AMHS can finally apply for long-delayed federal grant, but wait means ferry system will run out of funds in July without state help

Alaska DOT officials ask legislators for $20 million in stopgap funds to ensure Alaska Marine Highway System continues operating until grant funds arrive

The stern view of sunrise shortly after the ferry departs Juneau’s Auke Bay terminal on Thursday, Oct. 2, 2025. (Laurie Craig / Juneau Independent)

By Mark Sabbatini

Juneau Independent

A liferaft for the Alaska Marine Highway System arrived Monday with the federal government opening a ferry grant application process after a delay of several months, which had state officials worrying since they were counting on about $78 million in grant funds as part of AMHS’ $170 million operating budget.

The ferry system is still projected to run out of money in July because the grant funds aren’t expected to arrive until late August or early September, said Dom Pannone, program management and administration director for the Alaska Department of Transportation and Public Facilities, during a budget presentation to state lawmakers Wednesday.

He asked legislators to provide about $20 million in stopgap funding to ensure the ferry system can operate while the state applies for $161 million in federal grants to cover a two-year period, including the $78 million current-year gap.

"That will essentially float the system between the time the time our current funds run out, given the federal shortfall, and the time the other award would come online, and then we'd shift the excess federal funds to the following year, making both years whole," Pannone told the Senate Finance’s Transportation and Public Facilities Subcommittee.

The state has been reliying on the grants for operations — to the chagrin of critics who say the funds are meant for vessel and infrastructure upgrades — since a five-year dispersement was approved as part of the the bipartisan infrastructure bill passed in 2021. Alaska received about $150 million for operations during the first four years.

But after President Donald Trump returned to office last January his administration failed to open the grant period for the 2025 fiscal year that ended last Sept. 30. That caused an AMHS shortfall that state officials said could result in the shutdown of the ferry system this summer due to other funds being depleted, prompting state lawmakers to consider measures, including stopgap funding, in the hope the grant funds would eventually be provided.

On Monday the Federal Transit Administration announced a total of $657 million in ferry grants are being made available for fiscal 2025 and 2026. Pannone said the funds are intended to be used for operations as well as capital projects. The agency has not provided an explanation of why funding was not awarded in 2025.

"The stipulations on the operating is that the ferry system has to continue to provide 75% of the average of the state funding that was provided between 2017 and 2019," he said.

Legislators in the House and Senate have indicated they would be willing to provide funding to plug temporary shortfalls in the ferry system operations. The proposed state budget for the coming year approved last week by the House Finance Committee authorizes up to $49.5 million in backstop funds if the federal grant is less than expected.

Ferry officials are also considering cost-saving measures that include disposing of the Matanuska. In a public notice published last month, the state transportation department stated it primarily seeking bidders interested in acquiring the vessel “as a museum vessel, maritime training ship, tourism or hospitality venue, community facility, research platform, heritage site, or other maritime or public-serving use.”

• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.