FAA engages in three primary activities: aviation safety oversight, ATC, and airport infrastructure development (see fig. 1). The costs associated with each of these activities generally depend on the nature and usage of the specific service FAA provides. FAA safety activities include the licensing of pilots and mechanics, as well as the inspection of various aspects of the aviation system, such as aircraft and airline operations. According to FAA, the costs associated with these safety activities are primarily driven by the volume of each (e.g., the number of licenses and inspections). ATC includes a variety of complex activities that guide and control the flow of aircraft through the NAS. Generally, commercial aircraft fly under instrument flight rules (IFR) that require ATC services throughout a flight. Such flights rely on FAA staff in control towers to guide them from the terminal to the runway, and through takeoff. Once in the air and beyond the immediate vicinity of the airport, they rely on terminal radar approach control centers (TRACONs) to guide them out of the airspace in a broader area surrounding the airport. Services provided by control towers and TRACONs are referred to as terminal services. The TRACONs then pass flights off to air route traffic control centers (ARTCC), which provide en- route control until the flights near their destinations; services provided by ARTCCs are referred to as en-route services. When a flight nears its destination, control is passed back to a TRACON, and then to tower guidance, to land and proceed to an airport gate. General aviation’s (GA) use of these services varies greatly. Nearly all business jet flights file flight plans for IFR services, as do roughly half of GA piston flights. Many GA flights operate entirely under visual flight rules (VFR) and may not require any ATC services at all if they do not fly to airports that have towers. These other GA flights may require ground control, or rely on beacons or flight service stations en route. FAA states that the costs imposed by each flight are influenced by the amount and nature of the specific services it uses, and by whether the flight operates at peak periods. FAA funds airport infrastructure development through the Airport Improvement Program (AIP). AIP is a multibillion-dollar grant program that provides funding for the airports included in FAA’s National Plan of Integrated Airport Systems, which includes airports that range from the largest commercial service airports in the United States to small GA airports. Unlike safety and ATC services, AIP expenditures are not the direct result of costs imposed by users of the NAS. FAA distributes AIP funding based on congressional priorities established in authorizing and appropriation legislation. Accordingly, apart from some relatively small administrative expenses, FAA’s spending for AIP does not represent a “cost” of providing services to users. Therefore, it is not possible to establish a direct link between AIP expenditures and taxes or charges paid by system users based on their use of FAA services. The Trust Fund was established by the Airport and Airway Revenue Act of 1970 (P.L. 91-258) to help fund the development of a nationwide airport and airway system. The Trust Fund provides funding for FAA’s two capital accounts, AIP and the Facilities and Equipment account, which funds technological improvements to the ATC system. The Trust Fund also provides funding for the Research, Engineering, and Development account, which funds continued research on aviation safety, mobility, and environmental issues. In addition, the Trust Fund supports part of FAA’s operations. To fund these accounts, the Trust Fund is credited with revenues collected from system users through the following dedicated excise taxes: 7.5 percent ticket tax on domestic airline tickets $3.30 domestic passenger segment tax (excluding flights to or from rural airports) 6.25 percent tax on the price paid for transportation of domestic cargo or $0.043/gallon tax on domestic commercial aviation fuel $0.193/gallon tax on domestic GA gasoline $0.218/gallon tax on domestic GA jet fuel $14.50/person tax on international arrivals and departures, indexed to 7.5 percent tax on mileage awards (frequent flyer awards tax) $7.30 per passenger tax on flights between the continental United States and Alaska or Hawaii (or between Alaska and Hawaii), indexed to inflation Trust Fund revenues totaled $10.7 billion in fiscal year 2005. The ticket tax was the largest single source of Trust Fund revenue in fiscal year 2005, totaling about $5.2 billion, or about 48 percent of all Trust Fund receipts. The passenger ticket tax was followed by the passenger segment tax and the international departure/arrival taxes, which each totaled about $1.9 billion; fuel taxes, which totaled $870 million; the cargo/mail tax, which totaled $461 million; and interest income, which totaled $430 million. Figure 2 shows the shares received from each source in fiscal year 2005. Since the Trust Fund’s creation in 1970, revenues have, in aggregate, exceeded spending commitments, resulting in a surplus or an uncommitted balance, although expenditures from the Trust Fund exceeded revenues in 2005. The Trust Fund’s uncommitted balance, which was about $1.9 billion at the end of fiscal year 2005, depends on the revenues flowing into the fund and the appropriations made available from the fund for various spending accounts. Policy choices, structural changes in the aviation industry, and external events have affected revenues flowing into and out of the fund. For example, the uncommitted balance has been declining in recent years because Trust Fund revenues for the last 5 years have been less than FAA’s forecasted levels. Figure 3 shows the fluctuations in the Trust Fund’s uncommitted balance since its inception. In addition to Trust Fund revenues, in most years General Fund revenues have been used to fund FAA. The General Fund contribution has varied greatly, ranging from 0 percent to 59 percent of FAA’s budget (see fig. 4). From fiscal year 1997, the year when existing Trust Fund excise taxes were authorized, through fiscal year 2006, the General Fund contribution has averaged 20 percent of FAA’s total budget. About $2.6 billion was appropriated for fiscal year 2006 from the General Fund for FAA’s operations. This amount represents about 18 percent of FAA’s total appropriation. The National Civil Aviation Review Commission (Commission) issued a Congressional report in 1997 analyzing several issues, including alternative funding means to meet the needs of the nation’s aviation system. The Commission’s report identified a number of concerns with FAA’s funding structure as it existed at the time the Commission began its work. To address these concerns, the Commission made several unanimous recommendations, including that FAA’s revenues be more closely linked to the costs of services provided to support ATC activities, including capital investments. The Commission also recommended that General Fund revenues be used to fund aviation security and safety activities and government use of the air traffic system, and that GA operators continue to pay a fuel tax, although perhaps at a higher rate. Some stakeholders support the current excise tax system, stating that it has been successful in funding FAA, has low administrative costs, and distributes the tax burden in a reasonable manner. Other stakeholders, including FAA, state that under the current system, the disconnect between the revenues contributed by users and the costs they impose on the NAS raises revenue adequacy, equity, and efficiency concerns. Trends in, and FAA’s projections of, both inflation-adjusted fares and average plane size suggest that the revenue collected under the current funding system has fallen and will continue to fall relative to FAA’s workload and costs, supporting revenue adequacy concerns. Comparisons of revenue contributed and costs imposed by different flights provide support for equity and efficiency concerns. However, the extent to which revenue and costs are linked depends critically on how the costs of FAA’s services are assigned to NAS users. Thus, assessing the extent to which the current approach or any other approach aligns costs with revenues would require completing an analysis of costs, using either a cost accounting system or cost finding techniques to distribute costs to the various NAS users. FAA stated that it has made substantial progress in designing a cost accounting system, implementing it throughout its lines of business, and modifying it to determine costs by user group. Some stakeholders believe that maintaining the current funding structure for FAA is appropriate because it has been successful in funding FAA for many years, suggesting that there is no urgent reason to change it. According to these stakeholders, the revenues collected from users under the current funding system, along with General Fund revenues provided by Congress, have been sufficient for the United States to develop a safe and efficient aviation system. As the number of air travelers grew, so did revenues going into the Trust Fund. Even though revenues fell during the early years of this decade as the demand for air travel fell, they began to rise again in fiscal year 2004 (see fig. 5); FAA estimates that revenues will continue to increase. In addition, these stakeholders state that administrative costs of the current system are relatively low. Another argument put forward by some industry stakeholders and analysts for maintaining the current funding structure is that this structure provides a reasonable allocation of the funding burden between commercial aviation and GA. With the current funding structure, system users who are subject to the commercial taxes—including commercial airlines, air taxis, and many fractional ownership operations—contribute about 97 percent of the tax revenue that accrues to the Trust Fund. The remaining GA operators, including those who operate purely private corporate and individual aircraft, contribute about 3 percent. Representatives of the GA segment of the industry contend that collecting the bulk of the user- contributed revenues from the commercial segment is appropriate because the ATC system exists at its current size to accommodate the demands of commercial aviation and GA users should not be asked to contribute more than the incremental costs that result from also providing services to GA aircraft.