Deferred maintenance is just what it says — postponing repairs of real property in order to save costs and meet budget funding levels. Deferred maintenance projects are those that owners either can’t address or haven’t addressed through preventative maintenance. Proper preventative maintenance can extend the life of building components, and poor preventative maintenance will significantly shorten their life.
The Alaska Legislature annually appropriates funds to various state agencies for operations and preventative maintenance of their facilities. Each facility or agency manages its maintenance independently, some taking good care of their facilities and some not. Operational maintenance is the heat and the lights, and preventative maintenance is things like fixing a leaky roof.
As agency budgets have tightened in these lean fiscal times, they can’t turn off the heat and the lights, so one of the first things to go is preventative maintenance. Instead of fixing the roof, they buy a few plastic buckets to catch the drips. A practical solution but shortsighted.
According to information pre-sented to the Senate Finance Com-mittee by the Office of Management and Budget last spring, the state, including its university and the court system, owns and maintains over 2,200 facilities encompassing over 19 million square feet of space. Facilities include court rooms, office buildings, university facilities, museums and lib-raries, pioneer homes, National Guard armories, maintenance stations, fish hatcheries and field stations, airport and ferry terminals and public safety facilities — something there for everything we’ve come to expect government to do.
By number, the Department of Transportation & Public Facilities has the most facilities. Measured by square feet, the University of Alaska system has the most, with over 40 percent of the total square footage. University space is classrooms, offices, labs and dorms — by their very nature, more expensive to maintain. No matter how you measure it, the state has a lot of facilities and a tremendous need to keep them in good repair.
The combined replacement value of all state facilities is over $8.6 billion. It’s estimated the deferred maintenance needs the state is responsible for are over $1.8 billion. Maintenance needs exceeding 20 percent of the replacement value of all state facilities — by any standard, a number that is too high. It hasn’t always been that way, and we haven’t always ignored the need.
The backlog of deferred maintenance has been higher in the past. In November 2009 with the urging of our industry and recognizing the need, Gov. Sean Parnell proposed a plan to address the state’s deferred maintenance needs. On Nov. 12 that year, during a lunch event at the annual AGC conference, Parnell announced a comprehensive effort to tackle the state’s deferred maintenance needs. He proposed a $500 million, five-year deferred maintenance program and committed to include in his annual capital budget $100 million a year for five years.
I followed those capital budgets as I still do, and every year for the five years as promised there was at least $100 million a year in agency deferred maintenance line items. For those used to the smoke and mirrors of government promises, it was refreshing to see an initiative that not only addressed a pressing need but one that had some follow through.
That deferred maintenance initiative came at a good time. Not only was there a need to take care of a big backlog of work, but nationwide we were in the grips of the Great Recession and our industry was experiencing 25 percent unemployment rates. In Alaska, after hitting a historical high of $145 per barrel in July 2008, it fell precipitously to less than $50 in the summer of 2009. With that low price of oil, we were looking at a very meager capital budget.
From 2010 to 2014, oil rebounded. We had revenue to support a responsible capital budget, make many good new capital investments and take care of some of our facilities. Since the bottom dropped out of the oil market in 2014, the first to go was the capital budget. The capital budget cut and the pullback of private investment has caused the construction economy to drop almost 30 percent. That drop correlates directly to a drop in construction employment.
One of the definitive studies on facilities maintenance focusing on educational institutions determined that they should be spending 0.5 percent of their buildings cur-rent replacement value on regular preventative maintenance and 1.5 percent of the replacement value on capital repairs. Apply that to Alaska, and our capital budget would need about $172 million a year. That’s making the earlier $100 million a year initiative in 2010 by Parnell look smart.
Political foresight is common. Political action, these days, is not. For as long as we’ve had a permanent fund and the gush of oil revenue paying for almost everything, we’ve talked of the need for a long-term fiscal plan. A long-term fiscal plan is not just about direct funding government. It is about taking care of all those things we’ve come to expect from government, including our facilities. As our elected leaders struggle to agree on a fiscal plan for Alaska’s future, I hope they put our need for a regular maintenance program into that plan.