EAA Government Advocacy Campaign To Prevent User Fees

The FAA Funding Question: A Debate On User Fees

What is the issue?

The fundamental questions concern how the Federal Aviation Administration’s annual operating budget and capital improvement initiatives should be funded; who should have control over the revenue generation process; and how the money is spent.

The Bush Administration has taken the position that a “new funding mechanism” is needed that “ties revenues to costs and allows us to manage FAA more efficiently.” As a result, the Administration has proposed radical changes in the way FAA is both funded and controlled in its budget reauthorization proposal presented to Congress in February 2007. This proposal includes the implementation of a user-fee funding mechanism, significantly (four-fold) higher fuel taxes for general aviation, and a dramatic reduction of the general fund contribution (from all taxpayers) to fund FAA operations. Such a method would effectively shift the financial burden of the national airspace system to the direct users of the system, ignoring the value of air transportation to the nation’s economy as a whole.

Questions Congress must answer this year:

1. Does the FAA require more money to continue its current operations?
2. Is the existing revenue-generating system of fuel and ticket taxes, combined with contributions from the general fund, failing to meet the FAA’s current and projected operational and capital improvement needs?
3. Should the system of taxes that has been in place for nearly four decades be continued or should a system of user fees be implemented?
4. How much of the operational cost of the nation’s aviation infrastructure should be paid by U.S. taxpayers as a whole through the general fund?
5. Are various users and beneficiaries of the national airspace system paying their fair share of the costs?
6. Who should have control of the national airspace system – the Congress, the Administration, or the airlines?

Who made this an issue and why?

The White House

First and foremost, the pressure for change comes from the Administration, which wants to be able to charge user fees to cover FAA’s costs (and thus the national airspace system). That would remove FAA funding from the annual budget submission. The Administration could use the money that would otherwise go to the FAA for other non-aviation purposes or to artificially make the budget deficit appear smaller.

The Department of Transportation and the Federal Aviation Administration

As an extension of the Administration, DoT and 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 wanting to charge pilots and aircraft owners directly for all FAA services they use (and would likely be forced to use) while eliminating congressional control and oversight over how they spend the money.

The Major Air Carriers

After several years of hemorrhaging money, some airlines are currently reporting profitability. Their status is inherently unstable, however, due to failed business models, runaway costs, and cutthroat competition. All of them are looking for every means possible to reduce costs and shed debt through labor negotiations and restructuring. In all but one case, the “legacy” air carriers chose to declare bankruptcy to help achieve these ends. Now they are turning to the government and other users of the national airspace system to further offload their expenses. The airlines want to do this by shifting a substantial portion of the cost of funding the FAA and the national airspace system onto general aviation; some estimates ranging as high as $2 billion annually. At the same time, they seek control over the air traffic system and airspace access they covet as their own.

Certain members of Congress

There is a belief held by some in Congress that government inefficiency means that every opportunity should be found for placing government programs in the hands of private enterprise. They see great opportunity for transferring the air traffic system, airports, and other aviation infrastructure into private hands, with tremendous profit potential for the major corporations who would most likely bid to run such systems.

Why is this an issue right now?

On September 30, 2007, funding for the FAA will expire, as will the revenue collection and distribution mechanism the FAA uses for its budget that has been in place for nearly 40 years. Between now and fall 2007, Congress must develop and pass legislation to “reauthorize” the very existence of the FAA and approve the budget “appropriation” to fund its continued operation. This process not only includes the debate as to how much money the Agency should receive for fiscal year 2008 (October 1, 2007, through September 30, 2008) and how it may be spent, but also how that budget will be funded — i.e. from fuel and ticket excise taxes and a general fund appropriation; the imposition of a user fee-based system of revenue collection; or some combination thereof.

How does the system work today?

Since 1971, the FAA (and thus 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) has been funded by direct users of the system in the form of fuel and ticket excise taxes. Those taxes are paid directly into the Airport and Airway Trust Fund (commonly known as the Aviation Trust Fund) combined with a contribution by all U.S. taxpayers through the general fund. Originally, the Aviation Trust Fund was intended to provide the revenue for major capital improvement programs in order to maintain and improve the aviation infrastructure of this country. The general fund contribution was intended to fund the general operating budget of the FAA.

In recent years, direct users of the system have paid for 77 percent of FAA’s combined $14.3 billion operations and capital improvement budget. The general fund has contributed 23 percent. The problem today is that FAA operating expenses alone comprise 58 percent of the total budget. That means the general fund portion (from U.S. taxpayers as a whole) still contributes only 23 percent of the funding, which covers less than half of the ongoing FAA operational expenses and none of the capital improvement programs. This ever-increasing shortfall is being drawn from the Aviation Trust Fund, which is now paying the majority portion of FAA operations. That steals money away from airport and air traffic capital improvement programs and research and development initiatives for which the fund was intended.

The fact that the Aviation Trust Fund generates sufficient revenue to cover existing capital improvements, even though it is now being shortchanged, and still covers the majority portion of the FAA’s annual operating budget, is testament to the success of the Airport and Airways Trust Fund and its revenue collection process. Over the last two years, the Trust Fund has brought in record levels of revenue. It is projected to continue to do so in the coming years, contrary to Administration, DoT, and FAA assertions that revenue is declining and that there will not be enough money to cover planned modernization initiatives.

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 today through fuel and ticket taxes.

1. The freedom of 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, and economic disincentives to make use of this resource.
3. The general aviation industry as a whole would be damaged not just for personal and recreational flyers but for commercial applications, flight training, disaster relief, medical transport, agricultural aerial applications, police, fire and rescue operations, business travel, weather and traffic reporting. The list is endless.
4. 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 air carriers only serve around 500 of these airports with by far the vast majority of flights concentrated at the 28 most congested hub airports. General aviation serves them all.
5. The entire U.S. economy would suffer with the attendant loss of jobs in aircraft manufacturing, maintenance, and service; flight training; business and tourism travel; and all other fields related to the support of, or benefited by, general aviation.
6. General aviation is the foundation on which the entire aviation industry is based and is unique in the world. A contraction of GA would also mean a contraction of the entire U.S. aerospace industry. General aviation alone accounts for an annual economic impact on the U.S. economy of more than $11 billion and employs more then 1.3 million workers. In her January 2007 speech to the Aero Club of Washington, Transportation Secretary Mary Peters said the aviation industry in total contributes $640 billion in economic impact in this country, or 5.4 percent of U.S. GDP, accounting for over 9 million jobs. That represents our largest single trade surplus.
7. Complexity of personal flying would increase dramatically with the implementation of a fee-for-service process of billing, collection, and enforcement. Just think of the bureaucracy of the IRS that has been implemented for identifying and collecting taxes!
8. Fees would likely be assessed for all manner of services with no cost control oversight, giving the FAA license to arbitrarily raise the fees to cover “expenses” which today cannot even be accurately identified and accounted for. A combination of these fees can run anywhere from $10-$50 minimum for a basic local flight to well over $300 for a long cross country flight using a live weather briefing, flight plan, flight following, and landing fee. Some examples of the types of fees that have been imposed in other countries include:
   • Weather Briefings Fees
   • Flight Planning and Filing Fees
   • Landing Fees
   • Security Fees
   • Other Airport Service Fees
   • Written Test Exam Fees
   • Airman Certificate Issuance and Renewal Fees
   • Aircraft Airworthiness/Modification Approval Fees
   • Potentially any contact with the civil aviation agency
9. In some countries where a user fee-based revenue collection system has been implemented, some of these fees are mandatory whether you want to use the services or not.
10. The cost associated with flying under a user fee system creates a significant disincentive for pilots to use the safety enhancing services of weather briefings, flight planning, flight following, and in-flight FSS weather updates creating the potential for a net reduction in safety.
11. A user fee system costs a lot to operate because of the infrastructure and bureaucracy necessary to track and collect the fees. This would cost every U.S. taxpayer more money. The present system of excise taxes is paid directly to the government by fuel refiners in the case of fuel taxes and the airlines in the case of ticket taxes. This means that today the government collects very large sums of money from a relative handful of sources. User fees would require the government to collect very small sums of money repeatedly from literally hundreds of thousands of sources.

Who is grinding their axes?

The airlines and the Administration have each undertaken deliberate, coordinated campaigns to forward their respective agendas. Unfortunately for general aviation, the air carriers and FAA are advancing a common agenda with very differing motivations.

The airlines want to be able to control access to the nation’s airspace and air traffic system, ensuring that modernization occurs in the image that most suits their needs. They also want to be able to offload costs by shifting the burden away from themselves and onto general aviation.

The FAA wants to remove Congress from its budgetary oversight and management role, so that the Agency has free reign over how it raises money and how it spends it. FAA would like to be able to establish its own budget without Congressional constraints and raise whatever amount of money it needs to cover those costs. Their proposal is to tie user fees to the cost of providing services.

How is this all going to happen?

The first tangible signs of a move toward a user fee proposal have occurred. President Bush submitted his budget proposal to Congress on February 5, and the following appears in the FAA summary:

“The reauthorization proposal transforms FAA’s excise tax financing system into a cost-based system that recovers the costs of providing air traffic control services to commercial aviation operators through user fees and the costs of providing air traffic services to general aviation operators through a fuel tax.”

The budget proposal itself covers the entire U.S. government and does not go into specifics about the FAA and how it will be funded. The FAA Reauthorization Bill will soon be submitted to Congress. That bill carries all of the line items for various programs and will indicate where the FAA intends to receive its money. Any user fee proposal will be outlined in this Bill.

It is likely that both the House and the Senate will create their own versions of the FAA Reauthorization Bill, reflecting the will of Congress as opposed to that of the Administration. Hearings will be held in the Senate Commerce Committee and the House Committee for Transportation and Infrastructure and their respective aviation subcommittees. Overarching issues such as user fees will be discussed and various amendments added to the House and Senate bills. Final versions of the bills will not likely be completed until at least summer, at which point they will be sent to the House and Senate floors for a full vote. In all likelihood, the House and Senate versions will contain differences, necessitating a conference committee between the two houses to hammer out an agreement. Once this is accomplished, the bill will be sent to the president for his signature.

All of this must be accomplished by September 30, 2007, when the current FAA authorization runs out. The key point is that after this date the entire funding process that has been in place will expire with no replacement unless the Congress and President take expedient action. Without new authorization, no fuel and ticket taxes can be collected by the government and nothing can be spent by the FAA. The system will for all intents and purposes be shut down. This threat will undoubtedly be used by the airlines and the Administration to advance their respective positions.

What is EAA’s Position on this issue?

Working on behalf of its 170,000 members, the Experimental Aircraft Association is patently opposed to the implementation of the user fee system. The U.S. enjoys the 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. 60 percent of the world’s pilots live and fly in the United States. Nearly 70 percent of the world’s aircraft are registered and operate 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 many 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 size 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 pending difficulty in trying to take on the political clout of hundreds of thousands of individual pilots and aircraft owners in this country, is attempting a divide-and-conquer strategy. They claim they would leave personal and recreational aviation alone, but demand 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 of general aviation from this coordinated attack.

The longstanding system of funding our massive and complex air transportation system works well in this country. There is plenty of money to maintain this infrastructure and improve it through modernization and technological advancements, without having to unreasonably burden individual pilots and aircraft owners or introduce economic disincentives that could reduce safety.

That is a lot of information…what should I remember most?

• The U.S. aviation system is the largest, safest, and most efficient in the world.
• The Airport and Airways Trust Fund that built and maintains this system today is generating record levels of revenue and is projected to continue to grow. The FAA is not running out of money.
• The system of excise taxes and the method of collection are extremely efficient; a user fee system would be complex, bureaucratic, and expensive.
Congress plays a critical role in providing budget and management oversight of the FAA and must not be cut out of this oversight role.
• The U.S. air transportation system is a national asset that benefits every citizen of this country and 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, or general aviation. It is a shared asset and no one should be attempting to usurp control.
• There are no financial constraints on the FAA’s ability to modernize the air traffic and national airspace systems. They need only develop a plan that is sound, accommodates the needs of all users, and contains appropriate cost accounting and controls, then present it to the aviation community and the Congress.

What can I do?

1. Contact your congressional Representative and Senators in Washington. Educate them on the seriousness of this issue and the direct impact it will have on you, your family, your business, and your community.
   • Write a letter detailing what you know of this issue and how it will impact your life. Do not assume that your congressional representatives even know about this issue so explain the matter in some detail. Chances are that if they have heard anything about this issue, it has been from the concerted and coordinated lobbying efforts of the Administration, DoT, FAA, and the airlines telling their one-sided version of the story.
   • Call your Congressman and Senators at their offices in Washington and ask for them directly. Do not be bashful. They are sent there to serve the interests of their constituents and deserve to understand the issue and how it will impact the people back home in their district. If your Congressman or Senator is unavailable, ask for their Transportation Legislative Assistant or the person in their office who handles transportation- and aviation-related issues.
   • Be informative, respectful and polite in all your correspondence and contact with congressional representatives and their staff. Explain the issue, express your personal concerns, and feel free to seek their active support of you and your community. If you do not know who your congressional representatives are or how to contact them in Washington you can look them up on the web. U.S. House of Representatives (by State) :: U.S. Senate (by State)
2. Tell other pilots, aircraft owners, and aviation enthusiasts about this issue and encourage them to get better educated and actively support your concerns. Refer them to this briefing paper or to the EAA website for more information. Share this information at EAA Chapter meetings and other pilot gatherings. Encourage others to get actively involved.
3. Support EAA and other general aviation organizations through your continued membership and donations. This is the number one issue facing our community and EAA is tirelessly working on Capitol Hill, independently and with other organizations, in a unified front to combat the highly coordinated attack by the airlines and the Administration on general aviation.

Why doesn’t EAA just write a form letter for me to sign and send?

Form letters do not work. Congressional offices are bombarded daily with hundreds of letters on a myriad of issues of concern to their constituents, corporations and lobbying interests. Staffers can smell a form letter writing campaign a mile away and will dump all similar letters into a pile and respond with a single form letter of their own. There is no substitute for a well-informed personal letter or phone call from a constituent in their home district. E-mail works but still gets less attention than a letter or telephone call.

Help us help you by writing your own letter in your own words. Feel free to use the facts and talking points outlined in this briefing paper to help frame and organize your thoughts, but please tell your own story in your own words. Ultimately, it is the impact of this issue on you that matters to us at EAA and to your congressional delegation.