User fees included in proposed FAA budget

 - March 6, 2007, 10:02 AM

General aviation’s concerns found a firm basis last month when the FAA presented a reauthorization proposal that includes a more than 300-percent hike in the fuel tax and myriad fees for obtaining a pilot’s license, registering an airplane or receiving a medical.

The new proposal for funding the agency over the next 10 years would more than triple GA fuel taxes, from 21.8 cents per gallon to 70 cents per gallon, and create a mishmash of new or higher fees for such things as pilot licensing, aircraft certifications and other services.

It also would institute new user fees for GA flights that pass through airspace within several miles of large airports. All domestic commercial and GA users would pay a fuel tax of 13.6 cents per gallon (included in the 70-cent increase) to fund the Airport Improvement Program, the Essential Air Service program and the FAA’s R&D.

The 7.5-percent airline ticket tax–which is paid by airline passengers–would be replaced with a system of user fees, which the airlines undoubtedly will pass on to passengers.

The FAA bill–called the “Next Generation Air Transportation System Financing Reform Act of 2007”–allows general aviation to pay the bulk of its tax responsibility at the pump, albeit at a much higher rate, while at the same time eliminating the airline ticket and cargo taxes. In its place, scheduled airlines and cargo carriers will be taxed with as-yet-undetermined user fees.

The measure also gives the FAA power to float bonds up to $5 billion, which will help pay infrastructure costs for the next-generation ATC system, estimated to be between $14 billion and $20 billion between now and 2025. Equipage of the nation’s aviation fleet is also pegged to cost between $14 billion and $20 billion, which would be paid by owners and operators.

Overall, the FAA’s proposed budget for Fiscal Year 2008 is $14.077 billion, up from the FY2007 request of $13.724 billion but down from the $14.231 billion that Congress is authorizing in a continuing resolution that will appropriate money for most government departments through the end of FY2007 on September 30. The agency’s FY2008 budget will be funded under the current system of taxes. The proposed tax package would not take effect until FY2009.

An Unworkable Plan
Judging from its initial reception before the House aviation subcommittee, the White House funding proposal faces a tough road in Congress. Rep. Vernon Ehlers (R-Mich.), an avid supporter of general aviation, said the proposal “is dead on arrival.”
Rep. Robin Hayes (R-N.C.), a commercial-rated pilot, said, “There is no way that I can come to the conclusion that this user fee proposal is fair, equitable or that it will work.”

Echoing that view, Rep. Sam Graves (R-Mo.) roundly denounced the proposed avgas hike and new user fees. “I know there’s going to be a gas tax hike, so I’m bracing myself, but then I hear 70 cents gallon, and it just floors me,” he said.
Graves, who also is a pilot, groused, “This will make the skies safe because nobody will fly any more.”

The other side of the aisle was equally cool about the FAA plan to finance the FAA and the next-generation ATC system through a combination of user fees, taxes and a federal government contribution from the U.S. treasury.

Subcommittee chairman Rep. Jerry Costello (D-Ill.) noted in his opening remarks that if the new funding plan were put into effect in FY2008, it would raise $600 million less than the current system.

“I question the wisdom of moving to a new financing system that will not generate as much revenue as the current tax structure when we clearly need to make critical investments now to ensure that our nation’s air traffic control infrastructure is robust for the future,” he said. Under questioning from lawmakers, FAA Administrator Marion Blakey conceded that the current system of taxes would be able to raise enough money to fund the next-generation ATC modernization program.

“We’re not in agreement with what you are proposing,” said Rep. Leonard Boswell (D-Iowa), an active pilot. “I think this is an unfair approach, an unwise approach and I don’t think we have to do it.”

Meanwhile, over on the other side of Capitol Hill, Sen. Sam Brownback (R-Kan.) questioned Transportation Secretary Mary Peters about her plans to implement user fees and significantly raise aviation fuel taxes. He pointed out that the President’s budget shows that the upcoming reauthorization bill and its user fees and fuel tax scheme would raise less revenue than simply extending current law and tax rates. Administration budget documents show that between 2008 and 2012, the new user fee scheme will raise approximately $1 billion less than the current funding mechanism.

The senator went on to ask, “How can you say your funding proposal is needed to modernize our nation’s air traffic control system when you would raise less revenue over the next five years?”

Said General Aviation Manufacturers Association president and CEO Pete Bunce, “I’m pleased that within days of the administration releasing its budget, members of Congress are asking tough questions about this ill-advised funding scheme. We hope that more members of Congress will challenge the administration’s rhetoric that our aviation system cannot be modernized without implementing user fees.”

NBAA denounced the funding plan for providing a huge tax break and other giveaways to the large airlines, while punishing the mostly small and midsize businesses in general aviation and stripping Congress of most of its role in aviation system funding decisions.

“It’s fitting that the FAA’s plan was introduced on Valentine’s Day, because it’s a sweetheart deal between the agency and the airlines,” NBAA president and CEO Ed Bolen said. “Going into the FAA reauthorization process, the airlines wanted three things. They wanted user fees; they got them. They wanted to shift their costs to general aviation; they got that. And they wanted to reduce congressional oversight of the aviation system decision-making; they got that, too.”

He pointed out that revenues going into the Airport and Airways Trust Fund are
at record levels, and the Congressional Budget Office has said that the FAA will continue to have sufficient funds to fully support the transition to the next-generation air traffic system.

“We are disappointed with the lack of vision and stakeholder equity in the FAA’s proposal,” said National Air Transportation Association (NATA) president Jim Coyne. “Given the amount of time the administration has had to develop the proposal, it is remarkably lopsided and myopic.”

According to NATA, the Air Transportation System Advisory Board (ATSA) would be dominated by the airlines without a single representative from on-demand charter carriers or fractional ownership providers, two groups that provide a sizeable contribution to the aviation trust fund.

“This board, as proposed, is totally dominated by airline representation,” said NATA vice president of government and industry affairs Eric Byer. “There is no excuse for ignoring the charter and fractional communities. The FAA proposes to include at least three airline operatives on the ATSA Board but totally ignores the airlines’ direct competitors–charters and fractional–revealing the agency’s bias towards the airlines.”

AOPA blasted the financing proposal as a manufactured crisis based on flawed financial assumptions about the viability of the current funding system and the cost of the next-generation ATC system.

“The proposal is nothing more than a cynical attempt to shift FAA costs to a different set of taxpayers and to take control of the agency away from Congress and put it in the hands of unelected bureaucrats and airline executives,” said AOPA president Phil Boyer. “It doesn’t save money and it doesn’t make the FAA more efficient. This bill would be disaster for general aviation pilots and all the communities–ignored by the airlines–that depend upon general aviation for safety, commerce and air transportation.”