30 Years of Debate on Air Traffic Control Corporatization

May 4, 2017

Thirty years ago this week, the long-running, off-and-on debate about whether or not to separate air traffic control from the rest of the modern Federal Aviation Administration (FAA) began. Senators Daniel Inouye (D-HI) and Ted Stevens (R-AK) introduced a bill on May 6, 1987 which would have created “an independent, user-fee supported Government corporation established for the purpose of operating, maintaining, supplying, and enhancing an efficient and responsive national system for air traffic control.”

The bill (S. 1159, 100th Congress) can be read here.

The reason for separation cited by the bill’s sponsors was the inability of the FAA to modernize air traffic control (ATC) systems quickly enough due to budgetary pressures (which had been at the forefront since the deficit-cutting Gramm-Rudman-Hollings law had been enacted in 1985). Upon the bill’s introduction, its sponsors stated their rationale in the Congressional Record (see here). Inouye said:

The present day ATC system is inadequate. It often operates with obsolete equipment, understaffed and undertrained personnel, and inefficient procedures…The yearly congressional budget uncertainty creates funding instability in vital acquisition programs which lead to contractor stops, starts, delays and layoffs in programs everyone agrees should be funded and which were, in fact, previously approved in the National Airspace System (NAS) plan…Adherence to the usual budgetary and appropriations processes are impeding a quick, effective response to dramatically changing aviation needs.

Stevens said:

We propose to create a Federal corporation to run the air traffic control system. The recent near-misses and complaints about delays highlight the problems that the current ATC system faces. In light of our country’s increasing reliance on air transportation, we need to untie the hands of the system to deal with increased traffic loads, and additional personnel needs.

Even though Inouye was the lead sponsor who introduced the bill, the actual drafting was done by Stevens’ staff, since the Alaska Senator was, at the time, the ranking Republican on the Senate Post Office subcommittee and was therefore familiar with the structure of government-owned corporations. The Inouye-Stevens bill would have created a federal corporation called the National Aviation Authority (NAA), to be headed by a Director nominated by the President and confirmed by the Senate, who was required to have no financial stake in the aviation sector and who would serve a single, non-renewable 10-year term.

The bill created two different boards to oversee and advise the Director. A political board (the Policy Advisory Board) would have had the Secretaries of Transportation, Defense and Commerce, and the chairmen and ranking members of the House and Senate aviation subcommittees of the authorizing committees, “meet semiannually to review” the operations and future plans of the Authority and, on the basis of such review, to advise [the President and Congress] of the anticipated effectiveness of those plans or otherwise to recommend a course of conduct…”

And a separate 10-person Technical Advisory Committee would represent stakeholders (two members each from airlines, airports, general aviation interests, the military, and the public interest, all appointed by the President without need for Senate confirmation) to advise the Director on all aspects of NAA operations and to report to the President and Congress twice a year.

The bill would have made the Authority exempt from all federal procurement rules (sec. 236) and most civil service laws (sec. 271). Employees of the Authority would also have faced the same barrier against going on strike (sec. 273).

Critically, the Authority would have been given its own access to capital markets so that it could have a true capital budget. Section 303 of the bill authorized the Authority to issue its own bonds and to have up to $10 billion in bonds outstanding at any one time. No more than $2 billion in bonds could be issued in any one year ($1.5 billion for capital and $500 million to defray any operating losses). At the time, annual appropriations for the FAA’s capital account were only $805 million per year, so the Inouye-Stevens bill gave the Authority the ability to double its capital spending for several years running, or slow it down, as need be to make major procurements.

The Authority would fund itself through the issuance of direct user fees, which were to be capped for the first two years at the total amount of the excise taxes they replaced. (During that period, some of the user fees were to be rebated back to “Treasury to pay for airport development.) After that, the Authority would be on its own, and the Airport and Airway Trust Fund was to be abolished. The bill stated that “New user fee revenues shall be exempt from any and all restrictions and sequestration provisions.” And given that the bill also provided that said user fees “shall be available without further appropriation or fiscal year limitation,” that meant that the spending of those user fees would be exempt from sequestration and other budget restrictions as well.

(A Senate Commerce Committee staff memo summarizing the Stevens-Inouye bill can be read here.)

Then as now, legislation in Congress splitting up the FAA was something that the airlines had been advocating for years. In this case, the Air Transport Association had put together its own proposal for an ATC corporation in September 1985. ATA then commissioned a study of the issue from the National Academy of Public Administration (a federally chartered nonpartisan advisory board) to study the issue. The Academy’s report issued in March 1985 stated that “a government corporation would, if properly chartered by the Congress, offer substantial advantages over the current FAA in the management of the airport and airways program for the U.S. government.”

By January 1987, the ATA was actively shopping its draft legislation around Congress. They met with Sen. Wendell Ford (D-KY), chairman of the Senate Aviation Subcommittee, on January 13. In a memo to Ford the day before the meeting, the Aviation subcommittee staff advised him that “The primary concern expressed to date with the NAA proposal has been that it will be difficult, if not impossible to separate the day-to-day air traffic control operations from safety. The ATA argues that this can be done, but it has failed to be convincing.”

(Since that time, the FAA has formally established a new cost allocation system for air traffic control operations by creating the Air Traffic Organization within the FAA Operations appropriations account, pursuant to title III of the 2000 AIR-21 law and Executive Order 13180. So, from a budget point of view, separating ATC from safety would be a bit easier if it were attempted today.)

The Commerce staff memo also said that “The only outside group to take a position on [the government corporation proposal from ATA] has been the Aircraft Owners and Pilots Association, which opposes the proposal. Rather, AOPA, which represents general aviation, advocates separating the FAA from the rest of the Department of Transportation, creating a new independent agency.”

Stevens and Inouye introduced their modified version of the airlines’ proposal in May 1987. But while both men were members of the Senate Aviation Subcommittee, neither of them were the chairman – Wendell Ford was. And Ford was going another way. A July 29, 1987 memo from staff to Commerce chairman Fritz Hollings (D-SC) warned that Ford was on the verge of introducing a bill to take AOPA’s recommendation and make the entire FAA an independent agency.

The memo stated that “Since becoming Chairman of the Aviation Subcommittee, Senator Ford has become increasingly concerned about the level of interference in the FAA’s aviation safety efforts by the Secretary and her staff. At a speech in Washington earlier this year, he mentioned the idea of creating an independent FAA and it got very strong support from the majority of the aviation groups.”

Ford never held a hearing on the Inouye-Stevens ATC separation bill and instead introduced his independent FAA bill (S. 1600, 100th Congress – bill text starting on p. 22920 here) on August 6, 1987. In his remarks on the bill’s introduction (starting on p. 22919 here), Ford said that the FAA faced a “crisis in confidence” and that the solution was independence:

The current relationship of having the FAA under the Secretary of Transportation has, over the past 21 years, proven unworkable. Particularly in the recent past, every important decision-and indeed some seemingly less important decisions, made by the Administrator of the FAA-have been run through the political sieve by the Secretary and the departmental staff. This has gone on, unfortunately, not as the result of any regard for the wisdom or merit of the decision, but simply to test its political benefit or detriment. The results have been decisions characteristically mushy, lacking in clear direction and always delayed.

By this comment, I do not mean to suggest that under my proposal, the FAA should be or would be removed from the political and budgetary process. Obviously, it will continue to require macro-level, policy oversight from both the Congress and the White House.

Ford’s bill had three original cosponsors upon introduction, none of which should be surprising: the chairman of the Senate Appropriations Committee (Robert Byrd, D-WV), the chairman of the Transportation Appropriations Subcommittee (Frank Lautenberg, D-NJ) and Nancy Kassebaum (R-KS), whose state is the capital of general aviation.

Ford promised to hold a series of hearings on his bill, and four were held (at least one of which is preserved on video, here).

Since the introduction of their ATC corporation bill in May, Stevens and Inouye (and the airlines) had been unable to build much support for their approach. Formally, they never added any cosponsors to their bill. And the opposition of chairman Ford seemed insurmountable. After Ford introduced his FAA independence bill on July 29, Inouye and Stevens eventually signed on as cosponsors (Inouye on October 8 and Stevens on December 17, 1987).

On March 3, 1988, Commerce staff sent chairman Hollings a memo informing him that Ford would soon be asking to schedule S. 1600 for a markup. The memo notes that while the airlines had supported the Inouye-Stevens ATC corporatization bill, “when it became apparent that that bill would not get the necessary political support, and Senator Ford offered the idea of an independent FAA, the airlines quickly moved to support S. 1600.”

The timing of the markup was complicated by the need to wait for the release of a report by a Presidential blue-ribbon aviation safety commission chaired by John Albertine, released on April 1988, which recommended an independent FAA (but which also recommended user fees in lieu of taxes and independence from the federal budget, which the Ford bill did not.) An April 28, 1988 Commerce staff document compares the Ford bill with the Commission plan, a plan by a stakeholder coalition, the recommendations of the Office of Technology Assessment, and suggestions by Transportation Secretary Jim Burnley. (Disclosure: Sec. Burnley is the chairman of the Eno Center Board of Directors.)

The Commerce Committee finally marked up and reported S. 1600 on June 28, 1988 by a vote of 14 to 4, but Hollings did not file the report (S. Rept. 100-440) until August 2, just one week before the month-long summer recess. However, the Reagan Administration opposed the bill and the House version (H.R. 4650) introduced by Rep. Jim Oberstar (D-MN) could not get a markup in the Public Works Committee. Given that, Senate leaders never found time to schedule S. 1600 for a floor vote in the rush of end-of-session business in September and October before final adjournment October 22.

By the time the 101st Congress convened in January 1989, the December 21, 1988 Pan Am bombing over Lockerbie, Scotland had intervened and refocused all aviation debate on security concerns instead of air traffic control efficiency. The issue of separating ATC from the rest of the FAA would not rise again until the confluence of the Baliles Commission report and Vice President Gore’s “reinventing government” initiative produced the Clinton Administration’s ATC corporatization proposal in 1994.

Since the institutional opposition within Congress to taking air traffic control out of the regular budget process has always been centered in the Appropriations Committees, it is ironic that the first ATC corporatization bill was introduced by Stevens and Inouye, both of whom were already senior appropriators at the time and who went on to be legendary Appropriations Committee chairmen. But both men were also on the authorizing Commerce Committee. And more importantly, Alaska and Hawaii are uniquely dependent on airlines and efficient air traffic control in a way that far exceeds all other states. (All politics is local, or at least it was back in 1987.)



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