Transportation Financing

Overall, the $38 billion proposed in the Department of Transportation's fiscal year 1998 budget represents about a one-percent reduction from the agency's current appropriation. This testimony focuses on three critical transportation financing issues facing Congress and the administration: meeting the long-term funding needs of the Federal Aviation Administration, Amtrak, and the nation's highways. Each area presents formidable challenges that will stretch limited resources in a time of continuing pressure to reduce the federal budget.

GAO noted that: (1) major financing issues need to be resolved to improve the safety and security of the nation's aviation system; (2) FAA estimates that its needs will exceed projected funding levels by about $13 billion over the next 5 years; (3) the Congress last year established a national commission to make recommendations by August 1997 on how best to finance FAA; (4) currently, FAA receives most of its funding from excise taxes, but those taxes lapse at the end of fiscal year (FY) 1997; (5) the Administration has proposed replacing the current system with user fees, and the national commission clearly will be examining this option; (6) developing such fees requires good data for assigning FAA's costs to specific users and policy decisions on such issues as how to allocate costs not directly related to any particular user; (7) FAA currently lacks sufficient cost data and will not start collecting better data until October 1997; (8) as a result, better cost data will not be available before the excise taxes lapse or before initial decisions will have to be made about how to finance FAA; (9) deciding among the various financing alternatives involves tradeoffs between their ease of administration, impact on how efficiently the airport and airway system is used, ability to produce an equitable system in which users pay their fair share, potential competitive impacts, and other policy goals; (10) Amtrak remains in a very precarious financial position and continues to be heavily dependent on federal support to meet its operating and capital needs; (11) Amtrak's passenger rail service has never been profitable and, through FY 1997, the federal government has provided Amtrak with over $19 billion for operating and capital expenses; (12) while Amtrak's goal is to eliminate the need for federal operating support by 2002, it is likely that Amtrak will continue to require substantial federal financial support beyond that time; (13) the Department of Transportation believes that current public spending on the capital needs of highways is inadequate and estimates that $16 billion in additional spending is needed annually just to maintain the condition of the nation's highways; (14) state infrastructure banks offer the promise of helping to close the gap between transportation needs and available resources by sustaining and potentially expanding a fixed sum of federal capital; and (15) some state officials and industry experts are skeptical that such banks will produce these benefits and believe that the number of projects with a sufficient revenue stream to repay the loans may be insufficient and state infrastructure banks face impediments under state law.