Proposed FAA budget cuts grants, tax incentives

February 23, 2012

Industry leaders are preparing for another fight over user fees, but the president’s proposed budget is also drawing criticism on other fronts.

The latest White House push to impose fees on turbine general aviation and commercial flights was not unexpected, and members of Congress are working to rally opposition to the $100-per-flight fee. President Barack Obama’s FAA budget proposal for fiscal 2013 also would slash airport improvement grants by $926 million for large and medium hub airports; the administration proposes to offset this cut by asking Congress to grant these airports the authority to increase passenger facility charges to pay for new airport projects. The proposal sends mixed messages when it comes to a tax provision credited with boosting business aircraft sales in particular: accelerated depreciation for business aircraft.

AOPA President Craig Fuller decried user fees as an attempt to “fix what isn’t broken,” requiring the creation of an “expensive” new bureaucracy within the FAA to collect revenue on top of what GA operators already pay at the fuel pump. Fuller has been joined by a chorus of critics denouncing the fees, along with budget proposals that would shift airport improvement costs to the flying public. The proposal calls for large and medium  hub airports to increase facility fees to pay for infrastructure improvements.

“The budget request assumes the enactment in 2012” of a $50 billion transportation infrastructure spending proposal, the budget document states. That proposal includes $2 billion in one-time airport improvement grants and another $1 billion to support NextGen. Large and medium  hub airports, while allowed to compete for slices of the $2 billion in supplemental 2012 funding (if Congress approves), would be excluded from “guaranteed” improvement grants in 2013. Those facilities would instead be allowed to increase “passenger facility charges” to help cover the cost of infrastructure development.

In a National Air Transportation Association blog posted Feb. 15, NATA listed 10 reasons why the budget should never fly. They are far from alone: Industry groups such as NBAA were quick to denounce user fees, along with a proposal to boost federal revenue by $2 billion over 10 years by extending the depreciation period for business aircraft purchases from five years to seven—precisely the opposite of what the still-struggling industry hopes to accomplish. It is also the opposite of what the administration claims to support in verbiage found elsewhere in the budget that calls for preservation of accelerated depreciation rules that, in 2011, allowed businesses to take 100 percent of aircraft depreciation in the first year.

“That baffles us,” said General Aviation Manufacturers Association President and CEO Pete Bunce, announcing on Feb. 22 another year of declining deliveries for the industry that has struggled since the economic collapse of 2008.

Bunce said members have reported the “bonus depreciation” rule helped boost otherwise struggling sales. “We definitely have evidence from each one of our manufacturers that drove purchase decisions,” Bunce said.

Critics charge the mixed signals also extend to NextGen. The administration has penciled in a roughly 10-percent increase in total NextGen spending for fiscal 2013, bringing the annual federal investment in airspace modernization to more than $1 billion, while reducing future spending on airport improvements. NBAA noted that airports are an integral part of NextGen, as did former Sen. Byron Dorgan, who now leads the aviation practice at the Washington law firm Arent Fox. Dorgan, in a written statement, said reducing airport grants will undermine NextGen development.

“That approach will derail the critical effort to modernize American’s airports and infrastructure that serve both general and commercial aviation,” Dorgan said. “This budget should be a blueprint for building critical infrastructure, but without adequate funding our country will continue to fall behind.”

AOPA will coordinate efforts with other industry groups to protect GA from unfair burdens while supporting airspace modernization.

Jim Moore

Jim Moore | Online Associate Editor, AOPA

AOPA Online Associate Editor Jim Moore joined AOPA in 2011 and is an instrument-rated private pilot who enjoys competition aerobatics.