Although there have been fluctuations in its funding sources, FAA has been supported by the current structure for decades. The agency is funded primarily by the Trust Fund (82 percent)—which receives revenues from a series of excise taxes paid by users of the national airspace system—and by the General Fund. The excise taxes are associated with purchases of airline tickets and aviation fuel, as well as the shipment of cargo, and most are scheduled to expire September 30, 2007. Trust Fund revenues are available for use subject to appropriation. Including interest earned on its balances, the Trust Fund received about $11.2 billion in 2006. In addition, about $2.6 billion was appropriated for fiscal year 2006 from the General Fund for FAA operations. Table 1 shows the distribution of Trust Fund revenues for fiscal year 2005 by source. The Trust Fund was established by the Airport and Airway Revenue Act of 1970 to help fund the development of a nationwide airport and airway system and to fund investments in air traffic control facilities. It provides all of the funding for three of FAA’s four accounts, including (1) the Facilities and Equipment (F&E) account, which funds technological improvements to the air traffic control system; (2) the Research, Engineering, and Development (RE&D) account, which funds research on issues related to aviation safety, mobility, and the environment as well as most of FAA’s contribution to JPDO; and (3) the Airport Improvement Program (AIP), which provides grants for construction and safety projects at airports. In addition, at various times during its history, the Trust Fund has provided all or some portion of the funding for FAA’s Operations account. In fiscal year 2006, expenditures from the Trust Fund totaling $11.2 billion were made among the four accounts as shown in figure 1. The current funding structure—excise taxes plus a General Fund contribution—has funded FAA for many years, and estimates indicate that this structure can potentially provide sufficient funds for the next several years to support the transition to NextGen. As the number of air travelers has grown, so have excise tax revenues. Even though revenues fell with the decline in air travel following the terrorist attacks of September 11, 2001, they began to rise again in fiscal year 2004, and FAA estimates that if the current taxes remain in effect at their current rates, revenues will continue to increase. While retaining the basic structure for funding FAA, Congress has at times changed the mix of excise taxes and some of the tax rates and has appropriated different amounts from the General Fund to offset Trust Fund fluctuations. For example, when the taxes were most recently reauthorized in 1997, Congress added the passenger segment tax while reducing the passenger ticket tax rate from 10 percent to 7.5 percent. Congress has also appropriated varying amounts of General Fund revenues for FAA during the past 25 years, ranging from 0 to 59 percent of FAA’s budget and averaging around 20 percent since fiscal year 1997. The amount of the General Fund contribution fluctuates because the contribution is based on the incoming Trust Fund revenues that are available to fund the Operations account after revenues have been allocated to fund the F&E, AIP, and RE&D accounts. Therefore, fluctuations in Trust Fund revenues and FAA expenditures require different levels of General Fund contributions. Since the Trust Fund’s creation in 1970, revenues have in the aggregate exceeded spending commitments, resulting in an uncommitted balance, or surplus. As of the end of fiscal year 2006, the Trust Fund’s uncommitted balance was about $1.8 billion. The Trust Fund’s uncommitted balance depends on the revenues flowing into the fund and the appropriations made available from the fund for various spending accounts. Policy choices, structural changes in the aviation industry, and external events have affected revenues flowing into and out of the fund. For the last 6 years, for example, the uncommitted balance has been declining because expenditures from the fund are based on projected revenues and actual revenues have been less than FAA forecasted. In prior work, we ran scenarios in which Trust Fund revenues continued to fall short of forecasted levels and the Trust Fund balance continued to decline, eventually falling to zero. We believe these scenarios raise concerns because in the past the Trust Fund’s uncommitted balance has been used to offset lower-than-expected Trust Fund revenues and decreased General Fund contributions. The zero-balance scenario would most likely have implications for Congress in funding FAA programs, including NextGen. To address this concern, H.R. 2881 proposes to base expenditures from the Trust Fund on 95 percent, rather than 100 percent, of estimated Trust Fund revenues, which would reduce the likelihood of running the Trust Fund balance to zero. According to projections prepared by the Congressional Budget Office (CBO), the existing funding structure, if maintained, will generate substantially increasing revenues over the next decade. Assuming that the General Fund provides about 19 percent of FAA’s budget, CBO estimates that through 2017 the Trust Fund can support about $22 billion in additional spending over the baseline FAA spending levels CBO has calculated for FAA (the 2006 funding level, growing with inflation) provided that most of that spending occurs after 2010. According to FAA, the majority of the funding for NextGen will take place after 2010. Moreover, if the desired level of spending exceeded what was likely to be available from the Trust Fund at current tax rates, Congress could make changes within the current structure that would provide FAA with additional revenue. For example, Congress could raise more revenue from airspace system users for modernization or for other purposes by raising the rates on one or more of the current excise taxes. Congress could also provide more General Fund revenues for FAA, although the nation’s fiscal imbalance may make a larger contribution from this source difficult. Although the current funding structure may produce enough revenue to fund FAA, including NextGen, this structure presents equity and efficiency concerns. FAA and others have stated that the current approach to collecting funds from users through excise taxes creates inequities because the revenue contributions of different flights are not directly linked to the costs of the services that these flights receive from FAA. Some stakeholders have also raised concerns that the current funding system does not provide aircraft operators with incentives to use FAA services in the most efficient manner. For users to make efficient decisions about their use of the national airspace system, their price for using the system (the taxes or charges they pay) should accurately reflect the costs their use imposes on the system. These prices, along with other factors influencing supply and demand, will influence users’ decisions about the type, size, and number of aircraft to operate, and when and where to operate them. While revenue estimates indicate that the current funding structure can potentially fund NextGen, a number of issues could affect NextGen’s overall cost, especially its technology requirements, which have not yet been fully determined. The specific systems and associated costs of NextGen infrastructure and research and development are not fully known, nor are the resources that will be contributed by other federal agencies. Other issues include the cost savings that might result from more efficient FAA operations and acquisition processes, which could reduce the need for new NextGen funding, and the extent to which FAA uses public-private partnerships or leasing arrangements to acquire NextGen infrastructure as flexibly and cost-effectively as possible. JPDO recently estimated that the total federal cost for NextGen infrastructure through 2025 will range between $15 billion and $22 billion. JPDO also reported that a preliminary estimate of the corresponding cost to system users, who will have to equip with the advanced avionics that are necessary to realize the full benefits of some NextGen technologies, ranges between $14 billion and $20 billion. Thus, according to JPDO, the total costs for NextGen could be anywhere between $29 billion and $42 billion. We consider $13 billion to be a significantly wide range and believe there is a need to better define the costs of NextGen. According to JPDO officials, more precise cost estimates will depend on information contained in several key planning documents, some of which have been released and some of which are still being developed. In June 2007, JPDO released both the latest version of the NextGen Concept of Operations and the first version of the NextGen Enterprise Architecture. JPDO is developing an Integrated Work Plan that will describe the capabilities needed to transition to NextGen from the current system and provide the research and development, policy and regulation, and acquisition time lines necessary to achieve NextGen by 2025. The Integrated Work Plan, scheduled for release at the end of this month, is akin to a project plan and will be critical for planning the partner agencies’ fiscal year 2009 budgets and programs. JPDO is also developing an Office of Management and Budget (OMB) Exhibit 300 for NextGen that will be used as input to funding decisions for NextGen research and development and acquisitions across JPDO’s partner agencies. This Exhibit 300 will be due to OMB in September 2007 and will inform decisions about the partner agencies’ 2009 budget submissions. It will be important that these various documents be used in the near term to develop more refined cost estimates for NextGen. Although JPDO has released estimates for NextGen, questions remain over how much it will cost and which entities will fund and conduct some of the necessary research, development, demonstration projects, and training that will be key to achieving certain NextGen capabilities. In the past, the National Aeronautics and Space Administration (NASA) has performed a significant portion of federal aeronautics research and development, including intermediate technology development. However, NASA’s aeronautics research budget and proposed funding show a 30-percent decline in real terms (i.e., constant 2005 dollars) from fiscal year 2005 through fiscal year 2011. To its credit, NASA plans to focus its research on the needs of NextGen.