prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.



Report 2: The federal government supports the development of airport infrastructure in three different ways  First, the Airport Improvement Program (AIP) provides federal grants to airports for planning and development, mainly of capital projects related to aircraft operations such as runways and taxiways  Second, Congress has authorized airports to assess a local passenger facility charge (PFC) on each boarding passenger, subject to specific federal approval  PFC revenues can be used for a broader range of projects than AIP funds, including "landside" projects such as passenger terminals and ground access improvements  Third, federal law grants investors preferential income tax treatment on interest income from bonds issued by state and local governments for airport improvements (subject to compliance with federal rules)  Airports may also draw on state and local funds and on operating revenues, such as lease payments and landing fees  A federal role in airport infrastructure first developed during World War II  Prior to the war, airports were a local or private responsibility, with federal support limited to the tax exclusion of municipal bond interest  National defense needs led to the first major federal support for airport construction  After the war, the Federal Airport Act of 1946 (P L  79-377) continued federal a id, although at lower levels than during the war years  Initially, much of this spending supported conversion of military airports to civilian use  In the 1960s, substantial funding also was used to upgrade and extend runways for use by commercial jets  In 1970, Congress responded to increasing congestion, both in the air and on the ground at U S  airports, by passing two laws  The first, the Airport and Airway Development Act, established the forerunner programs of AIP: the Airport Development Aid Program and the Planning Grant Program  The second, the Airport and Airway Revenue Act of 1970, dealt with the revenue side of airport development, establishing the Airport and Airway Trust Fund (AATF, also referred to as the Aviation Trust Fund, and in this report, the trust fund)  The Airport and Airway Improvement Act of 1982 ( P L  97-248 ; the 1982 Act) created the current AIP and reactivated the trust fund  For a more detailed legislative history of AIP, see Appendix A of this report  Eight years later, amid concerns that the existing sources of funds for airport development would be insufficient to meet national airport needs, the Aviation Safety and Capacity Expansion Act of 1990 (Title IX of the Omnibus Budget Reconciliation Act of 1990, P L  101-508 ) allowed the Secretary of Transportation to authorize public agencies that control commercial airports to impose a passenger facility charge on each paying passenger boarding an aircraft at their airports  Different airports use different combinations of AIP funding, PFCs, tax-exempt bonds, state and local grants, and airport revenues to finance particular projects  Small airports are more likely to be dependent on AIP grants than large or medium-sized airports  Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs  Each of these funding sources places various legislative, regulatory, or contractual constraints on airports that use it  The availability and conditions of one source of funding may also influence the availability and terms of other funding sources  In a 2015 study, the U S  Government Accountability Office (GAO) found that airport-generated net income financed about 38% of airports' capital spending, AIP 33%, PFCs 18%, capital contributions by airport sponsor (often a state or municipality) or by other sources such as an airline or tenant 6%, and state grants nearly 5%  AIP provides federal grants to airports for airport development and planning  Participants range from very large publicly owned commercial airports to small general aviation airports that may be privately owned but are available for public use  AIP funding is usually limited to construction of improvements related to aircraft operations, such as runways and taxiways  Commercial revenue-producing facilities are generally not eligible for AIP funding, nor are operating costs  The structure of AIP funds distribution reflects congressional priorities and the objectives of assuring airport safety and security, increasing airport capacity, reducing congestion, helping fund noise and environmental mitigation costs, and financing small state and community airports  The main financial advantage of AIP to airports is that, as a grant program, it can provide funds for capital projects without the financial burden of debt financing, although airports are required to provide a modest local match to the federal funds  Limitations on the use of AIP grants include the range of projects that AIP can fund and the requirement that recipients adhere to all program regulations and grant assurances  Federal law requires the Secretary of Transportation to publish a national plan for the development of public-use airports in the United States  This appears as a biannual Federal Aviation Administration (FAA) publication called the National Plan of Integrated Airport System s (NPIAS)   For an airport to receive AIP funds, it must be listed in the NPIAS  AIP program structure and authorizations are set in FAA authorization acts  Modifications have been made to AIP through the years, but the basic program structure remains the same  The most recent act, the FAA Reauthorization Act of 2018 ( P L  115-254 ), authorized AIP funding through FY2023  The trust fund was designed to assure an adequate and consistent source of funds for federal airport and airway programs  It is the primary funding source for most FAA activities in addition to federal grants to airports  These include facilities and equipment (F&E); research, engineering, and development (R, E&D); and FAA operations and maintenance (O&M)  Congress determines how much the trust fund will be allowed to expend for various purposes, including the AIP  The money flowing into the Airport and Airway Trust Fund comes from a variety of aviation-related taxes  These taxes were authorized by the Taxpayer Relief Act of 1997 ( P L  105-34 ) and reauthorized by the 2018 FAA reauthorization act  Revenue sources include the following: 7 5% ticket tax, $4 20 flight segment tax, 6 25% tax on cargo waybills, 4 4 cents per gallon on commercial aviation fuel, 19 4 cents per gallon on general aviation gasoline, 21 9 cents per gallon on general aviation jet fuel, 14 1 cents per gallon fractional ownership surtax on general aviation jet fuel, $18 60 international arrival tax, $18 60 international departure tax, and 7 5% "frequent flyer" award tax  In most years since the trust fund was established, the revenues plus interest on the unexpended balances brought in more money than was being paid out  This led to the growth in the end-of-year unexpended balances in the trust fund  At times these unexpended balances are inaccurately referred to as a surplus  In practice, FAA may have committed unexpended balances to fund particular airport projects, so those balances may not be available for other purposes  Most air carriers have altered their pricing structures in ways that have implications for the trust fund  Ancillary fees are now commonly charged for services such as checked baggage that in the past were included in the ticket price  Such fees are not subject to the 7 5% ticket tax  Had the $4 57 billion in baggage fees collected in 2017 been subject to the ticket tax, the trust fund might have received more than $343 million in additional revenue  AIP spending authorized and the amounts actually made available for grants from the aviation trust fund since FY2000 are illustrated in Table 1   After trending upward from FY1982 to FY1992, grant funding approved in annual appropriations declined through the mid-1990s as part of federal deficit reduction efforts, leaving large gaps between authorized AIP spending levels and the amounts the program was actually allowed to expend  This occurred despite provisions in place since 1976 designed to ensure that federal capital spending for airports is fully funded at the authorized level (see Text B ox )  The Wendell H  Ford Aviation Investment and Reform Act for the 21 st Century (AIR21; P L  106-181 ), enacted in 2000, provided major increases in AIP's authorization, starting in FY2001  During FY2001-FY2006 AIP was funded near its fully authorized levels  The amount available for grants peaked at $3 47 billion in FY2008  From FY2008 through FY2011, when AIP was authorized by a series of authorization extension acts, appropriators set the program's annual obligation limitation at $3 515 billion  The 2012 FAA Modernization and Reform Act authorized funding through FY2015 at an annual level of $3 35 billion  In July 2016, the FAA Extension, Safety, and Security Act of 2016 ( P L  114-190 ) was passed to further extend the authorization of AIP at the annual level of $3 35 billion through September 30, 2017  The 115 th Congress passed a six-month extension ( P L  115-63 ) of aviation funding and programs through the end of March 2018  Subsequently, the Consolidated Appropriations Act, 2018 ( P L  115-141 ), provided a further extension through the end of FY2018  In addition to the annual funding of $3 35 billion, the 2018 appropriations act provided a $1 0 billion appropriation from the general fund to the AIP discretionary grants program  The Secretary of Transportation was directed to keep this supplemental funding available through September 30, 2020, and to give priority to nonprimary, nonhub, and small hub airports  These supplemental funds are not included in the AIP funding summary or discussion in this report, as FAA is in the process of evaluating applications and distributing funds  The FAA Reauthorization Act of 2018 ( P L  115-254 ) funded AIP from FY2019 through FY2023 at an annual level of $3 35 billion  It also authorized supplemental annual funding from the general fund to the AIP discretionary grants program ($1 02 billion in FY2019, $1 04 billion in FY2020, $1 06 billion in FY2021, $1 09 billion in FY2022, and $1 11 billion in FY2023), and required at least 50% of these additional funds to be available to nonhub and small hub airports  In February 2019, Congress passed the Consolidated Appropriations Act, 2019 ( P L  116-6 )  The act provided a $500 million supplemental appropriation from the general fund to the AIP discretionary grants program and required that this money remain available through September 30, 2021  The distribution system for AIP grants is complex  It is based on a combination of formula grants (also referred to as apportionments or entitlements) and discretionary funds  Each year the entitlements are first apportioned by formula to specific airports or types of airports  Once the entitlements are satisfied, the remaining funds are defined as discretionary funds  Airports apply for discretionary funds for projects in their airport master plans  Formula grants and discretionary funds are not mutually exclusive, in the sense that airports receiving formula funds may also apply for and receive discretionary funds  Grants are generally awarded directly to airports  Legislation sets forth definitions of airports that are relevant both in discussions of the airport system in general and of AIP funding distribution in particular (see Appendix B )  The statutory provisions for the allocation of both formula and discretionary funds are based on these definitions  Entitlements are funds that are apportioned by formula to airports and may generally be used for any eligible airport improvement or planning project  These funds are divided into four categories: primary airports, cargo service airports, general aviation airports, and Alaska supplemental funds (see Appendix B for a full list of airport definitions)  Each category distributes AIP funds by a different formula (49 U S C  §47114)  Most airports have up to three years to use their apportionments  Nonhub commercial service airports have up to four years  The formula distributions are contingent on an annual AIP obligation limitation of $3 2 billion or more  If this threshold is not met in a particular fiscal year, most formulas revert to prior authorized funding formulas  Primary Airports  The apportionment for airports that board more than 10,000 passengers each year is based on the number of boardings (also referred to as enplanements) during the prior calendar year  The amount apportioned for each fiscal year is equal to double the amount that would be received according to the following formulas: $7 80 for each of the first 50,000 passenger boardings; $5 20 for each of the next 50,000 passenger boardings; $2 60 for each of the next 400,000 passenger boardings; $0 65 for each of the next 500,000 passenger boardings; and $0 50 for each passenger boarding in excess of 1 million  The minimum allocation to any primary airport is $1 million  The maximum is $26 million  Cargo Service Airports  Some 3 5% of AIP funds subject to apportionment are apportioned to airports served by all-cargo aircraft with a total annual landed weight of more than 100 million pounds  The allocation formula is the proportion of the individual airport's landed weight to the total landed weight at all cargo service airports  General Aviation Airports  General aviation, reliever, and nonprimary commercial service airports are apportioned 20% of AIP funds subject to apportionment  From this share, all airports, excluding all nonreliever primary airports, receive the lesser of the following: $150,000; or one-fifth of the estimated five-year costs for airport development for each of these airports as listed in the most recent NPIAS  Any remaining funds are distributed according to a state-based population and area formula  FAA makes the project decisions on the use of these funds in consultation with the states  Although FAA has ultimate control, some states view these funds as an opportunity to address general aviation needs from a statewide, rather than a local or national, perspective  Alaska Supplemental Funds  Funds are apportioned to airports in Alaska to assure that Alaskan airports receive at least twice as much funding as they did under the Airport Development Aid Program in 1980  Foregone Apportionments  Large and medium hub airports that collect a passenger facility charge of $3 or less have their AIP formula entitlements reduced by an amount equal to 50% of their projected PFC revenue for the fiscal year until they forgo or give back 50% of their AIP formula grants  In the case of PFC above the $3 level the percentage forgone is 75%  A special small airport fund, which provides grants on a discretionary basis to airports smaller than medium hub, gets 87 5% of these foregone funds  The discretionary fund gets the remaining 12 5%  The discretionary funds (49 U S C  §§47115-47116) include the money not distributed under the apportioned entitlements, as well as the forgone PFC revenues that were not deposited into the small airport fund  AIP discretionary funding for FY2018 was about 9 4% of the total AIP funding  Discretionary grants are approved by FAA based on project priority and other selection criteria  Figure 1 illustrates the composition of both apportioned and discretionary grants, based on FY2018 data  Despite its name, the discretionary fund is not allocated solely at FAA's discretion  Allocations are subject to the following three set-asides and certain other spending criteria: Airport Noise Set-Asides   At least 35% of discretionary funds are set aside for noise compatibility planning and for carrying out noise abatement and compatibility programs  Military Airport Program   At least 4% of discretionary funds are set aside for conversion and dual use of up to 15 current and former military airports  The program allows funding of some projects not normally eligible under AIP  Grants for Reliever Airports   There is a set-aside of two-thirds of 1% of discretionary funds for reliever airports in metropolitan areas suffering from flight delays  The Secretary of Transportation is also directed to see that 75% of the grants made from the discretionary fund are used to preserve and enhance capacity, safety, and security at primary and reliever airports, and also to carry out airport noise compatibility planning and programs at these airports  From the remaining 25%, FAA is required to set aside $5 million for the testing and evaluation of innovative aviation security systems  Subject to these limitations and the three set-asides, the Secretary of Transportation, through FAA, has discretion in distribution of grants from the remainder of the discretionary fund  Under this program, FAA provides funds directly to participating states for projects at airports classified as other than primary airports  Each participating state receives a block grant made up of the state's apportionment (formula) funds and available discretionary funds  A block grant program state is responsible for selecting and funding AIP projects at the small airports in the state  In making the selections, the participating states are required to comply with federal priorities  Each block grant state is responsible for project administration as well as most of the inspection and oversight roles normally assumed by FAA  The states that currently participate in the state block grant program are Georgia, Illinois, Michigan, Missouri, New Hampshire, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin  For AIP projects, the federal government share differs depending on the type of airport  The federal share, whether funded by formula or discretionary grants, is as follows: 75% for large and medium hub airports (80% for noise compatibility projects); 90% for other airports; "not more than" 90% for airport projects in states participating in the state block grant program; 70% for projects funded from the discretionary fund at airports receiving exemptions under 49 U S C  §47134, the pilot program for private ownership of airports; airports reclassified as medium hubs due to increased passenger volumes may retain eligibility for up to a 90% federal share for a two-year transition period; certain economically distressed communities receiving subsidized air service may be eligible for up to a 95% federal share of project costs  This cost-share structure means that smaller airports pay a lower share of AIP-funded project costs than larger airports  The airports themselves must raise the remaining share from other sources  Although smaller airports' individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on AIP to meet their capital needs  This is particularly the case for noncommercial airports, such as general aviation and reliever airports, which received over 25% of AIP grants distributed in FY2018  Air carriers have objected to this allocation, pointing out that their passengers and freight shippers pay the vast majority of revenue flowing into the trust fund  General aviation interests, however, defend AIP grants to noncommercial airports  Figure 2 shows the share of AIP grants awarded in FY2018, by value, broken out by airport type  Figure 3 displays AIP grants awarded by type of project for FY2018  For the most part, AIP development grants support "airside" development projects such as runways, taxiways, aprons, navigation aids, lighting, and airside safety projects  Substantial AIP funds also go for state block grants and noise planning and abatement  AIP spending on roads is generally restricted to roads on or entering airport property  In cases in which a primary or reliever airport may want to begin an AIP-eligible project without waiting for the funds to become available, FAA is authorized to issue a letter of intent (LOI)  If it does so, the LOI states that eligible project costs, up to the allowable federal share, will be reimbursed according to a schedule set forth in the letter  Although the LOI technically does not obligate the federal government, it is an indication of FAA's approval of the scope and timing of the project, as well as the federal intent to fund the project in future years  Because most primary airports fund their major development projects with tax-exempt revenue bonds, the evidence of federal support that the LOI provides is likely to lead to favorable bond interest rates  The airport may proceed with the project with assurance that all AIP-allowable costs specified in the LOI will remain eligible for reimbursement over the life of the LOI  Both entitlement and discretionary funds are used to fulfill LOIs  FAA limits the total of discretionary funds in all LOIs subject to future obligation to roughly 50% of forecast available discretionary funds  LOIs have certain eligibility restrictions  They can only be issued to cover projects at primary and reliever airports  The proposed airport development project or action must "enhance airfield capacity in terms of increased aircraft operations, increased aircraft seating or cargo capacity, or reduced airfield operational delays " For large and medium hub airports, the project must enhance "system-wide airport capacity significantly " Airports' grant applications are conditioned on assurances regarding future airport operations  Examples of such assurances include making the airport available for public use on reasonable conditions and without unjust economic discrimination (against all types, kinds, and classes of aeronautical activities); charging air carriers making similar use of the airport substantially comparable amounts; maintaining a current airport layout plan; making financial reports to FAA; and expending airport revenue only on capital or operating costs at the airport  Within the AIP context, assurances are a means of guaranteeing the implementation of federal policy  Obligations derived from airports' assurances extend beyond the formal closure of AIP grant-supported projects  Obligations related to the use, operation, and maintenance of an airport remain in effect for the expected life of the improvement, up to 20 years  In the case of the purchase of land with AIP funds, the federal obligations do not expire  Airports may request that FAA release them from their AIP contractual obligations  Typically, as a condition of the release, the airport sponsor must either reimburse the federal government for the AIP grants (in the case of land grants, the federal share of the fair market value of the land) or reinvest the amount in an approved AIP project (see Text B ox )  When airport managers or interest groups express concerns about the "strings attached" to AIP funding, they are usually referring to AIP grant assurances  In 1990, federal deficits and expected tight budgets led to concerns that the Airport and Airway Trust Fund and other existing sources of funds for airport development would be insufficient to meet national airport needs  This led to authorization of a new user charge, the Passenger Facility Charge (PFC)  The PFC was seen as a complementary funding source to AIP  The Aviation Safety and Capacity Expansion Act of 1990 allowed the Secretary of Transportation to authorize public agencies that control commercial airports to impose a fee on each paying passenger boarding an aircraft at their airports  Initially, there was a $3 cap on each airport's PFC and a $12 limit on the total PFCs that a passenger could be charged per round trip  The PFC is a state, local, or port authority fee, not a federally imposed tax deposited into the Treasury  Because of the complementary relationship between AIP and PFCs, PFC provisions are generally folded into the sections of FAA reauthorization legislation dealing with AIP  The money raised from PFCs must be used to finance eligible airport-related projects  Unlike AIP funds, PFC funds may be used to service debt incurred to carry out projects  Legislation in 2000 raised the PFC ceiling to $4 50, with an $18 limit on the total PFCs that a passenger can be charged per round trip  To impose a PFC above $3 an airport has to show that the funded projects will make significant improvements in air safety, increase competition, or reduce congestion or noise impacts on communities, and that these projects could not be fully funded by using the airport's AIP formula funds or AIP discretionary grants  Large and medium hub airports imposing PFCs above the $3 level forgo 75% of their AIP formula funds  PFCs at large and medium hub airports may not be approved unless the airport has submitted a written competition plan to FAA, which includes information about the availability of gates, leasing arrangements, gate-use requirements, controls over airside and ground-side capacity, and intentions to build gates that could be used as common facilities  The FAA Modernization and Reform Act of 2012 included minor changes to the PFC program  The act made permanent the trial program that authorized nonhub small airports to impose PFCs  The act also required GAO to study alternative means of collecting PFCs without including the PFC in the ticket price  The FAA Reauthorization Act of 2018 did not include significant changes to the PFC program and maintained the $4 50 PFC cap, with a maximum charge of $18 per round-trip flight  It did include a provision, however, that required a qualified organization to conduct a study assessing the infrastructure needs of airports and existing financial resources for commercial service airports and to make recommendations on the actions needed to upgrade the national aviation infrastructure system  Unlike AIP grants, of which over 67% in FY2018 went to airside projects (runways, taxiways, aprons, and safety-related projects), PFC revenues are heavily used for landside projects, such as terminals and transit systems on airport property, and for interest payments  Table 2 shows the AIP grant awards and PFC approvals by project type in FY2018  Annual system-wide PFC collections grew from $85 4 million in 1992 to over $3 4 billion in 2018  The PFC statutory language lends itself to a broader interpretation of "capacity enhancing" projects, and the implementing regulations are less constraining than those for AIP funds  Air carriers, which historically have preferred funding to be dedicated to airside projects, must be notified and provided with an opportunity for consultation about airports' proposals to fund projects with PFC revenues  They are generally less involved in the PFC project planning and decisionmaking process than is the case with AIP projects  The difference in the pattern of project types may also be influenced by the fact that larger airports, which collect most of the PFC revenue, tend to have substantial landside infrastructure, whereas smaller airports that are much more dependent on AIP funding have comparatively limited landside facilities  Bonds have long been a major source of funding for capital projects at primary airports  According to Bond Buyer, a trade publication, airports raised approximately $17 4 billion in 84 bond issues in 2018, a substantial increase over the $14 7 billion raised in 116 issues in 2017  Most airport-related bonds are classified as tax-exempt private activity bonds (PABs)  These bonds, issued by a local government or public authority, allow the use of landing fees, charges on airport users, and property taxes on privately controlled on-airport buildings, such as cargo facilities, to service debt without obligating tax revenue  Their tax-exempt status enables airports to raise funds more cheaply than would otherwise be the case because investors enjoy a federal income tax exclusion on interest paid on the bonds  In some cases, revenue from PFCs may be used to service the bonds  PABs may be used to build facilities that are directly related and essential to servicing aircraft, enabling aircraft to take off and land, and transferring passengers or cargo to or from aircraft  Normally, airport bonds might be classified as taxable PABs because they are used to finance facilities where more than 90% of the activity is private and more than 90% of the repayment is from revenue generated by the facility  Issuers of taxable PABs must pay higher interest rates than required on tax-exempt bonds, to compensate investors for the taxes due on interest income  Congress therefore created an exception allowing airports that are owned by governmental entities to issue "qualified" PABs that are tax-exempt   The majority of airport bonds are considered by the Internal Revenue Service to be "qualified" PABs  Some recent proposals would allow privately owned airports to receive the same tax-preferred treatment of their bonds as airports owned by public authorities  A possible precedent for this is the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ( P L  109-59 , §1143; SAFETEA-LU), which allowed for up to $15 billion in tax-exempt bond financing for highways or freight transfer facilities that would otherwise not qualify for tax-exempt financing  Many of the supporters of the SAFETEA-LU provisions envisioned expanded eligibility for PABs as a means of facilitating public-private partnerships between a public authority and an outside investor  In the airport context, this would be analogous to an airport authority agreeing to a long-term lease with a private investor who would have the ability to enter the market for tax-exempt bonds to finance improvements at the airport and, perhaps, also to finance the purchasing costs of the lease itself  By statute, the safe operation of airports is the highest aviation priority  Other priorities established by Congress include increasing capacity to the maximum feasible extent, minimizing noise impacts, and encouraging efficient service to state and local communities (i e
Report 2:  Further, in 3 years, its investment returns fell either within the top 5 percent of returns (1996, 2009) or bottom 5 percent (1998)  In 8 of the 22 years, CSPF’s annual return was within the middle 50 percent of its TUCS peer group  The TUCS data we analyzed also included median portfolio allocations for the group of CSPF’s peers  Table 2 compares CSPF’s asset allocations for selected asset categories to the median allocations of its TUCS comparator group  In 1996, compared to the TUCS medians, CSPF had relatively lower proportions of its assets in both equities and fixed income and a relatively higher proportion in real estate  Twenty years later (2016), CSPF had relatively higher proportions of its assets in both equities and fixed income (about 15 and 7 percentage points, respectively) than the respective medians for its peer group  However, the relatively large difference between CSPF’s 2016 equity allocation and the median allocation of its peer group may be a result of the peers moving into different asset classes  For example, there is a relatively large difference, in the other direction, in the allocation to alternative investments (see table 2)  We did not identify an alternative asset category in CSPF’s asset reports for 2016, but the TUCS comparator group median asset allocation in that year is 11 8 percent of assets  Similar to our findings when comparing the returns on CSPF’s investments to a customized peer group of other large institutional funds, the annual returns on CSPF’s investments in recent decades have also generally been in line with the annual returns for a group of similar multiemployer pension plans  To create a group of comparable plans, we selected plans that had a similar degree of “maturity” to CSPF in 2000, as such plans may face similar cash flow challenges to those facing CSPF  This comparator group ultimately consisted of 15 plans in addition to CSPF  Relative to less mature plans, mature plans generally have a greater proportion of liabilities attributable to retired participants receiving benefit payments and a lower proportion attributable to active participants (i e , workers) earning benefits  Mature plans may have limited capacity to make up for insufficient investment returns through employer contributions  Similar to the comparison against other large institutional fund returns based on TUCS data, our comparison against other mature multiemployer plan returns based on Form 5500 data shows that CSPF’s annual returns fluctuate relative to the median annual return for the mature plan comparator group (see fig  18)  For example, in 12 of the 15 years, CSPF’s annual return was in the highest or lowest 25 percent of returns (7 times high and 5 times low)  In 3 of the 15 years analyzed, CSPF’s annual return fell within the middle 50 percent of the peer group  Overall, from 2000 to 2014, CSPF’s annual return was above the group median return in 9 of the 15 years—and lower than the median return in the other 6 years  Relative to its peers, CSPF’s annual returns performed worst during economic downturns and best in years coming out of such downturns  CSPF’s annual investment return was in the bottom 10 percent of returns in 2001, 2002, and 2008  Alternatively, its annual return was in the top 10 percent of returns from 2003 to 2006, in 2009, and in 2012  Additionally, the dollar-weighted average annual return for CSPF over the 2000 through 2014 period was roughly the same as the median for the mature plan comparison group  Specifically, the dollar-weighted average annual return over this period for CSPF was roughly 4 9 percent, while the median dollar-weighted average annual return over this period among the comparison plans with continuous data was 4 8 percent  Our analysis of investment returns for mature plans compares investment returns for a set of peers that includes only multiemployer defined benefit plans  However, as with the comparison against other large institutional funds, the comparisons against other mature plans are not measures of over- or under-performance relative to an index or benchmark  Similarly, as with the earlier comparison, the analysis does not account for variations in the levels of investment risk taken by the plans  Our analysis of Form 5500 data shows CSPF’s investment fees and administrative expenses were in line with other large multiemployer plans  Plan investment fees and administrative expenses are often paid from plan assets so many plans seek to keep these fees and expenses low  Additionally, investment fees are likely to be related to the value of assets under management, and plans with greater asset values tend to be able to negotiate more advantageous fee rates  According to a pension consultant and a DOL publication, investment management fees are typically a large defined benefit plan’s largest category of expense, but a pension plan also incurs a number of lesser expenses related to administering the plan  Administrative expenses (other than investment fees) may include those for: audit and bookkeeping/accounting services; legal services to the plan (opinions, litigation and advice); administrative services provided by contractors; plan staff salaries and expenses; plan overhead and supplies; and other miscellaneous expenses  These administrative expenses relate to plan operations beyond the management of the assets, including the day-to-day expenses for basic administrative services such as participant services and record keeping  Furthermore, some of these expenses can vary based on the number of participants in the plan  To compare CSPF’s fees and expenses against similarly sized plans, we tallied various investment fee-related and other administrative expenses and compared CSPF to a group of multiemployer defined benefit plans that were among the 19 largest plans in terms of assets as of January 1, 2014  According to CSPF’s 2014 Form 5500, CSPF spent about $46 5 million on investment fees (or $47 6 million in 2016 dollars) and had about $17 4 billion in assets (or $17 8 billion in 2016 dollars) as of the end of the year—resulting in an investment fee expense ratio of about 27 basis points, or 0 27 percent  Over the 2000 to 2014 period, CSPF’s average annual investment fee expense ratio was 34 basis points (0 34 percent) while the median of the averages for our large plan comparison group was 37 basis points (0 37 percent)  While CSPF’s average investment fee expense ratio was below the median for its comparison group over the period we examined, the relationship of CSPF’s annual ratio to the annual median changed over time  CSPF’s annual investment-fee expense ratio was consistently at or above the median from 2000 through 2006, but was below the median thereafter  In addition, CSPF’s average investment fee expenses over the period that followed 2006 were 26 percent less than the average over the period before 2007  (They averaged 39 basis points, or 0 39 percent, from 2000 through 2006 and 29 basis points, or 0 29 percent, from 2007 through 2014 ) Two events may have contributed to this change  First, CSPF introduced the passively-managed accounts beginning in 2003—as noted earlier, and CSPF moved certain assets to those accounts in an effort to reduce fees  Second, the change back to a single named fiduciary, which was suggested as an expense saving move, occurred in the middle of the 2007 to 2014 period analyzed  Figure 19 illustrates how CSPF’s investment fee expense ratio compares to other large plans  Our analysis uses investment fee data reported in the Form 5500 that does not include details about the sources of the fees  Investment fees may be sensitive to a plan’s particular investment strategy and the way assets are allocated  For example, with CSPF, a named fiduciary has responsibility for executing the investment strategy and allocations  According to a representative from Northern Trust—the current named fiduciary—CSPF pays a fee of about 5 basis points for named fiduciary services, and this, combined with investment management fees, is in line with investment fees for other clients (though the overall fees depend on the types of asset allocations and investment strategies)  Figure 20 shows how CSPF’s administrative (or non-investment) expenses compare to those of other large plans on a per participant basis  According to CSPF’s 2014 Form 5500, CSPF spent about $38 million on administrative expenses ($39 million in 2016 dollars)—the third most among the 20 peer plans  However, when these expenses are expressed relative to the number of plan participants, CSPF had per participant expenses of $98 in 2014, which is about 16 percent less than the median of the large comparator group, $117  Over the period studied, CSPF’s administrative expenses per participant were at or above the large comparator median in 3 years (2001, 2004, and 2005), but lower than the median in all other years of the 2000 to 2014 period  CSPF’s administrative expenses were also in line with a broader group of comparators  For example, PBGC reported on 2014 administrative expenses of a population of large multiemployer plans (plans with more than 5,000 participants)  By closely replicating the methodology of that study, we found CSPF’s expenses of $98 per participant in 2014 fell below the median expense rate of $124 dollars per participant but above the lowest quartile of this group of large multiemployer plans  In comparing administrative expenses as a percentage of benefits paid, we found CSPF’s administrative expenses were among the lowest 5 percent of this group of large multiemployer plans  We performed a similar comparison against the peer group of large plans  CSPF had the lowest administrative expense rate among the large plan peer group in 2014, paying administrative expenses at a rate of 1 4 percent of benefits paid  In addition, CSPF’s annual administrative expenses as a percentage of benefits were below the median of our peer group of large plans in all years we reviewed  Our analysis of administrative expenses is highly summarized and does not account for possibly unique sources of administrative expenses  Plans may have unique organizational structures and attribute expenses differently  For example, one plan may contract a significant portion of administrative duties with a third-party, while another plan may administer the plan in-house  According to an actuary we interviewed, most multiemployer plans are administered by a third-party, but the plan’s in- house staff will still retain a number of duties  Additionally, the amount of individual administrative expenses could vary significantly by plan depending on the importance of the related administrative function in the plan’s organization  We provided a draft of the report to the U S  Department of Labor, U S  Department of the Treasury, and the Pension Benefit Guaranty Corporation for review and comment  We received technical comments from the U S  Department of Labor and the Pension Benefit Guaranty Corporation, which we incorporated as appropriate  The U S  Department of the Treasury provided no comments  We will send copies to the appropriate congressional committees, the Secretary of Labor, the Secretary of the Treasury, Director of the Pension Benefit Guaranty Corporation, and other interested parties  This report will be available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact Charles Jeszeck at (202) 512-7215 or jeszeckc@gao gov or Frank Todisco at (202) 512-2700 or todiscof@gao gov  Mr  Todisco meets the qualification standards of the American Academy of Actuaries to address the actuarial issues contained in this report  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix IV  Our objectives were to review: (1) what is known about the factors that contributed to the Central States, Southeast and Southwest Areas Pension Fund’s (CSPF) critical financial condition; (2) what has been CSPF’s investment policy, and the process for setting and executing it, since the consent decree was established; and (3) how has CSPF performed over time, particularly compared to similar pension plans  For all objectives, we reviewed relevant federal laws and regulations, literature, and documentation the U S  Department of Labor (DOL) and CSPF officials provided, including reports prepared by the court- appointed independent special counsel  We interviewed knowledgeable industry stakeholders, participant advocates, CSPF officials, International Brotherhood of Teamsters officials and members, and federal officials— including officials from the Pension Benefit Guaranty Corporation (PBGC), DOL, and the U S  Department of the Treasury (Treasury)  To describe the major factors that led to CSPF’s critical financial condition, we conducted semi-structured interviews and reviewed CSPF documentation, relevant scholarly materials, trade and industry articles, government reports, conference papers, research publications, and working papers  We also collected actuarial, financial, and other data on current and historical measures of plan assets, liabilities, investment performance, and other factors, and performed our own analyses of these data  The data and documentation collected were generally from the plan or agencies that oversee pensions  We determined the information to be generally reliable for the purposes of our objectives  To describe CSPF’s investment policy and the process by which it was set and executed we (1) reviewed CSPF’s investment policy statements, court orders and consent decree amendments, and other documentation provided by CSPF officials; (2) interviewed CSPF officials, including pension plan staff, the board of trustees, and the investment advisor, and representatives of the named fiduciary serving the plan at the time of our review; and (3) summarized certain aspects of CSPF’s assets using year- end performance reports prepared by the named fiduciaries  To describe how CSPF has performed over time compared to similar pension plans, we analyzed investment and fee data from DOL’s Form 5500, the government’s primary source of pension information  We also examined CSPF’s investment returns in comparison to a customized Wilshire Associates’ (Wilshire) Trust Universe Comparison Service (TUCS) benchmark of trusts with $3 billion or more in assets  CSPF provided these data and the data are included in the independent special counsel reports  Wilshire provided supplemental data using the same benchmark specifications  We reviewed three types of documentation provided by CSPF for changes in named fiduciaries; changes in investment policy, strategy, and asset allocation; major issues that affected funding; and how these issues affected CSPF’s investment strategy and policy  Select independent special counsel reports  CSPF officials provided 4th quarter reports for each year from 1982 through 2002 and available quarterly reports from 2003 through 2007  We downloaded all available quarterly reports from 2008 through 2017 from CSPF’s website  Select board of trustee meeting minutes  We requested board of trustee meeting minutes from 1983, 1994-95, 1998-2005, 2007-2010, and 2016 so we could review trustee discussions from the first full year the plan was covered by the 1982 consent decree, the most recent full year; periods that included a recession and/or when the plan’s assets performed poorly; and periods that preceded a change or reappointment of the named fiduciary  CSPF officials selected portions of the trustee meeting minutes from those years that pertained to the following topics: named fiduciary reports concerning investment performance; discussions relating to the amortization extension the Internal Revenue Service (IRS) granted to the plan and the contribution rate increases the plan required of participating employers in an effort to comply with funding targets required as condition of the IRS-approved amortization extension; major amendments to the plan; significant reports concerning the plan’s financial condition; amendments to the consent decree; discussions relating to any inquiries or issues DOL raised; discussions of named fiduciary appointments or resignations; discussions of particularly significant contributing employer delinquencies, bankruptcies, and settlements; and discussions relating to the independent special counsel  In addition to the board of trustee meeting minutes, CSPF officials provided select documentation on similar topics a former secretary of the board of trustees retained (1995 through 2008)  Select correspondence between CSPF and DOL  CSPF officials provided select correspondence with DOL from 1987 through 2017 relating to DOL’s oversight of the plan  CSPF officials said they provided all records of those communications that related to significant, substantive, and nonroutine issues  The correspondence excluded other documents, such as periodic reports concerning asset rebalancing and correspondence related to fairly noncontroversial motions to the consent decree  In addition, DOL provided documentation throughout the course of our engagement, including documentation it provided between September and October 2017 that it had not previously identified as being relevant to our review  We completed an on-site file review at DOL in September 2017, and DOL sent us additional electronic documentation in September and October 2017  Overall, we reviewed extensive documentation from DOL—spanning over 10,000 pages of paper-based and electronic files— and spent substantial time cataloging and categorizing it  However, DOL officials reported that certain documentation related to CSPF was no longer available because it had only been retained for the time specified in the records retention policy of the relevant office  We conducted 23 semi-structured interviews with federal agency officials and other stakeholders, including affected parties, and persons knowledgeable about unions, participants and retirees, the trucking industry, collective bargaining agreements, and multiemployer pension plans  We also interviewed three stakeholders with actuarial expertise to specifically understand actuarial standards and procedures  We selected knowledgeable stakeholders based on review of literature and prior GAO work, and recommendations from other stakeholders  We judgmentally selected stakeholders whose expertise coincided with the scope of our objectives and who would be able to provide a broad range of perspectives  In our semi-structured interviews we asked about key factors affecting the plan, the broader regulatory and financial environment in which multiemployer plans operate, and solvency options for plans like CSPF  We reviewed CSPF’s investment policy statements after CSPF entered into a consent decree in 1982, most of which are documented in the consent decree or other court orders  Seven of the investment policy statements were developed by named fiduciaries in consultation with the plan’s board of trustees and four were developed by the trustees  (See fig  21 ) From each investment policy statement, we compiled relevant information on: (1) investment philosophy and plan characteristics considered in developing it, (2) investment return benchmarks, (3) asset allocation, and (4) strategies and assets  See table 3 for select asset allocation information  To describe how CSPF’s investment policy was executed, we compiled information from performance reports prepared by named fiduciaries  We reported CSPF’s asset allocation generally based on the aggregate asset allocation categories CSPF’s named fiduciaries assigned in those reports  CSPF provided these reports for the end of each year 1984 through 2016—except 1992 and 1995, for which it provided reports as of the end of November  Information we compiled included the plan’s: account breakdown (i e , assets in named fiduciary and passively- asset allocation; and investment assets withdrawn to pay benefits and administrative expenses  When possible, we checked the information from year-end performance reports against that in other sources  Specifically, to ensure we captured the vast majority of the plan’s assets in our asset summary we compared the total amount of plan assets named fiduciaries reported with Net Assets reported in CSPF’s Form 5500 filings, available from 1982 through 2016  We generally found these totals to be similar for each year—in most years the difference was about or under 1 percent  Also, named fiduciary performance reports included information on withdrawals from investment assets to meet pension and administrative expense obligations as of the end of each year, except for 1995 and 1999-present  For 1995 through 2016, we compiled this information from independent special counsel reports  For years in which we had overlapping information, 1996 through 1998, we found the reported totals were similar—no more than about 0 6 percent difference in each of those years  Based on our review we believe that the differences were insignificant to our overall analysis and did not impact our findings  To determine investment returns, investment fees, and administrative expenses for CSPF and related comparator group multiemployer defined benefit plans, we analyzed electronic Form 5500 information, the primary, federal source of private pension data  We analyzed information from 2000 through 2014, the most current and complete year at the time we performed our analysis  We began our analysis with 2000 data as data on investment returns and plan fees is primarily found in the Schedule H  Schedule H information was first collected in 1999  But we begin our analysis with 2000 data as electronic data became more reliable the year after the schedule was introduced  We have previously reported on the problems associated with the electronic data of the Form 5500  To mitigate problems associated with the data, we used Form 5500 research data from PBGC  PBGC analysts routinely and systematically correct the raw 5500 data submitted by plans, and PBGC’s Form 5500 research data are thought to be the most accurate electronic versions  Although we did not independently audit the veracity of the PBGC data, we took steps to assess the reliability of the data and determined the data to be sufficiently reliable for our purposes  For example, we performed computer analyses of the data and identified inconsistencies and other indications of error and took steps to correct inconsistencies or errors  A second analyst checked all computer analyses  Funded status is a comparison of plan assets to plan liabilities  One measure of funded status is the funded percentage, which is calculated by dividing plan assets by plan liabilities  Another measure of funded status is the dollar amount of difference between plan assets and plan liabilities; the excess of plan liabilities over plan assets is the unfunded liability (or surplus if assets exceed liabilities)  In this report, we measured funded status using the Actuarial Value of Assets and the Actuarial Accrued Liability, which are the basic measures used to determine the annual required minimum contribution for multiemployer plans under ERISA  We chose these measures because of the consistent availability of data for these measures  There are other ways to measure plan assets and plan liabilities  The Actuarial Value of Assets can be a “smoothed” value that differs from the market value of plan assets  The Actuarial Accrued Liability depends on the choice of actuarial cost method and discount rate, and on whether it is determined on an ongoing plan basis or a plan close-out basis  While different measures of plan assets and liabilities will produce different measures of funded status at any particular point in time, we found that our use of the Actuarial Value of Assets and the Actuarial Accrued Liability was sufficient for our purposes, which included examining the plan’s progress relative to statutory funding standards as well as its trend over time  We developed multiple comparison groups for our analysis  The general rationale behind these comparator groups is to identify plans with similar fundamental characteristics, such as plan size or plan maturity, for purposes of investment return and fee and expense comparisons  We created the following two comparator groups: 1  Large plans (in terms of assets)  We ordered multiemployer defined benefit plans by descending 2014 plan assets (line 2a of the 2014 of the Schedule MB)  Because one of our key analyses of the data involves comparing investment returns across plans, we also limited the comparable plans to those that share a common plan year to CSPF (specifically if they have the same plan year-end of December 31)  We selected the 20 plans that had the largest plan asset values  This includes CSPF, which was the second largest multiemployer plan as of the beginning of 2014  Because these comparator plans are among the largest, they should have similar cost advantages  For example, for investment management services, they should have similar advantages in obtaining lower fees and thus garner greater net returns due to the more favorable fee structures  2  Mature plans (in terms of retiree liability proportions)  We ordered multiemployer defined benefit plans by their similarity to CSPF’s ratio of retiree to total liabilities as of the beginning of calendar year 2000  The ratio of retiree to total liabilities is defined as line 2(b)1(3) of the 2000 Schedule B divided by total liabilities of line 2(b)4(3) of the 2000 Schedule B  To compare retiree to total liability ratios, we created a variable for the absolute value of the difference between CSPF’s ratio and that of a given plan  We ordered the plans by ascending differences in the ratios (excluding any with missing differences)  CSPF was the top plan because its difference is zero by definition  Because one of our key analyses of the data involved comparing investment returns across plans, we also limited the comparable plans to those that shared a common plan year with CSPF (specifically if they have the same plan year-end of December 31)  Of the plans that had the same plan year as CSPF and assets over $300 million, we selected the 20 plans (including CSPF) that had the smallest absolute difference from CSPF in the retiree-to-total liability ratio  Plans with a high ratio of liabilities attributable to retirees will have a relatively large portion of future benefit payments attributable to those that are older and retired  By selecting plans that were similarly mature to CSPF (and had $300 million in assets as of the beginning of 2000), we identified plans that may have had a similar basis for their plan investments, similar cash flow characteristics, or similar potential deviations between time-weighted and dollar-weighted average investment returns over time (see section below entitled “Calculation of Average Investment Return over Multiple Years”)  That is, these plans should have roughly similar cost advantages and similar considerations in their investment objectives such as the balance of cash flows into and out of the fund and the plans’ investment horizons  Similarity in the balance of cash flows is important because it helps to mitigate the influence of plan maturity on the weighted average investment return over multiple years  The year 2000 was used to select the group because the primary purpose of this group is comparison of investment returns for plans that are similarly situated at the beginning of the period being analyzed  Our calculation of investment returns is based on the investment return calculation expressed in the Form 5500 instructions for the Schedule MB  Specifically the instructions of the 2014 Schedule MB state: Enter the estimated rate of return on the current value of plan assets for the 1-year period ending on the valuation date  (The current value is the same as the fair market value—see line 1b(1) instructions ) For this purpose, the rate of return is determined by using the formula 2I/(A + B – I), where I is the dollar amount of the investment return, A is the current value of the assets 1 year ago, and B is the current value of the assets on the current valuation date  Enter rates to the nearest  1 percent  If entering a negative number, enter a minus sign (“ - “) to the left of the number  After preliminary analysis of the variable and consultation with a GAO senior actuary, we determined that Form 5500, Schedule H contains all the information necessary to derive the calculation for years prior to 2008—as far back as 1999 when the Schedule H first came into existence  Additionally, we made adjustments for the timing of cash flows, to the extent indicated by the data  For example, employer and employee contributions that were considered receivable at the end of the prior year and thus included in the Schedule MB calculation were instead included in the year when the plan received the cash for the contribution  Thus, our calculation of annual rate of return is expressed as line items of the 2014 Schedule H to be: 2 * / [[{item1(f)a} – {item 1(b)1(a)} - {item 1(b)2(a)} - {item 1j(a)}] + [{item1(f)b} – {item 1(b)1(b)} - {item 1(b)2(b)} - {item 1j(b)}] – [{item 2d} - {item 2a(3)} – {item 2c}]] Or expressed with expository names as: (2 * (TLINCOME - TOTLCON - OTHERINCOMEW)) / ((TASSTSBY - (ERCONBOY + EECONBOY + OTHER_LIAB_BOY_AMT)) + (TASSTSEY - (ERCONEOY + EECONEOY + OTHER_LIAB_EOY_AMT)) - (TLINCOME - TOTLCON - OTHERINCOMEW)) For purposes of data reliability and validation of our results, we ran permutations of the calculation to see how, if at all, certain items could influence the calculation  In two permutations, we changed the timing of net asset transfers to or from other plans  (This occurs when, for example, there is a plan merger ) A senior actuary determined whether the calculations with/without net asset transfers affected our calculation  If the timing of the net transfer caused the investment return calculation to vary by more than 0 1 percent, we excluded the data for that particular plan in that particular year  We also ran another calculation that did not include “other” income so we could estimate the impact of not adjusting for such information  Historical average investment returns over multiple years can be calculated in at least two different ways  One measure is the “time- weighted” average return, calculated as a geometric average of the annual returns during the period  A time-weighted average measures average investment performance without regard to the order of the annual returns or the impact of different plan circumstances over time  Another measure is the “dollar-weighted” average return–also known as the “internal rate of return” (and also referred to as the “cash flow weighted” return in this report)—which reflects the impact of the plan’s cash flow pattern  The dollar-weighted average return is the rate that, when applied over time to the asset value at the beginning of the period and to each year’s net cash flow into or out of the plan over the period, reproduces the asset value at the end of the period  We calculated dollar-weighted average returns (along with some time- weighted returns for comparison), for both CSPF and for the multiemployer system as a whole, as discussed in the report  We used a market value of plan assets for this purpose  The dollar-weighted average captures the impact of negative cash flow on average investment return  For example, with negative cash flow, investment results in an earlier year can have a bigger impact than investment results in a later year because more money is at stake in the earlier year  Using the same beginning-of-period asset value, and subsequent annual net cash flows into or out of the plan, used in calculating the dollar- weighted average return, we also performed a hypothetical calculation of what CSPF’s end-of-period asset value would have been if the plan had earned 7 5 percent per year instead of its actual return  Conceptually, there are multiple ways to express investment fees, but our analysis used the following two methods for calculating them: Investment fee ratio  Investment fees [line 2i(3) of the 2014 Schedule H] divided by end-of-year net assets [line 1l(b) of the 2014 Schedule H] less receivables [line 1b(1)(b); line 1b(2)(b); and line 1b(3)(b) of the 2014 Schedule H]  Investment fees per participant  Investment fees [line 2i(3) of the 2014 Schedule H] divided by total (end-of-year) participants [line 6f of the 2014 main form]  We define administrative expenses as all other expenses besides investment fees  In part, we used this definition of administrative expenses as it represents the expenses that remain after excluding investment fees  In addition, according to a PBGC analyst, this is the unit of analysis that they also used in their study of administrative expenses  Administrative expense to benefits paid  This is administrative expenses (professional, contract and other) divided by benefits paid  For administrative expenses we derived the value by taking total expenses less investment fees   For benefits paid, we used the 2014 Schedule H, line 2e(1), “Benefit payment and payments to provide benefits directly to participants or beneficiaries, including direct rollovers ” However, if the benefit payment value for such payments is missing or zero, we used the 2014 Schedule H, line 2e(4) “Total Benefit Payments” since the plan may be expressing their benefit payments on another line  Administrative expense per participant  Administrative expenses (professional, contract and other) divided by total (end-of-year) participants   For administrative expenses we derived the value by taking total expenses [line 2i(5) of the 2014 Schedule H] less investment fees [line 2i(3) of the 2014 Schedule H]  PBGC Study on Administrative Expenses PBGC has reported on administrative expenses and included various breakouts of these data in past data book supplements  The calculations of administrative expenses in this report are similar to those used by PBGC  Certain differences may exist because our calculation did not include certain multiemployer plans that reported missing data  Additionally, our population of multiemployer plans included only those plans exclusively associated with defined benefit features  The table below compares our results for plans with 5,000 or more participants, which is a subset of plans analyzed in the PBGC study  Our results used a sample that includes three fewer plans than the PBGC study, but our distributional results were within one-tenth percent for the administrative expense ratio and within $5 of the administrative expenses per participant (see table 4)  Comparing the administrative expenses across reports using other statistics such as the minimum, maximum and standard deviation shows similar results for the PBGC and our analysis (see table 5)  The mean administrative expenses per participant differ by $2 47  This difference is 1 5 percent lower than the PBGC estimate and could be a result of the difference in sample size  We also performed additional analyses as summarized below  We compared CSPF’s annual returns against plans that have the largest assets among multiemployer defined benefit plans (with the same plan year as CSPF) and CSPF’s results against these plans were broadly similar to results for the mature plans (see fig  22)  We compared CSPF’s administrative expenses as a percentage of benefit paid against other large plans  As noted in this report, CSPF has the lowest relative administrative expenses among the comparators in 2014 with administrative expenses at 1 4 percent of benefits (see fig  23)  In addition, CSPF’s administrative expenses as a percentage of benefits were consistently below the median  For our analysis of Wilshire TUCS data, we used two sources of data  Data from 1999 through 2016 was provided by CSPF  CSPF provided reports of their TUCS custom comparison group, master trusts with greater than $3 billion in assets  These data also included the year-end return results for the total fund (also known as the combined fund) as well as returns by subcategory such as a specific named fiduciary or fund  For example, subcategories listed for year-end 2006 included the results for both named fiduciaries (Goldman Sachs and Northern Trust) as well as the passively-managed accounts (then known as the CSSS fund)  The custom comparison groups for the 1999 through 2016 data were determined each year in early-February of the year following the December 31 return results for the prior year  Thus, over time more master trusts were added (or subtracted) depending on the level of assets for the master trusts in that year  For example, the return results for year- end 1999 are determined as of February 10, 2000 and the group of master trusts with more than $3 billion contains 62 observations  The number of trusts in the custom group of master trusts with more than $3 billion generally grew over time with the number peaking with the return results for year-end 2014 (determined as of February 9, 2015), which contains 124 observations  The TUCS data from 1995 through 1998 was provided by Wilshire  The comparison group for these data were not selected each year, but, instead, selected retrospectively  For example, the comparison group of master trusts with more than $3 billion from 1995 through 1998 was selected as of January 9, 2017  There were 99 reported observations in 1995 and 132 observations in 1998  In addition, the 1995 through 1998 TUCS data did not include specific returns for CSPF  We were able to find the annual year-end return in the December (i e  year-end) management report, which for these years was provided by the named fiduciary, Morgan Stanley  Below is a list of selected events that have affected the Central States, Southeast and Southwest Areas Pension Fund (CSPF) as identified through a review of relevant documentation and interviews with stakeholders and agency officials  It is not intended to be an exhaustive list of the events that have impacted CSPF, nor is it intended to include comprehensive descriptions of each event  On September 22, 1982, the Department of Labor (DOL) entered into a court-enforceable consent decree with the Central States Southeast and Southwest Areas Pension Fund (CSPF) to help ensure the plan’s assets were managed for the sole benefit of the plan’s participants and beneficiaries as required by the Employee Retirement Income Security Act of 1974 (ERISA)  The consent decree has been amended several times and currently remains in effect, as amended, under the jurisdiction of the Federal Court for the Northern District of Illinois, Eastern Division  Below is a description of the key parties to and their primary responsibilities under the consent decree  The consent decree defines roles and responsibilities for its parties, including the court, the court-appointed independent special counsel, DOL, the plan and its Board of Trustees, and the independent asset manager, which is called the named fiduciary  The primary role of the court is to oversee and enforce the consent decree  Specifically, the court: appointed an independent special counsel to assist it in administering has approval over the appointment of named fiduciaries and trustees; has approval over the appointment of investment managers of the may, for good cause shown, remove a named fiduciary after 60 days’ notice provided to the named fiduciary and DOL; and may, upon request by the plan, dissolve the consent decree absent good cause shown by DOL why the consent decree should continue in effect  The court-appointed independent special counsel is intended to serve the court by assisting in identifying and resolving issues that arise in connection with the plan’s compliance with the consent decree and Part 4 of Title I of ERISA, and to report on the plan to the court  Specifically, the independent special counsel: has full authority to examine the plan’s activities and oversee and report on the plan’s performance of the undertakings of the consent decree; may, with court approval, employ attorneys, accountants, investigators, and others reasonably necessary and appropriate to aid him in the exercise of his responsibilities; has full access to all documents, books, records, personnel, files, and information of whatever type or description in the possession, custody, or control of the plan; may attend meetings of the plan, including meetings of the board of trustees and any meetings at which plan-related matters are discussed or considered; can petition the court to compel the plan to cooperate with the independent special counsel in the performance of his duties and responsibilities; may consult with DOL, the Internal Revenue Service, and other agencies, as appropriate, but must provide access to DOL upon its request to any documents prepared by the independent special counsel within the exercise of his power; is required to file quarterly reports, as well as any other reports the independent special counsel deems necessary or appropriate, with the court, and provide copies to DOL and the plan; may have other powers, duties, and responsibilities that the court may later determine are appropriate; and cannot be discharged or terminated during the duration of the consent decree except for leave of court, and upon the termination, discharge, death, incapacity, or resignation of an independent special counsel, the court will appoint a successor  Under the consent decree, DOL has an oversight role and may object to certain proposed plan changes  Specifically, DOL: may request and review certain reports provided by the plan and any documents prepared by the independent special counsel in the exercise of his authority; may object to the appointment of proposed trustees, named fiduciaries, investment managers of the passively-managed accounts, and asset custodians; receives notice of proposed changes to the plan’s investment policy statements from the plan; and may object to the dissolution of the consent decree  The plan must operate in full compliance with the consent decree, with ERISA, and with any conditions contained in determination letters it receives from the Internal Revenue Service  Specifically, CSPF, its board of trustees, and its internal audit staff must meet certain requirements  is required to use an independent asset manager known as the named fiduciary; must rebid the named fiduciary role at least once within every 6 years, with the option to extend the appointment for 1 calendar year; may remove a named fiduciary without cause shown on 6 months’ written notice to the named fiduciary and DOL; must cooperate with the independent special counsel in the performance of his duties and responsibilities and with DOL in its continuing investigation and enforcement responsibilities under ERISA; is required to recommend to the court three replacement candidates, agreeable to DOL, to replace an outgoing independent special counsel; and is required to maintain a qualified internal audit staff to monitor its affairs  is required to appoint, subject to court approval, the investment managers of the passively-managed accounts; is prohibited from authorizing any future acquisitions, investments, or dispositions of plan assets on a direct or indirect basis unless specifically allowed by the consent decree; and is required to comply with ERISA fiduciary duties, such as monitoring the performance of the assets of the plan, under Part 4 of Title I of ERISA  is required to review benefit administration, administrative expenditures, and the allocation of plan receipts to investments and administration; and is required to prepare monthly reports setting forth any findings and recommendations, in cooperation with the executive director of the plan, and make copies available to the independent special counsel and, upon request, to DOL and the court  The independent asset managers, known as named fiduciaries, are appointed by the plan’s trustees, subject to court approval, and have exclusive responsibility and authority to manage and control all assets of the plan allocated to them  Specifically, the named fiduciaries: may allocate plan assets among different types of investments and have exclusive authority to appoint, replace, and remove those have responsibility and authority to monitor the performance of their are required to develop, in consultation with the Board of Trustees, and implement investment policy statements for the assets they manage, giving appropriate regards to CSPF’s actuarial requirements  In addition to the individual named above David Lehrer (Assistant Director), Charles J  Ford, (Analyst-in-Charge), Laurel Beedon, Jessica Moscovitch, Layla Moughari, Joseph Silvestri, Anjali Tekchandani, Margaret J  Weber, Adam Wendel, and Miranda J  Wickham made key contributions to this report  Also contributing to this report were Susan Aschoff, Deborah K  Bland, Helen Desaulniers, Laura Hoffrey, Jennifer Gregory, Sheila McCoy, Mimi Nguyen, Jessica Orr, Monica P  Savoy, and Seyda Wentworth  Central States Pension Fund: Department of Labor Activities under the Consent Decree and Federal Law  GAO-18-105  Washington, D C : June 4, 2018  High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others  GAO-17-317  Washington, D C : February 15, 2017  Pension Plan Valuation: Views on Using Multiple Measures to Offer a More Complete Financial Picture  GAO-14-264  Washington, D C : September 30, 2014  Private Pensions: Clarity of Required Reports and Disclosures Could Be Improved  GAO-14-92  Washington, D C : November 21, 2013  Private Pensions: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies  GAO-13-240  Washington, D C : March 28, 2013  Private Pensions: Multiemployer Plans and PBGC Face Urgent Challenges  GAO-13-428T  Washington, D C : March 5, 2013  Pension Benefit Guaranty Corporation: Redesigned Premium Structure Could Better Align Rates with Risk from Plan Sponsors  GAO-13-58  Washington, D C : November 7, 2012  Private Pensions: Changes Needed to Better Protect Multiemployer Pension Benefits  GAO-11-79  Washington, D C : October 18, 2010  Private Pensions: Long-standing Challenges Remain for Multiemployer Pension Plans  GAO-10-708T  Washington, D C : May 27, 2010  The Department of Labor’s Oversight of the Management of the Teamsters’ Central States Pension and Health and Welfare Funds  GAO/HRD-85-73  Washington, D C : July 18, 1985  Investigation to Reform Teamsters’ Central States Pension Fund Found Inadequate  HRD-82-13  Washington, D C : April 28, 1982 

ground_truth: According to the Office of Personnel Management (OPM), the federal workforce consists of an estimated two million civilian employees. Federal law categorizes these employees into three types of service—the competitive service, the excepted service, and the Senior Executive Service (SES)—that may be distinguished by different selection, compensation, and other standards. Title 5 of the U.S. Code (Title 5) contains most of the standards governing federal employment, and OPM is generally responsible for implementing these requirements. The competitive service largely consists of all civil service positions in the executive branch, other than (1) positions excepted from the competitive service by statute; (2) positions appointed by the President and confirmed by the Senate; and (3) the SES. Traditionally, OPM has administered examinations for entrance into the competitive service. These examinations are meant to be "practical in character" and relate to "matters that fairly test the relative capacity and fitness of the applicants for the appointment sought." Title 5 also authorizes OPM to prescribe rules allowing agencies to hire candidates directly under specified circumstances. The excepted service includes designated civil service positions that are not in the competitive service or the SES and are not subject to competitive examination. OPM maintains authority to exempt a position from the competitive service when it determines that an appointment through competitive examination is not practicable, or the recruitment of students or recent graduates would be better achieved through alternate recruitment and assessment processes. The pay structure for the competitive service and the excepted service is similar. Both services are typically paid in accordance with the General Schedule, a schedule of annual basic pay rates that consists of 15 grades, designated "GS-1" through "GS-15." This fixed pay scale is generally designed to reflect, among other things, equal pay for substantially equal work within a local pay area. Additionally, the competitive service and the excepted service generally have similar notice and appeal rights for adverse personnel actions. For example, before a removal, a suspension for more than 14 days, a reduction in grade or pay, or a furlough of 30 days or less, the agency must provide at least 30 days' advance written notice to the affected employee. The employee must also be given a reasonable time to respond to the notice and provide affidavits and other evidence to support the answer. Some adverse actions may also be appealed to the Merit Systems Protection Board (MSPB or Board), an independent, quasi-judicial agency that reviews and adjudicates specified personnel actions taken against qualifying federal employees. The SES is a corps of some 7,000 high-level government administrators who manage major programs and projects within most federal agencies. In these leadership roles, SES members may serve as a link between top-level political appointees of an agency and career civil servants within the agency. The SES is governed by a regulatory structure separate from the competitive and excepted services. While SES members are primarily career appointees chosen through a merit-based competitive hiring process, others are noncareer, limited term or limited emergency appointees (commonly political appointees) selected by agency leadership. To shield certain SES roles from political influence, some SES positions (career reserved positions) must be filled with career appointees, and Title 5 limits the number of noncareer and limited term appointees that may serve in SES positions. The SES pay structure is distinct from the rest of the civil service. Title 5 specifies that SES members are paid within a particular range based on an executive's individual performance or contribution to agency performance (or both), as measured under a performance appraisal system. In addition, Title 5 articulates special conditions and procedures for removing, suspending, or taking other adverse actions against a member of the SES. For example, career SES appointees who have successfully completed a one-year probationary period may be removed or subject to adverse action only for specified reasons, including misconduct and substandard performance. Career appointees must receive advance written notice of these actions, and an opportunity to appeal the action. In comparison, noncareer, limited term, and limited emergency appointees are generally not subject to the same protections and may be removed from the SES at any time.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: The federal government is the nation's largest employer, with over two million workers employed in the United States, U S  Territories, and foreign countries  A majority of these employees work in the competitive service of the executive branch  Applicants for competitive service positions compete with other applicants and are evaluated according to objective standards  The executive branch includes two other service classifications—the excepted service and the Senior Executive Service (SES)—with hiring and removal standards that diverge from those prescribed for the competitive service  Positions in the excepted service are specifically excepted from the competitive service by statute, by the President, or by the Office of Personnel Management (OPM)  SES positions are also not in the competitive service  The SES includes senior managerial, supervisory, and policy positions that are subject to a different pay scale, as well as different hiring and removal standards  This report examines the three service classifications, and reviews some of the central features and notable differences among these classifications  The competitive service consists of all civil service positions in the executive branch, except the following: positions that are specifically excepted from the competitive service by or under statute; positions to which appointments are made by presidential nomination for confirmation by the Senate, unless the Senate otherwise directs; and positions in the SES  The competitive service also includes non-executive branch positions and positions in the District of Columbia government that are specifically included in the competitive service by statute  OPM administers examinations for entrance into the competitive service  These examinations are meant to be "practical in character" and relate to "matters that fairly test the relative capacity and fitness of the applicants for the appointment sought[ ]" OPM identifies the relative weights for the subjects in an examination, and assigns numerical ratings on a 100-point scale  Applicants who meet the minimum requirements for entrance to an examination, such as citizenship and residence requirements, and are rated 70 or more in the examination are eligible for appointment in the competitive service  These individuals are placed on registers or lists of eligibles  When an agency seeks to fill a competitive service position, it requests a certificate of eligibles from OPM  This certificate is to include enough names from the top of the relevant register to allow an agency appointing official to consider at least three individuals for every position to be filled  The competitive service includes several types of appointments  An individual selected for a continuing position is generally appointed as a career-conditional employee subject to an initial one-year probationary period  After three continuous years of service in a career-conditional appointment, an employee will be converted to a career appointment  A term appointment is a nonpermanent appointment for a period of more than one year, but less than four years  An agency may make a term appointment when the need for an employee's services is not permanent, but involves a special project, extraordinary workload, or reorganization  A temporary appointment is a time-limited appointment for a period not to exceed one year  An agency may make a temporary appointment to fill a short-term position or meet an employment need that is scheduled to end within a specified timeframe  Employees in the competitive service are generally paid in accordance with the General Schedule, a schedule of annual basic pay rates that consists of 15 grades, designated "GS-1" through "GS-15 " The grades include 10 steps that provide for increasing rates of pay  An employee who has not reached the maximum pay rate for his or her position is generally advanced to the next step at specified intervals  General Schedule salaries are based on the principles that there is equal pay for substantially equal work within a local pay area, that any pay distinctions are based on work and performance, that federal pay rates are comparable with non-federal pay rates for the same level of work, and that any pay disparities between federal and non-federal employees should be eliminated  Employees in the competitive service who are not serving a probationary or trial period, or have completed one year of current continuous service in a position other than a temporary appointment limited to one year or less, maintain specified notice and appeal rights for adverse personnel actions  Before an agency may suspend such a qualifying employee for 14 days or less, the employee must be given an advance written notice that identifies the specific reasons for the suspension  The employee must also be provided a reasonable time to answer the notice and furnish affidavits and other evidence to support the answer  Similar notice is required before an agency may subject a qualifying employee to other adverse personnel actions  Before a removal, a suspension for more than 14 days, a reduction in grade or pay, or a furlough of 30 days or less, the agency must provide at least 30 days' advance written notice to the employee  The employee must also be given a reasonable time to respond to the notice and provide affidavits and other evidence to support the answer  Unlike suspensions for 14 days or less, these adverse actions may be appealed to the Merit Systems Protection Board (MSPB or Board), an independent, quasi-judicial agency that reviews and adjudicates specified personnel actions taken against qualifying federal employees  In general, an agency must establish three factors to withstand an individual's challenge of his or her adverse personnel action  First, the agency must prove, by a preponderance of the evidence, that the charged conduct occurred  Second, it must establish a nexus between that conduct and the efficiency of the civil service  Finally, the agency must show that the penalty imposed on the employee is reasonable  An agency's action may not be sustained if the appellant shows: (1) harmful error in applying the agency's procedures in arriving at its decision; (2) that the decision was based on a prohibited personnel practice; or (3) that the decision was not in accordance with law  About one-third of all federal workers are employed in the excepted service  The excepted service consists of those civil service positions that are not in the competitive service or the SES  Positions in the excepted service may be designated by statute or by OPM, and are not subject to competitive examination  OPM will exempt a position from the competitive service when it determines that an appointment through competitive examination is not practicable, or the recruitment of certain students or recent graduates would be better achieved through alternate recruitment and assessment processes  For example, OPM may determine that a position should be excepted from the competitive service because it is impracticable to examine the knowledge, skills, and abilities required for a position  Positions in the excepted service are categorized into four schedules  Schedule A includes positions that are not of a confidential or policy-determining character for which it is not practicable to examine applicants  Attorneys, chaplains, and short-term positions for which there is a critical hiring need are examples of schedule A positions  Schedule B also includes positions that are not of a confidential or policy-determining character for which it is not practicable to examine applicants  Unlike Schedule A positions, however, these positions require an applicant to satisfy basic qualification standards established by OPM for the relevant occupation and grade level  Individuals appointed to schedule B positions engage in a variety of activities, including policy analysis, teaching, and technical assistance  Positions in schedule C are policy-determining or involve a close and confidential working relationship with the head of an agency or other key appointed officials  These positions include most political appointees below the cabinet and subcabinet levels  An agency's senior advisor and special assistant positions are typically in schedule C  Finally, schedule D includes positions that are not of a confidential or policy-determining character for which competitive examination makes it difficult to recruit a sufficient number of certain students or recent graduates  Examples of schedule D positions include those involving science, technology, engineering, or mathematics (STEM) occupations and positions in the Presidential Management Fellows Program  Schedule D positions generally require an applicant to satisfy basic qualification standards established by OPM for the relevant occupation and grade level  Like employees in the competitive service, excepted service employees are generally paid in accordance with the General Schedule  In addition, excepted service employees maintain the same notice and appeal rights for adverse personnel actions  Some employees in the excepted service, however, must satisfy different durational requirements before these rights become available  So-called "preference eligibles" in an executive agency, the Postal Service, or the Postal Rate Commission must complete one year of current continuous service to avail themselves of the relevant notice and appeal rights  The term "preference eligible" refers to specified military veterans and some of their family members, such as an unmarried widow, and the wife or husband of a service-connected disabled veteran  Employees in the excepted service who are not preference eligibles and (1) are not serving a probationary or trial period under an initial appointment pending conversion to the competitive service, or (2) have completed two years of current or continuous service in the same or similar position, have the same notice and appeal rights as qualifying employees in the competitive service  The SES is a cadre of high-level government administrators who manage major programs and projects within most federal agencies  While they are considered federal employees within the civil service system, the SES is governed by a regulatory structure separate from the competitive and excepted services  As defined in statute, SES positions are generally managerial or supervisory positions that are classified above the GS-15 grade (or certain equivalent positions) and need not be appointed by the President and confirmed by the Senate  In these leadership roles, SES members may serve as intermediaries between top-level political appointees of an agency who seek to carry out the objectives of a particular President and career civil servants with institutional experience relating to relevant issues  According to a 2018 report, there are currently more than 7,000 permanent SES positions  There are two types of SES positions: (1) career reserved and (2) general  Career reserved positions must be filled with career appointees to shield certain SES roles from political influence  Generally, agency heads are to determine whether a particular SES position warrants a career reserved designation, to "ensure impartiality, or the public's confidence in the impartiality, of the Government " OPM regulations reflect the types of SES roles in which this designation is appropriate, including those involving adjudication and appeals, auditing, and law enforcement duties  General positions may be filled by career appointees, as well as other noncareer and limited term (i e , political) appointees  There are four types of SES appointments: career, noncareer, limited term, and limited emergency appointees  The SES mainly consists of "career appointees" chosen through a merit-based competitive hiring process  As part of this process, each agency must maintain a recruitment program for career appointees, as well as at least one executive board that reviews qualifications and makes recommendations regarding SES candidates  An OPM-convened Qualification Review Board (QRB) must certify the executive and managerial qualifications of a selected candidate before a career appointment may be made to an SES position  Unlike career appointees, noncareer appointees are not subject to the competitive selection process, but agency heads must determine that these appointees meet the qualifications of the SES position  While noncareer appointees are not QRB-certified, OPM must approve these appointees  Limited term and limited emergency appointees make up a small subset of the SES, and their terms are non-renewable  These appointments are used when a position is needed for a specified period (such as to manage a special project), or a position is established to meet a "bona fide, unanticipated, urgent need " Limited term and limited emergency appointments are also subject to OPM approval  To restrict the politicization of the SES, Title 5 of the U S  Code (Title 5) limits the number of noncareer and limited term appointees who may serve in SES positions  The SES pay structure is also distinct from the rest of the civil service  Title 5 specifies that the pay rate of each senior executive is based on the executive's individual performance or contribution to agency performance (or both), as measured under a "rigorous" performance appraisal system  Each federal agency must maintain at least one of these appraisal systems, subject to OPM standards, review, and approval  Performance appraisals of SES members may consider factors such as improvements in efficiency, productivity, and quality of work or service, cost efficiency, and performance timeliness  In response to earlier concerns that SES appraisal systems were flawed because most executives received the highest rating, Title 5 tasks OPM, in collaboration with the Office of Management and Budget, with the establishment and maintenance of a government-wide performance appraisal system certification process, in an effort to ensure that an agency's appraisal systems for SES employees make "meaningful distinctions based on relative performance " Title 5 also sets out different pay rates for the SES, with a minimum rate of basic pay equal to 120 percent of the rate for GS-15, step 1, and a maximum rate of basic pay equal to the rate for Level III of the Executive Schedule  But SES members' annual aggregate pay (that includes additional compensation such as bonuses, awards, and other payments in addition to basic pay) is capped at the rate for Level I of the Executive Schedule  If a senior executive's total compensation exceeds the aggregate limitation, the executive receives the overage in the following calendar year  To encourage federal agencies to establish and maintain an OPM-certified performance appraisal system, Title 5 allows for a higher range of SES pay for agencies that have these certified systems  Title 5 also articulates conditions and procedures for removing, suspending, or taking other adverse actions against a member of the SES  Career SES appointees who have successfully completed a one-year probationary period may be removed or subject to adverse action only for specified reasons  For example, an SES career appointee may be removed from the civil service or suspended for more than 14 days only for misconduct, neglect of duty, malfeasance, or failure to accept a directed reassignment or to accompany a position in a transfer of function  SES members must receive advance written notice about the action and opportunity to provide an answer or receive hearing, subject to exception  The senior executive may also appeal the employment action to the MSPB  A career appointee receiving a single unsatisfactory performance rating may be reassigned or transferred within the SES or removed from the SES  A career SES member who receives two unsatisfactory ratings in any period of five consecutive years, or twice in any period of three consecutive years receives less than fully successful ratings, must be removed from the SES  Affected SES career appointees must receive advance written notice of these actions  While these appointees may not appeal these actions to the MSPB, they may request an informal hearing before the Board  SES career appointees are also generally entitled to be placed in a civil service position at GS-15 or above (or an equivalent position)  In comparison, noncareer, limited term, and limited emergency appointees are generally not subject to the same removal protections and may be removed from the SES at any time  The procedures for removal of noncareer and limited term appointees are largely not addressed in federal statute, and the terms and procedures for their removal are mainly at the discretion of the agency head  In response to concerns about performance and accountability of SES members employed by the Department of Veterans Affairs (VA), Congress recently created special removal requirements that apply to these positions  In 2017, Congress passed the Department of Veterans Affairs Accountability and Whistleblower Protection Act, which amended an existing provision concerning removal procedures for these covered senior executives  Under the 2017 Act, the VA Secretary has discretion to suspend, demote, remove, or take other actions against SES career appointees or other high-level executives if the Secretary determines that the individual's misconduct or performance warrants such action  To address SES job performance issues more expeditiously, SES employees at the VA Department are entitled to abbreviated notice and appeals rights, as compared to the removal procedures in place in other federal agencies 


Report 2: , support for general aviation airports)  But there are significant disagreements about the appropriate degree of federal participation in airport development and finance and about the specific types of expenditure that should be given priority within AIP  Airline and airport operators tend to view the fully authorized funding of the program as a good thing  An alternative view, however, is that too much has been spent on AIP, particularly at smaller airports that do not play a significant role in commercial aviation  The assessment of airport capital needs is fundamental to determining the appropriate federal support needed to foster a safe and efficient national airport system  The federal government's interest goes beyond capacity issues to include implementation of federal safety and noise policies  Both FAA and the Airports Council International-North America (ACI-NA) have issued projections of airports' long-term financial needs  In its most recent NPIAS report, FAA estimated that the national system's capital needs for FY2019-FY2023 will total $35 1 billion (an annual average of approximately $7 billion)  The ACI-NA infrastructure needs survey resulted in an estimate of $128 1 billion over the same years (an annual average of approximately $25 6 billion)  The main reason for the widely differing estimates was disparate views on what kinds of airport projects to include  The NPIAS report was based on information taken from airport master plans and state system plans, but FAA planners screened out planned projects not justified by aviation activity forecasts or not eligible for AIP grants  Only designated NPIAS airports were included in the FAA study  Implicit in this methodology is that the planning has been carried through to the point where financing is identified  Not all projects used to develop the NPIAS estimates are actually completed, or in some cases even begun, within the range of years covered in the NPIAS estimates  ACI-NA argues that the NPIAS underestimates AIP eligible needs because not all such needs will be in the current airport plans  The ACI-NA study reflects the broader business view of major airport operators and casts a substantially wider net  It includes projects funded by PFCs, bonds, or state or local funding; airport-funded air traffic control facilities; airport- or TSA-funded security projects; "necessary" AIP-ineligible projects such as parking facilities, hangars, revenue portions of terminals, and off-airport roads/transit facilities; and AIP-eligible projects not reported to FAA in the belief that there would be a low probability of receiving additional AIP funding  Its 2019-2023 infrastructure needs survey, for example, included major airport terminal projects that are ineligible for AIP grants  The ACI-NA study also includes projects without identified funding sources  The ACI-NA estimate is higher than the FAA estimate because of the wider net it casts and because it is adjusted for projected inflation  The estimates are important because the primary AIP reauthorization issue is the program's appropriate level of funding  Because the ACI-NA airport needs projection includes much that is not eligible for AIP grants, its accuracy may not be as critical in evaluating appropriate AIP funding levels as that of the NPIAS projections  On the other hand, the broader ACI-NA estimate may be more significant for policy choices related to bond issuance and PFCs, since these sources fund a broader range of projects than AIP  In 2004, then-FAA Administrator Marion C  Blakey stated that the agency's goal was to increase total capacity at the top 35 U S  airports by 30% over a 10-year period  FAA's Operational Evolution Plan (OEP) is intended to increase the capacity and efficiency of the National Airspace System (NAS) over a 10-year period to keep up with the expected growth in demand for air travel and air cargo  In support of that goal, FAA released a study focused on the 35 busiest airports, Capacity Needs in the National Airspace System: An Analysis of Airport and Metropolitan Area Demand and Operational Capacity in the Future (also referred to as FACT1)  The study projected 18 airports would need additional capacity by 2020  In 2007, FACT1 was updated by a second study, FACT2  FACT2 expanded the study to include 21 non-OEP airports that were identified as having the potential to be capacity constrained or were in capacity-constrained metropolitan areas  The study examined airports that would need capacity increases and also projected which airports would need capacity increases in 2015 and 2025  It identified four airports plus the New York metropolitan area that needed additional capacity in 2007  It further identified 14 hub airports as likely to be capacity-constrained in 2025  FACT2 found that, in comparison to FACT1, many non-OEP airports "    have higher capacities than originally presumed and thus less need for additional capacity " A further update, FACT3, was released in January 2015  FACT3 forecasted that the 2007-2009 recession, volatile fuel costs, airline consolidation, and replacement of many 50-seat regional jets with larger aircraft would result in 32% fewer operations and about 23% fewer enplanements in 2025 at the 30 core airports than forecast in FACT2  It projected that airport delays would remain concentrated at a few major hub airports, notably the three New York City-area airports, Philadelphia International Airport, and Hartsfield-Jackson Atlanta International Airport  This study may have implications for the reauthorization of AIP  The large runway projects that are the focus of the OEP can require long lead times—10 or more years from concept to initial construction is not unusual  At large and medium hub airports, runway projects are usually paid for, in part, by AIP funds  Therefore, some projects needed by 2025 may require AIP funding in earlier years  Because large and medium airports that levy PFCs must forgo either 50% or 75% of their AIP formula entitlement funds, most federal funding for their runway projects would probably need to take the form of AIP discretionary funds  The pool of discretionary funds is primarily the remainder of annual funding after the entitlement formula requirements are satisfied  Of the forgone PFC funds, 87 5% are reserved for the small airport fund and are also not available for OEP airports  If the AIP budget is constrained in the future, either under a reauthorization bill or during the annual appropriations process, and the entitlement formulas remain as they are, the discretionary portion of the AIP budget may be squeezed, limiting large airports' ability to draw on AIP funds for major capacity expansion projects  Many of the attributes of AIP's programmatic structure are similar to those of the 1982 act that created the program  Over the years these attributes have been modified based on perceived needs and on the practical politics of passing the periodic FAA reauthorization bills that contain the AIP provisions  These considerations make a major overhaul of the AIP structure unlikely, but may leave room for programmatic adjustments in the distribution of apportionments  One such adjustment might shift AIP funds to enhancing capacity at large and medium hub airports  There are several ways Congress might accomplish this  One would be to eliminate the requirement that large and medium hub airports that impose the maximum PFCs forgo 75% of their entitlements  This change would give larger airports a greater share of entitlement funding, but at the cost of reducing AIP grants to small airports  Alternatively, changes in the statutory set-asides of discretionary funds could give FAA more flexibility to use that money for capacity enhancement, but might reduce funding for noise mitigation and other purposes  Changes in the last several FAA authorization acts increased entitlements and broadened the range of landside projects eligible for AIP grants  These changes generally benefitted airports smaller than medium hub size  In particular, the increased amount of apportioned funds has limited the availability of funds for discretionary grants at major airports  Further changes giving airports increased flexibility in the use of their entitlements might benefit smaller airports not served by commercial aviation, in line with the national goal of having an "extensive" national airport system, but this use of funds might conflict with the goal of reducing congestion at major commercial airports  The current apportionment system relies on a $3 2 billion funding level trigger mechanism to lift most of the apportionments to twice their formula level  This has been in place for two reauthorization cycles  Should that trigger be breached, entitlements for all airports would be reduced drastically  The entitlement formulas may not be sustainable, without depleting discretionary funds, in the absence of additional funding for AIP  One way to reduce the amount of trust fund revenue needed for AIP would be to allow large and medium hub airports to opt out of AIP and rely exclusively on PFCs to finance capital projects  This would require raising or eliminating the federal cap on PFCs  These "defederalized" airports could then be released from some or all of the AIP grant assurances under which they now operate, such as land use requirements and airport revenue use restrictions  If airports exit the program, AIP spending could be reduced or could be redirected to other NPIAS airports  Airport privatization denotes a change in ownership from a public entity (such as a local government or an airport authority established by a state government) to a private one  In a number of countries, such as Great Britain, government-owned airports have been privatized by sale to private owners  In the United States, some airports have allowed private ownership of certain on-airport facilities or management functions, but the ownership of all major airports remains in the hands of government entities  The Airport Privatization Pilot Program (49 U S C  §47134; Section 149 of the Federal Aviation Reauthorization Act of 1996, P L  104-264 , as amended) authorizes FAA to exempt up to 10 airports from certain federal restrictions on the use of airport revenue off-airport  Participating airports may be also exempted from certain requirements on the repayment of federal grants  Privatized airports may still participate in the AIP, but at a lower federal share (70%)  The pilot program was renamed the Airport Investment Partnership Program (AIPP) in the 2018 FAA reauthorization act and expanded to admit more than 10 airports  The AIPP provides that at primary airports, the airport sponsor may only recover from the sale or lease an amount approved by at least 65% of the scheduled air carriers serving the airport, as well as by both scheduled and unscheduled air carriers that together account for 65% of the total landed weight at the airport for the year  The requirement that air carriers approve the use of airport revenue for nonairport purposes, such as profit distribution, may have served to limit interest in the program  To date, only two airports have completed the privatization process established under the provisions of the AIPP  One of those, Stewart International Airport in New York State, subsequently reverted to public ownership when it was purchased by the Port Authority of New York and New Jersey  Luis Muñoz Marín International Airport in San Juan, PR, is now the only commercial service airport operating under private management after privatization under the APPP  As of 2018, there are three applicants under active FAA consideration: Hendry County Airglades Airport in Clewiston, FL; Westchester Airport in White Plains, NY; and St  Louis Lambert International Airport in St  Louis, MO  There is no certainty that any AIP cost savings from privatization would be retained for use by the other AIP-eligible airports  AIP spending is determined by the authorization and appropriations process, and Congress could choose to use any savings to reduce the program size, to marginally assist in deficit reduction, to reduce general fund portions of FAA operations funding, or to make money available for spending elsewhere  Debate over FAA reauthorization generally brings forth proposals to alter the AIP grant assurances, such as ensuring that workers on airport construction projects receive prevailing wages set under the Davis-Bacon Act and pledging to use airport revenue solely for spending on airport operations and capital costs  If AIP spending remains constrained, critics are likely to argue that the grant assurances raise the cost of projects to increase airport capacity and complicate the closure and reuse of underutilized airports or airports that are locally unpopular due to noise or safety concerns  Historically, a basic funding issue is whether to change the existing discretionary fund set-aside for noise mitigation and abatement  The noise set-aside, however, has been increased in previous reauthorization acts and is now 35% of discretionary funding  Demand to use AIP funds for noise mitigation could increase if Congress grants FAA the flexibility to fund noise mitigation projects that are outside the DNL 65 decibel (dB) noise impact area, but this could divert resources from capacity and safety projects  A related issue is whether to make the planning for noise-mitigating air traffic control procedures at individual airports eligible for AIP funding  The central issue related to PFCs is whether to raise the $4 50 per enplaned passenger ceiling or to eliminate the ceiling altogether  In general, airports argue for increasing or eliminating the ceiling, whereas most air carriers and some passenger advocates oppose higher limits on the PFCs  A 2015 GAO study analyzed the effects by raising the PFC cap under three scenarios: setting the cap at $6 47, $8 00, or $8 50  The study found raising PFC would significantly increase airport funding, but could also marginally slow passenger growth and therefore the growth in revenues to the trust fund  PFC supporters feel that the PFC is more reliable than AIP funding, which is subject to the authorization and appropriations process  They also argue that PFCs are procompetitive, helping airports build gates and facilities that both encourage new entrant carriers and allow incumbent carriers to expand  Advocates of an increase in the cap also argue that over time, the value of the PFC has been eroded by inflation and an adjustment is therefore necessary  The permissible uses of revenues are an ongoing point of contention  Airport operators, in particular, would like more freedom to use PFC funds for off-airport projects, such as transportation access projects, and want the process of obtaining FAA approval to be streamlined  Carriers, on the other hand, often complain that airports use PFC funds to finance proposals of dubious value, especially outside airport boundaries, instead of high-priority projects that offer meaningful safety or capacity enhancements  The major air carriers are also unhappy with their limited influence over project decisions, as airports are required only to consult with resident air carriers instead of having to get their agreement on PFC-funded projects  Unlike interest income from governmental bonds, which is not subject to the alternative minimum tax (AMT), interest from private activity bonds is still subject to the AMT  ACI-NA has proposed broadening the definition of governmental airport bonds to, in effect, include either all airport bonds or at least those bonds issued for public-use projects that meet AIP or PFC eligibility requirements  Opponents of such changes express concerns that these changes would reduce U S  Treasury revenues  Some also argue it would make more sense to change the AMT as part of a tax bill rather than including a specific exemption for income on airport bonds in an FAA reauthorization bill  In either case, such a change would not be under the jurisdiction of the congressional committees that will have jurisdiction over most reauthorization provisions  Changes to the AMT would be under the jurisdiction of the congressional tax-writing committees, the House Committee on Ways and Means and the Senate Committee on Finance  Appendix A  Legislative History of Federal Grants-in-Aid to Airports Prior to World War II the federal government viewed airports as a local responsibility  During the 1930s, it spent about $150 million a year on airports through work relief agencies such as the Works Progress Administration (WPA)  The first federal support for airport construction was granted during World War II  After the war, the Federal Airport Act of 1946 (P L  79-377) created the Federal Aid to Airports Program, using funds appropriated annually from the general fund  Initially much of this spending supported conversion of military airports to civilian use  In the 1960s substantial funding went to upgrade and extend runways for use by commercial jets  By the end of the 1960s, congestion, both in the air and on the ground at U S  airports, was seen as evidence that airport capacity was inadequate  Airport and Airway Development and Revenue Acts of 1970 (P L  91-258) In 1970, Congress responded to the capacity concerns by passing two acts  The first, the Airport and Airway Development Act (Title I of P L  91-258), established the Airport Development Aid Program (ADAP) and the Planning Grant Program (PGP), and set forth the programs' grant criteria, distribution guidelines, and authorization of grant-in-aid funding for the first five years of the program  The second, the Airport and Airway Revenue Act of 1970 (Title II of P L  91-258), established the Airport and Airway Trust Fund  Revenues from levies on aviation users and fuel were dedicated to the fund  Under the 1970 acts the trust fund could pay capital costs and, when excess funds existed, could also help cover FAA's administrative and operations costs  Airport and Airway Development and Revenue Acts Amendments of 1971 (P L  92-174) The Nixon Administration's FAA budget requests for FY1971 and FY1972 under the new trust fund system brought it into immediate conflict with Congress over the budgetary treatment of trust fund revenues  The Administration treated the new financing system as a user-pay system, whereas many Members of Congress viewed the trust fund as primarily a capital fund  The 1971 Amendments Act made the trust fund a capital-only account (although only through FY1976), disallowing the use of trust fund revenues for FAA operations  Airport and Airway Development Amendments Act of 1976 ( P L  94-353 ) The 1976 act made a number of adjustments to the ADAP and reauthorized the Airport and Airway Trust Fund through FY1980  The act again allowed the use of trust fund resources for the costs of air navigation services (a part of operations and maintenance)  However, in an attempt to assure adequate funding of airport grants, the act included "cap and penalty" provisions which placed an annual cap on spending for costs of air navigation systems and a penalty that reduced these caps if airport grants were not funded each year at the airport program's authorized levels  This cap was altered multiple times in reauthorization acts in the following decades  ADAP grants totaled about $4 1 billion from 1971 through 1980  Congress did not pass authorizing legislation for ADAP during FY1981 and FY1982, during which the aviation trust fund lapsed, although spending for airport grants continued  Airport and Airway Improvement Act of 1982 ( P L  97-248 ) The 1982 act created the current AIP and reactivated the Airport and Airway Trust Fund  It altered the funding distribution among the newly defined categories of airports, extending aid eligibility to privately owned general aviation airports, increasing the federal share of eligible project costs, and earmarking 8% of total funding for noise abatement and compatibility planning  The act also required the Secretary of Transportation to publish a national plan for the development of public-use airports in the United States  This biannual publication, the National Plan of Integrated Airport Systems (NPIAS) , identifies airports that are considered important to the national aviation system  For an airport to receive AIP funds it must be listed in the NPIAS  Although the 1982 act was amended often in the 1980s and early 1990s, the general structure of AIP remained the same  The Airport and Airway Safety and Capacity Expansion Act of 1987 ( P L  100-223 ; 1987 act) authorized significant spending increases for AIP and added a cargo service apportionment  It also included provisions to encourage full funding of AIP at the authorized level  Title IX of P L  101-508 , the Omnibus Budget Reconciliation Act of 1990 (OBRA1990), included the Aviation and Airway Safety and Capacity Act of 1990, which allowed airports, under certain conditions, to levy a Passenger Facility Charge (PFC) to raise revenue and also established the Military Airport Program (MAP), which provided AIP funding for capacity and/or conversion-related projects at joint-use or former military airports  The Airport Noise and Capacity Act of 1990 (OBRA 1990, Title IX, Subtitle D) set a national aviation noise policy  OBRA1990 included the Revenue Reconciliation Act of 1990, which reauthorized the Aviation Trust Fund and adjusted some of the aviation taxes  The Federal Aviation Reauthorization Act of 1994 ( P L  103-305 ) reauthorized AIP for two more years and again made modifications in the cap and penalty provisions  Federal Aviation Reauthorization Act of 1996 ( P L  104-264 ) The 1996 reauthorization of the AIP made a number of adjustments to entitlement funding and discretionary set-aside provisions  It also included directives concerning intermodal planning, cost reimbursement rules, letters of intent, and the small airport fund  A demonstration airport privatization program and a demonstration program for innovative financing techniques were established  The demonstration status of the state block grant program was removed  The act did not reauthorize the taxes that supported the Airport and Airway Trust Fund  This was done by the Taxpayer Relief Act of 1997 ( P L  105-34 ), which extended, subject to a number of modifications, the existing aviation trust fund taxes through September 30, 2007  The Wendell H  Ford Aviation Investment and Reform Act for the 21 st Century of 2000 (AIR21; P L  106-181 ) The enactment of AIR21 was the culmination of two years of legislative effort to pass a multiyear FAA reauthorization bill  The initial debate focused on provisions to take the aviation trust fund off-budget or erect budgetary "firewalls" to assure that all trust fund revenues and interest would be spent each year for aviation purposes  These proposals, however, never emerged from the conference committee  Instead, the enacted legislation included a so-called "guarantee" that all of each year's receipts and interest credited to the trust fund would be made available annually for aviation purposes  AIR21 did not make major changes in the structure or functioning of AIP  It did, however, greatly increase the amount available for airport development projects  The AIP funding authorization rose from $1 9 billion in FY2000 to $3 4 billion in FY2003  The formula funding and minimums for primary airports were doubled starting in FY2001  The state apportionment for general aviation airports was increased from 18 5% to 20%  The noise set-aside was increased from 31% to 34% of discretionary funding and a reliever airport discretionary set-aside of 0 66% was established  AIR21 also increased the PFC maximum to $4 50 per boarding passenger  In return for imposing a PFC above the $3 level, large and medium hub airports would forgo 75% of their AIP formula funds  This had the effect of making a greater share of AIP funding available to smaller airports  Vision 100: Century of Aviation Reauthorization Act of 2003 ( P L  108-176 ; H Rept  108-334 ) Vision 100, signed by President George W  Bush on December 12, 2003, included significant changes to AIP  The law codified the AIR21 spending "guarantees" through FY2007  It increased the discretionary set-aside for noise compatibility projects from 34% to 35%  It increased the amount that an airport participating in the Military Airport Program (MAP) could receive to $10 million for FY2004 and FY2005, but in FY2006 and FY2007 it returned the maximum funding level to $7 million  The act allowed nonprimary airports to use their entitlements for revenue-generating aeronautical support facilities, including fuel farms and hangars, if the Secretary of Transportation determines that the sponsor has made adequate provisions for the airside needs of the airport  The law permitted AIP grants at small airports to be used to pay interest on bonds issued to finance airport projects  The act included a trial program to test procedures for authorizing small airports to impose PFCs  Vision 100 repealed the authority to use AIP or PFC funds for most airport security purposes  FAA Modernization and Reform Act of 2012 ( P L  112-95 ) The 2012 FAA reauthorization act funded AIP for four years from FY2012 to FY2015 at an annual level of $3 35 billion  A new provision, Section 138, permitted small airports reclassified as medium hubs due to increased passenger volumes to retain eligibility for up to a 90% federal share for a two-year transition period  This provision also allows certain economically distressed communities receiving subsidized air service to be eligible for up to a 95% federal share of project costs  The 2012 act maintained the $4 50 PFC cap, with a maximum charge of $18 per round-trip flight  It included a provision that instructed GAO to study alternative means for collecting PFCs  The act also expanded the number of airports that could participate in the airport privatization pilot program from 5 to 10  This law was extended through July 15, 2016  The FAA Extension, Safety, and Security Act of 2016 ( P L  114-190 ) The 2016 FAA extension act funded AIP through FY2017 at an annual level of $3 35 billion  A new provision, Section 2303, provided temporary relief to small airports that had 10,000 or more passenger boardings in 2012 but had fewer than 10,000 during the calendar year used to calculate the AIP apportionment for FY2017  This provision allowed such airports to receive apportionment for FY2017 an amount based on the number of passenger boardings at the airport during calendar year 2012  The FAA Reauthorization Act of 2018 ( P L  115-254 ) The 2018 FAA reauthorization act funded AIP for five years from FY2019 through FY2023 at an annual level of $3 35 billion  It also authorized supplemental annual funding from the general fund to the AIP discretionary funds—$1 02 billion in FY2019, $1 04 billion in FY2020, $1 06 billion in FY2021, $1 09 billion in FY2022, and $1 11 billion in FY2023—and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports  The act included a provision permitting eligible projects at small airports (including those in the State Block Grant Program) to receive 95% federal share of project costs (otherwise capped at 90%), if such projects are determined to be successive phases of a multiphase construction project that received a grant in FY2011  The 2018 reauthorization expanded the number of states that could participate in the State Block Grant Program from 10 to 20 and also expanded the existing airport privatization pilot program (now renamed the Airport Investment Partnership Program) to include more than 10 airports  The law included a provision that forbids states or local governments from levying or collecting taxes on a business on an airport that "is not generally imposed on sales or services by that State, political subdivision, or authority unless wholly utilized for airport or aeronautical purposes " Appendix B  Definitions of Airports Included in the NPIAS Commercial Service Airports Publicly owned airports that receive scheduled passenger service and board at least 2,500 passengers each year (506 airports)  Primary Airports   Airports that board more than 10,000 passengers each year  There are four subcategories: Large Hub Airports   Board 1% or more of system -wide boardings ( 30 airports, 72 % of all enplanements)Medium Hub Airports   Board 0 25% but less than 1% (31 airports, 16% of all enplanements) Small Hub Airports   Board 0 05% but less than 0 25% (72 airports, 8% of all enplanements) Non hub Primary Airports   Board more than 10,000 but less than 0 05% (247 airports, 3% of all enplanements) Non primary Commercial Service Airports   Board at least 2,500 but no more than 10,000 passengers each year (126 airports, 0 1% of all enplanements)  Other Airports General Aviation Airports   General aviation airports do not receive scheduled commercial or military service but typically do support business, personal, and instructional flying; agricultural spraying; air ambulances; on-demand air-taxies; and/or charter aircraft service (2,554 airports)  Reliever Airports   Airports designated by FAA to relieve congestion at commercial airports and provide improved general aviation access (261 airports)  Cargo Service Airports   Airports served by aircraft that transport cargo only and have a total annual landed weight of over 100 million pounds  An airport may be both a commercial service and a cargo service airport  New Airports Seven airports are anticipated to be built between 2019 and 2023  They include two primary airports, two nonprimary commercial service airports, and three general aviation airports 

ground_truth: There are five major sources of airport capital development funding: the federal Airport Improvement Program (AIP); local passenger facility charges (PFCs) imposed pursuant to federal law; tax-exempt bonds; state and local grants; and airport operating revenue from tenant lease and other revenue-generating activities such as landing fees. Federal involvement is most consequential in AIP, PFCs, and tax-exempt financing. The AIP has been providing federal grants for airport development and planning since the passage of the Airport and Airway Improvement Act of 1982 (P.L. 97-248). AIP funding is usually spent on projects that support aircraft operations such as runways, taxiways, aprons, noise abatement, land purchase, and safety or emergency equipment. The funds obligated for AIP are drawn from the airport and airway trust fund, which is supported by a variety of user fees and fuel taxes. Different airports use different combinations of these sources depending on the individual airport's financial situation and the type of project being considered. Although smaller airports' individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on AIP to meet their capital needs. This is particularly the case for noncommercial airports, which received over 25% of AIP grants distributed in FY2018. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs. The FAA Reauthorization Act of 2018 (P.L. 115-254) provided annual AIP funding of $3.35 billion from the airport and airway trust fund for five years from FY2019 to FY2023. The act left the basic structure of AIP unchanged, but authorized supplemental annual funding of over $1 billion from the general fund to the AIP discretionary funds, starting with $1.02 billion in FY2019, and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports. The act included a provision permitting eligible projects at small airports (including those in the State Block Grant Program) to receive a 95% federal share of project costs (otherwise capped at 90%), if such projects are determined to be successive phases of a multiphase construction project that received a grant in FY2011. The 2018 reauthorization expanded the number of states that could participate in the State Block Grant Program from 10 to 20 and also expanded the existing airport privatization pilot program (now renamed the Airport Investment Partnership Program) to include more than 10 airports. The law included a provision that forbids states or local governments from levying or collecting taxes on a business at an airport that "is not generally imposed on sales or services by that State, political subdivision, or authority unless wholly utilized for airport or aeronautical purposes." The airport improvement issues Congress generally faces in the context of FAA reauthorization include the following: Should airport development funding be increased or decreased? Should the $4.50 ceiling on PFCs be eliminated, raised, or kept as it is? Could AIP be restructured to address congestion at the busiest U.S. airports, or should a large share of AIP resources continue to go to noncommercial airports that lack other sources of funding? Should Congress set tighter limits on the purposes for which AIP and PFC funds may be spent? This report provides an overview of airport improvement financing, with emphasis on AIP and the related passenger facility charges. It also discusses some ongoing airport issues that are likely to be included in a future FAA reauthorization debate.