Federal Aviation Administration
Challenges Facing the Agency in Fiscal Year 2009 and Beyond Gao ID: GAO-08-460T February 7, 2008Fiscal year 2009 will be a critical year for the Federal Aviation Administration (FAA), with the pending selection of a new Administrator, the beginning of the 5-year term of the new Chief Operating Officer, and the continuing process of transforming the nation's current air traffic control system to the Next Generation Air Transportation System (NextGen)--a complicated effort to modernize the air traffic control system. In addition, FAA is currently operating under a temporary reauthorization. Without legislative action, both the excise taxes that fund the Airport and Airway Trust Fund (Trust Fund) and FAA's authority to spend from the Trust Fund will expire at the end of this month. This statement is based on recent reports and discussions with selected senior FAA officials and representatives of aviation industry and stakeholder groups. This statement provides GAO's preliminary observations on some key aspects of the President's proposed budget for FAA for fiscal year 2009, and identifies some of the current and future challenges facing FAA and the Congress.
Although the President's budget for FAA proposes major changes in the agency's funding, the current funding mechanisms--the Trust Fund and the General Fund of the U.S. Treasury--can potentially support FAA activities, including NextGen; however, timely reauthorization of the authorities to collect Trust Fund revenues and to spend from the Trust Fund is critical. The expiration of either or both of these authorities could have significant negative effects on FAA's ability to carry out its mission unless other revenue sources and spending authority are provided. FAA also has expressed concern that revenues from the current funding mechanisms depend heavily on factors, such as ticket prices, that are not connected to FAA's workload and costs. We believe that a better alignment of FAA's revenues and costs can address concerns about long-term revenue adequacy, equity, and efficiency as intended, but the ability of the proposed funding mechanisms to link revenues and costs depends critically on the soundness of FAA's cost allocation system in allocating costs to users. FAA faces a number of challenges in ensuring the continued safe and efficient operation of the current National Airspace System. According to the Department of Transportation (DOT), delays and cancellations during the summer of 2007 exceeded those in the summer of 2006. In the near term, DOT and FAA are exploring various initiatives to relieve the stress on the system. But FAA also must continue to address safety issues, particularly in the area of runway safety. FAA is currently deploying a new radar-based ground surveillance system and has encouraged airport improvements, such as changes to runway layout, markings, signage, and lighting. Nonetheless, we recently recommended that FAA prepare a new national runway safety plan and address air traffic controller overtime and fatigue issues that may affect runway safety. We also have made recommendations concerning FAA's collection and analysis of data, which are key to the agency's implementation of a risk-based, system safety approach. Another challenge facing FAA will be its need to continue hiring and training thousands of air traffic controllers over the next decade to replace those who will retire and leave for other reasons, particularly given that controllers are retiring at a faster rate than FAA anticipated. FAA also faces a number of management challenges associated with the early implementation of NextGen--an enormously complicated undertaking due to the technological complexities, numerous stakeholders, and broad scope of the effort. As FAA moves closer to undertaking a number of major NextGen system acquisitions, a critical component for keeping such acquisitions on track will be having the right skill set within the agency to successfully manage NextGen programs. Another challenge for FAA is developing a new plan for configuring facilities and airspace that will support NextGen. In addition, FAA continues to face challenges in meeting the research and development requirements of NextGen and in establishing credibility with stakeholders that the agency is fully committed to and capable of implementing NextGen.
GAO-08-460T, Federal Aviation Administration: Challenges Facing the Agency in Fiscal Year 2009 and Beyond
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United States Government Accountability Office:
GAO:
Testimony:
Before the Subcommittee on Aviation, Committee on Transportation and
Infrastructure, House of Representatives:
For Release on Delivery:
Expected at 10:00 a.m. EST:
Thursday, February 7, 2008:
Federal Aviation Administration:
Challenges Facing the Agency in Fiscal Year 2009 and Beyond:
Statement of Gerald L. Dillingham, Ph.D. Director, Physical
Infrastructure Issues:
GAO-08-460T:
GAO Highlights:
Highlights of GAO-08-460T, a testimony before the Subcommittee on
Aviation, Committee on Transportation and Infrastructure, House of
Representatives.
Why GAO Did This Study:
Fiscal year 2009 will be a critical year for the Federal Aviation
Administration (FAA), with the pending selection of a new
Administrator, the beginning of the 5-year term of the new Chief
Operating Officer, and the continuing process of transforming the
nation‘s current air traffic control system to the Next Generation Air
Transportation System (NextGen)”a complicated effort to modernize the
air traffic control system. In addition, FAA is currently operating
under a temporary reauthorization. Without legislative action, both the
excise taxes that fund the Airport and Airway Trust Fund (Trust Fund)
and FAA‘s authority to spend from the Trust Fund will expire at the end
of this month.
This statement is based on recent reports and discussions with selected
senior FAA officials and representatives of aviation industry and
stakeholder groups. This statement provides GAO‘s preliminary
observations on some key aspects of the President‘s proposed budget for
FAA for fiscal year 2009, and identifies some of the current and future
challenges facing FAA and the Congress.
What GAO Found:
Although the President‘s budget for FAA proposes major changes in the
agency‘s funding, the current funding mechanisms”the Trust Fund and the
General Fund of the U.S. Treasury”can potentially support FAA
activities, including NextGen; however, timely reauthorization of the
authorities to collect Trust Fund revenues and to spend from the Trust
Fund is critical. The expiration of either or both of these authorities
could have significant negative effects on FAA‘s ability to carry out
its mission unless other revenue sources and spending authority are
provided. FAA also has expressed concern that revenues from the current
funding mechanisms depend heavily on factors, such as ticket prices,
that are not connected to FAA‘s workload and costs. We believe that a
better alignment of FAA‘s revenues and costs can address concerns about
long-term revenue adequacy, equity, and efficiency as intended, but the
ability of the proposed funding mechanisms to link revenues and costs
depends critically on the soundness of FAA‘s cost allocation system in
allocating costs to users. FAA faces a number of challenges in ensuring
the continued safe and efficient operation of the current National
Airspace System. According to the Department of Transportation (DOT),
delays and cancellations during the summer of 2007 exceeded those in
the summer of 2006. In the near term, DOT and FAA are exploring various
initiatives to relieve the stress on the system. But FAA also must
continue to address safety issues, particularly in the area of runway
safety. FAA is currently deploying a new radar-based ground
surveillance system and has encouraged airport improvements, such as
changes to runway layout, markings, signage, and lighting. Nonetheless,
we recently recommended that FAA prepare a new national runway safety
plan and address air traffic controller overtime and fatigue issues
that may affect runway safety. We also have made recommendations
concerning FAA‘s collection and analysis of data, which are key to the
agency‘s implementation of a risk-based, system safety approach.
Another challenge facing FAA will be its need to continue hiring and
training thousands of air traffic controllers over the next decade to
replace those who will retire and leave for other reasons, particularly
given that controllers are retiring at a faster rate than FAA
anticipated.
FAA also faces a number of management challenges associated with the
early implementation of NextGen”an enormously complicated undertaking
due to the technological complexities, numerous stakeholders, and broad
scope of the effort. As FAA moves closer to undertaking a number of
major NextGen system acquisitions, a critical component for keeping
such acquisitions on track will be having the right skill set within
the agency to successfully manage NextGen programs. Another challenge
for FAA is developing a new plan for configuring facilities and
airspace that will support NextGen. In addition, FAA continues to face
challenges in meeting the research and development requirements of
NextGen and in establishing credibility with stakeholders that the
agency is fully committed to and capable of implementing NextGen.
What GAO Recommends:
In prior reports, GAO has made recommendations to address a number of
the management challenges presented in this statement. FAA has begun to
address GAO‘s recommendations, although many have not yet been fully
implemented.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-460T]. For more information, contact
Gerald L. Dillingham, Ph.D., at (202) 512-2834 or dillinghamg@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I appreciate the opportunity to participate in this hearing today to
discuss the President's fiscal year 2009 budget proposal for the
Federal Aviation Administration (FAA), which resubmits the
administration's 2007 proposal to reauthorize FAA and change its
financing structure. Fiscal year 2009 will be a critical year for FAA,
with the pending selection of a new Administrator, the beginning of the
5-year term of the new Chief Operating Officer for the Air Traffic
Organization (ATO), and the continuing process of transforming the
nation's current air traffic control system to the Next Generation Air
Transportation System (NextGen). My testimony today provides GAO's
observations on some key aspects of FAA's proposed budget and
identifies some of the current and future challenges facing FAA and
Congress.
My statement is based on work that we conducted between January 2008
and February 2008, including our preliminary review of the President's
proposed FAA budget for fiscal year 2009, reviews of other key FAA
documents, discussions with selected senior FAA officials and
representatives of aviation industry groups, updates of the results of
prior GAO studies, and preliminary results of our ongoing work. All of
our studies were conducted in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives. A
list of related GAO products is included at the end of this statement.
Summary:
Although the President's budget for FAA proposes major changes in the
agency's funding, the current funding mechanisms--the Airport and
Airway Trust Fund (Trust Fund) and the General Fund of the U.S.
Treasury (General Fund)--can potentially provide sufficient resources
to support FAA activities, including NextGen; however, timely
reauthorization is critical. According to recent projections prepared
by the Congressional Budget Office (CBO), revenues obtained from the
existing funding mechanisms are projected to increase substantially and
could support additional spending. However, without legislative action,
both the excise taxes that fund the Trust Fund and FAA's authority to
spend from the Trust Fund will expire at the end of this month. The
expiration of either or both of these authorities could have
significant negative effects on FAA's ability to carry out its mission
unless other revenue sources and spending authority are provided. The
President's budget also proposes changes to FAA's funding mechanisms
that may be justified by factors other than the need for more revenues.
For example, FAA has expressed concern that revenues from the current
funding mechanisms depend heavily on factors, such as ticket prices,
that are not connected to FAA's workload and costs to maintain,
operate, and modernize the nation's air traffic control system. We
believe that a better alignment of FAA's costs and revenues can address
concerns, as suggested in the administration's reauthorization
proposal, about long-term revenue adequacy, equity, and efficiency as
intended. However, the ability of the proposed funding mechanisms to
link costs and revenues depends critically on the soundness of FAA's
cost allocation system in allocating costs to users. We found that the
support for some of FAA's cost allocation methodology's underlying
assumptions and methods is insufficient, leaving FAA unable to
conclusively demonstrate the reasonableness of the resulting cost
assignments. Another proposed change to FAA's budget would align the
agency's budget accounts with its lines of business. We agree that such
a restructuring is consistent with FAA's emphasis on aligning costs and
revenues and could allow FAA to more specifically distinguish those
funding options that better link costs and revenues; however, some FAA
activities, such as safety, may not be clearly divisible into discrete
categories. There could be some ambiguity in how safety activities are
defined and in how their costs should be allocated between aviation
users who benefit directly from a safe air traffic control system and
the public that receives general safety benefits. The President's
budget also proposes reductions in funding for the Airport Improvement
Program (AIP) and changes in AIP allocations among airports. The
proposed funding level of $2.75 billion would reduce AIP grants,
especially for smaller airports. Moreover, according to FAA, the
agency's authority to extend grants to airports lapsed at the end of
calendar year 2007. FAA states that while the Consolidated
Appropriations Act, 2008,[Footnote 1] extended the collection of
airline ticket taxes to February 29, 2008, FAA cannot obligate funds
for AIP after December 31, 2007. As a result, FAA has not made any
grants this year. For airports, uncertainty over whether they will
receive their AIP grant this year may delay or increase financing costs
for projects intended to increase safety, ease congestion, or modernize
their infrastructure or systems.
FAA faces a number of challenges in ensuring the continued safe and
efficient operation of the current National Airspace System (NAS).
According to the Department of Transportation (DOT), delays and
cancellations during the summer of 2007 exceeded those in the summer of
2006. In the near term, DOT and FAA are exploring various initiatives
to relieve stress on the system. For example, in an effort to reduce
congestion and delays at New York area airports, DOT and FAA formed an
Aviation Rulemaking Committee which, among other things, identified 77
operational initiatives to identify strategies that could ease
congestion and reduce delays in the New York region. FAA must also
continue to address safety issues, particularly in the area of runway
safety. FAA is currently deploying a new radar-based ground
surveillance system and has encouraged airport improvements, such as
changes to runway layout, markings, signage, and lighting. Nonetheless,
we recently recommended that FAA prepare a new national runway safety
plan and address air traffic controller overtime and fatigue issues
that may affect runway safety. We have also made recommendations
concerning FAA's collection and analysis of data, which are key to the
agency's implementation of a risk-based, system safety approach.
Another challenge facing FAA will be its need to continue hiring and
training thousands of air traffic controllers over the next decade to
replace those who will retire and leave for other reasons, particularly
since controllers are retiring at a faster rate than FAA anticipated.
Other immediate challenges FAA faces include maintaining existing
infrastructure so that the current system continues to operate safely
and reliably and keeping current system acquisitions on budget and on
schedule.
FAA faces a number of management challenges associated with the early
implementation of NextGen--an enormously complicated undertaking due to
the technological complexities, numerous stakeholders, and broad scope
of the effort. As FAA moves closer to undertaking a number of major
NextGen system acquisitions, a critical component for keeping such
acquisitions on track will be having the right skill set within the
agency to successfully manage NextGen programs. NextGen means an
increasing number of acquisitions and increasing complexity within
those acquisitions. FAA faces a significant challenge in hiring and
retaining an adequate acquisition workforce to handle the transition,
particularly in attracting managers who understand how to apply a
systems approach to managing acquisitions. A second challenge for FAA
is developing a new configuration of facilities and airspace that will
support NextGen. Until a plan for facilities consolidation or
realignment has been developed, the configurations needed for NextGen
may not be implemented and potential savings that could help offset the
cost of NextGen may not be realized. A third challenge that continues
to face FAA is the need to meet the research and development
requirements of NextGen. Although a 2006 assessment of NextGen research
and development requirements led to increased budget requests for
research and development funding for FAA, there continue to be
challenges in meeting identified research and development needs. For
example, if not adequately addressed, the environmental impacts of
aviation, particularly the noise that affects local communities and the
emissions that contribute to global warming, will constrain efforts to
build or expand the runways and airports needed to handle the added
capacity envisioned for NextGen. Finally, FAA faces a challenge in
establishing credibility with stakeholders that the agency is fully
committed to and capable of implementing NextGen. Stakeholders are
particularly concerned about the lack of a clearly defined and
transparent governance structure in the FAA organizations that share
responsibility for implementing NextGen. Stakeholders have expressed a
belief that one organization or person should be responsible, and thus
accountable, for NextGen.
The President's Budget Proposes a Number of Changes in Funding FAA
Activities, FAA Accounts, and Airports:
The President's budget proposes major changes in FAA's funding and
budget accounts. According to FAA, these proposed changes[Footnote 2]
are intended to provide more stable and reliable mechanisms to pay for
NextGen. FAA also says that the proposed changes would improve the long-
term revenue adequacy, equity, and efficiency of its funding and over
time better link revenues with the costs that users of the NAS impose
on the system. If implemented, the changes would alter the basis for
funding FAA, in part by recovering the costs of services provided by
ATO in accordance with the cost assignments in a cost allocation study
that FAA issued last year. These changes would redistribute the funding
burden among user groups, increasing general aviation's proportion in
accordance with the findings of FAA's cost allocation study.
The Current FAA Funding Mechanisms Can Potentially Provide Sufficient
Resources to Support FAA Activities, Including NextGen, but Timely
Reauthorization Is Needed:
FAA's current funding mechanisms--an appropriation from Trust Fund
revenues, which come from various excise taxes, combined with a General
Fund appropriation--have been used to fund the agency's activities for
many years. Trust Fund revenues fell during the early years of this
decade as the demand for air travel fell. However, as the number of
passengers has grown, revenues have also grown, starting in fiscal year
2004. FAA estimates that revenues will continue to increase if the
current taxes remain in effect at their current rates. While retaining
the basic structure for funding FAA, Congress has at times changed the
mix of excise taxes and some of the tax rates. For example, when the
taxes were reauthorized in 1997, Congress reduced the passenger ticket
tax rate from 10 percent to 7.5 percent, but added the passenger
segment tax.[Footnote 3] Congress has also appropriated varying amounts
of General Fund revenues for FAA during the past 25 years, ranging from
0 percent to 59 percent of FAA's budget and averaging around 20 percent
since fiscal year 1997 (but less than 16 percent for fiscal year 2008).
As FAA embarks on air traffic control (ATC) modernization through
NextGen, FAA plans to spend roughly $5.4 billion over the next 5 years
for NextGen, including both capital costs and development costs. But
there is considerable uncertainty about how much NextGen will cost in
the longer term. FAA estimates that the total federal cost for NextGen
infrastructure through 2025 will range from $15 billion to $22 billion.
Even if the cost should come in at the high end of the estimate,
funding NextGen does not require that the current funding mechanisms be
changed. According to recent CBO projections, revenues obtained from
the existing funding mechanisms will increase substantially. Assuming
that the General Fund provides about 16 percent of FAA's budget, CBO
estimates that through 2018 the Trust Fund can support about $20
billion in additional spending over the baseline spending levels CBO
has calculated for FAA (the 2008 funding level, growing with inflation)
provided that most of that spending occurs after 2010.[Footnote 4] How
far this money will go to fund modernization is subject to a number of
uncertainties--including the future cost of NextGen investments, the
volume of air traffic, the future costs of operating the NAS, and the
levels of future appropriations for the AIP, all of which may influence
the funding that would be necessary to support FAA's
activities.[Footnote 5]
An additional uncertainty results from the status of FAA's
reauthorization. Without legislative action, both the excise taxes that
fund the Trust Fund and FAA's authority to spend from the Trust Fund
will expire on February 29, 2008. The expiration of either or both of
these authorities could have significant negative effects on FAA's
ability to carry out its mission unless other revenue sources and
spending authority are provided. FAA estimates that two previous lapses
in taxing authority in 1996 and 1997 resulted in the Trust Fund not
receiving about $5 billion in revenue. If both authorities expire and
no additional revenue sources are provided for which FAA would have
authority to spend, the only funds available to FAA would be General
Fund revenues appropriated for fiscal year 2008 for FAA's Operations
account that have not yet been spent. FAA estimates that it could
maintain a scaled-down version of operations through early June using
those funds. However, no expenditures could be made for other FAA
programs because FAA's other accounts--AIP; Facilities and Equipment
(F&E); and Research, Engineering and Development (RE&D)--can be funded
only by Trust Fund revenues. As a result, not only would these programs
have to be shut down, but also no funds would be available to pay the
salaries of about 4,000 FAA staff who administer these programs, unless
legislation is passed allowing them to be paid with General Fund
revenues. Extending FAA's authority to spend from the Trust Fund would
allow FAA to use the Trust Fund's uncommitted balance, and interest
earned on that balance, for both operations and other programs.
However, because the uncommitted balance is relatively low by
historical standards--about $1.5 billion at the end of fiscal year
2007, down from over $7 billion at the end of fiscal year 2001--even
spending all of the uncommitted balance would have only a limited
effect. FAA estimates that if it spends the uncommitted balance, it
could maintain scaled-down operations and pay staff until August. In
this situation, FAA has indicated it would give operations priority and
seriously curtail other FAA programs.
Funding Changes in the President's Budget Are Intended to Address
Concerns about Long-term Revenue Adequacy and the Equity and Efficiency
of the Current Funding Mechanisms:
Although the current funding mechanisms can continue to support FAA
activities, factors other than the need for more revenues may justify a
major change in FAA's funding structure.[Footnote 6] FAA has expressed
concern that revenues from the current funding structure depend heavily
on factors, such as ticket prices, that are not connected to FAA's
workload and costs to maintain, operate, and modernize the system.
According to FAA, with the existing funding mechanisms, increases in
the agency's workload may not over time be accompanied by revenue
increases because users are not directly charged for the costs that
they impose on FAA for their use of the NAS. Revenues collected from
excise taxes are primarily dependent on the price of tickets and the
number of passengers on planes, while workload is driven by flight
control and safety activities. This disconnect raises three key
concerns about the current funding structure--its long-term revenue
adequacy, equity, and efficiency. Moreover, these three concerns are
supported by long-term industry trends and FAA forecasts of long-term
declines in inflation-adjusted air fares (despite recent increases in
fares due to higher fuel prices), the growing use of smaller aircraft,
and FAA's 2007 cost allocation study. Many of the changes proposed in
the President's budget are intended to address these concerns by
linking FAA's revenues more closely with its costs.
We believe that a better alignment of FAA's costs and revenues can
address long-term revenue adequacy, equity, and efficiency concerns as
intended, but the ability of the proposed funding structure to link
revenues and costs depends critically on the soundness of FAA's cost
allocation system in allocating costs to users. We have reported that
the design of FAA's methodology is generally consistent with the
principles and methods set forth in federal cost accounting
standards.[Footnote 7] However, as we also reported, the support for
some of the methodology's underlying assumptions and methods is
insufficient, leaving open the possibility that the study might assign
costs to commercial, general aviation, and exempt users differently.
Without better support, FAA is not able to conclusively demonstrate the
reasonableness of the resulting cost assignments. We recommended
several actions to FAA to provide additional support for the
reasonableness of its methodology.[Footnote 8]
Proposed Changes to Budget Accounts Would Have Advantages and
Disadvantages while Proposed Approach to Determining General Fund
Contribution Would Better Link that Amount to Public Benefits:
The proposal to align FAA's budget accounts with FAA's lines of
business would have advantages and disadvantages. Such a restructuring
is consistent with FAA's emphasis on aligning costs and revenues and
could allow FAA to more specifically distinguish those funding options
that better link costs and revenues. For example, an ATO account
dedicated to the operation, maintenance, and upgrade of the NAS could
better enable the agency to charge for direct usage of the NAS. In
addition, such an account structure could show the costs attributable
to each line of business, thereby supporting the agency's internal
financial management. However, some FAA activities may not be clearly
divisible into discrete categories. For example, FAA proposes a new
Safety and Operations account to include safety-related activities.
However, there could be some ambiguity in how safety activities are
defined and in how their costs should be allocated between aviation
users who benefit directly from a safe ATC system and the public that
receives general safety benefits.
Linking the General Fund contribution to FAA's budget with the public
benefits that FAA provides, as is proposed, would explicitly recognize
that users of the system are not the only beneficiaries of the system.
Such an approach allows for a "bottom up" calculation of the General
Fund contribution that is based on the different public benefits that
FAA provides, such as safety and use of the NAS by federal agencies.
Under the current approach, the General Fund contribution is based on
how much money is anticipated to be left from Trust Fund revenues to
fund the Operations account after Trust Fund revenues for that
particular year have been allocated to fund the AIP, F&E, and RE&D
accounts. An approach that links a General Fund contribution to public
benefits is consistent with the principle of public finance that public
benefits should come from the General Fund and not from user
contributions. This estimate of public benefits should not, however, be
viewed as a precise determination. Some aviation activities, such as
safety, benefit both users and nonusers. Others, such as a national
airport system that includes small airports receiving federal grants,
could be seen as a benefit not only to the users of those airports, but
also to the broader community or the broader public. Such a change in
the method of determining the General Fund contribution could result in
an increase or decrease in that contribution, which would then have
implications for how aviation activities are funded.
Proposed Changes Would Reduce Grant Funding for Airport Development,
but Would Allow Airports to Raise Charges:
The President's budget proposal would reduce AIP funding and would
change AIP allocations among airports. From 2001 through 2005, funding
for the nation's 3,400 airports averaged about $13 billion from all
sources (in 2006 dollars), including about $6.5 billion from bonds
(issued by airport authorities and state or local governments), about
$3.6 billion from AIP grants, and (for commercial airports) about $2.2
billion from passenger facility charges (PFC).[Footnote 9] This level
of funding is about $1 billion short of airports' planned development
costs, which total at least $14 billion annually (in 2006 dollars) over
the next 5 years. Of this $1 billion annual difference between historic
funding and planned development costs, larger airports account for
about $600 million annually, while smaller airports foresee a
difference of about $400 million annually.[Footnote 10] The budget
proposal would reduce AIP grant funding for fiscal year 2009 by $765
million from current funding levels (about $3.5 billion in fiscal years
2006, 2007, and 2008), to about $2.75 billion. In addition, the
administration's reauthorization proposal for FAA would allow
commercial airports to increase their PFC charge from a maximum of
$4.50 to $6 if they gave up certain AIP grant funds. According to our
calculations, a $6 PFC would have allowed larger airports to increase
their PFC collections by about $1.1 billion in 2007, while they would
forgo about $247 million in AIP funds under the proposal.[Footnote 11]
Conversely, smaller airports, which collect less in PFCs and are more
reliant on AIP for funding, could have increased their PFC collections
by about $171 million in 2007, but would have to forgo about $436
million in AIP funding under the proposal.
In addition, according to FAA, the agency currently is unable to
obligate any AIP funds because its authority to extend grants to
airports lapsed at the end of calendar year 2007. FAA states that while
the Consolidated Appropriations Act, 2008, extended the collection of
airline ticket taxes to February 29, 2008, it did not address
contracting authority for AIP funds. As a result, FAA has not made any
grants this year. For airports, uncertainty over whether they will
receive their AIP grant this year may delay or increase the financing
costs for projects intended to increase safety, ease congestion, or
modernize their infrastructure or systems. In addition, according to
FAA, 28 airport sponsors expect to receive $324 million in letter of
intent (LOI) disbursements in fiscal year 2008.[Footnote 12] Several
airports have financed capital projects with bonds tied to their LOI
disbursements and might need to obtain bridge loans to meet payment
dates or could face heavy financial penalties for late payments if AIP
grants are not made under the LOI. See appendix I for additional
information about the effect of the President's proposed budget and
reauthorization proposal on airports.
FAA Faces Challenges in Ensuring the Continued Safe and Efficient
Operation of the Current National Airspace System:
FAA faces significant challenges in keeping the nation's current
airspace system running as efficiently as possible given increasing
demand for air travel. System congestion, and the resulting flight
delays and cancellations, are serious problems that have worsened in
recent years. Some of FAA's current safety challenges include
addressing runway safety; improving aviation safety data to provide an
early warning of hazards that can lead to accidents; and hiring,
training, and retaining thousands of air traffic controllers. FAA also
faces challenges in maintaining its current facilities and in managing
the costs and schedules of current system acquisitions.
FAA Faces Challenges in Addressing Increasing System Congestion,
Delays, and Flight Cancellations:
According to DOT, delays and cancellations during the summer of 2007
exceeded those in the summer of 2006. Delays of more than 15 minutes in
on-time arrivals increased at 51 of the 55 airports tracked by DOT.
Flight cancellations also rose at the 55 major airports during the
first 9 months of 2007, increasing 38 percent over the same period in
2006.
The causes of increased delays and cancellations in the U.S. aviation
system are many, but the system is clearly under stress. For example,
of the 30 percent of flights delayed in the summer of 2007,
approximately 28 percent were attributed to national aviation system
delays, 32 percent were attributed to late aircraft arrivals, and 26
percent were attributed to air carrier delays. In the near term, DOT
and FAA are exploring various initiatives to relieve stress on the
system.[Footnote 13] For example, in an effort to reduce congestion and
delays at New York area airports, DOT and FAA formed an Aviation
Rulemaking Committee that, among other things, identified 77
operational initiatives to identify strategies that could ease
congestion and reduce delays. Some of these initiatives are underway
and expected to be completed by the summer of 2008. Additionally, in an
effort to reduce congestion in the New York region by the summer of
2008, FAA has announced measures to cap hourly operations at John F.
Kennedy International Airport in New York. In January 2008, FAA
proposed to amend its policy on airport rates and charges to allow
airports to vary what airport users are charged based on the time of
day, the volume of traffic, and airports' future investment needs.
While these initiatives may help to reduce some congestion before
summer 2008, in the longer term, the aviation community agrees that
major investment is required in the ATC system and in airport
infrastructure to accommodate current and expected future demand for
air travel. The key challenges in this area are managing a timely
acquisition and implementation of NextGen and dealing effectively with
the environmental concerns of communities that are adjacent to airports
or under the flight paths of arriving and departing aircraft. These
issues are discussed in greater detail later in this testimony.
FAA Must Address Increasing Runway Incursions:
Runway incursions can be considered a precursor to aviation accidents
and their number and rate have been increasing recently. Incursions
occur when aircraft enter the runway without authorization; in the most
serious instances, collisions between aircraft are narrowly avoided. On
August 16, 2007, for example, at Los Angeles International Airport--one
of the nation's busiest airports--two commercial aircraft carrying a
total of 296 people came within 37 feet of colliding during a runway
incursion. While the number and rate of incursions declined after
reaching a peak in fiscal year 2001 and remained relatively constant
for the next 5 years, the overall incursion rate increased during
fiscal year 2007 and was nearly as high as the fiscal year 2001 peak.
(See fig. 1.) In addition, serious incursions continue to occur--about
30 per year since fiscal year 2002--each involving the risk of a
catastrophic runway collision occurring in the United States. Moreover,
10 serious incursions occurred in the first quarter of fiscal year
2008, significantly exceeding the 2 serious incursions that occurred
during the same time period the previous year. This situation suggests
that managing the occurrence of runway incursions and minimizing the
risk of a catastrophic runway collision in the United States remains a
significant safety challenge for FAA.
Figure 1: Number and Rate of Runway Incursions from Fiscal Year 1998
through Fiscal Year 2007:
[See PDF for image]
This figure is a vertical bar graph illustrating the Number and Rate of
Runway Incursions from Fiscal Year 1998 through Fiscal Year 2007. The
left vertical axis of the graph represents number of runway incursions
from 0 to 500. The right vertical axis of the graph represents rate of
runway incursions from 0 to 8. The horizontal axis of the graph
represents fiscal years from 1998 through 2007. The following data is
approximated from the graph:
Fiscal year: 1998;
Number of runway incursions: 300;
Rate of runway incursions (per 1 million tower operations): 4.5.
Fiscal year: 1999;
Number of runway incursions: 325;
Rate of runway incursions (per 1 million tower operations): 5.
Fiscal year: 2000;
Number of runway incursions: 400;
Rate of runway incursions (per 1 million tower operations): 6.
Fiscal year: 2001;
Number of runway incursions: 400;
Rate of runway incursions (per 1 million tower operations): 6.25;
Fiscal year: 2002;
Number of runway incursions: 330;
Rate of runway incursions (per 1 million tower operations): 5.5.
Fiscal year: 2003;
Number of runway incursions: 310;
Rate of runway incursions (per 1 million tower operations): 5.5.
Fiscal year: 2004;
Number of runway incursions: 310;
Rate of runway incursions (per 1 million tower operations): 5.5.
Fiscal year: 2005;
Number of runway incursions: 310;
Rate of runway incursions (per 1 million tower operations): 5.5.
Fiscal year: 2006;
Number of runway incursions: 310;
Rate of runway incursions (per 1 million tower operations): 5.5.
Fiscal year: 2007;
Number of runway incursions: 350;
Rate of runway incursions (per 1 million tower operations): 6.
Source: FAA.
[End of figure]
To its credit, FAA has taken a range of actions to address runway
safety and reduce the risk of collisions, including researching,
testing, and deploying new technology such as the Airport Surface
Detection Equipment, Model X (ASDE-X), which is a radar-based ground
surveillance system. In addition, FAA has encouraged airport
improvements, such as changes to runway layout, markings, signage, and
lighting, and has provided training for pilots and air traffic
controllers. Many of these actions were taken since the number and rate
of incursions peaked in fiscal year 2001. However, as runway safety
incidents declined, FAA's runway safety efforts waned, leading us to
make several recommendations in November 2007.[Footnote 14] We
recommended that FAA prepare a new national runway safety plan, improve
its runway incident data collection and analysis capabilities, and
address air traffic controller overtime and fatigue issues that may
affect runway safety.
FAA's Data Limitations Impede Safety Oversight:
FAA's ability to identify and respond to trends and early warnings of
safety problems and to manage risk is limited by incomplete and
inaccurate data. Accurate, comprehensive data are particularly
important for FAA as it moves away from an oversight approach that
focuses on labor-intensive inspections to a system safety approach that
is based on analyzing data to assess and prioritize risks. This change
in oversight approach is a positive step; however, its effectiveness
depends on having complete and accurate data and user-friendly
databases. We have identified data limitations that affect FAA's
ability to manage risk. For example, we identified problems with the
completeness of FAA's safety inspection data; information on the
performance of "designees," who include over 13,000 individuals and
organizations that have been delegated to act on the agency's behalf;
and data on air ambulance operations. We also identified problems with
the completeness and usefulness of FAA's enforcement database. To
address these issues, we have previously recommended that FAA improve
the accuracy and completeness of its safety data and its analysis of
those data.[Footnote 15] To its credit, FAA has made progress in this
area, but more work remains. For example, our recent review of runway
safety identified additional problems with the completeness of
information on runway incursions.
FAA considers the integration and sharing of high-quality, relevant,
and timely aviation safety information critical to its system safety
approach, particularly if the air transportation system grows
significantly and increases in complexity, as anticipated. To improve
its access to data, FAA is in the early stages of developing the
Aviation Safety Information Analysis and Sharing (ASIAS)--a capability
to integrate aviation safety data that is distributed across the
aviation industry into information on the operational performance and
safety of the aviation system. During fiscal year 2007, FAA established
memorandums of understanding with seven commercial airlines to obtain
access to certain safety data. According to FAA, ASIAS currently can
access about 20 government and industry systems including de-identified
reports provided by several airlines. An enterprise architecture, or
blueprint for the initiative, is expected in September 2008. However,
it will be important for FAA to address the quality issues that we have
identified with its various databases as it moves forward with linking
them through ASIAS.
FAA Will Be Challenged to Continue Hiring and Training Thousands of Air
Traffic Controllers:
During the coming decade, FAA will be challenged to continue hiring and
training thousands of air traffic controllers to replace those who will
retire and leave for other reasons. FAA projects that about 72 percent
of its controller workforce will become eligible for retirement by 2016
and that between 2007 and 2016 it will lose a total of 13,527
controllers through retirement and other reasons. To replace these
controllers, FAA plans to hire about 15,900 new controllers from fiscal
years 2007 through 2016.[Footnote 16] In fiscal year 2007, FAA hired
1,815 controllers, bringing its total controller workforce to 14,874,
or slightly more than its planned target of 14,807. FAA anticipates
hiring 1,877 controllers in fiscal year 2008, which would bring the
total number of air traffic controllers to 15,130. Figure 2 shows the
estimated numbers of losses and planned hires for fiscal years 2008
through 2016.
Figure 2: FAA's Projected Air Traffic Controller Losses and Hiring,
Fiscal Years 2008-2016:
[See PDF for image]
This figure is a vertical bar graph illustrating FAA's Projected Air
Traffic Controller Losses and Hiring, Fiscal Years 2008-2016. The
vertical axis of the graph represents annual losses/hires. The
horizontal axis of the graph represents years from 2008 through 2016.
Bar represent losses and new hires for each year. The following data is
approximated from the graph:
Year: 2008;
Losses (with academy attrition): 1,250;
New hires: 1,900.
Year: 2009;
Losses (with academy attrition): 1,275;
New hires: 1,500.
Year: 2010;
Losses (with academy attrition): 1,300;
New hires: 1,600.
Year: 2011;
Losses (with academy attrition): 1,350;
New hires: 1,600.
Year: 2012;
Losses (with academy attrition): 1,400;
New hires: 1,600.
Year: 2013;
Losses (with academy attrition): 1,400;
New hires: 1,500.
Year: 2014;
Losses (with academy attrition): 1,350;
New hires: 1,450.
Year: 2015;
Losses (with academy attrition): 1,300;
New hires: 1,400.
Year: 2016;
Losses (with academy attrition): 1,250;
New hires: 1,300.
Source: FAA.
[End of figure]
Recent events may exacerbate the hiring situation. Data indicate that
controllers are retiring at a faster rate than FAA anticipated. For
fiscal year 2006, FAA estimated that 467 controllers would retire, but
583 actually retired--about 25 percent more than planned. For fiscal
year 2007, FAA anticipated 700 controller retirements, while 828
controllers actually retired--an 18 percent increase over anticipated
retirements. FAA incorporates each year's retirement numbers into its
plans for future years, and has increased its hiring to compensate for
greater than expected retirements. For example, in fiscal year 2008,
FAA plans to hire 1,877 controllers, a significant increase over the
planned 1,420 hires reflected previously in the Controller Workforce
Plan, published in March 2007.[Footnote 17] FAA recognizes that some of
these increases in retirements may be attributed to recent labor
disputes and disagreements over the contract that went into effect in
2006. In the fall of 2007, FAA began interviewing departing controllers
to learn their reasons for leaving the workforce.
In addition to the hiring situation, FAA will be challenged to retain
sufficient numbers of experienced controllers to handle a growing
volume of traffic while also addressing the on-the-job training needs
of a large number of inexperienced controllers. According to FAA, about
one quarter of the controller workforce, including Academy students,
had less than 5 years of experience at the end of fiscal year 2007.
Because it can take up to 3 to 5 years for a controller to become
certified, within a few years, trainees could constitute a larger
portion of the controller workforce. Our analysis of FAA's hiring and
retirement projections indicates that by 2010, up to 40 percent of the
controller workforce will have less than 5 years of experience. This
high percentage of newly hired controllers will continue for a number
of years, making it important for FAA to carefully balance the ratio of
trainees to certified controllers at each air traffic control facility.
Additionally, more controllers are failing their developmental
training, increasing from about 6 percent to about 9 percent of total
hires from 2006 to 2007. Another training challenge, as the transition
to NextGen moves forward, will be to train controllers on the current
system and on new air traffic management procedures envisioned for the
future, such as precise navigation procedures that minimize pilot-
controller communication.
FAA Will Be Challenged to Maintain Current Facilities:
FAA faces an immediate challenge in maintaining and repairing existing
infrastructure so that the current system continues to operate safely
and reliably. FAA is currently responsible for maintaining over 400
terminal facilities. While FAA has not assessed the physical condition
of all of these facilities, the agency rated the average condition of
89 of them as "fair," with some rated "good" and others "very poor."
Based on the assessment of these 89 facilities, FAA estimated that a
one-time cost of repair to all of its terminal facilities would range
between $250 million and $350 million. Two FAA employee unions, the
National Air Traffic Controllers Association and the Professional
Aviation Safety Specialists, contend that these facilities are
deteriorating because of lack of maintenance and that working
conditions are unsafe due to leaking roofs, deteriorating walls and
ceilings, and obsolete air-conditioning systems. According to FAA
officials, while some of these facilities can accommodate the new
technologies and systems of NextGen, many of them are not consistent
with the configurations that will be needed under NextGen. To the
extent that NextGen technologies and systems have greater capabilities
than the legacy systems now in use, fewer facilities will be needed to
control airspace. As a result, the costs of repairing and maintaining
the current number of facilities may be reduced. In the meantime, FAA
will have to manage its given budgetary resources so that it can
maintain legacy systems and legacy infrastructure while configuring the
NAS to accommodate NextGen technologies and operations. The potential
impact on the cost of NextGen in this circumstance is discussed later
in this testimony.
FAA Must Be Able to Successfully Control Costs and Schedules for
Current ATC Systems Acquisitions:
A cost-effective and timely transition to NextGen depends in large part
on FAA's ability to keep the current portfolio of ATC systems
acquisitions within budget and on schedule. In 1995, we designated
FAA's ATC modernization program a high-risk initiative because of its
cost, complexity, and systemic management and acquisition problems. We
have reported that, during the last few years, FAA has made significant
progress in acquiring ATC systems within budget and schedule goals.
These achievements came in part through implementing businesslike
operations and procedures for acquiring and managing ATC systems. For
example, FAA has introduced earned value management for all new major
acquisitions as a way to prevent, detect, report, and correct problems
in acquiring major systems.[Footnote 18]
In 2003, as part of its efforts to operate in a more businesslike
fashion, FAA established annual acquisition performance goals that
called for a high percentage of its major acquisition programs to be
within 10 percent of budget and on schedule. For fiscal years 2004
through 2006, FAA reported exceeding these annual goals. We recently
examined how FAA was measuring its performance and reporting on its
goals related to systems acquisitions. We found that because FAA
measures progress related only to current program baselines and annual
milestones, FAA's performance reporting could mask budget increases and
schedule delays, possibly misleading stakeholders, including Congress,
as to the agency's actual performance in acquiring ATC systems. In
December 2007, we recommended that FAA identify or establish a vehicle
for regularly reporting to Congress and the public on the agency's
overall, long-term performance in acquiring ATC systems by providing
original budget and schedule baselines for each rebaselined program and
the reasons for the rebaselining. We also recommended that FAA report
information on the potential effects that any budget increases or
schedule slippages could have on the overall transition to
NextGen.[Footnote 19]
FAA Faces a Number of Management Challenges as It Begins to Implement
NextGen:
The transformation of the NAS is one of the federal government's most
complex undertakings. Although NextGen is a collaborative effort, the
bulk of the responsibility for successful implementation and transition
belongs to FAA. The agency therefore faces a number of management
challenges as it begins implementing NextGen systems and procedures.
These challenges include hiring and retaining the right skill set
within FAA, developing a facility plan for NextGen, meeting the
research and development needs of NextGen, and establishing credibility
with stakeholders regarding the agency's NextGen efforts.
FAA Faces a Challenge in Hiring and Retaining Staff with the Right
Skills to Manage the Implementation of NextGen:
As FAA moves closer to undertaking a number of major NextGen system
acquisitions, a critical component for keeping such acquisitions on
track will be having the right skill set within the agency to
successfully manage NextGen programs. In November 2006, we recommended
that FAA examine its strengths and weaknesses with regard to the
technical expertise and contract management expertise that will be
required to define, implement, and integrate the numerous complex
programs involved in the transition to NextGen.[Footnote 20] In
response to our recommendation, FAA contracted with the National
Academy of Public Administration (NAPA) to conduct a workforce needs
analysis. In December 2007, NAPA reported its findings and observations
to FAA from the first phase of its study,[Footnote 21] which focused on
identifying the required workforce competencies and defining strategies
for obtaining the necessary expertise. We consider this a necessary but
not yet sufficient response to our recommendation. The challenge
remains to compare FAA's existing and needed staff resources, determine
what gaps exist, and fill those gaps with internal or external
resources in a timely manner.
More recently, FAA's Chief Acquisitions Officer, in discussing the
challenges that the agency must manage in the transition to Next Gen,
concurred with our assessment of FAA's hiring challenges. He stated
that transitioning to NextGen means an increasing number of
acquisitions and increasing complexity within those acquisitions, and
that the agency faces a significant challenge in having an adequate
acquisition workforce to handle the transition. The agency faces a
particular challenge in attracting acquisitions managers who understand
how to apply a systems approach to managing acquisitions.[Footnote 22]
A number of FAA's acquisition staff have retired or left the agency to
take positions in other organizations. In response, according to FAA,
the agency has increased its recruiting efforts and is working to
establish internships and university programs as means of developing
qualified staff. Nonetheless, according to the Chief Acquisitions
Officer, FAA was able to hire only enough acquisition staff in 2007 to
replace those that had left. The challenge for FAA is to increase its
hiring beyond one-for-one replacement to meet its growing human capital
needs in this area, as well as to find ways to further streamline and
automate its procurement process to increase staff productivity.
FAA Will Be Challenged to Develop a Facility Plan That Takes Maximum
Advantage of NextGen Technologies:
To fully realize all of NextGen's capabilities, a new configuration of
facilities and airspace will be required that is consistent with
NextGen. A provision in the administration's reauthorization proposal
directs the Secretary of Transportation to establish a working group on
facilities consolidation to develop and report its recommendations to
Congress before any facilities or services are realigned or
consolidated. However, FAA has not yet developed or presented a
comprehensive facilities consolidation plan. According to an FAA
official, the agency plans to report on the cost implications of
reconfiguring its facilities in 2009. Until a plan for facilities
consolidation or realignment has been developed, the configurations
needed for NextGen cannot be implemented and potential savings that
could help offset the cost of NextGen will not be realized. Some FAA
officials have said that planned facility maintenance and construction
based on the current ATC system are significant cost drivers that
could, without reconfiguration, increase the cost of NextGen.
FAA Faces Challenges in Meeting the Research and Development Needs of
NextGen:
Applied research and development is critical for the transition to
NextGen because it will help to reduce risk by better defining and
demonstrating new capabilities, setting parameters for the
certification of new systems, and informing decisions about the later
transfer of systems to industry for deployment into the NAS. In my
testimony before this Subcommittee last February, I noted that there
was some uncertainty over which entities would fund and conduct the
research and development needed to transition to NextGen. Although FAA
and the Joint Planning and Development Office (JPDO) have taken steps
to address these issues, some uncertainty still remains. In the past, a
significant portion of aeronautics research and development, including
intermediate technology development, was performed by NASA. FAA has
determined that research gaps now exist as a result of both the
administration's cuts to aeronautical research funding and the expanded
requirements for NextGen. While NASA still plans to focus some of its
research on NextGen needs, the agency is moving toward a focus on
fundamental research and away from developmental work and demonstration
projects. According to an FAA official, FAA and JPDO are currently
developing a written agreement that will address NextGen's most
pressing needs in fundamental research.
In 2006, officials from FAA and JPDO initiated an assessment of NextGen
research and development requirements. Although this initial assessment
led to increased budget requests for FAA to help lessen the research
and development gaps, there continue to be challenges in filling
identified research and development needs. For example, if not
adequately addressed, the environmental impacts of aviation,
particularly the noise that affects local communities and the emissions
that contribute to global warming, will constrain efforts to build or
expand the runways and airports needed to handle the added capacity
envisioned for NextGen.[Footnote 23] In an effort to move noise and
emissions reduction technologies beyond NASA's research stage, the
administration's proposal contains a provision that would create the
Continuous Lower Energy, Emissions and Noise (CLEEN) program. The CLEEN
initiative would create a program for the development, maturation, and
certification of airframe technologies for aircraft over the next 10
years to reduce aviation noise and emissions.[Footnote 24] According to
FAA, the program is intended to accelerate near-term technology
maturation and to provide an incentive for manufacturers to equip
aircraft with noise reduction technologies. FAA's budget request for
fiscal year 2009 includes provisions requesting an increase in research
and development funding to support the integration and implementation
of NextGen programs and the CLEEN initiative.
In spite of these developments, it is still unclear how NextGen's
developmental research needs will be addressed. Some observers believe
that FAA has neither the research and development infrastructure nor
the funding to address the developmental research needs for NextGen.
According to a draft report by an advisory committee to FAA--the
Research, Engineering and Development Advisory Committee--FAA would
need at least $100 million annually in increased funding to perform
this research and development work. Moreover, establishing the
infrastructure within FAA could delay the implementation of NextGen by
5 years. Unless NextGen's developmental research needs are met,
technology transfers to industry for further development will also
delay the implementation of NextGen, including capabilities aimed at
increasing the safety, efficiency, and capacity of the system.
FAA Faces a Challenge in Assuring Stakeholders That It Is Fully
Committed to NextGen:
Some industry stakeholders believe that FAA may not be fully committed
to NextGen, in part because FAA has stopped some past modernization
efforts. An example that is often cited is a partnership between FAA
and a major airline to develop a datalink communications system that
transmitted e-mail-like messages between controllers and pilots. The
airline invested in this technology by equipping some of its aircraft,
but, according to FAA, the agency and the airline subsequently agreed
to cancel the program.
In addition, some stakeholders have expressed a number of concerns
about how NextGen is currently being implemented. First, some
stakeholders are concerned about whether there is a clearly defined and
transparent governance structure in the FAA organizations that share
responsibility for implementing NextGen. These stakeholders have
expressed a belief that one organization or person should be
responsible and, thus, accountable for NextGen. Second, some
stakeholders are concerned that NextGen efforts are not proceeding as
quickly as needed. These stakeholders note that existing technologies
could be implemented more quickly and more strategically than FAA's
current plans allow. For example, the technologies for more precise
navigation are available and in use by some airlines at some airports.
However, because FAA has not developed all of the necessary
implementation procedures for some critical city-pairs, some airlines
cannot take full strategic advantage of these technologies. Third, some
stakeholders have noted that some FAA implementation priorities will
reduce costs immediately for FAA, but require airlines to make costly
investments that will not begin to yield a return for them until 2020.
Some stakeholders have suggested that returns on investment to industry
can be accelerated if a regional implementation approach is used. To
gain credibility and buy-in with stakeholders, FAA will have to address
stakeholders' concerns about NextGen governance, implementing
technologies more quickly, and structuring the required industry
investments so as to yield returns on investment more quickly.
Concluding Observations:
FAA faces numerous challenges in 2009 and beyond to maintain the safety
and efficiency of the current system and to successfully manage the
implementation of NextGen--one of the federal government's most complex
undertakings. Maintaining one of the safest systems in the world is
complicated by the steadily increasing demands placed on the system
while FAA's facilities and current technologies continue to age. As you
consider the President's budget for fiscal year 2009, it is important
to remember that a timely reauthorization is critical to ensuring the
continuity of FAA's current programs and the agency's continuing
progress toward NextGen.
Mr. Chairman, this concludes my prepared statement. I would be pleased
to respond to any questions from you or other Members of the
Subcommittee.
GAO Contact and Staff Acknowledgments:
For further information on this statement, please contact Gerald L.
Dillingham, Ph.D., at (202) 512-2834 or dillinghamg@gao.gov.
Individuals making key contributions to this report include Faye
Morrison (Assistant Director), Paul Aussendorf, Jay Cherlow, Elizabeth
Eisenstadt, Carol Henn, Bert Japikse, Edward Laughlin, Maureen Luna-
Long, Maren McAvoy, Edmond Menoche, Richard Scott, Teresa Spisak, and
Maria Wallace.
[End of section]
Appendix I: Additional Information on How Proposed Budget Changes Might
Affect FAA's Ability to Fund Airports and Other Capital Projects:
The President's budget and reauthorization proposal contain reductions
in funding for the Airport Improvement Program (AIP), changes in AIP
allocations among airports, and an increase in the cap on the Passenger
Facility Charge (PFC) program for commercial airport development
projects.[Footnote 25] Airports are an integral part of the nation's
transportation system, and maintaining their safety and efficiency is
an important Federal Aviation Administration (FAA) responsibility. To
this end, FAA administers the AIP, which in fiscal year 2007 provided
$3.5 billion in federal grants for development projects at the entire
range of the nation's 3,400 airports--from small general aviation
airports to the very largest that handle several million passengers per
year. In addition, FAA administers the PFC program, which provided an
estimated $2.7 billion during 2007.
Last year, we reported that the funding level for airports is about $1
billion less annually than planned development costs. Over the next 5
years, planned airport development costs total at least $14 billion
annually (in 2006 dollars).[Footnote 26] From 2001 through 2005,
airports' historical funding averaged about $13 billion per year (also
in 2006 dollars) from all sources. This amount covers all types of
projects, including those not eligible for federal grants. The primary
source of this funding was bonds, which averaged almost $6.5 billion
per year, followed by federal grants, PFCs, and state and local grants
(which averaged $3.6 billion, $2.2 billion, and $700 million per year,
respectively). Of this $1 billion annual difference between historic
funding and planned development costs, larger airports account for
about $600 million annually, while smaller airports foresee a
difference of about $400 million annually[Footnote 27]
The President's budget and reauthorization proposal for AIP would
decrease potential funding for all airports and shift more funding from
airport entitlements to funds under FAA's discretion. The President's
budget reduces AIP funding to $2.75 billion from its past level of $3.5
billion in fiscal years 2006, 2007, and 2008. Table 1 compares AIP
funding allocations at $2.75 billion to the current funding level of
$3.5 billion. To make more discretionary grants available, the
administration's reauthorization proposal would also remove the funding
trigger in current law that doubles the amount of entitlement funds
airports receive if the overall AIP funding level is above $3.2
billion. According to FAA officials, their objective is to increase the
amount of discretionary grants for airports so that higher-priority
projects can be funded.
Table 1: Estimated AIP Distribution under Alternative Funding Levels
and Allocations (in millions):
Primary airport entitlements[A]:
$2,750 (proposed FY 2009) Administration's reauthorization proposal*:
$629;
$3,500 (actual FY 2006) Current funding allocations: $864.
Other entitlements:
$2,750 (proposed FY 2009) Administration's reauthorization proposal*:
709;
$3,500 (actual FY 2006) Current funding allocations: 816.
Carryover entitlements[B]:
$2,750 (proposed FY 2009) Administration's reauthorization proposal*:
432;
$3,500 (actual FY 2006) Current funding allocations: 432.
Small airport fund:
$2,750 (proposed FY 2009) Administration's reauthorization proposal*:
0;
$3,500 (actual FY 2006) Current funding allocations: 428.
Discretionary and set aside grants[C]:
$2,750 (proposed FY 2009) Administration's reauthorization proposal*:
866;
$3,500 (actual FY 2006) Current funding allocations: 845.
Total AIP funds available for grants[D]:
$2,750 (proposed FY 2009) Administration's reauthorization proposal*:
$2,636;
$3,500 (actual FY 2006) Current funding allocations: $3,386.
Source: FAA.
[*] Assumes that fiscal year 2009 funding is allocated according to the
same reauthorization formulas as proposed in 2007.
[A] Includes entitlements for nonprimary, cargo, and Alaskan airports.
[B] Funds that some airports can claim to use in the fiscal year in
which the amount was apportioned and 2 fiscal years immediately after
that year.
[C] Funds that are available for use on AIP-eligible projects at FAA's
discretion. This includes funds set aside for such things as noise
planning and programming, reliever airports and capacity, safety,
security, and noise projects. It also includes discretionary grants
that can be used for any AIP eligible project at any airport.
[D] The funding available for grants after the 2006 rescission and
deductions for airport research, other programs, and administrative
costs.
[End of table]
For smaller airports, the effect of the administration's proposal is
greater because they are more dependent on AIP than other funding
sources. At a funding level of $2.75 billion, the proposal would reduce
entitlements and other funding dedicated to small airports by $436
million (see table 2). At a funding level of $3.5 billion in AIP
funding, smaller airports would lose $75 million in entitlements and
other dedicated funds under FAA's proposal, but discretionary funds
would increase by $282 million, making it less certain how smaller
airports would fare overall.
Table 2: Effect of Proposed AIP Reauthorization Formula on Smaller
Airports Assuming New Budget Level (dollars in millions):
Funding categories: Entitlements;
Current law at $3.5 billion: $1,680;
Proposed law at $2.75 billion: $1,244;
Difference from current: -436;
Proposed law at $3.5 billion: $1,605;
Difference from current: -75.
Funding categories: Discretionary;
Current law at $3.5 billion: 510;
Proposed law at $2.75 billion: 519;
Difference from current: +9;
Proposed law at $3.5 billion: 792;
Difference from current: +282.
Source: GAO analysis of FAA data.
[End of table]
The administration's reauthorization proposal would also allow airports
to increase their PFC to a maximum of $6 and allow airports to use
their PFC collections for any airport projects while forgoing their
entitlement funds. Based on calculations we did last year, a $6 PFC
could have generated an additional $1.1 billion for larger airports in
2007, exceeding the $247 million in entitlements that FAA estimates
they would forgo under their reauthorization proposal (see table
3).[Footnote 28] However, smaller airports (small and non-hub) would
not benefit as much from this ability to increase PFCs because they
collect less in PFCs and are more reliant on AIP for funding. A change
to a $6 PFC could yield as much as an additional $171 million for
smaller airports if they all imposed a $6 PFC. On a net basis, this
relatively small increase in PFCs would not compensate smaller airports
for the $436 million reduction in AIP funding at a $2.75 billion
funding level.
Table 3: Projected PFC Collections with a $6 PFC (dollars in millions):
Airport size: Large hub;
2007 PFC collections (estimated): $1,869;
If all primary airports had a $6 PFC[A]: $2,696;
Increase over 2007 collections: $827.
Airport size: Medium hub;
2007 PFC collections (estimated): $486;
If all primary airports had a $6 PFC[A]: $782;
Increase over 2007 collections: $295.
Airport size: Subtotal;
2007 PFC collections (estimated): $2,356;
If all primary airports had a $6 PFC[A]: $3,479;
Increase over 2007 collections: $1,123.
Airport size: Small hub;
2007 PFC collections (estimated): $184;
If all primary airports had a $6 PFC[A]: $303;
Increase over 2007 collections: $119.
Airport size: Non hub;
2007 PFC collections (estimated): $71;
If all primary airports had a $6 PFC[A]: $123;
Increase over 2007 collections: $52.
Airport size: Subtotal;
2007 PFC collections (estimated): $255;
If all primary airports had a $6 PFC[A]: $426;
Increase over 2007 collections: $171.
Airport size: Total;
2007 PFC collections (estimated): $2,611;
If all primary airports had a $6 PFC[A]: $3,905;
Increase over 2007 collections: $1,294.
Source: GAO analysis of FAA data.
[A] There are currently 382 primary airports eligible to apply for a
PFC.
[End of table]
[End of section]
Related GAO Products:
Air Traffic Control: FAA Reports Progress in System Acquisitions, but
Changes in Performance Measurement Could Improve Usefulness of
Information. GAO-08-42. Washington, D.C.: December 18, 2007.
Aviation Runway and Ramp Safety: Sustained Efforts to Address
Leadership, Technology, and Other Challenges Needed to Reduce Accidents
and Incidents. GAO-08-29. Washington, D.C.: November 20, 2007.
Aviation and the Environment: Impact of Aviation Noise on Communities
Presents Challenges for Airport Operations and Future Growth of the
National Airspace System. GAO-08-216T. Washington, D.C.: October 24,
2007.
Assigning Air Traffic Control Costs to Users: Elements of FAA's
Methodology Are Generally Consistent with Standards but Certain
Assumptions and Methods Need Additional Support. GAO-08-76. Washington,
D.C.: October 19, 2007.
Aviation Finance: Observations on the Current FAA Funding Structure's
Support for Aviation Activities, Issues Affecting Future Costs, and
Proposed Funding Changes. GAO-07-1163T. Washington, D.C.: August 1,
2007.
Federal Aviation Administration: Viability of Current Funding Structure
for Aviation Activities and Observations on Funding Provisions of
Reauthorization Proposals. GAO-07-1104T. Washington, D.C.: July 12,
2007.
Airport Finance: Observations on Planned Airport Development Costs and
Funding Levels and the Administration's Proposed Changes in the Airport
Improvement Program. GAO-07-885. Washington, D.C.: June 29, 2007.
Airport Finance: Preliminary Analysis Indicates Proposed Changes in the
Airport Improvement Program May Not Resolve Funding Needs for Smaller
Airports. GAO-07-617T. Washington, D.C.: March 28, 2007.
Next Generation Air Transportation System: Progress and Challenges in
Planning and Implementing the Transformation of the National Airspace
System. GAO-07-649T. Washington, D.C.: March 22, 2007.
Federal Aviation Administration: Key Issues in Ensuring the Efficient
Development and Safe Operation of the Next Generation Air
Transportation System. GAO-07-636T. Washington, D.C.: March 22, 2007.
Federal Aviation Administration: Observations on Selected Changes to
FAA's Funding and Budget Structure in the Administration's
Reauthorization Proposal. GAO-07-625T. Washington, D.C.: March 21,
2007.
Performance and Accountability: Transportation Challenges Facing
Congress and the Department of Transportation. GAO-07-545T. Washington,
D.C.: March 6, 2007.
Aviation Safety: Improved Data Collection Needed for Effective
Oversight of Air Ambulance Industry. GAO-07-353. Washington, D.C.:
February 21, 2007.
Federal Aviation Administration: Challenges Facing the Agency in Fiscal
Year 2008 and Beyond. GAO-07-490T. Washington, D.C.: February 14, 2007.
Next Generation Air Transportation System: Progress and Challenges
Associated with the Transformation of the National Airspace System. GAO-
07-25. Washington, D.C.: November 13, 2006.
Aviation Finance: Observations on Potential FAA Funding Options. GAO-
06-973. Washington, D.C.: September 29, 2006.
Aviation Safety: FAA's Safety Efforts Generally Strong but Face
Challenges. GAO-06-1091T. Washington, D.C.: September 20, 2006.
Aviation Safety: System Safety Approach Needs Further Integration into
FAA's Oversight of Airlines. GAO-05-726. Washington, D.C.: September
28, 2005.
Aviation Safety: FAA Needs to Strengthen the Management of Its
Designees Programs. GAO-05-40. Washington, D.C.: October 8, 2004.
Aviation Safety: Better Management Controls are Needed to Improve FAA's
Safety Enforcement and Compliance Efforts. GAO-04-646. Washington,
D.C.: July 6, 2004.
Passenger Facility Charges: Program Implementation and the Potential
Effects of Proposed Changes. GAO/RCED-99-138. Washington, D.C.: May 19,
1999.
[End of section]
Footnotes:
[1] Pub. L. 110-161.
[2] These funding changes include (1) introducing user charges for
commercial aircraft based on the cost of the air traffic control
services they receive, (2) eliminating many current taxes, (3)
substantially increasing the fuel taxes general aviation operators pay,
(4) charging both commercial and general aviation a fuel tax to pay for
airport capital improvements, the Essential Air Service program, and
air traffic system research and development, (5) modifying FAA's budget
accounts to align with FAA's activities or lines of business, and (6)
linking the contribution to FAA's budget from the General Fund of the
U.S. Treasury to the public benefits that FAA provides. These changes
are proposed to begin in fiscal year 2010.
[3] At that time, Congress also increased the international departure
tax from $6 to $12 per person, applied this tax to international
arrivals, and added the frequent flyer tax and the Hawaii/Alaska
passenger taxes.
[4] With a larger General Fund contribution toward FAA's budget, the
Trust Fund would be able to support a higher level of additional
spending beyond the baseline level. For example, in testimony last
year, using a fiscal year 2007 baseline in which General Fund revenues
provided about 19 percent of FAA's budget, CBO estimated that the Trust
Fund would be able to support about $22 billion in additional spending
over the fiscal year 2007 baseline level, provided most of the spending
occurs after 2010.
[5] If the desired level of spending exceeded what was likely to be
available from the Trust Fund at current tax rates, Congress could make
further changes within the current funding structure that would provide
FAA with additional revenue. For example, Congress could raise the
rates on one or more of the current excise taxes or could provide more
General Fund revenues for FAA, although the nation's fiscal imbalance
may make a larger contribution from this source difficult.
[6] For a more complete discussion of options for funding FAA, see GAO,
Aviation Finance: Observations on Potential FAA Funding Options, GAO-06-
973 (Washington, D.C.: Sept. 29, 2006).
[7] GAO, Assigning Air Traffic Control Costs to Users: Elements of
FAA's Methodology Are Generally Consistent with Standards but Certain
Assumptions and Methods Need Additional Support, GAO-08-76 (Washington,
D.C.: Oct. 19, 2007).
[8] GAO-08-76.
[9] Airports also received funding from state and local grants and
other sources.
[10] We follow conventions established in GAO's prior reports on
airport finance in differentiating between larger airports (67 large-
and medium-hub airports) and smaller airports (all other categories of
commercial and general aviation airports).
[11] GAO, Airport Finance: Observations on Planned Airport Development
Costs and Funding Levels and the Administration's Proposed Changes in
the Airport Improvement Program, GAO-07-885 (Washington, D.C.: June 29,
2007).
[12] The LOI program helps fund large-scale capacity projects at
primary or reliever airports. LOIs state that FAA intends to obligate
AIP discretionary and entitlement funds from future budgetary authority
in an amount not greater than the federal government's share of
allowable costs for that project. FAA issues an LOI to state that
reimbursement will be made according to a given schedule as funds
become available from Congress each year over the term of the LOI.
[13] We are currently conducting a study examining FAA's efforts to
reduce congestion through airspace redesign in the New York, New
Jersey, and Philadelphia, Pennsylvania region.
[14] GAO, Aviation Runway and Ramp Safety: Sustained Efforts to Address
Leadership, Technology, and Other Challenges Needed to Reduce Accidents
and Incidents, GAO-08-29 (Washington, D.C.: Nov. 20, 2007).
[15] See GAO, Aviation Safety: Improved Data Collection Needed for
Effective Oversight of Air Ambulance Industry, GAO-07-353 (Washington,
D.C.: Feb. 21, 2007); Aviation Safety: System Safety Approach Needs
Further Integration into FAA's Oversight of Airlines, GAO-05-726
(Washington, D.C.: Sept. 28, 2005); Aviation Safety: FAA Needs to
Strengthen the Management of Its Designees Programs, GAO-05-40
(Washington, D.C.: Oct. 8, 2004); and Aviation Safety: Better
Management Controls are Needed to Improve FAA's Safety Enforcement and
Compliance Efforts, GAO-04-646 (Washington, D.C.: July 6, 2004).
[16] Although air traffic is expected to increase significantly over
the next decade, FAA expects that NextGen technologies and procedures
will allow air traffic controllers to be more productive. Thus, FAA
does not currently plan for any dramatic increases in overall
controller staffing through 2016.
[17] According to the President's budget for fiscal year 2009, FAA
plans to further increase its hiring of controllers in fiscal year
2009.
[18] We are currently conducting an examination of FAA's implementation
of earned value management.
[19] GAO, Air Traffic Control: FAA Reports Progress in System
Acquisitions, but Changes in Performance Measurement Could Improve
Usefulness on Information, GAO-08-42 (Washington, D.C.: Dec. 18, 2007).
[20] GAO, Next Generation Air Transportation System: Progress and
Challenges Associated with the Transformation of the National Airspace
System, GAO-07-25 (Washington, D.C.: Nov. 13, 2006).
[21] Phase II of the project began in January 2008 and involves
additional data gathering, competency validation, and in-depth
benchmarking. NAPA plans to issue a final report on September 30, 2008.
[22] Many of the NextGen systems will not be stand-alone systems, but
rather interdependent systems that will require skills in managing
systems integration.
[23] GAO recently testified on aviation and the environment. See GAO,
Aviation and the Environment: Impact of Aviation Noise on Communities
Presents Challenges for Airport Operations and Future Growth of the
National Airspace System, GAO-08-216T (Washington, D.C.: Oct. 24,
2007). We will soon issue a report examining FAA's and NASA's research
and development plans for aviation noise reduction.
[24] A similar provision is in the Senate bill for FAA reauthorization.
As of the date of this publication, the House and Senate are discussing
the reauthorization bills.
[25] PFCs are fees airports can charge passengers to fund FAA-approved
projects. These are generally capped at $4.50 per passenger.
[26] This estimate is a combination of FAA's estimate of $8.2 billion
in AIP grant-eligible projects and $5.8 billion from the Airport
Council International's estimate of projects not eligible for AIP.
FAA's estimate is based on airport master plans that FAA planners have
reviewed and entered into a database of all national system airports.
The Airport Council International also estimates airports' planned
development, based on a survey of the 100 largest airports and includes
all projects regardless of grant eligibility. Conversely, airports
received an average of about $13 billion a year for planned capital
development. See GAO, Airport Finance: Observations on Planned Airport
Development Costs and Funding Levels and the Administration's Proposed
Changes in the Airport Improvement Program, GAO-07-885 (Washington,
D.C.: June 29, 2007).
[27] We follow conventions established in GAO's prior reports on
airport finance in differentiating between the 67 larger airports
(large-and medium-hub airports) and smaller airports (all other
categories of commercial and general aviation airports).
[28] This calculation assumes that the increased PFC would not affect
passenger demand for air travel. GAO has previously calculated that a
PFC increase could reduce passenger demand, which would reduce the PFC
revenue collected at the higher rate. Our previous work suggests the
revenue reduction due to demand effects would likely be small. See GAO,
Passenger Facility Charges: Program Implementation and the Potential
Effects of Proposed Changes, GAO/RCED-99-138 (Washington, D.C.: May 19,
1999).
[End of section]
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