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74–373—PDF 2011

S. HRG. 112–411 

STATUS OF THE AIRPORT AND 

AIRWAY TRUST FUND 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

FEBRUARY 3, 2011 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

JOHN ENSIGN, Nevada 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1, 4 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 2, 6 

Kyl, Hon. Jon, a U.S. Senator from Arizona ......................................................... 3 

WITNESS 

Dillingham, Dr. Gerald, Director of Physical Infrastructure Issues, Government Accountability Office, Washington, DC .................................................... 8 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statements ......................................................................................... 1, 4 

Prepared statement .......................................................................................... 19 

Dillingham, Dr. Gerald: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 22 

Responses to questions from committee members ......................................... 37 

Grassley, Hon. Chuck: 

Prepared statement .......................................................................................... 46 

Hatch, Hon. Orrin G.: 

Opening statements ......................................................................................... 2, 6 

Prepared statement .......................................................................................... 47 

Kyl, Hon. Jon: 

Opening statement ........................................................................................... 3 

(III) 

(1) 

STATUS OF THE AIRPORT AND 

AIRWAY TRUST FUND 

THURSDAY, FEBRUARY 3, 2011 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:02 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Cardin, Hatch, Snowe, Kyl, Roberts, and 

Thune. 

Also present: Democratic Staff: Russ Sullivan, Staff Director; 

Lilly Batchelder, Chief Tax Counsel; and Pat Bousliman, Natural 

Resource Advisor. Republican Staff: Chris Campbell, Staff Director; 

Mark Prater, Deputy Chief of Staff and Chief Tax Counsel; Nick 

Wyatt, Tax and Nomination Professional Staff Member; and Jay 

Khosla, Chief Health Counsel. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. 

This morning, before we turn to our scheduled business, we have 

an important task. Today we welcome the new ranking member of 

the Finance Committee, my colleague, my friend, Orrin Hatch. 

Only four Senators from Utah have served on the Finance Committee, and Senator Hatch is the third of those to serve as either 

chairman or ranking member. 

After Utah attained Statehood in 1896, Senator Reed Smoot was 

the first member from Utah to join the committee in 1909. Since 

then, Utah has had a member on the committee a remarkable 73 

out of the last 102 years. In fact, there are only two periods of time 

when Utah did not have a member on the committee, from 1941 

to 1952, between Senators William King and Wallace Bennett, and 

1975 to June 1991, between Senators Bennett and Hatch. 

Remarkably, each member of the Utah delegation has served at 

least 18 years on the committee. This June, Senator Hatch will celebrate 20 years of service on the committee. 

By assuming this dual role as ranking member, Senator Hatch 

joins an exclusive club. You will have the 4th-longest stretch of 

time from an initial appointment to the committee until attaining 

either chairman or ranking member status. It will have taken him 

just under 20 years to do so. [Laughter.] 

2 

Only three members have taken more time, and that record of 

22 years is jointly held by Senator Roth, Senator Byrd, Sr., and me. 

[Laughter.] 

Both Senator Hatch and I come from western States, where practicality and pragmatism are a way of life. We like to deliver results 

for our constituents. That connection is one reason we have been 

able to partner on the committee to get things done. 

Senator Hatch and I have been partners in the effort to make the 

Research and Development Tax Credit permanent and give businesses the certainty they need to grow. We worked together to reauthorize the Children’s Health Insurance Program, sometimes 

called CHIP. CHIP ensures that kids in working families can see 

a doctor and get the medicines that they need. 

Together, we produced a robust bipartisan bill in 2007, and I am 

proud to say that that legislation provided a strong foundation for 

the CHIP bill which was finally signed into law. Those are great 

examples of the Finance Committee’s long history of working together and building consensus to get things done, and I am confident that tradition will continue. 

Now I would like to take a moment to unveil Senator Hatch’s official photo, which will welcome guests to the Finance Committee. 

[Applause.] 

Thank you all. You are a very valued friend, and I look forward 

to serving with you. 

Senator HATCH. Thank you. I appreciate it. 

The CHAIRMAN. Would you like to say something? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. I want to thank my friend, Max Baucus, for this 

kindness. When I walked in and saw that, I knew there was something wrong here. [Laughter.] 

It is a great honor to serve on this committee. 

I am happy to see my friend Ben Cardin come on this committee, 

and two new ones on our side, Senator Thune and Senator Coburn, 

both excellent Senators, as well as Senator Cardin. Senator Cardin 

and I both graduated from the University of Pittsburgh School of 

Law. 

I just want you to know that I have served with Max Baucus for 

a long time. He is an excellent chairman. He is fair, he is honest; 

he does a good job. He is from the west, the intermountain west, 

which I think brings a certain amount of clarity to the committee. 

I am also deeply moved to see so many former staffers and others 

here on the sides today. It means a lot to me. I do not want to talk 

about it or I will start to get tears in my eyes, but it means a lot 

to me. I did not know this was going to happen, to be honest with 

you, and it is embarrassing. [Laughter.] 

But it is such an honor to serve on this committee. This is the 

most important committee in the Senate. It is not a knock on any 

other committees, but just because of its jurisdiction. It is an absolutely crucial committee, and I feel very honored to work with Max 

Baucus, our Democrats, and of course the wonderful Republicans 

we have on our side. 

3 

It is a committee where I hope we can work together in the best 

interests of our country. I will be doing the very best I can to do 

that, and feel very honored by this. I want to thank all of you for 

being here today. Like I said, it means a great deal to me. I did 

not realize this was going to happen. 

Max, we will work very well together as we have in the past. We 

have passed a lot of things together and have done a lot on this 

committee together. It is just a privilege to serve here, and not just 

on this committee, but in the Senate as a whole, and to serve with 

the type of people we have here. I look at Senator Kyl here. There 

is not a better Senator in the Senate than Senator Kyl, or a harder 

worker, or one who really does such an intellectually honest and 

good job. 

And I can say good comments about everybody on this committee, because I like everybody on this committee and appreciate 

everybody on this committee. So I do not want to say anything 

more. I just want to thank all of you for being here. It is a great 

honor for me. I will just tell you I will do the very best I can. As 

you all know, that means a lot of work for staff and everybody else. 

So, we will do our best, and we hope you will all be helping from 

the outside, those of you who are outside. Those who are inside, life 

is going to get even rougher. You know what that means with me. 

So, thank you, Max. Thanks for taking the time. 

The CHAIRMAN. You are welcome. You are welcome, Senator. 

Senator HATCH. Thanks to all of you. Thanks very much. [Applause.] 

The CHAIRMAN. I think Senator Kyl would like to say something. 

OPENING STATEMENT OF HON. JON KYL, 

A U.S. SENATOR FROM ARIZONA 

Senator KYL. Yes. Thank you, Mr. Chairman. It is tradition, of 

course, when someone ascends to the position of the chair or ranking member, to say a few things. I, Orrin, very much appreciate 

what you said about me. 

But, Mr. Chairman, maybe we should reveal the results of the 

election, that is to say, how Senator Hatch’s colleagues voted to put 

him in this position. This is not an automatic proposition. This is 

not a matter of just being old. [Laughter.] 

Of course, Orrin came to the Senate when he was hardly of age. 

[Laughter.] 

We actually had an election on this. I hesitate to get into a lot 

of detail about the debate that occurred and the candidates that 

ran, and so on, but the election took approximately 21⁄2 seconds; it 

was unanimous. That, obviously, is a testament to the esteem with 

which his Republican colleagues hold Senator Hatch. 

Just to reiterate something that is frequently said on this committee: everybody on this committee thinks it is pretty special, and 

historically it has been, because there has been a lot of working together, but that is not to say that people on both sides of the aisle 

do not bring to the committee very strongly held views that may 

differ with each other. It is just that we have found ways to ultimately work together to produce good results, and I am hopeful, 

even based on the conversation the chairman and I had last night 

on the Senate floor, that that kind of comity will continue to exist. 

4 

I know that it will between the chairman and our now-ranking 

member Senator Hatch, so I am pleased to acknowledge as a real 

leader on the Republican side Senator Hatch as our ranking member. It is going to make it fun for the next couple of years, working 

on this committee, to have the two of you as the leaders on the 

committee. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator, very much. Thank you. 

Again, welcome, Senator Hatch. 

I also want to take this opportunity to welcome our three new 

members to the committee: Senator Cardin, Senator Coburn, and 

Senator Thune. 

Senator Cardin is the 8th Senator from the Old Line State to 

serve on the Finance Committee. The last Marylander to serve on 

the committee was Senator John Marshall Butler, who concluded 

his service in 1962. Senator James Pearce had the longest service 

in the committee, with 11 years, 3 months. He first served with the 

Whig Party. When that party dissolved, he joined the Opposition 

Party, before eventually joining the Democratic Party in 1859. 

Senator Coburn is the 7th Senator from the Sooner State to 

serve on the committee. The Oklahoman with the highest seniority 

in the committee was Senator Robert Kerr. He ascended to the second seat behind Chairman Harry Flood Byrd, Sr. 

The last Oklahoman to serve on the committee was Senator Don 

Nickles. Senator Nickles was appointed to this committee in 1995. 

I served with him on the committee for nearly a decade. I might 

say, too, another Oklahoman we are proud to have served with is 

Senator David Boren, who joined the committees the same year I 

did. We were both elected in 1978, and he began in January of 

1979. Now he is the president of the University of Oklahoma. We 

are very pleased today, though, to see Senator Coburn on the committee. 

Senator Thune is the 4th Senator from the Mt. Rushmore State 

to serve on the Finance Committee. Senator Harlan Bushfield was 

the first South Dakotan to sit on the Finance Committee. He joined 

the committee in 1945. While it took South Dakota 56 years to obtain a seat on the committee, it took Montana longer. It took an 

incredible 77 years for my State to get a seat in this committee. 

I welcome Senator Cardin, Senator Coburn, and Senator Thune. 

I very much appreciate your joining this committee. You are very, 

very valuable, important members of the U.S. Senate and represent 

your States terribly well, and I just thank you very much for deciding that you wanted to join this committee, and making that choice 

instead of serving on some other committee. Thank you very much. 

All right. Down to business. Now I would like to turn to the topic 

of the hearing, the status of the Airport and Airway Trust Fund. 

I want to thank all of you who came to honor Senator Hatch. 

Thank you very, very much. I know he appreciates it. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. Turning to the business present before the committee, Captain A.G. Lamplugh, a British World War I pilot, once 

said, ‘‘Aviation itself is not inherently dangerous, but to an even 

5 

greater degree than the sea, it is terribly unforgiving of carelessness, incapacity, or neglect.’’ 

Today as we explore the state of the Airport and Airway Trust 

Fund, also known as the Aviation Trust Fund, we must remember 

just how dangerous and careless incapacity and neglect can be 

when it comes to aviation. We cannot afford to neglect our aviation 

infrastructure. Modernizing our runways and our air traffic control 

will improve safety, protect consumers, and create jobs. Strong and 

efficient aviation will reduce delays, lower costs, and improve access to rural communities, including those in my home State of 

Montana. 

We thank our witness for joining us today, Dr. Dillingham, particularly on such short notice. We deeply appreciate your appearance. 

The trust fund was enacted more than 40 years ago to help finance the capital and operating costs of our aviation infrastructure. 

Much has changed in aviation over the past 4 decades. From airline deregulation in the 1970s to the arrival of the Internet in the 

1990s, air travel has undergone a dramatic transformation in the 

4 decades since the trust fund was born. 

So has the trust fund. Revenues paid into the fund have risen 

from about $1 billion in 1971 to a projected $11 billion this year, 

and a dramatic increase in air travel made clear the importance of 

this fund. 

By 2030, the U.S. air traffic system will handle an estimated 

191,000 flights every day. This is a daily increase of about 49,000 

flights. The number of passengers on U.S. flights will increase from 

about 645 million this year to 1 billion per year by 2030. 

The revenues from the Aviation Trust Fund are paying for different things than they used to, including new technologies like 

NextGen. NextGen is the new GPS-based air traffic system that 

will help us better use our airspace. NextGen’s precision will allow 

us to significantly upgrade. Proper and careful implementation of 

NextGen is critical—critical for improving safety, for improving 

aviation efficiency, for creating jobs, and for advancing U.S. competitiveness. 

A word about safety. Until now, our air traffic control system has 

relied on 1950s air radar that pilots use to navigate from point to 

point. The use of NextGen’s GPS technology will allow for more 

precise traffic control of aircraft. This will improve safety by letting 

the air traffic controllers and pilots know the exact location of 

every aircraft at every moment. With NextGen, both pilots and controllers would have virtual maps in front of them to explain flights 

and weather in real time. 

NextGen will also improve air traffic efficiency. The GPS system 

will let aircraft maneuver safely much closer together. This will 

allow airports to maximize the use of existing runways and build 

future runways closer together, reducing delays. Those delays are 

costly and frustrating to passengers. 

Consider an FAA Commission report issued last year which 

found that flight delays cost our economy about $33 billion in the 

year 2007. Passengers lost billions through time wasted at airports, 

meals purchased while waiting for flights, hotels rented due to canVerDate Nov 24 2008 15:02 Jun 01, 2012 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 R:\DOCS\74373.000 TIMD
6 

cellations, and missed connections. Some of that is because of the 

weather, but also some of it is because we do not have NextGen. 

Implementation of NextGen will also create jobs. According to a 

report last October from the Treasury Department, more than 60 

percent of the jobs created by infrastructure investments such as 

NextGen occur in the construction sector. We all know that the 

construction sector was the hardest hit by the recession, with an 

average unemployment rate of over 15 percent. 

Reauthorizing FAA legislation with investments in NextGen will 

help improve the construction industry’s bleak situation and create 

an estimated 250,000 jobs in airports across the country. Finally, 

implementation of NextGen will improve U.S. competitiveness. We 

simply cannot continue to lead the world economy if we do not invest in infrastructure, including our transportation infrastructure. 

According to the same Treasury report, the U.S. spends approximately 2 percent of our GDP on infrastructure, a 50-percent decline 

from 1960. Meanwhile, China spends close to 9 percent of its GDP 

on infrastructure, and Europe spends about 5 percent. We cannot 

continue to ignore our roads, our runways, and our railways if we 

want to compete in the global economy. 

Today’s hearing is an important step this committee will take toward improving the air traffic system. Through that process, we 

will be working to fund an air traffic system that is safer and more 

efficient, one that sustains and creates jobs, and one that enhances 

our international competitiveness through investments in vital infrastructure. 

We reported legislation to that end in the last two Congresses, 

and last year the Senate passed that product by a vote of 93–0. But 

unfortunately, those efforts did not result in the bill becoming law, 

so we need to act again, and I urge us to do so very quickly. After 

this hearing, I hope to mark up this bill within a matter of days 

so we can get this bill on the floor and passed. 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Well, thank you, Mr. Chairman. Thank you for 

scheduling this hearing. It is an important one. 

I would like to welcome our three new members to the committee: Senators Coburn, Thune, and Cardin. Each of you brings 

different strengths and perspectives to the committee, and all three 

of you are known as serious legislators. All of you, each one of you, 

has a reputation for very hard work, and that means a lot to me. 

You engage fully in the fiscal issues that challenge our Nation. 

The Finance Committee is smack-dab in the middle of these issues, 

and I look forward to working with all three of you, and of course 

everybody else on this committee. 

There is something to be said for experience. Just try and tell the 

passengers that were on the plane that Captain Sullenberger guided safely into the Hudson that years of experience do not count for 

anything. Mr. Chairman, we have had a lot of experience dealing 

with reauthorizing the Federal Aviation Administration legislation. 

7 

This legislation has taken off but never quite fully landed. It is 

time to finish the flight plan and complete our multi-year reauthorization. 

Millions of travelers on literally millions of flights each year help 

to sustain and benefit from the services paid for out of the Airport 

and Airway Trust Fund. The trust fund, however, has not received 

the sustained and thorough attention from Congress that most of 

our constituents probably expect. 

The last reauthorization of the FAA program was done way back 

in the 108th Congress, and expired at the end of fiscal year 2007. 

Fiscal year 2007 ended at the end of September 2007. Since then, 

for more than 3 years, Congress has passed 17 short-term FAA extension bills. Now, these extensions have been necessary to both replenish the Airport and Airway Trust Fund and to authorize the 

use of the trust fund to continue to pay for aviation programs. 

The Airport and Airway Trust Fund is used to fund the FAA’s 

Airport Improvement Program, Facilities and Equipment Program, 

and Research, Engineering, and Development Program. The trust 

fund also pays for most FAA operations and maintenance. The 

services and facilities maintained by the FAA are utilized by literally millions of Americans and people from all over the world 

every year. 

According to data from the FAA, in 2009 FAA air route traffic 

control centers handled more than 39 million aircraft, and there 

are almost 20,000 airports in the United States. Air travel may be 

frustrating in many ways, but a lot of us take it for granted that 

we can travel across our country very quickly without too much 

trouble. It is absolutely shocking that Congress should go for so 

long, more than 3 years, without reauthorizing a program relied 

upon by so many people and of such critical importance to our 

economy. 

Getting back to the FAA programs the trust fund pays for, these 

include grants for airport planning development, and also programs 

to fund the improvement of the air traffic control system, such as 

the NextGeneration Air Transportation System, or NextGen, as the 

distinguished chairman has pointed out. I doubt there is anyone 

who would say that they do not want our airports or air traffic control systems to safely handle the unfettered flow of people and 

goods across the country and the world. 

Now, we expect that our national airport and airway system will 

be a catalyst for economic growth and for the simple freedom to 

travel whenever one desires to. In order for that to continue to be 

the case, we need to make sure we are doing our jobs and not kicking the can down the road. We have kicked the FAA can now 17 

times. We have done that by extending an expired FAA reauthorization 17 times and not completing the work on new legislation. 

Airplanes are still taking off and landing, and cargo is still being 

transported. We should be careful not to take that as a sign that 

we can continue to indefinitely put off a long-term FAA reauthorization. 

The Airport and Airway Trust Fund is dependent on several 

aviation-related excise taxes in order to distribute the burden of 

funding the FAA. These taxes include passenger ticket taxes, taxes 

on cargo, and taxes on fuel. Fuel taxes are different for commercial 

8 

aircraft than domestic general aviation. The distribution of these 

excise taxes is meant to approximate the burdens different users 

of our airports and airway systems place on our system. 

The reason it is important that real FAA reauthorization is completed, as opposed to extending an expired law, is this: we cannot 

expect that the package of excise taxes that worked several Congresses ago will continue to be the best way to fund our airport and 

airway system today based on how it is being used today. 

This is why I welcome the opportunity this hearing provides to 

carefully examine the status of the Airport and Airway Trust Fund. 

It is an opportunity to examine the series of excise taxes that fund 

the trust fund. We must understand how our airport and airway 

system functions now, we must understand how we expect it to 

function in the future, and we need to understand who uses our 

airway system and ensure that costs are imposed fairly and are 

representative of the burdens placed on the system. 

Mr. Chairman, I am glad that we are taking off on another FAA 

reauthorization bill. This time we need to reach our final destination and complete the legislation, and I know you are dedicated to 

doing that, and I am dedicated to helping you. 

The CHAIRMAN. Thank you, Senator, very much. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. I would now like to introduce our witness, Dr. 

Gerald Dillingham, who is the Director of Physical Infrastructure 

Issues at the Government Accountability Office. Thank you again, 

Dr. Dillingham, for coming in on such short notice. 

As you probably know, it is our practice here to include all written statements in the record and encourage our witnesses to summarize those statements for a period of about 5 minutes. So we 

would like you to follow that procedure, if you would, please. 

Dr. Dillingham, the time is yours. 

STATEMENT OF DR. GERALD DILLINGHAM, DIRECTOR OF 

PHYSICAL INFRASTRUCTURE ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, DC 

Dr. DILLINGHAM. Thank you, Chairman Baucus, Ranking Member Hatch, members of the committee. My statement today focuses 

on three areas: first, the current financial condition of the Airport 

and Airway Trust Fund; second, the role of the trust fund in supporting the new satellite-based air traffic management system 

known as NextGen; and third, some options for promoting the 

health and long-term sustainability of the trust fund. 

With regard to the financial condition of the trust fund, since fiscal year 2000, revenues to the trust fund have fluctuated, often in 

response to general economic conditions and international events. 

For example, during the recent recession, domestic passenger traffic declined, and the trust fund revenues fell from $12.4 billion in 

fiscal year 2008 to $10.9 billion in fiscal year 2009. 

Overall, since the trust fund’s creation in 1970, aggregate revenues have exceeded spending commitments from FAA’s appropriation, resulting in an uncommitted trust fund balance. However, our 

work shows that the uncommitted balance has generally declined 

9 

since the end of fiscal year 2001, when it exceeded $7.3 billion, and, 

at the end of 2009, it dropped to a low of $299 million. 

The principal reason for this decline is the uncertainty associated 

with forecasting trust fund revenues. These revenue forecasts are 

based on projections made a year in advance, and appropriation 

amounts for the next fiscal year are being based on those forecasts. 

In the interim, many significant events can affect the demand for 

air travel, fuel usage, and other factors that affect the trust fund 

revenues. When Congress became concerned about the declining 

uncommitted balance in fiscal year 2009, it appropriated an additional $1 billion from the general fund and decreased FAA’s appropriation from the trust fund by $1 billion. This general fund contribution reduced the risk that revenues would not be sufficient to 

cover all of FAA’s obligations. In addition, it reduced the potential 

for delays in planned projects and programs, including NextGen. 

With regard to the trust fund and support for NextGen, NextGen 

is intended to meet forecasted increases in demand for air travel 

and is designed to enhance the capacity, efficiency, and safety of 

the Nation’s air transportation system. NextGen has been identified as a national priority, and FAA has proposed substantial funding increases for it related to airport improvement in the coming 

years. 

For example, in fiscal year 2011, FAA’s proposed budget for NextGen activities is $1.1 billion. This is up from $868 million 

spent in fiscal year 2010. According to FAA’s capital improvement 

plan, the agency plans to spend $8 billion for NextGen through fiscal year 2016. In addition, FAA plans to build or expand runways 

at the Nation’s 35 busiest airports so they can accommodate the capacity increases that NextGen will allow. 

Yet even these planned runway improvements will not be 

enough. FAA has determined that 14 airports will need additional 

capacity. Much of the funding for runway construction and maintenance will come from the trust fund, and, although runway improvements will be costly, they will not only increase the aviation 

system’s efficiency, but will also support jobs and help stimulate 

the economy. 

Turning to our last area: options to promote the health and longterm sustainability of the trust fund. Given the inherent uncertainty of forecasting revenues and the overall decline in the uncommitted balance of the trust fund, we have suggested that Congress 

work with FAA to develop ways to reduce the risk of overcommitting budgetary resources from the trust fund. 

For example, Congress could appropriate less than 100 percent 

of the forecasted revenues, especially until a large enough surplus 

is built up to protect against potential disruption in revenue collections, and thereby reduce the risk of delaying or terminating 

projects. 

Another option would be to target a minimum level of the trust 

fund’s uncommitted balance and base appropriations on the goal of 

maintaining that target level. A third option would be to increase 

the general funds contribution or take actions to increase trust 

fund revenues. For example, if Congress determines that the benefits of added revenues to the trust fund warrant taxation of optional airline service fees, such as baggage fees, it could amend the 

10 

Internal Revenue Code to require that those fees be taxed and require that the revenue be deposited in the trust fund. 

Mr. Chairman and members of the committee, the continued financial health and long-term sustainability of the trust fund are 

critical to ensuring both the continued development of a safe and 

efficient national air transport system and the continued contribution of that system to strengthening key sectors of the U.S. economy. 

Thank you, Mr. Chairman and members of the committee. That 

concludes my statement. I would be pleased to answer any questions that you may have. 

[The prepared statement of Dr. Dillingham appears in the appendix.] 

The CHAIRMAN. Thank you, Dr. Dillingham. 

How much will the increase in general aviation fees that are in 

this bill help the viability of the fund? 

Dr. DILLINGHAM. Mr. Chairman, we have not analyzed the bill, 

but generally the increase in the gas tax for general aviation is relatively a small part of the trust fund. It will increase it, but over 

the last decade or so about 70 percent of the trust fund revenues 

have come from the excise tax. 

There are a couple of other factors that need to be considered, 

too. It depends in terms of if you get, say, more fuel-efficient GA 

aircraft into the system, maybe that is going to lessen the amount 

of tax that would be going into the trust fund. If you get more into 

the system, you are going to have that sort of trade-off with regard 

to its contribution to the trust fund. 

The CHAIRMAN. But if you compare the Highway Trust Fund, 

say, with the Aviation Trust Fund, how much more time do we 

have with the Aviation Fund? I do not know if you know much 

about the Highway Trust Fund. That has been depleted dramatically. We do not have nearly as much as we have had in the past 

in the Highway Trust Fund. It is very difficult to find ways to 

maintain a sufficient balance in the Highway Trust Fund to maintain past expenditures. So, if we could compare, to the degree you 

know about the highway, the aviation—— 

Dr. DILLINGHAM. Just a little bit, Mr. Chairman. The Aviation 

Trust Fund is in much better shape than the Highway Trust Fund. 

To keep the Aviation Trust Fund solvent, I guess the major thing 

is matching up forecasts with appropriations so that you do not 

over-obligate it. That is a much different situation than the Highway Trust Fund, although you hear about both of them in terms 

of being in trouble. But there is just a great deal of difference 

there. 

The CHAIRMAN. How much of additional expenditures of the 

Aviation Trust Fund would be due to NextGen as opposed to the 

financing of the Aviation Trust Fund to pay for runways and the 

like? 

Dr. DILLINGHAM. Well, almost all of NextGen, because it is facilities and equipment, will be paid for out of the trust fund. 

The CHAIRMAN. But how much more does NextGen add to projected expenses out of the trust fund? On a percentage basis, how 

much is NextGen? 

11 

Dr. DILLINGHAM. I would have to get back to you on that, Mr. 

Chairman. 

The CHAIRMAN. But could you give me a rough sense? 

Dr. DILLINGHAM. I know that FAA has projected that it is $8 billion over the next few years, but in terms of percentage, I could not 

tell you off the top of my head. 

The CHAIRMAN. Could you get a little bit, though, into the estimates of the cost of NextGen? Because to budget, it helps to know 

what we think NextGen is going to cost. Almost always there are 

cost overruns, so it is being just honest about it. What is NextGen 

going to cost, and how can we be sure that NextGen really is the 

cutting-edge technology and not something that is run-of-the-mill 

technology? That is, to make sure we absolutely are getting the 

best bang for our buck. 

Dr. DILLINGHAM. Yes, sir. You raise an issue that has been 

raised ever since NextGen was brought to the table. I would say 

that FAA is now making some positive steps to address those 

issues. By that, I mean they recently have put in place the Deputy 

Administrator at FAA as the person in charge so you now know 

who is in charge and who is accountable for NextGen. They have 

also now begun to integrate industry as stakeholders in deciding 

what needs to be a part of NextGen. You are now getting a closer 

approximation of what needs to be there, and therefore the cost. 

In the longer term, as you know, the closer you are to a particular program or implementing a program, you have better estimates. In the long term, past 2015, 2018, they have just begun to 

develop scenarios with regard to the implementation, the timing, 

and the cost. That kind of information will soon be available and 

will certainly help to hone in on what the costs will be in the longer 

term. 

The CHAIRMAN. All right. I just want to make sure, again, we are 

getting the best product here. 

Dr. DILLINGHAM. Yes, sir. In the early stages of NextGen, almost 

everything was NextGen. That, too, is being addressed now. FAA 

has identified six cutting-edge technologies which are the foundation for NextGen, and those will be integrated with some of the 

older technologies, or what we call legacy technologies. But we 

have moved along the path of knowing exactly what NextGen is, 

and in fact it is going to be those six foundational technologies/ 

cutting-edge technologies. 

The CHAIRMAN. One quick question, if you could keep your answer short, too. What is the current treatment of baggage fees? Are 

baggage fees taxed or do the airlines collect baggage fees and not 

have to pay tax on those baggage fees? 

Dr. DILLINGHAM. They do not pay tax on baggage fees. They do 

not pay the tax, the 7.5 percent. 

The CHAIRMAN. And if they were to pay, how much would that 

yield? 

Dr. DILLINGHAM. We did a study last year, and I think it was about $180 million. The update that we have is that it is now 

around $240 million that would have gone into the trust fund, and 

that only represents the baggage fees. There are other fees that, 

because of the way the money is reported, we were not able to get 

a number on. If airlines continue to use fees, the expectation is 

12 

that the monies available for the trust fund would also increase if 

they were taxable. At this point they are not taxable by the current 

Internal Revenue Code. 

The CHAIRMAN. Thank you, sir. 

Senator Hatch? 

Senator HATCH. Thank you, Mr. Chairman. 

I am very happy to welcome you here. I appreciate your testimony. You are really helping us to understand this better. 

Has the FAA or the GAO studied the benefits in terms of rate 

of return to passengers from NextGen spending? 

Dr. DILLINGHAM. There has been some modeling done. What you 

get, Senator, is, in terms of delays, reduced inefficiencies within the 

system. So they have, in fact, done some of that early modeling, 

and it comes out on the plus side. 

Senator HATCH. How will the average passenger benefit from 

NextGen, and how closely are those benefits specifically tied to 

marginal spending on NextGen? 

Dr. DILLINGHAM. Most of the individual passenger’s benefit will 

come from what the chairman said early on, the delays that will 

be eliminated, the efficiency of the system. I think there are also 

environmental benefits that are associated with the implementation of NextGen as well. 

Senator HATCH. All right. Would passenger benefits be consistent 

across all dollars spent on NextGen, or would certain dollars spent 

in certain places generate more return to consumers than others? 

Dr. DILLINGHAM. I think, Senator Hatch, you are going to get 

some across the board. But, of course, if you focus the implementation of NextGen in areas where there are the greatest delays, like 

in the northeast corridor or perhaps on the West Coast, you are 

going to get more system and individual benefit from the implementation of NextGen. 

Senator HATCH. As I am sure you are aware, there has been 

longstanding discussion as to whether different groups or users of 

FAA services are paying proportionate costs for those services. The 

tax title of the FAA reauthorization bill, the one that is currently 

under Senate consideration, represents a compromise to ensure different FAA customers pay for the services that they consume. Now, 

taxes are paid into the Airport and Airway Trust Fund right now. 

In your opinion, how closely does the tax burden upon user groups, 

such as general aviation and commercial, mirror costs placed upon 

the FAA by those same user groups? 

Dr. DILLINGHAM. Senator Hatch, as you indicated, this has been 

an ongoing issue of who pays with regard to how much they use 

the system. The work that we did—I guess I should say, traditionally there has been a public benefit associated with aviation, and 

that supports the notion of a general fund contribution. 

When you move to talk about individual groups that use the system, what we said is that, if FAA is going to impose or in some 

way indicate pay-by-your-use, that there were some things that 

needed to be in place, like there needed to be a solid cost allocation 

model so that one could see on what basis the charges were being 

made, as well as some other factors that should be considered: equity, efficiency, ability to pay, and even the international guidelines 

on this. We have not seen that come to fruition yet. 

13 

Senator HATCH. All right. Now, the tax title in the current FAA 

reauthorization bill raises the tax on general aviation jet fuel, classifies fractional aircraft as general aviation, and imposes an additional surtax. Could you give us your assessment of the burden of 

trust fund taxes versus costs imposed on the FAA? 

Dr. DILLINGHAM. We have not done that work, Senator Hatch, 

but we could work with your staff to develop that kind of information and provide it to you and for the record. 

Senator HATCH. All right. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Cardin? 

Senator CARDIN. First, Mr. Chairman, let me thank you very 

much for your warm welcome. I am really looking forward to working with the Senate Finance Committee. Senator Hatch, I see, is 

leaving. I just want to say, Senator Hatch, first of all, thank you 

for your kind comments. I enjoyed very much working with you on 

the Judiciary Committee. You were always a person who brought 

your knowledge of an issue to the committee in a very constructive 

way and reached across party lines so that we could try to deal 

with issues, and I very much appreciate that. I was not surprised, 

knowing your background at the University of Pittsburgh, but I 

very much appreciate the relationship we had on the Judiciary 

Committee, and I look forward to working with you on the Finance 

Committee. So, thank you for your kind comments. 

Senator HATCH. Thank you, Senator. 

Senator CARDIN. And Senator Baucus, I want you to know that 

I am really looking forward to working with you and with all the 

members of the committee, and I again thank you for the warm 

welcome to the committee. 

The CHAIRMAN. You bet. 

Senator CARDIN. Let me say, if I might, in regards to the issue 

we have before us today, NextGen is very important. There is important progress we need to make on air safety in this country. It 

will not only mean more efficient air service so people can get to 

their destinations quicker, but we can handle a greater volume of 

air traffic, which is critically important knowing the volume levels 

that we are now confronting. It will save us in fuel, which is important for our energy policy and for our environmental policy. For all 

those reasons, this is very important progress that we make. 

But as you point out, the cost involved, the investment, will be substantial. You said FAA is estimating that it will be $8 billion 

over the next couple of years. As I understand it, the total revenue 

of the existing trust fund is about $10–11 billion a year. So obviously, even if we extend existing revenues, they are going to be inadequate to deal with current needs, and they will not be able to 

meet the investments we need in NextGen. 

Then, as you mentioned, you have the new airports that are 

being scheduled, the new runways. I can tell you, at BWI-Thurgood 

Marshall International, we can tell you a whole list of projects that 

we have for our runways, for our terminal modernization, that are 

critically important for us to meet the demands at that important 

airport to Maryland and to our Nation. So as I understand it, the 

uncommitted funds have been reduced over the last decade, from 

14 

somewhere around $7–8 billion to virtually nothing that is remaining today. 

So, if we are going to modernize our air system in this country, 

if we are going to meet the current demands of our airports around 

the Nation, we need to either enhance the revenues going into the 

trust fund or be prepared to subsidize it through the general funds. 

It seems to me they are the two things that are going to need to 

be done if we want to make the investment in NextGen, if we want 

to modernize our airports, if we want to meet the expectations of 

how the funds have been used in the past to keep our system modernized. 

Dr. DILLINGHAM. Yes, Senator Cardin, you are right in laying out 

the landscape for NextGen. I think one of the important variables 

or factors here is the timing and the sequencing of what we do for 

NextGen. One of the things that is going on now is FAA, in consultation with Mitre, is developing various scenarios by which we 

can, in fact, get to NextGen, different times, different situations. 

The same thing is going on with the major carriers, and so forth. 

You are getting the stakeholders involved. So it is a big investment, and it is going to be a matter of what we think is important, 

and the sequence in which we do those things. 

Senator CARDIN. Looking at your report here, it indicates that the total cost of NextGen could be as high as $40 billion. Now, I 

understand some of that is private sector investment, but it could 

be at the $40-billion level. I just really want to underscore this. 

NextGen, I think, is very important and we should move forward 

on it, but it is also important to meet the needs of our airports 

around the Nation. 

I look at what is happening at my major airport, at BWIThurgood Marshall, and I look at what is happening at some of our 

regional airports in Maryland. They depend upon this trust fund 

funding in order to meet the needs. They are growing needs, and 

they are growing every year. So NextGen is important and we have 

to get it done, but we also need to meet the other needs that are 

out there. 

Dr. DILLINGHAM. Yes, sir. One part of what is now being called 

NowGen is getting the maximum benefit from the technologies that 

are already in place in the aircraft, getting the maximum benefit 

from the runways that we currently have by developing procedures 

to allow us to use them more efficiently and more effectively. So 

there are a number of scenarios that are being modeled and evaluated with that in mind, both NextGen and NowGen, for the system. 

Senator CARDIN. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman. I, too, am delighted 

to be on your committee and appreciate the warm welcome. There 

are lots of things that have to be done and dealt with on this committee and some big challenges ahead. But I look forward to working with you and the distinguished ranking member Senator Hatch 

as well, and other members of the committee. So, I appreciate the 

opportunity to be here. 

Let me, if I might, follow up on a question that the chairman 

asked, Dr. Dillingham. I know you talked a little bit about what 

15 

the cost of lost revenue is with regard to some of the additional fees 

that are being charged, and specifically he talked about the baggage fee. But do you see this as causing issues when it comes to 

adequately funding the trust fund needs, both in the short term 

and the long term? 

Dr. DILLINGHAM. Senator, I think the amount of money that we 

are talking about is relatively small. That is the extent to which 

it is impacting the trust fund. The ongoing question is, to what extent is this going to be a growing segment of money that is available, or potentially available, for the trust fund? But as it stands 

now, it is a relatively small piece of the pie. 

Senator THUNE. All right. And you said about a quarter of a million, roughly? 

Dr. DILLINGHAM. About a quarter of a million. 

Senator THUNE. A quarter billion, I should say. 

Dr. DILLINGHAM. Right. Right. This time around. 

Senator THUNE. Right. 

Dr. DILLINGHAM. But that is a growth, now, which goes with 

what we were saying, that these fees have been growing. At some 

point, though, they will reach a level where that is it, there is nothing else to charge for and there is no more raising them. But it is 

a billion-dollar piece of the industry at this point. 

Senator THUNE. All right. It strikes me that we have so many 

trust funds in the government, whether it is this one, or the Highway Trust Fund, or the Medicare or Social Security Trust Funds. 

In many cases, we are now transferring from the general fund to 

deal with the costs that are not being met by the trust funds, 

which seems to sort of contradict the whole idea of a trust fund. 

It also seems that that is going to be very hard to, going forward, 

be able to defend. I think the general fund, as we all know, is facing some serious budgetary constraints, so it strikes me that we 

are going to have to figure out ways to make these trust funds selfsufficient in terms of meeting the needs, the requirements, of, in 

this case, aviation capital improvements and those sorts of things. 

But what do you think are some options for improving the health 

of the trust fund? I mean, if you had to look at how we get this 

trust fund so it is more sustainable—I think last year’s number 

was about 24 percent of the total expenditures were general fund 

transfers. I think that is ballpark. But anyway, what are your 

views about how we—— 

Dr. DILLINGHAM. Senator Thune, I think, again, the major point 

is the way the forecasts are used to determine what the appropriations are. That takes place a year before you know what the actual 

revenues are. So FAA is making obligations during that period of 

time, and once they make those obligations, by law, then they have 

to adhere to that. So that brings in the general fund to keep them 

from going into an anti-deficiency. 

So our major suggestion is, let us look at the way we do forecasting and let us try to prevent this over-commitment. I mean, 

most recently the forecasting has moved from FAA to Treasury. 

Treasury has a lot more experience and responsibilities for these 

kinds of things. This would be their first one this time around. 

So we are hoping that that will be a major part of it, along with 

some practical sorts of things. As we had mentioned, do not approVerDate Nov 24 2008 15:02 Jun 01, 2012 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 R:\DOCS\74373.000 TIMD
16 

priate 100 percent of what you think are going to be the revenues. 

Have a cushion in there so that, if in fact the revenues do not come 

in as expected, you are not dipping into the general fund. As you 

say, the general fund can only support so much because of the 

whole deficit issue. 

Senator THUNE. When do you see the NextGen transition being 

complete? 

Dr. DILLINGHAM. I think it is going to be ongoing. I mean, the 

schedule is 2025, but by 2025 we will be looking at the next 

NextGen to keep our system on the cutting edge, as such. So 2025 

is the target for the six foundational systems that we are talking 

about that will give us better weather information, better surveillance and navigation. But that is always going to be reaching for 

the next improvement. 

Senator THUNE. All right. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Thune. 

Senator Roberts? 

Senator ROBERTS. Well, thank you, Mr. Chairman. I associate 

myself with the remarks of the members, welcoming our new ranking member and, as always, sir, your leadership on the committee, 

and friendship. Thank you for holding this hearing. Thank you, Dr. 

Dillingham, for your long service and your testimony, sir. I know 

you are a busy man. 

This is not only a top national priority, but I want to indicate for 

the record, it is a top priority for my home State of Kansas. Three 

years ago when we tried to pass this bill, Dr. Dillingham, we had 

40,000 employees in Wichita, which we like to think of as the air 

capital of the world, and the surrounding counties. Now we are 

down to 25,000. That shows you the rough economic times that we 

have gone through and what we are facing. 

We have 3,200 aviation and manufacturing businesses, including 

Cessna, Hawker-Beechcraft, Bombardier, Lear Jet, Boeing, Spirit 

Aerosystems, Garmin, and Honeywell, just to name a few. It is a 

part of our history, really. It is a way of life and it is part of our 

future, and it is part of the entrepreneurial spirit. I wish somehow 

we could translate that into some kind of revenue that could help 

NextGen, because that is going to obviously affect our economic situation out there. 

I just want to point out that general aviation has been called to 

increase its contribution to the Airport and Airway Trust Funds. I 

think that, without question, GA has stepped up to the plate. They 

have agreed to pay for the necessary increases to move our aviation 

infrastructure into the NextGen technology. 

Mr. Chairman, I cannot recall a time when industry has come to 

me and said, we want to help and we are willing to support an increase in our taxes to do so, but that is what general aviation did. 

Their only request is that they be able to pay through the current 

efficient and effective tax structure of the fuel tax. One thing about 

it, you do not have to worry about any baggage fees in regard to 

general aviation. I hope. [Laughter.] 

Anyway, they raised the general aviation jet fuel tax by nearly 

61 percent, from 35.9, or 40 cents a gallon, adding 20.9 cents per 

17 

gallon. They will contribute an estimated $113 million to updating 

NextGen, so I think that is certainly noteworthy. 

In conclusion, I am hopeful that the Senate will continue to work 

in this spirit of bipartisanship on this bill. Mr. Chairman, are we 

going to do this next Tuesday? Are we going to do this, or is it 

going to be pushed down the road? 

The CHAIRMAN. Well, my hope, Senator, is we mark it up on 

Tuesday. 

Senator ROBERTS. I would hope that would be the case. 

Dr. Dillingham, pardon my lack of understanding on this. You 

have stated, on page 12 of your testimony, ‘‘One approach would 

be to appropriate less than 100 percent of the forecasted revenues, 

especially until a sufficient surplus is established to protect against 

potential disruptions.’’ How can you have a surplus if you are going 

to appropriate less than 100 percent of the forecasted revenues? 

Dr. DILLINGHAM. What happens, Senator, is, when the forecasts 

are made, that is when the appropriations are made, if in fact the 

appropriations are made based on 90 percent of the forecast, then 

you would have a cushion if the revenues did not come in a year 

later as you had predicted they would. So you would not be in a 

situation of running into a negative or zero on the trust fund. It 

is the timing of the situation that creates the possibility or probability of going negative and not having a surplus. I did not make 

that clear, did I? 

Senator ROBERTS. Well, yes, you did. You might want to consider 

moving over to OMB. [Laughter.] 

I will just take it at that. We can go into that. I am sure staff 

can figure that out so I understand this. 

Dr. DILLINGHAM. I am still working on understanding it, too. 

Senator ROBERTS. All right. Thank you. Thank you, Dr. Dillingham. 

Mr. Chairman, are you ready for a tax on baggage fees? 

The CHAIRMAN. No. But I am just wondering if the tickets are 

taxed—— 

Senator ROBERTS. Then why not the bags? 

The CHAIRMAN. Yes. Then why not the bags? 

Senator ROBERTS. Have you seen the ads by Southwest? You are 

going to get Southwest employees all over you. 

The CHAIRMAN. No, they do not tax bags. 

Senator ROBERTS. Yes, I know. That is the whole point. I think 

that just gets passed on to the consumer. 

The CHAIRMAN. It is. 

Senator ROBERTS. Why don’t we fine the TSA employees who get 

a little too personal? 

The CHAIRMAN. I like that. 

Senator ROBERTS. I have a knee replacement, and I have to tell 

you, it is a wonderful experience. You have to put 15 minutes into 

your schedule to get through the whole mess. Depending on the 

personality—if they have any—of the TSA employees, that could be 

a possibility. You would have to hire somebody else to look and say, 

oops, you get another one. I am wandering into things I should not 

be wandering into. [Laughter.] 

Staff will really chastise me. But somehow I would just like to 

have a say about the people who are doing that. Maybe you could 

18 

have the TSA employees charge another $5 to the person instead 

of these just terribly personal pat-downs and just do a body massage. [Laughter.] 

Just a thought. It makes as much sense as your tax on bags. 

The CHAIRMAN. I am not going to go there. 

Senator ROBERTS. I am not either, anymore. [Laughter.] 

I am done. Thank you. 

The CHAIRMAN. Thank you, Senator Roberts. 

Thank you, Dr. Dillingham, very, very much for your time with 

the hearing. It will help us all by getting this bill reported out and 

passed very quickly. Thank you very much. 

The hearing is concluded. 

[Whereupon, at 11:05 a.m., the hearing was concluded.] 

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