EAA Briefing on User Fees

The Issue:  Who Will Fund the FAA? Who Will Control It?
How FAA Funding Works
EAA’s Position on User Fees
What Would Happen If User Fees Were Implemented?
Who is Pushing User Fee Proposals? Why?
Why Now?
User Fees Time Line
Things to Remember: Key Points

The Issue:  Who Will Fund the FAA? Who Will Control It?

The Obama Administration has maintained a proposal by the former Bush Administration to make fundamental changes in how the Federal Aviation Administration’s annual operating budget and capital improvement initiatives are funded.
The Bush Administration had said that a “new funding mechanism” was needed that “ties revenues to costs and allows us to manage FAA more efficiently.” The administration proposed radical changes in how the FAA would be funded and how it would be controlled. Their proposed changes included:

• implementation of a user-fee system to fund air traffic control and other infrastructure
• significantly higher fuel taxes for general aviation, and
• a dramatic cut in general tax revenues (from all taxpayers) to fund FAA operations.

In addition, the Bush Administration proposal included provision for who controlled the FAA’s revenue generation process and who decided how the FAA’s money should be spent:

• Congress would have lost substantial control over FAA operations and expenditures; and  
• Control would be given to an advisory board made up of “major users” of the airspace system - predominantly the airline industry.

If enacted, these proposals, whether Bush’s or Obama’s, would effectively shift the financial burden of the national airspace system almost entirely to the direct users of the system, ignoring the value of air transportation to the nation’s economy as a whole. Control of the FAA’s operations and budget would be, in effect, handed over to the airlines who have the ability to pass any additional costs on to their customers unlike general aviation pilots and aircraft owners.

How FAA Funding Works

The FAA’s budget covers the entire national airspace system including air traffic services, navigational aids, airports, terminals, research and development, airman and aircraft certification, and all other aviation related services and infrastructure.
Since 1971 the FAA has been funded by direct users of the system, through fuel taxes and ticket excise taxes which are paid directly into the Airport and Airway Trust Fund (commonly known as the Aviation Trust Fund) to pay for major capital infrastructure improvement programs and by all U.S. taxpayers through the federal government’s General Fund to pay for the FAA’s general operations.

In recent years, the FAA’s total budget has been approximately $14.3 billion per year, 42% for capital projects and 58% for operating expenses.

The problem is:

• Direct users, who should be paying for FAA capital projects (42% of the total FAA budget), are providing 77% of the agency’s revenues.
• The General Fund, which should be paying for FAA operations (58% of the total FAA budget), is providing only 23% of FAA’s revenues—less than half of FAA’s operating budget.

The other 35% of the FAA’s operating budget is being paid out of the Aviation Trust Fund. That steals money away from the things the trust fund is supposed to be supporting, specifically capital improvements in airports and air traffic control, and research and development initiatives.

The Aviation Trust Fund is not going broke. Even though it is being drained to pay 35% of the FAA’s operating expenses, the Aviation Trust Fund generates enough revenue to cover existing capital improvements. Over the past few years, the trust fund revenues have hit record highs and analysts project that its revenues will continue growing.

The administration, the DOT, and the FAA claim that the FAA needs a new source of revenue. They claim that trust fund revenues are declining and that there will not be enough money to cover the modernization projects that are needed.

Those claims are simply not supported by the facts. The current funding structure has worked for 40 years. And current revenues are at record highs and expected to go higher. Nonetheless, the administration, the DOT, the FAA, and the airline industry want to throw out the current funding structure and replace it with an onerous and expensive system of user fees.

EAA's Position on User Fees

Working on behalf of its 160,000 members, the Experimental Aircraft Association is patently opposed to the implementation of a user fee system.

• The U.S. enjoys by far the largest, safest, most efficient, aviation system in the world and extends that system freely to all of its citizens.
• No other place in the world allows an individual of relatively modest means to enjoy the freedom and rewards of personal flight. Sixty percent of the world’s pilots live and fly in the United States. Nearly seventy percent of the world’s aircraft are registered and operated solely in this country.
• Our aviation infrastructure is unique in the world and it has been successfully built and maintained using the existing system of fuel taxes, ticket taxes, cargo fees, and general fund contributions.

There can be no justification for imposing a user fee system on U.S. general aviation.

• User fees have proven time and again to be expensive, inefficient, and damaging to general aviation in every country in which they have been tried.
• Canada, Germany, Australia, the U.K., the Netherlands, the Philippines, Austria, Israel, and other nations have implemented user fees in one form or another, all with disastrous results for their limited general aviation communities. Each of these countries has aviation transportation infrastructures that are a tiny fraction of the U.S. aviation system, and none enjoy the vibrant opportunities for personal and recreational flight that we have here.

General aviation as a whole stands united in opposition to user fees.

• The airlines, seeing the difficulty in trying to take on the political clout of hundreds of thousands of individual pilots and aircraft owners in this country, attempted a divide-and-conquer strategy.
• They claimed they would leave personal and recreational aviation alone, but demanded that business aviation should shoulder a greater percentage of the economic burden.
• Business aviation is general aviation. It would be naïve to think that such a user-fee requirement imposed on business aviation would not quickly encompass all of general aviation. EAA and other aviation organizations stand united in the defense of all general aviation from this coordinated attack.

What Would Happen If User Fees Were Implemented?

Simply put, it would cost you a LOT of money. But there is more to the story than just shelling out more dollars for services that you already pay for through fuel and ticket taxes.

1. The freedom of unfettered access to the nation’s airspace would forever disappear under a user fee system.
2. The permanence and stability of the national airspace system would be compromised by constantly shifting priorities, ever-increasing fees, reduced flexibility, reduced Congressional oversight, and economic disincentives to make use of the airspace and air traffic systems.
3. The general aviation industry as a whole would be damaged—not just for personal and recreational flyers but for non-scheduled commercial operators, flight training, disaster relief, medical transport, crop dusting, aerial firefighting, police and rescue operations, business travel, weather and traffic reporting, and more.
4. If general aviation declines, many communities would lose their access to air transportation, because only general aviation serves local airports. The U.S. has approximately 5,400 public use airports and more than 17,000 landing facilities nationwide. The airlines only serve about 500 of these airports. And the vast majority of airline flights are concentrated at just 28 congested hub airports.
5. The entire U.S. economy would suffer with the loss of jobs in aircraft manufacturing, aircraft maintenance and service, flight training, business travel, tourism, and any other activities that support, or are supported by, general aviation.
6. America’s general aviation industry and community is unique in the world. Here, general aviation is the bedrock foundation of the entire aviation industry.
   • General aviation alone accounts for an annual economic impact on the U.S. economy of more than $11 billion and employs more than 1.3 million workers.
   • The aviation industry as a whole contributes $640 billion in economic impact in this country—5.4 percent of U.S. GDP—and provides more than nine million jobs. Aircraft and related products and services create our largest single trade surplus.
7. A fee-for-service air traffic system, as proposed by the administration, would dramatically increase the complexity of personal and business flying. And it would require a new and expensive bureaucracy for billing, collection, and enforcement—similar to the IRS.
8. The Bush Administration says it only wanted to impose a single user fee for business aircraft on instrument flight rules (IFR) flight plans. But under the administration’s proposal:
   • The FAA could impose user fees on virtually any airspace or air traffic service.
   • There would be no Congressional oversight or cost control.
   • FAA would have license to arbitrarily raise or impose fees to cover “expenses” which today cannot even be accurately identified or quantified, including:
     • Weather Briefings Fees
     • Flight Planning and Filing Fees
     • Landing Fees
     • Security Fees
     • Other Airport Service Fees
     • Potentially any contact with the civil aviation agency
       • The FAA could require you to pay user fees for services you did not use.
       • Based on the Bush’s administration’s budget projections, it was estimated that, when added up, general aviation user fees could run anywhere from $30 to $300 per flight, depending on the flight’s duration and the services used (or imposed) on the flight.
9. Many of the services provided by the FAA enhance the safety of pilots, passengers, other aircraft, and persons on the ground. Visual flight rules (VFR) flight plans and VFR traffic advisories (“flight following”) are good examples. User fees for those services would discourage pilots from using them, thus potentially making the skies less safe for everyone.
10. The current bureaucracy for collecting fuel taxes and ticket taxes is simple, lean, and efficient. A user-fee system would require a complicated and expensive bureaucracy drawing funds away from the main purpose for those collections; FAA operations and capital projects.
    • The Aviation Trust Fund receives its revenue directly from fuel refiners and airlines—very large sums collected a few times a year from a relative handful of entities.
    • A user fee system would require the FAA to calculate and collect relatively small sums of money, on a daily basis, from hundreds of thousands of users necessitating a massive new bureaucracy.

Who is Pushing User Fee Proposals?  Why?

The White House
Like the Bush administration, the Obama administration wants to charge user fees to cover FAA’s costs and thus, the national airspace system. Doing this would remove FAA funding from the annual budget submission, allow the administration to shift general fund tax revenues away from the FAA and use them for other purposes, and artificially make the federal budget deficit look smaller.

The Department of Transportation (DOT) and the FAA
As an extension of the Bush administration, the DOT and the FAA want a “new funding mechanism that ties revenues to costs and allows us to manage the FAA more efficiently.” This is Washington-speak for:

• charging pilots and aircraft owners directly for all FAA services they use (and would likely be forced to use), and
• eliminating congressional control and oversight over how FAA raises and spends its money.

The Major Airlines
After several years of hemorrhaging money, some airlines were showing modest profits in 2007. But their financial status is inherently unstable, due to failed business models, runaway costs, and cutthroat competition. More recently, skyrocketing fuel costs have driven the airlines to the wall.

They are looking for every possible way to reduce costs and shed debt through labor negotiations, mergers and restructuring, and bankruptcy protection.

Now, with the support of the Bush and Obama Administrations, the airline industry wants to:

• Take a substantial share of the cost of funding the FAA and the national airspace system and shift it away from the airlines and onto general aviation. By some estimates, the shift would save the airline industry—and cost general aviation—some $2 billion a year.
• Take control of the air traffic system and airspace access away from Congress and give it to the airlines.

These economic pressures continue to exist.

Congressional Members
Some members of Congress believe that the surest way to end government inefficiency is to place government programs into the hands of private enterprise. They imagine great cost savings for the government and great profits for large corporations if they hand off the air traffic system, airports, and other aviation infrastructure to private hands.
The airlines and the administration have each undertaken deliberate, coordinated campaigns to forward their respective agendas. Unfortunately for general aviation, the airlines and the FAA are pushing a common agenda, although they have very different motivations.

Why Now?

By law, every few years, Congress must renew funding for the FAA and “reauthorize” the agencies’ ability to collect and spend revenue. The FAA’s most recent reauthorization was extended until September 30, 2009. Congress has repeatedly granted short-term extensions  to the current budget through continuing resolutions while it wrangles over new proposals for the FAA’s budget and its mechanisms for collecting and distributing revenues.
Congress can keep extending the current authorization almost indefinitely. Extensions preserve the FAA’s current budget and its existing revenue collection and distribution mechanisms—systems that have been in place for more than 40 years.
So long as Congress keeps extending the current FAA funding, there will be no new user fees for general aviation. But extensions come with a cost. It is difficult for anyone at the FAA to do anything without new funding authorization, because no one at the agency—or outside it—knows what programs and activities will be funded or cut when Congress finally passes a reauthorization bill. As long as the new reauthorization bill is stalled, so is modernization of the nation’s air traffic control and other airspace infrastructures.
For the past 40 years, whenever Congress reauthorized FAA funding, it preserved, with minor adjustments, the revenue collection and distribution systems that were put in place 40 years ago.

A User Fees Time Line

July 2006 — EAA launches its campaign to prevent user fees after the Bush Administration, FAA, and airline industry unveil their plans to impose user fees on general aviation.

June 2007 — U.S. Senate introduces S.B. 1300, “The Aviation Investment and Modernization Act of 2007,” a bill to authorize appropriations for the Federal Aviation Administration for fiscal years 2008 through 2011, to improve aviation safety and capacity, to modernize the air traffic control system, and for other purposes. The bill includes provisions for substantial hikes in fuel excise taxes and a $25-per-flight IFR user fee for turbine-powered general aviation aircraft.

June 2007 — U.S. House of Representatives introduces H.R. 2881: The FAA Reauthorization Act of 2007. The bill includes fuel tax increases and hikes in other existing fees, but no general aviation user fees.

July 2007 — At AirVenture Oshkosh 2007, top executives of the major general aviation organizations and several federal lawmakers meet in an open forum to discuss the impact of and voice their united oppositition to user fees.

September 2007 — The FAA Reauthorization Act of 2003 expires. Congress extends the Act’s revenue and spending provisions to June 30, 2008.

September 2007 — U.S. House of Representatives passes H.R.2881, with a 65% hike in aviation fuel taxes but no general aviation user fees.

September 2007 — S.B. 1300 stalls as Senate’s Finance Committee and Aviation Subcommittee argue over user fees.

April 2008 — Senate committees reach a compromise that drops the IFR user fee from the bill but retains a 65% increase in aviation jet fuel taxes on business-jet operators. The bill stalls again in committee over disagreements on other amendments unrelated to user fees or aviation.

June 2008 —With the FAA budget reauthorization bill stalled in the Senate and FAA funding about to expire, Congress votes to extend the existing FAA budget through the end of September 2008. The budget extension will keep the lights on at the agency; it leaves a great deal of long-term FAA programs and projects in limbo because no one knows what the final FAA budget bill will include.

June-July 2008 —The airline industry, the FAA, and the Bush administration continue to push for GA user fees and airline-dominated control of FAA revenues and spending. EAA and the general aviation community continue the fight against user fees.

February 2009 – U.S. House of Representatives introduces H.R. 915: The FAA Reauthorization Act of 2009.  (The 111th session of Congress convened on January 6, 2009.)  Extension granted through September 30, 2009.

Today’s government continues to work under a continuing resolution for FAA funding.  Eventually, Congress will have to pass a new FAA budget bill.  No one can safely predict what compromises the FAA budget bill will contain when it finally reaches president’s desk but EAA continues to work every day to prevent the introduction of new user fees and taxes on the general aviation community.

Things to Remember:  Key Points

• The U.S. aviation system is the largest, safest, and most efficient in the world.
• The Airport and Airways Trust Fund pays for building and maintaining the U.S. aviation system. Its annual revenues have been at record highs, and are projected to go higher still. The FAA is not running out of money provided the American public continues to pay its fair share.
• The Aviation Trust Fund is intended by law to pay for aviation infrastructure and capital improvements, not ongoing FAA operations. The General Fund contribution should be substantially increased, to cover greater share of the FAA’s operating expenses.
• The current system of aviation excise taxes and the means of collecting them are extremely efficient. By comparison, a user fee system would be very complicated and expensive.

Congress plays a critical role in providing budget and management oversight of the FAA. Past administration’s proposals would eliminate that oversight and put control of the FAA in the hands of the airlines.  So far the Obama Administration has not proposed this measure but there is still pressure to make this happen.  

• The U.S. air transportation system is a national asset that benefits every citizen of this country. Every taxpayer should help pay for it through a healthy general fund contribution to the FAA operations budget.
• As a national asset, the U.S. air transportation system does not belong to any one set of users; military, airline, general aviation and the public. It is a shared asset and no one sector should be allowed to control it.
• There are no financial constraints on the FAA’s ability to modernize the air traffic and national airspace systems. FAA should develop a sound plan that accommodates the needs of all users and contains appropriate cost accounting and controls. That is the plan the FAA should present to the aviation community and Congress.
• Continue to be involved.
• Contact your congressional representative and senators in Washington, D.C. and tell them why this issue is important and how it affects you, your family, your business, and your community.
• Tell other pilots, aircraft owners, EAA members, and aviation enthusiasts about this issue and encourage them to get actively involved.
• Support EAA and other general aviation organizations through your continued membership and your donations. As a community, we have some clout. Your membership and financial support make that possible.

EAA and its members will continue to fight against general aviation user fees, and will continue to pressure Congress to pass a sensible FAA budget bill.