How Would the Budget Scoring of Air Traffic Control Reform Work?

April 14, 2017

After a long period of study, the Eno Center’s Aviation Working Group recommended that the United States follow the model adopted by most other developed nations and separate the provision of air traffic control (ATC) services from the regulation of aviation safety. The report also recommended that air traffic control services be insulated from the pressures of the federal budget process and be allowed a true capital budget in order to bring about the benefits from next generation ATC technology more rapidly.

In order to achieve these goals, the final report recommended “that the United States adopt a new governance and funding model for ATC provision that is either a government corporation or a non-profit independent entity.”

At present, ATC services are provided by the Federal Aviation Administration and ATC funding is part of the federal budget. Annual appropriations must be made by Congress (subject to the Budget Control Act’s spending caps), most of which are drawn from a federal trust fund account that receives deposits from an array of federal excise taxes on air carriers, which are largely passed through to passengers and air cargo shippers.

Any attempt to remove ATC provision from the regular federal budget – whether by transferring those responsibilities to a government-owned corporation or to a non-profit independent entity – will face a bewildering array of obstacles as part of the federal budget process. This article is an attempt to explain those obstacles.

Conceptualization. The most basic issue faced by ATC reform is conceptual – what is considered to be part of the federal government and what is not? This year is the 50th anniversary of the President’s Commission on Budget Concepts, the final report of which served to lock budget concepts in stone for generations. That final report is still treated like holy writ by the budget scorekeeping bodies – the White House Office of Management and Budget and the Congressional Budget Office.

However, within the recommendations of the Concepts Commission, there are gray areas and room for disagreement.

The Commission’s final report acknowledged that there were difficult judgment calls to be made in this regard:

Providing for national security or collecting census data are obviously activities of the Federal Government which should clearly be in “the budget.” It is equally clear that the housewife’s purchase of groceries or a private corporation’s borrowing from a commercial bank represent transactions out side the Federal sector. Between these obvious extremes, however, are a wide variety of activities ranging from those clearly within the Federal domain to those clearly outside the Federal establishment. Should the activities of enterprises owned jointly by the Government and the private sec tor of the economy be included in the budget? What about clearly Government agencies, such as the Federal Reserve System, which are not by law (or by logic) subject to the standard annual congressional and executive branch budgetary disciplines? What about privately owned agencies which were established by the Federal Government in pursuit of public policy objectives but from which all government capital has now been withdrawn, such as the Federal home loan banks or Federal land banks? It is difficult to draw a boundary line in some of these cases without having programs included in the budget that do not seem greatly different from other excluded items…

In making the decisions about whether or not to include programs in the budget, the Commission has asked several questions: Who owns the agency? Who supplies its capital? Who selects its managers? Do the Congress and the President have control over the agency’s program and budget, or are the agency’s policies the responsibility of the Congress or the President only in some broad ultimate sense? The answer to no one of these questions is conclusive, and at the margin, where boundary questions arise, decisions have been made on the basis of a net weighing of as many relevant considerations as possible. In general, the Commission recommends a comprehensive budget, with very few exclusions.

The Commission found the toughest judgment calls were in the area of government-sponsored enterprises (GSEs). The Commission recommended that “Government-sponsored enterprises be omitted from the budget when such enterprises are completely privately owned.” This would seem to draw a line of distinction between the government corporation option and the independent non-profit entity option for ATC provision.

In the last Congress, the House Transportation and Infrastructure Committee approved a bill (H.R. 4441, 114th Congress) to establish a federally chartered non-profit corporation to assume air traffic control responsibilities. (Ownership of the corporation was a bit unclear, as the bill had no provision for stock issuance – apparently, the corporation would own itself.) The corporation would charge user fees to air carriers.

The Congressional Budget Office, in its score of H.R. 4441, decided that even though the corporation would be non-governmental, its cash flow should still be a part of the budget:

Although the proposed corporation would be independent and autonomous, in CBO’s view it would effectively act as an agent of the federal government in carrying out a regulatory function. Hence, in keeping with guidance specified by the 1967 President’s Commission on Budget Concepts, the proposed corporation’s cash flows should be recorded in the federal budget. More specifically, fees charged by the proposed corporation should be recorded as federal revenues, and its expenditures should be classified as federal direct spending.

CBO cited the monopolistic nature of the ATC corporation’s services and the compulsory nature of the user fees the corporation would charge. They cited a section of the Concepts Commission report that said “Borderline agencies and transactions should be included in the budget unless there are exceptionally persuasive reasons for exclusion.”

However, CBO and OMB have been known to disagree from time to time on the scoring of GSEs. In particular, since the federal government took conservatorship of Fannie Mae and Freddie Mac in 2008, CBO and OMB have disagreed over whether or not those GSEs should be recorded as part of the budget – CBO says yes, and OMB says no.

In the event the two scorekeeping bodies disagree, the Supreme Court’s 1986 decision in Bowsher v. Synar makes it crystal clear that the President (OMB) has complete discretion in budget execution. Even if CBO believes that an ATC corporation’s cash flows should be part of the budget, if OMB disagrees, then OMB has the power to exempt the corporation from budget sequestration because it is OMB that has to implement sequestration orders. (CBO’s budget score can be problematic within Congress, but budget disputes within Congress are usually decided on the basis of who has the most votes on the floor.)

Of course, Congress and the President together can always change the rules through the lawmaking process and have been known to overrule both CBO and OMB from time to time in a process called “directed scorekeeping.” For example, in 2001, both CBO and OMB ruled that a bill making changes in investment procedures for railroad retirement fund assets would score as creating $15 billion in new federal outlays, so Congress put a provision in the law directing both scorekeeping bodies not to score the transfers as federal spending. (See section 105(c) of Public Law 107-90 for how it was phrased.)

It should also be noted that many budget experts think we are long overdue for a new budget concepts commission to update many of these ideas, some of which don’t make as much sense now as they did 50 years ago. Former House Budget Committee chairman Tom Price (R-GA) called for a new commission in his budget reform plan last summer, and Senate Budget chairman Mike Enzi (R-WY) also called for a new commission in his reform plan a few months later.

Making the parts add up to the whole. Conceptual issues aside, any serious ATC reform effort will run up against a fundamental structural flaw of the Congressional budget process established in 1974. That process enforces spending controls by assigning totals to House and Senate committees. In essence, each committee is its own budgetary island. This is great for forcing committees to set priorities among the various programs under their jurisdiction, but it means that the system is not set up to allow committees to cooperate on money bills that cross jurisdictional boundaries.

In this case, even if CBO were to change its mind on the T&I bill (or if the wording of the bill could be changed so that CBO would score the cash flow of the corporation as being outside the budget), the final legislation would still require components from three different sets of committees, each of which would have a different budget score.

  • House T&I/Senate Commerce would have to report bills taking ATC responsibility out of FAA and putting it into a non-government corporation. Under last year’s CBO scoring regime, this would be considered shifting federal spending from discretionary to mandatory. If CBO changes its mind, this would be considered a cut in total federal spending of around $12-15 billion per year.
  • House Ways and Means/Senate Finance would have to report bills reducing the existing aviation excise taxes by the amount of the new ATC corporation’s user fees in order to prevent air carriers for paying twice for the same service. This will be scored as a tax cut no matter how CBO scores ATC reform conceptually – whether  or not the ATC corporation’s fees are federal receipts, they would still be under T&I/Commerce jurisdiction, not Ways and Means/Finance, so the Ways and Means/Finance legislation by itself would be scored as a massive tax cut.
  • If CBO scores an ATC corporation’s cash flow as governmental, as they did last year, then the T&I bill would move $12-15 billion per year in federal spending from the discretionary side of the budget to the mandatory side. If CBO scores the corporation’s cash flow as being outside the budget, then the T&I bill would cause $12-15 billion per year in federal discretionary spending to vanish from the books of the government altogether. In either case, the House and Senate Budget Committees would need to report bills decreasing the levels of the Budget Control Act’s spending caps on annual non-defense discretionary appropriations in the amount of the estimated ATC appropriations that would no longer be part of the discretionary budget. On its own, this legislation would look like a $12-ish billion per year spending cut.

None of the scores of the three separate pieces of legislation would make sense until all three bills get combined into one bill on the floor of the House or Senate.

Legislation turning ATC over to a government-owned corporation (like the bill from Senators Stevens (R-AK) and Inouye (D-HI) that started this whole debate 40 years ago) would face similar hurdles. A federally-owned corporation would in all likelihood have its spending recorded on the mandatory side of the federal budget and have its user fee receipts recorded as federal receipts. But three sets of committees would still have to produce their own bills, and the scores of each part would not make sense until they were all joined together into a coherent whole. (And Congress would have the power to declare in law that the corporation’s spending would be exempt from budget sequestration.)

The late, great Aaron Wildavsky wrote of the federal budget process, “Budgeting is incremental, not comprehensive…it is based on last year’s budget with special attention given to a narrow range of increases or decreases.” The system, by its nature, is set up to frustrate attempts to make fundamental changes in programs or agencies. Instead, it usually serves to perpetuate the “dead hand” of previous generations that created the programs – budget scorekeeping rules reinforce inertia and encourage legislators to continue existing programs going as they are currently constituted, whether or not that still makes sense.

But if the political will is there, scorekeeping problems and other forms of legislative inertia can be overcome.

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