User fees likely to meet resistance in Congress

 - March 27, 2007, 7:06 AM

As Congress began hearings last month on the Bush Administration’s plan to fund the FAA, FAA Administrator Marion Blakey attempted to do what one lawmaker called “defending the indefensible.”

Early indications from Capitol Hill signaled that the White House proposal for increased taxes and user fees to provide the necessary money to run the FAA and modernize the ATC system would have rough sledding in Congress.

Under the FAA’s proposal, most of the agency’s revenue would come from new cost-based user fees, along with new certification and registration fees. The fee rates would be determined by the FAA and driven primarily by the agency’s cost requirements, with input from a proposed new governance board called the Air Transportation System Advisory Board.

For general aviation, the most unpalatable part of the White House plan is an increase in fuel taxes–a hike on GA jet fuel from 21.8 cents a gallon to 70 cents per gallon and aviation gasoline from 19.3 cents to 70 cents–in addition to user fees.

The FAA is also requesting authority to propose additional fees for certain activities pertaining to the issuance of certificates to foreign and domestic repair stations, flight and maintenance technical schools, training of designees, appointment of delegated organizations and training of foreign aviation authorities. The agency would determine the charges for these activities at a later date.

The proposal would also give the FAA the authority to establish additional, unspecified fees to cover the cost of other aviation regulation, certification and related services.

At one of several hearings last month, Rep. Jerry Costello (D-Ill.), chairman of the House aviation subcommittee, declared, “I have major reservations about implementing a user fee with no apparent cap.”

Congress is questioning the need to change to a new system of financing the FAA when it is generally agreed that the FAA’s new proposal would hypothetically yield approximately $600 million less in Fiscal Year 2008 than the current tax structure and more than $900 million less from FY2009 to FY 2012.

Blakey told the subcommittee that without the funding provided by the “Next Generation Financing Reform Act of 2007,” there will be no next-generation air transportation system (known as NGATS or NextGen) in time to prevent gridlock in the skies. “Without the program flexibility, financial stability and beneficial budget treatment that this bill brings,” she said, “our plan for the next-generation air transportation system is likely to limp along, far behind the traffic.”

She warned that Europe is already moving ahead with its Single European Sky ATM Research and has the funding to do it. “We need to take bold action, and with the taxes and user fees expiring in September, we have to get this right the first time,” she said.

Blakey told lawmakers that a seat on a jetliner is the most heavily taxed spot in all of aviation. “General aviation represents 16 percent of the cost to operate the system, yet it currently pays only 3 percent,” she said. “Everyday passengers shouldn’t have to pick up the tab for a CEO flying across the country in a private jet.”

While Blakey was the only witness at a March 14 hearing of the House aviation subcommittee, the industry did get to present its views on the FAA funding brouhaha before the Senate aviation subcommittee.

NBAA president and CEO Ed Bolen reminded the subcommittee that in 1997 the airlines argued that user fees were needed to overhaul aviation system funding. A decade ago airlines also wanted to shift some $600 million in costs and reduce the role of Congress in aviation system oversight.

“To everyone who was around the last time the nation’s big airlines pushed that scheme, there is a strong sense of déjà vu,” Bolen said. “This time around, the airlines have picked a new target for their tax shift–general aviation–and they have increased the amount to $2 billion.”

Bolen maintained that the battle over aviation user fees is about whether Congress will retain control of the air traffic system or whether that control will shift to unelected bureaucrats or even industry. Additionally, he said, allowing the airlines’ plan to prevail would impose devastating costs on the small and midsize businesses that rely upon general aviation in small and rural towns nationwide.  

“Revenues going into the Airport and Airway Trust Fund are at record levels,” Bolen said, “and no less an authority than 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 transportation system.”

The debate also has spilled over to other venues. The Aerospace States Association (ASA), an organization of lieutenant governors and governor-appointed delegates to promote a state-based perspective in federal aerospace policy development, held a hearing on Capitol Hill on March 13 to discuss FAA reauthorization and funding.

The National Association of State Aviation Officials (NASAO) strongly urged Congress to resist calls by the Administration and the airline industry to scrap the existing tax system. NASAO president and CEO Henry Ogrodzinski said NASAO is opposed to any new user fees for general aviation. “There is no need to build an expensive and inefficient new bureaucracy to calculate and collect new user fees,” he told the ASA delegates.

Not all lawmakers expressed opposition to the plan. “We’ve got to sober up and realize that we must devise a new method of adequately funding the FAA and the nation’s next-generation air transportation system,” said Rep. John Mica (R-Fla.), the ranking Republican on the House Transportation and Infrastructure Committee.
“To address the growing capacity problems, the FAA has proposed a hybrid financing system and we must give this system our serious consideration.”

At the Senate aviation subcommittee hearing, Sen. Trent Lott (R-Miss.), the ranking Republican on the panel, told witnesses, “Every one of you is going to pay more. Let’s find out how we can make that happen.” The group included Jim May, president and CEO of the Air Transport Association; Bolen; Chip Barclay, president of the American Association of Airport Executives; Stephen Alderman, president of the Cargo Airline Association; and Patrick Forrey, president of the National Air Traffic Controllers Association.