Shrinking Oil Revenues In Alaska May Force Cutbacks To Ferry System For decades, Alaska has collected enough revenue from the oil industry to run government and pay each resident a cash dividend. Now, with oil revenue dwindling, there isn't enough money for both.

In Alaska, Shrinking Oil Revenues May Mean Severe Cutbacks To State Ferry System

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For decades, the state of Alaska has collected enough revenue from the oil industry to run the government and pay a yearly cash dividend to each resident. Now, oil money is dwindling, so there's not enough for both. The state's new governor wants to boost the cash payments at the expense of health care, schools and Alaska's iconic ferry system. Nat Herz with Alaska Public Media has more.

NAT HERZ, BYLINE: The southeast Alaska town of Tenakee Springs has no airport and just a tiny stretch of dirt road.

UNIDENTIFIED PERSON #1: Well, good for them. It's a beautiful day.

HERZ: So the arrival of the twice-weekly ferry, the LeConte, is an event. Friends shout to each other across the water as it comes to shore, and at the dock, people load and unload with all-terrain vehicles.

UNIDENTIFIED PERSON #2: Back it right in front of that trailer in line, OK?

UNIDENTIFIED PERSON #3: I've got two of them.

HERZ: One of the passengers is Shayne Thompson who is shipping a weekly truckload of groceries to the indigenous village of Angoon, where he runs the store. And right now, Thompson is worried because Alaska's new governor, Republican Mike Dunleavy, has proposed a budget that would stop the ferry system's operations October 1. Thompson says he could hire a barge for his deliveries, but prices would rise by about 25 percent, and food would come less often.

SHAYNE THOMPSON: It's like a giant step back in time, and we would have fresh produce and dairy for a week or two of the month. Then the rest of the month, it would be all dry goods.

HERZ: The ferry system isn't the only government program that the governor wants to shrink. Dunleavy is also proposing major cuts to K-12 schools, the university system and health care. He says those cuts are needed to pay each resident a $3,000 dividend - about twice what it was last year. The governor campaigned on the issue, and he's continued to make the case that individuals should decide how to spend their dividends rather than the government.

MIKE DUNLEAVY: I'm having a difficult time believing that we take that money off of elders in rural Alaska, we take that money off of 10-year-olds who are saving up for college, we take that money off of single parents that have three or four children in their families and are struggling, and we bring it in the government to continue spending at the rate we're spending.

HERZ: The governor argues that the state can't afford that anymore with oil revenues less than half of what they were five years ago, and the money has to come from somewhere since Alaskans pay no state sales or income taxes. Dunleavy's proposal has sparked a debate that centers on what residents value and are willing to pay for. Dustin James spoke at a recent public forum in Fairbanks, the headquarters of the state university system.

DUSTIN JAMES: The university on the hill has got to take a look at their income and stop demanding from the citizens to meet their salaries and their retirement programs and all these other things. It's not fair to the rest of us.

HERZ: Many other Alaskans who turned out to the public hearings objected to the governor's proposed cuts, including those to the ferries, which function as school buses, freight vessels and even hearses in the southeast part of the state. On board the LeConte, as it steams from Tenakee Springs back to Juneau, retired state worker Erling Olsen says the reductions would cripple the region's economy.

ERLING OLSEN: This boat is functioning for us people. We have no road system. We're on an island. I mean, this is what we rely on.

HERZ: So far, the state legislature has rejected many of the governor's cuts, moving instead to lower residents' dividends and preserve state programs. The governor can't unilaterally boost dividends, but he does have line item veto power that he can use to cut spending after lawmakers pass the budget. For NPR News, I'm Nat in Anchorage.

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