Homer Alaska - Business

Story last updated at 11:36 AM on Wednesday, December 7, 2011

Feds suggest using permanent fund for 'bypass mail'

By Pat Forgey
Morris News Service - Alaska

JUNEAU — A federal official is recommending the state tap the Alaska Permanent Fund to pay some of the costs of living in Alaska, rather than looking to the federal treasury.

The suggestion quickly drew a harsh reaction from some state officials, however.

The recommendation came from the U.S. Postal Service's Office of the Inspector General, which issued a report late in November saying the federal government should not be funding the $70 million bypass mail program, which subsidizes shipping costs to rural locations.

Instead, Inspector General David Williams said the state had the resources to provide for those communities itself, including building new infrastructure to serve them more efficiently.

The program is typically called "bypass mail," due to its linkage to the Postal Service, but it more typically involves goods delivered on pallets rather than standard mail. The inspector general highlighted that fact by not even calling it "mail" in his report.

Continuing the bypass mail subsidy for rural Alaska may even be limiting some development in the state, the report said. "Alaska Bypass removes an incentive for the state of Alaska to develop infrastructure to connect its rural residents," according to the inspector general.

The report offered a suggestion as to where Alaska could get the money to pick up that cost itself.

"The state of Alaska's permanent fund is currently valued at almost $40 billion and could theoretically be used to pay for the program or improve the state's ground and air infrastructure for the benefit of all Alaskans," the report said.

Sen. Bert Stedman, R-Sitka, co-chairman of the Senate Finance Committee, called the inspector general's suggestions "over the top." Stedman said the federal government shouldn't be telling the state what to do with its money.

"I thought it was out of line," he said. "The state of Alaska's finances are, quite frankly, irrelevant to the fairness of bypass mail," Stedman said.

In most places, bypass mail is delivered by air to communities off the road system. In one place, the report noted, a road was built to a bypass mail community, but the program continued to subsidize shipping there using tractor-trailers.

The report also noted Alaskans pay no state income or sales taxes, and have the lowest gasoline tax in the nation.