United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Aviation, 

Committee on Commerce, Science and 

Transportation, U.S. Senate 

FEDERAL AVIATION 

ADMINISTRATION 

An Analysis of the Financial 

Viability of the Airport and 

Airway Trust Fund 

Statement of Gerald L. Dillingham, Ph.D. 

Director, Physical Infrastructure Issues 

For Release on Delivery

Expected at 10:00 a.m. EST 

Tuesday, March 28, 2006

 

GAO-06-562T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 28, 2006

FEDERAL AVIATION ADMINISTRATION

An Analysis of the Financial Viability of 

Highlights of GAO-06-562T, a testimony the Airport and Airway Trust Fund 

before the Subcommittee on Aviation, 

Committee on Commerce, Science and 

Transportation, U.S. Senate 

The Airport and Airway Trust Fund

was established by the Airport and 

Airway Revenue Act of 1970 (P.L. 

91-258) to help fund the 

development of a nationwide 

airport and airway system and to

fund investments in air traffic 

control facilities. It provides all of 

the funding for the Federal 

Aviation Administration’s (FAA) 

capital accounts, including: (1) the 

Airport Improvement Program,

which provides grants for 

construction and safety projects at 

airports; (2) the Facilities and 

Equipment account, which funds 

technological improvements to the

air traffic control system; and (3) 

the Research, Engineering, and

Development account, which funds

continued research on aviation

safety, mobility, and environment 

issues. In addition, at various times 

during its history, the Trust Fund

has funded all or some portion of

FAA’s operations. To fund these 

accounts, the Trust Fund is

credited with revenues from a

variety of excise taxes related to

passenger tickets, passenger flight 

segments, international 

arrivals/departures, cargo waybills, 

and aviation fuels. Including

interest earned on its balances, the

Trust Fund received $10.8 billion in 

fiscal year 2005. 

The various taxes that accrue to

the Trust Fund are scheduled to

expire at the end of fiscal year 

2007. GAO was asked to provide 

information and analysis about the

financial condition and future 

viability of the Trust Fund. 

The Trust Fund’s uncommitted balance decreased from $7.3 billion at the 

end of fiscal year 2001 to about $1.9 billion at the end of fiscal year 2005. In 3 

of the last 4 fiscal years, the Trust Fund’s uncommitted balance has fallen by 

over $1 billion because revenues were lower than FAA forecasted due to the 

impact of unanticipated events such as the September 11, 2001, terrorist 

attacks. However, the rate of decrease has slowed; during fiscal year 2005, 

the uncommitted balance decreased by about $500 million. Under FAA’s 

current authorization, appropriations from the Trust Fund are based on 

forecasted revenues. Thus, if actual revenues approximate forecasted 

revenues, there should be no substantial change in the uncommitted 

balance. However, for each fiscal year since 2001, because actual revenues

have been less than forecasted, the uncommitted balance has fallen. 

Based on its revenue forecast and appropriation for fiscal year 2006, FAA 

forecasts that the Trust Fund’s uncommitted balance will fall by the end of 

2006 to about $1.7 billion. If the Congress continues to follow the formula 

from Vision 100—FAA’s current authorizing legislation that links 

appropriations made available from the fund to revenue forecasts—then 

FAA expects there will be little change in the uncommitted balance for fiscal 

year 2007. If, instead, the Congress adopts the President’s budget for FAA for 

fiscal year 2007, FAA forecasts that the fund’s uncommitted balance by the 

end of 2007 will rise to about $2.7 billion (see figure). This higher forecasted

uncommitted balance occurs because the President’s budget calls for an 

appropriation to FAA from the Trust Fund that is about $1 billion lower than 

the Vision 100 formula. 

Trust Fund’s Projected End-of-Year Uncommitted Balance 

Dollars in billions

Source: GAO analysis of FAA data.

0

1

2

3

President's

proposal

Vision 100

2005 2006 2007

Fiscal year

If revenues in fiscal years 2006 and 2007 are below forecasted levels, the 

Trust Fund’s uncommitted balance will be less than forecasted and, in one 

scenario we analyzed, will reach zero by the end of 2007. This scenario raises 

concerns because, in the past, the Trust Fund’s uncommitted balance was 

used to offset lower-than-expected Trust Fund revenues and decreased 

general fund contributions. FAA could help address these concerns by 

continuing to look for ways to improve efficiency and reduce costs. 

However, the zero-balance scenario would most likely have implications for 

the Congress in funding FAA programs. 

www.gao.gov/cgi-bin/getrpt?GAO-06-562T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gerald L. 

Dillingham at (202) 512-2834 or 

dillinghamg@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

We are pleased to be here today to discuss the financial viability of the 

Airport and Airway Trust Fund (Trust Fund) and the President’s proposed 

2007 budget for the Federal Aviation Administration (FAA). Over the 

course of FAA’s last two authorizations, FAA’s appropriations increased 

from $9.8 billion in fiscal year 1999 to $14.3 billion this fiscal year (2006), 

and fiscal year 2007 is projected to be $15.2 billion.1

 In this testimony, we 

will present the results of our analysis of the uncommitted balance2

 of the 

Trust Fund and related issues as requested by this committee. 

FAA is currently funded by a combination of Trust Fund revenues derived 

from excise taxes levied on a variety of aviation activities and from general 

fund revenues. The Trust Fund’s uncommitted balance depends on the 

revenues flowing into the fund and the appropriations made available from

the fund for various spending accounts. Policy choices, structural changes 

in the aviation industry, and external events have affected revenues 

flowing into and out of the fund. For example, the uncommitted balance 

has been declining in recent years because Trust Fund revenues for the 

last 5 years have been less than FAA’s forecasted levels. Our analysis 

includes scenarios in which Trust Fund revenues continue to fall short of 

forecasted levels. Under these scenarios, the Trust Fund balance 

continues to decline, and in one scenario, the balance reaches zero by the

end of 2007. We believe these scenarios raise concerns because in the past

the Trust Fund’s uncommitted balance was used to offset lower-thanexpected Trust Fund revenues and decreased general fund contributions. 

FAA could help address these concerns by continuing to look for ways to 

improve efficiency and reduce costs. However, the zero-balance scenario 

would most likely have implications for the Congress in funding FAA 

programs. In addition, we believe that the information about the financial 

viability of the Trust Fund will be critical to congressional decision making 

regarding appropriations for FAA’s 2007 budget.

The Trust Fund was established by the Airport and Airway Revenue Act of 

1970 (P.L. 91-258) to help fund the development of a nationwide airport 

and airway system and to fund investments in air traffic control facilities. 

 1

Unless otherwise specified, all dollar amounts in this testimony are in nominal dollars and 

all data discussed and presented are on a fiscal year basis. 

2

The Trust Fund’s uncommitted balance represents money against which there is no 

outstanding budget commitment or budget authority to spend. 

Page 1 GAO-06-562T 
It provides all of the funding for FAA’s capital accounts, including: the 

Airport Improvement Program (AIP), which provides grants for 

construction and safety projects at airports; the Facilities and Equipment 

(F&E) account, which funds technological improvements to the air traffic 

control system; and the Research, Engineering, and Development (RE&D) 

account, which funds continued research on aviation safety, mobility, and 

environment issues as well as the FAA’s portion of the Joint Planning and 

Development Office. In addition, at various times during its history, the 

Trust Fund has funded all or some portion of FAA’s operations. In 2005, 

expenditures from the Trust Fund were made among the four accounts 

shown in figure 1. 

Figure 1: Expenditures from the Trust Fund for Fiscal Year 2005 Total $11,156 

Million 

To fund these accounts, the Trust Fund is credited with revenues from a 

variety of excise taxes related to passenger tickets, passenger flight 

segments, international arrivals/departures, cargo waybills, and aviation 

fuels. These taxes are scheduled to expire at the end of 2007. Including 

interest earned on its balances, the Trust Fund received $10.8 billion in 

2005. Table 1 shows the distribution of Trust Fund revenues for 2005 by 

source. 

Page 2 GAO-06-562T 
Table 1: Sources of Trust Fund Revenue, Fiscal Year 2005 

Dollars in millions 

Revenue source Amount Percent

Passenger ticket tax $5,161 48

Passenger flight segment tax 1,900 18

Cargo tax 461 4

Fuel tax 971 9

International departure/arrival tax 1,922 18

Interest 440 4

Refundsa(101) (1)

Total $10,754 100

Source: GAO analysis of FAA data. 

a

Refunds include: refund of aviation fuel other than gas (noncommercial), refund of aviation gasoline 

(noncommercial), and other refunds/credits. 

Although expenditures from the Trust Fund exceeded revenues in 2005, 

since the Trust Fund’s creation in 1970, revenues have in aggregate 

exceeded spending commitments, resulting in a surplus or an 

uncommitted balance. At the end of 2005, the Trust Fund’s uncommitted 

balance was about $1.9 billion. 

Policy choices, structural changes in the aviation industry, and external 

events have affected revenues flowing into and out of the fund and have 

caused some aviation stakeholders to speculate about the fund’s financial 

status. Some aviation stakeholders have said that there is a reason to be 

concerned about the financial condition of the Trust Fund because in 

recent years, revenues have not kept pace with funding commitments and 

the uncommitted balance has been used to close the gap. Other aviation

stakeholders state that the fund is healthy because revenues are currently

increasing and are expected to continue to increase. 

The focus today is the Trust Fund’s revenues and balances over the past 

few years; the projected near-term future of the Trust Fund, considering 

the President’s 2007 budget request for FAA; and policy decisions that may 

affect longer-term Trust Fund balances. The scope of our work and the 

specific methodology are discussed at the end of my statement. 

Page 3 GAO-06-562T 
Recent Trends of the 

Trust Fund and the 

Effect on the Fund’s 

Uncommitted Balance 

Revenues Have Generally 

Increased with Some 

Fluctuations 

The Trust Fund’s uncommitted balance depends on the revenues flowing 

into the fund and the appropriations made available from the fund for 

various spending accounts. The amount of revenue flowing into the Trust 

Fund has fluctuated from year to year but has generally trended upward, 

as shown in figure 2. Some of the fluctuation has resulted from changes in

economic conditions, but some has been due to other factors. For 

example, during 1981 and 1982, revenues (including interest) flowing into 

the fund averaged about $629 million—the lowest amount in the fund’s 

history—because of a lapse in the collection of aviation taxes. In 1999, 

revenue flowing into the fund totaled about $11.1 billion, the largest 

amount in the fund’s history. 

Figure 2: Trust Fund Revenues Have Fluctuated but Generally Increased

Note: Trust revenues include interest earned. 

Page 4 GAO-06-562T 
However, after revenues peaked in 1999, the amount of revenue flowing 

into the Trust Fund decreased in each of the next 4 years, reaching a level

of about $9.3 billion in 2003. A number of factors contributed to this 

decrease. For example, within the airline industry, the growth of the 

Internet as a means to sell and distribute tickets, the growth of low-cost 

airlines, and fare reductions by legacy carriers3

 all transformed the 

industry and led to lower average fares. These lower fares have resulted in

lower ticket taxes and less revenue going into the Trust Fund. In addition, 

in the same time period, a series of largely unforeseen events, including 

the September 11, 2001, terrorist attacks, war in Iraq and associated 

security concerns, the Severe Acute Respiratory Syndrome (SARS), and 

global recessions seriously affected demand for air travel, resulting in a 

decrease in airline industry and Trust Fund revenue. 

Since the beginning of 2004, however, Trust Fund revenues have been 

increasing. In fact, revenues from tax sources in 2005 were nearly as high 

as in 1999, although total revenues were still below peak level because less 

interest was earned due to a lower Trust Fund balance. 

Expenditures from the 

Trust Fund Have Also 

Generally Increased 

Similar to the revenue picture, the annual amount of expenditures from 

the Trust Fund also has generally increased since the fund’s inception, but 

with some fluctuation. One source of fluctuation has been that the share of

FAA operations paid by the Trust Fund has varied over time.4

 Figure 3 

shows how expenditures from the fund have changed over time and how 

they have compared with revenues. In some years, they have exceeded 

revenues, but in other years they have been less than revenues. 

 3

Generally, legacy carriers are those network airlines whose interstate operations predate 

airline deregulation of 1978 and that have adopted a hub-and-spoke network model. 

4

In a majority of years since its inception, the Trust Fund has funded some portion of FAA’s

operations. 

Page 5 GAO-06-562T 
Figure 3: Trust Fund Expenditures Have Generally Increased over Time and Occasionally Exceeded Revenues

0

2,000

4,000

6,000

8,000

10,000

12,000

Expenditures

Revenue, including interest

200

2004

2005

3

199

1994

1995

1996

1997

1998

1999

2000

2001

2002

3

198

1984

1985

1986

1987

1988

1989

1990

1991

1992

3

197

1974

1975

1976

1977

1978

1979

1980

1981

1982

3

1971

1972

Dollars in millions

Source: GAO analysis of Congressional Budget Office data and FAA budgets.

Fiscal year

Dollars in millions

Appropriations from Trust 

Fund Are Now Linked to 

Projected Revenues 

In the Wendell H. Ford Aviation Investment and Reform Act for the 21st 

Century (AIR-21), the Congress created a link between Trust Fund 

revenues and appropriations from the fund to try to ensure that all fund 

receipts, including interest, were committed to spending for aviation 

purposes on an annual basis. According to a provision of AIR-21, which 

was continued in the Century of Aviation Reauthorization Act (Vision 

100)—FAA’s current authorizing legislation—total appropriations made 

available from the fund in each fiscal year shall equal the level of receipts 

plus interest in that year, and these appropriations can be used only for 

aviation investment programs, which are defined as FAA’s capital 

accounts plus the Trust Fund’s share of FAA operations. Further, the level 

of receipts was specified to be the level of excise taxes plus interest 

credited to the fund for a fiscal year as set forth in the President’s budget 

baseline projection for that year. 

Page 6 GAO-06-562T 
As shown in figure 4, with the exception of its first four years, the Trust 

Fund has ended each year with an uncommitted balance; however, the 

amount of the uncommitted balance has fluctuated substantially over time, 

generally increasing when Trust Fund revenues exceed appropriations 

from the fund and decreasing when they are less than appropriations. As 

noted in the figure, the uncommitted balance has decreased substantially 

in recent years. The Trust Fund’s uncommitted balance peaked at over $7 

billion in 1991, 1999, and 2001. In contrast, because of lapses in the taxes 

that accrue to the fund, at the end of 1982, the uncommitted balance was 

about $2.1 billion, and at the end of 1997, it was about $1.4 billion. 

Specifically, the Trust Fund’s uncommitted balance decreased from $7.3 

billion at the end of 2001 to $4.8 billion at the end of 2002 and has 

continued to decrease since then, reaching about $1.9 billion at the end of 

2005. However, the rate of decrease has slowed; in 2005, the uncommitted 

balance decreased by about $500 million, after falling by at least $900 

million in each of the previous 3 years. 

Trust Fund’s Uncommitted 

Balance Has Been 

Declining in Recent Years 

Figure 4: Trust Fund’s End-of-Year Uncommitted Balance Has Trended Downward in Recent Years 

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

200

2004

2005

3

199

1994

1995

1996

1997

1998

1999

2000

2001

2002

3

198

1984

1985

1986

1987

1988

1989

1990

1991

1992

3

197

1974

1975

1976

1977

1978

1979

1980

1981

1982

3

1971

1972

Dollars in millions

Source: GAO analysis of Congressional Budget Office data and FAA budgets.

Fiscal year

Dollars in millions

Page 7 GAO-06-562T 
The uncommitted balance has fallen in recent years because Trust Fund 

revenues have fallen short of forecasted levels by over $1 billion in 3 out of

the last 4 fiscal years. For example, in 2001, the difference between 

forecasted revenue and actual revenue coming in to the Trust Fund was 

$383 million less than expected. In 2002, the difference jumped to $2.3 

billion due to the impact that unanticipated external events such as the 

September 11, 2001, terrorist attacks had on the aviation industry. 

Residual effects and other factors such as the war in Iraq and the SARS 

outbreak lasted through 2003 and 2004, with each year’s actual revenues 

coming in at least $1 billion below forecasted revenues. 

As mentioned above, under Vision 100 and its predecessor, AIR-21, 

appropriations made available from the Trust Fund are based on 

forecasted revenues.5

 Thus, if actual revenues approximate forecasted 

revenues, there should be no substantial change in the uncommitted 

balance. However, as shown in figure 5, for each year beginning with 2001, 

actual revenues, including interest, have been less than forecasted, so that

in each year since then, the uncommitted balance has fallen. 

 5

FAA has developed econometric forecast models and established a forecast process that 

attempt to anticipate changes that may affect the future direction of the aviation industry. 

Using this forecast process, FAA annually provides 12-year forecasts of aviation demand

and activity measures that are used for aviation-related personnel and facility planning. 

FAA also occasionally sponsors workshops that focus on the forecasting process and ways 

to improve the reliability and utility of forecasting results. Some errors in forecasting can 

be attributed to unanticipated external events and their impact on activity (e.g., terrorism, 

the outbreak of SARS, rapid rise in oil prices); others can be attributed to errors in the

assumptions (e.g., passenger trip length, seats per aircraft, economic growth) behind the

forecasts. 

Page 8 GAO-06-562T 
Figure 5: Comparison of Forecasted Revenue and Interest with Actual Revenue and

Interest Received

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Actual

Forecast

2001 2002 2003 2004 2005 

Fiscal year

Source: GAO analysis of FAA data.

Dollars in millions

Based on its revenue forecast and appropriations for 2006, FAA forecasts 

that the Trust Fund’s uncommitted balance will decrease by the end of 

2006 to about $1.7 billion. FAA forecasts that if, for 2007, the Congress 

continues to follow the Vision 100 formula for linking budget resources 

made available from the fund to expected revenues, then there will be 

little change in the uncommitted balance—$1.7 billion—during that year. 

If, instead, the Congress adopts the President’s budget request for FAA for 

2007, FAA forecasts that the fund’s uncommitted balance by the end of

2007 will rise to about $2.7 billion. This higher forecasted uncommitted 

balance occurs because the President’s budget calls for an appropriation 

from the Trust Fund that is about $1 billion lower than the Vision 100 

formula. In addition, compared with Vision 100, the President’s budget 

calls for a reduction in the appropriation to FAA from the general fund of 

about $500 million. Thus, in total, compared with Vision 100, the 

President’s budget calls for a reduction of about $1.5 billion in FAA’s 

Fund’s Uncommitted 

Balance Is Projected 

to Be Positive through 

2007 but Depends on 

Realization of 

Forecasted Passenger 

Traffic Levels and 

Airfares

Page 9 GAO-06-562T 
appropriation. Figure 6 shows the forecasted year-end uncommitted 

balance under both scenarios through 2007. 

Figure 6: Trust Fund’s Projected End-of-Year Uncommitted Balance under Vision 

100 and President’s Budget Proposal 

Dollars in billions

0

1

2

3

President's proposal

Vision 100

2005 2006 2007

Source: GAO analysis of FAA data.

Fiscal year

While the President’s budget calls for making a smaller appropriation 

available from the Trust Fund than under Vision 100, largely due to 

reductions in the AIP, it calls for greater reliance on the Trust Fund to 

fund FAA’s operations. Vision 100 uses the formula created in AIR-21 to 

determine how much funding for FAA operations should come from the 

Trust Fund, but the President’s budget proposal does not use this formula. 

Under Vision 100, the formula makes the amount of Trust Fund revenue 

that will be authorized for FAA operations and RE&D in a given year equal 

to projected Trust Fund revenues (as specified in the President’s budget) 

minus the authorizations for the capital accounts (AIP and F&E) in that 

year. Thus, under Vision 100, the Trust Fund is projected to support $4.6 

billion of FAA’s operations, or 57 percent. In contrast, the President’s 

budget specifies a set amount of Trust Fund revenue to be used for FAA 

Page 10 GAO-06-562T 
operations. Therefore, if Congress enacts the President’s budget request 

for FAA, the Trust Fund would provide $5.4 billion for FAA’s operations in 

2007, or 65 percent of its total estimated cost for operations. 

Although the Trust Fund is projected to have a surplus at the end of 2007 

under each of the expenditure proposals, this projection depends to a 

significant extent on achieving forecasted commercial passenger traffic 

levels and airfares, as they have the largest impact on the amount of 

revenues flowing into the Trust Fund. We recognize that it is difficult to 

anticipate future events that may significantly affect the demand for air 

travel, particularly since FAA makes a forecast that is contained in the 

President’s budget based on information available in the first quarter of 

the preceding fiscal year. However, our analysis shows that for each of the

last 5 years, FAA’s projected revenue forecast for the President’s budget 

was higher than the actual amount of revenue received, as shown in 

figure 5. 

Given the differences in recent years between the forecasted revenue and 

actual amount of revenue received, we conducted sensitivity analyses to 

estimate what would happen to the Trust Fund’s uncommitted balance if 

Trust Fund revenues in 2006 and 2007 fall below the levels that FAA 

projected in March 2006.6 For example, table 2 shows the projected Trust 

Fund balances under Vision 100 and the President’s proposal and the 

impact if revenues, for whatever reason, are 5 percent or 10 percent less 

than currently projected. If revenues are 5 percent lower than projected, 

which they were in 2001, the Trust Fund would have a small but positive 

uncommitted balance under both expenditure proposals—Vision 100 and 

the President’s budget proposal. However, if the revenues were 10 percent

lower than projected, as they were in 2004, the uncommitted balance

would drop below half a billion dollars under the President’s proposal and 

would fall to zero by the end of 2007 under Vision 100. 

 6

We did not conduct a sensitivity analysis beyond 2007 because both the current FAA 

authorization and the excise taxes that fund the Trust Fund are scheduled to expire at the 

end of 2007, making it difficult to project the long-term financial outlook of the Trust Fund.

Page 11 GAO-06-562T 
Table 2: Sensitivity Analysis of the Trust Fund’s Uncommitted Balance to Revenue 

Shortfalls

Dollars in million 

Revenue scenario showing projected uncommitted balance Fiscal year 

2006 2007

Baseline uncommitted balance as of March 2006 Vision 100 $1,722 $1,718

President 1,722 2,706

If revenues are 5 percent less than projected Vision 100 1,189 595

President 1,189 1,582

If revenues are 10 percent less than projected Vision 100 657 0

President 657 459

Source: GAO Analysis of FAA data. 

We believe these scenarios raise concerns because, in the past, the Trust 

Fund’s uncommitted balance was used to offset lower-than-expected Trust 

Fund revenues and decreased general fund contributions. FAA could help

address these concerns by continuing to look for ways to improve 

efficiency and reduce costs. However, the zero-balance scenario would 

most likely have implications for Congress in funding FAA programs. 

To keep the Trust Fund from declining, the Congress could use an 

alternate basis for authorizing and appropriating money out of the Trust 

Fund that does not rely on the revenue forecast in the President’s budget.

One alternative that would still maintain the link between revenues and 

spending would be for appropriations from the Trust Fund to be based on 

the actual Trust Fund revenues from the most recent year for which data 

are available. That would mean, for example, that the Congress would 

appropriate for 2007 the Trust Fund revenues received in 2005. Although 

that would make it less likely that the Trust Fund balance would decline 

further, it could also mean that a smaller appropriation would be made 

available for aviation. Whereas Trust Fund revenues in 2005 were about 

$10.8 billion, the President’s budget for 2007 forecasts Trust Fund 

revenues of about $11.8 billion. 

Page 12 GAO-06-562T 
Future policy decisions concerning spending for aviation will affect the 

Trust Fund balances beyond 2007. If general fund appropriations for FAA’s 

operations are maintained at recent levels, future projected Trust Fund 

revenues under the current tax structure may be insufficient to pay for the

expenditures that FAA says are needed to maintain and modernize the 

current system. According to FAA, its aviation infrastructure is aging, and

replacing it will cost $32 billion. Even more, Trust Fund revenues would 

be needed to pay for those expenses if general fund appropriations for 

operations are reduced. Insufficient Trust Fund revenues could result in 

critically needed capacity-enhancing air traffic control modernization 

investments being deferred or canceled at a time when commercial 

activity is returning to or exceeding pre-September 11 levels.7

Future Policy 

Decisions Will Affect 

the Trust Fund 

Balance beyond 2007 

Funding Will Be Needed 

for the Next Generation 

Air Transportation System 

In addition to costs projected just to maintain FAA’s current system, 

additional capital expenses are on the horizon to modernize the system. 

Vision 100 directed the administration to develop a comprehensive plan 

for a Next Generation Air Transportation System (NGATS) that can 

accommodate the changing needs of the aviation industry and meet air 

traffic demands by 2025. The act chartered the Joint Planning and 

Development Office (JPDO) within FAA to coordinate federal and privatesector research related to air transportation. FAA leads the interagency

effort that leverages expertise and resources within the Departments of 

Transportation, Defense, Homeland Security, and Commerce as well as at 

the National Aeronautics and Space Administration and the White House 

Office of Science and Technology Policy. The Congress appropriated $5 

million to FAA in seed money in 2005, and appropriated $18 million to FAA 

for JPDO in 2006, while additional funding and in-kind support comes 

from the participating agencies. For 2007, the President’s budget requests 

$18 million for JPDO critical system engineering and planning efforts for 

 7

We note that the Trust Fund projections for 2008-2011 contained in the President’s budget 

show a large increase in the fund’s uncommitted balance, reaching $15.5 billion by the end 

of 2011. Officials at the Office of Management and Budget told us that the underlying 

assumption for the commitment of budget resources from the fund that yields this

projection is based on administration policies for reducing—or limiting the increase in—

nondefense, nonhomeland security discretionary spending. Thus, the projection does not 

account for challenges particular to any agency, such as FAA’s projected increase in 

workload or future air traffic control modernization spending. Accordingly, we think the 

$15.5 billion projection is of limited value. 

Page 13 GAO-06-562T 
NGATS, as well as funding for two NGATS systems at a combined cost of

$104 million.8

JPDO published the Integrated Plan for the Next Generation Air 

Transportation System in December 2004, but the plan did not specify 

what new capabilities would be pursued or how much they would cost to 

implement and maintain. Vision 100 also directed that an annual progress 

report, including any changes to the Integrated Plan, be submitted at the 

time of the President’s budget request. In March 2006, JPDO published its 

2005 Progress Report to the Next Generation Air Transportation System 

Integrated Plan and reported it is working to identify the longer-term 

costs. JPDO conducted a financial analysis of the air traffic management 

portions of NGATS, including examining the existing 2025 operational 

vision, to understand the hardware and software components that may be 

required to implement NGATS. However, because of the high level of

uncertainty in some areas and a significant number of assumptions in 

others, JPDO reported more work is required before this analysis can be

useful and credible.9

 A clear understanding of proposed future capabilities 

for NGATS (and how they will be paid for) will be important as the 

Congress prepares to reauthorize FAA programs and explores financing 

mechanisms. 

Continued Efforts for Cost 

Control Are Necessary 

While FAA has made great efforts in its cost-control program, cutting costs

will remain a challenge for FAA well into the future. In 2005, FAA 

outsourced its flight service stations to a private contractor, resulting in 

total savings estimated at $2.2 billion. Also in 2005, FAA put in place a 

number of cost-control initiatives that affected smaller programs and that, 

if successful, will generate smaller levels of savings. We are reviewing 

options to fund FAA, at the request of this subcommittee, and we will 

address this issue in detail later this year. 

 8

The President’s fiscal year 2007 budget requests $80 million for the Automatic Dependent 

Surveillance-Broadcast system to replace antiquated radars and outmoded technology. The

budget also requests $24 million to begin developing System Wide Information capabilities 

that will make advanced information distribution and sharing capabilities possible.

9

In order to address these matters and to better understand the costs and benefits of 

NGATS, JPDO has asked the NGATS Institute to host a forum in the spring of 2006, so that

the critical assumptions and uncertainties underlying any cost-benefit effort can be 

scrutinized and validated. In addition, further detailed studies will focus on the near-term 

costs and benefits that will be used to inform agency planning activities over the next 5 

years. JPDO will then expand its cost analysis to consider the expected total systems costs 

for NGATS. 

Page 14 GAO-06-562T 
Although FAA has initiated several of these cost-control measures, these 

initiatives alone cannot reduce expenses enough to free up sufficient Trust 

Fund revenues to pay for the expenditures that FAA says are necessary to

maintain and modernize the current airspace system, let alone finance 

future NGATS initiatives. Through the reauthorization process, the 

Congress will determine both the level of appropriations for aviation and

the way in which that commitment will be funded. Congressional 

decisions pertaining to the link between annual Trust Fund revenues and

appropriations made available for aviation programs, as well as the 

method for funding the Trust Fund, will continue to influence future Trust 

Fund balances. 

To assess the current financial status and projected financial viability of

the Airport and Airway Trust Fund, we obtained financial data from FAA 

and interviewed FAA officials familiar with the information. To assess the 

comparisons of Vision 100 with the President’s budget, we analyzed the 

legislation and the administration’s 2007 budget proposal. We used a 

sensitivity analysis to project what would happen if Trust Fund revenues 

in fiscal years 2006 and 2007 were 5 percent and 10 percent lower than the

levels projected by FAA in March 2006 under each of these proposals. 

Accordingly, our findings on the financial outlook of the Trust Fund are 

based on GAO projections, not FAA’s. We performed our work in February 

and March 2006 in accordance with generally accepted government 

auditing standards. 

Mr. Chairman, this concludes my prepared statement. At this time, I would 

be pleased to answer any questions that you or other Members of the 

Subcommittee may have. 

For further information on this testimony, please contact Dr. Gerald 

Dillingham at (202) 512-2834 or dillinghamg@gao.gov. Individuals making 

key contributions to this testimony include Chris Bonham, Jay Cherlow, 

Tammy Conquest, Colin Fallon, David Hooper, Maureen Luna-Long, Maren 

McAvoy, Rich Swayze, and Matt Zisman. 

Page 15 GAO-06-562T 

GAO Contact and 

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