The Importance of FAA Reauthorizations

May 8, 2015

The 2013 sequester and government shutdown has sparked a discussion in Congress about whether to separate air traffic control from FAA’s safety function and run it as a quasi-government corporation.  This breakdown in the appropriations process was created by an impasse between the Congress and President about the level of overall government spending.  A similar impasse may emerge in the debate about FY2016 spending.  An air traffic control corporation, were it to be created, would most likely be contained in the upcoming FAA reauthorization legislation that is currently under development in both houses of Congress.  Let’s take a look at the difference between authorization and appropriations bills.  Both are important to aviation businesses but each type of bill performs a different function.

Appropriators will proudly tell you that their function is enshrined in the Constitution itself; “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law (Article I, Section 9).”  Authorizations (and by extension reauthorizations) are a creation of House and Senate rules.  In the two-step congressional process for spending money, an agency or program must first be authorized in order to be eligible to receive an appropriation. According to the Congressional Research Service, “Authorization acts establish, continue, or modify agencies or programs.”[1]  Legislative committees are responsible for developing authorization legislation and the House Transportation and Infrastructure and Senate Commerce Committees are responsible for legislation that authorizes the functions and programs of the FAA.

The duration of an authorization can be for a fixed amount of time or open-ended.  Similarly, an authorization can be for a fixed amount of money or provide for “such sums as may be necessary.”  Securing an authorization does not guarantee the agency or program the full amount of the authorization.  The decision about how much money a program or agency will actually receive is within the purview of the House and Senate Appropriations Committee.  As we saw, the process for funding the FAA in FY2016 began last week with approval by the House Transportation Appropriations Subcommittee of the Transportation, Housing and Urban Development and Related Agencies Appropriations bill for FY2016.   A frequently asked question is whether there are unauthorized appropriations.  The answer is yes.  In fact, a January report from the Congressional Budget Office noted that in the current fiscal year about $294 billion was appropriated for programs and activities whose authorizations have expired.[2]

The FAA’s last reauthorization bill, the “FAA Modernization and Reform Act of 2012” (PL 112-95), authorized spending for the FAA’s major accounts and programs including NextGen for FY2012 through the end of FY2015.  Of particular interest to aviation business, the 2012 FAA reauthorization also contained a number of provisions aimed at accelerating the implementation of new technologies by improving the certification process and streamlining regulatory interpretation across the eight FAA regions, 10 aircraft certification offices, and 80 flight standards district offices.

The current authorization of FAA programs expires on September 30, 2015 and theoretically a lapse in authorization renders a program ineligible for appropriations.  Practically, that rarely happens as Congress will typically waive the authorization requirement and continue to fund the agency.  Recall that between 2007 and 2012 there were 23 short-term extensions of the FAA, a period when enacting a long-term reauthorization was seemingly bedeviled by various labor and airport competition issues.  Protracted lapses in authorization reduce congressional oversight and shift the governmental balance away from the legislative branch more firmly toward the executive branch.

This year’s FAA reauthorization bill poses both risk and opportunity for the general aviation community.  As we discussed in the opening, the 2013 government shutdown and sequestration have started a discussion about the future organization structure and funding of the FAA.  On this issue, NATA has told policymakers (link to ATC reform testimony) that while we should all support the injection of more private sector practices into the FAA, it is important how we manage any changes to the agency in order to maintain a stable, safe and efficient system that protects access for all users of our system.  The upcoming reauthorization presents lawmakers with an opportunity to make even clearer that the 24/7 operation of the air traffic control system is – like our defense – a national priority that should not be held hostage to political debates.

As we saw in 2012, the upcoming FAA reauthorization bill also represents an opportunity for NATA to intervene on behalf of our members in other policy matters.  In preparation for such conversations, our regulatory team consulted with members through our policy committees to help us identify aviation business issues to be raised with policy makers.  Because of your help, we are also emphasizing how Congress can utilize the upcoming legislation to assist industry efforts to improve regulatory consistency at the agency, use its existing resources in a manner that benefits aviation businesses, improve safety, and provide a better investment climate.

Hearings on the development of the FAA reauthorization bill are well underway in Congress. By the time you arrive in Washington, D.C. in June for the 2015 Aviation Business Conference, the debate may be entering a critical phase and the opportunity to share your views with key policymakers will be critical to the future of aviation businesses.

[1] “The Congressional Appropriations Process: An Introduction,” Sandy Streeter, CRS. Page 24

[2] “Unauthorized Appropriations and Expiring Authorizations,” Congressional Budget Office. January 15, 2015

By Bill Deere, Senior Vice President for Government and External Affairs

Visit or return to NATA website: www.nata.aero


House Subcommittee Approves FAA Funding Bill

April 29, 2015

This morning the House Transportation/HUD Appropriations Subcommittee marked-up the 2016 Transportation, Housing and Urban Development funding bill that contains next year’s FAA funding.  The challenges we identified earlier in the year to funding discretionary spending programs (including the FAA) are beginning to manifest themselves.  First, the FAA numbers:

FY2015 Admin Proposal House
Ops $9.74b $9.915b $9.87b
F&E $2.6b $2.855b $2.5b
RE&D $157m $166m $156.75m
AIP $3.35b $2.9b* $3.35b
Total $15.847 $15.836 $15.876

*Proposal assumes an increase in the Passenger Facility Charge (PFC) from $4.50 to $8.00 and focus of remaining funds on smaller commercial and GA airports.

Highlights

  • Contract towers $154.4m
  • Continues prohibition against unauthorized user fees

The proposed legislation provides the FAA an additional $40m above the President’s request.  However, the legislation denies the request to increase the PFC, thereby causing other FAA accounts to absorb a cut in order to level fund airport infrastructure funding.

Now remember, what was approved today is an appropriation bill and therefore subject to change if the FAA reauthorization bill, under development by a different committee, the House Transportation and Infrastructure Committee, makes policy changes that impact spending.  In unveiling the legislation today, House Appropriators acknowledged that fact noting that changes contained in an FAA reauthorization bill could change the numbers approved by the subcommittee today.

In January, I outlined (below) how the Budget Control Act (BCA) allows for a less than one percent increase in overall discretionary spending for next year, to approximately $1.017 trillion.  Last week, the Chairman of the House Appropriations Committee, Representative Hal Rogers (R-KY) unveiled a set of allocations for development of the twelve annual appropriations bills that total $1.017 trillion, not the $1.091 trillion proposed by President Obama.

Chairman Rogers’ initial allocations include a $1.5 billion increase over current levels for the Transportation, Housing and Urban Development, and Related Agencies appropriations bill.  While that appears sufficient to addressing the Administration’s proposed increases for FAA operations, F&E and RE&D, the Committee noted that reduced offsets in Federal Housing Administration receipts create an actual increase of only $25 million above the current level. The proposed legislation also includes controversial policy riders related to trucking and travel to Cuba.  The Administration opposes spending at the Budget Control Act levels and President Obama has already indicated he will veto spending bills that increase only defense spending above the BCA caps.

It’s unlikely the budget impasse will lead to a government shutdown though operating under short-term continuing resolutions are possible.  As a result, discussions are beginning about the possibility of increasing the discretionary spending caps, similar to the Ryan-Murray deal struck in 2013 that has produced two years of relative budget peace.

By Bill Deere, Senior Vice President for Government and External Affairs

Visit or return to NATA website: www.nata.aero


The FAA Budget Request For FY2016

February 5, 2015

On Monday, the Administration submitted to Congress a $4 trillion budget proposal for FY2016 that includes $15.84 billion for the FAA. In context with the President’s other discretionary spending proposals, the increases in funding for FAA operations, modernization and research will be difficult to sustain through the budget process unless Congress and the President reach a new agreement on overall discretionary spending levels.

FY2016 FAA Budget Request

FY2015        Proposed FY2016 (% change from FY15)

Ops                 $9.74b          $9.915b (+2%)

F&E                $2.6b             $2.855b (+10%)

RE&D             $157m          $166m (+6%)

AIP                  $3.35b          $2.9b (-13%)*

Total               $15.847        $15.836

*Proposal assumes increase in the Passenger Facility Charge (PFC) from $4.50 to $8.00 and focusing remaining funds on smaller commercial and GA airports.

Highlights:

Operations – $9.915b (+2%)

  • 85 additional FTEs requested for additional flight standards safety inspectors and aircraft certification engineers.

Facilities & Equipment – $2.86b (+10%)

  • $845m for NextGen capital investments.

RE&D – $166m (+6%)

  • Maintains $6m in funding for alternative GA fuels.
  • Largest proposed increases are in the Flightdeck/Maintenance/System Integration Human Factors program ($3.9m) and weather program ($3.4m).

Airport Improvement Program – $2.9b (-13%)

  • While an overall reduction, the Administration believes that limiting the use of AIP to smaller commercial service and GA airports would represent an increase in available funds in those categories.
  • The GAO estimates increasing the Passenger Facility Charge from $4.50 to $8.00 will generate approximately $2.4b in additional funding to the larger airports.

User Fees

  • The Administration has finally dropped a proposal to derive part of its budget from a $100 per flight surcharge on general aviation flights.

Tax

Trends in FAA spending

Because of the proposed shift in AIP spending, it is not a straightforward exercise to assess the proposed FAA budget increase in the context of other domestic discretionary spending proposals. However, the proposed increases for operations, F&E and RE&D are 3.5% above current levels. This is in contrast to the Administration’s total proposed domestic discretionary funding increase of 7%.

While the additional proposed spending for FY2016 in F&E and RE&D are welcome, it does not appear those increases will be sustained in the long-term. The Administration’s out-year projections of FAA funding average approximately 2% growth through 2025 (see charts below). AIP would be sustained at the $2.9b level until FY2020 when it is projected to rise to $3.35b per year through FY2025. The proposed 10% increase in F&E funding for FY2016 actually increases out-year funding for modernization by $200m annually above the levels the agency reported to Congress just last summer in its capital development proposal.

chart1

chart2

Budget Outlook

So now we know. Last week in our scene setter we discussed the FAA budget proposal for FY2016 in context of its place within overall discretionary spending. We noted that discretionary spending is an increasingly smaller part of the federal budget and capped in statute by the Budget Control Act to allow for a less than one percent increase in spending next year. We also noted that in response to this situation the President has three choices:

  1. Submit a budget proposal adhering to the caps;
  2. Ignore the caps, propose spending increases and let Congress agree or make cuts to his proposals;
  3. Propose new user fees and taxes to offset any proposed spending increases.

The President’s budget proposal essentially uses elements of choices #2 &#3. His overall discretionary spending numbers are 7% above the caps and the overall proposed budget would still deficit spend by $474 billion.

Discretionary Spending Caps (in billions)
Enacted FY15 Current Law FY16 President FY 16
 (proposed)
Defense $521 $523 $561
Non-defense $492 $493 $530
Total $1,013 $1,016 $1,091

The ball is now in Congress’ court. It can live within the discretionary caps, which limit overall funding increases to less than one percent, and develop appropriations bills that are essentially flat. This would be difficult for many agencies to absorb. For example, given increased annual costs in categories such as FAA operations, a flat budget will essentially represent a cut to other parts of the FAA budget.

However, the President’s offer of increased defense discretionary spending may be intriguing to many congressional Republicans and could serve as the basis for a compromise similar to the Ryan-Murray agreement in 2013 when the discretionary caps were adjusted using various budgetary slight-of-hands to offset the increased funding.

By Bill Deere, Senior Vice President for Government and External Affairs

Visit or return to NATA website: www.nata.aero


Federal Budgets, Sequesters and the FAA

January 28, 2015

One of the things I have noticed since returning to aviation is the use of the term “sequestration,” with its implication that at some point this year or next there could be another mindless, across-the-board cut applied to the FAA budget. The good news is that thanks to the agreement reached in late 2013 between then House and Senate Budget Committee Chairmen Paul Ryan and Patty Murray and President Obama, we know that the application of an across-the-board cut to the FAA budget will not occur this year and is unlikely in future years.

We also know the overall budget numbers that lawmakers will be working from this year absent a change in law. However, that doesn’t make the FAA’s budget picture necessarily brighter. The Administration will release its FY2016 budget proposal next Monday, so now is a good time to review the FAA’s budget and what we should be looking for on budget day.

FAA Spending In Context

To understand the FAA’s budget situation we have to first understand the overall federal spending. The FAA’s annual budget of approximately $16 billion is part of a category of spending known as discretionary spending. In other words, Congress must annually fund discretionary programs through the passage of 12 appropriations bills. However, as we see in the chart below, discretionary spending is a small part of overall government spending.

blogchart1

Mandatory spending programs are determined by eligibility rules rather than the annual appropriations process.  As you saw above, these programs represent the largest portion of annual federal spending. Examples of mandatory spending include Social Security, Medicare, Medicaid, and food stamps.

Breaking discretionary spending down further, we see that over half of all discretionary spending is devoted to national defense. As a result, the FAA competes for resources against a number of other worthy causes for a slice of the federal spending pie that represents only 13% of all government spending.

blogchart2

So the budget fights between Congress and the President of the last four years — fights that have resulted in government shutdowns and across-the-board program cuts — have largely been directed at approximately one-third of annual federal funding.

Worse, as you see below, discretionary spending has been steadily shrinking and will continue to shrink because mandatory spending is the real driver of annual budget deficits and growing debt.

blogchart3

The Congressional Budget Office (CBO) released a report this week noting that while an improved economy and reduced spending has reduced the size of annual budget deficits, they will begin to climb again starting in 2019, driven by the healthcare and other retirement costs of the baby-boom generation.  The CBO also noted that federal debt held by the public will amount to 74 percent of GDP at the end of this fiscal year—more than twice what it was at the end of 2007 and higher than in any year since 1950 and that by 2025 it will rise to nearly 79 percent of GDP.

So what does this all mean? First, feel free to be less than impressed by those who brag about controlling federal spending, as some budgetary wits have nicknamed them the “One-Third Serious Caucus.” To really control government spending you have to, like Willie Sutton, go where the money is – mandatory spending.

In fairness to lawmakers, it is political suicide to reduce the benefits of mandatory spending programs absent the kind of grand budget deal that requires Congressional members from both parties and the President to all hold hands and jump in together.

Sequester Level Spending

A 2011 agreement between Congress and the President to address the seemingly endless disputes about federal spending and the debt limit resulted in the creation of a congressional “Super Committee” to develop a plan to control spending through savings in discretionary and mandatory spending and changes to revenue policy (i.e. taxes). A failure to reach agreement would trigger a “sequester” on the current and future federal discretionary spending levels contained in the agreement. It was thought at the time that the possibility of draconian cuts to both defense and non-defense discretionary spending would motivate lawmakers from both parties to reach agreement.

So of course lawmakers could not reach agreement, and by March of 2013 the sequester was triggered that cut part of the FAA’s funding mid-way through the fiscal year.

The situation reached comical proportions later in 2013 when House floor debate on discretionary spending bills for the following year (FY2014) became impossible as few members wanted to face the consequences to federal programs required by the draconian discretionary spending levels created by the sequester. The Bipartisan Budget Act of 2013, also known as the Ryan-Murray Agreement, created more realistic discretionary funding levels for FY2014 and FY2015 to act as a bridge to the levels sequestration requires for FY’s 2016-2021. Below are the discretionary limits (in billions) to which the Congress and the President must adhere absent a change in law:

blogchart4(2)

Source: OMB, Budget for Fiscal Year 2015, The Budget, Table S-10 and CBO, The Budget and Economic Outlook: 2014 to 2024, February 2014, Box 1-1.

So when you hear someone express concern about “sequester spending levels,” they are referring to the numbers above, not the possibility of across-the- board spending cuts.

The question of whether discretionary spending is sustainable at the sequester levels was discussed at a recent event at the Brookings Institution. Opinions ranged from doable in the short-term to the possibility that, similar to the Ryan-Murray Agreement of 2013, Congress could once again “game the caps.” There was also discussion about whether lawmakers would attempt to stay within the overall discretionary cap but move some portion of non-defense discretionary spending to defense, something that would exacerbate the FAA’s budget challenge.

The FY2016 Budget Proposal and the FAA

The President will submit his budget proposal to Congress on Monday, February 2nd, marking the start of another part of the annual congressional calendar, the development of the FY2016 budget.

As we see above, the Ryan-Murray budget deal of 2013 was a bridge of increased discretionary funding for FY2014 and FY2015 to approach the cap level on discretionary spending for FY2016 (including the FAA’s budget). For next year it is almost the same level as the current year. This would make a major funding increase for the FAA unlikely absent a decision to cut other discretionary spending.

However, the President has choices, he may:

  • Submit a proposal adhering to the caps;
  • Ignore the caps, propose spending increases and let Congress agree or make cuts to his proposals;
  • Propose new user fees and taxes to offset any proposed spending increases.

These choices will not only impact the FAA but also tell us a great deal about how smoothly we can expect the budget process to unfold this year.

Finally, we will also be watching to see if the administration proposal will continue to contain proposals impacting GA in a negative way including user fees, cuts to contract tower funding and changes to the aircraft depreciation schedule.

More next week.

By Bill Deere, Senior Vice President for Government and External Affairs

Visit or return to NATA website: www.nata.aero


Congress Expected to Adjourn This Week

December 8, 2014

By Bill Deere, NATA Senior Vice President for Government and External Affairs

The lame duck session of congress is expected to adjourn this week after addressing several must-pass items of interest to aviation.

Late today, the House Appropriations Committee is expected to unveil a “cromnibus,” legislation to fund the government for the rest of the year.  The legislation will combine a short-term funding extension for the Department of Homeland Security and funding for the balance of the fiscal year for other government operations including the FAA.  Any major funding increases are expected to fall on the international side, addressing the Ebola outbreak, operations in Syria and Iraq, and assistance to Ukraine and the Baltic states.  The House is expected to consider the legislation Wednesday, leaving the Senate one day to consider the legislation in advance of the expiration of the government’s current funding bill.

Also this week, the Senate is expected to consider a one year extension of approximately 50 tax provisions that expired at the end of 2013, including bonus depreciation and section 179 expensing.  Last week, the House passed a one year extension after House-Senate negotiations over longer-term extensions for certain provisions including bonus depreciation and section 179 expensing stalled in the face of a possible presidential veto threat.  Late last week, the office of Senate Majority Leader Reid reached out to leading members of the coalition in support of bonus depreciation, including NATA, to refute a news story that suggested the Senate might not have time to pass the House tax extenders bill before adjourning.

Finally, Senate Majority Leader Reid and Minority Leader McConnell must still agree on a final package of nominations for floor action before adjournment.  Among those nominees awaiting floor action is Christopher Hart to serve as Chairman of the NTSB.  Hart’s nomination cleared the Senate Commerce Committee in July but has yet to be acted on.

Return or visit NATA website: www.nata.aero


Aviation and the Lame Duck Session

November 14, 2014

By Bill Deere, NATA Senior Vice President for Government and External Affairs

The mid-term elections are concluded, the people have spoken, and Congress returned on Wednesday from two months of campaigning for a lame duck session that is expected to end in mid-December.  For those of you unfamiliar with the term, “lame duck session” is the nickname for a session of Congress that follows an election and includes lawmakers who will not be members of the next Congress, having decided to retire or were defeated.

Initially, it was thought that should control of the Senate change hands as a result of the election, very little legislative activity would occur in the lame duck.  However, even with Republicans winning control of the Senate, an effort is being made to act on at least two fronts, appropriations and taxes.

FAA Appropriations

Before adjourning, lawmakers approved legislation funding the government through December 11th. The legislation also contained other provisions including a nine month extension of the Export-Import Bank.  As a result, the FAA has been operating since October 1st at funding levels below the increases recommended for the agency by the House and Senate Appropriations Committees.

The expiration of government funding on December 11th was deliberately chosen by House and Senate appropriators to give them time to develop an “omnibus” spending package for the balance of the fiscal year.  This omnibus bill would literally wrap all twelve spending bills into one massive piece of legislation.  Should that occur, we expect the FAA will secure a funding increase that will also include bill language requiring funding of contract towers and prohibiting the development of unauthorized user fees.

Of course, the biggest decision is whether or not to move such a package.  At this writing it appears House Republicans are divided about whether to take up a full year spending package or extend government funding for a few months and revisit the issue in the new Congress.

Tax Extenders

NATA has been serving as one of the leading members of a multi-industry coalition of supporters that includes the U.S. Chamber and the National Association of Manufacturers, in support of renewing a package of approximately 55 tax provisions that expired at the end of 2013.

The “extenders” of particular interest to our industry are the immediate expensing of 50% of new investments in equipment and software commonly referred to as “bonus depreciation” and its small business counterpart known as Section 179 expensing.

The House and Senate have approached the issue in different manners.  The Senate Finance Committee approved a two-year extenders package that included bonus depreciation and Section 179.  The full House approved a series of bills making certain extenders permanent changes in tax law, including both Bonus and Section 179.

Similar to the appropriations situation, the fate of extenders remains fluid.  While it is doubtful that the House approach will be fully accepted by the Senate Finance Committee, its chairman, Senator Ron Wyden (D-OR), has indicated his willingness to explore a mix of permanent and multi-year extenders.  While a failure to act this year could make filing season very problematic, there is nevertheless an ongoing discussion about the advantages of acting on extenders retroactively in the new Congress.

NATA and other coalition members are meeting with key members of the tax writing committees and the congressional leadership to coordinate efforts toward adoption of a permanent or multi-year extenders package.

Other Aviation Issues

The House Transportation and Infrastructure Committee is taking advantage of the lame duck session to jump start its work on the FAA reauthorization.  On Tuesday the 18th the full committee will hold a hearing entitled: “FAA Reauthorization: Issues in Modernizing and Operating the Nation’s Airspace.”  In addition, the Senate Commerce Committee approved the nomination of Christopher Hart to serve as Chairman of the National Transportation Safety Board.  Action by the full Senate is still required before adjournment.


Congress has returned….and is about to leave

September 10, 2014

By Bill Deere, NATA Senior Vice President for Government and External Affairs

On Monday, Congress returned from its traditional August recess but will only stay in session for a short time before adjourning again to campaign in advance of the mid-term elections.  The House is expected to leave by September 19th with the Senate adjourning as early as the following week.  In such a brief time, not much is expected by way of legislative action but the first important step was put in place yesterday to avoid a government shut down when current funding expires on October 1st.

Yesterday, the Chairman of the House Appropriations Committee, Representative Hal Rogers (R-KY), unveiled a draft continuing resolution (CR) that will fund the government at current spending levels through December 11th. A CR is legislation designed to keep the government running on a temporary basis until the completion of the twelve regular appropriations bills.  The CR also contains other provisions including a proposal to extend the authorization of the Export-Import Bank until June 30, 2015.   For the FAA it means funding – for the moment at least – below the increased levels recommended for FY2015 by the House and Senate Appropriations Committees.  The House will consider the CR the week of the 15th.

As a result, long-term government funding and final resolution of issues like tax extenders are likely on the back burner until a post-election “lame duck” session.  The duration and issues to be considered in the lame duck will turn on the results of the general election – particularly the battle for control of the Senate.

Visit or return to NATA site: http://www.nata.aero


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