Raising fuel taxes, pledging future oil royalties in exchange for cash up front, or even tapping into the Permanent Fund to create a separate account -- it's all on the table as lawmakers consider how to pay for Alaska's mounting transportation needs.
To many Alaskans, the options are as controversial as rough roads, crumbling bridges and untended runways are unacceptable. But something has to be done to compensate for sagging federal highway funds and to catch up to $8 billion in transportation projects, plus hundreds of millions in maintenance that's been deferred pending more money, Department of Transportation and Public Facilities officials told lawmakers on the House Finance Committee at a meeting Thursday in Anchorage.
The solution would likely take shape as a state-funded transportation program, with federal dollars playing a secondary role.
After logging a handful of options from people testifying on the subject, committee Chairwoman Rep. Peggy Wilson, R-Wrangell, said she'd like to craft a bill before the Legislature reconvenes in January, offering a solution in the form of a state-backed transportation funding mechanism. The backlog of deferred maintenance has doubled since she entered the Legislature nine years ago, Wilson noted.
DOT Commissioner Leo von Scheben cited a backlog of $430 million for airports, highways, the ferry system and more. Meanwhile, ferries are aging quickly (with some less than 10 years from the end of their anticipated life span), runway maintenance at 258 state airports is soaking up available money, and highways are pocked with more ruts and potholes as the subsurface thaws.
Add to the backlog other needs, like the estimated $1 billion to create "highway safety corridors" through Alaska's deadliest road stretches -- like the Seward Highway.
Yet at the federal level, a greater share of transportation funding is going to mass transit systems, like trains, in areas of the country with far greater population density than Alaska. The days of earmarks are largely over, and Alaska could draw the short straw as federal dollars are doled out, thanks to an increasing awareness that the state has no income or sales tax and pays annual dividends to residents.
"Times are changing," von Scheben said. "We're not going to be getting the federal funds we used to get."
The prospect of taking the lead on such controversial issues as raising taxes or tapping into the Permanent Fund didn't seem to sit well with legislators on the House Finance Committee, but neither did borrowing money against future state revenues. More than 90 percent of the state's annual revenue comes from oil, and prices have proven more volatile in the past year than most anyone anticipated.
Providing lawmakers do push to establish a state-funded transportation plan, the money has to come from somewhere -- and that means raising taxes, spending savings, or borrowing money, said Larry Persily, a former deputy revenue commissioner and now staff to Rep. Mike Hawker, R-Anchorage.
Persily laid out the options, none of which struck as an ideal fit. Alaska can hope for "high oil prices and fat capital budgets," or look for new revenue sources. Doubling fuel taxes from the current eight cents per gallon -- the lowest in the nation -- would probably not pull much more than $50 million per year, far from enough to meet transportation needs. The state could tap into savings, not to fund specific projects but to establish a special account to pay for a state transportation program. But any withdrawal from savings -- including the Permanent Fund -- would leave less to invest, resulting in lower dividends. The state could even consider promising future oil production royalties in exchange for a lump sum now -- but it would leave less revenue coming into the general fund in years ahead. And borrowed money, whether from the federal government or by issuing bonds, has to be repaid.
"I don't see the place we magically make money appear and it doesn't cost us anything," Rep. Mike Doogan, D-Anchorage, said. "Either we rob Peter to pay Paul and advance the income stream ... or we just keep muddling through the way we are."
Lawmakers also heard about state infrastructure banks, which, after initial capitalization, fund projects with the potential of payback. If installing new drains in Anchorage streets saves the state thousands each year in street-sweeping costs, those savings can be used to pay back the loan.
The committee wasn't taking any action Thursday, but members were gathering ideas -- and they left with plenty, although few clear answers. And of course, this discussion only applied to transportation, while the state faces money woes with education, health care, and more.
"We've had a nice, long run," Doogan said. "People are either going to have to do with less in the way of public services, or pay more for them."
Contact Rena Delbridge at rena@alaskadispatch.com.