DNR transition at top takes place amid budget challenges

  • The new K’esugi-Ken campground in Denali State Park on the Parks Highway will be open by Memorial Day 2017 with 32 campsites and, weather permitting, stunning views of Denali. The Department of Natural Resources Parks Division expects the new campground to be very profitable and contribute to the division getting off state general funds. Photo/Courtesy/Department of Natural Resources

When outgoing Natural Resources Commissioner Marty Rutherford gives the keys to incoming commissioner Andy Mack, she will be handing over a major state agency that is, considering the state budget, in pretty good shape.

Rutherford is a 27-year veteran Department of Natural Resources administrator who retired June 30 after having served for years as deputy commissioner with several stints as acting commissioner, the most recent since March with the departure of former commissioner Mark Myers.

She first became the deputy boss at DNR in 1991, leaving in 2005 after a falling out with then-Gov. Frank Murkowski. She returned to her old job in December 2014 when Gov. Bill Walker took office.

The Legislature treated DNR relatively easy this year when it wielded its big budget axe and that’s partly because of legislators’ respect for Rutherford and partly because the agency was hammered hard in the preceding two years.

Some good news is that some of DNR’s revenue-generated core divisions, like the Division of Oil and Gas, are going into next year with its funding and staff relatively intact, although there were come cuts.

Incoming commissioner-designee Mack, who takes the helm July 1, is known for having good political skill, which will be sorely needed over the next few years because the state’s financial situation won’t be getting better any time soon.

Unlike many state agencies the DNR has the ability to generate some of its own funding, through fees.

“We’re basically in the economic development business,” Rutherford said, and that includes raising revenues where it’s possible, including selling t-shirts and hats with state logos to support state parks.

“No idea is off the table,” deputy commissioner Ed Fogels said, including ideas like renting out unused parking space at the state’s new geological materials center in Anchorage, a former Sam’s Club.

Here’s the budget picture for DNR: State undesignated general funds approved for the agency by the Legislature for fiscal year 2017, the budget year starting July 1, totals $62.47 million.

That’s down from $70.3 million in fiscal year 2016 ending June 30, $77.92 million in 2015 and $83 million in 2014.

“We’re losing 17 positions next year and that’s on top of 76 positions lost last year. It’s a reduction of 10 percent of our workforce over two years,” deputy commissioner Ed Fogels said in an interview.

Some good news is that the agency has been able to preserve its core divisions, particularly those that bring in money. The Division of Oil and Gas, for example, took a $139,000 hit this year and lost three positions. The bite was deeper last year for the oil and gas division, however.

Other divisions took deeper cuts, however. The Division of Forestry is down $752,000 and two positions. The commissioner’s office was cut $335,000 and two positions.

“This is going to affect our ability to deliver services,” Rutherford said. “In the divisions of forestry, mining, land and water management, there are cuts to support staff. This is going to slow down our work.”

In the Division of Land and Water Management, which is cut $363,000 and two positions, there will be an effect on the processing of state land and water-use permits.

This is an area where the DNR, and the Legislature, applied extra resources in 2011 to catch up on a backlog of land-use permit applications. The agency may be able avoid some piling up of applications by unified permitting procedures and electronic permitting, Fogels said.

In other divisions, DNR is moving to find new fund sources so that agencies can become more self-funding.

“If people use it, they should help pay for it,” Rutherford said.

One example is in the state Parks Division, a small part of DNR but one that is popular with the public, which is already partly self-funded through campsite and visitor fees. The parks division will still take a $99,000 reduction this year.

However, a planned increase in park and camping fees will allow the division to pay about half of its costs, Fogels said. The remainder could eventually be covered through new revenues from sales of state park t-shirts, caps and other paraphernalia with the state park logos and other designs, he said.

Most state park systems in the U.S. help support themselves through sales of memorabilia, and now Alaska’s will do so, too. State park managers are now working on designs and ordering materials.

Fogels said the objective is not to compete with the private sector. The state will be a wholesaler, selling the goods through retailers.

Continued development of the state parks and campgrounds, however, could become very profitable for the state. The new K’esugi-Ken campground in Denali State Park, on the Parks Highway, will be open by Memorial Day 2017 with 32 campsites and, weather permitting, stunning views of Denali.

“This is one of the best views of Denali along the Parks Highway, and it’s going to really pull people. We expect it to be very profitable,” Fogels said.

More public-use cabins, for which fees are charged, are planned in high demand areas, too.

“My goal is to get the Parks Division completely off state general funds,” Fogels said.

Similarly, the state Division of Geological and Geophysical Services, another part of DNR, wlll be charging for access by companies to use its geologic materials center, which is an expensive facility to maintain. This is common in other states, but has not been done in Alaska. The division is taking a $53,000 cut this year.

Rutherford is concerned about the state Forestry Division, which is taking a larger reduction. Cuts this year will eliminate a forester position in the small Haines State Forest in Southeast, and that, plus other reductions, could impair the state’s timber sales program in the region.

The Southeast timber sales are profitable for the state, Rutherford said, and are also important for the few sawmills that remain in the area. State-owned forest lands are now the most important source of wood for these mills because harvests in the Tongass National Forest are sharply down.

A bill passed by the Legislature this spring to allow the state to do negotiated long-term timber sales will help these mills secure a steady supply of wood. Previously the mills had to bid competitively in shorter-term sales, which meant that purchasers selling state timber as logs into export markets could usually outbid the local mills, which make products.

In Interior Alaska the state supplies wood for small mills and biomass for heating from the Tanana State Forest.

Rutherford is worried about the Forestry Division’s cuts in firefighter training. Last year saw a hugely destructive forest fire season and it’s too early to predict this year.

“If we’re unable to have our own trained firefighters we have to import firefighters from other states,” she said. That not only drains money out of the economy — seasonal firefighting is a big source of jobs for rural Alaska — but it can slow response time.

The federal government pays firefighting costs on its own lands, mainly in the Interior and northern parts of the state, but Alaska is responsible for state lands, which are also mostly near communities.

Last year the state spent more than $75 million on firefighting.

One division in DNR, the Division of Agriculture, has been a kind of step-child in previous years, but the division, and the industry it serves, is actually doing well, though Alaska farming is small-scale, Rutherford said. 

The Matanuska-Susitna Borough has long been a source of fresh vegetables for Southcentral Alaska communities and the advent of weekend farmers’ markets had added a new profit center for local growers, though it is small.

The new director of the Division of Agriculture, Arthur Keyes, is a local farmer himself and an entrepreneur who also developed the vibrant weekend farmers’ markets in Anchorage.

The success for Alaska growers will be in niche markets, Rutherford said, like growing and shipping peonies for seasonal out-of-state markets.

Even in Delta, east of Fairbanks, where the state unsuccessfully attempted to develop a large barley farming project in the 1980s, farmers still grow the grain for local markets and are making and selling new products.

Bryce Wrigley, one local farmer, is making a barley flour that he sells in Fairbanks and Anchorage stores. His company is Alaska Flour Co.

Rutherford said one of the Agriculture Division’s most important functions is the plant materials center that provides seeds for local grasses and plants that are important for land rehabilitation and restoration.

Providing disease-free seed potatoes for Alaska growers is another function.

This unit was under the budget axe this spring in Juneau. The state House cut $335,000 from the Agriculture Division, essentially eliminating the unit, but the Senate restored the money for one year.

“In the next year we’ve got to figure out a way to raise funds for the plant materials center,” Fogels said.

Rutherford said the ability to grow grass and other plant seeds in the state is important for keeping invasive plant species out.

“Growing our own eliminates the need to import seeds for Alaska growers,” she said.

It’s when seeds are imported that invasive species are introduced, mixed in with the out-of-state seeds.

The state-owned and prisoner-operated Mt. McKinley Meat & Sausage plant in the Mat-Su, which provides the Southcentral region’s only approved U.S. Department of Agriculture inspection service for meat sales, was also given a reprieve by the Legislature.

It was to have closed in July but lawmakers are allowing it to stay open while negotiations are underway with a local nonprofit that could take over ownership and operations.

Tim Bradner is a correspondent for the Journal. He can be reached at [email protected].

06/29/2016 - 8:13pm