Industry trends -- lower airfares and smaller aircraft -- exacerbate the "mismatch" between FAA's workload and its revenues and focus is on regional jets. However, judging from testimony during the recent House Aviation Subcommittee hearing, it is clear the lynchpin for deciding what, if any, changes need to be made to FAA funding is costing out FAA services to the different segments of the industry. Without that, legislators and industry leaders will not have the information needed to determine how the Next General Air Traffic System (NGATS) will be funded.

Government Accountability Office's Gerald Dillingham said the real crux of the problem is reaching a consensus on how to assign ATC costs among users. Without that, it is impossible to assess the financial burden on each group.

About the only thing that is clear is the development of NGATS will mean at least an additional $1 billion in annual FAA funding at a time when trust fund revenues are down. Subcommittee Chair John Mica (R-FL) noted a weak economy and lower air fares resulted in three consecutive years of declining trust fund revenues, from $10.5 billion in FY2000 to $9.3 billion in FY2003. While on an upward trend, uncommitted cash balance in the trust fund has been reduced from $7.3 billion at the end of FY2001 to $1.9 billion at the end of FY2005. Limited, preliminary estimates indicate that, from FY 2008 through FY 2025, a total of $15.2 billion in additional Facilities and Equipment investment will be needed in addition to the $50 billion needed to sustain the existing ATC system during the period.

Mica further explained that budget rules preclude increasing the FAA budget. Aviation user charges are currently subject to a split-budget treatment, whereby revenues from system users come into the mandatory side of the budget, but must be spent on the discretionary side, making them subject to discretionary spending caps, meaning revenues must compete with all other discretionary spending in the federal budget.

Despite the estimates, determining the actual cost of NGATS is a crap shoot. "The NGATS enterprise architecture has not yet been developed," said Dillingham. "Consequently, estimates should be seen as providing only a sense of the order of magnitude of the potential increased costs. In addition, this estimate does not include the costs that the other agencies or the industry might incur in their implementation of NGATS systems and technologies."

Nonetheless, Mica noted not implementing NGATS is expected to cost the economy $400 billion by 2025, or $40 billion a year in productivity losses which, according to some estimates, would result in FAA operating costs rising to $49 billion between 2006-2025.

Mica indicated alternative funding mechanisms could include leasing and "bonding" as well as moving cost-based user fees outside discretionary spending limits. But witnesses from the Office of Management and Budget indicated that such mechanisms could put managing costs beyond Congressional control and increase costs, unless borrowing is done directly from the treasury. They also indicated such borrowing would commit the government to future expenditures, not reflected in the budget at the time the commitments were made.

FAA's general fund share has dropped from 48 percent 20 years ago to 18 percent today, with user fees taking up the slack. The question remains as to whether its revenue stream will be sufficient to finance NGATS. Experts indicated it would be, but that would still not guarantee steady funding levels. However, trends over the past 25 years with fares and average plane size suggest revenue collected will continue to fall relative to FAA's workload.

Dillingham focused on regional jets in illustrating the disconnect between costs and revenues. He said costs for FAA are largely driven by workload but users are not directly charged for the costs they impose. He indicated that three 48-seat regional jet flights between LAX and San Francisco would generate three times the cost of handling a single, 132-seat, narrow-body aircraft between the two points. "Revenues from the three regional jet flights total only about $37, or three percent, more than the revenue generated by the one narrow-body jet flight," he said. This is compounded by other factors, such as similar commercial flights contributing different amounts of revenue as well as the fairness of distributing the funding burden between commercial and GA operators.

"A 767 flight contributes nearly twice as much as the 737 flight," he said. "A private Learjet flight contributes approximately $40, while the commercial flights of a 767 and a 737 contribute $1,742 and $877, respectively. Commercial aviation representatives favor assigning those costs among all system users in proportion to their use of the system. GA representatives state that the system exists at its present size to serve the needs of the commercial aviation industry, and GA should be assigned only the incremental costs that would not exist apart from the need to serve GA."

Dillingham also pointed out that current funding encourages inefficient use of the airspace. "There is little financial incentive [$37] for the airline to avoid imposing additional costs on FAA by using one flight instead of three flights," he said. "For users to make efficient decisions about their use of the NAS, their price for using the system should accurately reflect the costs their use imposes on the system. Users who pay more in taxes than the costs they impose may use the system less than is optimal, while those who pay less than the costs they impose may use the system more than is optimal."