By WIN GRUENING
SENIOR CONTRIBUTOR
In recent “battle of the budget” town hall meetings across the state, there have been few surprises. Budget-cutting resisters really know how to pack a room with emotionally charged testimony. And many people seem determined to “kill the goose that laid the golden egg,” insisting that Alaska’s largesse-fueled services are not just a benefit but a permanent entitlement.
Many testified, that along with the Permanent Fund Dividend program, generous government services are sacrosanct and, if they were to be reduced, economic dislocation, widespread suffering, even death, would ensue.
Never mind that residents living in Alaska 50 years or more got along just fine before receiving government gifts like the PFD, Medicaid expansion, Pre-K programs, hefty union-negotiated retirements, 1 percent for art, and ferries to any community that asked — just to name a few.
Anguished testimony about the Alaska Marine Highway System has been particularly intense. The Alaska House Majority shamelessly produced a video featuring a child weeping over the possibility she might never again see her cousins in a neighboring community.
It’s understandable people are upset over potential cuts to our ferry system. Coastal towns in Southeast, Prince William Sound and Southwest Alaska rely on subsidized ferries because of the lack of inexpensive alternatives. But if we ever hope to justify continuing ferry operations, it’s important to recognize why we’re in this fix.
Some testimony compared AMHS to Alaska’s road system saying that “roads don’t make a profit” and reducing ferry service would be like “shutting down the Parks Highway.” This faulty comparison ignores the fact that 99.5% of Alaska’s vehicular traffic occurs on roads but historically over 80% of the highway operations/maintenance budget is offset by users through gas taxes and other fees. Ferries move less than 1% of vehicular traffic with only 30% of the cost paid by users.
Yet, total AMHS expenses run about $150 million annually, almost double the cost of maintaining all Alaska’s highways.
Environmental activists and ferry unions have deliberately stalled meaningful road projects that would have made AMHS more efficient and sustainable. In 2000, after ample public process, former governor Tony Knowles rejected the DOT announced Preferred Alternative for a Lynn Canal highway – instead spending almost $70 million on two untested fast-ferries. Both ferries turned out to be unreliable, gas-guzzling albatrosses that have since been removed from service.
For decades, ferry boosters ignored the reality of decreasing ridership and thwarted commonsense transportation planning. Alaskans are now saddled with a system rife with inefficiency, runaway operating costs, maintenance issues with aging vessels, and a state subsidy of about $100 million in FY2017.
For every dollar of passenger revenue, the State of Alaska contributes two dollars to keep the ferries afloat. Now we face more vessel layups, increasingly unaffordable vehicle fares, and service cutbacks.
That’s what happens when emotion and politics inform our decisions.
But it didn’t need to be that way.
George Davidson, former ferry system manager in the 1980’s, describes in his own words why.
“While on the Southeast Conference (SEC) board, I proposed a plan in 1977 to ensure the future of AMHS that SEC endorsed unanimously. The plan eliminated double crews on most vessels by operating mostly shuttle ferries. A mainline vessel would run north to Ketchikan then on to Juneau and return south. Shuttle ferries would then run from Juneau and Ketchikan to outlying communities. This “hub and spoke” system, combined with extending roads where possible, promised to greatly improve flexibility and reduce costs.”
Unfortunately, the concept of a sensible, integrated transportation system was never implemented except in a limited way with ferry service between Ketchikan, Prince of Wales Island and Metlakatla.
The Dunleavy administration is clear-eyed about what needs to be done. Their proposed day-boat shuttle ferry service in northern Lynn Canal will be a welcome enhancement that will improve reliability and reduce costs.
The administration is also analyzing ten other cost-saving “optionsavailable for reshaping the system.” These include raising rates, privatizing services, dropping or reducing high-cost/low-volume runs, and even selling vessels and facilities to allow municipalities to operate their own service.
Some of these ideas may seem far-fetched and may not be implemented.
But this is where the facts have finally led us.
Win Gruening retired as the senior vice president in charge of business banking for Key Bank in 2012. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is active in community affairs as a 30-plus year member of Juneau Downtown Rotary Club and has been involved in various local and statewide organizations.
Pfd “gift”?
Very nice piece Suzanne. Most of the south east people when riding the ferry don’t take their cars with them. A smaller vessel would work out better only sending a bigger ferry once a week. Smaller vessel have to watch weather closer but it’s though times. If they look there are also other areas in other departments to be cut the same way. Cut the fat out of government before cutting into the meat.
What is the public policy case for some things being subsidized and others not? Economics tells us there are public goods and private goods. Public goods should be subsidized and private goods left to the market. Public goods are both non-excludable and non-rivalrous, private goods, the reverse.
Non-excludable means it’s impossible to exclude consumers from the good or service. Like clean air, if the government takes measures to keep air clean, it can’t tax only people who prefer to breath clean air and are willing to pay for it. It must give the clean air to all. By contrast a concert is excludable, you have it in an enclosed area and charge admission.
Non-rivalrous goods are those where additional consumers of the goods or services do not interfere with the enjoyment of the good by other consumers. Again, clean-air is a good example, I am not put out if you are enjoying clean air. Another is broadcast TV; it doesn’t impose a cost of me if you enjoy it.. However most other goods and services are rivalrous, if you take groceries home, someone else can’t eat them. If you go to a movie, someone else can’t sit in that seat.
So is ferry service a public good or a private good? It’s a private good. It’s excludable, it’s very easy to charge admission. It’s rivalrous; there are only so many seats on the ferry and so my consumption of the service at some point makes it impossible for others to enjoy.
Therefore, the ferry service should be provided by private enterprise. We do it with airline service, why is ferry service any different. I’d be in favor of cutting ferry service budget crisis or not.
Alaska’s 2019 Lobbyist Directory shows who represents the union, maritime interests, and how much they’re paid to get what their clients want.
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Imagine a legislator telling these lobbyists their clients are not gonna get what they want.
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Now that would be “rivalrous”.
Keep in mind when you say things like that because the state gets Federal dollars for highways. That is why it is called the Mairne Highway there is Federal dollars that assist in the running of that highway. I have not heard how much we mite lose if we dumped that highway.
This is a good question and fact. It is for us to use as a highway to connect us to other communities. As it sits it is cheaper to fly and rent a car. Our Alaska system is catering to tourism and not as our highway. So sad.
Ryan. Have you not heard of ESSENTIAL AIR SERVICE? Do you really think airline service is “private?”
Win, thank you for a clear presentation of the facts, a presentation which has not seen the light of day in the state’s newspaper of record, and for your cogent analysis as well.
The PFD is your commonly held mineral right which is your tool against the largess of government…It is not a entitlement but a investment in private sector growth against an unwilling government which only wants to pick winners and losers. The PFD is your investment tool in the peoples land grant which is 100 to 1 against the private sector. Give us our land or land rights. With out this common held right the government would not protect we the people but put the government sanctuaries un abated at the front of the line. We shall vote on this or be granted greater land granted rights more private sector land at least 50 to the people. Our PFD is not for sale our rights are not to be taken lightly…Time to send red pens and vote against those who seek to turn us into a socialist state…
“…gifts like the PFD”
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Want to explain that one?
I’ll try. Governor Billy Bob Walker and his liberal cronies on the Alaska Supreme Court found a way to optionalize the dividend. So now any amount you receive becomes a gift.
Good job!
Refreshing narrative, good job!
The reason his plan wasn’t implemented was because it wouldn’t work. Plus riders getting on in Bellingham want to stay on til their final destination. Which is Haines or Skagway. They don’t want to have to get a hotel in juneau and wait another day to get on another ferry .
You’re talking about the tourists who are subsidized by the state to ride a ferry. Bellingham should be the first port of call to be axed, last time I checked it’s not in this state.
Actually, Juneau is a suburb of Seattle. What percentage of residents fly south v. north?
I applaud the author’s call for improved efficiency on the AMHS, but I disagree with the cherry picking of data to put the AMHS in the most extreme picture of spending as compared to DOT highway maintenance and operations. The two are so different that they cannot be compared by identical measures
Earlier this year we saw the cost of highway operations at 2 cents per mile compared to $4.78 per mile for AMHS. Where and how these figures came from was never told. Having a background in public safety in Alaska I can say that a moderately busy highway has a law enforcement cost of about $2.60 per mile. That does not include Department of Law costs for prosecuting highway related offenses nor EMS costs. In my opinion it is pointless to go down this “highway” of data juggling; there is an old saying about figures lying and liars figuring.
Most important is how do we deliver AMHS services in an efficient and reliable manner? We should agree that our coastal communities require a transportation system to retain their current economy and to allow for development of new and expanding business. We got into the current fiscal mess through many administrations since the AMHS began over 50 years ago; we cannot fix it in one fiscal year or even one administration term.
The AMHS Reform Project that has been underway for about two years lays out a plan for taking the politics out of management. A new AMHS would be run by a board with marine transportation experience and a Director appointed by the board. The board would have staggered terms to reduce the opportunity of meddling by politicians. The AMHS would still be funded by the State, still collect fares, but would be run with the objective of efficiency, service, and reliability. In the meantime the public will be better served if we do not use “red herring” statistics that are divisive rather than offering a solution to the AMHS, coastal communities, and interior communities.
From the date that JFK said we would put a man on the moon, it took a little more than 8 years to achieve that feat. Fixing a small ferry system should not take half that time, let alone 1\8th of that time. Find the problem and fix it, two years max.
Not every highway in Alaska carries the load Mr. Gruening expounds; perhaps we should get rid of the low volume roads and just keep the main highways. Highways have costs not identified within the DOT budget; traffic enforcement, court costs for offenders, etc. But, this type of argument takes us down the wrong path, we can use figures to advance any side of a position. AMHS has provided a valuable service that is vital to the economy of most coastal communities; this spreads like a ripple to the remainder of the State. Rather than sink the ships so to speak, why not fix the system? Earlier in these blogs, George Davidson, presented solutions. We have infrastructure in place, boats that are paid for, lets get the model right.
The reason for 2 crew system is most the runs including the Lynn canal take longer than 12 hrs to complete. Coast guard rules say a day boat cannot go over 12 hrs. The leconte was a day boat for 6 years, however the state insisted it go back to 2 crews. so it could send us on combined runs lasting 18hrs b4 we got back to Auke bay. Unions had nothing to do with all that jack ass blamed us for.
Wonderful article by Win Gruening! Makes so much sense!
The private sector of Alaska advocates its 2019 State Priorities:
Support reduction of spending to sustainable levels – The Alaska Chamber supports a reduction in spending from the General Fund, excluding both the capital budget and Permanent Fund Dividend, from the previous fiscal year’s spending level until the State reaches a sustainable level of spending.
Support a meaningful cap on operating budget expenditures – The Alaska Chamber supports a meaningful cap on operating budget expenditures. With an ever-growing State operating budget, the business community will live in constant fear of large tax increases. Either a spending cap or a tax cap allows elected officials to make tough calls on spending. They work relatively well in many communities at the local level.
A very good article Win. Changes to the our ferry system are going to come and these changes will not be for more service or even the same level of service because Alaska can not keep on subsidizing the ferry system at the past or present level. So, the arguments being passed around about the cost of running the ferry system vs the road system are a waste of time. The ferry using communities had better figure out what they can do without. Alaska might not have a Mercedes level of ferry service, but we will soon have a basic Chevrolet or Ford model.
Not every highway in Alaska carries the load Mr. Gruening expounds; perhaps we should get rid of the low volume roads and just keep the main highways. Highways have costs not identified within the DOT budget; traffic enforcement, court costs for offenders, etc. But, this type of argument takes us down the wrong path, we can use figures to advance any side of a position. AMHS has provided a valuable service that is vital to the economy of most coastal communities; this spreads like a ripple to the remainder of the State. Rather than sink the ships so to speak, why not fix the system? Earlier in these blogs, George Davidson, presented solutions. We have infrastructure in place, boats that are paid for, lets get the model right.
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