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Alaska: New Report Ties Ferry System Funding to Economic Growth

Public investment in Alaska’s chronically-underfunded ferry system is producing an economic impact at a rate greater than twice its cost, according to a new report. 

The report, issued by the McDowell Group and funded by the Alaska Department of Transportation, concluded that the Alaska Marine Highway System produced a total economic impact of $273 million in 2014, based on $117 million in capital expenditures.

Marine transportation is an economic driver in Alaska. The state maintains 5,500 miles of inland waterways, ranking it first nationally, according to the American Society of Civil Engineers.

According to the study, the ferry system employs nearly 700 workers. Another 300 people work jobs dependent on ferry operations, most of them located in the southeast. Collectively, the labor pool earns more than $100 million in wages and benefits.

The McDowell Group
The McDowell Group

The ferry system provides basic transportation services to regional hubs for medical care, retail, travel, and other household needs, said Jim Calvin, co-principal of the Juneau-based McDowell Group. The ferry system “plays a particularly important role in both the visitor and seafood industries, but a wide variety of other businesses use the ferry to transport goods and materials essential for day-to-day operations,” he said.

Recognizing that public funding of infrastructure improvement is closely tied to energy revenues, now in decline, the report warned against further spending cuts. Calvin asserted that each dollar cut from infrastructure maintenance would diminish economic activity by $2.30.

“Alaska’s challenge at the moment is how to preserve the infrastructure we have in the face of major budget challenges associated with the sharp decline in oil prices,” said Calvin.

In a comment following the report’s release, Gov. Bill Walker said he was “surprised to learn just how widespread economic impacts are.”

Alaska 1
Source: The McDowell Group

In 2015, Alaska ranked 34th on Chief Executive’s Best & Worst States for Business. The quality of life is a good selling point and the low-taxation is an attraction for CEOs. However, companies in this isolated state struggle with finding enough qualified employees, and are concerned that low oil pricing will result in future tax increases.


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