Alaska ferry system faces $78M budget hole after Trump administration delays federal grant

The Alaska ferry system is at risk of running out of operating funds this summer because of a frozen federal grant program, according to state transportation officials.

Nearly half of the Alaska Marine Highway System operating budget in the current calendar year was intended to be funded with a grant from the Federal Transit Administration, according to a budget approved by lawmakers last year. But the grant, which was expected to be issued last year, has not yet been released.

That has left a nearly $78 million hole in the $170 million budget for the current calendar year. Without a solution, ferry boats that provide transportation to communities in Southeast Alaska, Kodiak and along the Aleutian chain could be left without the funds needed to continue running as soon as July.

Amid a tight revenue outlook, the state has few options for backfilling the $78 million that it was counting on receiving from the federal grant, lawmakers in the House and Senate budget committees said in recent days.

The federal grant, known as the Ferry Service for Rural Communities Program, was created through the bipartisan infrastructure bill that passed in 2022.

Alaska’s U.S. Sen. Lisa Murkowski was instrumental in creating the program and designing it to benefit the ailing ferry system, which has seen decreased service and reliability amid years of declining state investment.

Murkowski’s spokesperson Joe Plesha said Monday that the senator had “received a commitment” that the grant funding window would open “this spring.” However, he said her office didn’t have a specific time for releasing the funds, nor any specifics on the amount of funding that would be available this year, given that funding was not released last year. The state is again banking on a federal grant through the program to fund ferry operations in the 2027 calendar year.

In the first three years of the federal program, the state received $45 million, $38 million and $66 million for ferry operations. Because of the grant timeline, the Alaska Legislature has built the grant into its annual budget each year before the specific funding amount has been announced.

Last year, lawmakers — at the request of Gov. Mike Dunleavy — built a $78 million federal grant for ferry operations into the state budget. But after President Donald Trump took office, the grant application window never opened.

In response to a request for comment, the Federal Transportation Administration said in a December statement that it “anticipates announcing a Notice of Funding Opportunity for its Ferry Programs in 2026.” The FTA press office did not provide an explanation as to why the funding had not been awarded in 2025, or when in 2026 the funding opportunity would open.

The office did not immediately respond to additional questions sent Monday.

Murkowski personally reached out to U.S. Transportation Secretary Sean Duffy “to ensure that steps are taken so that this funding can get out the door as soon as possible,” her spokesperson said in December.

In previous years of the program, the application window has opened between April and July. Specific funding amounts were announced between five and six months after the window opened. That means that even if Trump administration opens an application window in the coming days or weeks, the funding amount awarded to Alaska likely won’t be known until after the legislative session ends.

State transportation officials, including Transportation Commissioner Ryan Anderson, told the Alaska Senate Finance Committee on Monday that they will be traveling to Washington, D.C., later this month to advocate for the funding to be released.

But they provided few details on how they would proceed if the funding is not awarded in time to keep ferries running through the summer months, which are the system’s most busy and most profitable.

Department officials are proposing to move the ferry system from a calendar year budget cycle to a two-year cycle, which would give them more flexibility in balancing state and federal funding streams.

One idea that Anderson raised was to shore up the system’s available funding by selling the Matanuska, a mainline vessel built in 1963. That ferry has not been in regular operation since 2020 due to structural problems that have been deemed too costly and complicated to fix. Instead, the vessel has been used to house ferry workers in Ketchikan amid a housing crunch that has made it difficult to attract new workers and fill vacancies. But Anderson said other operational ferries, the Kennicott and the Columbia, could be used intermittently as so-called “hotel ferries,” instead of the Matanuska.

It is unclear how much the state would save by selling the Matanuska. In 2022, the state sold the Malaspina — another mainline ferry built in 1963 — to Alaska businessmen John Binkley and David Spokey for $128,250.