Aviation Finance: Federal Aviation Administration (FAA) Reauthorization and Related Issues

Publication Date: April 2008

Publisher: Library of Congress. Congressional Research Service

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Research Area: Transportation

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Abstract:

The aviation taxes and fees associated with funding the Federal Aviation Administration's (FAA) operation and oversight of the federal aviation system will expire at the end of FY2007, as will most of the related federal aviation programs. These taxes and fees, which are deposited in the airport and airways trust fund (aviation trust fund), pay for the majority of FAA's activities. The FAA and others have expressed concern that the current funding system is inadequate to meet future federal needs for upgrading, expanding, maintaining, and operating the existing federal air navigation system as part of the FAA's Next Generation Air Transportation System (NGATS). This view is disputed by some aviation industry groups who believe that the existing trust fund based system is adequate for the foreseeable future. Many of these same groups would even argue that overall federal spending on certain federal aviation programs could be increased in new authorization legislation without a new funding system. There is also a third view, which suggests that the current financing system needs to be reexamined because it is potentially unreliable, e.g. events such as September 11th and recessions can have a major and unpredictable impact on annual tax and fee collections. Hence, in this view, the existing system might not be able to provide the long term consistent source of annual revenues that would allow for the orderly funding of NGATS and other FAA programs.

This report provides background information on how the existing trust fund based aviation finance system operates, discusses several basic issues concerning aviation taxation, and identifies FAA programmatic spending. From that point on the report focuses on three major issues related to the trust fund. First is the question of whether the trust fund will provide sufficient revenue to meet the growing needs of the FAA's activities and programs. Second is the controversial issue of how much of the FAA's total funding should come from the Treasury's general fund account, the so-called "public interest" contribution. And third is the long standing issue of whether the existing tax and fee system is the appropriate mechanism for producing trust fund revenues, or whether an entirely new revenue collection mechanism should be adopted.

The FAA remains firmly convinced of the need to create a new aviation funding system, with corresponding FAA budgetary and administrative changes. On February 14, 2007, the FAA released a legislative proposal encompassing this view (H.R. 1356, introduced by request). The FAA contends that this legislation will provide for improved delivery of its air traffic control and other services, in part by directly linking taxes and fees paid by users to their use of Agency resources. This report discusses the financial aspects of this proposal.

Congress has begun consideration of the FAA reauthorization proposal and hearings are scheduled in House and Senate authorizing committees during the month of March. Any FAA reauthorization proposal must also face consideration by congressional finance committees. This report will be updated as additional reauthorization legislation is introduced.