Murkowski urges Dunleavy to maximize federal aid with state investment in Alaska ferries

U.S. Sen. Lisa Murkowski sent a letter Tuesday to Alaska Gov. Mike Dunleavy urging him to include $23 million in his coming budget draft for the replacement of a state ferry.

Dunleavy spokesperson Jessica Bowers declined Tuesday to say whether the governor’s draft budget — due by Dec. 15 — would include the matching funds needed to secure a $92 million federal funding award that Murkowski announced last week.

The Alaska Marine Highway system has already been promised $416 million in federal funds through the federal Infrastructure Investment and Jobs Act. That includes $131 million announced by Murkowski’s office in November. Of that, $92 million was awarded for the long-planned replacement of M/V Tustumena. To receive those funds, Alaska must provide $23 million in state funds, according to Murkowski’s office.

“I urge you to include those funds, which the state’s applications committed to providing, in your December budget proposal to signal to the State Legislature that it is a top priority to secure these awards,” Murkowski wrote in a letter sent to Dunleavy on Tuesday and copied to chairs of the House and Senate finance committees.

The governor’s proposed budget, due a month before the Legislature is set to convene in Juneau next month, is just that — a proposal. The Legislature can, and often does, change it significantly. But the governor’s draft is a starting point for lawmakers and influences the final funding plan.

State Sen. Bert Stedman, a Sitka Republican who co-chairs the Senate Finance Committee, said in a statement last month that he looks “forward to working with the delegation to secure the necessary matching funding from the State.”

In an interview last week, Murkowski, a Republican, said the state ferries had been allowed to go “into a death spiral” and “break down” because there had not been necessary “investment in operations and maintenance.”

“I will be critical because I think there are some who feel like this is just kind of a nice-to-have,” said Murkowski.

According to figures compiled by the state transportation department, annual ridership in Alaska ferries had been declining each year since 2014 amid a budget crunch that saw less and less funding go toward the marine highway system. But that decline accelerated after Dunleavy, a Republican, was elected governor in 2018 and proposed in his first year to cut the ferry budget by half.

Ridership dropped from more than 237,000 in 2018 to around 190,000 in 2019. Then, ridership was further pummeled in 2020, when only 52,000 passengers rode on Alaska ferries amid pandemic-era closures and restrictions. But even after the pandemic, the system is struggling to rebound. Preliminary numbers indicate around 150,000 passengers traveled on Alaska ferries in 2022, far less than the pre-pandemic low.

“There’s a big difference for these communities. There’s a big difference when COVID hit and the schedules just kind of went sideways. You had communities like Angoon that couldn’t get toilet paper,” Murkowski said.

Murkowski was instrumental in including key provisions in the 2021 federal infrastructure law specifically meant to help the Alaska ferry system. Asked last month if she was satisfied with the state’s use of the funds, Murkowski said she was “getting a little bit anxious.”

“The clock is ticking here. These funds are not without limitation,” said Murkowski. “If I seem a little pushy on it, it’s only because I know how hard a fight it was to get the resources specific to Alaska in the amount that we’re talking about.”

Murkowski’s letter states Alaska could receive $600 million in federal funds from a single provision in the infrastructure bill, called the Rural Ferry Program. Alaska has so far received far more through that provision than any other state.

When Transportation Secretary Pete Buttigieg traveled to Alaska earlier this summer, he rode the ferry with Murkowski after a planned flight from Juneau to Haines was canceled due to bad weather — a moment that later turned into a late night television punch line.

[Transportation Secretary Pete Buttigieg ends Alaska visit with emphasis on ferries]

The Alaska Marine Highway Operations Board is working on a 20-year plan for the operations of the state ferries, but key figures in designing the plan say that returning to past levels of service is virtually impossible. In 2009 — the number of vessels in service was 11, compared to 2022′s six — the number of ferry passengers was more than double the 2022 figure.

“The system’s probably never going to go back to 11 vessels,” said board chair Shirley Marquardt, during a meeting last week.

Kristen Kissinger, a consultant who has been working on the marine highway long-term plan, said that while returning to 2009 levels of service “won’t be a realistic future” in the coming two decades, Alaskans participating in focus groups on the future of the marine highway had consistently brought up 2009 levels of service as what they hoped for in the future.

“People rely on our Alaska Marine Highway System. So in order to rely on it, you’ve got to have it show up,” said Murkowski.

“We need to have a ferry system that is workable. One of the reasons that you have seen the decline in ridership is because nobody can count on the ferry. Nobody can count on a schedule. So if you’re the coach of the Petersburg basketball team, and you need to get your kids over to play a game in Wrangell, and there’s no schedule that you can rely on, you can’t book it.”

The marine highway’s aging fleet contended with multiple issues this summer that affected schedules, including understaffing that kept one vessel tied up all season and a fire on one of the mainline vessels.

Dom Pannone, state department of transportation administrative services director, told board members last week that out of the $144 million operating budget approved for the current calendar year, only 90% was projected to be spent by the end of 2023. The Legislature has already appropriated $158 million to be spent on ferry operations in 2024. The 2025 budget — including the appropriation of the matching funds requested by Murkowski — will be determined in the coming legislative session.

“I can only help so far. This is the Alaska Marine Highway System. It is not the national marine highway system,” said Murkowski. “The State of Alaska has got to put this on sustainable footing. What I have done is I have given them the opportunity to do so.”