NATA 75: An Industry Voice Is More Important Than Ever

December 28, 2015

 

As we launch into our anniversary year, reading the excellent history of the association written by Paul Seidenman and David J. Spanovich (page 18) underscores just how important it is for aviation businesses to have a voice to represent them in the public policy arena. As the article demonstrates, NATA’s birth was directly linked to the future of civil aviation, when the association’s founders had the vision to join together and intervene at a critical juncture, not letting the military in effect—take over—American aviation. In fact, the article is replete with examples, large and small, of how the association’s intervention made a difference in supporting aviation businesses’ contin­ued growth in this vital, and uniquely American, part of our economy.

It is easy to understand the advantages of membership when viewed from a purely business perspective. Many NATA members, for example, take advantage of the association’s industry leading workers’ compensa­tion insurance program or perhaps its Safety 1st training. However, the need for a public policy presence is not something that is always readily apparent nor easily quantified.

Perhaps because of our history, NATA members see that need. In our recent membership survey, advocacy was rated as one of the most important aspects of membership. It is also borne out by the fact that when the call for help goes out to aviation businesses, NATA members respond.

Looking ahead to 2016 we, like our founders, continue to see challenges and opportunities for aviation busi­nesses. On our immediate horizon is the upcoming FAA reauthorization bill. While events in 2015, the leadership crisis that resulted in a new Speaker of the House, Paul Ryan, and the difficul­ties of financing a multi-year surface transportation bill, slowed down the FAA bill in Congress—make no mis­take about it—the airlines still want the keys to the air traffic control system.

In early December, Airlines for America (the trade group representing the major carriers) and the CEOs of the nation’s six major airlines were in Washington, D.C., talking to lawmak­ers about their desire to create an independent, user-fee funded air traffic control organization. Don’t think they are serious? When the world’s largest airline, Delta, announced it was leav­ing the trade group in a disagreement over this and other policies the airlines are pursuing, the remaining members waived the association’s required de­parture notice allowing Delta to leave immediately.

The idea of privatizing air traffic control has been one pursued by others as well, some frustrated by the pace of modernization, others concerned the congressional budget process has bro­ken down to the point where funding for the agency may no longer be able to keep up with the future needs of the system.

While NATA agrees the FAA could certainly stand the injection of more private sector practices, we view the unknowns associated with corporati­zation as simply too great to risk. Can such a proposal be safely implemented in a system many times larger and far more complex than any other in the world? Will its implementation set back the cause of modernization rather than enhance it? And what happens to general aviation, a uniquely American user not really a large factor elsewhere in the world? Will new costs and fees in effect deny your businesses and cus­tomers access to airports and airways necessary to your operating a viable business?

While a huge concern, I don’t want to leave you with the impression this is the sole issue confronting avia­tion businesses. We are still working to unwind a 2012 IRS opinion that concluded that aircraft management fees are “transportation” and therefore management service providers should be assessing the 7.5 percent commer­cial ticket tax on amounts paid for those services. We are also working as part of a broad national coalition to bring certainty to investment policy by making permanent bonus depreciation and Section 179 expensing. Finally, the NATA regulatory team is working across a myriad of issues, before the FAA, the TSA, and Customs, among others, looking to bring common-sense and your real world perspective to the issues under consideration by the exec­utive branch.

Our issues are not always defen­sive. Our committee members were instrumental in developing a positive agenda for the FAA reauthorization bill. In fact one agenda item, requiring the investigative arm of Congress, the Government Accountability Office, to conduct a study of diversions of non-commercial jet fuel tax revenues to the Highway Trust Fund, was just incorporated into the recently enacted surface transportation bill. We are also particularly proud of the ongoing effort by NATA and AAAE members to identify and address the issues that divide and can unite airports and their tenants.

So as Tom Hendricks says, our future is bright and getting brighter by the day. As we move into what could be a watershed year in aviation, stay involved, and stay engaged. In the end, you are aviation businesses best advocates!

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


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

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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