Bush budget opens ‘Padora’s box’: As predicted, userfees and higher fuel taxes part of plan

WASHINGTON, D.C. — The American airline industry is closer to getting what it wants — user fees for general aviation — now that President Bush’s budget officially calls for taxes and fees on users of air traffic control facilities, instead of the ticket tax on passengers and a fuel tax on general aviation.

In the budget submitted to Congress, President Bush says it this way: “”The FAA would have the authority to collect user fees that directly offset the cost of its operations; expenditure of the available fees would be affirmed in the appropriations process. User fees would be collected from commercial operators. General aviation users would continue to pay a fuel tax. Both user fees and fuel rates would be calibrated based on the costs users impose on the system. The FAA would also be able to charge all users a fee for operating in the nation’s most congested airspace.”"

Actual specifics of the proposal weren’t known at the time the budget was presented. The FAA was scheduled to release details of its plan the week after the budget went to Congress. The wording indicates the amount of the fuel tax could be adjusted and users would have to pay fees for services they receive from the FAA, particularly in what is termed “”congested airspace”" — that is higher altitudes and cities where airlines concentrate their flights.

The budget proposal cited a precedent for the fee system by noting that in 1998 the FAA began collecting fees from flights that use air traffic control facilities but do not take off or land within the U.S.

The budget also includes $175 million for a satellite system to replace older air traffic control equipment and $900 million in additional system upgrades.

Announcement of the fees, expected for months, brought an immediate response from general aviation alphabet groups. The fees and taxes are a “”toxic mix”" that shift airline costs to other segments of the industry, while giving airlines more control over the air traffic control system, according to Ed Bolen, president of the National Business Aviation Association (NBAA). He added that the present approach to funding and oversight of the aviation system is “”effective and efficient.”"

Doug Macnair, vice president for government relations for the Experimental Aircraft Association (EAA), declared the budget proposal would “”transfer control of agency funding and oversight away from Congress and dramatically reduce how the FAA exercises its discretionary spending.”"

He also chided Transportation Secretary Mary Peters and FAA Administrator Marion Blakey for their public statements about fees. “”They failed to acknowledge,”" he said, “”that the fuel tax would be increased dramatically and a whole series of user fees would be implemented for FAA services that today do not carry a charge.”"

He went even further, pointing out that “”it is an ironic twist that while Peters said the budget proposal will help get our freedom back in the nation’s transportation infrastructure, it severely threatens the freedom of our country’s general aviation community.”"

A few days before the budget was released, Phil Boyer, president of the Aircraft Owners and Pilots Association (AOPA), held a news conference at the National Press Club to give reporters a clearer picture of why general aviation was opposed to the tax and fee structure. After release of the budget message, Boyer declared it would take “”an all-out fight”" by the aviation community to defeat this. He warned that the FAA wants fees instead of taxes because it would allow the agency to sidestep the Congressional budget process.

The fee and tax proposal “”opens a Pandora’s Box of user fees which I can only hope Congress will be able to shut,”" said Pete Bunce, president and CEO of the General Aviation Manufacturers Association (GAMA).

Congress will be taking a hard look at the tax and fee plan. Rep. John L. Mica (R-Fla.), Republican leader of the House Transportation and Infrastructure Committee, said he “”has some concerns”" about the President’s budget. He added that although the details of the FAA financing plan had not been released, he was eager to see those details so that Congress can make a decision on the best way to fund the next generation air traffic control system.

Ironically, only days before the President’s fees and tax proposal was released citing the need for increased revenue, the FAA released a report citing how better management is resulting in massive savings. By operating the agency “”more like a business,”" the programs are saving millions of dollars, according to the report. Consolidating facilities and services of the air traffic organization is saving more than $4 million a year and will amount to savings of $360 to $460 million over the next 10 years. Procurement of supplies and equipment from the private sector will achieve $5 million in savings annually.

Wording used in the President’s budget message announcing the tax and fee structure mimics the position the airlines have been touting for years: “”There is no relationship between the taxes paid by users and the air traffic control services provided by the FAA.”" Citing the differences between large and small aircraft in the number of persons aboard, the message says less revenue is received from the smaller planes while the services from the FAA remain the same.

Even though the proposed revenue structure will probably cost the airline companies money, it is another step toward their apparent goal of moving general aviation away from the airports they serve and airspace they primarily occupy. Currently airlines pay a small fuel tax and passengers pay a ticket tax. The airlines collect the ticket tax but do not have to turn it over to the government for three months. A spokesman for the Air Transport Association (ATA) told me several months ago that without the ticket tax, the airline companies would pay more in expensive user fees.

James May, ATA president, praised the tax and fee proposal, calling it “”sound economics and basic fairness.”" He said the airlines subsidized business aircraft operators by $3 million in 2005.

In reality, the airline companies were subsidized by money paid by their passengers and the fuel taxes paid by general aviation users.

For decades the airlines have been trying to move general aviation out of what they term “”commercial airspace.”" More than 30 years ago airlines pushed for terminal control areas — predecessors of Class B airspace — requiring every aircraft to be under positive control. At the time they cited differences in speeds between jet and piston-powered aircraft. This, despite the fact that a speed limit in the space keeps jet airliners as slow as piston-powered DC-6s, Constellations and other airline aircraft in use before the restrictions were put in place.

In 1996, when the FAA was up for reauthorization, the airlines tried to get user fees passed. Speaking before a House committee, Robert Crandall, then president of American Airlines, said “”by linking the FAA’s funding to measurements of actual use, Congress will dramatically strengthen the link between the FAA and its users.”"

All in Congress need to heed the words of John Marshall, a chief justice of the Supreme Court in the 18th century: “”The power to tax is the power to destroy.”"

Charles Spence is GAN’s Washington, D.C., correspondent.

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