Both the House and the Senate have begun the arduous process of reauthorizing the FAA, in other words replacing the historic Aviation Investment and Reform Act for the 21st Century (AIR-21), which set spending priorities for the past three fiscal years. AIR-21 expires September 30, the end of fiscal year 2003.
Congress passed AIR-21 overwhelmingly in 2000, earmarking $40 billion for the FAA over the three-year life of the act. Among its provisions was “unlocking” the Airport and Airway Trust Fund, in which lawmakers agreed that all of the money flowing into the fund from aviation taxes would be spent on the FAA and airports.
The Bush Administration has proposed a $14 billion reauthorization budget for the FAA for FY 2004, calling for no new user fees but taking a larger portion of the money from the aviation trust fund. Beyond that, the White House said it wants a four-year budget reauthorization for the FAA this time around, versus the three years contained in AIR-21.
Although revenues going into the trust fund have declined as a result of the flat economy and effects of 9/11, the Administration proposes to increase the amount of money taken from the fund from 76 percent to 88 percent by the end of the reauthorization period. The budget for FY 2004 (Oct. 1, 2003, to Sept. 30, 2004) is about 3 percent higher than the estimated total for 2003.
The House and Senate have already held several oversight hearings on FAA reauthorization, including the Airport Improvement Program (AIP). There are about 3,344 public-use airports eligible for AIP grants, ranging from the 437 primary airports to general aviation airports, which share 20 percent of the total AIP funds. The House aviation subcommittee has heard from airport executives and commercial aviation, and general aviation is scheduled for April 9.
The AIP is funded entirely by the Airport and Airway Trust Fund, which held $12.6 billion in its coffers at the beginning of FY 2003 (last October 1). In addition to the AIP, the trust fund fully pays for the FAA’s ATC facilities and equipment (F&E) modernization program and its aviation research program, as well as partially paying for the salaries, expenses and operations of the agency.
The aviation trust fund continues to earn interest on its cash balance, and interest revenue in 2002 totaled approximately $860 million. According to the House aviation subcommittee, that means the trust fund tax and interest revenue, together with various offsetting collections, totaled about $10.1 billion in FY 2002. The President’s budget projects that the trust fund revenue will increase to $10.2 billion in 2003 and to $11.1 billion in 2004.
The bulk of the trust fund revenue comes from a 7.5-percent airline passenger ticket tax, which amounted to $4.8 billion in FY 2002. The passenger flight-segment fee accounted for another $1.5 billion and the international departure and arrival taxes $1.3 billion. Aviation fuel taxes totaled $789 million.
At a hearing on AIP funding early last month, House aviation subcommittee chairman Rep. John Mica (R-Fla.) called on Congress to pass legislation to speed up airport improvement projects, perhaps as part of the FAA reauthorization process. Standalone streamlining legislation that passed the House last year later died in the Senate.
Gina Lindsey, managing director of Seattle-Tacoma International Airport (SEA), told the house panel that it will take Sea-Tac longer to build its new runway (now in its 16th year and counting) than it took to construct one of the Great Pyramids in Egypt.
“As one example of the bizarre regulations we’ve faced–this one at the state level–we’re not allowed to use fill dirt that would be acceptable for the backyard of a day-care center, dirt that’s OK for kids to eat but evidently not clean enough to build a runway on,” she said. “The benefits of required mitigation measures are at times not clearly defined and go beyond what is justifiable.”
In addition to delaying airport projects, airport executives said that federal, state and local red-tape was costing millions of dollars annually. Lindsey said the cost of the runway at SEA has already ballooned by one-third, from $580 million to a recent estimate of $773 million. “It is going to be significantly more than that,” she declared.
Witnesses also described the airports’ burden of financing significantly more security measures after 9/11. A substantial amount of airport funds that would have gone to infrastructure enhancements and expansion before 9/11 have since had to be diverted to accommodate new baggage-screening equipment and other security initiatives.
“It is imperative that legislators focus on the potential effect on safety and security at airports so that airports are not forced to choose between spending AIP funds on much needed safety and capacity projects or on security-related projects mandated by the federal government,” said William DeCota, director of aviation for the Port Authority of New York and New Jersey. The authority runs Kennedy International, Newark Liberty International, La Guardia and Teterboro Airports and the Downtown Manhattan Heliport.
Mica agreed: “It is important that we return to the primary purpose of the trust fund, and that is capacity enhancement. “I think we made a start in that direction in two recent appropriation bills, where $738 million and $265 million were provided from the general fund for physical modification of airport terminals to accommodate explosive-detection systems.”
The American Association of Airport Executives (AAAE) and the Airports Council International-North America (ACI-NA) called for a “modest” increase in AIP funding from the current $3.4 billion to at least $4 billion, along with more flexibility on how the AIP money and proceeds from passenger facility charges (PFCs) can be spent.
The two organizations said that even $4 billion would not be nearly enough to pay for half of the $9.2 billion in AIP-eligible capital needs that airports will have each year, although it would address the fact that the AIP share of the trust fund has been declining the last three years.
AAAE and ACI-NA estimate that total capital development costs for airports will be approximately $15 billion per year, and the modest increase in AIP funding combined with other revenue sources will only help close the gap. “We would like to stress, however, that the $15 billion in capital needs does not include the cost of installing explosive-detection systems (EDS),” they said, “so the funding gap would expand dramatically if airports are forced to use their AIP funds to pay for security.”
Mica acknowledged that many of the nation’s airports are stretched to their financial limits and “do not have a clue” as to how future capacity infrastructure and security improvements will be funded.
“If you believe, as I do, that air traffic will eventually return to its former levels, then we need to be thinking now about how we are going to invest in the infrastructure needed to accommodate that growth,” he said. “If we do not, we will be facing the same congestion and delays that preceded 9/11.”