EAA Briefing on User Fees

Key Points
Who Will Pay for the FAA? And Who Will Control It?
EAA’s Position on User Fees
Who Is Pushing User Fee Proposals, and Why
Why They Are Pushing These Proposals Now
FAA Funding — How It Works Today
What Would Happen If User Fees Were Implemented
A User Fees Time Line

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.
• 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 very expensive.

Congress plays a critical role in providing budget and management oversight of the FAA. The Administration’s proposals would eliminate that oversight and put control of the FAA in the hands of the airlines.

• 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, or general aviation. 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 plan that is sound, that accommodates the needs of all users, and that contains appropriate cost accounting and controls. That is the plan the FAA should be presenting to the aviation community and to Congress.
• Get Actively Involved. (See: “You Can Help Fight User Fees”)
• Contact your congressional representative and senators in Washington, D.C. 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 can have a lot of clout. Your membership and financial support make that possible.

Who Will Pay for the FAA? And Who Will Control It?
The Bush Administration and its allies in Congress and the airline industry have proposed fundamental changes in:

• how the Federal Aviation Administration’s annual operating budget and capital improvement initiatives are funded
• who controls the FAA’s revenue generation process; and
• who decides how the FAA’s money should be spent.

The Bush Administration says a “new funding mechanism” is needed that “ties revenues to costs and allows us to manage FAA more efficiently.” The Administration has proposed radical changes in how the FAA is funded and how the FAA is controlled. The proposed changes include:

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

Also, under the Bush Administration’s proposal:

• Congress would lose substantial control over FAA operations and expenditures.
• That control would be given to an advisory board made up of “major users” of the airspace system—the airline industry.

If they were enacted, these proposals 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. Control of the FAA’s operations and budget would be, in effect, handed over to the airlines.

EAA’s Position on User Fees
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. Sixty 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.

EAA strongly opposes the Administration’s proposal to put control of the FAA in the hands of a quasi-governmental advisory board.

• This proposal would eliminate Congressional control and oversight over how the FAA raises and spends its money. The advisory board that would take over control of the FAA would be dominated by the airline industry. General aviation would be excluded.
• 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 sector should be allowed to control it.

The EAA strongly opposes any cut in the General Fund contribution to the FAA’s budget.

• 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.
• The Aviation Trust Fund is intended by law to pay for aviation infrastructure and capital improvements, not the FAA operations. The General Fund contribution should be substantially increased, to cover greater share of the FAA’s operating expenses.

Who is Pushing User Fee Proposals, 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.
• 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 Federal Aviation Administration (FAA)
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:

• 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 Air Carriers
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 Administration, 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.

Certain Members of Congress
Some members of Congress believe that the surest way to end government inefficiency 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 air carriers and FAA are pushing a common agenda, although they have very different motivations.

Why They Are Pushing These Proposals Now
By law, every few years, Congress must renew funding for the FAA and “reauthorize” the agency existence. The FAA’s most recent reauthorization expired on September 30, 2007. Congress has twice extended the current mandate 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 hard for anyone at the FAA to do anything without new FAA 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 were put in place 40 years ago.

This time, the airlines and the Administration are pushing for radical changes that would:

• Shift a huge share of costs away from the airlines and onto general aviation, and
• Take control of the FAA and its budget away from Congress and give it to the airline industry.

The debate that has delayed passage of a new FAA reauthorization bill involves some fundamental questions:

• How much money should the agency receive for fiscal year 2008 (October 1, 2007, through September 30, 2008)?
• How should that money be spent—what programs and activities will be funded?
• Where the money will come from?
• from fuel and ticket excise taxes and a general fund appropriation, as it does now?
• from a new system of airspace or air traffic control user fees? or
• from some combination of these two?

FAA Funding— How It Works Today
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 in two ways:

• 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). This was intended to pay for major capital improvement programs in the aviation infrastructure.
• by all U.S. taxpayers through the federal government’s General Fund. This was intended to pay for the FAA’s general operations.

In recent years, the FAA’s total budget has been about $14.3 billion per year:

• 42% for capital projects
• 58% for operating expenses

But there is a problem:

• 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—and 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 the things the Trust Fund is supposed to be supporting:

• 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, 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.

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, 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, any communities would lose their access to air transportation, because only general aviation serves their 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 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 attendant 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 then 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 9 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. Administration says it only wants to impose a single user fee for business aircraft on IFR flight plans. But under the Administration’s proposal:

•  The FAA could impose user fees on virtually any airspace or air traffic service.
• The 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
• Written Test Exam Fees
• Airman Certificate Issuance and Renewal Fees
• Aircraft Airworthiness/Modification Approval Fees
• Potentially any contact with the civil aviation agency

• The FAA could require you to pay user fees for services you did not use, even if you did not want or need the services.
• Based on the Administration’s budget projections, it has been 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, and other aircraft. VFR flight plans and VFR Traffic Advisories (“Flight Following”) are good examples. User fees for those services would discourage some pilots from using them, and make 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 that would suck funds away from FAA operations and capital projects.

• The Aviation Trust Fund receives those taxes directly from fuel refiners and airlines—very large sums collected a few times a year from a relative handful of taxpayers.
• A user fee system would require the FAA to calculate and collect very small sums of money, on a daily basis, from hundreds of thousands of users each year.

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
• 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 that user fees would have on general aviation, and to voice their united opposition 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, to keep FAA from shutting down for lack of a new funding bill.

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-percent 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.

May 2008 — There is little chance for passage of an FAA funding bill before June 30 when the current FAA funding extension expires, say legislative aides.

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 for another three months, but it leaves a lot of long-term FAA programs and projects in limbo because no one knows what the final FAA budget bill will include. Among the items left hanging are much-needed air traffic control modernization projects.

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.

Eventually — Congress will have to pass a new FAA budget bill. In their current form, the House and Senate bills do not include any general aviation user fees. But no one can safely predict what compromises the FAA budget bill will contain when it finally reaches president’s desk.

Some lawmakers in both houses still support a $25-per-trip IFR user fee. And President Bush has threatened to veto any FAA budget reauthorization bill that does not deliver the Administration’s funding proposals, including aviation user fees.

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