The state-owned company that operates the Spirit of Tasmania ferries will receive a $506 million bailout from the Tasmanian government.The major funding injection for TT-Line was announced by Infrastructure Minister Kerry Vincent and Treasurer Eric Abetz on Friday, ahead of next week's state budget."This equity is not adding to the cost of the project. It is paying for past direct capital cost overruns, and is not TT-Line spending any additional money," Mr Vincent said."This is about ensuring our vital infrastructure and a key tourism and freight link is supported and continuing to function as Tasmanians need and deserve."He said $200 million would be included in the 2026/27 budget, while the rest would be in future years.The announcement comes as TT-Line continues to wrestle with the financial fallout from its bungled delivery of the new Spirit of Tasmania vessels.Spirit of Tasmania IV pictured leaving Leith, Scotland, in June of last year. (Supplied: TT-Line)Last week, a parliamentary inquiry heard the company was carrying a "substantial" amount of debt and that its interest repayments were "quite high".The same inquiry was also told the ferry replacement program had cost TT-Line at least $717 million more than originally forecast.The overrun includes an extra $403 million for the building of a new ferry terminal in Devonport compared to the original estimate of $90 million.The two new ferries have been built while the terminal they need to operate from is still under construction.Bailout described as 'long-term investment'TT-Line chair Ken Kanofski said it was "no secret" the ferry operator was in a very difficult financial position.The company's forecasts showed that, without this funding, it would have carried about $1.4 billion in debt by the end of the decade."With this injection, we're anticipating we'll be carrying about $950 million of debt and we believe we're in a position to service that debt and pay it off," Mr Kanofski said."This is just like a mortgage on your house. It's a long-term investment and once we get into that position, the business will pay that debt off over a long period of time."Ken Kanofski says he believes TT-Line is in a position to service its debt. (ABC News: Kate Nickels)He said the funding announced by the government was exactly what the company requested when it put forward a proposal in early March.Mr Abetz said it was important to invest and provide TT-Line with certainty for its future, as it is a "frontline service" for the state."We are doing this by providing TT-Line with equity to reduce its debt and maintain a manageable and sustainable fiscal position," he said.The treasurer said Tasmania had a "strong balance sheet", so it was deemed appropriate for it to take on some of TT-Line's debt.He said this would ensure the company had sufficient equity to service the remaining debt and continue operations successfully.'Catastrophic outcome' for TasmaniansLabor Shadow Treasurer Dean Winter said the bailout was a major financial blow for Tasmanian taxpayers, which would be felt for generations."What this means is that every single year Tasmanian taxpayers will effectively be paying a Spirits fiasco tax," he said."Every year, instead of $30 million going into schools or hospitals, it will be wasted paying the interest on this debt."Mr Winter said the injection was an admission that TT-Line was insolvent, as described by the auditor-general last year.He said the impact on the budget would be suffered by Tasmanians through job cuts and reduced funding for schools and hospitals."This is a catastrophic outcome for Tasmanians and for our budget," Mr Winter said.The two new ferries, Spirit of Tasmania IV and V, are both currently being held in Victoria's Port Phillip Bay before being put into operation at the end of October.In last year's state budget, TT-Line was given a $75 million equity injection and had its debt capacity increased from $990 million to $1.4 billion.