AOPA Government Affairs Issue Brief: FAA Reauthorization Proposal--User Fees

AOPA Government Affairs Issue Brief

FAA Reauthorization Proposal - User Fees

Updated April 6, 2007

The issue

The Bush administration has submitted its proposal to change the funding mechanism for the Federal Aviation Administration to Congress. According to the FAA's "Next Generation Air Transportation System Financing Reform Act of 2007," the FAA says the act will "replace the decades-old system of collecting ticket taxes with a cost-based, stable, and reliable funding program that relies on a combination of user fees, taxes, and a federal government contribution to support the development of a new, satellite-based air traffic control system, called NextGen."

In AOPA's analysis, the bill would raise aviation fuel taxes to 70.1 cents, increase current FAA fees, add new fees for FAA services including air traffic control, and reduce or eliminate Congress' ability to control FAA spending or the fees the FAA charges system users. It would also cut funding for airports by nearly a third. This $1 billion per year reduction in grants made under the Airport Improvement Program hurts communities dependent on federal assistance for airport development.

The importance to our members

Nearly 90 percent of AOPA members indicate that they will reduce their flying if the FAA proposal is enacted and the government tax on aviation fuel increases nearly fourfold. New user fees for flight in Class B airspace would likely deter pilots from using certain airports and airspace near major metropolitan areas. Today, ATC user fees stymie general aviation around the world with huge costs to operate aircraft and, most importantly, insert cost considerations into critical safety decisions.

The proposal also changes the role of the U.S. Congress, putting more power in the hands of FAA bureaucrats and in an airline-dominated management board. The FAA and the board would set policy on use and access to ATC services and airspace, and the board would establish user-fee levels and set FAA spending, with no appeal available to Congress or the courts.

AOPA's position

The changes proposed by the FAA are unnecessary to keep the U.S. aviation system the safest and most efficient in the world. AOPA opposes user fees for any segment of aviation and have asked Congress to reject the calls for user fees on any segment of aviation and the almost quadrupling of general aviation fuel taxes. Then, industry and Congress can get to the real issues at hand through a productive, meaningful discussion on how to strengthen the nation's airports and modernize air traffic control - the plan, design, and implementation - that enables the United States to continue its global aviation leadership position.

AOPA has seen user fees implemented in foreign countries, where there is a trickle-down effect, and in a relatively short period of time, charges are imposed on all user segments. User fees also deter pilots from using key safety services, which will impact safety.

AOPA proposes to retain the existing tax system, which collects revenues from fuel sales, passenger airline tickets, and cargo waybills. These taxes, combined with a general fund contribution, will be more than sufficient to support the FAA's future funding needs and pay for ATC modernization. The General Accountability Office and the Department of Transportation inspector general have testified before Congress that ATC modernization can be accomplished under the existing FAA financing structure.

Background

Since 2005, FAA Administrator Marion Blakey has insisted that the FAA lacks the necessary funding to plan and prepare for NextGen, the agency's plan to modernize the air traffic control system. The airlines claim that they pay too much for the portion of system they use and would like to pay less than they do today. The airlines and the Bush administration believe that a user-fee system would better serve the needs of the FAA.

Details of the proposal - user fees

Effective October 1, 2008, the administration's proposal would increase the tax on avgas from 19.4 cents per gallon to 70.1 cents per gallon and jet fuel taxes from 21.9 cents per gallon to 70.1 cents. Fuel taxes would be adjusted annually based on the Consumer Price Index. In addition, all general aviation flights into 30 large hub airports, or the airspace around those airports, would be charged a user fee (about $5 per flight for the typical single-engine aircraft). The airlines and air taxi and fractional operators would be subject to a user fee for terminal and en route airspace. They would also pay 13.6 cents per gallon tax on the fuel they consume.

Details of the proposal - governance

The FAA's plan would create an independent committee led by the administrator. It would set fees and make investment decisions, usurping the oversight role Congress plays today. If the committee did not agree with the administrator's proposal, the FAA would publish its decision in the U.S. Federal Register. Aviation users could protest the proposed fees to the secretary of Transportation. If the secretary agreed with the administrator, no further recourse would be offered. For the general aviation industry, with pilots in every congressional district, important protection and oversight would be eliminated. The new oversight committee would be called the Air Transportation System Advisory Board, and it would be made up of eight individuals representing:

• One from the airport community
• Three from air carriers
• One from cargo airlines
• One from business aviation
• One from general aviation
• One from aviation manufacturing

Financial health of the FAA

According to the President's budget released on February 5, 2007, the uncommitted balance in the Airport and Airway Trust Fund (AATF) was $1.77 billion. The FAA claims that this is insufficient. AOPA analysis indicates that the aviation trust fund uncommitted balance would grow to $4.7 billion in the next five years with the existing tax and funding structure. This growth assumes that Congress would continue to provide the FAA with a contribution from the U.S. general fund at 21 percent of the FAA budget. The historical average of general fund contribution has been closer to 25 percent.

Along with the increase in the balance of the trust fund, the FAA budget would be able to grow by 6 percent each year, and an average of $1.4 billion could be spent on NextGen each year for the next five years. On February 15, 2007, the FAA administrator testified that the cost of NextGen over the next five years is $1 billion per year. The administrator has not provided an estimate of the needed funding for NextGen beyond 2012.