Aviation: Direct Federal Spending, 1918-1998

Congressional research reportFeb 3, 1999

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Order Code RL30050

CRS Report for Congress

Received through the CRS Web

Aviation: Direct Federal Spending, 1918-1998

February 3, 1999

(name redacted)

Specialist in Transportation

and

(name redacted)

Economics Division

Congressional Research Service ˜ The Library of Congress

ABSTRACT

The federal government has provided large financial resources in support of commercial

aviation since 1918. This report details the amounts and types of federal spending that have

occurred over this 80 year period. The report also discusses some of the issues that have

shaped federal policy toward aviation and identifies some of the issues likely to affect

federal spending in the future. This report will not be updated.

Aviation: Direct Federal Spending, 1918 - 1998

Summary

The federal government has played a large role in the development of aviation.

In the ten years prior to 1918 this role was exclusively military in origin. Beginning

in 1918, with the first air mail flights, commercial aviation became a growing focus

of federal attention and assistance. In the intervening 80 years the federal

government has spent $155 billion in support of aviation activities.

This report details, and comments on, federal assistance provided directly in

support of commercial aviation. Direct assistance in this view can take several forms;

for example, the physical components of the air traffic control system can be

regarded as infrastructure; direct payments to airlines can be regarded as subsidies,

and the operating expenses of the Federal Aviation Administration (FAA) and its

predecessor agencies can be construed as operational support. Indirect assistance,

such as that provided through military research and development (R&D), and by

R&D provided by agencies other than the Department of Transportation and its

predecessor agencies is not detailed in this report.

In the early years of federal support for aviation most assistance came in the

form of designated subsidies to foster the growth of what has become the

commercial aviation industry. This was in keeping with the aviation sector's

embryonic nature. As the industry has matured, the level and expense of the federal

effort has expanded and spending for capital infrastructure and operational activities

have become specific components of annual federal budgets.

The debate today is not so much about whether a federal role in aviation is

appropriate. Rather the debate is about how to pay for federal programs and who

should pay for it. In the first half of this century almost all aviation expenses came

from U.S. Treasury general funds. In the trust fund era this contribution has

diminished as designated user fees have provided a majority of direct aviation-related

funding. The general fund contribution, however, remains significant, and

controversial.

Contents

Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Early History, 1918-1938 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The Regulated Era: 1938 - 1978 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Airline Subsidies, 1939-1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Guaranteed Loans for Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Essential Air Service (EAS): 1979 - 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Airways, 1926 - 1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Airports, 1926 - 1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

The Trust Fund Era: 1971 - 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

FAA Programs and Spending, FY1971 - FY1998 . . . . . . . . . . . . . . . . . . . 10

Trust Fund Revenues, FY1971 - FY1998 . . . . . . . . . . . . . . . . . . . . . . . . . 12

The National Weather Service (NWS) and Aviation . . . . . . . . . . . . . . . . . . . . . 14

Summary of Federal Spending on Aviation . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

List of Tables

Table 1. Federal Subsidies to Airlines: 1954-1983 . . . . . . . . . . . . . . . . . . . . . . 5

Table 2. Guaranteed Loans to Air Carriers, 1957-1983 . . . . . . . . . . . . . . . . . . . 6

Table 3: Essential Air Service Expenditures:

Fiscal Years 1979-1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Table 4. Federal Airway Expenditures, 1942-1970 . . . . . . . . . . . . . . . . . . . . . . 8

Table 5. Federal Airport Expenditures, 1953-1970 . . . . . . . . . . . . . . . . . . . . . 10

Table 6. FAA Expenditures: Fiscal Years 1971-1998 . . . . . . . . . . . . . . . . . . . 11

Table 7. Aviation Trust Fund Revenues, FAA Appropriations, and General Fund

Contribution: Fiscal Years 1971-1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Table 8. National Weather Service Expenditures for Aviation

FY1977-FY1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Table 9. Summary of Federal Direct Spending on Aviation, 1918-1998 . . . . . . 15

Aviation: Direct Federal Spending, 1918 - 1998

The dawn of human flight occurred less than a century ago. Yet in that short

period, flight has gone from novelty to utility. Air travel, in the eyes of many, is now

nothing more than a ho hum reality, notable mostly for its mystery meals and lost

luggage. In fact, the benefits of aviation permeate our society in ways that are both

visible to us, such as airline travel, and largely invisible to most of us, such as the

rapid transport of human organs for transplantation.1

The federal government has played a large role in the development of aviation.

In the ten years prior to 1918 this role was exclusively military in origin. Beginning

in 1918, with the first air mail flights, commercial aviation became a growing focus

of federal attention and assistance. In the intervening 80 years the federal

government has spent $155 billion in direct support of aviation.

Framework

This report details, and comments on, federal assistance provided directly in

support of commercial aviation. Direct assistance in this view can take several

forms; for example, the physical components of the air traffic control system can be

regarded as infrastructure; direct payments to airlines are historically categorized as

subsidies2, and the operating expenses of the Federal Aviation Administration (FAA)

and its predecessor agencies can be construed as operational support. Indirect

assistance, such as that provided through military research and development (R&D),

and by R&D provided by agencies other than the Department of Transportation and

its predecessor agencies is not detailed in this report.

For the purposes of this report commercial aviation is composed primarily of

the air carrier industry (airlines) and general aviation.3 Military aviation is a separate

The historical information in this report draws heavily from two previous CRS Reports:

U.S. Library of Congress. Congressional Research Service. Federal Aid to Domestic

Transportation. CRS Report 77-112E. by Stephen Thompson, Barbara Maffei, and William

Lipford; and Federal Aid to Domestic Transportation: A Brief History from the 1800s to the

1980s. CRS Report 88-574E. by Nancy Heiser. The first of these reports contains detailed

information on levels of assistance and provides an explanation of how and why specific

subsidy determinations were made. The second report is a shortened update of the earlier

product.

Subsidies refer to historical data identified as such in source documents.

General aviation is a bucket term that refers to all types of aviation activities except air

(continued...)

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activity not detailed in this report. There are, however, numerous overlaps between

commercial and military aviation. The air traffic control system, for example, has

both civilian and military components and serves both types of aviation, often using

the same facilities.

The authors of this report exercise some judgement as to whether or not to

include certain agency information. Costs that cannot be directly viewed as having

a direct impact on aviation activities are omitted. The operating expenses for the

now defunct Civil Aeronautics Board (CAB), for example, have been omitted,

whereas assistance to airlines provided as a result of CAB actions is included. The

data in this report is presented using actual dollars. The period covered by this report

examines a wide range of federal activities that cannot be easily compared in fact or

in monetary terms. Hence the use constant dollars is not viewed as being helpful for

this analysis.

Federal assistance to commercial aviation has taken numerous forms. In some

instances, federal assistance is readily identifiable, and can be detailed using federal

budget documents. However, identifying spending in the era prior to the adoption

of a unified federal budget, which occurred in 1969, is somewhat problematic. It is

often not possible to find original source data for the pre-1969 period. As a result,

this analysis draws heavily on secondary sources for this information.

In addition, it is often difficult to distinguish whether pre-1969 data reflects

fiscal year data or calendar year data. This distinction does not affect the results and

trends enumerated in this report, however. Post 1970 data in this report is all fiscal

year data.

The research for this report has identified a number of data inconsistencies for

federal accounting of aviation activities. Most of these inconsistencies exist because

of choices made by earlier research about what should, or should not, be counted as

federal aid. To adjust for these problems, this report uses what CRS feels are the

most consistent data sources. For the most part, however, data differences are

relatively small in numerical terms and would not have a major affect on the

spending trends presented in this report.

Early History, 1918-1938

The federal government has had a direct financial involvement in the

development and support of domestic air transportation since the aforementioned

beginning of air mail service by the Post Office Department in 1918. Air mail

service remained mainly a Post Office Department endeavor until 1928. The

estimated cost to the federal government from 1918 to 1928 for the provision of this

(...continued)

carriers and the military. Corporate jets and crop dusters are examples of general aviation.

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service was $12 million.4 The Air Mail Act of 1925, also known as the Kelly Act,

allowed for the hiring of private contractors to replace the existing government

operation of the air mail service. By 1928 this transfer was largely complete.

Between 1926 and 1930, the federal government paid more than $31 million to

contractors, while collecting less than $15 million in postal revenues for air mail

service. As a result, the service was provided at a deficit of slightly over $17

million.5

In 1930, Congress passed the Watres Act which permitted higher compensation

to air carriers by relating payments to the cost of operation rather than keying them

to the actual volume of mail carried. During the period of airmail operation under

the Watres Act, 1931 to 1934, total postal expenditures exceeded postal revenues by

approximately $53.6 million.6 More importantly from the perspective of federal

policy, the Post Office began requiring that air mail contractors carry passengers. It

was the hope of the Post Office that passenger traffic could eventually lead to a

reduction in the need for air mail subsidies. In 1934, the Post Office terminated all

air mail contracts on the grounds that contractors were colluding on pricing. The

fledgling U.S. Army Air Corps was pressed into mail delivery service with disastrous

results. Numerous accidents and deaths revealed an Air Corps with severe operating

deficiencies in need of correction.

To rectify the situation, Congress passed the Air Mail Act of 1934 (P.L. 73308), which contained several significant changes in Government policy regarding

airmail operations. The Act reopened all airmail routes to competitive bidding and

authorized the Postmaster General to contract with private firms to provide airmail

service. It also transferred economic regulation of aid to carriers and rates of

compensation from the Post Office Department to the Interstate Commerce

Commission (ICC), and moved safety regulation from the Post Office Department

to the Department of Commerce. From the enactment of the Air Mail Act of 1934

until 1938, air passenger-miles doubled and airmail pound-miles rose substantially.

During this time, the Federal Government incurred a deficit from airmail activities

of $26.4 million.7

The Regulated Era: 1938 - 1978

Airline Subsidies, 1939-1984

For many years, the issue of subsidy payments to airlines was among the most

controversial of all transportation issues considered by Congress. The airline

industry’s once major competition, the passenger railroads, railed at the unfair

U.S. Congress. House. Committee on Interstate and Foreign Commerce. Public Aid to

Domestic Transportation. Report submitted by the Board of Investigation and Research.

Washington, U.S. Govt. Print. Off., 1941. p. 110. (Here after referred to as Board Report.)

Board Report, p. 439.

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advantage which they believed accrued to the airline industry as a result of subsidy

payments. Long-term arguments about how to count subsidies and what they meant

continued throughout the 1940s, 1950s, and into the 1960s. Some serious attempts

were made by the federal government to put airline industry subsidies into

perspective. The results of these studies are reflected in the following discussion and

table.8

In 1938, Congress passed the Civil Aeronautics Act which created a five

member, independent regulatory agency called the Civil Aeronautics Authority

(CAA). At the same time, the Act also created an Air Safety Board which is the

predecessor of today’s National Transportation Safety Board (NTSB). In 1940, an

Executive Order reorganized the CAA, renamed it the Civil Aeronautics Board

(CAB), and made it part of the Department of Commerce. The CAB had authority

to fix airmail rates and hence, subsidy levels. Prior to the 1938 Act the payment of

air mail subsidies to encourage airline passenger travel was implicit. The 1938 Act

was explicit in its subsidy provisions. Federal subsidies to airlines from 1939 to

1953 totaled $310,890,000.9

During the regulated era, 1938 - 1978, airlines operated on routes prescribed by

the CAB. The CAB also regulated fares, market entry, and other facets of the airline

industry’s activities. The CAB never regulated frequencies (the number of flights per

day) between markets. The regulated era is viewed as the maturation period of the

airline industry, which under the CAB’s watchful eye moved into the jet age and

became the nation’s principal common carrier of passenger service.

In 1953, airline subsidies were separated from airmail compensation and

provided independently10. After that date, the Post Office paid airmail compensation

and the CAB made all airline subsidy payments. For all practical purposes, direct

subsidy to the largest airlines was phased out by the end of the 1950s. After that date

almost all remaining subsidy was focused on local air service and other specialized

services, such as those provided in Alaska and Hawaii.

Shortly after World War II the CAB participated in the creation of a new class

of air carriers, the local service carriers, whose primary purpose was to provide

service to destinations lacking air service from the large trunkline air carriers. Most

local service carriers originally started as small scale operations performing extensive

short-hop type service. Over time these airlines evolved into significant service

providers (U.S. Airways is a direct descendent of one of the local service carriers).

The local service airlines were provided with designated assistance long after the

subsidies to trunk lines ended. In addition, these air carriers were major recipients

of aid from the aircraft guaranteed loan program that will be discussed later in this

report. Local service subsidies, known over part of their life as the Section 406

Op Cit. Footnote 1.

U.S. Civil Aeronautics Board. Subsidy for United States Certified Air Carriers.

Washington, U.S. Govt. Print. Off., March 1974. Appendix I.

This split was accomplished by Executive Order of the Eisenhower Administration,

Reorganization Plan No. 10.

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program, terminated in the early 1980s, but some residual subsidy was provided as

late as 1984.

Subsidy payments by the CAB from 1954 to 1983 totaling almost $1.9 billion

are detailed in Table 1.

Table 1. Federal Subsidies to Airlines: 1954-1983

($ thousands)

Year

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976a

1977

1978

1979

1980

1981

1982

1983

Total

Alaskan

Carriers

$8,303

7,902

7,619

7,707

8,179

7,337

8,818

9,313

9,056

9,690

9,411

8,163

6,509

5,939

5,984

5,421

4,896

4,499

4,394

4,365

4,329

4,345

4,360

4,273

2,989

3,916

5,530

9,505

10,022

—

192,684

Hawaiian

Carriers

$689

293

291

216

168

330

505

338

520

802

995

1,124

567

—

789

—

7,672

Helicopter

$2,574

2,656

2,735

3,771

4,419

4,860

4,930

5,538

5,781

5,000

4,300

3,358

1,170

—

51,092

Local

Service

$24,299

22,358

24,122

28,444

32,703

36,450

51,498

56,300

64,835

67,700

65,482

61,412

58,402

54,966

47,982

40,513

34,830

55,940

62,160

60,206

68,470

59,043

68,162

77,888

70,944

68,227

74,544

97,118

45,085

1580083

Domestic

Trunkline

$3,822

2,773

1,790

1,572

2,283

1,201

—

2,566

3,475

3,089

2,477

1,343

—

26,391

Total

$39,687

35,982

36,557

41,710

47,629

50,016

65,576

71,656

80,010

82,910

82,561

77,403

70,294

63,949

55,219

46,723

39,726

60,439

66,554

64,571

72,799

63,388

72,522

82,161

73,933

72,143

80,074

106,693

55,107

1,857,992

Source: For years 1954 through 1975: U.S. Civil Aeronautics Board. Subsidy for U.S.

Certificated Air Carriers, Washington, U.S. Govt. Print. Off., March 1974, Appendix I, and March

1976 edition, Appendix VII. For years 1976 through 1983: The U.S. Office of Management and

Budget. The Budget of the United States Government, Appendix. Fiscal years 1978 through 1985.

Figures for 1976-1983 are net obligations incurred. Totals may not add due to rounding.

Guaranteed Loans for Aircraft

The aircraft loan guarantee program began in 1957 (P.L. 85-307) and expired

in 1983. During its lifetime, the program authorized federal guarantees of up to 90

percent of private loans for the purchase of equipment by local, short-haul, and feeder

air carriers. The program was instituted to help carriers replace equipment with

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newer and lower cost operating equipment. The rationale for the program was that

lower costs would likely reduce the amount of subsidy paid to the carriers by the

Federal Government. These loan guarantees totaled $924 million over the years 1957

to 1983, as shown in Table 2. Funding for this program was subject to appropriations

and is considered spending for the purposes of this report.

The absolute amount of assistance to airlines provided by the loan guarantee

program is not clear. If the airline could have obtained credit on essentially similar

terms without a guarantee, the subsidy issue would be essentially moot. However,

if the airline could not have obtained the loan without a Government guarantee, it

would have benefitted greatly from the program. Since there is little evidence to

indicate whether the loans could have been obtained, or on what terms, in the absence

of a Government guarantee, the amount of subsidy to airlines cannot be accurately

determined.

However, the Federal Government does bear the cost of the loan program if

airlines default. The guarantee shifts the cost of default away from the private market

to the public-at-large. During the program’s existence, 12 airlines defaulted on 23

loans for a total of $183,038,430. Airlines have paid back just over $132 million of

these defaulted loans for a net cost to the Government of approximately $50.5

million.11 There are no outstanding loans.

Table 2. Guaranteed Loans to Air Carriers, 1957-1983

Year

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

Amount of

Guarantee

$13,234,950

9,273,839

3,414,600

7,220,484

4,630,500

810,000

5,850,000

359,640

2,547,742

2,432,551

Year

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

Total

Amount of

Guarantee

24,300,000

9,558,000

47,014,369

69,245,550

77,029,158

14,096,826

246,170,595

372,372,680

10,693,744

3,816,000

924,071,228

Note: The loan amounts guaranteed are up to 90 percent of the total loan.

Source: For years FY1978 - FY1983: The Federal Aviation Administration, FAA Aircraft Purchase

Loan Guarantee Program, 1958- 1983, Experience and Lessons for the Future. {FAA Internal

Report}. May 5, 1983. p. A13-A16. For FY1958 -FY1977: U.S. Library of Congress. Congressional

Research Service. Federal Aid to Domestic Transportation: A Brief History from the 1800s to the

1980s. CRS Report 88-574E. by Nancy Heiser. p. 31.

Essential Air Service (EAS): 1979 - 1998

The only assistance that might be categorized as subsidies which continue today

are those provided under the Essential Air Service (EAS) Program created by Section

Federal Aviation Administration. Unpublished data January 1999.

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419 of the Airlines Deregulation Act of 1978 (P.L. 95-504). The program was

designed to provide air service to communities that lost service as a result of

deregulation. EAS could be viewed as a successor to the Section 406 program with

which it overlapped for several years. The EAS program, however, was broader in

its intent and was designed to potentially serve more markets than the section 406

program. The program was originally created with a 10-year authorization. Until

January 1, 1985 the EAS program was administered by the CAB. Since that date it

has been operated by the Office of the Secretary of Transportation (OST).

The EAS program has now survived into a third decade. Given the numerous

attempts to eliminate the program by fiscal conservatives as an unnecessary expense

for a relatively small number of communities, its continued existence would be

viewed by some as remarkable. Perhaps the most important reason for the program’s

survival, however, was a change in its source of funding. Since FY1992, EAS has

received all of its funding from the Airport and Airway Trust Fund (also known as

the Aviation Trust Fund). Over its lifetime the program has received almost $588.2

million in trust fund and general fund monies.

Table 3: Essential Air Service Expenditures:

Fiscal Years 1979-1998 ($ thousands)

Year

1979

1980

1981

1982

1983

1984

1985

Amount

507

9,053

15,007

26,075

57,019

35,264

34,949

Year

1986

1987

1988

1989

1990

1991

1992

Amount

24,291

26,679

28,393

25,567

33,237

26,126

38,600

Year

1993

1994

1995

1996

1997

1998

Total:

Amount

35,571

31,827

23,000

39,000

588,165

Source: U.S. Office of Management and Budget. The Budget of the United States Government,

Appendix. Fiscal years 1981 through 1999. Figures for FY1979-FY1991 are net obligations

incurred. Figures for FY1992-FY1998 are appropriations funded out of the Airport and Airway Trust

Fund.

Airways, 1926 - 1970

Enactment of the Air Commerce Act of 1926, gave the federal government its

first formal role in the regulation and development of civil aviation. As a result of

the Act, the Department of Commerce became responsible for establishing a system

of airways, maintaining necessary aids-to-navigation, licencing pilots, issuing

airworthiness certificates for aircraft, and investigating accidents.

Airways are paths through the navigable airspace developed by the Federal

Government to control the movement of aircraft in an orderly fashion. The airways

system includes physical attributes such as control towers and radar equipment. Only

the Federal Government provides domestic airway facilities.

As the aviation system developed the airway and air navigation systems also

grew in sophistication. In the mid 1930s, the first airway traffic control center,

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operated by the airline industry, was established in Newark, NJ. On July 6, 1936 the

federal government took over operation of the Newark center and two other

established centers. All new airway centers would be constructed and staffed by the

federal government from this point forward. On November 1, 1941 airport towers

came under federal control as well.

The Civil Aeronautics Administration (CAA) was responsible for maintaining

and operating the airways system until 1958. In that year, the Federal Aviation Act

of 1958 created the Federal Aviation Administration (FAA). At that time, the FAA

essentially assumed all non-regulatory activities, such as safety oversight and

operation of the air traffic control system. In 1966, the FAA lost its independence

and became an operating agency of the newly created Department of Transportation

(DOT).

For the years 1925 through 1941, the governments’s airway costs totaled almost

$112 million.12 Federal airway expenditures for 1942 through 1970, shown in Table

4, totaled just over $9 billion. Therefore, expenditures on airways from 1925 through

1970 were just over $9.1 billion.

Table 4. Federal Airway Expenditures, 1942-1970

($ thousands)

Year

1942

1943

1944

1945

1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

Amount

$34,200

39,500

36,600

65,300

51,000

84,700

90,300

108,600

130,100

122,800

109,900

119,500

111,500

115,200

123,800

Year

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

Total

Amount

208,586

302,801

353,895

420,527

515,644

509,889

555,443

614,486

580,750

578,619

645,030

690,266

806,234

990,040

$9,115,210

Sources: For years 1942 through 1956: U.S. Congress. Senate. Committee on Commerce. 87th

Congress, 1st Session. National Transportation Policy. Report No. 445, Washington, U.S. Govt.

Print. Off., 1961. p. 182. (Construction & operations; R &D, Flight Standards, and “other necessary

expenses”) For years 1957 through 1970: U.S. Department of Transportation. Estimated Federal

Expenditures on Domestic Transportation Capital Improvements and Operating Programs, by State,

Fiscal Years 1957-1971, Washington, U.S. Govt. Print. Off., 1974. p. xii.

Airports, 1926 - 1970

The Air Commerce Act of 1926 did not authorize the Secretary of Commerce

to establish, operate, and maintain airports. The Act followed the precedents set by

Board Report, p. 78.

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maritime laws which authorized federal aid for areas such as safety and weather

forecasting, but not for the construction and improvement of docks and terminal

facilities. Prohibition of federal aid for airport development remained in law until

the passage of the Civil Aeronautics Act of 1938.

Although the Air Commerce Act of 1926 specifically prohibited federal support

for airport development, the economic programs of the 1930s, created to relieve the

effects of the Great Depression, used federal funds for airport construction, as they

did for waterway and road projects. This support, which began as an emergency

employment and income measure, marked the first period of substantial federal

funding for airport development. Federal aid under these work-relief programs

totaled $393,306,703.13 However, approximately 60 percent of the airports built

under these work-relief projects were eventually converted to other uses. This can

be accounted for by reducing program expenditures, $393,306,703, by 60 percent for

an estimate of $157,322,618.

The Civil Aeronautics Act of 1938 (P.L. 75-706) authorized the CAB to survey

the existing airport systems and recommend whether or not, and to what extent, the

Federal Government should participate in the construction, improvement,

development, operation, and maintenance of airports. In March 1939, the CAB

submitted its report to Congress, recommending that the Federal Government

participate in the development and maintenance of airports and that preference be

given to airports along the major trade routes of the nation or to those useful to the

national defense. During World War II, many airports were constructed to facilitate

the war effort, but the value of these airports cannot be accurately determined.

Although World War II intervened before Congress could implement the CAB’s

recommendations, they did become the starting point for consideration of legislation

which became the Federal Airport Act of 1946 (P.L. 79-377). This Act provided a

program of grants-in-aid for airport development. The Airport and Airway

Development Act of 1970 (P.L. 91-258) marked the beginning of a strong Federal

Government commitment to airport development, including increased funding and

the creation of an airport and airway trust fund.

Federal expenditures for airports prior to 1953, excluding work-relief programs

and the Federal-Aid Airport Program, were almost $403 million.14 Federal

expenditures on airports from 1953 to 1970 were just over $1 billion as shown in

Table 5.

U.S. Congress. Senate. The National Airport Program; Report of the Airport Panel of the

Transportation Council of the Department of Commerce on the Growth of the United States

Airport System. Senate Document No. 83-95, 83rd Cong., 2d Session. Washington, U.S.

Govt. Print. Off., 1954. p. 34.

Ibid.

CRS-10

Table 5. Federal Airport Expenditures, 1953-1970

Year

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

Amount

$11,007,007

-855,556

19,698,475

17,794,280

45,141,216

70,325,745

72,956,360

82,202,876

73,783,676

46,381,321

Year

1963

1964

1965

1966

1967

1968

1969

1970

Amount

75,279,543

71,596,981

59,587,993

64,296,000

71,690,000

82,785,000

112,256,000

93,446,000

Total

1,069,372,917

Note: The amounts include outlays for grants-in-aid and for Dulles International Airport and

Washington National Airport which were owned and operated by the FAA until 1986.

Source: For years 1953 through 1965: U.S. Congress. House. Continuing Federal Airport

Program. 89th Congress, 2d Session, Report No. 2164. Washington, 1966. p. 5. For years 1966

through 1971: U.S. Department of Transportation. Estimated Federal Expenditures on Domestic

Transportation Capital Improvement and Operating Programs, by State, 1957-1971. Washington,

U.S. Govt. Print. Off., 1974. p. xii.

The Trust Fund Era: 1971 - 1998

Prior to the passage of the Airport and Airway Development Act of 1970, none

of the federal taxes paid by airlines, general aviation operators, or passengers were

specifically designated for airport and airway construction improvements. Although

many observers considered these taxes a partial offset to the expense of constructing

and maintaining the airport and airway system, they were paid into the general fund

of the U.S. Treasury.

The airport and airway trust fund was created by the revenue title of the Airport

and Airway Development Act of 1970 (P.L. 91-258). The “aviation trust fund,” as

it is also known, was established to provide funding for capital improvements to the

nation’s airport and airway system. The scope of the aviation trust fund has been

expanded over time. The most recent full reauthorization of aviation programs

occurred with passage of Federal Aviation Administration Authorization Act of 1996

(P.L. 104-264). A six-month extension to that authorization approved in the waning

moments of the 105th Congress in the Omnibus Consolidated and Emergency

Supplemental Appropriations Act of 1998 (P.L. 105-277) expires on March 31, 1999.

The most recent change in the levels of revenue dedicated to the trust fund occurred

as part of the Taxpayers Relief Act of 1996 (P.L. 105-34 ).

FAA Programs and Spending, FY1971 - FY1998

The trust fund, at present, provides funding for all four of the FAA budget’s

major components: Operations and Maintenance (O&M), Facilities and Equipment

(F&E), Research, Engineering, and Development (RE&D), and the Airport

Improvement Program (AIP). The trust fund provides all funding for all but the

O&M account. Funding for the O&M account is derived from both the trust fund

and U.S. Treasury general fund (issues concerning this split will be discussed in the

next section).

CRS-11

As can be seen in Table 6, FAA program spending has risen dramatically since

FY1971. Although increases have occurred in all spending categories , the increases

in the O&M account have been the most substantial on a relative basis. A source of

growth in spending has been the ongoing, and controversial, upgrade of the air traffic

control system which began in the early 1980s and is still many years from

completion. Most of this spending shows up in the F&E account, but this spending

has affected other accounts as well.

A close examination of this table reveals some apparent anomalies in growth

trends. In most instances, these are the results of specific events, such as the air

traffic controllers strike of 1981. As a result, the anomalies should probably be

regarded as transient effects on what has been, and is likely to remain, a scenario of

steady growth.

Table 6. FAA Expenditures: Fiscal Years 1971-1998

($ millions)

Year

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

Totals

O&M

1,026

989

1,170

1,292

1,419

1,567

1,738

1,898

2,033

2,170

2,340

2,292

2,579

2,587

2,699

2,725

2,959

3,184

3,445

3,825

4,037

4,360

4,530

4,579

4,572

4,643

4,955

5,337

80,950

F&E

238

302

213

250

227

246

200

209

345

293

350

261

625

750

1,358

895

805

1,108

1,384

1,721

2,095

2,409

2,302

2,055

1,960

1,855

1,938

1,901

28,295

RE&D

103

264

265

237

142

153

160

170

205

218

230

254

252

186

208

199

4,092

AIP1

193

635

515

510

555

644

677

570

450

750

800

925

885

1,025

1,269

1,400

1,425

1,800

1,900

1,800

1,690

1,450

1,460

1,700

26,493

Total

1,506

1,384

2,088

1,604

1,704

2,395

2,522

2,743

3,097

3,215

3,345

3,075

4,057

4,401

5,247

4,742

4,931

5,714

6,389

7,141

8,137

8,887

8,862

8,578

8,234

8,134

8,561

9,137

139,830

The AIP was created in 1982. The airport assistance program from FY1971-FY1982 was

known as the Airport Development Aid Program (ADAP).

Source: U.S. Congress. Senate Budget Committee [based on Federal Aviation Administration

data]. Financing FAA: Airport and Airway Trust Fund and General Fund Shares. Washington, The

Committee, [1999] 4 p.

CRS-12

Note: During Fiscal Years 1971 and 1972 some trust fund monies were transition funds

transferred from the general fund to avoid shortfalls during the trust fund’s first years. The FAA data

used did not break out the amount of general fund revenues used for these appropriations.

Trust Fund Revenues, FY1971 - FY1998

There is a longstanding debate in the aviation community about the usefulness

and/or desirability of user fees as a mechanism for funding the FAA. In 1970 it was

decided that a user fee system was desirable for funding the aviation trust fund. This

was far from the end of the debate, however. The trust fund has gone through several

modifications over the years and on two occasions, 1980-1982 and 1996, disputes

over funding and/or programs led to lapses in the operation of the trust fund.

The existing tax system is certainly based on collections from users, but this

system is viewed by many observers as a less than perfect proxy for a user fee

system. The ticket tax, for example, is collected on the basis of a wide range of fares

charged by airlines for what is essentially a standard product, an airline seat. The

operating requirements of the air traffic control (ATC) system, however, are based

on the movement of aircraft. A 200-seat aircraft and a 20-seat aircraft, operating

under positive air traffic control, require a similar level of ATC services, but pay into

the trust fund at very different rates.15 Changes were made in 1997 to create a

segment fee in addition to the ticket tax that was intended to address the differential

use issue. These changes, however, have engendered at least as much discussion as

the predecessor system. It is unlikely, given the bifurcated nature of the aviation

industry and its various interests groups that any system could be devised that would

satisfy all groups. Hence, it is likely that there will be calls for Congress to revisit

the user fee system in the future.

Another long-standing issue surrounding the trust fund is the appropriateness

of spending trust fund revenues for FAA operating expenses. The trust fund was

originally established as a means of paying for aviation capital needs. Every

presidential Administration since the trust fund was established, however, has sought

additional O&M funding from the trust fund. As can be seen in Table 7, the general

fund share of FAA spending has varied over time, but on the whole, the trust fund

share of the overall FAA budget has grown, to the point that it now accounts for

approximately 70% of spending in most recent years.

A final, and related issue, is the question of the accumulation of unexpended

funds in the trust fund over time.16 During most of its life the trust fund has had a

large unexpended balance. The unexpended balances have several origins, but one

of the most important is the annual accumulation of interest to the fund by virtue of

the investment of the unexpended balance in U.S. Treasury financial instruments.

For a historical perspective on the user fee issue see: U.S. Library of Congress.

Congressional Research Service. Reorganization of the Federal Aviation Administration:

Safety and Efficiency Issues. CRS Report 94-371 E, by (name redacted), J.Glen Moore, and

Pamela Hairston.

For a discussion of trust fund balances and the budgetary treatment of trust funds see: U.S.

Library of Congress. Congressional Research Service. Transportation Trust Funds:

Budgetary Treatment. CRS Report 98-63E. by (name redacted).

CRS-13

The temporary expiration of the trust fund in 1996 largely eliminated the

unexpended balance. By all predictions, however, the trust fund’s unexpended

balance is expected to grow dramatically in the next few years unless additional trust

fund spending is allocated for capital or operating expenses in the next FAA

reauthorization cycle. This new unexpended balance is likely to provide the debating

points for those who want more spending on aviation capital activities and for those

who wish to see the general fund contribution to aviation reduced.

Table 7. Aviation Trust Fund Revenues, FAA Appropriations, and

General Fund Contribution: Fiscal Years 1971-1998 ($ millions)

Year

FY Trust

Fund

Revenue

FY Trust

Fund

Interest

FY Trust

Fund App.

FY General

Fund App.

Total

FAA App.

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

Totals

1,184

1,551

832

840

962

1,215

1,191

1,326

1,526

1,874

133

2,165

2,499

2,851

2,736

3,060

3,189

3,665

3,700

4,910

4,644

3,261

5,217

6,363

2,369

4,027

8,065

75,376

147

194

219

282

400

561

542

533

546

746

829

880

893

1,009

1,245

1,297

1,273

1,040

837

757

759

481

543

16,137

299

1,369

918

312

285

828

1,034

1,120

1,364

1,370

1,530

1,593

2,755

1,814

3,658

2,444

2,593

3,356

3,415

4,124

6,103

6,637

6,611

6,293

6,112

5,714

5,307

5,701

84,659

1,207

1,170

1,292

1,419

1,567

1,488

1,623

1,733

1,845

1,815

1,482

1,302

2,586

1,589

2,298

2,337

2,358

2,974

3,017

2,034

2,250

2,251

2,285

2,122

2,420

3,255

3,435

55,169

1,506

1,384

2,088

1,604

1,704

2,395

2,522

2,743

3,097

3,215

3,345

3,075

4,057

4,400

5,247

4,742

4,930

5,714

6,389

7,141

8,137

8,887

8,862

8,578

8,234

8,134

8,562

9,136

139,828

Source: U.S. Congress. Senate Budget Committee [based on Federal Aviation Administration

data]. Financing FAA: Airport and Airway Trust Fund and General Fund Shares. Washington, The

Committee, [1999] 4 p. Trust fund revenue and trust fund interest data for table 7 were drawn from

the following sources: for FY1971 to FY1988, U.S. Congressional Budget Office. Status of the

Airport and Airway Trust Fund: a Special Study. Dec. 1988. Washington, 1988. p. 12-13.; for

FY1989 to FY1998, U.S. Library of Congress. Congressional Research Service. Transportation

Trust Funds: Budgetary Treatment, (name redacted). CRS Report 98-63 E. Updated April 6, 1998.

p. 22.; for FY1998 interest, U.S. Office of Management and Budget. Budget of the United States

Government: Fiscal Year 2000: appendix. Washington, 1999. p. 744.

Note: Transition quarter data for trust fund revenue and interest are included as FY1996 data.

During Fiscal Years 1971 and 1972 some trust fund monies were transition funds transferred from

CRS-14

the general fund to avoid shortfalls during the trust fund’s first years. The FAA data used did not

break out the amount of general fund revenues used for these appropriations. Totals may not add due

to rounding.

The National Weather Service (NWS) and Aviation

The National Weather Service (NWS) provides aids to aviation. For example,

the NWS provides routine weather forecasts and warnings. The assistance provided

by the NWS can be viewed as either direct, in the sense that it provides specific

services to aviation, or indirect, because the Service would exist exclusive of the

needs of the aviation system. The information on NWS spending is included because

it has been an identified item in the FAA budget during much of the discussion

period. Expenditures by the NWS totaling $672,933,000 since FY1977 are shown

in Table 8. Additional NWS expenditures detailed in the NWS budget might be

construed as aids to aviation by some observers, but are not detailed here.

Table 8. National Weather Service Expenditures for Aviation

FY1977-FY1998 ($ thousands)

Year

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

Amount

$22,516

23,719

24,817

26,507

26,564

26,700

27,000

26,796

30,309

30,000

Year

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

Amount

28,717

29,583

32,580

35,389

35,596

50,056

35,596

Total

$672,933

Source: For Fiscal Years 1977 through FY1986: The National Weather Service, unpublished

data provided July 1988; For FY1987 through FY1998: Federal Coordinator for Meteorological

Services and Supporting Research, National Oceanic and Atmospheric Administration. Federal Plan

For Meteorological Services and Supporting Research [Annual volumes for years 1988 through

1998}. Figure for FY1998 is an estimate.

Summary of Federal Spending on Aviation

In the early years of federal support for aviation most assistance came in the

form of designated subsidies to foster the growth of what has become the

commercial aviation industry. This was in keeping with the aviation sector's

embryonic nature. As the industry has matured, the level and expense of the federal

effort has expanded and spending for capital infrastructure and operational activities

have become specific components of annual federal budgets.

The debate today is not so much about whether a federal role in aviation is

appropriate, which by most accounts it is. Rather the debate is about how to pay for

federal programs and who should pay for it. In the first half of this century almost

all aviation expenses came from U.S. Treasury general fund. In the trust fund era this

CRS-15

contribution has diminished as designated user fees have provided a majority of

direct aviation related funding. The general fund contribution, as discussed earlier,

remains significant, and controversial.

As Table 9 demonstrates the federal contribution to aviation has been and

continues to be substantial. All forecasts suggest that short of an unforseen major

policy change, the federal financial contribution to aviation activities will increase

in the years ahead, not decrease.

Table 9. Summary of Federal Direct Spending on Aviation, 1918-1998

Type of Aid

Airmail Operations by Post Office, 1918-1928

Airmail Contract Operations, 1926-1930

Airmail Contract Operations, 1931-1934

Airmail Contract Operations, 1935-1938

Airmail Subsidies, 1939-1953

Airline Subsidies, 1954-1984

Loan Guarantee Program,, 1958-1983

Essential Air Service, 1979 - 1998

Airways, 1925-1941

Airways, 1942-1970

FAA Facilities and Equipment (trust fund), FY1971FAA Research, Engineering & Development (trust

Airports: Federal Work-Relief Projects

Airports: Other aid prior to 1953

Airports, 1953-1970

Airports (trust fund), 1971-1998

FAA Operations and Maintenance (general fund),

FAA Operations and Maintenance (trust fund),

National Weather Service, 1977-1987

Total Spending for Aviation, 1918 - 1998

Estimate

Trust Fund Revenues, FY1971-FY1998

Trust Fund Interest Revenues, FY1971-FY1998

Total Trust Fund Income, FY1971-FY1998

Source: Data presented in this report. Totals may not add due to rounding.

$12,000,000

17,096,464

53,570,447

26,398,568

310,890,000

1,857,992,000

924,071,228

588,165,000

111,881,934

9,115,210,000

28,295,000,000

4,092,000,000

157,322,618

402,783,870

1,069,372,917

26,493,000,000

54,941,000,000

26,009,000,000

672,933,000

155,149,688,046

75,376,000,000

16,012,000,000

91,388,000,000

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