Dunleavy put Arduin at the helm, steering Alaska Marine Highway toward chaos, collapse

A year ago, Gov. Mike Dunleavy announced a plan to cut state spending on the ferry system by 75 percent.

Ignoring the results of past studies, he hired a consultant for $250,000 to produce a “reshaping” study showing how ferry service could be maintained at $24 million a year.

Dunleavy, who had promised as a candidate to not cut the Alaska Marine Highway System, planned to implement the Dunleavy overhaul this July. He talked of selling some ferries to private companies, abandoning some routes entirely and reducing the number of ferry sailings.

His consultants produced a report last fall—kept secret by the state for months—concluding that ferry service could not be maintained for $24 million a year, a figure that may have been plucked out of the air by Dunleavy or his former temporary budget director, Donna Arduin.

On Wednesday, Dunleavy announced a new “reshaping” effort, picking nine people to produce a study by Sept. 30 to implement the results of the last study or come up with other ideas.

In this new vision, another element at damage control to fight the recall, Dunleavy doesn’t admit that the disarray from his bungled 2019 budget is a major factor in the ferry fiasco that is harming communities from Ketchikan to the Aleutians.

Dunleavy and his apologists are now saying that decades of mismanagement created the collapse, trying to shift public attention away from the extreme level of mismanagement brought by Dunleavy and Arduin that produced the immediate crisis.

Dunleavy and Arduin’s veto threats pressured the Legislature to cut ferry funding last year by $44 million, though the governor acts as if he made no threats and the Legislature acted on its own.

Let’s not forget the way in which Dunleavy and his former temporary budget director described their shared vision for the ferry system a year ago, usually in communities not dependent on the ferry system.

Their basic pitch during each episode of the Dunleavy/Koch Network road show was the same—the state appropriation for ferry service could be cut by 75 percent to about $24 million and the results would be great.

Dunleavy said ridership has dropped off by about 100,000 since the 1990s. “In other words, they are not riding the ferry like they did at one time,” Dunleavy said at the Fairbanks road show, with more people traveling by air or using “some other type of watercraft vehicles to transport themselves and their goods.”

He said while ridership and total fare collections dropped, “the expenditures were going up until 2014-2015.” In 2019, the system is “still propped up with subsidies,” he told the Fairbanks crowd. Expenditures have been dropping since then, but not enough to satisfy Dunleavy.

“Even some of the most ardent supporters of the ferry understand that there can be efficiencies and change to make this a better system and cause less of a draw on the state’s treasury,” he said.

During the Dunleavy/Koch Network presentations, Dunleavy never corrected any of Arduin’s assumptions about the Alaska Marine Highway System or the difference between a profit-making enterprise and a government service.

“As government running the ferry system we failed to be able to provide profitably, not only the ferry runs, but also meal services, housekeeping services and we even failed to run a bar profitably,” Arduin told the Fairbanks crowd.

In Nome, Dunleavy said while passenger travel on the ferries has dropped, “but the runs are still the same.”

He talked about the reduction schedule that he expected to see from his consultant.

“This run right here is not profitable, it may never be profitable or this run here you have been running five days a week, run it three days a week. Or this one here is very profitable, there may be a private entity that wants to pick up that run,” he said, “We’re trying as quickly as possible to find a way to increase the efficiencies and save money that we don’t have so we don’t have to subsidize.”

In the Anchorage road show, Arduin referred to the “major cost drivers” of state government.

“One that you’ve heard a lot about is our marine highway system, the ferry system on the south coast of Alaska,” said Arduin, by then a four-month resident who hadn’t spent much time studying Alaska geography or the significance of the ferry system.

She said that fares collected from passengers once covered more than 60 percent of the cost, “never 100, we certainly haven’t profited on the system.”

“We have a billion dollars in assets and we’re now losing almost $100 million a year. Our farebox recovery is now down to about 37 percent. So we’re losing customers, we’re spending more but we’re not getting more revenues. We think we can do better,” she said.

“By changing our concentration on running as many ferries as possible to trying to concentrate on returns, we believe we can run the ferry system for about 25 percent of our costs,” Arduin said,

She made the same attempted joke in Anchorage about how the state was so bad at running the ferries that it couldn’t even make a profit selling alcohol to passengers.

“We’re going to fix this and in time right the ship, no pun intended,” Dunleavy said.

In the Kenai road show, Arduin said the “state is managing to lose about $100 million a year” on ferries. She said by focusing on routes with the most revenue, the state “could run the system at a fraction of the cost, but we think we can do better than that with private operators.”

She repeated her joke about losing money on booze.

In the Mat-Su road show, Dunleavy said that selling profitable ferry runs, stopping some runs entirely and cancelling others in the winter were strong possibilities.

“We can’t keep subsidizing at this rate because we simply don’t have the money, it’s a $1.6 billion issue,” he said.

When Dunleavy’s consulting study was finally released in January, it concluded that privatizing the ferry system wouldn’t work because the service would not earn a profit.

“In general, the study team concludes that reducing the AMHS operating subsidy to $24 million will be extremely difficult if there is also a desire to provide minimum levels of service to existing AMHS communities,” the report said.

Four years ago a report issued during the Walker administration concluded that a public corporation resembling the one that operates the state-owned Alaska Railroad should be pursued.

The new Dunleavy study made a proposal with some similarities, but Dunleavy 2020 is not the decider that Dunleavy 2019 was. He is the studier, calling for a study of the study.

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