The ferry Malaspina makes a rare visit to waters off downtown Sitka during the 2010 Alaska Day celebration. (Ed Schoenfeld/CoastAlaska)

The Dunleavy administration proposes cutting three quarters of the state’s ferry system and exploring privatization. Such deep cuts could potentially cripple the service before the end of the year. Civic leaders in Southeast have long urged ferry reform but are skeptical of the governor’s approach.

Southeast Conference brings together civic and business leaders from the region. It’s usually a chance for the ferry system’s chief to check in with leaders from smaller communities.

At Wednesday’s meeting, a resident of Kake stands up. He’s upset about cost overruns of the Alaska-class ferries. And its inability for the new ferries to serve smaller docks without even more costly retrofits.

“You had all these people down in Ketchikan and yet they couldn’t figure out that they were building something wrong in the yard. It seems like somebody should’ve been paying attention,” Delbert Kadake, head of the community of about 500 people’s tribal fuel company, tells the Alaska Marine Highway System’s top executive.

As he finishes upbraiding ferry chief Shirley Marquardt, his tone lightens.

“I appreciate what you’re doing there, Shirley,” he says. “I’m not trying to get mad or anything. I just want to speak up for our community because we do need help.”

Such is the love/hate relationship in coastal communities with state ferries. Cost-cutting has meant less service, more breakdowns and delays. Which in turn hurts ridership and revenues.

Low ridership is one of the justifications made by Gov. Mike Dunleavy’s budget czar for even steeper cuts.

Budget Director Donna Arduin told reporters in Juneau that state-subsidized ferries aren’t cost effective.

“For example, the cost to transport a vehicle on a state highway is about 2 cents per mile whereas it’s about $4.58 on a ferry,” she said.

That comparison doesn’t square.

All but five of the 33 Alaska communities served by the ferry are off the road system. For them it is the highway. It’s how people bring vehicles in. Seafood is exported. Sports teams travel.

“This is going to have a far-reaching impact,” said Garry White, executive director of Sitka’s Economic Development Association. “It’s not only business, for the cultural for the social impacts and for the economic impacts of all our communities.”

The governor’s long-term plan goes further.

“We have proposals to look at privatization,” Arduin told reporters.

The governor released an order to study at divesting from the ferry system entirely. “For example, in the marine highway system we’re in the process of hiring, bringing in a marine consultant to talk about all of the options that are available — that may be one of them,” she said.

But civic leaders in Southeast are skeptical that could work.

“There’s not one public ferry system in the world that operates 100 percent on the farebox – it just doesn’t exist,” says David Kensinger, executive director of Petersburg’s chamber of commerce. “You can have consultants study things, you’re not necessarily going to get the answer you want. “

Kensinger’s also part of the ferry reform committee that’s studied ferry governance models around the world.

Efforts to de-politicize ferry system management are not new.

“All of us around the region, have tried for years to change how the ferry system operates,” Kensinger said, “and every time you get a new governor – well – you get a new change.”

The reform committee is championing legislation to turn the marine highway into a public corporation. That two-year effort wasn’t mentioned by the governor’s office.

But Kensinger said they hope to work together.

“We have the information there,” he said. “He doesn’t have to pay a new consultant. He can just take a look at it and we’re open to engage him in discussions with it.”

More concerning to Southeast leaders is further cost-cutting.

The Dunleavy administration touts its cuts would save around $96 million. But how the ferry system would survive the year isn’t clear.

Alaska Marine Highway System officials referred all questions back to the governor’s budget office.

Ferry boosters in the House recently held a meeting touting the importance of the Alaska Marine Highway System.

It’ll be just one of many core services that Alaska lawmakers will tussle over in the coming weeks in the Capitol.