Alaska DOT faces continued budget shortfall despite partial restoration

Alaska Department of Transportation and Public Facilities will continue operating under financial strain in fiscal year 2027 after the Legislature restored only half of a $5 million operating budget cut, leaving the agency to manage equipment fleet, utilities, and fuel costs through continued cost-saving measures.

The Legislature approved $2.5 million in restored maintenance and operations funding for the department's fiscal year 2027 budget, which begins July 1. The partial restoration leaves DOT facing the same challenges it confronted in the current fiscal year, when unanticipated fluctuations in internal cost allocation pool revenue created budget shortfalls.

Governor Mike Dunleavy signed Alaska's fiscal year 2026 budget on June 12, 2025, after issuing vetoes that reduced overall spending to approximately $14.7 billion because of a downgraded general fund revenue forecast. In early 2025, the Legislature approved a conference committee substitute for House Bill 289, a supplemental appropriation that restored about $70 million in transportation funding previously vetoed by the governor.

Dom Pinon, director of program management and administration, told staff Friday that the partial restoration means the department still faces challenges paying for equipment fleet, utilities, and energy costs. The operating budget shortfall will be the biggest financial risk going into fiscal year 2027, he said.

The department implemented cost-saving measures during the current fiscal year, including a purchase approval system using Airtable software that requires advance authorization for equipment and supply purchases. That system will continue into fiscal year 2027, Pinon said.

Internal cost allocation pool revenue, which funds administrative overhead by charging capital projects for shared services, fluctuated unexpectedly during the current year. The revenue stream depends on capital expenditure levels and can show effects years after projects are completed. Pinon said next year's ICAP revenue outlook is more positive.

Ryan Anderson, commissioner of the department, said energy costs affect every aspect of operations. When the cost of energy picks up, the cost of everything goes up, Anderson said.

The Legislature approved the department's capital budget request for fiscal year 2027, including all federal matching funds. The capital budget included adjustments for two projects: removal of a federal fund allocation for Cascade Point and a reduction of federal fund allocation for the West Sioux Project. Both projects will continue, Pinon said.

The Legislature accepted all budget transactions tied to the department's reorganization effort. Pinon said there was substantial discussion on the record about the reorganization and the Legislature's acceptance of it.