Economy

Alaska’s state ferry system is at risk of a partial or total shutdown this summer due to the failure of the federal government to issue a key annual grant.

“Currently right now, we have a shortfall in our budget,” said Dom Pannone, director of program administration and management for the Alaska Department of Transportation and Public Facilities, to members of the Senate Finance Committee during a Monday morning hearing.

Money from the Federal Transit Administration’s rural ferry program pays for almost half of the Alaska Marine Highway System’s operating expenses, but the administration failed to open its annual grant process in fiscal year 2025, which ended Sept. 30.

The ferry system’s budget runs according to the calendar year. Last spring, the Alaska Legislature and Gov. Mike Dunleavy budgeted $171 million for the 2026 ferry budget. Of that, almost $78 million was supposed to come from the rural ferry program.

Without that money, the system could be forced to tie up its ships in midsummer, at the peak of the state’s annual tourist season.

“Right now, we have a federal chaos problem,” said Sen. Jesse Kiehl, D-Juneau and a member of the Senate Finance Committee.

Ryan Anderson, commissioner of the state DOT, said his agency is “looking at several options” to prevent a shutdown of the ferry system.

If a federal grant isn’t delivered, DOT would make significant changes to the summer ferry schedule, which is slated to begin in May.

Anderson said the state could “dispose of the Matanuska,” the state’s oldest active ferry, which has been tied up dockside as a “hotel ship” because of maintenance costs.

The ferry Kennicott, coming out of drydock, or the Columbia, another old mainline ferry, could be tied up as a hotel ship instead of the Matanuska, he said.

On Monday, neither DOT officials nor state legislators could say why the Federal Transit Administration has failed to make grants available.

“What is going on in Washington, D.C.? That’s always a tough thing to work with,” Anderson said.

U.S. Sen. Lisa Murkowski, R-Alaska, secured almost $1 billion in the 2021 Infrastructure Investment and Jobs Act bill for the rural ferry program, which was written in a way to steer much of the money to Alaska.

By text after Monday’s hearing, Murkowski spokesman Joe Plesha said the Federal Transit Administration told her office it will release the FY26 ferry grants this spring but did not give a timeline.

“We are directly engaged with the FTA and working to advance the release of this grant funding as soon as possible,” Plesha said.

When Murkowski got the ferry language signed into law, it was the first time the federal government had significantly funded operational expenses for Alaska’s ferry system.

“In this particular case, it can actually pay for the operations of those (ferry) vessels,” Anderson said, noting that includes operating costs like crew and fuel. That billion dollars was to be spread across five years, and the program disbursed more than $252 million nationwide in FY22, $170 million in FY23 and $194 million in FY24.

Alaska received more than five-sixths of the total distribution in that time, something that allowed Gov. Mike Dunleavy to divert state dollars to other parts of Alaska’s annual budget.

Alaska DOT estimates that about $410 million remains available for the federal government to disburse.

In each of the three prior grant years, it took between 152 and 199 days from the time the grant application period opened to the time the grant was awarded.

That timeline means that even if federal transit officials were to open the grant process tomorrow, a decision might not be made before the start of the summer ferry schedule in May.

Dunleavy and the Legislature could extend the timeline by changing the ferry system’s budget calendar so that it starts July 1 along with all other state agencies, but if there’s still no federal money, that would just extend operations until January 2027, and then the system would face a $150 million cliff instead of a $78 million one.

Sen. Bert Stedman, R-Sitka, said that finding “backfill” money will be difficult in either case.

“Our budgets are getting tighter and taking away the flexibility the (finance) committee has to backfill some of these holes, and this particular hole could be significant, pushing $80 million,” he said.

The ferry funding issue could persist even if the federal transit authority resumes paying grants, because its ferry operations program is set to expire this year.

“What happens when that grant money is gone?” asked Sen. Mike Cronk, R-Tok.

“This year, the surface transportation reauthorization is up for renewal,” Anderson said. “This, we understand, is part of that discussion: Will the rural ferry program continue over the next subsequent four years?”

Anderson said that even if Congress renews the program, the current Alaska-favorable rules might be rewritten.

“Other states are very interested in this program as well because they have a lot of similar challenges,” he said. “Nationwide, there’s support for a program such as this. The questions that are out: How will the rules be rewritten, and how competitive will the program be? That will be the challenge.”

The U.S. Forest Service is moving forward with a plan to harvest over 5,000 acres of trees in the Tongass National Forest, just east of Ketchikan. A majority of that will be old-growth trees, which some people worry will be devastating to the forest.

The Forest Service released the final environmental impact statement for the South Revilla project earlier this month. It would allow for the harvest of over 4,000 acres of old-growth timber, and over 1,000 acres of young growth timber. The project site, which surrounds Carroll Inlet on both sides, is around 41,000 acres in total.

Cathy Tighe, a district ranger with the Forest Service, says the cut will allow for more than logging — it will also create new recreation opportunities.

“So it’s actually it’s not just focused on timber,” she said. “It actually clears a lot of activities that help us meet our multiple-use mandate as an agency.”

The project includes construction of new trails, a cabin, boat launches and outhouses. It also includes the construction of parking spaces and 14 miles of new road.

Environmental groups have been pushing back on large-scale, old-growth logging for decades. For years, up until Trump was reelected, the Forest Service was steering away from large-scale, old-growth logging. The focus was instead on young-growth sales, which has less cultural and environmental impact.

The Ketchikan-area plans were originally introduced in 2016, under the first Trump administration, but were shelved in 2020 with the change in administrations. But with the latest administration change came a new executive order, and a new directive from the Department of Agriculture to restart and increase timber production.

“Since this project was so close to being completed previously, we had all of our resource specialists review those changes and sort of pick up where we left off.”

Part of developing the plan involves an interdisciplinary review, where resource specialists with the federal agency study the site and evaluate risks.

“It’s a long process, partly because we have all of these different resources working together,” Tighe said. “And then, in addition, there’s a lot of what we call best management practices that go into, you know, how far away from a stream you have to, like, fuel equipment to protect resources.”

But critics say that old-growth logging projects of this scale will be devastating.

Betsey Burdett is the owner of Southeast Exposure Outdoor Adventure Center, a kayaking and ziplining tour company. She says she’s seen logging projects of this size before. And she doesn’t see it as responsible development.

“It’s just a question of how many people can this land support,” she said. “What’s the breaking point, and how can we do it responsibly?”

She says she’s seen people leave the island because they didn’t like what was happening to the forests at the height of the timber industry.

Nathan Newcomer from the Southeast Alaska Conservation Council says there are better ways to go about logging.

“Our organization works with small mill operators that are just like mom-and-pop shops really, like two people that work there, and they might go grab one or two old growth trees every once in a while,” Newcomer said. “Or a tribe, for example, they might want to go chop down one old growth tree to build a canoe or carve a totem pole. There’s appropriate ways to do this.”

He says the project will harm animal populations, like those native to the Tongass, and the region’s world-class salmon runs. Old-growth projects also affect carbon sequestration and long-standing ecosystems.

Newcomer says the South Revilla project will affect Southeast Alaskans who live a subsistence lifestyle and will come at a cost to taxpayers, who will likely have to pay for a lot of the project.

“The average person in Alaska understands that that’s not our economy,” he said. “It’s not based on large scale timber production. It might have been at one point decades ago, but we’ve moved on. And so again, I ask the question, who’s asking for this? Who’s getting the benefit out of this? It certainly isn’t the majority of Alaskans in Southeast.”

Newcomer suspects this project might be a bellwether for other large scale old growth projects to come in Southeast, particularly if important conservation laws get repealed.

There is a 45-day objection period that follows the release of the final environmental impact statement. That ends on March 8. The final environmental impact statement can be found on the Forest Service website.

Some storefront owners in Juneau spoke out against U.S. Immigration and Customs Enforcement or shuttered their doors Friday as part of the nationwide general strike following recent killings in Minneapolis. 

Downtown, small businesses including Drip Drop Wonder Shop, Liaise Studio and Alaska Robotics Gallery closed, joining businesses across the country protesting ICE. 

Aaron Suring is co-owner of Alaska Robotics Gallery, a game and book shop. He said he participated in the strike because he wants to see ICE defunded. 

“There’s limited things that we can do so far away from what’s happening in Minneapolis, and we wanted to show our support in what way we could,” he said. 

He said he thinks joining the nationwide response can raise awareness and lead to action. Across the country, people are refraining from attending school, going to work or spending money in solidarity with those impacted by ICE. 

Some Juneau stores that remained open took a stance against ICE in other ways. 

Kindred Post, a gift shop and post office downtown, posted on social media that 25% of its revenue between Friday and Sunday will be donated to the International Rescue Committee in support of immigrants and refugees. 

Travis Smith, co-owner of The Rookery Cafe and In Bocca al Lupo, said he decided to keep the restaurants open because he can’t afford to close. But he encouraged patrons to pay in cash. 

“We’re going to basically take what would have been the credit card processing fees that we’re not paying, since people are paying in cash, and then we’re going to match that amount as a donation,” he said. 

He said that will amount to 6% of their sales from the day, which they plan to donate to funds on Stand With Minnesota, a directory aimed at supporting people impacted by ICE in the state. 

“The reality is that our businesses both rely upon immigrants, our communities are built on them,” he said. 

Smith called the ICE raids “atrocious” and said the U.S. should not allow masked officers to kill people. 

Across the street, a chalkboard sign stands in front of Bustin’ Out Boutique.

“It says, ‘fight fascism, not your bra.’ We’re just a full-service bra-fitting store,” said Hollis Kitchin, owner of the boutique. She said she’s been using the sign to speak out against the current administration since President Donald Trump’s inauguration last year. 

She said she couldn’t afford to close for the day, but set up a snack and tea station in her shop to create a welcoming space for protestors. 

Kitchin said she’s a descendant of people who immigrated to the U.S. to escape fascism before World War II and the issue is close to her heart. 

“I have friends in Minnesota that are afraid to leave their houses because they’re not white, they’re carrying their passports and stuff with them,” she said. “It’s just disturbing and horrifying.”

The response from local business owners comes after organizers hosted an anti-ICE rally Thursday and a recent vigil remembering Alex Pretti and Renee Good Sunday. Another anti-ICE is planned for Friday evening starting at 5 p.m. at the whale statue. 

Correction: This story has been updated to correct when Hollis Kitchin’s family migrated. 

Alaska’s population rose slightly between 2024 and 2025 and is now at its highest level since 2017, the Alaska Department of Labor and Workforce Development announced Wednesday.

Alaska had an estimated 738,737 people as of July 1, 2025, the department said in its annual state population estimate. That’s up 1,649 people from the department’s July 2024 population estimate of 737,088.

The rise comes despite a revision that erased thousands of international immigrants that the U.S. Census mistakenly believed had moved to Alaska.

Last year, relying on Census figures showing that thousands of people had migrated to Alaska from other countries, the department in July 2024 estimated Alaska’s population at more than 741,000 people.

Since then, and after prodding from Alaska state demographer David Howell, the Census Bureau retroactively lowered the number of international migrants that came to Alaska, and this year’s population estimate is significantly lower than last year’s but higher than the state’s revised 2024 figure.

“We think (that) is more accurate given that people crossing the southern border aren’t very often making their way to Alaska,” Howell said.

With the extra residents removed and a new baseline in place, the state’s population grew on a year-over-year basis because the number of births in the state exceeded the number of Alaskans who died.

That natural increase — births minus deaths — of 3,389 people was greater than the number of people who moved out of the state.

Between 2024 and 2025, 1,740 more people moved out of Alaska than moved here. It was the 13th consecutive year of negative net migration in Alaska, extending the longest streak of negative net migration since 1945.

Overall, the state’s population grew by 0.22%. That was less than the nation as a whole (0.5%). Compared with the other 49 states and the District of Columbia, Alaska’s population growth ranked 40th.

South Carolina (1.5%), Idaho (1.4%) and North Carolina (1.3%) had the highest growth rates among states. Vermont (-0.29%), Hawaii (-0.15%) and West Virginia (-0.07%) had the lowest and were among five states that posted population declines.

The U.S. Census Bureau has slightly different figures than the state — it estimated a 0.1% population gain between 2024 and 2025 — but the Alaska Department of Labor conducts surveys of military bases and group homes that the Census Bureau does not, Howell said. For that reason, he believes the state’s estimate is more accurate than the Census Bureau’s.

Overall, Howell said, Alaska seemed to simply extend existing population trends between 2024 and 2025.

“We’re continuing to see losses in the working-age population. … We’re really starting to see declines in the school-age population. It was growing slightly at the beginning of this decade, but at this point, there’s about 1,000 more 17-year-olds than there are 4-year olds. And so we’re just going through aging,” he said.

Alaska’s median age is 37.1, one and a half years older than it was at the start of the decade. Haines, the state’s oldest community, has a median age above 50.

As the state ages, the number of new births is dropping and the number of deaths is rising.

Howell and the Department of Labor and Workforce Development are predicting that the state’s population will start dropping steadily by the year 2050.

The number of births in the latest population estimate is the lowest since the trans-Alaska oil pipeline was built. The number of deaths dropped slightly last year, but Howell said there may be a morbid reason for that: The COVID-19 pandemic peaked in Alaska in 2021-2022 and may have killed elderly Alaskans who would have died later.

This year’s state population estimate retroactively updated the population change between 2021-2022, turning it from a small gain into a decline.

On a borough and city level, existing trends continued in the latest forecast. The Matanuska-Susitna Borough continues to be the fastest-growing large area of the state, the population of Anchorage is relatively flat, the Interior’s population is growing slightly and Southeast Alaska’s population is falling.

Juneau residents might have to pay sales tax again on food and utilities, despite approving a local exemption during last fall’s municipal election. 

That’s because Gov. Mike Dunleavy recently proposed a statewide sales tax as part of his fiscal plan meant to stabilize the state’s finances. 

At a community town hall event Thursday evening, Juneau’s three state lawmakers weighed in on the governor’s plans and other topics at play this legislative session. Democratic Juneau Sen. Jesse Kiehl said the governor’s sales tax proposal, as written, would override Juneau’s local exemptions.

“The governor’s proposal would be to override that and to allow no variation,” he said. “I think that’s a bad choice, especially because it impacts people with a sales tax who struggle most to get by.”

Dunleavy’s proposed sales tax – Senate Bill 227– would follow a seasonal structure, set at 4% from April through September and 2% for the remainder of the year. That would be on top of Juneau’s existing 5% sales tax on most items. If passed, the state sales tax would expire in 2034 and provide between $735 million and $815 million of revenue to the state each year.

The governor’s proposal might sound familiar, because this past municipal election, the Juneau Assembly proposed implementing a similar seasonal sales tax at the local level to take advantage of the 1.7 million cruise passengers that come to town each summer. While voters shot that down, they did approve an exemption for essential food and residential utilities from local sales tax. 

Kiehl said he thinks a moderate state income tax would be a fairer way to raise additional revenue for the state while not disproportionately affecting low-income residents. At the town hall meeting, Democratic Juneau Rep. Sara Hannan agreed. She said Alaska needs to stabilize its revenue with its expenditures. 

“A state sales tax on top of local sales tax makes things really burdensome,” she said. “But right now, this is the first time we’ve been able to get the governor to use the word tax and not choke, so that’s a step forward.”

Some Alaska Senate leaders have said they’re skeptical the governor’s plans will pass the Senate this year. Leaders in the state House similarly said they’re not optimistic Dunleavy’s plans will pass this year, which is his last as governor. The House Finance Committee plans to hear public testimony on the tax proposal at 5:30 p.m. Thursday, Feb. 5.

KTOO’s Jamie Diep contributed to this report. 

A new nonpartisan report by the Institute of Social and Economic Research at the University of Alaska Anchorage has concluded that raising oil and corporate taxes to balance Alaska’s budget likely has the lowest negative side effects for Alaskans’ jobs and income.

The report, eagerly anticipated by state lawmakers and experts, comes as legislators consider ways to balance Alaska’s expenses and revenue over multiple years.

Commissioned by the administration of Gov. Mike Dunleavy, the report was released days after the governor debuted a plan intended to bring Alaska’s expenses and revenue in line.

Since 2015, when oil prices plummeted, Alaska has struggled to balance its budget on an annual basis despite steep cuts to state services. At times, the tug-of-war between services and the Permanent Fund dividend has driven the state to the brink of a government shutdown.

Figures from the Legislative Finance Division, which advises the Legislature on fiscal issues, show state agencies have had their budgets cut by 16.6% when adjusted for inflation since Fiscal Year 2015.

During the same period, lawmakers have passed no significant revenue measures. Dunleavy, who opened his first year in office by proposing massive budget cuts, hasn’t proposed significant reductions in recent years and is now suggesting a statewide sales tax and other revenue measures are needed for the state to keep up with spending.

ISER’s analysis of the situation was keenly awaited by state legislators and other experts, who crowded into a ballroom at Juneau’s convention center on Thursday morning to hear its economists deliver their report.

A 2016 analysis by ISER remains widely consulted in the capitol and was a contributing factor to lawmakers’ decision to begin using the Alaska Permanent Fund as a trust fund two years later. Legislators installed an annual transfer from the fund to the treasury for dividends and services, and it’s now the No. 1 source of general-purpose state revenue for Alaska, accounting for almost two-thirds of the state’s flexible spending each year.

The report released Thursday concluded that Alaska’s unstable fiscal situation has created so much uncertainty that it’s lowered Alaska’s real gross domestic product growth by 2-3% over the past decade, the equivalent of billions of dollars, said Brett Watson, an economist with the Institute of Social and Economic Research and the lead author of the report.

Alaska’s GDP — the value of all goods and services in the state — is about $70 billion and ranks near the bottom of U.S. states in terms of growth over the past decade.

ISER examined 11 different options to balance the state budget, including spending cuts, cuts to the Permanent Fund dividend, income taxes, sales taxes and business taxes.

Raising business and oil taxes would have the lowest negative impact on jobs and income, while cuts to services would have the biggest negative effect on them, the report found.

Reducing the Permanent Fund dividend to balance the budget — which has been the existing legislative policy for the past several years — has similarly large negative effects on income, but smaller negative effects on employment. Poor Alaskans are affected more by a PFD reduction than rich Alaskans, making it the most regressive option.

Among statewide taxes, a progressive income tax would have the biggest negative impact on high-income Alaskans and the lowest negative impact on low-income residents.

Nonresidents would pay 27% of a statewide sales tax with many exclusions — food, utilities, and health care, for example — making it the option with the least direct impact on individual income among broad-based taxes.

Corporate and oil taxes have a lower impact overall, ISER concluded.

Making a sales tax higher in the summer and lower in the winter “shifts the burden toward visitors, reducing the impact on Alaska families by 2-5 percentage points per dollar raised,” ISER concluded.

Dunleavy’s fiscal plan includes a seasonal sales tax as one of its pillars.

ISER also concluded that its models suggest that it is possible to come up with “a budget neutral combination that stimulates growth.”

“For example,” its report states, “coupling a less distortionary revenue source (like property tax) with expansionary spending (like capital project investment) can result in a net increase in total employment.”

Imposing a statewide property tax and a broad corporate tax cut in combination, ISER suggested in a slide presented to lawmakers, would result in increased employment and personal income by 2050, it estimated.

The effect of each tax or cut was examined independently, Watson said, in $100 million chunks.

“You can think about these as items on a buffet, and you kind of scoop from them different serving sizes as you construct a plate that is a state fiscal plan,” he said.

ISER also considered things linearly — economists didn’t try to predict whether Alaskans would react differently if a sales tax went from 5% to 6% instead of from 0% to 1%.

“In reality, it is likely that there are certain important thresholds that if you turn that dial too far, consumers start reacting in more and more aggressive ways to it, but we assume that their reaction is the same, regardless of what the level set is,” he said.

Watson said there is a cost if lawmakers do nothing. In addition to the GDP penalty caused by uncertainty, the state remains vulnerable to what’s called the “Alaska disconnect.”

Imagine, he said, if “something crazy would happen and one of the Silicon Valley tech giants were to announce that they were going to create a Silicon Valley of the north somewhere in Alaska and that they would move 100,000 employees somewhere in Alaska and create this northern hub of tech.”

“It would be absolutely catastrophic from the standpoint of the state of Alaska budget,” he said. “There would be 100,000 new Permanent Fund dividends to pay, the children of 100,000 new employees to educate, more roads to maintain, more state services to provide, without any additional revenue collected for any of those individuals. And so there’s this disconnect now that’s growing between our private sector economy and what goes on in our public sector.”