ferry appropriation vetoes were part of more than $260 million cut from the 2020-2021 budget, as Dunleavy said he needed to reduce state spending to more closely match revenues hit hard by falling oil prices.

The governor did not veto any of the $19 million that legislators appropriated for overhaul of the 43-year-old state ferry, the Aurora, and for the addition of crew quarters to the system’s two newest vessels, the Tazlina and Hubbard.

State lawmakers passed the budget bill and left Juneau on March 29, sending the appropriations to the governor.

Lawmakers had not seen “any indication up, down or sideways” of whether the governor would use his veto powers to reduce ferry funding, said Sen. Jesse Kiehl. The Juneau Democrat also represents Skagway.

The Legislature is technically still in session — lawmakers rushed through their work and recessed to get home early amid the statewide social-distancing directive intended to slow the spread of the coronavirus. Because they did not formally adjourn, the clock continues to run on the session. Under state law, that gives legislators just five days — until April 12 — if they want to reconvene to attempt an override of any vetoes.

There are no plans to reconvene, as there are not 45 votes — the required three-quarters majority — to override budget vetoes, Kiehl said April 4.

The governor has a loyal base of supportive legislators sufficient in numbers to block an override. 

Lawmakers might get back together in a special session in late summer or fall to consider additional public works spending and further state response to the COVID-19 pandemic and its damage to the economy, Kiehl said. “Right now, I expect there will be one (a special session).”

The extra $8 million for the Fiscal 2021 budget will not change this summer’s ferry service, said Rep. Sara Hannan. “The summer schedule is already out. … The operating money that we added is for the fall/winter season.”

The spending plan approved by lawmakers, she said, was “to have at least two vessels operating at all times” during the winter season. This past winter, due to budget cuts and mechanical breakdowns, Skagway went without any ferry service for seven weeks, until the first week of March, with other coastal communities even worse off.

The Aurora has been out of service since last year. Plans for a winter overhaul were canceled when officials determined the vessel needed millions of dollars in steel work — with no funding to cover the cost.

“They think they can get the Aurora back in 12 months, if things go well,” Kiehl said.

The Tazlina and Hubbard cannot make a same-day Juneau-Haines-Skagway round trip without a crew change — the run exceeds the U.S. Coast Guard 12-hour limit on crew time — and the ships, both launched in the past couple of years, lack crew rest quarters.

With that constraint, the ferry system this summer will not be able to provide the same frequency of service between Haines and Skagway as in past years because the Tazlina is unable to stop in both communities on the same voyage out of Juneau. 

Improved frequency could return next summer after crew quarters are added to the Tazlina, though the governor’s veto will affect how much service the ferry system can afford.

Kiehl expects it will be at least a year before work is completed on the Hubbard, which also will include installation of a side-loading door to better accommodate more ports of call. But it’s not as if that means a loss in sailings in the meantime — the new ship has never entered service.

Currently, the Tazlina is the only ferry operating in Southeast Alaska, other than a small shuttle boat, the Lituya, between Ketchikan and Metlakatla.

The Columbia, Kennicott and Tustemena (which serves Cook Inlet, Kodiak and Gulf of Alaska communities) had been scheduled to return to service this month, but the state announced April 1 that the ships will be delayed until mid-May. Because of travel and work restrictions due to the COVID-19 pandemic, it is taking longer to reassemble the crews and provision the ships to start service, the state said.

Kiehl said he also is concerned that winter overhaul work on the LeConte will not be finished in time to put the ferry back into service in Southeast as scheduled. The ship’s first stop in Skagway is set for May 19. “My concern is that there are some highly specialized subcontractors” that need to fly into the state to work on the ship at the Vigor shipyard in Ketchikan, the senator said.

Quarantine restrictions on interstate travelers could make manufacturers reluctant to send crews to Alaska, Kiehl said. “Maybe the state will be able to finagle and make it happen,” getting the work done and putting the ship back into service mid-May, he said. 

With the governor’s veto, the ferry system operating budget for the state fiscal year that starts July 1 is about $108 million. Slightly less than half of the money would come from passenger and vehicle fares; the rest would come from state dollars.

The separate $19 million appropriation for the Aurora overhaul and crew quarters on the Tazlina and Hubbard is in the capital budget section of the appropriations bill; the money cannot be used for operating expenses.

The budget as signed by the governor also includes a separate $15 million for annual maintenance to the fleet, the same as Dunleavy had requested.

In addition to the ferry operating money, the governor also vetoed:

• Funding to restore the Ocean Rangers program, which until last year had put marine engineers aboard cruise ships to monitor for environmental compliance. Lawmakers added back $3.4 million for the program that Dunleavy zeroed out last year.

• $12.5 million for the University of Alaska system.

• $4.3 million in pre-kindergarten grants.

• $2.7 million for public broadcasting radio and TV stations.

Dunleavy also vetoed the legislative appropriation of a $1 billion transfer of Permanent Fund earnings to the constitutionally protected principal of the fund. Lawmakers had approved the transfer to cover the principal’s loss to inflation.  

Putting the $1 billion off-limits in the principal would reduce the fund’s ability to pay Permanent Fund dividends in future years, the governor said.

The governor said he plans to cover more than $200 million of his vetoes by spending some of the federal dollars Alaska will receive through federal coronavirus relief and economic stimulus legislation. Dunleavy wants to use federal dollars to replace the state dollars in his vetoes of $100 million in state reimbursement for local school construction debt payments, a $30 million boost in state funding for public schools, $37 million for Regional Educational Attendance Areas and $5 million to respond to homelessness.

“We have been presented the unique opportunity to capitalize on a one-time fund source through the Federal Coronavirus Aid, Relief and Economic Security (CARES) Act,” the governor said.

However, it’s debatable whether that is an allowable use of the federal money, House Speaker Bryce Edgmon said in a prepared statement April 7.

“From our initial understanding, federal funds can only be used for expenditures incurred due to COVID-19, not expenditures unrelated to the COVID-19 response,” Edgmon said. “The governor’s vetoes gamble with vital programs like Medicaid, community assistance, school bond debt reimbursement, K-12 education, homeless grants … and more. There is no guarantee that the federal government will pick up the tab.”