Air Traffic Control Funding System Are Absurd

Robert Poole

The partial shutdown of the FAA came about because Congress failed to agree on extending the current law (and therefore the aviation excise taxes that fund most of FAA). This has been going on since autumn 2007, when the previous authorization expired. The bill Congress failed to pass last week would have been the 21st short-term extension of the old law.

Edward Wyatt at The New York Times writes:

The F.A.A. is not some esoteric financial concept like the debt ceiling — an issue that has some lawmakers proclaiming the end is nigh while others bluster that it does not really matter. The aviation agency holds the lives of hundreds of thousands of travelers in its hands every day, overseeing the nation’s airports and the air traffic controllers who make sure that tens of thousands of flights a day take off and land safely.

“It’s amazingly aberrant behavior on the part of our lawmakers that they haven’t been able to get a bill approved since 2007,” said Marion C. Blakey, president of the Aerospace Industries Association, who from 2002-7 was the F.A.A. administrator, the agency’s top official.

The issue is not merely a question of whether the F.A.A. might have to delay some spending on little-used airports in the districts of powerful legislators. Their dependence on a stream of short-term F.A.A. allocations has led airports to have to bid out projects one small chunk at a time, raising costs and inconveniencing travelers.

What this means is that modernization of the air traffic control system is still largely on hold.  This is a $20 billion or more program that FAA must fund in dribs and drabs, as Congress gradually appropriates annual funding. But repeated extensions of the old authorization make realistic long-term planning for air traffic control modernization nearly impossible. 

The situation is absurd.

Not a single one of the numerous issues holding up the FAA bill concerns air traffic control. The latest stumbling block was over how small the cutback would be in the subsidy program for airline service to small towns. Another major sticking point is the House’s effort to overturn a recent change in policy on airline unionization by the National Mediation Board. There have been battles over foreign aircraft repair stations, FedEx workers, slots at Reagan National Airport, and many other issues. Yet not one of those contentious issues has anything to do with air traffic control, which is about 80 percent of FAA’s budget.

Isn’t there a better way to fund air traffic control modernization? Any business faced with a $20 billion modernization agenda would finance the investment, probably issuing long-term bonds to be paid off from future sales revenue. But as a government agency, the FAA is stuck with annual appropriations, of uncertain timing—and now, a hiatus in the whole program.

Among all serious developed countries, the United States is the only one left that funds air traffic control this way. Australia, New Zealand, Canada, Germany, the U.K., Switzerland, and dozens of other countries have all de-politicized their air traffic control systems, by “commercializing” their air traffic control providers—turning them into separate corporate entities that are self-funding, getting paid by their aviation customers. That revenue stream is predictable enough that the company can issue revenue bonds to fund capital investments in facilities and equipment. 

Nav Canada was commercialized in 1996, after Canada passed legislation authorizing the change from a government department to a self-supporting not-for-profit corporation. Since the transition, Nav Canada has developed into one of the world’s best air traffic control providers. It has won the Eagle Award as ‘number one’ in air traffic control from the International Air Transport Association three different times, including last year. Like many of its European counterparts, Nav Canada has an investment-grade bond rating.

De-politicizing the air traffic control system is such a good idea that it was recommended by Vice President Al Gore’s reinventing government shop, the National Performance Review, back in 1994, and the Clinton administration introduced a bill to create a self-supporting air traffic control corporation in 1995. Congress, however, refused to let go, and the bill died.

I hope the current shutdown of FAA’s NextGen modernization program serves as a wake-up call to airlines and the traveling public. We desperately need to modernize our 1960s-era air traffic control system. But if we cling to the government-as-usual status quo, this is increasingly unlikely to happen.