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Fact Sheet

The Next Generation Air Transportation System Financing Reform Act of 2007

The NextGen Financing Reform Act of 2007 lays the groundwork so we can meet the challenge of transforming the aviation system to meet future demand.  Our nation depends on a safe, efficient air transportation system, and this legislation delivers.

Why Reform is Needed

The tax system that funds the FAA and the authority for its programs both expire on September 30^th, presenting a rare opportunity to enact major reforms.  The primary source of FAA funding – the Airport and Airway Trust Fund – has an uncommitted balance that would cover only two months of FAA’s operations, so Congress must act quickly—before the current taxes expire.

• The current aviation system cannot handle future traffic increases without major delays, making system transformation paramount.
  • Our NextGen initiative will transform today’s air traffic system by using modern technology to expand capacity while creating a safer, quieter and cleaner system.
• Taxes based on the price of a ticket have no direct link to the costs they impose—so our proposal eliminates the 7.5% ticket tax.
  • Our reformed funding structure provides the financial tools and revenue stability we need to invest in NextGen technology and meet future demand.
• Outdated airport regulations and grant funding formulas constrain airports’ ability to meet their capital requirements and serve their customers.
  • Our proposal makes substantial reforms to ensure that airports have the tools they need to meet their capital investment needs.

How We Implement Reform

The financing reforms in our legislation are the result of nearly two years of consultation with our stakeholders and are supported by a detailed analysis of the current system.  Our bill balances a diverse set of views while recognizing the fundamental need for stable, equitable, cost-based funding that enables the FAA to deploy the NextGen system.  The proposal draws on the work of numerous bi-partisan commissions that have called for reform of the FAA’s financing system.

Specifically, our proposed reforms will:

• Generate revenues based on the costs that different flights impose on the air traffic system, whether they be commercial, business, or general aviation (GA).
• Create a stable, cost-based revenue structure combined with flexible capital financing.
• Treat stakeholders equitably, with each paying their fair share of the aviation system’s costs through their preferred payment mechanism.
•  Maintain a continued general fund contribution for services that support the public good, such as safety regulation, public use of the system, and flight service stations.
•  Provide up to $5 billion in Treasury debt financing authority beginning in FY 2013 to support NextGen-related capital needs and accelerate the transition to NextGen.
• Provide stronger incentives for the FAA to control costs and meet demand efficiently through enhanced stakeholder consultation and continued congressional oversight.
•  Allow airports to more effectively meet their capital needs through an expansion of the Passenger Facility Charge (PFC) program and reform of its outdated regulations.
• Meet national airport system priorities through a restructuring of the Airport Improvement Program (AIP) that targets federal funds to airports that most need them.
• Authorize the use of congestion pricing or auctions to more effectively allocate scarce resources at congested airports, reducing delays and maximizing passenger throughput.
• Support a cleaner, quieter, and more energy-efficient future for aviation through initiatives that support enhanced stewardship of our natural resources.

Proposed Funding Sources

We propose a hybrid funding structure with three funding sources for FAA services: fees for air traffic and certification services, taxes, and the general fund.  FAA conducted a comprehensive examination of our costs to determine the most appropriate funding source and allocation.

Air Traffic and Certification Fees (53% of FAA's total budget)

• Jet and turboprop flights currently subject to the ticket tax—including domestic, international, passenger, cargo, charter, air taxi, and fractional operators—would pay for their use of the air traffic system via terminal and enroute service fees.  The proposal sets broad parameters for how these fees would be structured and how users would be consulted as they are established.
• Collecting fees to recover the cost of air traffic services is a widely accepted practicearound the world.  Fees would be based on data derived from FAA’s cost accounting and allocation systems, and would cover nearly three-fourths of the Air Traffic Organization’s budget.
• To cover equipment, personnel, and other costs directly related to managing traffic in and around these facilities, our proposal gives FAA the authority to charge a limited, cost-based congestion fee for flights that land at the nation’s most congested airports.
• FAA would charge modest fees to recover the cost of some FAA certification services since current fees are set well below the cost of providing the service.  Fees would cover 10% of the Aviation Safety organization’s budget, with 90% still covered by the General Fund.

Fuel and International Passenger Taxes (28% of FAA's total budget)

• GA and piston users will pay their fair share of FAA costs through a fuel tax, their preferred mechanism.  The tax rates are based on a detailed cost allocation, and would change every two years in line with an updated cost allocation study.
• All domestic commercial and GA users will also pay a common fuel tax of 13.6 cents per gallon to fund AIP, the Essential Air Service program and FAA’s Research, Engineering and Development account.  International commercial passenger flights will pay a $6.39 passenger head tax to fund these services. 

General Fund Contribution (19% of FAA's total budget)

• A General Fund contribution would continue to pay for public good functions such as safety regulation, military use of air traffic services, and flight service stations. The contribution would account for approximately 19 percent of the FAA’s budget.

Airports

Our proposals for Airport Improvement Program (AIP) and Passenger Facility Charge (PFC) reform will enhance airports’ ability to meet their capital needs in a constantly changing environment; assure that FAA and the states have discretionary funds they need to meet high priority objectives; provide airports with greater flexibility in managing their financial resources; and target AIP funds to advance NextGen activities.

AIP Reform

• We will continue to direct AIP to airports with the greatest need for Federal assistance.
  • Medium and large hub airports are mature financial enterprises that no longer need passenger entitlements to meet their capital needs – our proposal phases out these entitlements over time.
  • Smaller airports depend heavily on AIP to finance their capital investments. Our proposal protects passenger entitlements for these airports, eliminating the risk that these funds will be cut in half or eliminated if AIP falls below $3.2 billion.
  • Our proposal eliminates outdated set asides that no longer serve their original purpose.
• The non-primary entitlement program has been very successful but needs to be a more strategic and targeted investment tool.
  • GA airports play various roles in the system and have divergent capital needs. We replace the flat $150,000 maximum entitlement with a tiered system that recognizes these differences and the different roles airports will play in the NextGen system.
• The current minimum discretionary fund of $148 million was established when AIP was less than half current levels, and needs to be updated to reflect future needs.
  • Our proposal increases the discretionary minimum to $520 million.
  • We also propose a minimum state apportionment fund of $300 million to provide states the resources they need to fund state priorities and initiatives.

PFC Reform

• PFC's serve as an important local financing tool for airports, but the program can be improved to enhance their ability to raise capital and build confidence on Wall Street. Our proposal would:
  • Increase the maximum PFC from $4.50 to $6.00, bringing an additional $1.2 billion annually to commercial airports.
  • Expand PFC eligibility to include any airport capital investment as long as it will not hinder competition.
  • Streamline the administrative review process for PFC’s to help airports modify their PFC programs more quickly, while continuing to carefully review controversial projects.

FAA Governance

• The introduction of a fee-for-service financing structure is typically coupled with increased user input to give them a greater role in fee-setting decisions and the use of revenues collected.
• We propose a new Air Transportation System Advisory Board comprised of representatives from across the aviation community. The Board would provide advice and make recommendations on fee-setting, major capital projects and the FAA’s strategic plan.
• The Administrator would retain safety and regulatory responsibilities and be given new authority to set fees. Congress would retain its oversight authority through both authorizing and appropriations committees.

Environmental Stewardship and Streamlining

Our goal is to pursue an aviation future that is cleaner, quieter, and more energy efficient. Key environmental stewardship initiatives in our proposed legislation include:

• A research consortium for the development and certification of lower energy, emissions, and noise engine and airframe technology over the next ten years.
• A permanent Airport Cooperative Research Program with authorization for Research & Development specifically related to the airport environment.
• An environmental mitigation demonstration pilot program to demonstrate the noise, air quality, or water quality benefits of promising research concepts at airports.