Over the past three years one of the major issues, if not the most important for your association, has been the various proposals designed to change the funding of the Federal Aviation Administration. All government agencies are under pressure today as Congress carries out the clear mandate we the public have sent them to balance the federal budget. The Clinton administration reacted with near panic last summer and declared a funding "crisis."
We'll concede that the FAA might have a funding problem. But a $12 billion crisis? Not likely. DOT Secretary Federico Pena says that the FAA will need an additional $12 billion in the next seven years. The only solution, he says, is to charge airlines and pilots drastic new user fees for every service the FAA provides, including air traffic control and services related to certification, training, and licensing. This pricing mechanism is the heart of S.1239, the bill introduced by senators Ford and McCain and supported by the White House.
Are user fees the answer? AOPA strongly feels that they are not, unless you believe in killing the patient with the cure. User fees present many problems. They are costly to collect, they can disrupt the financial planning of the airlines, they have safety implications, and — most important — the FAA would have little direct accountability to Congress for the way the agency spends the money.
On your behalf we have challenged the Department of Transportation's claimed $12 billion shortfall. Within the past month, government's financial watchdog agency, the General Accounting Office, went public with its preliminary finding that the $12 billion estimate wasn't accurate.
Whether it's a crisis or merely a problem, most agree that it's important to be prepared for a possible money crunch at the FAA. AOPA believes that being prepared with viable alternatives is the responsible position for a membership organization representing a specialized constituency. Nothing brought this position home more than a plea from Senator Ted Stevens (R-AK), who fought valiantly for GA when S.1239 was being voted on in the Commerce Committee. Stevens turned to AOPA Legislative Action and asked us to help him develop an alternative to the direct user fee concept in the bill.
We have named our idea Linked Financing and designed the funding mechanism to ensure that there will be sufficient resources to meet the future needs of the air transportation system. In 1990 Congress put caps on total federal spending for discretionary government programs to help control the budget deficit as part of the 1990 Budget Enforcement Act. Discretionary means that Congress fixes the amount of spending in advance, as opposed to mandatory spending programs such as Social Security or Medicare, which spend as much as they need. Essentially all transportation spending is considered discretionary, so the FAA's budget is subject to the cap on discretionary spending.
A cap on discretionary spending means that if one domestic program spends more, others must spend less. To spend an additional $100 million on the FAA, for example, Congress must cut $100 million from other discretionary programs such as education, law enforcement, or agriculture. Gradually lowering the discretionary spending cap is one of the ways by which Congress hopes to reduce the deficit and eventually balance the budget.
As you are aware, the majority of funds for the annual FAA budget are very efficiently collected from three sources: aviation fuel taxes, a cargo tax, and a 10-percent passenger ticket tax for airline travel. These dollars go to the Aviation Trust Fund. It makes little difference how much money is in the trust fund or how much we as aviation users are willing to pay to support the system. The ability of Congress to spend our aviation tax dollars is still limited by the discretionary spending cap.
Under AOPA's Linked Financing, what aviation users pay in taxes for a given year would depend on what the FAA spent the year before. If Congress allows the FAA's spending to go up, the taxes collected would be adjusted upward by a corresponding amount the following year, according to a predetermined formula. An upper limit on the tax rates would keep the rates at a reasonable level. We believe most of the growth in tax revenue would result from aviation industry growth, not tax rate increases. More important, with the recently enacted personnel and procurement reforms at the FAA and new technology that is being deployed, FAA spending could drop. If that happens, tax rates will decrease automatically in the following year.
Our Linked Financing plan would establish an "Annual Reserve Account" that would be available to the congressional spending committees to supplement the resources otherwise available to them within the discretionary cap. This Annual Reserve Account would be outside the discretionary cap, meaning that the cap would not limit the ability of Congress to spend the funds.
We have also interested Representative Jim Lightfoot (R-IA) in our unique plan, and he intends to introduce this as legislation.
Our Linked Financing proposal reflects new political realities. Those who rely on essential government services can't expect a balanced budget and more money for government programs. That's why we are working to develop thoughtful and creative ideas to help Congress balance the budget while maintaining essential services such as the air traffic control system. If there's going to be a problem, AOPA wants to be a big part of the solution.
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