LEXIS-NEXIS® Congressional Universe-Document

LEXIS-NEXIS® Congressional

FEBRUARY 11, 1999, THURSDAY

SECTION: IN THE NEWS

LENGTH: 2026 words

HEADLINE: PREPARED STATEMENT OF
CAROL B. HALLETT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AIR TRANSPORT ASSOCIATION OF AMERICA
BEFORE THE HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE ON AVIATION
SUBJECT - HEARING ON THE FINANCIAL NEEDS OF AIRPORTS,
THE FEDERAL AVIATION ADMINISTRATION, THE AVIATION SYSTEM
AND THE COMMITMENT NEEDED TO ENHANCE AIRPORTS
AND AIR TRAFFIC CONTROL SAFETY

BODY:

Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity to appear before you today to present the views of the Air Transport Association (ATA) concerning the financial needs of our aviation system. ATA represents the major U.S. passenger and cargo air carriers. Our members transport approximately 95 % of the passengers and goods transported by air on U.S. flag airlines.
Let me begin by saying that it is our view that the Aviation Trust Fund must be unlocked to meet the needs of the traveling and shipping public for a safe, efficient, and reliable system. We urge your expeditious consideration of legislation to accomplish that objective, consistent with the recommendations that I am providing in this statement on behalf of the Board of Directors of the Air Transport Association. ATA and its member carriers pledge our vigorous support of your effort to accomplish this objective.
As the United States aviation community nears the next millennium, several challenges must be confronted. Our country's aviation infrastructure must deliver a safe and efficient aviation environment. As aviation activity continues to grow, additional capacity and technological modernization must be forthcoming.
The Air Transport Association member airlines have been engaged in multiple attempts to deal with infrastructure modernization over the last several years. The ATA airlines believe that fundamental change is required in the near term to insure that aviation infrastructure modernization becomes a reality before demand swamps the system's available capacity. The needed reforms, as we view them, fall into two categories - governance and budget reforms. Our carriers believe that these two cornerstones of Federal Aviation Administration reform are inextricably linked to form one solid platform for comprehensive reform. Both of these reform areas are equally critical to a successful outcome - but neither can be a success in isolation.
Budget Reform
This Committee has long led the fight for restoring integrity to the transportation trust funds. The Air Transport Association has endorsed efforts to unlock the trust fund on several occasions in the past. We want our passengers and shippers to receive thebenefits derived from spending the taxes for the purpose for which they were collected from them.
We strongly endorse doing for the Aviation Trust Fund what this Committee and Congress has done with the Highway Trust Fund -- through the enactment of TEA - 21 - and urge you to establish a new and separate aviation budget category which is no longer subject to budget caps. Only through this mechanism can we be certain that the funds collected from aviation users are spent to enhance the safety and efficiency of our aviation system.
Fiscal year 1998 was the first full fiscal year under the new aviation tax system adopted in the Taxpayer Relief Act of 1997 (PL 105-34). During FY '98, in addition to interest accruing on the ever-increasing balance in the aviation trust fund, $8.110 billion was collected from airline passengers and shippers, airlines themselves, and private aircraft owners. Alarmingly, and we think wrongly, at the end of FY '98, when all had been reconciled, $ 2.828 billion more accrued in the uncommitted balance of the Aviation Trust Fund. This must be stopped.
In addition, our members are absolutely committed to the principle that as part of FAA budget reform, there must be a permanent and mandatory general fund contribution. This amount has been in the range of 30% of FAA's total budget and represents the fair, classically governmental responsibility of the FAA's budget. We urge the Committee to set this general fund contribution apart from other discretionary spending too. This 30% general fund contribution would cover the costs for three components of the FAA budget:
- FAA's regulatory functions, e.g. safety, security and certification. - FAA's provision of services for those users who do not pay the full amount of the costs they drive. - Societal benefits derived from having a safe and functioning FAA.
Mr. Chairman, equally important as the role of the authorizing committees in the formulation of the FAA's financial plan, we believe that there is a critical role to be played by the appropriations committees. Specifically, we feel strongly that the appropriations committees must retain their authority to oversee the FAA's budget, insuring that the various projects and programs, the line items, are carefully overseen.
While the goals and targets established by the authorizing committees guide the FAA, the appropriations committees should maintain their authority to ensure that monies are properly spent. To this end, we believe that the appropriations committees should have the power in any year to "holdover" or reduce FAA spending to amounts below the sum of the taxes collected and general fund contribution. However, within some brief period of years, say two or three; the legislation should require those "holdover" amounts be spent for the purpose for which they were intended - improving aviation safety and efficiency.With respect to airport financing, we think that this formulation provides significant benefits. In addition to an AIP authorization floor of at least $2 billion, interest accruing on the aviation trust fund surplus should be used to increase airport infrastructure funding. Thus surpluses from the fund, whether on an individual year basis or as a result of several years' "holdover" could be allocated to AIP at levels higher than $ 2 billion as determined by the Appropriations Committees. Using the surplus in this manner would completely obviate the need for a PFC increase.
As Chairman Shuster and others have said before, there is no plausible justification to increase taxes when there is already a surplus from collections of taxes. Thus, the $ 2.8 billion surplus which accrued in the Aviation Trust Fund in FY '98 could be spent on airports -- and is the equivalent of a $ 4.50 increase in the Passenger Facility Charge without levying any additional taxes.
As you may recall, ATA submitted a proposal last year to ensure that there was a more equitable distribution of AIP funds. We urge the Committee to consider that proposal again, particularly in light of the even more significant amounts that would be made available for airport infrastructure pursuant to the financing proposal we are endorsing today. In any case, there is no publicly acceptable rationale for an increase in the PFC tax when $ 2.8 billion remains unexpended from Fiscal Year '98 tax collections, and the Administration's budget projects the uncommitted balance increasing to $ 8.173 by the end of the 106th Congress.
When discussing tax increases, we think it is important to note both the comment of the 1993 National Commission to Ensure a Strong Competitive Airline Industry as well as tax changes since that report.

Notwithstanding the Commission's finding that the airline industry is the most heavily taxed transportation mode, the industry's tax struggle has produced a new tax formula estimated to cost an additional $1,000,000,000 per year in taxes, beginning in 2003 and escalating thereafter. As a result, unless corrected the aviation trust fund surplus is predicted to reach unprecedented levels. To avoid further injury, the industry believes that fully detailed FAA cost and efficiency data must be made publicly available.
We urge the Committee to include in the reauthorization, provisions similar to those in Section 817 of H.R. 4057, which provided for the DOT Inspector General to undertake analyses of the FAA's cost accounting system to ensure that the system meets fundamental requirements for adequacy, appropriateness, and reasonableness. Without such public transparency there will inevitably be a lack of public confidence in the validity of a "government only" system.
FAA Cost Accounting System Validation and Verification
While the FAA has embarked upon the establishment of a cost accounting system, the adequacy and accuracy of the FAA's cost accounting system needs to be publicly determined. Testing and verifying the reliability of the cost data is especially important in order for the FAA to associate accurately its costs with its activities. While we areaware of some planning by the FAA to utilize the cost accounting system initially in the air traffic control area, the analysis that needs to be performed must be conducted across the entire range of FAA activities - air traffic control, certification, procurement, security, inspections, etc. Without an agency wide analysis of the costs of providing services, we fear the FAA will continue its current practice of allocating costs to air traffic control users, which more properly should be allocated to others. We believe that knowledge and understanding of those costs must be paramount. And cost assignment methodologies must be validated and comparisons of alternatives for allocating common costs must be explored.
Congress should require an analysis of the reasonableness of FAA's costs. This can be accomplished through both internal benchmarking and external bench -marking. With internal bench-marking, the FAA would find the best-performing units for each of its activities, identify the superior performance factors, and assess the feasibility of improving lower performing units through adoption of practices utilized in the better performing units. For external benchmarking, there are at least two types of comparisons which need to be undertaken - one, with other air traffic control providers; the other with large, complex organizations. With the huge investment already made in the FAA, we think it would be particularly worthwhile to undertake external bench marking for activities such as property management, telecommunications network costs, and maintenance.
Governance Reform
Our members have reviewed the recommendations of the National Civil Aviation Review Commission and endorse the recommendations of NCARC only with respect to a new governance structure for operation of the air traffic control system. In prior years, the Congress has adopted this Committee's recommendations for personnel and procurement reforms. Now it is time to deal with governance by creating an Air Traffic Control Board of Directors, chaired by the FAA Administrator and consisting of the Administrator and six public board members, appointed by the President and subject to Senate confirmation.
I would note that Chairman Duncan proposed a similar type governing structure in his independent FAA legislation that passed the House unanimously in the 1044 Congress.
This Board, which must be free of bias, conflict of interest and competitive selfinterest, would be empowered to hire a Chief Operating Officer to run the ATC system, The Board would establish specific measures for ATC performance (organizational, financial, and operational), implement appropriate cost accounting and financial systems to ensure cost containment and efficiency and productivity gains, and have authority to access normal capital markets to finance capital expenditures for modernization of aviation infrastructure.Mr. Chairman, two years ago, this Committee passed legislation to establish a Management Advisory Council (MAC) (49 U.S.C. 106(p)) to serve as an advisory board for the Administrator to consult with on matters of FAA management, policy, spending, funding, and regulatory issues. Today, because of the importance of air traffic control modernization and reform, we feel that an ATC Board, such as the one we propose, is more critical than an FAA-wide Management Advisory Council. If the Administrator should seek the kind of advice that the MAC was designed to provide, the ATC Board should have the discretion to appoint such a MAC, without Senate confirmation.
Mr. Chairman, attached to my testimony is some suggested legislative language to fulfill the objectives put forth in my statement. We stand ready to work with you to ensure that FAA meets the safety and efficiency requirements of the next century.
END

LOAD-DATE: February 13, 1999