Issue Brief

National Civil Aviation
Review Commission Report

May 1998

Background: As part of the FAA Reauthorization Act of 1996 (P.L. 104-264), Congress created the National Civil Aviation Review Commission (NCARC) to review FAA funding mechanisms and aviation safety. Transportation Secretary Rodney Slater appointed 13 of its members, and the majority and minority leaders of both houses of Congress appointed eight others.

The law that created the NCARC charged the Commission with analyzing the FAA's budget requirements through 2002, alternative financing and funding means for meeting these requirements, and aviation safety. Unlike most congressionally-mandated commissions, the NCARC's recommendations will go directly to the U.S. Senate in draft bill form. The law also clearly stated that Clinton Administration appointees should "represent a balanced view of the issues important to all segments of the aviation industry, including general aviation�"

However, despite the specific mandate from Congress, not one of the 13 commissioners appointed by the Administration represents general aviation users. (One congressional appointee was the owner of an aviation business which deals in the general aviation marketplace. While receptive to our point of view, her main role was successfully representing the views of air taxi operators.) The Administration also chose to disregard the law creating the NCARC by failing to appoint representatives for airline passengers, regional airlines, or business aviation.

Issue: If Congress implements the NCARC recommendations � increased spending, coupled with a reduction in the general fund contribution and tax breaks � it would likely trigger a second tax increase on the flying public in two years, dispense special tax and funding favors solely to the interests represented on the Commission (see box), and diminish the role of the Congressional appropriations and tax-writing committees in aviation safety, funding and modernization issues. The only people who would pay are the groups left off the commission � general aviation, airline passengers and regional airlines.

AOPA Legislative Action Recommendation: Congress should complete the reform of the FAA by making it an independent agency free from interference by the Department of Transportation or the White House. The NCARC report offers only a grab bag of special interest handouts and calls it reform, despite the fact that Congress has already addressed FAA's financing and management problems. The only reform remaining is to make the FAA an independent agency.

Information in Depth

The NCARC's final report, released December 11, 1997, recommends dramatic increases in FAA spending as well as a reduction in the general fund contribution to FAA and a modification to the budget treatment of FAA in Congress to funnel money directly to the agency through cost based user fees. The report would bifurcate FAA management by converting the FAA's air traffic control system to a nebulous "Performance-Based Organization." A board of directors � a new layer of bureaucracy � would run the "PBO" and fund it with user fees or other user charges as it saw fit.

The report calls for the FAA Administrator to appoint the members of the FAA Management Advisory Council (MAC) � which Congress created last year to give the agency access to the management expertise of the aviation industry and outsiders � without Senate approval. Congress required the President to appoint MAC members with Senate confirmation. The MAC is an excellent idea that promises to provide useful and independent input for the FAA from outside the agency, but giving the FAA Administrator the power to choose its members without Senate approval reduces the MAC to just another layer of bureaucracy.

Commission Singles Out GA for Higher Taxes and Less Service

As for general aviation, the report does endorse AOPA Legislative Action's recommendation that, for both safety and convenience, general aviation should continue to pay for services via the current fuel tax method. However, though general aviation uses relatively few of the FAA's services, the report also claims that general aviation does not pay enough to cover the costs it imposes on the system. The report calls for consideration of a change in GA tax rates � the only segment of aviation singled out for such treatment. How high should taxes go up? The Commission did not specify in its report. But earlier this year the Commission staff proposed doubling the tax on avgas.

Ironically, this recommendation is found in the same paragraph where the Commission proposes a $75 million dollar tax cut for air taxi operators, the only segment of GA represented on the Commission. The report also calls for further consolidation of Flight Service Stations used by GA and more reliance on the Direct User Access Terminal program for flight planning by personal computer. Such a cavalier reduction in one of the few services provided by FAA for general aviation could actually lead to a decrease in flying safety as it would reduce the ability of pilots to receive timely and accurate weather forecasts.

Analysis

The recommendations of the Commission closely reflect the membership of the Commission. Those aviation industries and interests represented on the Commission would benefit, while those not represented would suffer (see box). For instance, in addition to the tax increase general aviation would suffer, the major airlines would benefit from user fees when their total burden of FAA's costs shifts to other users through user fees.

The NCARC report does contain some positive aspects. The report correctly notes that FAA faces challenges such as micromanagement by the Department of Transportation and the Office of Management and Budget. It endorses AOPA Legislative Action's recommendation of a direct link between FAA spending and revenues. It acknowledges, at least for general aviation, the efficiency and safety of excise taxes over user fees. And it calls for incentives to change the FAA's culture to a more external focus on users and services and more businesslike and responsive management.

However, the NCARC report's core recommendation � user-based charges leading to greatly increased revenue � makes the report in whole a failure. The solution to FAA's problems is not to throw more money at the agency while diminishing Congressional oversight. Every government agency, no matter how essential, must live within its means. The FAA needs to better manage its existing resources, a fact Congress recognized when it adopted legislation in 1995 freeing FAA from the burden of certain federal personnel and procurement rules. The NCARC makes a few management and cost-control suggestions, but they don't go far enough.

For example, labor costs, the most important area of potential cost savings for the FAA, were almost completely ignored by the Commission. Despite extensive discussion of labor cost savings in the congressionally-ordered audit of FAA by Coopers & Lybrand � the report the NCARC was statutorily required to consider closely � the NCARC makes only a passing mention of labor cost savings. Yet the Coopers & Lybrand report notes that labor costs are the largest component of FAA's current costs and future cost growth and identifies staffing and personnel, facility consolidation and closure, and productivity improvements as three of FAA's seven sources of cost savings.

Overall, the NCARC report adopts the longstanding goal of the FAA under the Clinton Administration: to get out from under the constraints Congress puts on the agency's budget by securing a source of funding that does not go through the normal tax and appropriations process. While every federal agency would like to spend unlimited amounts of money, no discretionary programs are allowed that privilege, and there is no compelling case for the FAA to enjoy special treatment.

The so-called "funding gap," an Administration estimate of the difference between FAA's expected needs and funds available in a balanced budget environment, continues to drop year by year � from $14 billion to $9 billion � as Congress continues to prove it can provide the necessary funds to modernize the FAA even as it moves to balance the federal budget.

The AOPA Alternative

AOPA recommends that Congress reject the recommendations of the NCARC and make the FAA an independent agency. In its report, the NCARC writes "�the FAA, the DOT, the aviation industry, the Administration and the Congress want to make the system work. But there are too many people in charge."

Exactly. In addition to the management flexibility granted FAA by the 104 ^th Congress when it approved personnel and procurement reform, Congress should restore the FAA as an independent agency free from the second-guessing of the DOT and the White House. Until the Administration gives up on its quest to bypass Congress and secure an unlimited supply of funds for FAA, the benefits of management flexibility and legislation to expand it cannot materialize. Independent status for the FAA already enjoys broad support; the House of Representatives passed a bill (H.R. 2276) in 1996 that would have made the FAA independent.

Current Status

The Commission initially hoped to complete its report by June of 1997 in order for their findings to be relevant to the congressional budget reconciliation process; however, the members were unable to complete their work until after the budget process was over. Congress moved forward without waiting for the Commission's report, and on August 5, 1997, President Clinton signed into law H.R. 2014, the "Taxpayer Relief Act," which extended the current excise taxes on general aviation fuel for ten years, an action AOPA Legislative Action strongly advocated. The law also extended, with some changes, the other aviation excise taxes that provide revenue to the Trust Fund. The long-term extension of the excise taxes makes major changes to the FAA budget process or aviation tax structure unnecessary.

The NCARC's final report was released December 11, 1997. Secretary of Transportation Rodney Slater released the Administration reauthorization proposal, which draws heavily from the NCARC report, on April 20, 1998.

The NCARC: Winners and Losers
Aviation Group	NCARC Recommendation
Groups Represented on the NCARC�
Major Airlines ü	Cost Shift through User Fees
Airports ü	Increased AIP Funding, No Cost-Sharing of NavAids
Air Taxis ü	Tax Cut by Shifting to Fuel Tax
Aircraft Manufacturers ü	No Certification Fees
Labor Unions ü	Silent on Labor Cost Reductions
Groups NOT Represented on the NCARC�
General Aviation û	Tax Increase
Airline Passengers û	Tax Increase through User Fees
Regional Airlines û	Tax Increase through User Fees