Alaska DOT faces continued budget shortfall despite partial restoration

Alaska Department of Transportation and Public Facilities will operate under financial strain next fiscal year after the Legislature restored only half of a $5 million budget cut.

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

Dom Pinon, director of program management and administration, told staff Friday that 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.

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

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

The Legislature approved the department's capital budget request for fiscal year 2027, including all federal matching funds. The operating budget also included approval for Huecof contracting, which allows the department to contract for equipment maintenance in certain circumstances to increase equipment uptime.

The department will begin preparing its fiscal year 2028 budget request and fiscal year 2027 supplemental budget request in coming weeks. Pinon said the agency will continue monitoring spending to preserve frontline maintenance and operations services.