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.
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.
- The Administration has finally dropped a proposal to derive part of its budget from a $100 per flight surcharge on general aviation flights.
- The Administration has once again proposed to lengthen the depreciation schedule for business aircraft from five years to seven years.
- The Administration is also proposing to increase the capital gains rate from 25% to 28%.
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.
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:
- Submit a budget 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.
The President’s budget proposal essentially uses elements of choices #2 . 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|
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
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