Infrastructure Investment and Jobs Act (IIJA) and Airport Funding

Infrastructure Investment and Jobs Act (IIJA) and Airport Funding

INSIGHTi

Infrastructure Investment and Jobs Act (IIJA)
and Airport Funding
February 24, 2022
The Infrastructure Investment and Jobs Act (IIJA, also referred to as the bipartisan infrastructure law; P.L.
117-58), enacted on November 15, 2021, appropriated $25 billion over a five-year period (FY2022-2026)
for airport and air traffic control projects. This aviation funding includes $15 billion in grants for airport
infrastructure projects that increase safety and expand capacity; $5 billion in competitive grants for airport
terminals including replacing aging terminals and airport-owned control towers; and $5 billion to improve
the physical condition of Federal Aviation Administration (FAA) air traffic control facilities.
The entirety of the $25 billion in the IIJA specified for civil aviation derives from the Treasury general
fund. This departs from the usual practice of funding civil aviation infrastructure in the United States
largely from user taxes and fees. In addition, the IIJA provides money for aviation purposes that
previously were not eligible to receive federal funding.
Since 1970, the Airport and Airway Trust Fund (AATF) has been the primary funding source for all major
FAA accounts that fund federal aviation programs—Operations and Maintenance (O&M), Airport
Improvement Program (AIP), and Facilities and Equipment (F&E)—with a small portion of FAA O&M
funding supplemented by general fund appropriations. AATF revenue comes from a variety of excise
taxes paid by users of the national airspace system, including airline passenger ticket taxes, segment fees,
air cargo fees, and fuel taxes paid by both commercial and general aviation aircraft. Taxes and fees related
to passenger transportation have accounted for the majority of trust fund revenue.
Additionally, federal law authorizes commercial airports to impose a local Passenger Facility Charge
(PFC) on each boarding passenger, with a maximum of $4.50 per flight segment, capped at $9 one-way or
a total of $18 per round trip flight. PFCs may be used to fund a broad range of airport infrastructure
projects, including landside projects that are ineligible for AIP funding, such as passenger terminals and
on-airport rail systems.
The decrease in air travel as a consequence of the COVID-19 pandemic has had considerable effects on
the amount of funds available for civil aviation infrastructure and activities. For example, FAA reported
that airports had collected a total of $1.69 billion from PFCs in 2020, 46% of the amount collected in the
last pre-pandemic year, 2019.
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In the 20 months prior to enactment of the IIJA, Congress addressed the financial impact of the pandemic
in three separate laws that appropriated a total of $20 billion from the general fund to eligible U.S.
airports as COVID relief measures. These included
 the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136,
enacted on March 27, 2020), which provided $10 billion as economic relief to eligible
airports affected by the COVID-19 pandemic;
 the Consolidated Appropriations Act, 2021 (P.L. 116-260, enacted on December 27,
2020), which provided $2 billion in economic relief to eligible U.S. airports, including
$200 million to operators of eligible airport concessions, such as on-airport parking and
car rental as well as in-terminal concessions; and
 the American Rescue Plan Act of 2021 (P.L. 117-2, enacted on March 11, 2021), which
provided $8 billion for eligible airports to cover costs of operations, personnel, and
cleaning, including a set-aside for rent relief and other costs of airport concessionaires.
On December 16, 2021, FAA announced an initial $2.89 billion for FY2022, the first tranche of the $15
billion of airport infrastructure grants to be allocated to over 3,000 eligible airports under the IIJA. This
money supplements regular Airport Improvement Program (AIP) grants, which are currently authorized at
$3.35 billion a year, and thus represents a significant boost in federal funding to airports. FAA is expected
to release more detailed guidelines for the use of these funds in the near future.
Further, FAA is accepting airport applications from February 22, 2022, to March 28, 2022, for the first
annual $1 billion in competitive grants for airport terminal development projects under the IIJA. These
grants are available to eligible airports to upgrade, modernize, and rebuild airport terminals and airport-
owned air traffic control towers. Projects may also include on-airport rail access and multimodal
development, neither of which is eligible for federal funding under regular AIP.
AIP funding is generally limited to construction of airside improvements related to aircraft operations,
such as runways, taxiways, aprons, safety-related projects, and noise abatement. Landside projects such as
airport terminals have generally been funded with airports’ own sources, such as PFCs, bond issues, and
operating revenues. The IIJA airport infrastructure funds, however, can be used for any airport-related
project as defined under the existing AIP and PFC criteria. This means the money can be invested in
runways, taxiways, and safety and sustainability projects, as well as landside projects such as terminals
and airport transit connection projects.
Because of the complementary relationship between AIP grants and PFC funds, PFC provisions are
generally included in the sections of FAA reauthorization legislation dealing with AIP. The current FAA
reauthorization is set to expire after September 30, 2023. Some airport interests have been urging
Congress to increase or eliminate the ceiling on PFCs, which has remained unchanged since 2000.
Airlines, on the other hand, generally oppose higher limits on PFCs, which are included in air ticket
prices and collected by the airlines on behalf of airports; they assert that higher PFCs would increase
ticket prices and constrain air travel demand. The availability of IIJA funds for a wider range of airport
projects may ease the immediate pressure on Congress to alter the law concerning PFCs.

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Author Information

Rachel Y. Tang

Analyst in Transportation and Industry

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