October 2, 2015

This week, Congress passed and the President signed into law a six-month extension of Airport and Airway Trust Fund taxes and spending authority and of authorizations for Federal Aviation Administration programs. The bill (H.R. 3614) was passed by the House on Monday by voice, passed the Senate by unanimous consent on Tuesday, and was signed by the President on Wednesday before the end of the fiscal year at midnight.

(Readers can see where this new extension fits into the long list of extensions since 1996 in our updated table here.)

The new law provides a straight six-month extension of existing aviation taxes, authorities and funding levels, with one exception – the level of annual contract authority for the Airport Improvement Program was changed back to its last authorized level of $3.350 billion to reverse the effects of a rescission in the FY 2015 transportation appropriations law that cut $130 million from the program in its final authorized year and thereby reduced the budget baseline for the program to $3.220 billion in all future years.

During the House debate on the legislation (there was no Senate debate), a key player in the upcoming reauthorization bill expressed a fundamental difference of opinion with his chairman over the future structure of the FAA. House Transportation and Infrastructure chairman Bill Shuster (R-PA) has spent much of this year preparing to offer transformational reform of air traffic control (ATC) by spinning off ATC into a not-for-profit private corporation that is supported by user fees, governed by aviation stakeholders (making it a user co-op like, similar to we utilities and insurance companies), and not bound by cumbersome federal procurement rules.

This corporatization of ATC is the general trend amongst other developed nations (although most countries follow the route of creating a government corporation, not a private entity), as noted in the part 2 of the final report of Eno’s NextGen Working Group, and some kind of separation of ATC from safety regulation has been discussed in Congress since 1987 and was proposed by Presidents Clinton and Bush II. A complete legislative history of those efforts, and much more background information on the topic, can be found on Eno’s FAA reform reference page.

The prospect of corporatization has some of the FAA unions concerned (but, notably, not NATCA, which represents the air traffic controllers and is the biggest FAA union) and while a user-fee-based financial structure may be superior to the current excise taxes in theory, the devil is in the details, and the dispute over how to allocate ATC costs to system users doomed the last effort to change the FAA’s financial structure. Since any fair allocation of costs will created winners and losers amongst stakeholders, bipartisan support for the legislation is considered essential.

So it was T&I ranking Democrat Peter DeFazio (D-OR), not Shuster, who really made news this week. DeFazio, in a speech earlier in the day to a National Journal forum and then later that day on the House floor, DeFazio outlined three fundamental problems that prevent the FAA from modernizing – its dependence on the annual appropriations process (fraught with funding squeezes, sequestration, shutdowns, and short-term thinking), federal procurement rules that work horribly when upgrading high-tech systems, and the FAA bureaucracy structure.

He then said that “The chairman’s solution is to separate only the air traffic organization from the FAA and insulate that from Congress and those sorts of problems and make it, you know, free of the procurement rules and a lot of the personnel rules. I would prefer to do that with the entire agency, because there are functions—we do have the best air traffic control system in the world. We are busier in the U.S. with more planes under instrument flight rules (IFR) on a daily basis, about 20 percent more on an IFR average, than Canada, U.K., France, and Germany combined. So we know we have a safe system. We move massive amounts of air traffic. We don’t want to mess that up. And I understand, but I also don’t think we can isolate it from other decision-makers in the agency and leave them subject to the vicissitudes of Congress.”

DeFazio then proposed to convert the entire FAA into a federally owned corporation – but since the most prominent federally-owned corporations are the Postal Service and Amtrak, he shied away from that name and instead called it a “21st century Constitutionally chartered corporation.” The whole corporation would be paid for by user fees instead of the current excise tax structure and thus would be outside the annual appropriations process.

It is fairly clear that the regulation of aviation safety is an inherently governmental function that cannot be outsourced to a private entity, so any effort to remove safety from the annual appropriations process would have to be a government-owned corporation. But while the idea of funding ATC from user fees fits in squarely with the general user charge principle first set under the Truman Administration (of private businesses and persons having to pay for the business-like services they receive from the government), the concept of making airlines and manufacturers pay for their own safety oversight through user fees requires a fundamental rethinking of the user fee concept. And while a private ATC corporation would be run by a board of stakeholders, putting stakeholders in charge of their own safety oversight obviously cannot happen, so the governance of a government-owned corporation would have to be far different under the DeFazio proposal than under the Shuster model. It should be also noted, that moving the entire FAA into a government corporation would not separate ATC operation from its safety regulation, leaving the U.S. still as the only industrialized nation where both activities are housed in the same entity, which many identify as being an inherent conflict of interest (for more on that issue see this ETW article).

It is not clear how much of DeFazio’s proposal this week is a negotiating strategy with Shuster and how much is a serious proposal that could be enacted into law. But once the highway bill situation is dealt with (and hopefully it will be out of committee by the end of October), T&I will turn back to FAA reform in hopes of getting a reauthorization law on the President’s desk by March 31 of next year and ensuring that the just-enacted extension is the only one for this authorization cycle.