In the four fiscal years from July 1, 2003, to June 30, 2007, the amount of state funds needed for operations escalated from $43.5 million to $94.2 million. During this period, budgets and operating plans were submitted to the Legislature for approval and then routinely changed again and again.

In 2006, the Legislature became so concerned, it passed language in a bill stating that the AMHS should operate within the budget and operations approved by legislators. We're doing just that, and we're making positive, beneficial changes that Alaskans are likely to embrace.

This administration began analyzing the problems and finding solutions. AMHS management also sought input from the Marine Transportation Advisory Board (MTAB), state and local officials and the general public.

From that effort, AMHS created a budget and operating plan that balanced fiscal responsibility and efficient use of vessels with the demand for more service from virtually every community and increased labor and fuel costs. The budget and operating plan were offered to the Legislature, the MTAB, and the public for review and comment.

Ultimately, the Legislature and MTAB approved the budget and operating plan. Recognizing stability is critical in providing time to completely build up ridership on the new schedules, MTAB has asked AMHS to maintain the new schedules for the next three years.

I am happy to report to Alaskans the operations and schedule changes have proven both AMHS and MTAB right in recognizing schedule improvements. Total traffic from May 11 through Aug. 3 increased 6 percent for both passengers and vehicles, compared to the same time period in 2007. By moving the motor vessel Malaspina to Lynn Canal, the AMHS provided more service to Sitka and Petersburg with the fast vehicle ferry Fairweather.

Passenger and vehicle embarkation has increased at all communities in Lynn Canal this summer, with even larger increases at Sitka, (19 percent for passengers and 16 percent for vehicles), Petersburg, (20 percent for passengers and 13 percent for vehicles) and Prince Rupert (18 percent for passengers and 26 percent for vehicles).

The current schedule also provides the needed connection between the communities of Haines and Skagway, and meets the need for vehicle capacity in Lynn Canal. We have received positive comments from local officials and residents of these communities.

For the first time in the history of the AMHS, a draft summer schedule has been released - almost one year ahead of time and about five months earlier than last year. This should help provide stability and with a ferry system, increased stability usually means increased ridership, as communities, schools, businesses and residents become familiar with the schedules and how it fits their travel or shipping needs.

The most important part of my message for Alaskans is that we continue working hard to stay the course of AMHS. We understand the importance of stability in budgeting and operations to the Legislature and the public as AMHS strives to meet the public's transportation needs. We welcome and expect to receive comments, both good and bad, because that is the public process. While I have responsibility for making operational decisions, public input is welcome and will be considered.

Here's another exciting development. When the Aurora returned to service earlier this summer, it did so in a new, hybrid sort of fashion. It underwent a federally funded, capital improvement project overhaul and was outfitted with an electronic speed pilot system. We're confident this may save as much as $5 million in fuel costs during the next few years.

This new computerized system is integrated into the ship's navigation instruments and main engines. It's designed to control the vessel's power and speed settings and eventually add to fuel consumption savings.

While the system is currently being used aboard Aurora, AMHS engineers are in the process of tracking potential fuel savings. As an example of the savings, Aurora saved 16 percent on fuel costs on one day in July. At $4 per gallon for fuel, the savings for one day was more than $1,000. AMHS engineers will install the systems in the vessels Matanuska and Tustumena this winter in conjunction with those vessels undergoing federal capital improvement projects. Other vessels will follow.

As someone who began as a steward on AMHS about 30 years ago, and who has worked on almost every AMHS vessel during those years, I am dedicated to operating the system as effectively as possible. With the full support of Commissioner Leo von Scheben, I will work hard every day to make your ferry system as safe, dependable and sustainable as possible. Thank you for the opportunity to serve you.