The Alaska Marine Highway System is at risk of a shutdown this summer due to the federal government's failure to issue a key annual grant, potentially impacting tourism and ferry operations.
ANCHORAGE, Alaska – Alaska's state ferry system faces the potential of a partial or complete shutdown this summer. The primary cause is the federal government's failure to issue a crucial annual grant. This financial support covers a significant portion of the Alaska Marine Highway System 's (AMHS) operational expenses. The delay in releasing these funds has created a budgetary shortfall, threatening the ferry service's ability to operate during the peak tourist season.
Dom Pannone, director of program administration and management for the Alaska Department of Transportation and Public Facilities, highlighted the budget deficit during a Senate Finance Committee hearing. The federal grant, which accounts for nearly half of the AMHS's operating costs, was not opened in fiscal year 2025, which concluded on September 30. The ferry system operates on a calendar-year budget. Last spring, the Alaska Legislature and Governor Mike Dunleavy allocated $171 million for the 2026 ferry budget, with approximately $78 million expected from the rural ferry program. Without this federal funding, the AMHS could be forced to cease operations in midsummer, disrupting the state's tourism industry. Senator Jesse Kiehl described the situation as a “federal chaos problem.” The Alaska Department of Transportation (DOT) is exploring various options to prevent a shutdown. Ryan Anderson, commissioner of the state DOT, indicated that significant adjustments to the summer ferry schedule, scheduled for release in May, are being considered. One potential measure includes the disposal of the Matanuska, the oldest active ferry, which has been docked due to maintenance expenses. Alternatively, the Kennicott, just coming out of drydock, or the Columbia, another older mainline ferry, might be used as a “hotel ship” instead of the Matanuska. During the Monday hearing, neither DOT officials nor state legislators were able to determine the exact reason for the Federal Transit Administration's (FTA) delay in releasing the grants. U.S. Senator Lisa Murkowski secured almost $1 billion in the 2021 Infrastructure Investment and Jobs Act for the rural ferry program. This legislation was designed to direct a considerable portion of the funding to Alaska. According to a text message after Monday's hearing, Murkowski's office was informed by the FTA that the FY26 ferry grants would be released this spring, although a specific timeline was not provided. Joe Plesha, Murkowski's spokesman, stated that the office is actively engaged with the FTA to expedite the grant funding release. The initial provision for operational expenses for Alaska's ferry system through federal funding was a significant development. Anderson noted that the federal funds would cover operating costs, including crew salaries and fuel expenses. The $1 billion was earmarked to be distributed over five years. The program disbursed more than $252 million nationwide in FY22, $170 million in FY23, and $194 million in FY24. Alaska received over five-sixths of the total distribution during this period, which allowed Governor Dunleavy to allocate state funds to other areas of the state's budget. The Alaska DOT estimates that approximately $410 million remains available for disbursement by the federal government. Historically, the grant application process has taken between 152 and 199 days from the opening of the application period to the awarding of the grant. Considering this timeline, even if the FTA initiates the grant process immediately, a decision may not be made before the summer ferry schedule is released in May. Dunleavy and the Legislature could potentially extend the timeline by shifting the ferry system's budget calendar to align with other state agencies, starting July 1. However, if federal funding remains unavailable, this would merely postpone the operational crisis until January 2027, potentially resulting in a $150 million deficit. The ferry funding issue may persist even if the FTA resumes grants because the ferry operations program is up for renewal this year. Anderson highlighted that the future of the rural ferry program over the next four years is under discussion. He also mentioned that, even if Congress renews the program, the current Alaska-favorable rules could be revised. Other states are also expressing interest in the program because of similar transportation challenges. Anderson explained that nationwide support exists for the program, but the main uncertainties are how the rules will be rewritten and how competitive the program will be. This will present a challenge for the ferry system and the state
Alaska Ferry Federal Grant Shutdown Alaska Marine Highway System Transportation
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