AIRPORT AND 

AIRWAY TRUST 

FUND 

Factors Affecting 

Revenue Forecast 

Accuracy and 

Realizing Future FAA 

Expenditures 

Report to the Committee on Commerce, 

Science, and Transportation, U.S. 

Senate 

January 2012 

GAO-12-222 

United States Government Accountability Office

GAO 
United States Government Accountability Office

Highlights of GAO-12- , a report to the 

Committee on Commerce, Science, and 

Transportation, U.S. Senate 

222

January 2012

AIRPORT AND AIRWAY TRUST FUND

Factors Affecting Revenue Forecast Accuracy and 

Realizing Future FAA Expenditures 

Why GAO Did This Study

Established in 1970, the Airport and 

Airway Trust Fund (trust fund) is the 

primary source of funding for the 

Federal Aviation Administration’s 

(FAA) investments in the airport and 

airway system. Trust-fund revenues 

come largely from taxes on airline 

tickets and aviation fuel. The financial 

health of the trust fund is important to 

ensure sustainable funding for FAA

without increasing demands on general 

revenues. Current law authorizes 

appropriations from the trust fund 

equal to forecast trust-fund revenues. 

However, if forecasts overestimate 

actual revenues and Congress 

appropriates the forecast level, the 

trust fund’s uncommitted balance—that 

is, the balance in excess of what has 

been appropriated from the fund or 

authorized as contract authority—is 

drawn down. 

Among its objectives, GAO was asked 

to examine (1) the accuracy of the 

trust-fund revenue forecasts and 

factors affecting forecast accuracy, 

(2) different options for determining

appropriations from the trust fund that 

would reduce the risk of 

overcommitting the fund, and (3) the 

extent to which trust-fund revenues 

might cover planned FAA expenditures 

through fiscal year 2021. GAO 

reviewed the Department of the 

Treasury’s (Treasury) and FAA’s

forecasting methods, analyzed trustfund revenue and forecast data, and 

interviewed federal officials and

aviation-industry and forecasting 

experts. The Departments of 

Transportation and Treasury and the 

Office of Management and Budget 

provided technical comments, which 

GAO incorporated into the report as 

appropriate.

What GAO Found 

Actual trust-fund revenues fell short of FAA’s revenue forecasts for 9 of the past 

11 years, contributing to a decline in the trust fund’s uncommitted balance from 

over $7 billion in fiscal year 2000 to $770 million in fiscal year 2010. Inaccurate 

forecasts for the taxes related to domestic passenger tickets, which account for 

over 70 percent of trust-fund revenues, drove the aggregate overforecast, but 

inaccurate forecasts for other taxes also had an effect. This inaccuracy is largely 

attributable to unexpected events affecting aviation, such as the terrorist attacks 

of September 11, 2001, and the recession in 2009; the budget process requiring 

the forecasts to be developed over a year in advance of the fiscal year; and lags 

in recognizing structural changes in the airline industry, such as airlines’ 

increased reliance on ancillary fees for which excise taxes for the trust fund are 

not collected. Changes in the methodology for forecasting trust-fund revenues

and the assumption of forecasting responsibility by Treasury, begun in fiscal year 

2011, may also affect the future accuracy of forecasts, but it is too soon to tell

what effect the changes will have after just 1 fiscal year. 

Alternative options for how Congress determines available resources for 

appropriation from the trust fund could provide for substantially greater protection 

against overcommitting trust-fund resources—that is, help ensure that trust-fund 

revenues would be sufficient to cover FAA’s expenditures—or requiring 

additional general-revenue contributions than the current approach outlined in 

law. To this end, Congress could limit budget resources available for 

appropriation from the trust fund to less than the forecast revenues—for 

example, the current House FAA Reauthorization bill has a provision that would 

make only 90 percent of forecast revenues available for appropriation from the 

trust fund as well as any prior year differences between actual trust-fund 

revenues and appropriations from the trust fund. Other options would make only 

actual revenues from the prior year available, or base appropriations on the 

maintenance of a target level for the trust fund’s balance. However, unless a 

sufficiently large minimum balance is established, there would still be some risk 

of overcommitting trust-fund resources under these options. The alternatives 

could also result in greater swings in trust-fund appropriations, requiring varying 

levels of general revenues to maintain overall stable spending levels for FAA. 

The extent to which trust-fund revenues might cover FAA’s future expenditures 

will depend on whether trust-fund revenue and FAA expenditure forecasts are 

realized. Under current revenue and expenditure forecasts, between 8 percent 

and 32 percent of FAA’s annual expenditures for fiscal years 2013 through 2021 

could have to be paid for by general revenues unless spending is reduced or 

additional taxes are paid into the trust fund. However, congressional decisions, 

including the level of FAA’s appropriations; unexpected events affecting trustfund revenues and FAA expenditures; and FAA’s implementation and 

management of programs could significantly change forecast revenues and 

expenditures in future years. For example, FAA’s modernization of the air traffic 

control system, called the Next Generation Air Transportation System (NextGen), 

is currently estimated to cost FAA $15 billion to $22 billion, and an additional $5 

billion to $7 billion for equipping aircraft with NextGen technology, but those costs 

View GAO could change depending upon the speed of implementation and other factors. -12- . For more information, 

contact Susan Fleming at (202) 512-2834 or

222

flemings@gao.gov. 
Page i GAO-12-222 Airport and Airway Trust Fund

Letter 1 

Background 5

Treasury’s Demand-Based Approach to Forecasting Revenues 

Somewhat Differs from FAA’s Previous Approach 13

Overforecasting of Revenues Due to Aviation Shocks and Other 

Factors Has Contributed to a Significant Decline in the Trust 

Fund’s Uncommitted Balance 17

Options Exist to Reduce, but Not Eliminate, the Risk of 

Overcommitting Trust-Fund Resources 25

The Extent to Which Trust-Fund Revenues Might Support Future 

FAA Expenditures Will Depend on Differing Assumptions and 

Other Factors 31

Concluding Observations 41

Agency Comments 42

Appendix I GAO Contact and Staff Acknowledgments 44

Tables

Table 1: Trust-Fund Excise Tax Lines, Revenue Sources, and 

Current Rates 5

Table 2: Options for Determining Budget Resources to Be Made 

Available for Appropriation from the Trust Fund 28

Table 3: Estimated End-of-year Trust-Fund Uncommitted Balance 

under Different Options Assuming an Uncommitted 

Balance of $770 Million at the Beginning of Fiscal Year 

2000 29

Table 4: Proposed and Actual Appropriations for FAA for Fiscal 

Year 2012 38

Figures

Figure 1: FAA Appropriations by Account for Fiscal Year 2010 7

Figure 2: Timeline of the Budget Process for FAA for Fiscal Year 

2010 9

Figure 3: End-of-Year Trust-Fund Uncommitted Balance, Fiscal 

Years 2000 through 2010 11

Figure 4: Effects of Congressional Decision Making and Forecast 

Accuracy on the Trust Fund, Fiscal Years 2000 through 

2010 19

Contents
Page ii GAO-12-222 Airport and Airway Trust Fund

Figure 5: Total Trust-Fund Tax Receipts and Forecast Accuracy by 

Tax Line, Fiscal Years 2000 through 2010 21

Figure 6: Estimated Trust-Fund Appropriations under Different 

Options If Started in Fiscal Year 2000 30

Figure 7: Actual and Forecast Trust-Fund Revenues and FAA 

Expenditures, Fiscal Years 2000 through 2021 32

Figure 8: Actual and Forecast Trust-Fund Revenues and 

Uncommitted Balance and FAA Expenditures by TrustFund and General-Revenue Appropriations, Fiscal Years 

2000 through 2021 34

Figure 9: Comparison of FAA’s Trust-Fund and General-Revenue 

Appropriations under OMB’s Approach and under the 

AIR-21 Method, Fiscal Years 2012 through 2021 36

Abbreviations 

AIP Airport Improvement Program

AIR-21 Wendell H. Ford Aviation Investment and Reform Act for 

 the 21st Century

ADS-B Automatic Dependent Surveillance System Broadcast

CBO Congressional Budget Office

DOT Department of Transportation

ERAM En Route Automation Modernization

FAA Federal Aviation Administration

IRS Internal Revenue Service

NextGen Next Generation Air Transportation System

OMB Office of Management and Budget

SWIM System Wide Information Management

Treasury Department of the Treasury 

trust fund Airport and Airway Trust Fund

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Page 1 GAO-12-222 Airport and Airway Trust Fund

United States Government Accountability Office 

Washington, DC 20548

January 23, 2012

The Honorable John D. Rockefeller IV

Chairman

The Honorable Kay Bailey Hutchison

Ranking Member

Committee on Commerce, Science, and Transportation

United States Senate

Established in 1970, the Airport and Airway Trust Fund (trust fund) 

finances nearly all of the Federal Aviation Administration’s (FAA) capital 

investments in the airport and airway system, such as construction and 

safety improvements at airports and technological upgrades to the air 

traffic control system.1 The trust fund also provides a substantial portion—

between 43 and 84 percent over the last 10 years—of FAA’s operations 

spending, which includes the maintenance and operation of the air traffic 

control system and safety inspections. The trust fund is principally funded 

by a variety of excise taxes paid by users of the national airspace system, 

and its financial health is important to ensure sustainable funding for a 

safe and efficient aviation system without increasing demands on general 

revenues. Current law requires that all of the forecast trust-fund 

revenues—that is, the projected amount contained in the President’s 

annual budget request—be made available each fiscal year for 

appropriation.2

 

1

Airport and Airway Revenue Act of 1970, Pub. L. No. 91-258, § 208, 84 Stat. 236, 250

(1970). 

However, in recent years, forecasting errors—particularly, 

several years of overestimated revenues—have contributed to a 

2

Starting with the Wendell H. Ford Aviation Investment and Reform Act of the 21st 

Century (AIR-21) in 2000, Pub. L. No. 106-181 § 106, 114 Stat. 61, 72 (2000), and 

continuing with Vision 100—Century of Aviation Reauthorization Act (Vision 100), Pub. L. 

No. 108-176, § 104, 117 Stat. 2490, 2496 (2003), codified at 49 U.S.C. § 48114, 

Congress has based FAA’s fiscal year appropriation from the trust fund on the forecast 

level of trust fund revenues, including interest on trust fund balances, as set forth in the 

President’s baseline budget projections for the budget year. Under current law, total 

budget resources made available from the trust fund are to be appropriated to equal to the 

sum of annual obligation limitations and other budget authority, which in turn is equal to 

the forecast level of receipts plus interest credited to the trust fund for that fiscal year. 49 

U.S.C. § 48114(a)(1), (b)(1). 

 
 

Page 2 GAO-12-222 Airport and Airway Trust Fund

drawdown of the trust fund’s uncommitted balance.3 As the uncommitted 

balance approaches zero, the trust fund could become overcommited—

that is, revenues could be insufficient to cover all of the funding that 

Congress has committed. This risk of overcommitting funds could create 

budgetary challenges for FAA and require larger general-revenue 

appropriations to fund FAA’s operations spending. For example, as we 

have previously reported to this committee, Congress increased the 

general-revenue appropriation for FAA’s operations by nearly $1 billion in 

fiscal years 2009 and 2010. If these actions had not occurred, the trust 

fund would have been overcommitted.4

In this context, you asked us to examine the trust-fund revenueforecasting process. To address your request, we examined (1) how trustfund revenues are forecast for the budget year; (2) the accuracy of past 

trust-fund revenue forecasts and the factors affecting forecast accuracy; 

(3) how different options for estimating appropriations from the trust fund 

might reduce the risk of overcommitting the trust fund; and (4) the extent 

to which trust-fund revenues might cover planned FAA expenditures in 

fiscal years 2012 through 2021.

To determine how trust-fund revenues are forecast for the President’s 

budget, we interviewed FAA and Department of the Treasury (Treasury) 

officials on the forecasting methods used and the forecasts developed for 

fiscal years 2000 through 2011. To determine the accuracy of trust-fund 

revenue forecasts, we obtained FAA’s forecasts of excise tax receipts 

and interest revenue for fiscal years 2000 through 2010, which we 

compared to the sum of trust-fund tax receipts, as certified by the Internal 

 

3

FAA considers the committed balance of the trust fund to include amounts that have 

been appropriated from the trust fund (directly or to liquidate prior contract authority) and 

authorized contract authority (contract authority up to the annual obligation limitation), 

whether or not an actual obligation has been incurred. The uncommitted balance is the 

revenue that would remain in the trust fund after subtracting the committed balance. The 

financial condition of the trust fund generally can be evaluated by looking at the

uncommitted balance and the cash balance. The uncommitted balance is used to evaluate 

FAA’s ability to enter into future commitments as provided in authorization and 

appropriations acts. The cash balance reflects all cash on hand in the trust fund—both 

that which may be required to satisfy outstanding obligations and funds for which no 

commitments may have been made. This balance is used to evaluate the trust fund’s 

ability to pay outstanding bills as they become due.

4

GAO, Commercial Aviation: Airline Industry Contraction Due to Volatile Fuel Prices and 

Falling Demand Affects Airports, Passengers, and Federal Government Revenues, 

GAO-09-393 (Washington, D.C.: Apr. 21, 2009). 
 

Page 3 GAO-12-222 Airport and Airway Trust Fund

Revenue Service (IRS), and interest revenue data from FAA.5 We 

reviewed academic literature and interviewed aviation-industry and 

forecasting experts to identify factors affecting forecast accuracy.6 To 

evaluate different options for estimating appropriations from the trust 

fund, we identified four options based on our previous trust-fund work7

and analyzed these options using actual and forecast trust-fund taxreceipt data for fiscal years 2000 through 2010. One of these options 

includes a provision in the current House FAA reauthorization bill that 

would limit the budget resources made available for appropriation from 

the trust fund to 90 percent, rather than 100 percent, of forecast revenues 

and apply any differences between actual trust-fund revenues and 

appropriations from the trust fund to a subsequent year.

8 The other 

options include using a prior year’s actual trust-fund revenue amount as 

the basis for the appropriation and setting a target level for the trust fund’s 

uncommitted balance—such as $2 billion or $3 billion. Through analyzing 

these options, we determined how they might have affected the total 

amount of budget resources made available from the trust fund for 

appropriation and the trust fund’s uncommitted balance, if the options had 

been followed in fiscal years 2000 through 2010. For this report, our 

analysis assumes that obligations against the trust fund will equal the 

amounts authorized and that FAA’s outlays in a given year to liquidate 

obligations equal the amounts appropriated for that purpose.9

 

5

For fiscal year 2000, IRS was able to provide documentation for only one quarter of 

refunds and credits. However, because refunds and credits pertain only to fuel and 

gasoline, we inferred that the difference between FAA’s aggregate tax receipts and the 

aggregate tax receipt data we compiled from IRS documentation was wholly attributable to 

fuel and gasoline.

6

Through a review of the literature on trust fund revenue forecasting, we identified 

individuals with expertise on federal government revenue forecasting, aviation-activity 

forecasting, or the trust fund, or a combination of these subjects. We selected a group of 

these individuals to provide perspectives on our engagement objectives. While others with 

expertise in the area may have provided different opinions, our process resulted in a 

group of experts—three from academia, three from the private sector, and one from the 

airport industry—that we believe provided a balanced set of perspectives.

7

GAO-09-393. 

8

FAA Reauthorization and Reform Act of 2011, H.R. 658, 112th Cong. (as passed by the 

House of Representatives on Apr. 1, 2011).

9

For simplicity, this analysis does not consider accrued interest. 
 

Page 4 GAO-12-222 Airport and Airway Trust Fund

To determine the extent to which trust-fund revenues might cover FAA 

expenditures in fiscal years 2012 through 2021, we examined Treasury’s 

trust-fund revenue forecasts and the Office of Management and Budget’s 

(OMB) budget authority forecasts for FAA for fiscal years 2012 through 

2021 from the President’s fiscal year 2012 budget request and midsession review (the latest available forecast). We reviewed OMB budget 

guidance and interviewed OMB, Treasury, and FAA officials to 

understand the basis of these forecasts and potential factors affecting 

forecast accuracy. We also reviewed FAA’s fiscal year 2012 

appropriation10 and the House and Senate FAA reauthorization bills11 and 

drew from our previous work on FAA’s program and acquisition 

management to identify potential factors affecting forecast accuracy.12 We 

assessed the reliability of the FAA, IRS, OMB, and Treasury data by (1) 

performing electronic testing of required data elements, (2) reviewing 

existing information about the data and the systems that produced them, 

and (3) interviewing agency officials knowledgeable about the data. We 

determined that the data were sufficiently reliable for the purposes of this 

report. We conducted this performance audit from April 2011 to January 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

 

10Consolidated and Further Continuing Appropriations Act, 2012, Pub. L. No. 112-55, div. 

C, 125 Stat. 552, 644-649 (2011).

11H.R. 658; FAA Air Transportation Modernization and Safety Improvement Act, S. 223, 

112th Cong. (as passed by the Senate on Feb. 17, 2011 and incorporated by the Senate 

in H.R. 658).

12GAO, Next Generation Air Transportation System: FAA Has Made Some Progress in 

Implementation, but Delays Threaten to Impact Costs and Benefits, GAO-12-141T

(Washington, D.C.: Oct. 5, 2011) and NextGen Air Transportation System: FAA’s Metrics 

Can Be Used to Report on Status of Individual Programs, but Not of Overall NextGen 

Implementation or Outcomes, GAO-10-629 (Washington, D.C.: July 27, 2010).
 

Page 5 GAO-12-222 Airport and Airway Trust Fund

In 1970, almost a decade before airline deregulation, Congress created 

the trust fund to provide a dedicated source of funding for the aviation 

system. The trust fund is funded principally by a variety of excise taxes 

paid by users of the national airspace system, as well as by interest 

revenue.13

Table 1: Trust-Fund Excise Tax Lines, Revenue Sources, and Current Rates

The excise taxes are imposed on airline ticket purchases and 

aviation fuel, as well as the shipment of cargo. Disbursement of revenues 

deposited in the trust fund is subject to congressional appropriations. 

These taxes are classified in six categories or “tax lines,” as shown in 

table 1.

Tax line Revenue source Rate effective as of January 1, 2011

Transportation of Persons by Air Domestic passenger ticket tax 7.5 percent

Domestic flight segmenta tax (excluding 

flights to or from rural airports)

$3.70 per passenger per segment; indexed to the 

Consumer Price Index

Tax on mileage awards (frequent flyer awards 

tax)

7.5 percent of value of miles

Transportation of Property by Air Tax on domestic cargo or mail 6.25 percent of the price paid for transportation of 

domestic cargo or mail

Use of International Air Facilities Tax on international arrivals and departures $16.30 per passenger; indexed to the Consumer 

Price Index

Tax on flights between the continental United 

States and Alaska or Hawaii (or between 

Alaska and Hawaii)

$8.20 per passenger; indexed to the Consumer 

Price Index

Aviation Fuel Commercial Use Domestic commercial fuel tax $0.043 per gallon

Aviation Fuel Other than Gasb Domestic general aviation jet fuel tax $0.218 per gallon

Aviation Gasoline Domestic general aviation gasoline tax $0.193 per gallon

Source: FAA and IRS data.

Note: In addition to the excise taxes deposited into it, the trust fund accrues interest. 

a

A flight segment consists of one takeoff and one landing. 

b

Pub. L. No. 109-59 § 11161, 119 Stat. 1144, 1969 (2005) requires that taxes collected on kerosene 

used in aviation—previously deposited directly into the trust fund—be initially deposited in the 

Highway Trust Fund and then transferred by accounting adjustments to the trust fund. 

 

13The trust fund accrues interest on its cash balance.

Background

Source of Trust-Fund 

Revenues
 

Page 6 GAO-12-222 Airport and Airway Trust Fund

The trust fund finances capital improvements of the airport and airway 

system, and to the extent funds are made available, it funds the 

government’s operation and maintenance of that system.14 Figure 1 shows 

how trust-fund revenues were appropriated to FAA’s operations and capital 

accounts for fiscal year 2010, which generally represents the breakout of 

trust-fund revenue use for recent years.15 FAA’s three capital accounts 

include (1) the Facilities and Equipment account, which funds technological 

improvements to the air traffic control system, including the modernization of 

the air traffic control system called the Next Generation Air Transportation 

System (NextGen); (2) the Research, Engineering, and Development 

account, which funds research on issues related to aviation safety, mobility, 

and NextGen technologies; and (3) the Airport Improvement Program (AIP), 

which provides grants for airport planning and development. In addition, the 

trust fund has provided all or some portion of the funding for FAA’s 

operations account, which funds the operation of the air traffic control system 

and safety inspections, among other activities.16

 

14Since 1976, the trust fund has been used to fund both capital and operations expenses. 

Before that, however, the fund was restricted to capital funding. Specifically, in 1971, 

Congress amended the original 1970 law establishing the trust fund to eliminate the 

provision permitting the use of the trust fund to finance FAA operations. Pub. L. No. 92-

174, 85 Stat. 491, 492 (1971). The trust fund continued to serve as a capital funding 

mechanism until the Airport and Airway Development Act Amendments of 1976 (Pub. L. 

No. 94-353, § 6, 90 Stat. 871 (1976)) established that trust-fund revenues could be used 

for some maintenance and operations costs. As the Congressional Research Service 

(CRS) has reported, there has been general acceptance that there is a public interest 

component to the operation of the national aviation system, which is appropriated from the 

Treasury’s general revenues. This compensates for what the military, government, and 

nonuser beneficiaries (also known as societal users) might have contributed if they had 

actually paid into the trust fund. See GAO, Whether the Airport and Airway Trust Fund 

was created solely to finance aviation infrastructure, B-281779 (Feb. 12, 1999) and CRS, 

Aviation Finance: Federal Aviation Administration (FAA) Reauthorization and Related 

Issues (Washington, D.C.: Apr. 21, 2008).

General revenues from the 

U.S. Treasury have been used to supplement trust-fund revenues for

operations and have funded about 16 to 57 percent of FAA’s operation 

appropriation—or 8 to 33 percent of FAA’s total appropriation—during fiscal 

years 2001 through 2010.

15The trust fund also funds the Essential Air Service (EAS) program, which was 

established when the airline industry was deregulated in 1978 to subsidize air service to 

eligible communities that would otherwise not have scheduled air service. See 49 U.S.C. 

§§ 41731–48. In fiscal year 2010, the appropriation for EAS was $150 million, with $50 

million funded from overflight fees.

16General revenues are held in general fund accounts, which are U.S. Treasury accounts 

holding all federal money not allocated by law to any other fund account.

Use of Trust-Fund and 

General Revenues for FAA
 

Page 7 GAO-12-222 Airport and Airway Trust Fund

Figure 1: FAA Appropriations by Account for Fiscal Year 2010

From the trust fund’s creation in 1970 through the late 1990s, 

appropriations from the trust fund were consistently lower than revenues 

deposited into the trust fund, resulting in a growing uncommitted balance. 

To ensure that revenue collected from persons and businesses paying 

taxes into the trust fund are used for aviation purposes, AIR-21 and 

Vision 100, which reauthorized FAA investments in the airport and airway 

system, added certain provisions. These provisions require that the total 

budget resources made available each fiscal year from the trust fund—

Annual Budget Process 

and Appropriations from 

the Trust Fund
 

Page 8 GAO-12-222 Airport and Airway Trust Fund

that is, the appropriation from the trust fund17—equal the President’s 

baseline budget projection, or forecast, for excise taxes and interest 

credited to the trust fund for the coming fiscal year (budget year).18

The budget-year trust-fund revenue forecast, and accordingly FAA’s 

appropriation, is based on information available in the first quarter of the 

preceding fiscal year and more than 2 years before the final accounting 

for the forecast year is certified by IRS. Figure 2 shows the timeline for 

the fiscal year 2010 budget process, which generally reflects a typical 

budget cycle for recent years.

Since 

2000, appropriations from the trust fund have generally followed the 

forecast amounts, but they can, and have, varied—a point we discuss in 

more detail later in this report.

19

 

17Appropriations from the trust fund includes contract authority up to the annual obligation 

limitation.

Because the President’s budget is 

released about 8 months before the beginning of the fiscal year, the 

revenue forecast for the fiscal year 2010 budget submission to Congress 

was developed in the first quarter of fiscal year 2009—October through 

December of calendar year 2008—or about a year before the start of the 

18The legislative objective in FAA’s authorizing legislation, which seeks to mandate that 

annual spending from the trust fund be equal to annual trust-fund receipts, is enforced by 

two spending guarantees. One makes it out-of-order in the House or Senate to consider 

legislation that fails to use all forecast trust-fund revenues each year. The second makes it 

out-of-order to consider any bill that provides funding for research, engineering, and

development or operations and maintenance if it fails to fully fund the FAA’s two capital 

programs, AIP and facilities and equipment, at their authorized levels. The authorized 

level equals total budget resources, which FAA’s authorizing legislation defines “as the 

total amount made available from the Airport and Airway Trust Fund for the sum of 

obligation limitations and budget authority made available for a fiscal year for the ... 

budget accounts that are subject to the obligation limitation on contract authority provided 

[in title 49, U.S.C.] and for which appropriations are provided pursuant to [title 49] 

authorizations” for airport grants-in-aid, facilities and equipment, research and 

development, and trust fund share of operations. 49 U.S.C. § 48114(b)(1). The 

guarantees are only enforceable if a point of order is raised and if it has not been waived. 

While these procedural guarantees have not been employed, appropriations from the trust 

fund have generally reflected the President’s baseline projection for trust fund revenues 

(tax receipts plus interest). Also, according to a 2008 CRS report, the history of these 

guarantees indicates that broader budget policy goals or spending priorities of the 

appropriators can trump these guarantees. For more information, see CRS, Aviation 

Spending Guarantee Mechanisms (Washington, D.C.: Mar. 25, 2008) and Aviation 

Spending Guarantee Mechanisms (Washington, D.C.: Oct. 6, 2006).

19These dates reflect the actual dates for the fiscal year 2010 budget process. Specific 

dates, such as those for the budget submission and passage of the fiscal year 

appropriation, can vary from year to year.
 

Page 9 GAO-12-222 Airport and Airway Trust Fund

fiscal year. Furthermore, the most recent available data on actual trustfund revenues (IRS-certified tax-receipt data) for preparing this forecast 

were from the first three quarters of fiscal year 2008, or through June 30, 

2008.20

Figure 2: Timeline of the Budget Process for FAA for Fiscal Year 2010

Likewise, the accuracy of the fiscal year 2010 revenue forecasts 

could not be assessed against IRS-certified data until February 2011, 

which was 5 months after the end of the fiscal year. In addition to the 

budget-year forecast, the President’s budget includes revenue forecasts 

for the 9 years beyond the budget year (referred to as out-year forecasts), 

which are then updated during roughly the middle of the calendar year as 

part of the mid-session review.

a

Congress enacted another continuing resolution providing appropriations for FAA on October 30, 

2009. 

 

20IRS collects taxes and currently takes over 4 months after the end of each quarter to 

certify tax receipts for that quarter. Before fiscal year 2007, IRS took about 6 months after 

the end of each quarter to certify tax receipts for that quarter. In addition, IRS certifies tax 

receipts collected each quarter but does not track whether the tax receipts collected 

correspond to tax liability incurred during that quarter. Thus, for any given quarter, the 

taxes collected may or may not correspond to tax liability incurred during that quarter. 

However, IRS officials stated that the vast majority of taxes reported for any given quarter 

likely reflect taxes paid on liability incurred during that quarter. Though this is an imperfect 

measure of actual receipts, FAA used IRS-certified tax receipts in a review of its forecast 

accuracy in 2006 because although these receipts are estimates, these data are expected 

to be a more accurate reflection of tax receipts generated by aviation activity in a given 

fiscal year.
 

Page 10 GAO-12-222 Airport and Airway Trust Fund

Through fiscal year 2010, FAA generated the trust-fund revenue forecast 

for the President’s annual budget request. Starting with fiscal year 2011, 

the responsibility for forecasting trust-fund revenues shifted from FAA to 

Treasury. According to Treasury officials, Treasury assumed this 

responsibility so that it would have responsibility for all federal excise-tax 

forecasts, including the revenues for other trust funds such as the 

Highway Trust Fund.

In addition to budget-year and out-year revenue forecasts, the President’s 

annual budget request includes forecasts of FAA’s budget authority for the 

same period.21 Budget authority forecasts represent the estimated amount 

that may be requested for FAA to enter into obligations that will result in 

outlays of federal funds; in this report, we refer to FAA’s forecast budget 

authority as its forecast expenditures. According to OMB budget guidance, 

OMB forecasts the out-year budget-authority levels for agencies based on 

proposed changes in legislation along with the administration’s overall 

policy goals and forecasts of economic growth. As this guidance indicates, 

these forecasts are developed to allow an analysis of the long-term 

consequences of proposed program or tax-policy initiatives. FAA works 

with OMB to develop the proposed expenditures for a given budget year 

and then works to align its programs and plans with OMB’s out-year 

budget-authority targets.22 After the President submits his budget to 

Congress, Congress begins deliberations on the appropriate level of 

federal revenues and expenditures for a given fiscal year.

Since the AIR-21 spending provisions were introduced in 2000, the trust 

fund’s uncommitted balance—that is, the revenues in the trust fund that 

remain after funds have been appropriated from the trust fund and a 

 

21Budget authority is the authority provided by federal law to incur financial obligations. It 

includes both appropriations and contract authority.

22FAA’s planned capital improvements, which are funded through the Facilities and 

Equipment account, are outlined in the agency’s Capital Improvement Plan while its 

planned research and development projects are detailed in FAA’s National Aviation 

Research Plan. FAA updates both of these plans annually.

Status of the Trust Fund
 

Page 11 GAO-12-222 Airport and Airway Trust Fund

limitation on obligations established23—has generally declined because it 

has been used to offset shortfalls in forecast trust-fund revenues. As we 

previously reported, the trust fund’s uncommitted balance, which 

exceeded $7 billion at the end of fiscal year 2001, declined to $299 million 

at the end of fiscal year 2009—the lowest balance over the past 

decade—before slightly rebounding in fiscal year 2010 (fig. 3).24

Figure 3: End-of-Year Trust-Fund Uncommitted Balance, Fiscal Years 2000 through 

2010

 

23Limitations of obligations limit the exercise of contract authority. Contract authority is the 

authority to incur an obligation in advance or in excess of an appropriation. A subsequent 

appropriation is needed to liquidate (pay off) the obligations incurred using contract 

authority. Budget authority is the authority provided by federal law to incur financial 

obligations. It includes both appropriations and contract authority. FAA considers the 

committed balance to include amounts that have been appropriated from the trust fund 

and authorized contract authority, whether or not obligated.

24GAO, Airport and Airway Trust Fund: Declining Balance Raises Concerns over Ability to 

Meet Future Demands, GAO-11-358T (Washington, D.C.: Feb. 3, 2011). The trust fund’s 

uncommitted balance was recently estimated at about $1.4 billion at the end of fiscal year 

2011. 
 

Page 12 GAO-12-222 Airport and Airway Trust Fund

The largest decline in the uncommitted balance in the past decade 

occurred in 2002 following the sudden drop-off in aviation activity after the 

terrorist attacks of September 11, 2001. This decline occurred because 

revenue forecasts, which had been developed many months before the 

September 11 attacks and the subsequent decline in air travel, were 

considered in determining the level of appropriations from the trust fund. 

In addition, declines in passenger traffic, aircraft operations, and fuel 

consumption in 2009 resulted in actual revenues to the trust fund that fell 

well below forecast levels and an uncommitted trust-fund balance that 

approached zero. As previously reported, if the trust fund’s uncommitted 

balance approaches zero, FAA officials noted that they might be required 

to delay obligations for capital programs if they do not have adequate 

revenues in the trust fund to cover them—unless additional general 

revenues are first authorized and appropriated.25

As we have previously reported, NextGen will transform the way in which 

the air transportation system operates today, in part by

• using satellite-based surveillance as opposed to ground-based radar,

• using performance-based navigation instead of cumbersome step-bystep procedures,

• replacing routine voice communications with data transmissions, and

• organizing and merging the disjointed data that pilots, controllers, 

airports, airlines, and others currently rely on to operate the system.26

Because of the potential benefits of modernizing the air transportation 

system and the substantial costs of modernization, NextGen implementation 

has been a top congressional priority. FAA has been planning and 

developing NextGen since 2003 and is now implementing near-term 

(through 2012) and midterm (through 2018) capabilities. According to FAA, 

approximately $2.9 billion was appropriated for NextGen for fiscal years 

2004 through 2011—most of which was funded from the trust fund. FAA 

recently estimated the cost for NextGen for the agency to be between $15

 

25GAO-09-393. 

26GAO-12-141T. 

Planned NextGen Costs
 

Page 13 GAO-12-222 Airport and Airway Trust Fund

billion and $22 billion, and another $5 billion to $7 billion for equipping aircraft 

with NextGen technology, for fiscal years 2012 through 2025—much of 

which will be funded from the trust fund.27 In FAA’s latest Capital 

Improvement Plan—which outlines FAA’s planned facilities and equipment 

expenditures for the next 5 years—about one-third, or $4.8 billion of the 

$14.3 billion, in planned capital improvements for fiscal years 2012 through 

2016 is for NextGen or NextGen-related projects. In addition, given the 

incremental rollout of NextGen technology, FAA has stated that significant 

levels of investment—including those that rely on trust-fund revenues—will 

continue to be allocated to sustaining current infrastructure to prevent failures 

and maintain the reliability and efficiency of current operations.

Beginning in fiscal year 2011, when the administration transferred the 

responsibility for developing trust-fund revenue forecasts from FAA to 

Treasury, Treasury has been forecasting trust-fund revenues (tax 

receipts) for both the budget year and out-years using a demand-based 

econometric model.28

 

27Statement of the Honorable Michael P. Huerta, Deputy Administrator, Federal Aviation 

Administration, before the Committee on Transportation and Infrastructure, Subcommittee 

on Aviation, on the Benefits of the Next Generation Air Transportation System (Oct. 5, 

2011). 

Specifically, according to Treasury officials, 

28Econometric techniques are applied to estimate, based on historical values, the 

relationships used to project future values of a key variable. Treasury’s approach to 

forecasting aviation trust-fund revenues is largely similar to its approach to forecasting 

revenues for the Highway Trust Fund. FAA forecasts interest revenues earned on the 

trust-fund balance based on the administration’s economic assumptions for the 

President’s budget.

Treasury’s DemandBased Approach to 

Forecasting Revenues 

Somewhat Differs 

from FAA’s Previous 

Approach

Revenue Forecasts Now 

Used for Trust-Fund 

Budgeting Are Based on 

Treasury’s Model 

Estimates of Aviation 

Demand
 

Page 14 GAO-12-222 Airport and Airway Trust Fund

Treasury begins its forecast by estimating activity measures that reflect 

aviation demand, such as domestic enplanements, international 

enplanements, revenue-ton miles,29

gasoline.

and purchased gallons of fuel and 

30 For example, in estimating aviation demand as measured by 

domestic enplanements, Treasury assumes these enplanements grow 

with the economy and population and are a function of ticket prices and 

certain other factors, which is consistent with economic theory. Similarly, 

according to Treasury officials, Treasury forecasts all other aviation 

activity measures for future years based on elements of the economy that 

are likely to affect growth in those activities. In addition, Treasury 

estimates average ticket prices. Treasury uses these activity and pricing 

estimates, along with applicable tax rates, to forecast revenues for seven 

of the nine trust-fund-related tax sources listed in table 1 on page 5. 

Prior to the fiscal year 2011 budget, FAA was responsible for developing 

the trust-fund revenue forecasts used in the budget process. According to 

FAA officials, FAA developed its budget-year revenue forecast using 

airlines’ schedules for the upcoming several months to estimate airline 

capacity—most notably, available seat miles (the number of available 

seats and scheduled distance). These capacity measures, along with 

historical and economic data and professional judgment, enabled FAA to 

forecast several activity measures, such as revenue passenger miles31

and enplanements for both mainline and commuter carriers,

32

 

29A revenue-ton mile is 1 ton of revenue freight transported 1 mile.

as well as 

cargo and mail revenue-ton miles. For example, FAA used its estimate of 

available seat miles together with its estimate of average load factors (the 

percentage of seats that are filled) to forecast revenue passenger miles. 

Other capacity measures, such as available seat miles on international 

30Treasury forecasts these aviation activities using a demand-driven model that assumes 

growth in demand in future years will be unimpeded by any limitations on aviation 

infrastructure capacity. 

31Revenue passenger miles are the number of miles revenue-paying passengers are 

transported.

32FAA defines mainline carriers as the commercial airlines that use jets over 90 seats and 

regional carriers as the commercial carriers that use smaller piston, turboprop, and 

regional jet aircraft with up to and including 90 seats. According to FAA officials, FAA 

generated separate yield forecasts for mainline and regional carriers because regional 

carriers, which generally travel shorter routes, have higher yields. 

FAA’s Previous Revenue 

Forecasts Were Based on 

Estimates of Aviation 

Capacity
 

Page 15 GAO-12-222 Airport and Airway Trust Fund 

flights33 and the size and usage patterns of the general aviation fleet, 

enabled FAA to develop other aviation activity forecasts, such as 

international enplanements and gallons of purchased aviation fuels, 

respectively. In addition, FAA forecast pricing factors—such as mainline 

and commuter passenger yields34 as well as cargo yields—based largely 

on recent fares, cargo transport prices, trends, and professional 

judgment. In forecasting activity measures for the out-years (the 9 years 

beyond the budget year)—which are not used to determine the budget 

year’s appropriation—FAA used a demand-based econometric approach 

similar to Treasury’s current approach, both of which assume no limits on 

capacity that would prevent demand from being met.35 FAA officials told 

us they used a capacity-based approach for the budget-year forecast 

because they viewed the airlines’ recent and near-term planned capacity 

as a more accurate basis for projecting aviation activity in the near term 

than the demand-based econometric model they used for out-year 

forecasts.36

FAA used these activity and pricing forecasts to calculate its revenue 

forecasts for all nine trust-fund-related individual tax sources listed in 

table 1. One notable difference from Treasury’s current approach is that 

FAA separately forecast enplanements involving an airport in Alaska or 

Hawaii, which are taxed at a different rate from other enplanements. 

 

33As it does for domestic enplanements, FAA forecasts international enplanements by 

using carrier schedule information to estimate the level of committed capacity for flights 

between the United States and other countries. FAA performs this analysis by region (e.g., 

Pacific, Atlantic, and Latin America), as well as by individual country for 6 or 7 countries in 

each region that have the most U.S. air traffic. 

34Yield is a measure of revenue per revenue passenger mile flown. 

35For years further into the future, the use of an unconstrained demand forecast may 

become increasingly unrealistic. Many airports in the United States are facing or are 

expected to face significant capacity issues by 2015, so as demand grows, airport 

capacity may become a more limiting factor that would hold demand to a level less than 

the unconstrained forecast. However, if this were to occur, the effect on aviation tax 

revenue is difficult to predict. While this would likely mean that fewer passengers would be 

handled and thus fewer tickets on which taxes are levied, it could also mean that ticket 

prices would grow faster than assumed under an unconstrained demand forecast, so the 

passenger ticket tax revenues could rise. 

36FAA continues to produce aviation-activity forecasts for its annual aerospace forecast. 

Treasury officials responsible for forecasting trust-fund revenues told us that they do not 

use FAA’s aviation-activity data because they do not have access to FAA’s detailed and 

up-to-date activity data on a timely basis for developing their revenue forecasts. 
 

Page 16 GAO-12-222 Airport and Airway Trust Fund 

Additionally, because tickets sold through frequent-flyer programs are not 

assessed passenger ticket taxes, FAA used estimates of the sales of 

frequent-flyer mileage awards to augment its forecast for the domestic 

passenger ticket tax for these sales and reduce estimates of all segment 

taxes.37

After just 1 year and without certified receipts for the fourth quarter of 

2011, it is too soon to tell whether Treasury’s demand-based econometric 

approach will provide more accurate revenue forecasts for the budget 

year than FAA’s more detailed, capacity-based approach.38 According to 

forecasting experts that we interviewed, neither approach is necessarily 

better given the inherent uncertainty associated with forecasting. Despite 

these differences in Treasury’s and FAA’s approaches, several years of 

Treasury forecasts and corresponding actual revenues would be needed 

to meaningfully compare the results of the two agencies’ methodologies 

and gauge the efficacy of their approaches. Furthermore, comparing 

forecast methods, even with several years of data, can be inconclusive. 

Forecasting is inherently uncertain, and, as one forecasting expert noted, 

luck can be a factor in accurate forecasting. Specifically, if forecasts for 

model components err, even slightly, in the same direction, the aggregate 

error can be considerable. However, if forecasts for model components 

err in opposite directions, even forecasts that are wildly inaccurate for 

individual components can be accurate in the aggregate. 

 

37FAA began making these adjustments in fiscal year 2007 after a 2005 study of FAA’s 

revenue forecasting model by GRA Inc., a private transportation-consulting firm, reported 

that the adjustments would improve the accuracy of FAA’s revenue estimates. 

38Since 2006, the Congressional Budget Office (CBO) has independently forecasted trust 

fund revenues. In 2009, CBO reported that its recent forecasts at that time had been very 

similar to those produced by FAA, suggesting that the historical track record may have 

been similar. 

It Is Too Soon to Compare 

the Accuracy of FAA’s and 

Treasury’s Budget Year 

Forecasting Approaches 
 

Page 17 GAO-12-222 Airport and Airway Trust Fund

During the past 11 years, FAA overforecasted trust-fund revenues by a 

net total of $9.34 billion, with overforecasts in 9 of the 11 years. Because 

Congress considers forecast trust-fund revenues in its appropriation from 

the trust fund, this overforecasting has contributed to the decline in the 

trust fund’s uncommitted balance. However, the effect of this inaccuracy 

on the overall difference between appropriations and actual revenues—

and ultimately, the trust fund’s uncommitted balance—was smaller than it 

would otherwise have been because, for fiscal years 2000 through 2010, 

Congress appropriated $2.4 billion less from the trust fund than the 

forecast revenues (fig. 4). More specifically, Congress can choose to 

appropriate more or less than the forecast trust-fund revenues—which 

include forecasts of tax receipts and interest revenue and serve as the 

basis for the authorized level of funding—and actual revenues may be 

higher or lower than forecast.39

 

39Beginning with the enactment of AIR-21, the revenue forecast has served as the basis 

for the authorized level of funding, and trust-fund appropriation levels have closely tracked 

the authorized level of funding in most years. However, Congress may choose not to 

appropriate the amount of funding it authorized.

For example, for fiscal year 2005, 

Overforecasting of 

Revenues Due to 

Aviation Shocks and 

Other Factors Has 

Contributed to a 

Significant Decline in 

the Trust Fund’s 

Uncommitted Balance

Overforecasting of 

Revenues for 9 of the Past 

11 Years Has Contributed 

to a Decline in the Trust 

Fund’s Uncommitted 

Balance
 

Page 18 GAO-12-222 Airport and Airway Trust Fund

Congress appropriated $59 million less than the forecast revenues, and 

the revenue forecast was $414 million higher than the actual revenues. 

Together, these effects netted a $355 million decline in the trust fund’s 

uncommitted balance. For fiscal years 2009 and 2010, the amount 

Congress appropriated from the trust fund was substantially less than the 

forecast revenues—$2.7 billion—which prevented the trust fund’s balance 

from being overcommitted. To help offset declining revenues in 2009 and 

2010, Congress increased FAA’s appropriations from general revenues in 

these years.40

 

40The 2009 appropriation excludes the general revenues provided under the American 

Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, Title XII, 123 Stat. 115 

(2009).

The net outcome of these two effects varied during fiscal 

years 2000 through 2010, but together, appropriations from the trust fund 

were $6.9 billion greater than actual revenues over this period.
 

Page 19 GAO-12-222 Airport and Airway Trust Fund

Figure 4: Effects of Congressional Decision Making and Forecast Accuracy on the Trust Fund, Fiscal Years 2000 through 

2010
 

Page 20 GAO-12-222 Airport and Airway Trust Fund

Note: These data include forecast and actual (IRS-certified) tax receipts and interest revenue. 

Because FAA calculates the trust fund’s end-of-the-year uncommitted balance using incomestatement data, our calculation of the total effect on the trust fund does not precisely match the yearover-year change in the trust-fund balance, as reported by FAA. We excluded the fuel and gasoline 

data for fiscal year 2006 in our analysis because, according to FAA officials, the initial 2006 financial 

statements for the trust fund did not accurately account for the provisions of Pub. L. No. 109-59 

requiring that taxes collected on kerosene used in aviation be initially deposited in the Highway Trust 

Fund and then transferred by accounting adjustments to the trust fund; these errors were addressed 

in the fiscal year 2006 financial statements and during the fiscal year 2007 processing activities, but 

the fiscal year 2006 certified numbers were not revised. 

Inaccurate forecasts of taxes on the transportation of persons by air—the 

tax line composed of the domestic passenger ticket tax, the domestic 

segment tax, and the mileage award tax—was the major factor affecting 

the aggregate forecast inaccuracy, as shown in figure 5. These taxes 

account for 70 percent of trust-fund tax receipts and 73 percent of FAA’s 

forecast error for fiscal years 2000 through 2010. Inaccuracy in 

forecasting both gasoline and fuel taxes41

 

41For the purposes of our analysis, we combined all taxes on fuel and gasoline into one 

category. 

and taxes on the transportation 

of property by air accounted for a disproportionate amount of the 

aggregate forecast inaccuracy. Taxes on gasoline and fuel accounted for 

7 percent of total tax receipts for fiscal years 2000 through 2010, yet 

forecasts for them accounted for 20 percent of the total forecast 

inaccuracy. Similarly, taxes on the transportation of property by air 

accounted for 5 percent of total tax receipts for the same period, but 

forecasts for them accounted for 13 percent of the total forecast 

inaccuracy. Furthermore, the effects of these overforecasts were offset 

somewhat by underforecasts of taxes on the use of international air 

facilities. For fiscal years 2000 through 2010, these taxes accounted for 

18 percent of total trust-fund tax receipts, yet the forecasts for these taxes 

were less than the actual revenues.
 

Page 21 GAO-12-222 Airport and Airway Trust Fund

Figure 5: Total Trust-Fund Tax Receipts and Forecast Accuracy by Tax Line, Fiscal Years 2000 through 2010

Note: The fuel/gasoline category includes the domestic commercial fuel tax, the general aviation jet 

fuel tax, and the general aviation gasoline tax as well as related refunds and credits. The percentage 

totals may not equal 100 percent because of rounding. We excluded the fuel and gasoline tax data for 

fiscal year 2006 in our analysis because, according to FAA officials, the initial 2006 financial 

statements for the trust fund did not accurately account for the provisions of Pub. L. No. 109-59 

requiring that taxes collected on kerosene used in aviation be initially deposited in the Highway Trust 

Fund and then transferred by accounting adjustments to the trust fund; these errors were addressed 

in the fiscal year 2006 financial statements and during the fiscal year 2007 processing activities, but 

the fiscal year 2006 certified numbers were not revised. 

Several factors make forecasting trust-fund revenues a challenge 

including: (1) unexpected events that rapidly shift the demand for aviation 

services, (2) the timing of the forecasts, and (3) the difficulty of 

recognizing when apparent changes in the industry are transitory or 

permanent. These factors can affect the accuracy of both activity and 

pricing forecasts used to generate the revenue forecasts.

• Unexpected events causing changes in aviation demand or airline 

capacity can considerably affect trust-fund revenues and the accuracy 

of trust-fund revenue forecasts. For example, geopolitical events, 

such as the terrorist attacks of September 11, 2001, which 

substantially reduced the demand for air travel and led to lower trustfund revenues, could not have been foreseen. In fiscal year 2002, 

when the attacks had their greatest effect on aviation activity, revenue 

forecasts exceeded actual revenues by $2.7 billion, or 22 percent. 

Additionally, rapid changes in the economy can lead to forecast 

A Variety of Factors Affect 

the Accuracy of TrustFund Revenue Forecasts
 

Page 22 GAO-12-222 Airport and Airway Trust Fund

inaccuracy. In fiscal year 2009, when the effects of the recent 

recession were greatest, revenues were overforecast by nearly $2.2 

billion, or 17 percent. In response to high fuel prices and a weakening 

economy, the airline industry reduced its domestic capacity (the 

number of scheduled seats) in 2008, mostly by removing older, lessfuel-efficient aircraft from service. In fiscal year 2009, fuel and 

gasoline tax receipts were overforecast by 37 percent as the reduction 

in capacity led to a 13 percent decrease in fuel consumption from 

fiscal year 2008 to fiscal year 2009.

According to an industry expert, the effects of certain exogenous 

events—events caused by factors outside the aviation industry—on 

demand for air travel are such that it is common for demand to drop 

much more quickly in response to a negative shock than it will build in 

response to overall good economic conditions. Thus, the likelihood 

that there will be years when revenues are considerably overforecast 

may be higher than the likelihood that there will be years when 

revenues are considerably underforecast. This pattern held for fiscal 

years 2000 through 2010. In fiscal years 2000 and 2007, revenues 

were underforecast by $399 million and $154 million respectively. In 

all other years during that decade, yearly revenues were overforecast 

by between $321 million and $2.7 billion. Similarly, other factors 

external to the industry and economy—such as health issues like an 

outbreak of a contagious virus—can cause rapid shifts in demand.

• The timing of budget forecasts exacerbates the potential for 

inaccurate trust-fund revenue forecasts, particularly in the face of 

unexpected events. Developed over a year in advance, the forecasts 

often cannot account for the effects of unexpected events, such as the 

September 11 attacks or changes in economic conditions. For 

example, the revenue forecast for fiscal year 2002 was developed in 

the final months of calendar year 2000, almost a full year before 

September 11, 2001. Additionally, because of the timing of the budget 

process, the revenue forecasts incorporate early forecasts of changes 

in gross domestic product (GDP), which is a critical exogenous factor 

affecting airline revenues and thus forecasts. Studies have found that 

predictions of, for example, recessions, are not very accurate more 

than a year in advance, and so the sharp drops in demand that occur 

as a result of rapidly changing macroeconomic conditions are likely to 
 

Page 23 GAO-12-222 Airport and Airway Trust Fund

be missed in the relevant forecast.42 For example, OMB’s fiscal year 

2009 forecast for real GDP growth from February 2008 was 3.0 

percent, but real GDP actually declined by 3.5 percent, according to 

the Bureau of Economic Analysis.43

• The difficulty of recognizing when apparent changes in the 

industry are transitory or permanent affects forecast accuracy 

because long-term structural changes require adjustments to forecast 

models. As we have previously reported, the airline industry has 

experienced significant structural changes over the last decade, but 

they were not usually apparent until well after they had occurred.44

• Short-distance markets (less than 250 miles between airports) 

have lost a large share of passenger traffic, likely because of the 

increased time required for aviation security measures

implemented since September 11, 2001, has made driving a more 

viable option for short-distance routes.

Examples of apparent structural changes include the following:

45

 

42Grace Juhn and Prakash Loungani, “Further Cross-Country Evidence on the Accuracy 

of the Private Sector’s Output Forecasts,” IMF Staff Papers, vol. 49, no. 1 (2002); Pew 

Center on the States and the Nelson A. Rockefeller Institute of Government, States’ 

Revenue Estimating: Cracks in the Crystal Ball (Washington, D.C., and Albany, N.Y.: 

March 2011).

43The types of challenges faced by aviation forecasters mirror those of other revenue 

forecasters. For example, states need to estimate revenues a little more than a year 

ahead of a budget year, and these estimates underlie planned spending. According to a 

recent study on state revenue forecasting, during the recent recession most state 

revenues were overforecast, with a median error in 2009 of about 10 percent over actual 

revenues. This study examined the causes of forecasting problems and identified key 

issues: (1) apparent changes in the linkage of certain state tax revenues to economic 

cycles, (2) inaccurate forecasts of GDP before the recession began, and (3) the inability to 

know when natural disasters, such as floods or tornados, will strike, potentially placing 

unexpected demands on state revenues.

44GAO, Commercial Aviation: Consumers Could Benefit from Better Information about 

Airline-Imposed Fees and Refundability of Government-Imposed Taxes and Fees, 

GAO-10-785 (Washington, D.C.: July 14, 2010) and Airline Deregulation: Reregulating the 

Airline Industry Would Likely Reverse Consumer Benefits and Not Save Airline Pensions, 

GAO-06-630 (Washington, D.C.: June 9, 2006).

45As reported in GAO-06-630, the number of short-distance flights (under 250 miles) fell 

26 percent between 2000 and 2005, while the number of flights of over 1,000 miles 

increased by 15 percent during that time. 
 

Page 24 GAO-12-222 Airport and Airway Trust Fund

• Over the past 10 years the use of the Internet for ticket purchases 

has became ubiquitous and appears to have contributed to a 

reduction in fare dispersion and helped to suppress average fares. 

In particular, there appear to be fewer tickets that are high-priced 

tickets compared to average-priced tickets on a given route.46

• Passenger load factors (the percentage of seats that are filled) 

have risen to levels previously thought not possible, according to 

industry experts.

• Increasingly, airlines are charging fees for a number of optional 

services, such as checked baggage, in-flight food and beverages, 

and ticket change or cancellation fees, for which separate fees did 

not previously exist. This change in pricing structure enables 

airlines to keep airfares lower while bringing in additional revenue 

through fees, which are not subject to excise taxes for the trust 

fund.47

These various factors—exogenous shocks, the timing of forecasts, and 

lags in recognizing structural changes to the airline industry—affect 

forecast accuracy for key activity and pricing measures, such as 

enplanements and ticket prices. In particular, experts told us that 

estimating how these factors may affect ticket prices is particularly hard 

because prices are closely tied to individual airline business decisions as 

well as to aggregate demand. For example, one airline’s decision to 

reduce fares may easily lead to a fare war, in which competing airlines 

attempt to undersell each other. Forecasters are unable to predict when 

these fare wars may occur and how they may affect on ticket prices. 

Similarly, forecasters are unable to predict changes airlines make to their 

business models, such as the addition of baggage checking and other 

 

46GAO-06-630. 

47As we previously reported, although fares have decreased, airlines have imposed fees 

for a variety of passenger services, most notably for checked bags, for which separate 

charges did not previously exist. Fees have also been imposed for early boarding, seat 

selection, and meals, among other services. Under governing Treasury regulations and 

IRS guidance, the 7.5 percent excise tax is not collected on amounts paid by passengers 

for these optional airline services, and consequently, those revenues are not deposited 

into the trust fund. If baggage fees alone had been subject to the 7.5 percent excise tax in 

fiscal year 2010, the trust fund would have received approximately an additional $248 

million in revenues. This potential amount of trust fund revenues from fees is expected to 

grow in future years if airlines continue to shift toward more fee revenue relative to fare 

revenue. See GAO-10-785. 
 

Page 25 GAO-12-222 Airport and Airway Trust Fund

ancillary fees. FAA’s analysis of forecast accuracy for key activity 

measures illustrates this difficulty in forecasting ticket prices. Specifically, 

for fiscal years 2003 through 2009, near-term forecasts of average ticket 

prices for mainline carriers were in error by an average of 3.4 percent, 

compared with errors that averaged 1.6 percent for forecasts of revenue 

passenger miles and 1.1 percent for enplanement forecasts.48

Although the trust fund’s uncommitted balance was used to offset lowerthan-forecast trust-fund revenues in the past, the current trust-fund 

balance provides less protection against overcommitting trust-fund 

resources. This means that trust-fund revenues could be insufficient to 

cover all of the obligations that FAA has the authority to incur if actual 

trust-fund revenues continue to fall below forecast levels and Congress 

appropriates funds from the trust fund at the forecast levels. The trust 

fund’s uncommitted balance was about $1.4 billion at the end of fiscal 

year 2011—up from $770 million at the end of fiscal year 2010. Despite 

the lapse in collecting certain taxes from July 23 through August 7, 2011, 

according to FAA, the trust fund’s uncommitted balance grew due to 

higher-than-expected revenues in fiscal year 2011.

49

A substantial decline in the trust fund’s uncommitted balance could lead 

to budgetary challenges for FAA, if commitments from the trust fund 

exceed revenues deposited into the trust fund. As we have previously 

reported, a decline in the trust fund’s uncommitted balance toward zero 

 

48This average refers to the mean absolute error—that is, the average value of the 

difference between forecast and actual revenues, regardless of whether the difference 

was positive or negative. 

49FAA’s authority to collect trust fund revenues and expend money from the trust fund 

expired on July 22, 2011. In response to the lapse in program expenditure and revenue 

collection authority, FAA halted work on a number of construction projects at airports and 

air traffic control facilities and furloughed almost 4,000 employees effective July 23, 2011. 

On August 5, 2011, the Senate reached an agreement and passed H.R. 2553 without 

amendment by unanimous consent. The measure was signed by the President later that 

day, becoming the Airport and Airway Extension Act of 2011, Part IV, Pub. L. No. 112-27, 

125 Stat. 270. Although this law retroactively reinstated the taxes as though they never 

expired, IRS granted relief for airlines and taxpayers who purchased tickets during the two 

week lapse. Tax collection for the trust fund started up again on August 8, 2011, thus 

ending the partial shutdown of FAA and the lapse in trust-fund revenue collection 

authority, including passenger ticket taxes. FAA estimated the lapse to have resulted in 

approximately $200 million of foregone trust fund revenues each week—or roughly $400 

million for the tax lapse.

Options Exist to 

Reduce, but Not 

Eliminate, the Risk of 

Overcommitting 

Trust-Fund Resources
 

Page 26 GAO-12-222 Airport and Airway Trust Fund

signals to FAA that revenues available to incur future obligations could be 

limited, which could affect FAA’s ability to move forward with planned 

projects and programs.50 OMB, the Department of Transportation (DOT), 

and FAA budget officials noted that if the trust fund were to become 

overcommitted, there would be some time to determine what actions, if 

any, FAA might have to take and to address this issue through the 

appropriations process, given capital programs are paid for—or 

outlayed—over several years and because the trust fund maintains a 

cash balance ($9.4 billion as of the end-of-fiscal-year 2010), for which 

revenues are continually paid into the trust fund. However, as we have 

previously reported, in the short term, FAA officials have noted a risk of 

overcommitting trust-fund resources might require them to delay 

obligations for capital programs if they do not have adequate revenues in 

the trust fund to cover those obligations—unless additional funding was 

authorized and appropriated from general revenues.51

While appropriating less-than-forecast revenues from the trust fund in 

recent years has helped to keep the trust fund from being overcommitted, 

we and others have recommended the development of an alternative 

approach to guiding appropriations from the trust fund that could help 

reduce the risk of overcommitting budget resources from the trust fund.52

 

50

Given the inherent uncertainty of forecasting and the deteriorating 

GAO-09-393. We have also made recommendations to help DOT reduce the likelihood 

of a funding shortfall in the Highway Account of the Highway Trust Fund, including 

identifying changes to existing solvency mechanisms designed to make annual 

adjustments to this account. See GAO, Highway Trust Fund: Improved Solvency 

Mechanisms and Communication Needed to Help Avoid Shortfalls in the Highway 

Account, GAO-09-316 (Washington, D.C.: Feb. 6, 2009).

51According to FAA officials, they would start by deferring or deobligating some existing 

capital-program obligations so they could continue to first fund operating expenses, such 

as air-traffic control and safety inspections. These actions would ensure that the agency 

did not improperly incur obligations in excess of the trust fund’s cash balance, which could 

potentially lead to a violation of the Antideficiency Act. This act prohibits an officer or 

employee of the federal government from making or authorizing an obligation or 

expenditure in advance or in excess of an appropriation or fund. 31 U.S.C. § 1341(a)(1). 

FAA would have to stop making payments if the fund were to be exhausted for any reason 

before all outstanding obligations were discharged. However, FAA’s aviation programs are 

partly funded with contract authority, to which section 1341(a)(1) does not apply and which 

allows FAA to incur obligations in advance or in excess of an appropriation. However, FAA 

must receive an appropriation from the trust fund in order to liquidate the contractauthority obligations.

52GAO-09-393. 
 

Page 27 GAO-12-222 Airport and Airway Trust Fund

uncommitted balance, better matching of actual revenues to the 

appropriation from the trust fund would better ensure that trust-fund 

revenues are sufficient to cover FAA’s expenditures, thus reducing the 

potential risk of disruptions in funding for aviation projects and programs.

For our analysis, we considered four alternative options for determining 

the amount that would be made available for appropriation from the trust 

fund—each of which would require a change in law to implement (table 

2). First, the House of Representatives’ current FAA reauthorization bill 

(H.R. 658) includes a provision that would limit the budget resources 

made available for appropriation from the trust fund to 90 percent, rather 

than 100 percent, of forecast revenues and apply any differences 

between actual trust-fund revenues and appropriations from the trust fund 

to a subsequent year. The second option would use a prior year’s actual 

trust-fund revenue amount as the basis for the appropriation since this 

revenue amount would represent the level of actual revenues deposited 

into the trust fund from a prior year and therefore not make funding 

dependent on revenue forecasts. For example, the second preceding 

year’s revenue amount could be used, since it would be certified by IRS 

in time for the development of FAA’s budget. Finally, the third and fourth 

options would target a level for the trust fund’s uncommitted balance—

such as $2 billion or $3 billion—and base appropriations on the goal of 

maintaining that target level. These options would increase the likelihood 

that uncommitted resources would be available to FAA if actual revenues 

fell short of forecast revenues.
 

Page 28 GAO-12-222 Airport and Airway Trust Fund

Table 2: Options for Determining Budget Resources to Be Made Available for Appropriation from the Trust Fund

Option Description of option

Option 1: Provision in 

Section 104 of H.R. 658a Total budget resources made available in the first fiscal year after enactment (i.e., fiscal year 2011) equal 

90 percent of the forecast trust-fund revenues for that year.

In the year after enactment (i.e., fiscal year 2012) and each fiscal year thereafter, total budget resources 

made available during that fiscal year equal 90 percent of the forecast trust-fund revenues for that fiscal 

year (i.e., fiscal year 2012) in addition to the difference between the second preceding fiscal year’s (i.e., 

fiscal year 2010) actual revenues and budget resources made available for obligation from the trust fund.

Option 2: Prior year’s 

revenues

Total budget resources made available each fiscal year equal the amount of a prior year’s revenues.

The second preceding year’s actual trust-fund revenue amount would be certified in time for use in 

developing FAA’s budget.

Option 3: $2 billion target

level for the uncommitted 

balanceb

Total budget resources made available each fiscal year would be based on maintaining an uncommitted 

balance of $2 billion in the trust fund. Specifically, the $2 billion target level for the trust fund’s uncommitted 

balance would be subtracted from the total of the budget year’s revenue forecast and the previous year’s 

uncommitted balance to determine the amount available for appropriation from the trust fund. 

Option 4: $3 billion target

level for the uncommitted 

balanceb

Total budget resources made available each fiscal year would be based on maintaining an uncommitted 

balance of $3 billion in the trust fund. Specifically, the $3 billion target level for the trust fund’s uncommitted 

balance would be subtracted from the total of the budget year’s revenue forecast and the previous year’s 

uncommitted balance to determine the amount available for appropriation from the trust fund. 

Source: H.R. 658 and GAO analysis.

a

This provision was also contained in section 105 of H.R. 915, the FAA Reauthorization Act of 2009, 

which passed the House of Representatives on May 21, 2009, as well as in the Democratic Members 

of the House Transportation and Infrastructure Committee recommendations to the Joint Select 

Committee on Deficit Reduction. 

b

We chose these levels because from fiscal year 2000 through fiscal year 2010, forecast revenues 

exceeded actual revenues by no more than $3 billion, so a target of $3 billion could help to protect the 

uncommitted balance. A target of $2 billion could also help to protect the uncommitted balance 

because forecast revenues exceeded actual revenues by more than $2 billion only twice in that same 

period—in fiscal years 2002 and 2009—and could also allow for slightly higher appropriation levels 

from the trust fund. 

Our analysis of these options shows that although they provide for 

substantially greater protection to the trust fund than the provision in 

current law, they do not completely eliminate the risk of overcommitting 

revenues from the trust fund (table 3). For our analysis, we applied these 

four approaches to the actual and forecast trust-fund revenues for fiscal 

years 2000 through 2010, using the trust fund’s end-of-year fiscal year 

2010 uncommitted balance of $770 million as the balance for the end of 

fiscal year 1999 to analyze how these options might function in starting with 

a low uncommitted balance. 53

 

53Our analysis assumes that appropriation levels will equal authorization levels. Currently, 

FAA’s authorizing legislation defines the total budget resources made available from the 

trust fund.

On the basis of this analysis, we determined 
 

Page 29 GAO-12-222 Airport and Airway Trust Fund

that the four options provide better protection against overcommitting 

resources from the trust fund when it has low uncommitted balance than 

the current law (which we refer to as AIR-21 method) would have provided 

had it been followed. However, these alternatives could still result in the 

trust fund being overcommitted unless Congress appropriated more 

general revenues because if the uncommitted balance is close to zero, 

there is no margin for error if the actual revenues fall significantly short of 

the amounts appropriated. For example, in 2002 when appropriations 

exceeded actual revenues by over $3.2 billion (as previously shown in fig. 

4), the H.R. 658 option and the $2 billion target option, if in place during 

that time, would have been insufficient to protect the trust fund’s 

uncommitted balance from being overcommitted.

Table 3: Estimated End-of-year Trust-Fund Uncommitted Balance under Different Options Assuming an Uncommitted Balance 

of $770 Million at the Beginning of Fiscal Year 2000

Dollars in millions

Option 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Current Law: AIR-21 1,168 825 (1,765) (2,624) (3,263) (3,693) (4,935) (4,807) (5,262) (7,342) (8,015)

#1 H.R. 658 2,093 1,019 (1,775) (592) 2,585 2,039 (1,247) 561 4,601 1,970 (1,573)

#2 Prior year’s revenuesa 2,319 1,221 165 (315) 670 2,095 2,594 3,817 5,377 4,398 3,784 

#3 Target $2 billion 2,398 1,657 (589) 1,141 1,361 1,569 759 2,128 1,544 (80) 1,327 

#4 Target $3 billion 3,398 2,657 411 2,141 2,361 2,569 1,759 3,128 2,544 920 2,327 

Source: GAO analysis based on FAA and IRS data.

Notes: Our analysis of each option assumes the errors in forecasting that occurred in fiscal years 

2000 through 2010 and that appropriations do not vary from the prescribed approach. Additionally, for 

simplicity, we estimated the end-of-year uncommitted balance by adding together the start-of-the-year 

uncommitted balance and actual revenues for a given year and subtracting the estimated 

appropriation from the trust fund based depending on the option. 

a

Under the prior year’s revenue option, appropriating the level of actual trust-fund revenues from a 

prior year can lead to a growing uncommitted balance if revenues are generally increasing, because 

appropriations would be based on a prior year’s lower trust-fund revenues. If the actual revenues 

from the second preceding year—which are the basis for the appropriation—are greater than the 

actual revenues for the year being appropriated, the uncommitted balance would decline. The 

balance can even become negative if, as in this case, the actual revenues from 2 years prior—which 

is the basis for the appropriation—are higher than the actual revenues in the budget year and the 

uncommitted balance is too low to make up the difference. 

Our analysis of these options further shows that they—particularly the 

H.R. 658 provision—could also lead to greater swings in trust-fund 

contributions, which in turn would require greater variation in generalrevenue appropriations to maintain overall stable appropriation levels for 

FAA. As figure 6 shows, the H.R. 658 provision, if in place during fiscal 

years 2000 through 2010, would have resulted in a wider variation in the 
 

Page 30 GAO-12-222 Airport and Airway Trust Fund

total amount available for appropriation from the trust fund than the other 

options and current law.54

Figure 6: Estimated Trust-Fund Appropriations under Different Options If Started in 

Fiscal Year 2000

Because of these variations with the H.R. 658 

option, general-revenue appropriations would also have to vary widely 

from year to year to maintain the same appropriation levels during that 

time frame. In addition, these options could result in the availability of 

fewer resources for some period of time than under current law, unless a 

general-revenue appropriation made up the difference.

 

54When analyzing alternatives, including the AIR-21 method, we omitted interest revenues 

from all calculations because of the complexity involved in forecasting interest revenues 

for each of the alternatives and because interest revenues are a relatively small portion of 

total trust-fund revenue—about 5.1 percent of all revenue for fiscal years 2000 through 

2010.
 

Page 31 GAO-12-222 Airport and Airway Trust Fund

According to the President’s fiscal year 2012 budget request and midsession review, FAA expenditures (as reflected by OMB’s estimates of 

FAA’s budget authority) are expected to continue to exceed forecast trustfund revenues through fiscal year 2021 (see fig. 7).55

 

55For the fiscal year 2012 mid-session review, Treasury forecast a slight decrease in 

revenues from fiscal year 2010 through fiscal year 2011, due in part to the lapse in FAA’s 

authority to collect certain taxes from July 23 through August 9, 2011. Treasury then 

anticipated trust fund revenue growth at an annual rate of about 3 percent to 5 percent 

from fiscal year 2013 through fiscal year 2018 with the growth rate slowing to about 2.7 

percent to 2.9 percent through fiscal year 2021. As previously noted, according to FAA, 

the trust fund received higher-than-expected revenues in fiscal year 2011, which is 

reflected in the most recent estimate of the trust fund’s uncommitted balance. The 

updated revenue forecast for the out-years will be released as part of the President’s fiscal 

year 2013 budget request. 

FAA expenditures 

not covered by trust-fund revenues are projected to be paid for by general 

revenues.

The Extent to Which 

Trust-Fund Revenues 

Might Support Future 

FAA Expenditures 

Will Depend on 

Differing Assumptions 

and Other Factors

The President’s Budget 

Forecasts Show FAA 

Expenditures Continuing 

to Exceed Trust-Fund 

Revenues 
 

Page 32 GAO-12-222 Airport and Airway Trust Fund

Figure 7: Actual and Forecast Trust-Fund Revenues and FAA Expenditures, Fiscal Years 2000 through 2021

Notes: The actual (IRS-certified) trust fund revenues for 2000 through 2010 include interest revenues. 

The 2009 expenditures exclude the general revenues provided under the American Recovery and 

Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009). 

In the near term, the administration forecasts reductions in FAA’s 

expenditures in fiscal years 2013 through 2015, primarily because of the 

President’s directive to reduce discretionary spending for non-security 

agencies.56

 

56The Budget Control Act, Pub. L. No. 112-25, 125 Stat. 240 (2011), established caps on 

the amount of money that could be spent through the annual appropriations process for 

the next 10 years and created a Joint Select Committee on Deficit Reduction that was 

instructed to develop a bill to reduce the federal deficit by at least another $1.5 trillion over 

the 10-year period ending in fiscal year 2021. Since the joint committee did not reach an 

agreement before the committee’s deadline of January 15, 2012, under the act, a $1.2 

trillion automatic spending reduction process has been triggered to begin in January 2013 

unless Congress and the President first act to eliminate or change the process. 

These forecasts, if realized, would reduce total FAA 

expenditure levels for these years below fiscal year 2008 levels, primarily 

because of the $1 billion proposed reduction to AIP, according to OMB. 

OMB uses inflation adjustments and other factors to project out-year 
 

Page 33 GAO-12-222 Airport and Airway Trust Fund

expenditures, resulting in FAA’s fiscal years 2016 to 2021 expenditures 

growing roughly at the forecast rate of GDP growth—around 2.3 percent 

to 2.5 percent annually. Under these assumptions, total forecast FAA 

expenditures would require $20 billion in general revenues to supplement 

trust-fund revenues.

OMB’s forecasts base future years’ general-revenue contribution for FAA 

on the current budget year’s (fiscal year 2012) proposed general-revenue 

proportion. Specifically, OMB assumes trust-fund revenues cover about 

68 percent of FAA’s estimated total expenditures, and general revenues 

cover the remaining 32 percent for each year of this same period. This 

level of general revenue funding for FAA is among the highest levels 

since fiscal year 2000 (see fig. 8). Since the assumptions behind the 

President’s budget forecasts keep the general-revenue and trust-fund 

contributions constant in the out-years, OMB’s forecasts differ from the 

AIR-21 approach in that they assume all forecast trust-fund revenues are 

not made available for appropriation. As a result, OMB projects a growing 

trust-fund uncommitted balance—from $770 million at the end of fiscal 

year 2010 to almost $30 billion at the end of fiscal year 2021. Although 

such growth does not reflect what has historically happened under the 

AIR-21 method—which makes the forecast level of receipts available for 

appropriation—OMB officials noted that this approach aligns with how 

OMB forecasts out-year budget authority for other agencies.
 

Page 34 GAO-12-222 Airport and Airway Trust Fund

Figure 8: Actual and Forecast Trust-Fund Revenues and Uncommitted Balance and FAA Expenditures by Trust-Fund and 

General-Revenue Appropriations, Fiscal Years 2000 through 2021

By contrast, applying the AIR-21 approach to current revenue and 

expenditures forecasts would reduce the amount of additional general 

revenues needed to cover forecast expenditures but would maintain the 

current uncommitted balance level and still require some level of 

additional general revenues or increases in aviation tax levels or sources 

into the trust fund to fund FAA expenditures as compared to OMB’s 

approach (fig. 9).57

 

57CBO also prepares forecasts of trust-fund revenue, expenditures, and uncommitted 

balance using both a fixed general-revenue contribution approach, similar to OMB’s 

approach, and the AIR-21 approach.

Specifically, applying the AIR-21 approach would 

make approximately $27 billion more in trust revenues available for 

appropriation for fiscal years 2013 through 2021 than OMB projects. 

Although this approach would reduce the amount of general revenues 
 

Page 35 GAO-12-222 Airport and Airway Trust Fund

needed to cover forecast FAA expenditures, the assumption that all 

forecast trust-fund revenues would be appropriated halts the growth in the 

trust fund’s uncommitted balance holding it at the most recent estimate of 

$1.4 billion for fiscal year 2011 and providing limited protection against 

forecast error. Additionally, projected FAA expenditures under the AIR-21 

approach would still require some level of general-revenue 

appropriation—specifically, 20 percent for fiscal year 2013, respectively, 

and then about 8 percent to 16 percent for fiscal years 2014 through 

2021.58

 

58Additionally, each of the four options that we analyzed for determining budget resources 

for appropriations from the trust fund, if implemented, would reduce the trust fund’s 

contribution in some years to help protect the trust-fund balance.
 

Page 36 GAO-12-222 Airport and Airway Trust Fund

Figure 9: Comparison of FAA’s Trust-Fund and General-Revenue Appropriations 

under OMB’s Approach and under the AIR-21 Method, Fiscal Years 2012 through 

2021

While these forecasts provide perspectives on future FAA expenditures 

and trust-fund revenues, the extent to which these forecasts are more 

accurately realized in future years depends on changing economic, 

technological, political, industry, and other factors. In particular, 

congressional decisions, including the level of FAA’s appropriations or the 

trust-fund tax structure; unexpected changes affecting trust-fund 

revenues and FAA expenditures; and FAA’s implementation and 

management of programs, such as NextGen, could significantly affect 

trust-fund revenues and FAA expenditures in future years.

Realizing Revenue and 

Expenditure Forecasts 

Depends on Several 

Factors
 

Page 37 GAO-12-222 Airport and Airway Trust Fund

In its deliberations on the appropriate level of federal revenues and 

expenditures for a given year, Congress decides on the level of FAA’s 

appropriations—which could be more or less than the President’s budget 

request—and the level of trust-fund and general revenues to fund FAA. 

As previously noted, in fiscal years 2009 and 2010, the level of 

appropriations from the trust fund was reduced and the general-revenue 

appropriation was increased from the President’s budget request. FAA’s 

fiscal year 2012 appropriations generally funded the President’s fiscal 

year 2012 request, with the exception of the President’s request for $3.35 

billion in general revenues for the AIP and Facilities and Equipment 

accounts for a proposed infrastructure initiative (table 4).59 Additionally, 

FAA’s fiscal year 2012 appropriations cover approximately 30 percent of 

FAA’s total expenditures from general revenues. As CRS has reported, 

the House-passed FAA reauthorization bill calls for reductions to all FAA 

accounts, setting flat funding levels for fiscal years 2012 through 2014.60

These levels would reduce FAA’s annual budget by about $1 billion 

compared with fiscal year 2010 enacted levels and, except for AIP, are 

slightly below the OMB’s fiscal year 2012 budget forecasts for these 

same years.

 

59As part of the administration’s $50 billion proposed infrastructure initiative, the 

administration requested $3.35 billion for AIP and NextGen improvements. 

60The Senate reauthorization bill only encompassed the previous 2 fiscal years—2010 

and 2011. It proposed increasing total authorized funding levels for the FAA by just under 

$500 million from fiscal year 2010 to fiscal year 2011, and its proposed authorization 

levels for fiscal year 2011 were considerably greater than the approved amounts for fiscal 

year 2010 for all accounts except operations. By contrast, the House-passed H.R. 658 

sought considerable budget reductions compared with the fiscal year 2010 approved 

amounts for all FAA accounts. Authorized totals for fiscal year 2011 would have been 

$548 million below fiscal year 2010 enacted levels. For fiscal year 2011, the only year in 

which the House and Senate bills overlap, the House-passed bill specified a total 

authorization level of approximately $2 billion below the Senate-passed amount. See 

CRS, Federal Aviation Administration (FAA) Reauthorization: An Overview of Legislative 

Action in the 112th Congress (Washington, D.C.: Sept. 29, 2011).

Congressional Decisions
 

Page 38 GAO-12-222 Airport and Airway Trust Fund 

Table 4: Proposed and Actual Appropriations for FAA for Fiscal Year 2012 

Dollars in millions 

Budget category 

President’s budget 

request 

H.R. 658, FAA 

authorization bill 

Fiscal year 2012 omnibus 

appropriation 

Operations 9,823 9,168 9,653

General revenues 4,865 a 4,593

Trust-fund revenues 4,958 a 5,060

Facilities & Equipment 3,120 2,600 2,731

Trust-fund revenues 2,870 a 2,731

General revenues 250 a 0

Research, Engineering, & Development 190 147 168

Trust-fund revenues 190 a 168

AIP 5,524 3,000 3,435

Trust-fund revenues 2,424 a 3,435

General revenues 3,100 a 0

Budget authority for FAA 15,307 excluding general 

revenues to the facilities 

and equipment and AIP 

accounts

18,657 with additional 

general revenues to the 

facilities and equipment 

and AIP accounts

14,915 15,987

Percentage of trust-fund revenue appropriation 68 percentb a 71 percent

Percentage of general-revenue appropriation 32 percentb a 29 percent

Source: OMB, relevant legislation, and GAO analysis. 

Notes: This table excludes payments to air carriers for the Essential Air Service program, which are 

also drawn from the trust fund. The Senate reauthorization bill only encompasses the previous 2 

fiscal years—2010 and 2011—and therefore is omitted from this table. 

a

This bill does not establish the amount of trust-fund and general revenues for funding FAA. 

b

This calculation does not assume the general revenues requested through the President’s proposed 

infrastructure initiative. 

Changes in trust-fund taxes and fees, if enacted, would also affect trustfund revenue forecasts. For example, the Senate-passed FAA 

reauthorization bill calls for an increase of 14.1 cents per gallon in 

general-aviation jet fuel taxes and a new surcharge of 14.1 cents per 

gallon surcharge on general-aviation jet fuel purchased for fractionally 
 

Page 39 GAO-12-222 Airport and Airway Trust Fund

owned aircraft.61

Unanticipated changes affecting aviation can affect the realization of 

trust-fund revenues and FAA expenditure forecasts. Although Treasury 

forecasts continuous growth in trust-fund revenues, actual revenues have 

fluctuated considerably from year to year.

The Joint Committee on Taxation estimates that this 

provision could result in about $50 million in additional trust-fund 

revenues for fiscal years 2012 through 2014. In addition, the 

administration has proposed a fee of $100 per flight as part of the 

September 2011 deficit-reduction plan that it submitted to Congress. This 

fee would be deposited into the trust fund and, according to 

administration estimates, could generate an additional $11 billion in trustfund revenues over the next 10 years.

62

FAA’s capital and research plans align with OMB’s expenditure forecasts 

for FAA, but these forecasts do not consider potential efficiency gains 

from improvements in the air traffic control system. As part of the forecast 

reduction in FAA’s expenditures for fiscal years 2013 through 2015, FAA 

adjusted its capital plans to absorb a $2.8 billion reduction in its capital 

Specifically, the year-overyear change in trust-fund revenues has ranged from a 13 percent 

increase to an over 10 percent decline during fiscal years 2000 through 

2010. As we previously described, events, such as the economic 

recession in 2009 and structural changes in the industry, can cause trustfund revenues to vary from year to year. For example, in 2007, airline 

capacity grew more slowly than air traffic leading to growth in airline 

revenues and better-than-expected trust-fund revenues in that year. In 

addition, unanticipated events can affect FAA’s expenditures, as well as 

trust-fund revenues. For example, major airline accidents and terrorist 

actions can create additional resource needs for the agency that cannot 

be easily forecast. Additionally, these incidents can cause passenger 

demand to fall with airlines responding by lowering fares—with both of 

these factors leading to reduced trust-fund revenues.

 

61Under fractional aircraft-ownership programs, aircraft owners purchase a minimum 

share of an aircraft and share the aircraft with others having an ownership interest in that 

aircraft. 

62Treasury forecasts growing trust fund revenues because aviation activity generally 

grows with the expected growth in economic activity. Long-term revenue forecasts 

generally show a continuous growth even though economic cycles will cause revenues to 

fluctuate from year to year. However, long-term forecasts, in aggregate, should reflect the 

total effect of economic cycles.

Unanticipated Changes 

Affecting Aviation

FAA’s Implementation and 

Management of NextGen 
 

Page 40 GAO-12-222 Airport and Airway Trust Fund

expenditures. Much of this proposed reduction is in NextGen and 

NextGen-related expenditures that are being scaled back or deferred to 

later years.63

In addition, delays in implementing capital programs could result in 

additional costs, which are not factored into forecasts until the delays are 

known. As we recently reported, some key acquisitions may soon 

encounter delays, which can increase the acquisitions’ overall costs, as 

well as the costs to maintain current systems.

Although FAA also reduced its forecast operations 

expenditures because of budget constraints, these forecasts do not 

account for potential efficiency gains that may occur from the 

implementation of NextGen technology, which could reduce the overall 

cost of FAA operations.

64 For example, due to 

technical problems, the En Route Automation Modernization (ERAM) 

program—a critical program for NextGen—has been delayed, increasing

the program’s estimated costs by $330 million over 4 years, as well as 

adding an estimated $20 million per year to the costs of maintaining the 

system that ERAM was meant to replace.65

 

63As we have previously reported, FAA has not detailed how the planned funding 

reductions or the implementation delays will affect its modernization efforts, making it 

difficult for Congress to understand the trade-offs in deferring, eliminating, or reducing 

funding for different NextGen programs. As a result, we recommended that providing such 

information would help Congress assess the implications of approving annual budget 

submissions for NextGen and NextGen-related activities that support more 

comprehensive efforts to modernize the national airspace system, particularly under a 

constrained budget environment. GAO, National Airspace System: FAA Has Made 

Progress but Continues to Face Challenges in Acquiring Major Air Traffic Control 

Systems, 

Moreover, because of the 

integrated nature of NextGen, many of its component systems are 

mutually dependent on one or more other systems. For example, ERAM 

is critical to the delivery of the Automatic Dependent Surveillance System 

Broadcast (ADS-B)—the satellite-based information-broadcasting system 

that will enable more precise air traffic management—because ADS-B 

requires the use of some ERAM functions. ERAM is also pivotal to the ontime implementation of two other key NextGen acquisitions—Data 

Communications and System Wide Information Management (SWIM)—

and the delays in ERAM have, in part, resulted in delays to both of these 

GAO-05-331 (Washington, D.C.: June 10, 2005). According to an FAA official, 

FAA has communicated to appropriators how potential reductions in funding might affect 

the implementation of NextGen programs.

64GAO-12-141T. 

65ERAM is a new en route air traffic control system for high-altitude traffic. 
 

Page 41 GAO-12-222 Airport and Airway Trust Fund

programs.66

While FAA’s budget generally identifies the NextGen capabilities that FAA 

plans to implement in the near term to midterm (through 2018), the outyear expenditure forecasts are not tied to specific FAA programs and will 

be affected by decisions that have yet to be made on the long-term 

direction of NextGen. Specifically, although FAA estimates that it will incur 

total NextGen costs of between $15 billion and $22 billion for fiscal years 

2012 through 2025, two key planning documents—the NextGen 

Integrated Work Plan and Enterprise Architecture—contain a wide variety 

of possible ideas and approaches for the long-term direction of NextGen 

(beyond 2018).

Thus, looking more broadly, the implementation of 

NextGen—both in the midterm (through 2018) and in the long term 

(beyond 2018)—and FAA’s overall costs will be affected by how well FAA 

manages program interdependencies.

67 Decisions about which of these—or other—ideas and 

approaches will be implemented remain to be made. Additionally, FAA 

estimates that the avionics needed on aircraft to realize significant 

NextGen capabilities will cost private operators in the range of $5 billion 

to $7 billion through 2018. FAA has not determined whether they will 

provide financing to help aircraft operators cover these costs.

Since 1970, the trust fund has provided a stable and dependable source 

of funding for aviation-infrastructure investments. To ensure that taxes 

paid by aviation users are directed only to aviation, in 2000, Congress 

introduced a mechanism to fully appropriate all forecast revenues. 

However, the inherent difficulty in accurately forecasting revenues 

contributed to over a $6 billion decline in the trust fund’s uncommitted 

 

66SWIM is the information-management architecture for the national airspace system. 

FAA pushed the Data Communications program’s start date from September 2011 to 

February 2012, plans to revise the original SWIM-segment 1 cost and schedule plan, and 

delayed the SWIM-segment 2 start date from 2010 to December 2012. The long-term 

result of this decision is not yet known.

67The Enterprise Architecture, commonly referred to as the “blueprint” for NextGen, is a 

technical document that describes the segments, capabilities, operational activities, and 

identified relationships to the key target components of NextGen in the year 2025. The 

NextGen Integrated Work Plan is a document that describes when NextGen capabilities 

and potential improvements will be introduced and who will be responsible for them. 

Additionally, FAA’s NextGen cost estimate for 2012 through 2025 is in 2011 constant 

dollars. Thus, even though the present value of the cost are represented by this estimate, 

the actual dollars needing to be appropriated to cover those expenses in the years that 

they are incurred will be higher due to inflation.

Concluding 

Observations
 

Page 42 GAO-12-222 Airport and Airway Trust Fund

balance. Deciding on the appropriate mechanism for determining the level 

of appropriations from the trust fund requires Congress to weigh tradeoffs between the amount available for appropriations from the trust fund, 

the amount of general revenues in a given year, and the overall level of 

FAA expenditures, all while ensuring stable and sustainable funding for 

aviation investment. As we have previously suggested, a better 

mechanism may be needed to match actual revenues with trust-fund 

appropriations, and thereby help to protect the trust fund’s uncommitted 

balance and provide Congress, FAA, and the larger aviation community 

with greater certainty about the trust fund’s sustainability.

Congress will determine the future budget resources available to meet 

FAA’s operating and capital investments, including NextGen 

improvements. Even within the currently constrained federal budget 

environment, it appears that based on the President’s budget request

estimates, FAA expenditures will continue to exceed trust-fund revenues 

in future years. As federal budget resources continue to be constrained, 

Congress may face some difficult choices about whether to reduce FAA’s 

appropriations, which could increase FAA’s total costs and delay the 

benefits associated with investments such as NextGen, or to either 

increase revenues going into the trust fund or increase appropriations 

from general revenues.

We provided a draft of this report to OMB, Treasury, and DOT for review 

and comment. Each entity provided technical comments that we 

incorporated, as appropriate.

As arranged with your offices, unless you publicly announce the contents

of this report earlier, we plan no further distribution until 30 days after the

date of this letter. At that time, we will send copies of this report to

interested congressional committees, the Director of OMB, the Secretary 

of Transportation, the Acting Administrator of FAA, the Secretary of the 

Treasury, and other parties. In addition, the report will be available at no 

charge on the GAO website at http://www.gao.gov. 

Agency Comments 
 

Page 43 GAO-12-222 Airport and Airway Trust Fund

If you or your staff have any questions about this report, please contact 

me at (202) 512-2834 or flemings@gao.gov. 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 major contributions to 

this report are listed in appendix I.

Susan A. Fleming

Director, Physical Infrastructure Issues
Appendix I: GAO Contact and Staff 

Acknowledgments

Page 44 GAO-12-222 Airport and Airway Trust Fund

Susan Fleming, (202) 512-2834 or flemings@gao.gov

In addition to the individual named above, key contributors to this report 

were Paul Aussendorf (Assistant Director), Heather Krause (Assistant 

Director), Amy Abramowitz, Lauren Calhoun, Bess Eisenstadt, Bert 

Japikse, Carol Henn, Hannah Laufe, Sara Ann Moessbauer, Joshua 

Ormond, and Rebecca Rygg.

Appendix I: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(541081)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

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