Industry challenges threats to trust fund

 - October 17, 2006, 11:08 AM

The National Association of State Aviation Officials (NASAO) is urging Congress to resist all attempts to “raid” the Airport and Airway Trust Fund, including airline industry calls for new tax breaks, and the National Air Transportation Association (NATA) reiterated its preference for having general aviation contribute to the fund through taxes on aviation fuels.

“The trust fund was originally and wisely designed by Congress to invest in infrastructure maintenance and improvement at all of the nation’s airports,” said NASAO president and CEO Henry Ogrodzinski. “Unfortunately, in recent years much of it has been diverted to become the major source of FAA salaries and operations.”

With nearly 80 percent of FAA operations being paid for by the trust fund, he continued, the airline industry wants additional federal financial relief paid for by a fuel tax “holiday,” which could further erode the viability of the trust fund. “Tax breaks focused on a single industry while the whole transportation system and entire nation are suffering from higher fuel prices is inequitable, unjustifiable and poor public policy,” Ogrodzinski argued.

NATA president Jim Coyne noted that NATA member businesses contribute to the trust fund through both the commercial passenger and cargo excise taxes and the fuel taxes applied to noncommercial operations. He warned that on-demand air charter operators would face difficulties under a user fee system as opposed to the current system of fuel taxes for general aviation aircraft.

Finding New Revenue Sources

The FAA is struggling to find reliable and predictable sources of revenue to fund its operations, and in September it issued a list of questions for industry groups to consider regarding any change in the funding of the trust fund. The FAA is scheduled to release its proposal for changes to the funding stream in the spring of next year. Meanwhile, the taxes that currently provide money for the trust fund expire on Sept. 30, 2007, the end of Fiscal Year 2007.

Last April, the FAA hosted a trust-fund forum with major aviation stakeholders, during which a number of options for FAA funding were discussed. The agency said that any new financing structure should allow it to maintain appropriate levels of service and make long-term investments, not only in modernization but also in the next-generation air transportation system. FAA Administrator Marion Blakey has said the Bush Administration is not seeking user fees per se, but is calling for new aviation financing reauthorization.

Ogrodzinski cited news reports that airline lobbyists, in addition to trying to roll back the 4.3-cent-per-gallon federal fuel tax, are also trying to get Congress to suspend the 7.5-percent excise tax on passenger tickets, which is also invested in the trust fund.

“The airlines have urged Congress to press for a supplemental appropriation to the trust fund to make up for the tax break,” he said, “but that is not likely to happen in the face of necessary, but highly expensive, hurricane relief and unprecedented federal deficits.”

Ensuring Accessfor General Aviation

NATA’s comments included discussion of the administrative burden that a user-fee system would place on hundreds of small air charter operations throughout the country that would not have the capability to sort through the high volume of bills such a system would generate.

“There are certainly a number of questions that need to be answered before Congress contemplates any change in the current funding structure for the aviation trust fund,” Coyne wrote, “and it is critical that both Congress and the FAA are aware that overall a system of user fees could add greater confusion and inefficiency to the air transportation system, cause a bureaucratic nightmare for both government and industry, jeopardize safety and ultimately result in less revenue than the current system.”

Should the FAA decide to move forward with a user-fee system, Coyne demanded that all aircraft be treated as equal participants in the system. Discussing the fact that most charter and GA aircraft are the first to be denied access to airspace during a special event or high-security period, Coyne stated, “Any proposal put forth by the FAA regarding user fees should absolutely recognize on-demand charters and general aviation operators in the same manner as airlines.”

He added that an ATC system that continues to operate in the same way with a new user-fee structure will provide no benefit to the charter and GA community and could ultimately reduce air transportation in this country at a time when we should be looking at ways to increase service.

Earlier this year NASAO opposed the administration’s attempt to strip $600 million from the already authorized $3.6 billion 2006 Airport Improvement Program (AIP) investment package, which benefits the entire aviation system.

“A $600 million reduction in the AIP would result in a 40-percent reduction in airport apportionment and a 50-percent reduction in federal discretionary investment in all state aviation infrastructure programs,” said Ogrodzinski. “It is an interesting coincidence that the airline industry says that the fuel tax break will cost the nation $600 million.”