Airport Improvement Program (AIP):
Reauthorization Issues for Congress
Robert S. Kirk
Specialist in Transportation Policy
May 29, 2009
Congressional Research Service
7-5700
www.crs.gov
R40608
CRS Report for Congress
P
repared for Members and Committees of Congress
Airport Improvement Program (AIP): Reauthorization Issues for Congress
Summary
The Airport Improvement Program (AIP) has been providing federal grants for airport
development and planning since the passage of the Airport and Airway Improvement Act of 1982
(P.L. 97-248). AIP funding is usually spent on projects that support aircraft operations such as
runways, taxiways, aprons, noise abatement, land purchase, and safety or emergency equipment.
The funds obligated for the AIP are drawn from the Airport and Airway Trust Fund (hereafter
referred to as the trust fund), which is supported by a variety of user fees and fuel taxes. The AIP
is one of five major sources of airport capital development funding. The other sources are tax-
exempt bonds, passenger facility charges (PFCs: a local tax levied on each boarding passenger),
state and local grants, and airport operating revenue. Different airports use different combinations
of these sources depending on the individual airport’s financial situation and the type of project
being considered. Small airports are more dependent on AIP grants than large or medium-sized
airports. The larger airports, whose projects tend to be much more costly, are more likely to
participate in the tax-exempt bond market or finance capital development projects with a PFC.
The multi-year authorization of the AIP under Vision 100—Century of Aviation Reauthorization
Act (P.L. 108-176) ended on September 30, 2007. Since then, a series of short-term extensions
has authorized and provided funding for AIP, most recently through September 30, 2009 (P.L.
111-12). The AIP and PFC issues that have been considered during the ongoing debate regarding
the reauthorization of the Federal Aviation Administration (FAA) include the national level of
need for airport development and the appropriate AIP funding level; the appropriate federal role
in airport development; the criteria for the distribution of funding across airports of different
types and sizes; the sufficiency of AIP discretionary funding, especially for major capacity
enhancing projects; airport privatization; defederalization of large airports; raising or eliminating
the $4.50 ceiling now imposed on PFCs; the use and tax treatment of airport bonds; and noise
mitigation funding and eligibility.
During the FAA reauthorization debate, virtually all of the policy issues and options concerning
AIP will be influenced by the broader budget issues of the adequacy of trust fund revenues and
the availability of money for the FAA from the Treasury general fund. Should ample revenues be
available, the reauthorization of AIP could maintain the program’s structure and perhaps even
increase AIP spending. A constrained-budget scenario would probably increase interest in such
issues as defederalization or a tightening of program formula funding and eligibility criteria,
which could provide cost savings. It could also increase interest in raising or eliminating the PFC
ceiling, which could help airports fund more projects.
This report is focused solely on AIP issues in the ongoing FAA reauthorization debate. To track
the full FAA reauthorization debate, including legislative action on AIP and other FAA programs
and activities, see CRS Report R40410, Federal Aviation Administration (FAA) Reauthorization:
An Overview of Legislative Action in the 111th Congress, coordinated by Bart Elias.
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Airport Improvement Program (AIP): Reauthorization Issues for Congress
Contents
Introduction ................................................................................................................................ 1
Background and Selected Legislative History.............................................................................. 2
Airport and Airway Development and Revenue Acts of 1970 (P.L. 91-258) .......................... 3
Airport and Airway Improvement Act of 1982 (P.L. 97-248; the 1982 Act) ........................... 3
The Wendell H. Ford Aviation Investment and Reform Act for the 21st Century of
2000 (AIR21, P.L. 106-181) ............................................................................................... 4
Vision 100: Century of Aviation Reauthorization Act of 2003 (P.L. 108-176; H.Rept.
108-334) ............................................................................................................................ 5
Sources of Project Funding for Airports....................................................................................... 5
Airport Improvement Program (AIP)........................................................................................... 6
The Airport and Airway Trust Fund....................................................................................... 7
AIP Funding ......................................................................................................................... 9
AIP Funding Distribution .................................................................................................... 12
Formula and Discretionary Funds.................................................................................. 12
State Block Grant Program ........................................................................................... 15
The Federal Share of AIP Matching Funds .................................................................... 16
Distribution of AIP Grants by Airport Size .................................................................... 16
What the Money is Spent On......................................................................................... 17
Letters of Intent (LOI)................................................................................................... 18
Voluntary Airport Low Emissions (VALE) Grants ......................................................... 19
AIP Grant Assurances ................................................................................................... 19
Passenger Facility Charges (PFCs) ............................................................................................ 19
AIP Funding of Airport Security................................................................................................ 22
Congressional Issues ................................................................................................................. 23
Airport Capital Needs Assessments ..................................................................................... 23
Views of the Adequacy of Funding Availability ............................................................. 25
Airport Capacity Needs at the 35 Busiest Airports ......................................................... 26
Caveats ......................................................................................................................... 28
AIP’s Financial Future Under an Uncertain Budgetary Outlook ........................................... 28
AIP Spending “Guarantees” ................................................................................................ 29
Current Law: Point-of-Order Enforced Spending Guarantees......................................... 29
Spending Guarantee Options ......................................................................................... 30
Partial Defederalization....................................................................................................... 31
Privatization........................................................................................................................ 31
Apportionment and Eligibility Changes............................................................................... 33
Federal Share ...................................................................................................................... 33
Discretionary Fund Set-Asides ............................................................................................ 34
Minimum Discretionary Fund ............................................................................................. 34
Grant Assurances ................................................................................................................ 34
Noise Mitigation ................................................................................................................. 34
Very Light Jets (VLJs) and the Airbus A380: Impact on AIP................................................ 35
“Place Naming” in Annual Appropriations Legislation ........................................................ 36
Passenger Facility Charge Issues ......................................................................................... 36
Airport Bonding Issues ....................................................................................................... 38
Alternative Minimum Tax (AMT) Issues....................................................................... 38
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Airport Improvement Program (AIP): Reauthorization Issues for Congress
AIP Stimulus Funding ......................................................................................................... 39
Figures
Figure 1. AIP Authorizations and Amounts Made Available for AIP,FY1982-FY2009
(Dollars in Millions)............................................................................................................... 10
Figure 2. Distribution Entitlement and Discretionary Grants for 2007........................................ 15
Figure 3. FY2008 % Value of AIP Grant Distribution by Airport Size........................................ 17
Figure 4. AIP Grants Awarded, by Type, FY1992-FY2008......................................................... 18
Tables
Table 1. Annual AIP Authorizations and Amounts Made Available, FY1992-FY2009 ............... 11
Table 2. Distribution of PFC Approvals and AIP Grants by Project Type, FY1992-
FY2008.................................................................................................................................. 21
Appendixes
Appendix A. Legislative History of Federal Grants-in-Aid to Airports ....................................... 40
Appendix B. Definitions of Airports Included in the NPIAS ...................................................... 45
Contacts
Author Contact Information ...................................................................................................... 46
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Airport Improvement Program (AIP): Reauthorization Issues for Congress
Introduction
The Airport Improvement Program (AIP) provides federal grants to airports for airport
development and planning. The airports participating in the AIP range from very large publicly-
owned commercial primary airports to small public use general aviation airports that may be
privately-owned.1 AIP funding is usually limited to construction or improvements related to
aircraft operations, typically for planning and construction of projects such as runways, taxiways,
aprons, noise abatement, land purchase, and safety, emergency or snow removal equipment.
Commercial revenue producing portions of terminals (such as shop concessions or commercial
maintenance hangars), automobile parking garages, and road construction outside the airport
boundary, are examples of improvements that generally are not eligible for AIP funding. Airports
smaller than medium hub, however, have broader eligibility on terminal projects under certain
conditions.2 AIP money cannot be used for an airport’s operational expenses.3
The passenger facility charge (PFC) is a local tax imposed, with federal approval, by an airport on
each boarding passenger. The spending of PFC program revenues is meant to complement AIP
grants. PFC funds can be used for a broader range of projects than AIP grants and are more likely
to be used for “landside” projects such as passenger terminal and ground access improvements
that are generally not eligible for AIP funding.4 PFCs can also be used for bond repayments and in
some cases to provide the local match for AIP projects.
This report discusses the Airport Improvement Program and its complement, the PFC, within the
broader context of airport capital development finance.5 After a brief history of federal support
for airport construction and improvement, the report describes AIP funding, its source of
revenues, funding distribution, and the types of projects the program funds. This is followed by a
1 General aviation airports do not serve military (with a few Air National Guard exceptions) or scheduled commercial
service aircraft but typically do support one or more of the following: business/corporate, personal, instructional flying;
agricultural spraying; air ambulances; on-demand air-taxies; charter aircraft. See Appendix B at the end of this report
for airport definitions.
2 Primary commercial airports are categorized by the percentage of the total national passenger boardings
(enplanements) that occur at the individual airport during a year: large hub airports enplane at least 1% of the national
total; medium hub airports enplane at least 0.25% but less than 1%; small hub airports enplane 0.05% but less than
0.25%; and nonhub airports enplane more than 10,000 passengers but less than 0.05% of total national enplanements.
Large and medium hub airports accounted for almost 89% of all enplanements in 2005. See Appendix B at the end of
this report for more detail.
3 For AIP eligibility criteria and prohibitions, see FAA, AIP Handbook, chapter 3, at http://www.faa.gov/
airports_airtraffic/airports/resources/publications/orders/media/aip_5100_38c.pdf. Generally, all work items must be
located within the airport boundary. Exceptions, however, include such items as removal of obstructions, relocation of
roads and utilities to allow for eligible airport development projects, some environmental mitigation work, and noise
program projects.
4 The terms airside and landside are terms of art often used in discussions of airport development and planning.
Although their meanings may vary depending on the user and context, airside generally refers to parts of an airport that
directly involve the arrival and departure of aircraft (i.e. runway, taxiway, and ramp areas, etc.), landside generally
refers to other areas of the airport (i.e. buildings such as terminals, hangars, firehouses and other facilities and
infrastructure such as fuel farms, roads, perimeter facilities, etc.). Although most would describe AIP as primarily an
airside program, its eligibility criteria allow for some projects that are landside as well as for noise and environmental
mitigation projects, which do not fit neatly into the airside/landside distinction.
5 For an overview of how airports fund their operating expenses and the sources of funding commonly used to pay for
airport capital development, see CRS Report 98-579, Airport Finance: A Brief Overview, by Robert S. Kirk.
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review of AIP legislative and policy issues that are being considered in the course of the Federal
Aviation Administration (FAA) reauthorization debate of the 111th Congress.
The multi-year authorization of the AIP under Vision 100—Century of Aviation Reauthorization
Act (P.L. 108-176) ended on September 30, 2007. AIP spending is supported by funding from the
Airport and Airway Trust Fund (hereafter referred to as the trust fund). The aviation user fees and
taxes that support the trust fund had been authorized through September 30, 2007, in this case
under provisions of the Taxpayer Relief Act of 1997 (P.L. 105-34). A series of short-term
extensions authorized and provided funding for AIP through December 31, 2007. Although tax
and trust fund authority were extended to February 28, 2008, AIP contract authority was allowed
to lapse. Consequently, AIP was in abeyance from January 1, 2008 until February 28, 2008.
During this period, new grants could not be awarded, but the FAA could honor payment requests
for existing grants. Since then, Congress has again passed a number of short-term extension acts.
The most recent of these Acts, the Federal Aviation Act Extension Act of 2009 (P.L. 111-12)
extended the revenue collection, expenditure, and program authorities that support FAA programs
and activities (including AIP) through September 30, 2009.
This report is focused solely on AIP issues in the ongoing FAA reauthorization debate. To track
the full FAA reauthorization debate, including legislative action on AIP and other FAA programs
and activities, seeCRS CRS Report R40410, Federal Aviation Administration
(FAA) Reauthorization: An Overview of Legislative Action in the 111th Congress, coordinated by
Bart Elias.
Background and Selected Legislative History6
Prior to World War II the federal government limited its role in aviation to maintaining the airway
system, viewing airports as a local responsibility. Some federal monies were spent on airports
during the 1930s (about $150 million) but only as part of federal work relief activities such as
Works Progress Administration (WPA) projects. The national defense need for a strong system of
airports during World War II led to the first major federal support for airport construction. After
the war, the Federal Airport Act of 1946 (P.L. 79-377; the 1946 Act) continued federal aid under
the Federal Aid to Airports Program, although at lower levels than during the war years. Under
the 1946 Act, funds were appropriated annually from the general fund of the U.S. Treasury.
Initially much of this spending supported a policy of conversion of military airports to civilian
use. In the 1960s substantial funding also was used to upgrade and extend runways for use by
commercial jets.7 Increasing congestion during the 1960s, both in the air and on the ground at
U.S. airports, was seen as evidence by some that past federal support for airports had not been
sufficient to maintain adequate airport capacity.8
6 This is a summary of a more detailed legislative history of federal grants-in-aid to airports provided in Appendix A,
at the end of this report.
7 For a general discussion of the U.S. airport system see Alexander R. Wells, Airport Planning & Management, (New
York, TAB Books, 1992), 1-76.
8 U.S. President (1969-1974: Nixon), Problems of Air Transportation in America: Message from the President of the
United States, 91st Cong. 1st Sess., June 1969, (Washington, U.S. Govt. Print. Off. , 1969), H.Doc. 91-130.
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Airport and Airway Development and Revenue Acts
of 1970 (P.L. 91-258)
In 1970, Congress responded to the congestion problems and capacity concerns at airports by
passing two acts. The first, the Airport and Airway Development Act, dealt with the spending side
of federal aid to airports. It established the forerunner programs of AIP—the Airport
Development Aid Program (ADAP) and the Planning Grant Program (PGP)—and set forth the
programs’ grant criteria, distribution guidelines, and authorization of grant-in-aid funding for the
first five years of the program.9 The second Act, the Airport and Airway Revenue Act of 1970,
dealt with the revenue side of airport development. This act established the Airport and Airway
Trust Fund (AATF, also referred to as the Aviation Trust Fund, and in this report, simply the trust
fund). Revenues from levies on aviation users and fuel were dedicated to the fund.10 Since
enactment of the 1970 Act, the trust fund has been the principal source of federal aid to airports
(first under ADAP and then under the AIP starting in FY1982).
In 1976, the Airport and Airway Development Amendments Act of 1976 (P.L. 94-353),
responding to concerns over the amounts made available in appropriations bills for ADAP,
included “cap and penalty” provisions which placed an annual cap on spending for costs of air
navigation systems and a penalty that reduced these caps if airport grants were not funded each
year at the airport program’s authorized levels.11 Some form of cap and penalty mechanisms were
in effect until FY1998.
ADAP grants totaled about $4.1 billion from 1971 through 1980. In part because of a debate over
proposed “defederalization” provisions, Congress did not pass authorizing legislation for the
taxes that supported the trust fund or for the fund’s operation during FY1981 and FY1982, which
meant that the Aviation Trust Fund lapsed during those two years, although spending for airport
grants continued.12
Airport and Airway Improvement Act of 1982
(P.L. 97-248; the 1982 Act)
The 1982 Act created the current AIP and reactivated the trust fund. Although the AIP maintained
the ADAP’s approach of using grants-in-aid (as opposed to providing loans) to support an
integrated national system of airports, it did make some significant changes in the operation of the
program. The program differences included altering the funding distribution among the newly
defined categories of airports and extending aid eligibility to privately owned general aviation
airports.13 The act also required the Secretary of Transportation to publish a national plan for the
9 Grants-in-aid to airports refer to the giving of federal money (that does not have to be repaid) to an airport sponsor,
such as an airport authority, to subsidize an FAA approved airport project.
10 See CRS Report RS21321, Aviation Taxes and Fees: Major Issues, by John W. Fischer.
11 For a detailed discussion of the history of the various cap and penalty provisions and other spending guarantees, see
CRS Report RL33654, Aviation Spending Guarantee Mechanisms, by Robert S. Kirk.
12 Airport aid for those years was appropriated at $450 million per year. Certain aviation fee revenues went into the
Treasury’s general fund and the Highway Trust Fund. The defederalization debate centered around proposals to
withdraw federal aid from major air carrier airports on the grounds that the federal government was overly involved in
airport development finance and that large airports could finance any needed development themselves.
13 See the discussion in Appendix A, at the end of this report, for more detail.
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development of public-use airports in the United States. This biannual publication is called the
National Plan of Integrated Airport Systems (NPIAS). The NPIAS identifies airports that are
considered important to national transportation. For an airport to receive AIP funds it must be
listed in the NPIAS.14 In this report, all references to the “national airport system” are references
to the NPIAS airports. In reauthorizing the Aviation Trust Fund, the act also adjusted the schedule
of aviation user fees.
Although the act was amended often in the 1980s and early 1990s, the general structure of the
program remained the same.15
The Wendell H. Ford Aviation Investment and Reform Act
for the 21st Century of 2000 (AIR21, P.L. 106-181)
AIR21’s enactment was the culmination of two years of legislative effort to pass a multi-year
FAA reauthorization bill.16 The length of the effort was a reflection of the difficult issues faced.
Major issues that had to be resolved included the budgetary treatment of the aviation trust fund,
raising or eliminating the ceiling on the passenger facility charge (PFC), and the spending
amounts and their distribution.
Rather than enacting further modifications of the “cap and penalty” provisions, AIR21instead
included a so-called “guarantee” that all of each year’s receipts and interest credited to the trust
fund will be made available annually for aviation purposes. The guarantee is enforced by changes
made in House and Senate point-of-order rules. One rule makes it out-of-order to consider
legislation that does not spend all trust fund revenues for aviation purposes. The second rule
makes it out-of-order to consider legislation for funding FAA’s Operations and Maintenance
(O&M) or Research, Engineering and Development (R,E&D) budgets if AIP and the Facilities
and Equipment (F&E) budgets are funded below authorized levels. As is discussed later in this
report, the funding guarantees have not been enforced in recent years because points-of-order
have either been waived by the House Rules Committee or have not been raised by Members on
the floor of the House or Senate.
AIR21 did not, however, make any major changes in the overall structure or functioning of AIP. It
did make a major change in the amount of money made available for airport development
projects. From a funding level of approximately $1.9 billion for FY2000, AIP’s authorization
increased funding by nearly 70% to $3.2 billion for FY2001, then to $3.3 billion for FY2002, and
to $3.4 billion for FY2003. The bill also made changes in funding distribution to facilitate the
14 Federal Aviation Administration, National Plan of Integrated Airport Systems (NPIAS) 2009-2013, (Washington,
FAA, 2008), p. 1. According to the FAA, 3,411 (including 55 proposed NPIAS airports) of the 19,815 airports existing
in the United States are listed in the NPIAS. Unless otherwise stated, the discussion in this paper refers to the NPIAS or
“national system” airports.
15 Authority to collect taxes for the trust fund expired on January 1, 1996 and the trust fund received no revenues for
nearly eight months until it was extended to the end of the calendar year. Tax authority then expired for another two
months. Spending from the trust fund continued during these lapses, however.
16 During the debate AIP underwent four separate authorization extensions: P.L. 105-227 extended AIP through March
31, 1999; P.L. 106-6 through May 31, 1999; P.L. 106-31 through August 6, 1999; and, finally, P.L. 106-59 through
September 30, 1999. The AIP was held in abeyance from October 1, 1999 until AIR21 was enacted on April 5, 2000.
See CRS Report RS21621, Surface Transportation and Aviation Extension Legislation: A Historical Perspective, by
John W. Fischer and Robert S. Kirk.
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larger amounts authorized. The formula funding and minimums for primary airports were doubled
starting in FY2001; the state apportionment for general aviation airports was increased from
18.5% to 20%; the noise set-aside was increased from 31% to 34% of discretionary funding and a
reliever airport discretionary set-aside of 0.66% was established.17
AIR21 also increased the PFC maximum to $4.50 per boarding passenger. In return for imposing
a PFC above the $3 level, large and medium hub airports would give back, or “forgo,” 75% of
their AIP formula funds. This made more AIP funding available to the smaller airports.
Vision 100: Century of Aviation Reauthorization Act
of 2003 (P.L. 108-176; H.Rept. 108-334)
Vision 100, the FAA reauthorization act, signed by President George W. Bush on December 12,
2003, included some changes to AIP but not on the scale of the changes made under AIR21. Both
the funding increase and the programmatic changes were modest by comparison. Vision 100
funded AIP for four years at the following annual levels: $3.4 billion for FY2004; $3.5 billion for
FY2005; $3.6 billion for FY2006; and $3.7 billion for FY2007. The law extended the AIR21
spending “guarantees” through FY2007. As was mentioned earlier, a number of FAA extension
acts extended both the authorization of revenue collection and expenditure from the trust fund as
well as AIP program authority through the end of FY2009.
Sources of Project Funding for Airports
The AIP is one of five major sources of funding for airport development and improvement.18
Airports also fund capital projects using tax-exempt bonds, passenger facility charges (PFCs; a
local tax levied on each boarding passenger), state and local grants, and airport revenue.19
Different airports use different combinations of these sources depending on the individual
airport’s financial situation and the type of project being considered. Small airports are more
likely to be dependent on AIP grants than large or medium-sized airports. The larger airports are
also much more likely to participate in the tax-exempt bond market or finance capital
development projects with the proceeds generated from PFCs. Each of these funding sources
places differing legislative, regulatory, or contractual constraints on airports that use them.
Bonds, AIP, and PFCs are the primary sources of funding for airport capital projects. Based on
2001-2005 data, the U.S. Government Accountability Office (GAO), found that the airport system
received an average of $13 billion per year from all sources for capital development. Of this
amount, bonds accounted for 50%, AIP for 29%, PFCs for 17%, state and local contributions for
4%, and airport revenue for 4%.20 The average amounts made available for AIP and the average
17 An increase in AIP funding of the size of the AIR21 increase, faces a number of obstacles in the 111th Congress, that
are discussed later in this report, including deficit reduction efforts, enforcement of pay-as-you-go rules, and the
spending of limited available funds on other initiatives such as air traffic control modernization.
18 For more see, CRS Report 98-579, Airport Finance: A Brief Overview, by Robert S. Kirk.
19 Airport revenue sources include airfield area fees/landing fees, terminal area concessions and rent, airline leases,
parking, etc. PFCs are sometimes referred to as a “head tax.”
20 Government Accountability Office, Airport Finance: Observations on Planned Airport Development Costs and
Funding Levels and the Administration’s Proposed Changes in the Airport Improvement Program (Washington: GAO),
(continued...)
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annual PFC collections have been significantly higher since FY2001 (because of the AIR21
increase in AIP funding and the raised PFC ceiling).21 Bonds, however, remain the largest source
of funding for airport capital projects.22
Of the 3,356 airports in the NPIAS, all but 102 are public sector enterprises that usually operate
under a city, county, or state department or a specially created organization such as an airport or
port authority.23 Generally, airports can do little to influence their financial relationship to their
governmental sponsors. On the other hand, airports that handle commercial service aircraft are
able to negotiate the terms and conditions of their agreements with their major users and
creditors.
The source of airport development funds sets the different limitations and obligations that
influence how project money can be raised and spent. The availability and conditions of one
source of funding may also influence the availability and terms of other sources of funding. The
two financing sources for airports with the most significant federal involvement are the AIP and
PFC programs.
As mentioned above, the dependence on AIP to pay for capital needs varies greatly according to
airport size categories, with the smaller airports being more dependent on AIP funding.24 Large
and medium-hub airports finance much of their capital expenditures by using bonding and PFCs,
and rely on AIP for only 16% and 29%, respectively, of their total capital spending. For small-hub
airports the dependence on AIP grants rises to 51%. For non-hub commercial service airports AIP
dependence rises to 89% and for other non-hub airports to 94%.25
Airport Improvement Program (AIP)
The AIP provides federal grants to airports for airport development and planning. The airports
participating in the AIP range from very large publicly-owned primary commercial service
airports to small public use general aviation airports that may be privately-owned (but are
required under AIP to be available for public use). As mentioned earlier, AIP funding is usually
limited to construction or improvements related to aircraft operations, such as runways and
taxiways. Commercial revenue producing facilities are generally not eligible for AIP funding, nor
are operational costs.26 The structure of AIP funds distribution reflects legislatively set national
(...continued)
GAO-07-885, 2007, p. 8.
21 The 2009-2013 NPIAS estimates that AIP and PFCs together account for about 40% of capital spending. p. 69.
22 Because PFCs are often used to make debt payments, this use reduces the total of PFC revenues used to directly pay
for airport projects. This means that the amounts actually available for airport projects will be somewhat less that the
grand total of AIP, PFCs, bonds, local grants, and airport revenues dedicated to capital improvements.
23 There are 1, 834 public use airports that are not in the NPIAS because they do not meet minimum entry criteria. For
the entry criteria see FAA Order 5090.3C, available at http://www.faa.gov/airports_airtraffic/airports/resources/
publications/orders/media/planning_5090_3C.pdf, see pages 11-15.
24 See Appendix B for airport definitions.
25 Based on FY2003 data, see FAA. Airports Data Package for Stakeholders. Available at http://www.faa.gov/about/
office_org/headquarters_offices/aep/aatf/media/Airports%20Data%20Package.pdf.
26 For detailed guidance on allowable costs see chapter 3 of the AIP Handbook, at http://www.faa.gov/
airports_airtraffic/airports/resources/publications/orders/media/aip_5100_38c.pdf.
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priorities and objectives of assuring airport safety and security, stimulating capacity building,
reducing congestion, helping fund noise and environmental mitigation costs, and financing small
state and community airports. There is less federal involvement in the four other sources of
airport development funds.
The main financial advantage of AIP to airports is that, as a grant program, it can provide funds
for a known range of capital projects without the financial burden placed on airports by bond or
other debt financing. Limitations on the use of AIP grants include the range of projects that AIP
can fund and the requirement that airports adhere to all program regulations and grant assurances.
This section begins with a brief discussion of the source of the money that is used to pay for AIP
grants, the Airport and Airway Trust Fund (AATF: aviation trust fund, hereafter simply referred to
as the trust fund), followed by a description of the AIP’s system of project grant distribution. The
section then describes AIP funding in terms of what types of projects the grants are spent on and
examines grant distribution by airport size. Finally, it discusses AIP’s complement, the PFC
program.
The Airport and Airway Trust Fund
Modeled on the Highway Trust Fund, this trust fund was designed to assure an adequate and
consistent source of funds for federal airport and airway programs.27 The trust fund is also the
primary funding source for most FAA activities in addition to federal grants for airports. These
include, facilities and equipment (F&E); research, engineering, and development (R,E&D); and
FAA operations and maintenance (O&M). O&M also, however, receives some funding from the
Treasury general fund. Air traffic system capital maintenance and improvement falls primarily
under the F&E category. Under the 1970 Act the trust fund was to have been both a capital
account and, when excess funds existed, a user-pay system to help support FAA’s administrative
and operations costs.28
The money that goes into the Aviation Trust Fund comes from a variety of aviation user fees and
fuel taxes.29 As mentioned earlier, these tax revenues were authorized until September 30, 2007,
by the Taxpayer Relief Act of 1997 (P.L. 105-34). The authority for these taxes has been extended
through September 30, 2009. Revenue sources (current rate as of January 1, 2009) include:
• 7.5% ticket tax
• $3.60 flight segment tax30
27 Although the Airway and Airport Trust Fund was modeled after the Highway Trust Fund, there are differences in the
way funds are distributed. One major difference is that highway spending is funneled through the states whereas most
airport development funds go directly to airports.
28 See General Accounting Office, Congressional Intent: Whether or Not the Airport and Airway Trust Fund Was
Created Solely to Finance Aviation “Infrastructure,” “B-281779” (Washington, GAO, 1999), 16 p. For another
discussion of congressional intent regarding the debate over the use of aviation trust fund revenues for both airport and
airway infrastructure as well as spending on FAA operations, see also Congressional Budget Office, The Status of the
Airport and Airway Trust Fund (Washington, CBO, 1988), 1-18.
29 U.S. Internal Revenue Code sec. 4041,4081, 4091, 4261-4263,4271, 9502. See also P.L. 105-34 sec. 1031-1032. See
also CRS Report RS21321, Aviation Taxes and Fees: Major Issues, by John W. Fischer, and CRS Report RL30050,
Aviation: Direct Federal Spending, 1918-1998, by John W. Fischer.
30 A flight segment is defined as “a single take-off and a single landing.” The flight segment fee has been inflation
adjusted (rounded off to the nearest dime) on an annual basis beginning on January 1, 2004.
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• 6.25% tax on cargo waybills
• 4.3 cents on commercial aviation fuel
• 19.3 cents on general aviation gasoline
• 21.8 cents on general aviation jet fuel
• $16.10 international arrival tax31
• $16.10 international departure tax
• 7.5% “frequent flyer” award tax32
• 7.5% ticket tax at rural airports33
Over much of the life of the trust fund, these revenues plus interest on the trust fund’s
unexpended balances often brought more revenue into the fund than was being paid out. This led
to the growth in the end-of-year unexpended balance in the trust fund. There are outstanding
commitments against these unexpended balances, so not all of the unexpended balance would
actually be available in any given year. Nonetheless, these unexpended balances (somewhat
inaccurately referred to by some as a surplus) have been large enough, at times, during the history
of the aviation trust fund to make their existence controversial.
The scenario of an unexpended trust fund balance, that grows substantially larger each year,
ended in FY2001. Most observers believe the drop in demand for air travel that began during
2001, due at first to a recessionary economy and later to potential fear of flying following the
September 11 attacks, significantly reduced the revenues flowing to the trust fund. In addition,
AIR21 established a mechanism to ensure that all trust fund receipts would be committed to
spending on aviation each year. The forecast levels of receipts were drawn from the President’s
budget baseline projection for each year. For FY2001 through FY2008, actual trust fund revenues
fell below the forecast revenues. Consequently, this meant that more money was being committed
than was being collected in revenues and the difference was drawn from the trust fund’s
uncommitted balance. The uncommitted balance in the aviation trust fund fell from $7.3 billion at
the end of FY2001 to $1.4 billion at the end of FY2008 and is forecast to fall to $752 million by
the end of FY2009 and to $386 million by the end of FY2010.34 Although it appears that the
uncommitted balance could remain positive through FY2010, it is important to keep in mind that
this is a small financial buffer. Should actual revenues fall below projected levels, this buffer
could prove insufficient. It is also important to keep in mind that the taxes that provide revenue to
the trust fund will lapse unless reauthorized by the end of FY2009. Historically, achieving
agreement on the authorization of aviation taxes has been difficult. The authority to collect
31 Both the international arrival and departure taxes have been adjusted (rounded off to the nearest dime) for inflation
on an annual basis since January 1, 1999. The rate for U.S. flights to and from Alaska or Hawaii is $8.00.
32 This tax is not limited to frequent flyers but includes all second party purchases of airline miles.
33 Rural airport passengers pay only the rural airport ticket tax. They do not pay the segment tax on the segment to or
from the rural airport, and do not pay the general ticket tax in addition to the rural airport ticket tax.
34 Government Accountability Office, Commercial Aviation: Airline Industry Contraction Due to Volatile Fuel Prices
and Falling Demand Affects Airports, Passengers, and Federal Government Revenues, GAO-09-393, (Washington,
GAO, 2009), p. 36-41. GAO also estimated that if revenues were 5% less than projected the uncommitted balance
would fall to $595 million in FY2007 and to $0 if revenues were 10% less than projected. See also, Congressional
Budget Office, Financing Federal Aviation Programs: Testimony before the Committee on Ways and Means, U.S.
House of Representatives, Doc. 10116, May 7, 2009, 18 p.,
http://www.cbo.gov/ftpdocs/101xx/doc10116/FAA_Testimony.pdf.
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aviation taxes lapsed for significant periods in 1980 and 1996. At the times of these lapses there
existed in the trust fund large accumulated unobligated balances, which permitted the funding of
AIP and other FAA programs to continue in spite of the absence of new tax revenue. It appears
that this will not be the case after September 30, 2009. Based on GAO’s projections, the trust
fund’s uncommitted balance would not be sufficient to fund FAA programs, including AIP, for
long in the event that the aviation taxes are allowed to lapse.
The adequacy of trust fund revenue under the current tax regime, for the years ahead, has recently
also been an issue of significant debate. The basic question is whether the current revenue streams
from the existing tax sources at their existing rates will be adequate to fund FAA programs and
activities without the trust fund going into deficit before or during the next authorization cycle.
The expected availability of trust fund revenues could influence whether the transportation
authorizing committees in Congress recommend modest, significant or no growth in AIP funding
in their legislative proposals. Both the FAA and the Department of the Treasury projections
indicate that any increases in revenues flowing into the trust fund will be modest.35 The
Congressional Budget Office (CBO) has also warned about falling balances in the trust fund.36
The Air Transport Association, which represents the major air carriers, has expressed concern
about the sufficiency of the trust fund and has suggested the imposition of a fee on use of the air
traffic control system, in part, as a means of addressing the impending revenue constraints.37The
Aircraft Owners and Pilots Association (AOPA), however, argues that the current trust fund
mechanism has passed the test of time and will suffice in the future with few changes.38
Because of the current small size of the uncommitted balance in historical terms, the assumptions
of the size of the annual revenue flows to the trust fund in the forthcoming FAA reauthorization
bill could have an impact on both the AIP authorization levels and the programmatic provisions in
the upcoming FAA reauthorization. It could also increase the likelihood of an increase in funding
drawn from the U.S. Treasury’s general fund.
AIP Funding
AIP spending authorized and the amounts actually made available since FY1982 are illustrated in
Figure 1. From FY1982 to FY1992 the yearly amounts made available (obligation limitations) in
the annual appropriations bills trended upwards, increasing from $450 million to $1,900 million.
This upward trend was reversed in the mid-1990s. For FY1993-FY1997 spending was reduced as
part of overall federal deficit reduction efforts. As can be seen in both Figure 1 and Table 1,
below, the amounts made available for AIP spending declined in FY1993 and FY1994 before
35 For the FAA view, see http://www.faa.gov/airports_airtraffic/trust_fund/media/Trust_Fund.pdf
36 U.S. Congressional Budget Office, Financing Federal Aviation Programs: Testimony before the Committee on Ways
and Means, U.S. House of Representatives, Doc. 10116, May 7, 2009, 18 p.,
http://www.cbo.gov/ftpdocs/101xx/doc10116/FAA_Testimony.pdf.
37 U.S. Congress, Senate Committee on Commerce, Science and Transportation, Subcommittee on Aviation, Statement
of James May, President and CEO , Air Transport Association of America, Reauthorization of the Federal Aviation
Administration: Perspectives of Aviation Stakeholders, 111th Cong., 1st sess., May 13, 2009,
http://www.airlines.org/government/testimony/2009/ATA+Testifies+on+the+Reauthorization+of+the+Federal+Aviatio
n+Administration.htm.
38 Aircraft Owners and Pilots Association, Financing the Federal Aviation Administration, (Washington, AOPA,
2009), 1 P.
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leveling off at about the $1.5 billion level during FY1995-FY1997. The amounts made available
increased significantly in FY1998-FY1999 but the gaps between these funding levels and AIP’s
authorized levels remained in the neighborhood of $500 million. The gaps were a major target of
criticism from both airport advocates and members of the transportation authorizing committees
in Congress during the debate that preceded the enactment of AIR21.39
The major increases in AIP’s authorization, provided for in AIR21, began in FY2001 at $3.2
billion. This was an increase of nearly 70% over the FY2000 enacted funding. FY2001 was also
the first year that the AIR21 point-of-order spending guarantees of AIP and F&E spending were
active. During FY2001-FY2006 AIP was funded near its fully authorized levels. The difference
between the authorized levels and the yearly amounts made available narrowed significantly in
comparison to the previous eight years. The remaining shortfalls mostly reflected the impact on
AIP of government-wide across-the-board rescissions and of some administrative and minor
programmatic funding transfers that were included in the annual appropriations bills.
Figure 1. AIP Authorizations and Amounts Made Available for AIP,FY1982-FY2009
(Dollars in Millions)
4500
4000
3500
3000
2500
2000
1500
1000
500
0
2
3
4
5
6
7
8
9
0
2
3
4
5
6
7
8
9
0
1
3
4
5
6
8
9
8
8
8
8
8
8
9
91
9
9
9
9
0
0
02
0
0
07
9
9
9
98
8 9 9 9 9 99 9 9 9 9 99 9 9 0 0 0 00 0 0 0 0 00 0
19 1
1
1
1
19 1
1
1
1
1
19 1
1
1
1
19 1
2
2
2
2
20 2
2
2
2
20
Fiscal Year
Authorization
Amount Available
Source: FAA, Airports Branch, 2007 AIP Report of Accomplishments. FY2008 and FY2009 amounts made available
are estimates based on their annual Obligation Limitations less funds obligated for administration and for non AIP
purposes as set forth in P.L. 110-161 and P.L. 111-8, respectively. The FY2008 and FY2009 authorizations were taken
from P.L. 110-253 and P.L. 111-12, respectively.
Vision 100, as mentioned earlier, continued the spending guarantees included in AIR21 through
FY2007. During the years the guarantees were in effect (FY2001-FY2007), appropriators initially
provided funding at the authorized level, but then reduced the amounts provided by the
imposition of across-the-board rescissions. Technically the failure of the amount made available
to achieve the authorized level should have made these spending levels subject to the spending
guarantee’s point of order provisions. In recent years, however, all points of order on
39 In some years the annual AIP obligation limitation has supported some other uses. This reduced the amounts made
available for AIP below the obligation limitation in some years.
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appropriations bills have been waived by the Rules Committee in the House or have not been
raised on the floor of the House and Senate. This, as well as the recent failure to fully fund the
F&E account, brings into question the effectiveness of the so-called spending guarantees for
AIP.40 Under the authorization extension acts, mentioned earlier, the AIP has been authorized at
$3.675 billion and $3.9 billion for FY2008 and FY2009, respectively. Appropriators set the
programs’ annual obligation limitation for both of these years at $3.515 billion (less a number of
administrative and programmatic reductions or transfers).41
Table 1. Annual AIP Authorizations and Amounts
Made Available, FY1992-FY2009
($ millions)
Fiscal Year
Authorization
Amount Made Available
1992 $1,900
$1,900
1993 $2,025
$1,800
1994 $2,970
$1,690
1995 $2,161
$1,450
1996 $2,214
$1,450
1997 $2,280
$1,460
1998 $2,347
$1,700
1999 $2,410
$1,950
2000 $2,475
$1,851
2001 $3,200
$3,140
2002 $3,300
$3,223
2003 $3,400
$3,295
2004 $3,400
$3,294
2005 $3,500
$3,384
2006 $3,600
$3,424
2007 $3,700
$3,402
2008 $3,675
$3,471
2009 $3,900
$3,385
Sources: FAA, Airports Branch, AIP Annual Report of Accomplishments, 2007. FY2008 and FY2009 amounts made
available are estimates based on their annual Obligation Limitations less obligations for administration and for non AIP
purposes as forth in P.L. 110-161 and P.L. 111-8, respectively. The FY2008 and FY2009 authorizations were taken
from P.L. 110-253 and P.L. 111-12, respectively.
40 See CRS Report RL33654, Aviation Spending Guarantee Mechanisms, by Robert S. Kirk.
41 The Consolidated Appropriations Act, 2008 (P.L. 110-161) and the Omnibus Appropriations Act, 2009 (P.L. 111-8).
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AIP Funding Distribution
The distribution system for AIP grants is complex. It is based on a combination of formula grants
(also referred to as apportionments or entitlements) and discretionary funds.42 Each year the
entitlements are first apportioned by formula to specific airports or types of airports including
primary airports, cargo service airports, states and insular areas, and Alaska airports. The
remaining funds are defined as discretionary funds. Discretionary funds are applied for by
airports to pay for planned airport capital development needs. In recent years, however,
significant amounts of AIP discretionary funding have been earmarked by Congress.43 Formula
grants and discretionary funds are not mutually exclusive, in the sense that airports receiving
formula funds may also apply for and receive discretionary funds.
Airport legislation sets forth definitions of airports by type that are relevant both in discussions of
the airport system in general and AIP funding distribution in particular. Because the statutory
provisions for the allocation of both formula and discretionary funds depend on some of these
definitions, these definitions are set forth in at the end of this report.
Formula and Discretionary Funds
Formula Funds
Sometimes referred to as apportionments or entitlements, these funds are apportioned by formula
or percentage. Formula funds may generally be used for any eligible airport or planning project.
Formula funds are divided into four categories, primary airports, cargo service airports, general
aviation airports, and Alaska supplemental funds (see Appendix B for airport definitions). Each
category distributes AIP funds by a different formula. Most airports have up to three years to use
their apportionments. Non-hub commercial service airports (the smallest of the primary airports)
have up to four years. The formula changes implemented in AIR21 and, in some cases, modified
in Vision 100 are contingent on an AIP funding level of $3.2 billion or more. If this threshold is
not met, most formulas revert to prior authorized funding levels. For instance in the case of the
primary airport entitlement the Vision 100 authorized doubling of the formula amounts would not
take place.
Primary Airports. The apportionment for primary airports is based on the number of passenger
boardings (also referred to as enplanements) made at the airport during the prior calendar year.
The amount apportioned for each fiscal year is equal to double the amount that would be received
according to the following formulas:
• $7.80 for each of the first 50,000 passenger boardings;
• $5.20 for each of the next 50,000 passenger boardings;
• $2.60 for each of the next 400,000 passenger boardings;
42 See U.S.C. 49 Chapter 471 and FAA, Airport Improvement Program Handbook. Available at http://www.faa.gov/
airports_airtraffic/airports/resources/publications/orders/media/aip_5100_38c.pdf.
43 For an explanation of FAA’s policy for selecting discretionary projects see the 24th AIP Annual Report of
Accomplishments. P. 26-28. Available at
http://www.faa.gov/airports_airtraffic/airports/aip/grant_histories/media/aip_annual_report_fy2007.pdf
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• $0.65 for each of the next 500,000 passenger boardings; and
• $0.50 for each passenger boarding in excess of 1 million.
The minimum formula allocation is $1 million. The maximum is $26 million. New airports
receive the minimum for their first fiscal year of operation.
Virtual Primary Airports. Vision 100 included a special rule for certain airports that no longer
meet the requirement of 10,000 enplanements to be categorized as primary airports but had met
the requirement in calendar years 2000 or 2001.44 The act allowed these airports to continue to
receive their full entitlement (i.e. of formula funds), usually the $1 million primary airport
minimum, for FY2004 and FY2005. The entitlement would otherwise have dropped to $150,000
in most cases. The FY2006 Transportation/Treasury Appropriations Act (P.L. 109-115) extended
the virtual primary airport eligibility through FY2006 but at a reduced entitlement of $500,000.
The explanatory language in the conference report expresses the conferees’ intent that FY2006 be
the last year for virtual primary airport entitlements. Accordingly, the FY2007 Continuing
Resolution (H.J.Res. 20) did not extend the virtual primary funding distribution, in effect,
eliminating the virtual primary distribution category. Paying the higher entitlements to the virtual
primary airports reduces the amount of funding available for discretionary spending. Some
observers have speculated that a similar rule could be proposed for airports whose enplanement
levels fell below 10,000 because of lower economic growth during the recession which began in
December 2007.
Cargo Service Airports. 3.5% of AIP funds subject to apportionment are apportioned to cargo
service airports. The allocation formula is the proportion of the individual airport’s landed weight
to the total landed weight at all cargo service airports.
State/Insular Areas. 20% of AIP funds are to be apportioned to general aviation, reliever, and
nonprimary commercial service airports. From this share, all airports, excluding all non-reliever
primary airports, receive the lessor of:
• $150,000 or
• one-fifth of the estimated five-year costs for AIP eligible development costs for
each of these airports published in the most recent National Plan of Integrated
Airport Systems (NPIAS) to a maximum of $200,000 per year.
Any remaining funds are distributed according to a state-based population and area formula.45
The FAA makes the project decisions on the use of these funds in consultation with the states.
Although FAA has ultimate control of the use of these remainder funds, some states view these
funds as an opportunity to address some general aviation needs from a state-wide, rather than a
local or national, perspective.46
44 Vision 100 required that the Secretary of Transportation find that the decline in passenger boardings at each of these
airports was due to the 9/11 attacks. There were 55 virtual primary airports in FY2005.
45 For FY2007, the total nonprimary entitlement was $408.6 million. Of the remaining funds ($271.7 million), 99.4%
were distributed to the 50 states, the District of Columbia, and Puerto Rico. The remainder 0.6% was apportioned to
Guam, American Samoa, the U.S. Virgin Islands and the Commonwealth of the Northern Mariana Islands.
46 Block grant states, discussed later in this report, receive a block grant consisting of their general aviation airports’
apportionments and, if available, AIP discretionary funds. These states select and fund AIP projects at their small
airports. They also perform most of FAA’s inspection and oversight roles at these airports.
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Alaska Supplemental Funds. Funds are apportioned to Alaska to assure that Alaskan airports
receive at least twice as much funding as they did under the ADAP in 1980.
Foregone Apportionments. Large and medium hub airports that collect a passenger facility charge
of $3 or less have their AIP formula entitlements reduced by an amount equal to 50% of their
projected PFC revenue for the fiscal year until they have foregone (sometimes referred to as a
“give back”) 50% of their AIP formula grants. In the case of a fee above the $3 level the
percentage foregone is 75%. The implementation of the reduction is not imposed until the first
fiscal year following the calendar year in which the PFC is first imposed.
A special Small Airport Fund, which provides grants on a discretionary basis to airports smaller
than medium hub, gets 87.5% of these foregone funds. The discretionary fund gets the remaining
12.5%.
Discretionary Funding
The discretionary fund (49 U.S.C. sec. 47115-47117) includes the money not distributed under
the apportioned entitlements, as well as the foregone PFC revenues that were not deposited into
the Small Airport Fund. In recent years, AIP discretionary funds have ranged from roughly 24%-
30% of the total annual AIP funding distribution.47 Discretionary grants are approved by the FAA
based on project priority and other selection criteria, including congressional directives in
appropriations legislation. Despite its name, the discretionary fund is subject to three set-asides
and certain other spending criteria. The three set-asides are:
Airport Noise Set-Aside. At least 35% of discretionary grants are set-aside for noise compatibility
planning and for carrying out noise abatement and compatibility programs.
Military Airport Program (MAP). At least 4% of discretionary funds are set-aside for conversion
and dual use of current and former military airports. Fifteen airports may participate. The MAP
provides financial assistance for capacity and /or military-to-civilian use conversion projects at
former military or current joint-use airports. MAP allows funding of some projects not normally
eligible under AIP.48
Grants for Reliever Airports. There is a discretionary set-aside of 2/3 of 1% for reliever airports
in metropolitan areas suffering from flight delays.
The Secretary of Transportation is also directed to see that 75% of the grants made from the
discretionary fund are used to preserve and enhance capacity, safety and security at primary and
reliever airports, and also to carry out airport noise compatibility planning and programs at these
airports. From the remaining 25%, the FAA is required to set aside $5 million for the testing and
evaluation of innovative aviation security systems.
47 Based on figures from the AIP Annual Reports of Accomplishments, for various years. The discretionary funding
percentage for FY2001 was 30%, for FY2002 was 25%, for FY2003 was 25%, for FY2004 was 27%, for FY2005 was
25%, for FY2006 was 24.8%, for FY2007 was 23.7%.
48 For more on MAP, see http://www.faa.gov/airports_airtraffic/airports/aip/military_airport_program/
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Subject to these limitations, the three set-asides, or priority directives from the appropriation
committees (referred to by some as “place naming,”),49 the Secretary, through the FAA, has
discretion in the distribution of grants from the remainder of the discretionary fund.50
Figure 2 presents a picture of both apportioned and discretionary grants, based on FY2007 data.
Figure 2. Distribution Entitlement and Discretionary Grants for 2007
Small Airport Fund
13.7%
Reliever
Primary
1%
25.2%
Other Disc.
15%
Noise
35%
Map
23.7%
4%
C/S/S/N*
Carryover
45%
13.2%
Cargo
3.5%
States
Alaska
20%
0.6%
Source: FAA, Airports Branch, AIP Annual Report of Accomplishments, 2007, Table 4.
Notes: C/S/S/N = Capacity, Safety, Security, & Noise Abatement.
State Block Grant Program 51
Under this program the FAA provides funds directly to participating states for projects at airports
classified as other than primary airports (non-primary commercial service, reliever and general
aviation airports). Each participating state receives a block grant made up of the state’s
apportionment (formula) funds and available discretionary funds. A block grant program state is
responsible for selecting and funding AIP projects at the small airports in the state. In making the
selections the participating states are required to comply with federal priorities, however. Each
block grant state is responsible for project administration as well as most of the inspection and
oversight roles normally done by the FAA. Up to ten states may participate. Currently the state
block grant program states are, Illinois, Michigan, Missouri, New Hampshire, North Carolina,
Pennsylvania, Tennessee, Texas, and Wisconsin.
49 See the discussion of place naming in the following the “Congressional Issues” section of this report.
50 For a description of FAA’s process for selecting projects for AIP discretionary funding see the 2007 Airport
Improvement Program Annual Report of Accomplishments, p. 31-35, available at
http://www.faa.gov/airports_airtraffic/airports/aip/grant_histories/media/aip_annual_report_fy2007.pdf
51 49 U.S.C. Sec. 47128. For program requirements see 14 C.F.R. Part 156.
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The Federal Share of AIP Matching Funds
For AIP development projects, the federal government share differs depending on the type of
airport. The federal share, whether funded by formula or discretionary grants, is as follows:
• 75% for large and medium hub airports (80% for noise compatibility projects);
• 95% for other airports; and
• “not more than” 95% for airport projects in states participating in the state block
grant program;
• 70% for projects funded from the discretionary fund at airports receiving
exemptions under, 49 U.S. sec. 47134, the pilot program for private ownership of
airports.
Vision 100 included a sunset clause that returns the federal share of the projects eligible for 95%
share to 90% after FY2007. The increase in share to 95% was established to provide relief to
operators of small airports after the 9/11 terrorist attacks. The 95% share has been retained under
the legislation that has extended AIP’s authorization through FY2009.
The airports themselves must raise the remaining share from other sources. Unlike federal aid to
highways, AIP grants generally go directly to airports rather than through the states. This federal
share regime means that smaller airports do not pay as high a percentage of AIP eligible funded
project costs as large and medium airports do. Some argue that the high federal share for small
airports may be a factor in the low level of participation by small airports in the bond market (i.e.,
why borrow when federal AIP grants may eventually be available at a 95% federal share).
Distribution of AIP Grants by Airport Size
The appropriateness of the distribution of grants among airports of different sizes has, at times,
been a source of debate. Although smaller airports’ individual grants are of much smaller dollar
amounts than the grants going to large and medium hub airports, the smaller airports are much
more dependent on AIP to meet their capital needs. In FY2008, of the 2,457 grants issued by the
FAA, 224 (9.1%) of the grants (representing, by value, 28.3% of AIP grant amounts) financed
projects at large and medium-hub airports. For the same fiscal year, small airports (i.e., airports
smaller than medium hub) were awarded 2,167 grants (or 88.2% of the total individual airport
grants awarded). By dollar value, these small airport grants accounted for 68.8% of the total
dollar value of AIP grants for FY2008.52
The FY2008 percent value of AIP grants awarded, broken out by airport size, is displayed in
Figure 3. The chart displays the percentage aggregates of all AIP funds derived from all
categories of both formula and discretionary funds. Depending on how the chart is viewed, it
could either support or refute the contention that AIP funding distribution favors large airports.
Although the large and medium hub primary airports received a combined 28.4% of the total
funds awarded, the smaller of the primary airports—the primary non hub airports and the small
hub airports—also received substantial percentages of the total AIP funds awarded (18.8% and
17%, respectively). If one counts only the large and medium hub airports as “major” airports and
52 Source: FAA, Airports Branch data. By value, an additional 2.9% of AIP grants were provided for airport system
planning (composed of 66 grants, or 2.9% of all grants).
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all the others as “small” airports one could argue that only 28.4% of grant awards went to major
airports. On the other hand, general aviation advocates could point out that commercial service
airports as a group were awarded 66.6% of AIP grant amounts.53
Figure 3. FY2008 % Value of AIP Grant Distribution by Airport Size
General Aviation
Large Primary
16.7%
17.5%
Integrated
Planning 2.9%
Medium Primary
State Block
10.9%
Grant/State
Sponsored 8.0%
Reliever 5.8%
Nonprimary
Commercial
Small Primary
Service 2.4%
17.0%
Primary Nonhub
18.8%
Source: FAA. Airports Branch.
AIR21’s provisions raised the percentage share of total AIP funding for smaller airports. This may
be, in part, because, beginning with AIR21, large and medium hub airports have to forego 75% of
their AIP formula funds in return for the ability to impose PFCs at the $4.50 level.
What the Money is Spent On
Figure 4 below, displays AIP grants awarded by type of project during FY1992-FY2008. For the
most part, AIP development grants support “airside” development projects such as runways,
taxiways, aprons, navigational aids, lighting, and airside safety projects. Substantial AIP funds
also go for state block grants and noise planning and abatement. AIP spending on roads is
generally restricted to roads on or entering airport property.54
53 As set forth in Appendix B of this report, of all national enplanements, large hub airports account for 68.7%,
medium hub airports for 20%, small hub airports for 8.1%, non-hub primary airports for 3%, and non-primary
commercial service airports for 0.1%.
54 For AIP eligibility criteria and allowable costs see the AIP Handbook, 27-37. See http://www.faa.gov/
airports_airtraffic/airports/resources/publications/orders/media/aip_5100_38c.pdf.
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Figure 4. AIP Grants Awarded, by Type, FY1992-FY2008
Landside
(mostly
terminal) 12.8%
Noise 9.8%
Roads 2.2%
State Block
Grants & Misc.
9.8%
Airside 65.4%
Source: FAA, Airports Branch.
Letters of Intent (LOI)
In cases where an airport sponsor may want to begin an AIP eligible airport project without
waiting for the funds to become available, the FAA is authorized to issue a letter of intent (LOI).55
Under the LOI program, a primary or reliever airport sponsor may notify the FAA of their intent
to carry out an AIP eligible airport development project in advance of federal funding and request
that the FAA issue an LOI for the project. If the FAA agrees, it issues a letter (the LOI) stating
that the eligible project costs, up to the allowable federal share, will be reimbursed according to a
schedule set forth in the letter. Although the LOI is technically not an obligation of the federal
government to pay, it is an indication of the FAA’s approval of the scope and timing of the
project, as well as the federal intent to fund the project in future years. Because most primary
airports fund their major development projects with tax-exempt revenue bonds, the evidence of
federal support that the LOI provides is likely to lead to favorable bond rates in financing the
project.56 With an LOI, the airport may proceed with the project both without waiting for the AIP
grants to become available and with the assurance that all AIP allowable costs in the LOI will
remain eligible for reimbursement over the life of the LOI. Both entitlement and discretionary
funds are used to fulfill LOIs. The FAA limits the total of discretionary funds in all LOIs subject
to future obligation to roughly 50% of forecast available discretionary funds.
LOIs have certain eligibility restrictions. They can only be issued to cover projects at primary and
reliever airports. The proposed airport development project or action must “enhance airfield
capacity in terms of increased aircraft operations, increased aircraft seating or cargo capacity, or
55 49 U.S.C. 47110. See also http://www.faa.gov/airports_airtraffic/airports/aip/loi/.
56 The interest on these bonds is not an allowable AIP cost, however.
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reduced airfield operational delays.” For large and medium hub airports, the project must enhance
“system-wide airport capacity significantly.”57
Voluntary Airport Low Emissions (VALE) Grants
Vision 100, directed the FAA to establish a national program to reduce airport ground emissions
at commercial service airports located in air quality nonattainment and maintenance areas
(currently, roughly 530 airports can participate). The Voluntary Airport Low Emissions (VALE)
program allows airport sponsors to use Airport Improvement Program (AIP) grants and Passenger
Facility Charge (PFC) funds to help finance the purchase of low emissions vehicles, refueling and
recharging stations, gate electrification, and other airport air quality improvements.58 VALE is
restricted to financing capital improvements and cannot pay for operations or maintenance costs
such as fuel purchases. The range of VALE uses for PFC funding is broader than those allowable
under AIP. For example, AIP funds are limited to vehicles and infrastructure for “alternative fuel”
use as defined by the Department of Energy, whereas the PFC program allows for use of clean
conventional fuels. Significantly, VALE program funding is restricted to the “incremental” cost
differential between the higher priced low-emission vehicle and the lower price of a conventional
fuel vehicle. Retaining, changing, or eliminating these restrictions or eligibility criteria could be
considered during reauthorization.59
AIP Grant Assurances
Airports’ grant applications are conditioned on assurances regarding future airport operations.
Examples of such assurances include making the airport available for public use on reasonable
conditions and without unjust discrimination; charging air carriers making similar use of the
airport substantially comparable charges; maintaining a current airport layout plan; making
financial reports to the FAA; and expending airport revenue only on capital or operating costs at
the airport.60 Within the AIP context, assurances are an important means of guaranteeing the
implementation of federal policy. When airport managers or interest groups express concerns
about federal regulation and the “strings attached” to AIP funding, they are usually referring to
AIP grant assurances.61
Passenger Facility Charges (PFCs)
During the late 1960s a number of airports began collecting a local “head tax” (the precursor of
the PFC) on each paying passenger boarding an aircraft.62 Although the legality of the head tax
57 AIP Handbook, chapter 10, section 8.
58 According to the FAA gate electrification is the aircraft equivalent of vehicle idle reduction. It provides for air
conditioning and electricity for an aircraft parked at the gate.
59 For more on VALE see the FAA website, http://www.faa.gov/airports_airtraffic/airports/environmental/vale/
60 49 U.S.C. sec. 47107. The layout plan must be approved by the Secretary of DOT as must any revision or
modification of the plan. This, in effect, generally means that any AIP project must be written into the airport’s plan.
The nondiscrimination provision protects a wide variety of users, including for example, nighttime users and cargo
carriers.
61 For a listing of the grant assurances see, http://www.faa.gov/airports_airtraffic/airports/aip/grant_assurances/
62 The head tax was similar but not exactly the same as a PFC. There were no limits on how the head tax could be
spent. Head taxes and similar devices are common outside the United States.
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was affirmed by the Supreme Court in Evansville-Vanderburgh Airport Authority v. Delta
Airlines, there was severe criticism of the passenger charges, by both airlines and passengers. The
complaints included administrative problems for the airlines collecting the charge; passenger
inconvenience, especially when the passengers had to make payments separately at the airport;
and the use of head tax revenue for off-airport projects and projects not aviation related.63 In
1973, the Airport Development Acceleration Act (P.L. 93-44) banned the imposition of state and
local passenger charges.
In 1990, expected tight budgets, resulting from federal deficit concerns, led to a reconsideration
of head taxes. Concerns that the aviation trust fund and other existing sources of funds for airport
development would be insufficient to meet national airport needs led to the legislation that
developed the passenger facility charge (PFC). The PFC was seen as being complementary to AIP
funding. The Aviation Safety and Capacity Expansion Act of 1990 (P.L. 101-508) allowed the
Secretary of Transportation to authorize public agencies that control commercial airports to
impose a passenger facility fee of $1, $2, or $3 on each paying passenger boarding an aircraft at
their airports. The money was to be used to finance eligible airport-related projects and, unlike
AIP funds, could be used to make payments for debt service or indebtedness incurred to carry out
the projects.64 There was a $3 cap on each airport’s PFC and there was a $12 limit on the total
PFCs that a passenger could be charged per round-trip. Large and medium hub airports had their
AIP apportionments reduced by 50% of their projected PFC revenues until they had forgone 50%
of their apportionments. As mentioned earlier, 87.5% of these forgone entitlement funds are
credited to the Small Airport Fund and the discretionary fund is credited the remaining 12.5%.65
Although the FAA oversees the PFC program, the agency does not impose the fee. The PFC is a
state, local, or port authority fee, not a federally imposed tax. Because of the complementary
relationship between AIP and PFCs, PFC legislation is generally folded into the AIP provisions of
FAA reauthorization legislation. The legislative origin of the PFC itself is Title IX of the Omnibus
Budget Reconciliation Act of 1990 (P.L. 101-508).
AIR21 increased the PFC ceiling to $4.50. To impose a PFC above the $3 level an airport has to
show that the funded projects will make significant improvements in air safety, increase
competition, reduce congestion or noise impacts on communities and that these projects could not
be funded by using the airport’s AIP formula funds or through AIP discretionary grants. Large and
medium hub airports imposing PFCs above the $3 level forego 75% of their AIP formula funds.
Beginning in FY2001, PFCs at large and medium hub airports could not be approved unless they
had submitted a written competition plan to the FAA. The competition plans include information
such as: the availability of gates; leasing arrangements; gate-use requirements; patterns of air
service; controls over air and ground-side capacity; intentions to build gates that could be used as
common facilities; and airfare levels compared to other large airports. The Airports Council
International/North America (ACI-NA) favors the elimination of the competition plan
requirement. The competition plan provision, however, was supported by Members of Congress
63 House Committee on Public Works and Transportation, Subcommittee on Aviation, Passenger Facility Charges.
Hearing, 101st Cong., 2nd sess., June 19, 1990, v-vi.
64 49 U.S.C. sec. 40117.
65 The Airport Capacity Funding Advisory Committee, which had recommended many of the PFC characteristics,
including that of forgone entitlements, recommended that small hub and nonhub airports should not be required to
forgo any AIP entitlement funds. The committee also recommended that the forgone funds should all be shifted to the
discretionary fund and allocated proportionally across all “categories of the discretionary category.”
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who wanted to assure that the major airports be “available on a reasonable basis to all air carriers
wishing to serve those airports.”66
Vision 100 included a number of relatively minor changes to the PFC program. The act included
provisions to streamline PFC public notice requirements as well as to end the “significant
contribution” project requirement on large and medium hub airports that wish to impose PFCs at
the $4 and $4.50 level. As of May 1, 2009, 56 large and medium-hub airports and 252 smaller
airports had been approved to collect PFCs at the $4.50 level. The requirement of notice and
consultation of air carriers at applicant airports was limited to carriers having no less than 1% of
the boardings at the airport, having 25,000 or more boardings, or airports providing scheduled
service. Vision 100 also established a pilot program to test alternative procedures for authorizing
small airports to impose PFCs. It made conversion of ground support equipment to low emission
technology eligible for PFC funds. The Secretary of Transportation was also empowered to allow
the use of PFCs for debt service on what would normally be non-eligible non-airport related
projects, if the Secretary finds that such project funding is necessary due to an airport’s financial
need. The act requires that airlines filing for bankruptcy must place PFC collections in a
segregated account to prevent their loss as airport revenue. Vision 100 required DOT to publish in
the Federal Register its policy under current law on the eligibility of airport ground access
projects for PFC funding.
Airports have used PFC revenues for a broad range of purposes. Unlike AIP grants, of which
65.4% since 1992 have gone to airside projects (runways, taxiways, aprons, and safety related
projects), PFC revenues have been increasingly used for landside and interest payments purposes
(17.7% of approved PFCs have been for airside spending since FY1992). Table 2 shows the AIP
grant awards and PFC approvals by project type for FY1992-FY2008.67
Table 2. Distribution of PFC Approvals and AIP Grants
by Project Type, FY1992-FY2008
Type of Project
Percentage of PFC
Percentage of AIP
Airside 17.7
65.4
Landside 35.9
12.8
Noise 4.5
9.8
Roads/Access 6.2
2.2
Interest on Bonds
30.8
0.0
New Denver (PFC)
4.8 9.8
Unclassified, State Block Grants, misc. (AIP)
Total 100.0
100.0
Source: FAA, Airports Branch.
The PFC statutory language lends itself to a broader interpretation of “capacity enhancing” and
the implementing regulations are less constraining than those for AIP funds. Also the airlines,
who historically have preferred funding be dedicated to airside projects, only have to be notified
66 See AIR21 Conference Report, H.Rept. 106-513, 29-30, 165.
67 FAA, Airports Branch.
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and provided with an opportunity for consultation about PFC funding requests and are therefore
somewhat less involved in the PFC project planning and decision-making process than with AIP
projects. The difference in the pattern of project types may also be influenced by the difference in
project spending patterns between the larger airports, that collect most of the PFC revenue and
have more substantial landside infrastructure, versus the smaller airports that are much more
dependent on AIP funding and have comparatively limited land side facilities.
In recent years, PFC approvals have most often been for interest on bonds and for landside
projects. For FY2008, PFCs approved were 22.1% for interest on bonds, 45.4% for landside
(primarily terminal) projects, 5.9% for access (mostly roads), 20.8% for airside projects, and
5.7% for noise projects.
According to the FAA, as of April 30, 2009, the agency had approved $68.2 billion in PFC
collections at a total of 378 locations over the life of the program.68 Large and medium-hub
airports are the most likely to impose a PFC, with 98.5% collecting PFCs. Small hub and nonhub
primary airports participate at rates of 94% and 79%, respectively. Only 26% of nonprimary
commercial airports participate. Small airports often do not have a high enough ticketed
passenger volume to provide a sufficient revenue surplus over the costs associated with
implementing a PFC. A major use of PFCs at non-hub primary and smaller airports is to pay for
the local share for AIP funded projects. Actual annual system-wide collections grew from $85.4
million in 1992 to $2.8 billion in 2007.69 In FY2008 collections experienced a modest decline to
$2.66 billion.
AIP Funding of Airport Security
Prior to the passage of Vision 100, the AIP was the main source of federal grants for airport
security capital projects. In the years preceding the 9/11 terrorist attacks, however, security
projects only amounted to about 2% of AIP’s total project spending. In FY2002, following the
9/11 terrorist attacks, the spending of AIP funds for security projects expanded to 17% of the
amounts made available for AIP grants for that year ($561 million of the $3.2 billion of amounts
made available). As the AIP funding of security projects grew there was a proportional decline of
AIP resources dedicated to non-security projects. There were concerns among AIP supporters that
the program’s traditional priorities of enhancing capacity, safety, and noise mitigation were in
danger of being underfunded.70
Vision 100 made two major changes regarding the funding of airport security projects. First, the
act included a provision that repealed the language of the Federal Aviation Reauthorization Act of
1996 (P.L. 104-264) that permitted the use of AIP and PFC funds for security-related
improvement of facilities and the purchase or deployment of equipment for security purposes.
Second, Vision 100 established the Aviation Security Capital Fund to fund airport security related
projects. Together, these provisions were expected to relieve the AIP of the demands on its funds
for most security projects. The aviation security fee revenues credited to the fund, however, have
68 FAA, Passenger Facility Branch, PFC Applications per Hub Size.
69 For PFC collections by year, see http://www.faa.gov/airports_airtraffic/airports/pfc/monthly_reports/media/stats.pdf.
70 See GAO, Airport Finance: Using Airport Grant Funds for Security Projects Has Affected Some Development
Projects, “GAO-03-27,” (Washington, GAO, 2002), 1-22.
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been insufficient to fully fund security costs.71 Consequently, despite the Vision 100 prohibition,
some still view AIP as a potential source of funding for certain security-related airport
improvements in the future. The use of AIP grants for security purposes could reemerge as an
issue during FAA reauthorization.72
Congressional Issues73
There is little disagreement at the national level among the airport interests, the airlines, general
aviation interests, the military, or within Congress that a strong national network of airports is in
the national interest. However, views of how to best support the national airport system can vary
greatly from group to group depending on the issues involved. A related issue is the appropriate
degree of federal participation in airport development and finance.
By statute, the safe operation of airports is the highest aviation priority. Other priorities include
increasing capacity to the maximum feasible extent, minimizing noise impacts, and encouraging
efficient service to state and local communities (i.e. support for general aviation airports). These
priorities along with the assessment of airport capital needs and the availability of budgetary
resources for AIP all influence the scope and structure of the program.
During the FAA reauthorization debate in the 111th Congress, virtually all of the policy issues and
options concerning AIP will be influenced by the broader budget issues of the adequacy of
aviation trust fund revenues and the availability of money from the Treasury general fund. If AIP
funding is increased significantly, the program may well remain basically as it is. If AIP’s funding
is reduced, the funding formulas and project eligibility requirements might be altered to assure
that the AIP’s statutory priorities can still be met at the lower funding levels.
Because this report is about an existing program, the analysis of the program necessarily
discusses the existing programmatic structure and the historical funding levels of the periods
being discussed. Advocates of AIP view the fully authorized funding of the program as a good
thing. Over time, however, there has also been an alternative view, that too much was being spent
on AIP, particularly at smaller airports that do not play a significant role in commercial aviation.
These critics often view the breadth of AIP spending, decreasing local share requirements, and
ever-widening project eligibilities as allowing for spending that is increasingly inefficient,
unfocused, and of questionable federal purpose.
Airport Capital Needs Assessments
The debate over the scope of airport capital needs is of concern to Congress because a reliable
assessment of needs can help facilitate determining the appropriate federal support needed to
71 See CRS Report RL32498, Vision 100: Historical Review of the Century of Aviation Reauthorization Act (P.L. 108-
176), by Bart Elias, John W. Fischer, and Robert S. Kirk.
72 Vision 100 did allow for use of AIP formula funds for the replacement of baggage conveyor systems, and the
reconfiguration of terminal baggage areas, necessary to install bulk explosive detection devices. Such use, however, has
been specifically prohibited each year by appropriators in the legislative language for Grants-in-Aid for Airports in
recent transportation appropriations acts.
73 See CRS Report R40410, Federal Aviation Administration (FAA) Reauthorization: An Overview of Legislative
Action in the 111th Congress, coordinated by Bart Elias, for tracking of AIP reauthorization legislative proposals.
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foster a safe and efficient national airport system.74 The federal government’s interest in the needs
debate is broader than just dealing with capacity constrained airports. It also deals with
implementing federal safety and noise policies.
Views on the scope of airport capital needs vary among airport stakeholders. Historically, air
carriers preferred that federally supported capital projects be restricted mostly to airside capacity
enhancing projects.75 Airports generally view their capital needs within the context of the
business needs of the airport’s operations as a whole (i.e. airside, landside, as well as some off-
airport access projects). The FAA view is from within the more limited context of the NPIAS, the
national plan, that is used by FAA management to administer the AIP and, therefore, is focused
more narrowly on AIP eligibility as the primary criterion for making its capital needs
assessments.
Both the FAA and the Airports Council International-North America (ACI-NA) have projected
different long-term airport financial needs. In the most recent NPIAS report, the FAA has
estimated that the national system’s capital needs for FY2009-FY2013 will total $49.7 billion (an
annual average of $9.9 billion).76 The ACI-NA capital needs survey resulted in an estimate of
$94.3 billion for the same range of years (an annual average of $18.9 billion).77
The studies’ differing conclusions are the result of a number of factors, including a difference in
collections periods and an inflation adjustment in the ACI-NA study. Although these differences
may somewhat limit the comparability of the two estimates, the main reason for the widely
differing estimates is the differing views on what kinds of airport projects were appropriate to
include in the estimates.
The NPIAS report was based on planned project information taken from airport master plans and
state system plans. FAA planners screened out projects that were not justified by aviation activity
forecasts or that were not eligible for AIP grants. Only designated NPIAS airports were included
in the study. Implicit in this methodology is that the planning has been carried through to the
point where financing is identified. Not all projects used to develop the NPIAS estimates are
actually completed, however. Economic conditions, the financial conditions in the aviation
industry, constraints on federal funding, and, on a project-by-project basis, legal challenges, can
prevent the completion of some projects or delay them beyond the range of years covered in the
NPIAS estimates. Some observers argue that the NPIAS under estimates AIP eligible needs
because not all such needs will be in the current airport plans.78
74 See FAA, NPIAS (2009-2013), http://www.faa.gov/airports_airtraffic/airports/planning_capacity/npias/
75 As of this writing, the Air Transport Association, which represents the major air carriers, has not done an estimate of
airport capital needs for the upcoming 2007 FAA reauthorization debate. However, during the 1996 reauthorization
debate the airlines estimated the annual airport capital needs at $4 billion. This was significantly less than the FAA
estimate of $6.5 billion and much less than the airport estimate of $10 billion per year. A GAO study, concluded that
the widely differing estimates were primarily a result of different views on what kinds of projects and airports to
include in the estimates. See GAO, Airport Development Needs: Estimating Future Costs. April 1997, GAO-RECD-97-
99, 38 p.
76 The five year total is $8.5 billion higher than the estimate in the previous NPIAS (2005-2011).
77 Airports Council International, Airport Capital Development Costs: 2009-2013, http://www.aci-na.org/static/
entransit/Airport%20capital%20development%20costs.pdf.
78 In the Dept. of Transportation Inspector General’s November 15, 2006 report, Top Management Challenges:
Department of Transportation, the discussion of keeping planned short- and long-term aviation capacity enhancing
initiatives on schedule shows in tabular form that of the six major new runway projects underway in September 2006
(continued...)
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The ACI-NA study reflects the broader business view of major airport operators and casts a
substantially broader net, including non-AIP funded projects (funded by PFCs, bonds, or
state/local funding); airport-funded air traffic control facilities; airport or TSA funded security
projects; “necessary” AIP-ineligible projects such as parking facilities, hangars, revenue portions
of terminals, off-airport roads/transit facilities; and AIP-eligible projects not reported to FAA in
the belief that there would be a low probability of receiving additional AIP funding.79 The ACI-
NA study also includes projects that have not yet identified funding sources. Unlike the NPIAS
the ACI-NA’s estimate adjusts for inflation. Because the $18.9 billion annual cost estimate is
based on “proposals” for airport development projects, some would argue that this figure is high
because it reflects wants rather than needs and includes projects that may never be completed.
Views of the Adequacy of Funding Availability
The ACI-NA and the FAA also disagree on the adequacy of funding. The 2009-2013 NPIAS
report finds that recently “together, AIP grants and PFC collections account for about 40 percent
of annual U.S. airport capital spending needs. Historically the combined resources have been
adequate to achieve needed development.”80
The AIP obligation limitation for FY2009 for AIP is $3.515 billion (roughly the same annual level
as for all years since FY2006). This would be 35.5% of the $9.9 billion average annual needs
estimated in the 2009-2013 NPIAS81. Calculating this funding level against the average annual
ACI-NA derived level of $18.9 billion produces a percentage of 18.6% of all funding sources
(should all “needs” be met).
It is important to keep in mind that AIP is only one source of funding for airport capital projects.
Airport Bonds are the largest source of funds for airport capital needs, often totaling more than
AIP and PFC awards combined.82
The estimates are important because the primary AIP reauthorization issue is the program’s
appropriate level of funding. Because the ACI-NA airport needs projection includes much that is
not eligible for AIP grants, its accuracy may not be as critical to policy makers considering AIP
funding as the NPIAS projections. On the other hand, the broader ACI-NA estimate may be more
significant to bonding and PFC policies, since these sources fund a broader range of projects than
AIP.
(...continued)
only two were listed in the 2001 Operational Evolution Plan.
79 ACI-NA. Airport Capital Development Costs: 2009-2013, Washington, ACI-NA, 2007.
80 NPIAS:2009-2013, p. 56. Counting all five sources of airport funding.
81 The AIP percentage of estimated needs has declined relative to the percentage in the 2007-2011 NPIAS, in part, due
to the program’s obligation limitation having been held steady since FY2006.
82 See GAO, Airport Finance: Observations, GAO-07-885, Appendix I.
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Airport Capacity Needs at the 35 Busiest Airports83
In March 2004, then FAA Administrator, Marion C. Blakey, stated that the agency’s goal was to
improve the overall capacity at the top 35 U.S. airports by 30% over a ten year period. These
airports account for about 73% of commercial passenger boardings. The FAA’s Operational
Evolution Plan (OEP, recently also referred to as the Operational Evolution Partnership) is
intended to increase the capacity and efficiency of the National Airspace System (NAS) over a
ten-year period to keep up with the expected growth in demand for air travel and air cargo. The
plan focuses on “infrastructure—primarily new runways—and technological and procedural
initiatives at the top 35 airports.”84 The focus on runways is based on estimates from 2004 Airport
Capacity Benchmark Report data that the 12 OEP airports planning new runways would achieve
an average capacity increase of 31%. This would be a much larger improvement than the
expectation that technology enhancements could net of 3% to 8%.85
The May 2007 FAA study of airport capacity, Capacity Needs in the National Airspace System:
an Analysis of Airport and Metropolitan Area Demand and Operational Capacity in the Future
(also referred to as FACT 286), was the second study that examined which of the 35 OEP airports
would and would not be able to meet future demand. The study also examined 21 non-OEP
airports that were identified as having the potential to be capacity constrained or were in a
capacity constrained metropolitan area. FACT 2 examined airports that would need capacity
increases (mostly new or reconfigured runways) from a base year of 2007 and also projected
which airports would need capacity increases in 2015 and 2025. It identified four airports plus the
New York metropolitan area that needed additional capacity in 2007. The study projected that,
assuming that planned OEP improvements for 2007-2015 were completed, capacity
improvements would still be needed at 18 airports and 7 metropolitan areas for 2015. For the year
2025, assuming implementation of runway construction projects, as well as improvements in
technologies and procedures (an ambitious assumption, the study notes), the study still identifies
14 airports and 8 metropolitan areas as likely needing additional capacity (some not currently part
of the OEP). If planned improvements are not made, the study projects that 27 airports and 15
metropolitan areas that will need increased capacity in 2025.87 Analysis in Fact 2 also revealed
that, in comparison to Fact 1, non-OEP airports, in many cases had
made more effective use of their runways than had originally been assumed, had plans for
runway construction that had not been factored into the original analysis, or had different
ATC procedures than those previously used. As a result, this updated study shows that some
of the non-OEP airports have higher capacities than originally presumed and thus less need
for additional capacity.88
83 For a broad discussion of aviation congestion issues, see CRS Report RL32707, Avoiding Gridlock in the Skies:
Issues and Options for Addressing Growth in Air Traffic, by Bart Elias.
84 FAA and Mitre Corporation, Capacity Needs in the National Airspace System. (Washington, FAA, 2007).
See also Operational Evolution Plan, 2005-2015: Executive Summary; Version 7.0, (Washington, FAA, 2005) 24 p.
85 See CRS Report RL32707, Avoiding Gridlock in the Skies: Issues and Options for Addressing Growth in Air Traffic,
by Bart Elias.
86 FAA and Mitre Corporation, Capacity Needs in the National Airspace System (Fact 2), (Washington, FAA, 2007),
http://www.faa.gov/airports_airtraffic/airports/resources/publications/reports/media/fact_2.pdf
FACT 2 is short for Future Airport Capacity Task, study 2. The predecessor study, FACT 1, was released in June 2004.
87 Fact 2, p. 6-21.
88 Fact 2, p. 5.
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Interestingly, the airports identified for 2015, and especially for 2025, show potential for
increased needs at some medium hub airports that are considered secondary to large hub airports
in major metropolitan airports. Part of this trend may be that some major metropolitan airports are
approaching the point that they may have limited room to add new runway capacity but could
also result from the expansion of secondary metropolitan area airports that have found favor with
low cost air carriers in recent years. This also could reflect a shift to more point-to-point service
and a somewhat diminished reliance on the hub-and-spoke model by the legacy carriers.89
If valid, the study has implications for AIP within the context of reauthorization. To begin with,
although the life cycles of FAA authorization bills are usually only for two to four years, large
runway projects, that are the focus of the OEP, can require long lead times (10 or more years from
concept to initial construction is not unusual). Because of this, some costs from projects needed
by 2015 and even 2025 may need to be funded in the next few years. At large and medium hub
airports, runway projects are usually paid for, in part, by AIP funds (there is a 75% maximum
participation: at large airports the participation, however, is generally significantly below this
maximum). These funds are generally used in combination with other sources of funding such as
PFCs, tax-free airport bonds (often paid for using PFC revenues), airport revenues, and
sometimes state funds.
As mentioned earlier, most large and medium airports impose PFCs on each boarding passenger.
In return for permission to levy the PFC, these airports forgo either 50% or 75% of their AIP
formula entitlement funds. This means that federal funding for major runway projects at large and
medium hub airports will probably need to be, for the most part, funded with AIP discretionary
funds. The pool of discretionary funds is primarily the remainder of provided annual funding after
the entitlement formula requirements are satisfied. Of the forgone PFC funds, 87.5% are reserved
for a small airport fund and are also not available for OEP airports.
If there is a confluence of a policy of overall federal budget deficit reduction with an inability to
either increase trust fund revenues or to increase the general fund share for the FAA budget, there
could be a meaningful reduction in the amount of funding available for discretionary grants once
the entitlement (i.e. formula) funding requirements are satisfied. In other words, if the AIP budget
is constrained, either under a reauthorization bill or during the annual appropriation process, and
the entitlement formulas remain as they are, the squeeze-down effect will be likely on the
discretionary portion of the AIP budget.
Within this context, it is important to also keep in mind that a significant portion of AIP
discretionary funds have, in recent years, been earmarked to hundreds of airports, based primarily
on local needs and wants rather than in accordance with a national capacity plan. This situation
could also limit or reduce AIP participation in some of the capacity increasing projects at OEP
airports.
89 Some have argued that, because some of the large airports, included in the OEP 35, have been losing market share to
low-cost secondary airports in their urban areas, it might make more sense, in these cases, to consider increasing AIP
funding to these secondary airports rather than supporting major capacity enhancement projects or airside
reconfigurations at “legacy airports.” Discussed during session “Effects of Airline Restructuring on Airport Systems,”
at the 2007 Transportation Research Board 86th annual meeting, Washington, January 23, 2007.
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Caveats
Predicting the future is difficult and, although the FAA has a reasonably good record for accuracy
in its activity forecasts, the FAA itself has pointed out that since the events of 9/11 the instability
of the industry, has led to larger errors in the agency’s short-term forecasts.90 The recent
unpredictability of fuel prices, a major component of aviation business costs, also brings a degree
of uncertainty to aviation forecasts as does the impact of the economic recession that began in
December 2007.
AIP’s Financial Future Under an Uncertain Budgetary Outlook
The AIP is a good example of how broader budget issues can have implications for not only a
program’s funding level but also the program’s scope and benefit distribution. Should ample
revenues be available, the reauthorization of AIP could likely maintain the programmatic status
quo with relatively few changes to the program’s structure, although project eligibility criteria
could be broadened. Given, however, the recent decline in the uncommitted balance of the
aviation trust fund, for the AIP to grow substantially some observers expect that something will
have to change in the budgetary environment. Increased tax revenues (either through new taxes,
higher fares, or faster economic growth) or an increase in the general fund share would be needed
to provide for an AIP increase on the order of the increases initiated by AIR21and maintained in
Vision 100.91 Otherwise, any AIP increase would have to come at the expense of other FAA
programs.
For a variety reasons, some within the transportation community expect budgetary constraints
will restrict the size of the AIP budget. As mentioned earlier, the uncommitted balance in the trust
fund is much smaller than it was during the last authorization cycle. More money may be needed
to fund the F&E component of the FAA budget to support the modernization of the air traffic
control system under the Next Generation Air Transportation System (NGATS) and, in a
constrained budgetary environment, this could exert downward pressure on the AIP component of
the FAA budget. The enforcement of pay-as-you-go rules and a renewed commitment to reduce
the federal budget deficit could also make it difficult to increase AIP funding.92 As was mentioned
earlier, the annual obligation limitation for AIP has held steady from FY2006-FY2009. The
March 2009 Congressional Budget Office (CBO) analysis of the Airport and Airway Trust Fund
projects that the uncommitted balance of the fund will drop to just $386 million in FY2010.93
This leaves little room for programmatic expansion for AIP without revenue increases or an
expanded general fund contribution to other parts of the FAA budget.
Within a constrained-budget scenario, interest would probably increase in such issues as
defederalization of the larger airports which, by allowing them to opt out of the AIP program,
could reduce AIP spending on large hub airports. Another possibility would be to make the AIP
90 FAA Aerospace Forecast Fiscal Years 2009-2025, p. 50-53.
91 As mentioned earlier in this report, the FY2001 increase in the AIP budget under AIR21 was a 70% increase over the
FY2000 amount made available.
92 See CRS Report RL32835, PAYGO Rules for Budget Enforcement in the House and Senate, by Robert Keith and Bill
Heniff Jr.
93 Congressional Budget Office, Financing Federal Aviation Programs: Testimony before the Committee on Ways and
Means, U.S. House of Representatives, Doc. 10116, May 7, 2009, 18 p.,
http://www.cbo.gov/ftpdocs/101xx/doc10116/FAA_Testimony.pdf.
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formulas more restrictive. Project eligibility criteria could also be tightened. Perhaps the greatest
concern, at the federal level, may be the availability of AIP discretionary funds for major capacity
enhancing projects as those set forth in the OEP.
AIP Spending “Guarantees”94
As discussed earlier, congressional concerns, especially among transportation authorizing
committee members, that aviation trust fund revenues first be used to fund FAA’s two capital
programs (AIP and F&E), before being drawn down to pay for the agency’s operations activities,
have led to the enactment of a series of “cap and penalty” and other so-called spending
“guarantee” mechanisms. Although the various “cap and penalty” mechanisms, that were in place
prior to passage of AIR21 in 2000, succeeded in restricting spending from the aviation trust fund
on operations, they did not consistently succeed in forcing full appropriation of authorized AIP
and F&E funding levels.95 This situation led to the growth of the trust fund’s uncommitted
balance. As a Congressional Budget Office (CBO) report explained in 1988,96
Primarily because of program constraints, these provisions have merely altered the
accounting for aviation spending, forcing the general fund to finance more of these
expenditures.... In addition, there still remains an incentive to limit capital spending for
aviation programs. Given the annual level of excise tax revenue from aviation, each dollar of
aviation spending greater than these tax revenues must be funded by general revenues.
Therefore, regardless of the actual accounting for aviation spending, each dollar reduction in
spending on aviation either reduces the need for the general fund to finance aviation
spending, or produces a trust fund surplus from which the Treasury can borrow to cover non-
aviation expenditures.
In effect, within the context of the unitary federal budget, appropriators and budgeteers were
more concerned about the overall budget level or the size of the federal budget deficit than
whether below-authorized spending on AIP and F&E caused a reduction of trust fund spending
for O&M. Broader budget concerns trumped the cap and penalty provisions.
Current Law: Point-of-Order Enforced Spending Guarantees
There are two existing spending guarantees which are different than the previously discussed cap
and penalty provisions. One makes it “out-of-order” in the House or Senate to consider legislation
that failed to use all aviation trust fund receipts and interest annually. The second makes it out-of-
order to consider any bill that provided any funding for RE&D or O&M if it failed to fully fund
the FAA’s two capital programs, AIP and F&E, at their authorized levels. As a penalty of sorts,
any failure to fully fund F&E would lead to an increased appropriation (referred to as “pop-up”
budget authority) for AIP equal to the appropriations shortfall for F&E.
94 For a detailed discussion of the history of funding guarantees, see CRS Report RL33654, Aviation Spending
Guarantee Mechanisms, by Robert S. Kirk.
95 The cap set a ceiling on the amount of aviation trust fund money that could be used to fund FAA operations. The
penalty would reduce this cap by a formula linked to FAA capital program appropriations shortfall below their
authorizations for the fiscal year.
96 CBO. Status of the Airport and Airway Trust Fund: 1988. p. 10-11.
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During the first years of the AIR21 guarantees, FY2001-FY2003, these measures appear to have
successfully assured that both AIP and F&E were funded at or very near their authorized levels in
the annual appropriations acts. The obligation limitations for AIP for FY2004-FY2006 were
reasonably close to their authorized levels for these years. However, congressional support, in the
annual appropriation bills, for adherence to the guarantees during the last three years has been
mixed. For FY2007 the difference between the amount authorized and the amount obligated for
AIP widened to $185 million. For FY2008 and FY2009 the gaps were $160 million and $385
million, respectively. Had the guarantees not lapsed at the end of FY2007 AIP’s funding levels
would have been out of compliance with the guarantees. On the other hand, F&E spending has
been significantly below authorized levels for all of the years FY2004-FY2009 and the gaps have
generally been substantially larger than has been the case for AIP. F&E’s annual appropriation fell
below its authorization as follows: $320 million for FY2004; $468 million for FY2005; $498
million for FY2006; $595 million for FY2007; $596 million for FY2008; and $368 million for
FY2009.97
There are a number of reasons that the guarantee provisions have not been adhered to. To begin
with, the authorization extension legislation has not extended the funding guarantee provision
and, consequently, the guarantee has not been in effect since September 30, 2007. Also, specific
to F&E spending has been the lack of confidence in Congress in the ability of the FAA to oversee
the national air system modernization. The hesitance to fully fund F&E may have more to do with
this than with resistance to adherence to the funding guarantees. However, some other
weaknesses in the current guarantee mechanism have manifested themselves in the years prior to
the guarantee’s expiration at the end of FY2007. Spending guarantees that are enforced by point-
of-order actions only work if the point-of-order is raised by a Member and if they have not been
waived by rule. In the House, recent annual appropriations bills have had all points-of-order
waived by the Rules Committee. Senators have also chosen not to raise points-of-order against
violations of the AIP and F&E funding guarantees.98 Points-of-order have not been allowed on
appropriations bill conference reports. Also the “pop-up” AIP budget authority, which some
viewed as part of the mechanism for preventing appropriators from spending any F&E shortfall
for noncapital aviation spending, can and has been rescinded in recent appropriations legislation.
These rescissions allow appropriators to bring down the nominal total cost of the
Transportation/Treasury Appropriations bills, generally in the following budget year. As was true
during the cap and penalty era (FY1977-FY1998), the current spending guarantees can still be
trumped by broader budget policy goals (such as deficit reduction) or, at times, by the spending
priorities of appropriators.
Spending Guarantee Options
Aviation funding guarantees are expected to be considered in the FAA reauthorization debate
during the 111th Congress and could include keeping the current system, modifying the current
guarantees, resurrecting a mechanism analogous to the cap and penalty provisions, reconsidering
97 Under extension legislation, AIP’s authorization was $3.675 billion for FY2008 and $3.9 billion for FY2009. During
these years the Obligation limitation for AIP has been set at just over $3.5 billion. Had the funding guarantees not
lapsed for these years, AIP, as well as F&E, would have been out of compliance with the funding guarantees.
98 In part, this may have been because, if a point of order were upheld, the entire AIP or F&E financing provision
would be stricken from the bill that Senate conferees would take to conference. This absence of a funding provision
could put the Senate conferees at a disadvantage in negotiating with House conferees over the contents of the bill to be
voted out of conference.
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taking the trust fund “off-budget,” or erecting budgetary “fire walls” as was done for the highway
and transit programs in 1998. Some would argue that there should be no guarantees and that the
normal congressional budget process should be allowed to progress unfettered. The absence of a
large uncommitted trust fund balance could also have an impact on the support for new or
continued aviation spending guarantee mechanisms during FAA reauthorization in the 111th
Congress.
Partial Defederalization
One way to reduce the amount of trust fund revenue needed for AIP would be to allow large and
medium hub airports to opt out of the AIP program in favor of unrestricted or higher PFC
financing. This would, in the view of some airport executives, also give them the flexibility they
would prefer to have in managing their airports. These airports would no longer be bound by all
of the grant assurances that are currently required of participants.
If the large and medium hub airports are able to defederalize, there would be implications for the
degree of policy influence the federal government could wield in airport development. Some
argue that, because the threat of withdrawal of federal AIP funds provides the federal government
with substantial leverage to enforce grant assurances that implement federal policy (for example,
the “fair and reasonable rates” requirement or airport revenue diversion assurances), other means
of maintaining federal influence might be considered during reauthorization should
defederalization gain significant legislative attention.
Privatization
For Congress the privatization debate is both about saving money on airports that can be less
dependent on federal assistance and also, in the broader sense, whether federal involvement in
airport infrastructure is excessive. Airport privatization differs from defederalization in that
privatization denotes a change in ownership from a public entity to a private one. Airport
privatization in the United States has, for the most part, been limited to what some would refer to
as commercialization of airport management or services. The use of private companies to provide
airport services is widespread. At the largest airports in the United States employees of private
companies—the airlines, concessionaires and other contractors—account for 90% of all
employees.99
The Airport Privatization Pilot Program (49 U.S.C. sec. 47134; Section 149 of the Federal
Aviation Reauthorization Act of 1996, P.L. 104-264), authorizes the FAA to exempt up to five
airports from certain federal restrictions on the use of airport revenue off-airport. Participating
airports may be exempted from such requirements as repayment of federal grants. Privatized
airports may still participate in the AIP, but at a lower federal share (70%). During the nine years
since the application procedures were published only one airport, Stewart International Airport in
New York, has obtained an approved exemption.100 In January 2007, however, the British lease
holder, National Express Group Plc, agreed to sell the operating lease (which has 93 years
remaining) at Stewart International to the Port Authority of New York and New Jersey, for $78.5
99 NCARC. Development Needs and Financing Options, p. 13.
100 The owner of the 99 year lease at Stewart Airport, the United Kingdom-based, National Express Group (NEG), held
the lease for seven years.
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million. National Express had bought the lease for $35 million in 2000. This means that the only
successfully privatized airport under the Airport Privatization Pilot program is returning to public
sector control.101 The case can be made that neither the repurchase of a privatized airport by a
public airport authority, nor the quick resale at a significant profit of a long-term airport lease of
an airport built with public funds, was what some supporters had in mind when they supported
the privatization program.
Recently the discussion of airport privatization has taken place within the context of the recent
leasing agreements of the Chicago Skyway toll road and the Indiana toll road to private investors.
The Skyway sale was especially controversial because the money payed to the City of Chicago
was used by the city to defray normal city budgetary expenses and not to support or improve
transportation infrastructure. On September 14, 2006, the City of Chicago submitted a
preliminary application under the Airport Privatization Pilot Program for the long-term lease of
Chicago Midway Airport, and on October 3, 2006, the FAA authorized the City of Chicago to
select a private operator, negotiate an agreement and submit a final application under the pilot
program.102 Chicago Midway has received $371 million in federal (AIP) grants since 1982. On
October 8, 2008, the Chicago City Council agreed to a $2.5 billion agreement to lease Midway
Airport for 99 years to Midway Investment and Development Corporation. The investment group,
however, was unable to raise the necessary funds to close the agreement by an April 6, 2009
deadline. The lease agreement was terminated April 20, 2009. Chicago is expected to pursue
another leasing agreement when the economy rebounds.
Some observers of Chicago’s Midway Airport lease proposal have described it as a “value
extraction” proposal because they expect that the lease payments would be simply used as general
City revenue and would not add value (i.e. make improvements) to the airport or to any
transportation infrastructure.103 Supporters of privatization generally take the view that, if lease
revenues or profits from airport sales can only be used for airport purposes, there is no incentive
for an airport authority to sell or a for-profit company to purchase an airport or airport lease.
As mentioned earlier, the pilot program provides for exemptions on the AIP grant assurance
restrictions on use of revenues. The Airport Privatization Pilot Program, however, requires that
the airport sponsor may only recover from the sale or lease the amount that may be approved by
at least 65% of the air carriers serving the airport; and air carriers that account for 65% of the
total landed weight at the airport for the year. Proponents of privatization argue that this
requirement of air carrier approval (air carriers have historically not favored privatization) of the
use of airport revenue off-airport or into a city or county budget, as a major reason there has been
limited interest in the privatization pilot program. Given the limited success of the Airport
Privatization Pilot Program, Congress may wish to modify, replace or eliminate the program.104
There is no certainty that any AIP cost savings from either privatization or defederalization would
be retained as AIP funds for use by the remaining airports. AIP spending is determined by the
authorization and appropriations process and there is no guarantee that the savings would be
101 Joe Mysak, “Airport Privatization,” Pittsburgh Tribune Review (February 4, 2007).
102 See FAA, “Fact Sheet: Chicago Midway Airport Pilot Privatization Program,” FAA News, April 2008.
103 Government Accountability Office, “Financing Airport Capital Development: a Roundtable Discussion,” Meeting
held January 27, 2007.
104 See Robert W. Poole, Jr, “U.S. Airport Privatization, the Second Time Around,” Airport Policy News, no. 23,
(February 2007), 4-5. The issues were also discussed at the GAO roundtable, Financing Airport Capital Development.
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made available to the remaining eligible airports. Any savings could also be used to lower the
program size, to marginally assist in deficit reduction, to lower the needed general fund payment,
or to make money available for spending elsewhere.
Apportionment and Eligibility Changes
Apportioned funds (sometimes referred to as entitlements) were substantially increased in AIR-21
and the range of land-side projects eligible for AIP grants was increased somewhat in both AIR-
21 and Vision 100. Most of the eligibility changes benefitted airports smaller than medium-hub
size. Although the increase in apportioned funding and the broadening of eligibility criteria could
continue in the next reauthorization bill, if the budget environment is constrained the opposite
could happen. In particular, the apportioned funds may have to be reduced to assure that sufficient
funds remain to fund discretionary grants (in particular for operational evolution plan projects).
The ACI-NA supports the maintenance of AIP funding for smaller airports and argues further for
giving these airports increased flexibility in the use of their entitlements. The case can be made
that, over the years, the broadening of AIP eligibility at small airports has made it increasingly
difficult to identify the federal interest that has been met by such spending. As mentioned earlier,
air carriers are skeptical of the benefit to the national airport system of some proposals seeking to
broaden project eligibility, in part because they feel it shifts spending away from airside projects
at large airports and to projects at small airports that do not play a key role in commercial
aviation. General aviation and small airport supporters defend the distribution of AIP funds to
small airports, noting that smaller airports are more dependant on AIP and do not often have the
access to the bond market that larger airports have. In addition, they stress the importance of
small airports to broad regions of the United States and their role in fulfilling the national goal of
having an” extensive” national airport system.105
Federal Share
Vision 100 raised the federal share from 90% to 95% for airports smaller than large and medium-
hub and for airports in states participating in the state block grant program, but included a sunset
clause that returns the federal share back to 90% after FY2007. The 95% share, however, has
been continued under the FAA authorization extension acts. Should the federal or FAA budget be
constrained or held at current levels, Congress may wish to consider adjusting the federal share as
either a cost cutting measure or to encourage more local financial participation. The federal share
for most projects at large and medium-hub airports is 75%. Those who favor a significant local
matching share in federal transportation projects generally argue that it helps prevent the
construction of projects of questionable value that may be built only because federal funds may
be obtained at little cost to local governments or airport authorities. Some also argue that a high
federal share discourages local government financial participation and makes smaller airports less
interested in seeking funds through the bond market.
Some small airport supporters have argued for making the 95% federal share, for airports smaller
than medium hub, permanent. Others have argued that small airports in economically distressed
areas should be allowed to retain the 95% federal share. Especially in a constrained fiscal
105 NPIAS, 4. The NPIAS includes the attribute that ” the airport system be extensive, providing as many people as
possible with convenient access to air transportation, typically by having most commuters with no more than 20 miles
of travel to the nearest NPIAS airport.”
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environment, however, a higher federal share for a group of airports would mean fewer total
airport grants would be awarded, than would be otherwise.
Discretionary Fund Set-Asides
The discretionary funds (which are the remainder funds after the apportionments are satisfied) are
subject to set-asides for noise mitigation, the Military Airports Program (MAP), reliever airports,
and the capacity/safety/security/noise set-aside. Any of these could be modified during
reauthorization. However, the greater the total of all the set-asides, the smaller the remaining
amounts that are truly unrestricted discretionary funds. Some observers argue that this could limit
the ability of the FAA to respond to national aviation priorities, such as the OEP.
Minimum Discretionary Fund
49 U.S.C. 47115 requires that a minimum amount ($148 million plus any outstanding pre-January
1, 1997 letters of intent) remains available for the discretionary fund after all apportionments and
set-asides are satisfied. If less money remains, the apportionments are reduced pro rata to bring
the discretionary funding up to the required level. Because AIP has been funded since FY2001 at
historically high levels, the minimum discretionary fund provision has not been a factor in AIP
funding. If, however, AIP’s budget is reduced substantially or if the entitlements are increased
substantially, the appropriate minimum discretionary fund level may need to be reconsidered.
Grant Assurances
As mentioned earlier, along with the acceptance of AIP funds come certain obligations (generally
referred to as assurances) that airports must agree to. These assurances include the obligation to
maintain and operate their facilities safely and efficiently, as well as more specific obligations
such as not to discriminate against any class of air system users,106 to adhere to “Davis-Bacon”
prevailing wage requirements, and to use airport revenue solely for spending on airport operations
and capital costs.107 Proposals to alter the AIP grant assurances can be expected to arise during the
reauthorization debate. For example, the ACI-NA is seeking a bill that “simplifies airport grant
assurances including reforms that permit airports to use non-aeronautical revenue sources to
attract new and competitive air service to their communities.”108 Supporters of maintaining the
grant assurances generally argue that the assurances not only help establish and enforce federal
policy priorities but also insulate airports from local efforts to limit or shut down airport
operations (for example, because of noise concerns or for land development).
Noise Mitigation
Historically, the basic funding issue is whether to change the existing discretionary fund noise
set-aside. The noise set-aside, however, has been raised in each of the last two reauthorization
106 For example, against cargo or commuter aircraft, or night time flight operators.
107 49 U.S.C. sec. 47107.
108 Board of Directors, Airports Council International-North America, The ACI-NA Board of Directors Endorses an
Aviation Reauthorization Program That Includes a Balanced Financing Program, (Washington, ACI-NA, 2006) 1.
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acts and is now 35% of discretionary funding. Although some support for another increase could
develop, it would likely face resistance from proponents of spending on capacity and safety
enhancing projects that also rely on AIP discretionary spending. This scenario would change
should the aviation trust fund revenue outlook improve enough to allow for a significant increase
in AIP funding.
Other noise issues that may arise are funding eligibility issues. One issue is whether FAA should
be granted the flexibility to fund some noise mitigation projects that are outside the 65 decibel
noise impact area. Supporters argue that, at some airports expanding noise mitigation to areas
subject to slightly lower than 65 decibel impact could significantly lower local resistance to
airport projects. Some air carriers and airports, however, are concerned that any lowering would
eventually, in effect, be applied nation-wide and the resulting demand for AIP funds would divert
resources from capacity and safety projects. Another issue is whether or not to make the planning
for noise mitigating arrival and departure operational (air traffic control) procedures eligible for
AIP funding. In what was a major expansion of AIP noise funding eligibility, Vision 100
authorized the FAA to make grants for land use compatibility planning and projects around large
and medium hub airports that have not submitted a part 150 noise compatibility plan (under 14
C.F.R. Part 150), as was previously required. Congress may wish to review this provision and
extend or modify it, or allow it to lapse.
Very Light Jets (VLJs) and the Airbus A380: Impact on AIP
Some predictions of the rapid growth of a new type of aircraft, the VLJs (jets with a takeoff
weight less than 12,500 pounds that can land on a 3,000 foot runway), have, in turn led to
concerns that increased airport funding will be needed to accommodate them.109 Even if the
optimistic estimates of the speed of introduction of VLJs pan-out, given that VLJs have been
specifically designed to operate at most existing general aviation airports, existing airport
facilities should be able to handle the traffic. If, however, the advent of VLJs leads to increasing
demands for installing all weather capabilities at small airports or if insurers place requirements
on VLJ use, for example that VLJs only be used at airports with runways longer than 3,000 feet,
the demand for AIP-funded improvements at small airports could increase over time. In either
case, unless the reauthorization bill covers an unusually long time frame, it is unlikely that VLJs
will be a major AIP concern at this time. As mentioned previously, small airports are more
dependent on AIP funding for their capital projects than larger airports.
Recent economic conditions and the instability in fuel prices, however, have put a damper on the
expectations for the VLJ industry. Two major players in VLJ manufacturing, Eclipse Aviation and
Adam Aircraft, have ceased operations recently, casting doubt on the optimistic forecasts for the
VLJ market.
What some see as more likely to have an impact on AIP funding in the near term is the Airbus
super jumbo A380. The GAO identified 18 U.S. airports making changes to accommodate the
109 For a more detailed discussion of the issues related to the advent of VLJs, see the VLJ discussion in the chapter
“Accommodating Future Airspace Users,” in CRS Report RL33698, Reauthorization of the Federal Aviation
Administration: Background and Issues for Congress, by Bart Elias et al.
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A380 at an estimated cost of roughly $927 million. These airports identified AIP as the planned
source for 50% of these costs and PFCs for another 21%.110
“Place Naming” in Annual Appropriations Legislation
Historically, Congress has not earmarked AIP funds in the manner typical to mass transit
appropriations where specific projects have specific dollar amounts designated in the language of
the appropriations bills. Instead of earmarking, AIP funds are subject to “place naming.” Under
place naming, the appropriations committees direct FAA to give priority consideration to
discretionary grant applications at airports named in the appropriations bill report language. The
enacted FY2001 conference agreement (H.Rept. 106-940) place named 158 airports and also
specified dollar amounts to be awarded (totaling just under $300 million). The language was also
more directive than had been the case previously. The report directed FAA to “provide not less
than the following [specified] funding levels, out of available discretionary resources.” Since then
each annual conference report has named over 100 airports with set dollar amounts. Most
recently, the FY2006 Transportation/Treasury Appropriations conference report (H.Rept. 109-
307) “place named” 124 airport for projects totaling just under $196 million. For FY2007 the
continuing appropriations resolution (H.J.Res. 20) passed the House free of earmarks or place
naming. Place naming of airports for AIP grants, however, reemerged during the FY2008
appropriations process. The Consolidated Appropriations Act, 2008 (P.L. 110-161; H.Rept. 110-
434) named 110 airports for projects, totaling just over $99 million. The Conference report
language of the Omnibus Appropriations Act, 2009 (P.L. 111-8) named 78 airports for projects
totaling just under $82 million.
One of the issues related to this form of earmarking is the impact it has on the grant application
process. Another is the impact of place naming on the availability of limited discretionary funds
for national priorities such as the operation evolution plan (OEP).
Passenger Facility Charge Issues
The central PFC issue is whether to raise the $4.50 per enplaned (i.e., boarding) passenger ceiling
or to eliminate the ceiling all together. Airports have long argued for elimination of the cap, but
would also be pleased with an increase of some sort. The overall historical arguments for and
against raising or eliminating the $4.50 cap on passenger facility charges are similar to the current
arguments and are similar to the arguments for and against the PFC in general. Most air carriers
and some passenger advocates will probably oppose an increase in the PFC. The pros and cons of
increasing or eliminating the PFC cap are discussed below.
• Pro. PFC supporters feel that the PFC is more reliable than AIP funding. They
also argue that PFCs are pro-competitive, helping airports build gates and
facilities that both encourage new entrant carriers and allow incumbent carriers to
expand. Airports also argue that the PFC has proven an appropriate user fee that
has travelers pay for airport improvements and capacity expansion at the airport
where the fee is collected. In addition, supporters argue that over time the value
110 U.S. Government Accountability Office, Commercial Aviation: Costs and Major Factors Influencing Infrastructure
Changes at U.S. Airports to Accommodate the New A380 Aircraft, “GAO-06-571” Washington, DC: GAO, 2006.
Available at http://www.gao.gov/new.items/d06571.pdf.
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of the PFC has been eroded by inflation and an adjustment is therefore necessary.
Airport interests also want even fewer restrictions on the use of PFC revenue.
• Con. The airlines object to increasing the PFC cap. They argue that the PFC is
just another head tax.111 They also argue that it is anti-consumer because it
increases passenger costs and that, by raising these travel costs, it could at some
point lead to a reduction in passenger traffic. Airline interests object to what
PFCs have been spent on, arguing that airports have learned to “game the
system” to provide money for marginal proposals of debatable value instead of
high priority projects that offer meaningful safety or capacity enhancements. The
major air carriers are also unhappy with the less influential decision making role
they have in project decisions under PFCs. Airports only have to consult with
resident air carriers under the PFC rules; they do not have to get air carrier
agreement on PFC funded projects.
Although PFC revenues can be used for a broader range of projects than AIP, some airport
advocates argue there is still room for more flexibility in PFC eligibility requirements. For
example, some would like more freedom to use PFC funds on off-airport projects, such as
transportation access projects. Airports would also like the application process to be streamlined.
Additionally, they would also to eliminate the competition plan requirement that is placed on
large and medium hub airports that charge PFCs at the $4.50 level. As mentioned earlier,
supporters of the competition plan provision hoped the requirement would help assure that the
major airports would be available on a reasonable basis to all air carriers wishing to serve those
airports.
Air carrier advocates have expressed concerns about the expansion of project eligibility under the
PFC program. They are especially concerned about the use of PFCs to fund certain airport access
projects, such as rail mass transit projects, that would spend PFC revenues beyond the airport
boundary. They view the broadening of PFC project eligibility as shifting resources away from
airport infrastructure projects that support the operation of aircraft at the airport. In their view,
this creates a situation where the airside projects generally favored by air carriers are more likely
to be funded by AIP grants, bonds, and airport revenues and less likely to be funded with PFCs.
Part of this concern is driven by air carrier belief that the broadening of PFC project eligibility, in
effect, makes some large airports more likely to raise the rates and fees (such as landing fees)
charged to air carriers that use the airport.
If the AIP budget faces a period of constraint, which could limit the availability of AIP
discretionary funding for national priorities such as the OEP, Congress may wish to revisit the
distribution of the AIP apportionments that are foregone by the large and medium-hub airports
that impose a PFC. Currently 87.5% of the foregone funds are directed to a small airport fund and
12.5% to the discretionary fund. Adjusting these percentages could be one way of increasing the
money available to support OEP projects. In 1990, the Airport Capacity Funding Advisory
Committee recommended that all foregone funds should be “shifted to the discretionary fund and
allocated proportionally across all categories of the discretionary category.”112 This original
recommendation could be reconsidered.
111 Merlis, Edward A. Passenger Facility Charge Increase: Statement on Behalf of the Air Transport Association of
America Before the House of Representatives Aviation Subcommittee. March 12, 1998. 6 p.
112 FAA, Report of the Airport Capacity Funding Advisory Committee (Washington: FAA), p. 3.
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Airport Bonding Issues
Recently, there has been interest in increased use of private activity bonds (PABs) for
transportation development. Private activity airport bonds could allow a private entity to enter the
tax-exempt bond market to raise funding for a capital project at a public use airport. As a possible
precedent, the most recently passed surface transportation act, the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: a Legacy for Users (P.L. 109-59; SAFETEA-LU), allowed
for up to $15 billion in private facility bond funding for highways or freight transfer facilities.113
Airport bonds, however, have long been a major source of funding for capital projects at primary
airports. Because most airports are owned by public authorities, they can seek funds in the tax-
exempt bond market. The majority of these bonds are already treated by the Internal Revenue
Service as private activity bonds because they fund projects that benefit the activities of private
entities (usually airlines at the airport) and because they directly or indirectly (through fees)
depend on revenue from such private entities to make the bond payments. Income from PABs are
subject to the alternative minimum tax.
The current use by airport sponsors of airport bonding differs somewhat from the use of PABs
envisioned in SAFETEA-LU. Many of the supporters of the SAFETEA-LU provisions
envisioned PABs as a means of facilitating public-private partnerships between the public
authority and an outside investor (see the privatization issue discussion earlier in this report).
Within the airports context, this would be analogous to an airport authority agreeing to a long
term lease with an outside private investor who would have the ability to enter the market for tax-
exempt bonds to finance improvements at the airport and, perhaps, also to finance the purchasing
costs of the lease itself.
Alternative Minimum Tax (AMT) Issues
As mentioned above, income from PABs is subject to the AMT.114 Income from tax-exempt
governmental purpose bonds is not subject to the AMT (the majority of airport bonds are PABs).
One change sought by ACI-NA would be to broaden the definition of governmental purpose
airport bonds to, in effect, include either all airport bonds or at least those bonds issued for public
use projects that meet AIP or PFC eligibility requirements.115
Opponents of such changes express concerns that these changes could reduce U.S. Treasury
revenues. Some also argue it would make more sense to change the AMT as part of a tax bill
rather than as a specific exemption provided for income on airport bonds in an FAA
reauthorization bill. In either case, such a change would not be under the jurisdiction of the
congressional committees that will have jurisdiction over most reauthorization provisions.
113 For a description of the Federal Highway Administration program, see http://www.fhwa.dot.gov/ppp/
private_activity_bonds.htm.
114 The AMT was originally enacted to make sure that all taxpayers pay at least a minimum amount of federal taxes on
their income so that individual taxpayers could not take unfair advantage of the various federal tax preferences and
incentives. Because the tax was not indexed for inflation the impact of the tax has grown beyond the small group of tax
payers for whom it was originally intended. See CRS Report RS22909, The Alternative Minimum Tax for Individuals:
Legislative Activity in the 110th Congress, by Steven Maguire and Jennifer Teefy.
115 ACI-NA, Reforming the Federal Tax Treatment of Airport Bonds, (Washington, ACI-NA) 2006. The ACI-NA also
proposes that the advance refunding of PABs (which is usually done to take advantage of lower interest rates) be
allowed.
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Changes to the AMT would be under the jurisdiction of the congressional tax-writing committees,
the House Committee on Ways and Means and the Senate Committee on Finance.
The Congressional Budget Office (CBO), the Office of Management and Budget (OMB) and the
Treasury Department, however, have generally opposed bonding as adding additional
government-borne costs to the airport improvement process.116
AIP Stimulus Funding
President Barack Obama signed the American Recovery and Reinvestment Act (ARRA; P.L. 111-
5) on February 17, 2009. This economic stimulus act included $1.1 billion for grants-in-aid for
airports. The funding is to be administered by the FAA as if the funding is pure AIP discretionary
funding (i.e., without formulas, special apportionment categories, or minimum set-asides).117 All
normal AIP grant conditions and assurances conditions must be met. Priority consideration is to
be given to projects that may be awarded within 120 days of enactment and completed within two
years. The federal share is 100% and, because of this, each grant application must identify a
useable unit of work that would be 100% funded. The grants must supplement and not supplant
planned expenditures from airport generated revenues or from other state and local sources for
airport development activities. FAA is interpreting this to mean that projects planned for
traditional AIP grants in FY2009 that include state or local match requirements, are not eligible.
The main ongoing congressional issue is oversight of the spending of the stimulus funding.
ARRA includes substantial reporting, transparency and oversight requirements. In the narrow
sense the issue is compliance with these requirements. Congress may also provide oversight
concerning issues such as the distribution of ARRA funding across regions and state compliance
with the law’s directive that grants must supplement and not supplant planned expenditures from
airport generated revenues or from other state and local sources for airport development activities.
Oversight may also respond to concerns, should they arise, of fraud, waste, and abuse of ARRA-
funded airport grants. In a broader sense, Congress may wish to examine the degree to which the
ARRA spending on airport infrastructure provided the intended economic stimulus.
116 CBO reiterated this position at recent (September 27, 2006) House Aviation Subcommittee hearings on Financing
Options for FAA and Redesign of the Air Transportation System. GAO also expressed the reasons for its concerns
about the costs of bonding. See GAO. National Airspace System Modernization: Observations on Potential Funding
Options for FAA and the Next Generation Airspace System. “GAO-06-1114T” Washington, GAO, 2006. p. 16-17.
117 See FAA, Stakeholder Guidance: American Recovery and Reinvestment Act (AARA) of 2009, (Washington, DC,
2009), http://www.faa.gov/airports_airtraffic/airports/aip/media/FY09_aip_arra_guidance.pdf
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Appendix A. Legislative History of Federal Grants-
in-Aid to Airports
Prior to World War II the federal government limited its role in aviation to maintaining the airway
system, viewing airports as a local responsibility. Some federal monies were spent on airports
during the 1930s (about $150 million) but only as part of federal work relief activities such as
Works Progress Administration (WPA) projects. The national defense need for a strong system of
airports during World War II led to the first major federal support for airport construction. After
the war, the Federal Airport Act of 1946 (P.L. 79-377, hereafter referred to as the 1946 Act)
continued federal aid under the Federal Aid to Airports Program, although at lower levels than
during the war years. Under the 1946 Act, funds were appropriated annually from the general
fund of the U.S. Treasury. Initially much of this spending supported a policy of conversion of
military airports to civilian use. In the 1960s substantial funding also went to upgrade and extend
runways for use by commercial jets.118 By the end of the 1960s, congestion, both in the air and on
the ground at U.S. airports, was seen as evidence by some that past federal support for airports
had not been sufficient to maintain adequate airport capacity.119
Airport and Airway Development and Revenue Acts of 1970
(P.L. 91-258; the 1970 Acts)
In 1970, Congress responded to the congestion problems and capacity concerns at airports by
passing two Acts. The first, the Airport and Airway Development Act, dealt with the spending
side of federal aid to airports. It established the Airport Development Aid Program (ADAP), the
Planning Grant Program (PGP), and set forth the programs’ grant criteria, distribution guidelines,
and authorization of grant-in-aid funding for the first five years of the program. The second Act,
the Airport and Airway Revenue Act of 1970, dealt with the revenue side of airport development.
This act established the Airport and Airway Trust Fund (also known as the Aviation Trust Fund).
Revenues from levies on aviation users and fuel were dedicated to the fund.120 Modeled on the
Highway Trust Fund, this fund was designed to assure an adequate and consistent source of funds
for federal airport and airway programs.121 The Aviation Trust Fund also funds most FAA
activities in addition to grants-in-aid for airports. These include, facilities and equipment (F&E);
research, engineering, development (R,E&D); and FAA operations. Air traffic system
maintenance and improvement fall under the first two of those categories. Under the 1970 Acts
the trust fund was to have been both a capital account and, when excess funds existed, a user-pay
system to help support FAA’s administrative and operations costs.122
118 For a general discussion of the U.S. airport system see Alexander R. Wells, Airport Planning & Management, (New
York, TAB Books, 1992), 1-76.
119 U.S. President (1969-1974: Nixon), Problems of Air Transportation in America: Message from the President of the
United States, 91st Cong. 1st Sess., June 1969, (Washington, U.S. Govt. Print. Off. , 1969), H.Doc. 91-130, 1-4.
120 See CRS Report RS21321, Aviation Taxes and Fees: Major Issues, by John W. Fischer.
121 Although the Airway and Airport Trust Fund was modeled after the Highway Trust Fund, there are differences in
the way funds are distributed. One major difference is that highway spending is funneled through the states whereas
most airport development funds go directly to airports.
122 See GAO, Congressional Intent. For another discussion of congressional intent regarding the debate over the use of
aviation trust fund revenues for both airport and airway infrastructure as well as spending on FAA operations, see
CBO. The Status of the Airport and Airway Trust Fund.
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Airport and Airway Development and Revenue Acts
Amendments of 1971 (P.L. 92-174; the 1971 Amendments Act)
The Nixon Administration’s FAA budget requests for FY1971 and FY1972 under the new trust
fund system brought it into immediate conflict with Congress over the budgetary treatment of
trust fund revenues.123 The Administration treated the new financing system as a user-pay system,
whereas many Members of Congress viewed the trust fund as primarily a capital fund for the
ADAP and F&E (although spending on FAA operations was allowable).124 The 1971
Amendments Act was a strong congressional reaction consistent with many Members’
perceptions that the Nixon Administration was ignoring the intent of Congress under the 1970
Acts. The Amendment made the trust fund a capital-only account (although only through
FY1976), disallowing the use of trust fund revenues for FAA operations.125
Airport and Airway Development Amendments Act of 1976
(P.L. 94-353; the 1976 Act)
The 1976 Act (P.L. 94-353) made a number of adjustments to the ADAP and reauthorized the
Aviation Trust Fund through FY1980. The act again allowed the use of trust fund resources for
the costs of air navigation services (a part of operations and maintenance). However, in an
attempt to assure adequate funding of airport grants, the act included “cap and penalty”
provisions which placed an annual cap on spending for costs of air navigation systems and a
penalty that reduced these caps if airport grants were not funded each year at the airport
program’s authorized levels.126
ADAP grants totaled about $4.1 billion dollars from 1971 through 1980. In part because of a
debate over “defederalization,” Congress did not pass authorizing legislation for ADAP during
FY1981 and FY1982, which meant that the Aviation Trust Fund lapsed during those two years,
although spending for airport grants continued.127
Airport and Airway Improvement Act of 1982 (P.L. 97-248;
the 1982 Act)
The 1982 Act (P.L. 97-248) created the current AIP and reactivated the Aviation Trust Fund.
Although the AIP maintained the ADAP’s approach of using grants-in-aid to support an integrated
national system of airports, it did make some significant changes in the operation of the program.
The program differences included altering the funding distribution among the newly defined
123 See CBO, Status of the Airport and Airway Trust Fund, 3-11.
124 The Administration’s FY1972 budget proposal would have provided more aviation trust fund monies for FAA
operations than for AIP and F&E combined.
125 CBO, Status of the Airport and Airway Trust Fund, 5-7.
126 For a detailed discussion of the history of the various cap and penalty provisions and other spending guarantees, see
CRS Report RL33654, Aviation Spending Guarantee Mechanisms, by Robert S. Kirk.
127 Airport aid for those years was appropriated at $450 million per year. Certain aviation fee revenues went into the
Treasury’s general fund and the Highway Trust Fund during the lapse. The defederalization debate centered around
proposals to withdraw federal aid from major air carrier airports on the grounds that the federal government was over-
involved in airport development finance and that large airports could finance any needed development themselves.
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categories of airports,128 extending aid eligibility to privately owned general aviation airports,
increasing the federal share of eligible project costs, and earmarking 8% of total funding for noise
abatement and compatibility planning. The act also required the Secretary of Transportation to
publish a national plan for the development of public-use airports in the United States. This
biannual publication is called the National Plan of Integrated Airport Systems (NPIAS). The
NPIAS identifies airports that are considered important to national transportation. For an airport
to receive AIP funds it must be listed in the NPIAS. In reauthorizing the Aviation Trust Fund, the
act also adjusted the schedule of aviation user fees.
Although the act was amended often in the 1980s and early 1990s, the general structure of the
program remained the same. The Airport and Airway Safety and Capacity and Expansion Act of
1987 (P.L. 100-223; 1987 Act) authorized significant increases for AIP and added a cargo service
apportionment. The 1987 Act also included modified “cap and penalty” provisions as well as a
“tax reduction trigger,” in part, to encourage full funding of AIP at the fully authorized level.129
Title IX of P.L. 101-508, the Omnibus Budget Reconciliation Act of 1990 (OBRA), included the
Aviation and Airway Safety and Capacity Act of 1990 which allowed airports, under certain
conditions, to levy a Passenger Facility Charge (PFC) to raise revenue and also established the
Military Airport Program (MAP), which provided AIP funding for capacity and/or conversion-
related projects at joint use or former military airports. The Airport Noise and Capacity Act of
1990, also set a national aviation noise policy. OBRA included the Revenue Reconciliation Act of
1990 which reauthorized the Aviation Trust Fund and adjusted some of the aviation taxes. Finally,
OBRA again modified the cap and penalty provisions and eliminated the tax reduction trigger.
The Federal Aviation Reauthorization Act of 1994 (P.L. 103-305) reauthorized AIP for two more
years and again made modifications in the cap and penalty provisions.130
Federal Aviation Reauthorization Act of 1996 (P.L. 104-264)
The 1996 authorization of the AIP (P.L. 104-264) provided $2.28 billion for FY1997 and $2.37
billion for FY1998. The act made a number of adjustments to entitlement funding and
discretionary set-aside provisions. It also included a number of directives concerning intermodal
planning, cost reimbursement rules, letters of intent (LOIs), and the Small Airport Fund. A
demonstration airport privatization program and a demonstration program for innovative
financing techniques were established. The pilot status of the state block grant program was
removed. The 1996 Act again altered the cap and penalty provisions. The act did not reauthorize
the taxes that supported the aviation trust fund. This was done by the Taxpayer Relief Act of 1997
(P.L. 105-34), which extended, subject to a number of modifications, the existing aviation trust
fund taxes for ten years, through September 30, 2007.
128 The 1982 Act defined four categories for the distribution of formula funds: commercial service, primary, reliever,
and general aviation. Of the distribution, not more than 50%was to primary airports, based on the number of
enplanements. 12 % of the authorization was for use within the states and insular areas and the remainder was defined
as discretionary. A sizable portion of the discretionary funding was dedicated to specified funding minimums.
129 The 1987 Act added a provision for FY1988-FY1989 that would trigger a reduction in aviation tax rates, if the total
of the amounts made available for AIP, F&E, and R,E&D were less than 85% of the amounts authorized for these
programs.
130 The 1994 Act was preceded by two acts that extended the AIP program. The Airport and Airway Safety, Capacity,
Noise Improvement and Intermodal Transportation Act of 1992 (P.L. 102-581) extended AIP through FY1993 and the
AIP Temporary Extension Act of 1994 (P.L. 103-260) extended AIP through June 30, 1994.
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The Wendell H. Ford Aviation Investment and Reform Act for the
21st Century of 2000 (AIR21; P.L. 106-181)
The enactment of AIR21 (P.L. 106-181) was the culmination of two years of legislative effort to
pass a multi-year FAA reauthorization bill.131 The length of the effort was a reflection of the
difficult issues faced. Major issues that had to be resolved included the budgetary treatment of the
aviation trust fund, raising the ceiling on the passenger facility charge (PFC), as well as the
amounts to be spent and their distribution.
Rather than debating further modifications of the “cap and penalty” provisions the initial debate
focused on provisions to take the aviation trust fund off-budget or erect budgetary “firewalls” to
assure that all trust fund revenues and interest would be spent each year for aviation purposes.
These proposals, however, never emerged from the conference committee. Instead, the enacted
legislation included a so-called “guarantee” that all of each year’s receipts and interest credited to
the trust fund would be made available annually for aviation purposes. The guarantee is enforced
by changes made in House and Senate point-of-order rules. One rule makes it out-of-order to
consider legislation that does not spend all trust fund revenues for aviation purposes. The second
rule makes it out-of-order to consider legislation for funding FAA’s Operations and Maintenance
(O&M) or Research, Engineering and Development (R,E&D) budgets if AIP and the F&E
budgets are funded below authorized levels. Although these provisions are not considered airtight,
the budgetary resources made available for AIP during the years (FY2001-FY2003) that the
AIR21guaranties were in effect were at or near the program’s authorized levels.
AIR21 did not, however, make any major changes in the structure or functioning of AIP. The big
difference was the amount of money made available for airport development projects. From a
funding level of approximately $1.9 billion for FY2000, AIP’s authorization increased funding by
nearly 70% to $3.2 billion for FY2001, then to $3.3 billion for FY2002, and to $3.4 billion for
FY2003. Within the context of these increases, the formula funding and minimums for primary
airports were doubled starting in FY2001. The state apportionment for general aviation airports
was increased from 18.5% to 20%. The noise set-aside was increased from 31% to 34% of
discretionary funding and a reliever airport discretionary set-aside of 0.66% was established.
AIR21 also increased the PFC maximum to $4.50 per boarding passenger. In return for imposing
a PFC above the $3 level, large and medium-hub airports would give back, or “forgo,” 75% of
their AIP formula funds. This made more AIP funding available to the smaller airports.
Vision 100: Century of Aviation Reauthorization Act of 2003
(P.L. 108-176; H.Rept. 108-334)
Vision 100 (P.L. 108-176; H.Rept. 108-334), the FAA reauthorization act, signed by President
George W. Bush on December 12, 2003, included some significant changes to AIP but nothing of
the scale or consequence of the changes made under AIR21. Both the funding increase and the
131 During the debate AIP underwent four separate authorization extensions: P.L. 105-227 extended AIP through March
31, 1999; P.L. 106-6 through May 31, 1999; P.L. 106-31 through August 6, 1999; and, finally, P.L. 106-59 through
September 30, 1999. The AIP was held in abeyance from October 1, 1999 until AIR21 was enacted on April 5, 2000.
See CRS Report RS21621, Surface Transportation and Aviation Extension Legislation: A Historical Perspective, by
John W. Fischer and Robert S. Kirk.
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programmatic changes were modest by comparison. Vision 100 funded AIP for four years at the
following annual levels: $3.4 billion for FY2004, $3.5 billion for FY2005, $3.6 billion for
FY2006, and $3.7 billion for FY2007. The law codified the AIR21 spending “guarantees”
through FY2007. The agreement does not authorize the use of AIP funds for the administration of
the program.
Vision 100 increased the discretionary set aside for noise compatibility projects from 34% to
35%. It increased the amount that an airport participating in the Military Airport Program (MAP)
could receive to $10 million for FY2004 and FY2005, but in FY2006 and FY2007 it returned the
maximum funding level to $7 million. The act allowed non-primary airports to use their
entitlements for revenue generating areas if the Secretary of DOT determines that the sponsor has
made adequate provisions for the air-side needs of the airport. The agreement permitted AIP
grants at small airports to be used to pay interest on bonds used to finance an airport project. The
act included a pilot program to test procedures for authorizing small airports to impose PFCs.
Vision 100 repealed the authority to use AIP or PFC funds for most airport security purposes.
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Appendix B. Definitions of Airports Included in the
NPIAS
Commercial Service Airports132
Publicly owned airports that receive scheduled passenger service and board (enplane) at least
2,500 passengers each year (522 airports).
Primary Airports
All 383 primary airports board more than 10,000 passengers each year. Primary airports are
subdivided into four categories of airport:
Large Hub Airports
Board 1% or more of total system-wide enplanements (30 airports that together account for
68.7% of all enplanements)
Medium Hub Airports
Board 0.25% but less than 1% (37 airports that together account for 20% of all enplanements)
Small Hub Airports
Board 0.05% but less than 0.25%.(72 airports that together account for 8.1% of all enplanements)
Non-hub Primary Airports
Board more than 10,000 but less than 0.05% (244 airports that together account for 3% of all
enplanements)
Non-Primary Commercial Service Airports
Board at least 2,500 but no more than 10,000 passengers each year (139 airports that together
account for 0.1% of all enplanements)
132 2009-2013 NPIAS, 4-9. Passenger enplanements are the total number of passengers boarding aircraft, including
originating passengers as well as those changing aircraft.
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Other Airports
Cargo Service Airports
Airports that are served by aircraft that provide air transport for cargo only and have a total
“landed weight” of over 100 million pounds.
Reliever Airports
Airports designated by the FAA to relieve congestion at commercial airports and provide
improved general aviation access to a community (i.e. to draw general aviation activity away
from congested commercial metropolitan airports). There are 270 airports classified as reliever
airports.133
General Aviation Airports
All other airports. General aviation airports do not serve military or scheduled commercial service
but typically do support one or more of the following: business/corporate, personal, and
instructional flying; agricultural spraying; air ambulances; on-demand air-taxies; and/or charter
aircraft service. There are 2,564 general aviation airports in the national airport plan (NPIAS). In
addition there are 16,459 non-NPIAS low-activity airports that together accounted for 0.1% of all
enplanements. Non-NPIAS airports are not eligible for AIP funding.
Author Contact Information
Robert S. Kirk
Specialist in Transportation Policy
rkirk@crs.loc.gov, 7-7769
133 Reliever airports must have 100 or more based aircraft or 25,000 itinerant operations. These airports average 230
based aircraft. In total, 28% of the general aviation fleet in the United States are based at reliever airports.
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