NCARC Preliminary Report on FAA Funding — Appendix and Attachments

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A special supplement to the complete report from the National Civil Aviation Review Commission (NCARC).

NCARC logoAvoiding Aviation Gridlock: A Consensus for Change

National Civil Aviation Review Commission
Preliminary Funding Task Force Report

Norman Y. Mineta, Chair
September 10, 1997

ATTACHMENTS

  1. NewsWireDraft Legislation and Section by Section Summary

  2. List of Commissioners

  3. Agency Liaisons to the Commission

  4. Legislation creating the Commission

  5. Witnesses at the Public Hearing on Funding the FAA

  6. Commissioner Meeting Agendas

  7. Roster of Commission Staff

  8. Letter sent to Capitol Hill Regarding Budget Treatment

  9. Colloquy on Budget Treatment from Senate

  10. Selected Reference Materials Reviewed by Comissioners

  11. Special Acknowledgements

DRAFT LEGISLATION AND SECTION BY SECTION SUMMARY

SEC. 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.— This Act may be cited as the `Aviation System Improvement Act'.

(b) TABLE OF CONTENTS.—

Section 1. Short title; table of contents
Section 2. Amendments to title 49, United States Code
Section 3. Applicability
Section 4. Definitions
Section 5. Effective date
Section 6. Findings
Section 7. Purposes

Section A. Establishment of the Performance Based Organization for the Air Traffic System
Section B. Air Traffic Performance Fund
Section C. Fees to support FAA programs through June 2000
Section D. Ticketing and advertising
Section E. Fees to support FAA programs beginning in July 2000
Section F. Modification of current funding system for FAA
Section G. Extension of Airport and Airway Trust Fund expenditures
Section H. Transfers to the Air Traffic Performance Fund
Section I. Termination of transfers to trust fund
Section J. Transfers from the Airport and Airway Trust Fund
Section K. Budget treatment
Section L. Discretionary spending limits
Section M. Outlay limits on FAA expenditures
Section N. Consolidation of facilities
Section O. Multiyear appropriations
Section P. Management Advisory Council

SEC. 2. AMENDMENTS TO TITLE 49, UNITED STATES CODE.

Except as otherwise specifically provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision of law, the reference shall be considered to be made to a section or other provision of title 49, United States Code.

SEC. 3. APPLICABILITY.

Except as otherwise specifically provided, this Act and the amendments made by this Act apply only to fiscal years beginning after September 30, 1998.

SEC. 4. DEFINITIONS.

In this Act, the following definitions apply:

(1) ADMINISTRATION.— The term `Administration' means the Federal Aviation Administration.

(2) ADMINISTRATOR.— The term `Administrator' means the Administrator of the Federal Aviation Administration.

(3) SECRETARY.— The term `Secretary' means the Secretary of Transportation.

SEC. 5. EFFECTIVE DATE.

Unless otherwise specified in this Act, the provisions of this Act and the amendments made by this Act shall take effect on the date that is 30 days after the date of the enactment of this Act.

SEC. 6. FINDINGS

Congress finds the following:

(1) Traffic data and trends indicate that adding a few minutes of delay to each airline flight in the United States will bring the aviation system to gridlock with dramatic negative impacts on the economy. The airline industry's complicated schedules are based on precise and efficient air traffic control technology and management. Rapidly growing demand combined with a reduction in capacity, as the result of outdated equipment, will bring our nation's aviation system to gridlock soon after the turn of the century. Gridlock could also have safety implications as pressures to meet flight schedules grow just at a time when capacity is increasingly constrained.

(2) The present system of federal budget regulation is inappropriate for a system controlling commercial operations that need to be driven by demand for services. Budget rules that govern the federal aviation system must be revised. The money problem that faces the Federal Aviation Administration (FAA) is an inability to access the revenues collected for its use.

(3) Authority and accountability are too diffused to run a 24 hour-a-day, high technology, rapidly changing operating system for a major commercial industry. Everyone responsible for the current air traffic control (ATC) system — the Federal Aviation Administration, the Department of Transportation, the aviation industry, the Administration, and the Congress — want to make the system work. But there are too many people in charge. The problems are systemic and require basic changes in command and control.

(4) While the vast majority of FAA employees remain dedicated and professional, the FAA itself impedes needed modernization by not focusing enough on determining and meeting its external users' needs for high quality and modern services at reasonable costs. Modern business tools such as a cost accounting system that tie specific costs to services and measurement tools to assess how well services are provided are not yet available. Incentives are needed to change the FAA culture to be more externally focused on users and services and more businesslike and responsive.

(5) The funding system forces trade-offs which substitute operational costs for capital investments. The system is in a downward spiral where increasing operational and maintenance costs, driven by outdated equipment, are "freezing out" new investments under current federal budget cap assumptions. Future system capacity will be reduced in real terms from today's capacity.

(6) Airport-related congestion will increase in the future without a strong federal commitment of resources. Airport capital investments must go hand-in-hand with ATC investment to maintain system capacity.

(7) Airport Improvement Program (AIP) funding serves as the linchpin of airport financial planning and, therefore, must be funded adequately on a reliable basis. AIP contributions to airport capital requirements should be funded at $2 billion annually over the next five years assuming growth adjustments through this period. Further, AIP should be provided requisite budget treatment to ensure a stable and predictable federal funding source for airport capital development. More AIP funding will result in more system capacity being developed.

(8) Smaller airports should receive funding at a higher level, so that their capital development needs can be met and thereby allowing them to continue serving as a critical element of the air transportation system. The Airport Improvement Program is essential for capital development at smaller airports as they have less capability to draw in a meaningful way from other sources of capital funds.

(9) In order to meet the needs for airport infrastructure investment, in the future, the current $3 ceiling on passenger facility charges (PFCs) will need to be raised. As an alternative, AIP levels would need to be funded at a level substantially above a $2 billion annual level. If the limit on PFCs is increased, there should be a process established that places a strong emphasis on negotiation between local airports and tenant airlines when a higher-than-$3 PFC is being proposed. When there is written agreement between an airport and its tenant airlines for the airport to levy a PFC higher than $3, there should be no statutory PFC dollar limit, and the FAA's approval process should be ministerial.

(10) Historically, the United States has been the leader in air traffic management and technology. However, other countries are moving ahead of the United States in making improvements to their aviation infrastructure. Falling behind other countries in making critical capital investments will certainly affect the international competitive position of the United States.

SEC. 7. PURPOSES

The purposes of this Act are—

(1) to ensure that the United States continues to have a safe, secure, and efficient air transportation system;

(2) to ensure that there is an adequate and stable funding system specifically dedicated to support the programs of the Administration;

(3) to reform and authorize the programs of the Administration that ensure a safe and healthy national air transportation system;

(4) to permit the Administration to establish a program to improve air traffic system performance and to establish appropriate levels of cost accountability for air traffic services provided by the Administration;

(5) to make the Administration a more efficient and effective organization, able to meet the needs of a dynamic, growing industry, and to ensure the safety of the traveling public;

(6) to provide a financial structure for the Administration so that it will be able to safely support the future growth in the national aviation and airport system;

(7) to establish a process for the creation of an improved financing and funding system for the Administration, including performance- and incentive-based fees for certain services, and to establish a program to improve air traffic system performance and to establish appropriate levels of cost accountability for air traffic services provided by the Administration;

(8) to ensure that any funding derived from aviation system users will be dedicated solely for the use of the Administration;

(9) to establish a process for the implementation of a user charge system based on an accurate and comprehensive accounting of the costs of the services provided;

(10) to develop an aviation funding system to provide for the long-term efficient and cost-effective support of the Administration and the national aviation system; and

(11) to achieve a more efficient and effective Administration for the benefit of all users of the national aviation transportation system, including the aviation transportation industry.

SEC. A. ESTABLISHMENT OF THE PERFORMANCE BASED ORGANIZATION FOR THE AIR TRAFFIC SYSTEM.

(a) Subtitle VII is amended by inserting after chapter 445 the following:

CHAPTER 446—PERFORMANCE BASED ORGANIZATION FOR THE AIR TRAFFIC SYSTEM

SUBCHAPTER I—GENERAL PROVISIONS
44601. Definitions.

SUBCHAPTER II—ORGANIZATION AND ADMINISTRATIVE
44611. Establishment.
44612. Governing Board.
44613. Officers.
44614. Performance management
44615. Authority to incur indebtedness

SUBCHAPTER I—GENERAL PROVISIONS

Sec. 44601. Definitions

In this chapter, the following definitions apply:

(1) `Airport and Airway Trust Fund' means the Airport and Airway Trust Fund established under section 9502 of the Internal Revenue Code of 1986 (26 U.S.C. 9502).

(2) `Board' means the Governing Board established by section 44612.

(3) `Chief Operating Officer' or 'COO' means the Chief Operating Officer established by section 44613(a).

SUBCHAPTER II—STRUCTURE OF ORGANIZATION

Sec. 44611. Establishment

(a) In General.— There is established an entity within the Federal Aviation Administration to be known as the Performance Based Organization for the Air Traffic System (hereinafter referred to as the "PBO-ATS").

(b) General Authority and Responsibilities of the PBO-ATS.— Except as otherwise specifically provided in this part of subtitle VII of this title after enactment of this chapter, the PBO-ATS shall—

(1) exercise the authority of the Federal Aviation Administration over day-to-day operational supervision and control over the movement of aircraft;

(2) develop and implement airspace orders, procedures, and other directives with respect to the use of navigable airspace. This authority includes the ability to issue routine airspace actions and airspace assignments and designations in accordance with rules prescribed for the PBO-ATS by the Administrator of the Administration. Notwithstanding the PBO-ATS's safety functions and responsibilities with regard to any orders or directives it may prescribe, the authority and responsibility for prescribing safety standards and the policies encompassing the safety structure of the National Airspace System remain with the Administrator. The PBO-ATS shall faithfully and efficiently adhere to and abide by all safety and security standards and regulations prescribed by the Administrator.

(3) develop and implement air traffic orders, procedures, and other directives governing the flight of aircraft, for the navigation, protection, and identification of aircraft, for the protection of persons and property on the ground, and for the efficient utilization of the navigable airspace, including procedures as to safe altitudes of flight and the prevention of collision between aircraft and land or water vehicles, and between aircraft and airborne objects;

(4) be authorized to—

(A) acquire, establish, improve, dispose of, and eliminate air navigation facilities or equipment wherever necessary;

(B) operate and maintain such air-navigation facilities; and

(C) provide necessary facilities and personnel for the management and protection of air traffic. The PBO-ATS shall update and arrange for publication of clearly defined routes for navigation through airspace where the PBO-ATS determines that publication of such routes would promote safety in air navigation;

(5) to encourage and allow maximum use of the navigable airspace by civil aircraft consistent with national security, and subject to appropriate military authority exercised pursuant to section 40106 of this title, recommend for issuance by the Administrator, in consultation with the Secretary of Defense, regulations that establish areas in the airspace the Administrator decides are necessary in the interest of national defense, and to restrict or prohibit flight of civil aircraft that the PBO-ATS cannot identify, locate, and control with available facilities in those areas;

(6) recommend to the Administrator long-range plans and policy for the orderly development and use of the navigable airspace and airport infrastructure that will best meet the needs of, and serve the interests of, civil aeronautics and the national defense, except for needs of the armed forces that are peculiar to warfare and primarily of military concern. In making recommendations, the PBO-ATS shall emphasize—

(A) providing the highest degree of safety and efficiency in air commerce;

(B) meeting the forecasted needs of civil aeronautics; and

(C) meeting the requirements that the Secretary of Defense establishes for the support of the national defense.

(7) to implement the authority in this section, undertake reasonable actions, including action to—

(A) develop, alter, test, and evaluate systems, procedures, facilities, and devices, and define their performance characteristics, to meet the needs for safe and efficient navigation and air traffic control of civil and military aviation, except for needs of the armed forces that are peculiar to warfare and primarily of military concern; and

(B) select systems, procedures, facilities, and devices that will best serve those needs and promote maximum coordination of air traffic control, air defense, and range surveillance systems except for needs of the armed forces that are peculiar to warfare and primarily of military concern;

(8) establish procedures to notify the public when major changes in service are contemplated;

(9) in any case where negotiations with other countries over airspace control and air navigation may be necessary or desirable, act through the Administrator; and

(10) exercise the authority of the Administrator under sections 347 and 348 of Public Law 104-50 (109 Stat. 436; November 15, 1995) (as amended), under subtitle B of Title II of the Federal Aviation Reauthorization Act of 1996, and under section 106(l) of this title.

Sec. 44612. Governing Board

(a) IN GENERAL.— There is established a Governing Board ("Board") in which the powers and authority of the PBO-ATS are vested.

(b) FUNCTIONS.—

(1) IN GENERAL.— The Board shall be responsible for the major actions and policy functions of the PBO-ATS, including the following:

(A) The appointment and removal of the Chief Operating Officer and the approval of other senior officers of the PBO-ATS under section 44615. The Board may retain outside experts or consultants as part of any effort to identify potential candidates for the position of Chief Operating Officer.

(B) Authorization for issuance of indebtedness.

(C) Long-range and strategic planning for the PBO-ATS.

(D) Approval or modification of user fees and other charges to the public imposed under section 45313 of this title.

(E) Approval of annual plan for PBO-ATS expenditures.

(F) Such other significant actions as the Board considers appropriate and are consistent with the Aviation System Performance Improvement Act.

(2) NONDELEGABLE FUNCTIONS.— The Board may not delegate the functions described in subparagraphs (A) through (E) of paragraph (1).

(3) NOT SUBJECT TO ENTITIES CREATED BY EXECUTIVE ORDER.— The PBO-ATS shall not submit decisions for the approval of, and shall not be bound by the decisions or recommendations of, any committee, board, or other organization established by Executive order.

(c) MEMBERSHIP.— The Board shall be composed of the Administrator of the Federal Aviation Administration and 6 other voting Members to be appointed by the President, by and with the advice and consent of the Senate. The initial members of the Board shall be appointed as soon as practicable after the date of the enactment of the Aviation System Performance Improvement Act.

(d) QUALIFICATIONS.—

(1) IN GENERAL.— Members appointed to the Board under subsection (c) of this section shall have a fiduciary responsibility to represent the public interest, shall be citizens of the United States, shall have knowledge of sound corporate business practices, and at least three of whom should be selected from individuals who have knowledge of or a background in aviation. Members of the Board may not—

(A) have a pecuniary interest in, or own stock in or bonds of, an aviation or aeronautical enterprise;

(B) engage in another business, vocation, or employment of an aviation or aeronautical nature;

(C) be a member of any organization a substantial part of whose activities are for the purpose of influencing aviation-related legislation;

(D) be an employee of the Administration or PBO-ATS (except for the Administrator); and

(E) serve more than two consecutive five-year terms, as defined in subsection (e) of this section.

(2) DEFINITION.— In this subsection, `influencing legislation' has the meaning such term has under section 4911(d) of the Internal Revenue Code of 1986 (26 U.S.C. 4911(d)).

(e) TERMS.—

(1) IN GENERAL.— Subject to paragraphs (2) and (3) of this subsection, each Member of the Board appointed under subsection (c) of this subsection shall be appointed for a term of 5 years.

(2) TERMS OF APPOINTEES.—Members other than the Administrator shall be appointed to the Board for a term of 5 years except that, of the Members first appointed, two shall be appointed by the President for 1-year terms, two shall be appointed by the President for 3-year terms, and two shall be appointed by the President for 5-year terms. Administrators shall serve terms coincident with their service in their positions.

(3) VACANCIES.— Any Member appointed under subsection (c) of this section to fill a vacancy occurring before the expiration of the term for which the Member's predecessor was appointed shall be appointed only for the remainder of that term. A Member may serve after the expiration of that Member's term until a successor has taken office.

(f) REMOVAL.— Members of the Board appointed under subsection (c) of this section may be removed by the President for inefficiency, neglect of duty, or malfeasance in office.

(g) CHAIRPERSON.— The Chairperson of the Board shall be the Administrator.

(h) QUORUM AND MAJORITY APPROVAL.— Four members of the Board shall constitute a quorum for carrying out the duties and powers of the Board. Decisions of the Board require approval by a majority vote of all Members of the Board. In the case of a crisis or emergency, the Administrator may take an action or make a decision on behalf of the Board, but such action or decision may only stand if ratified by a majority of the Board Members within 15 days.

(i) PAY AND EXPENSES.— Each Member not employed by the United States Government is entitled to compensation as set by the President, which may be comparable to corporate boards when performing Board duties and powers. Each Member is entitled to reimbursement for necessary travel, reasonable secretarial support, and subsistence expenses incurred in attending Board meetings.

(j) BYLAWS.— The Board may adopt and amend bylaws governing the operation of the PBO-ATS. The bylaws shall be consistent with this chapter.

(k) PUBLIC HEARINGS.— At least twice each year, the Board shall hold a public hearing to take public and aviation industry input on issues relevant to responsibilities and activities of the PBO-ATS.

(l) MEETINGS.— The Board shall meet at least six times each year, or at the call of the Chairperson.

Sec. 44613. Officers

(a) CHIEF OPERATING OFFICER.—

(1) APPOINTMENT.— The Board shall appoint a Chief Operating Officer for an initial period of three to five years. The appointment shall be made on the basis of demonstrated ability in management and without regard to political affiliation or activity. The COO also should have knowledge of or experience in aviation. The Board may reappoint the COO to subsequent terms so long as performance, as set forth in the annual performance agreement (as defined in paragraph (4) of this subsection), is satisfactory or better. However, until the Board appointed pursuant to section 44613 makes an appointment, an individual with the qualifications specified by this subsection may be appointed, by the Administrator, within 30 days of the enactment of the Aviation System Performance Improvement Act, to serve as an interim COO. The COO is subject to the policy guidance of the Board and reports to the Board. The Board may revoke, rescind, or modify actions of the COO.

(2) DUTIES.— The Chief Operating Officer shall manage the day-to-day operation of the PBO-ATS, including (except as provided in section 44612(b) of this title) the hiring, firing, and assignment of employees, acquisition of facilities and equipment, preparation of the annual budget submission, and such other functions as the Board considers appropriate.

(3) REMOVAL.— The Chief Operating Officer shall serve at the pleasure of the Board, except that the Board shall make every effort to ensure stability and continuity in the leadership of the PBO-ATS.

(4) PERFORMANCE AGREEMENT.— The Board and the COO shall enter into an annual performance agreement which shall set forth measurable organizational and individual goals for the COO in key operational areas. The agreement shall be subject to review and renegotiation on an annual basis.

(5) COMPENSATION.— The COO is authorized to be paid an annual rate of basic pay not to exceed that of the Administrator. In addition, the COO may receive a bonus in an amount up to, but not in excess of, 50 percent of such annual rate of basic pay, based upon the Board's evaluation of the COO's performance in relation to the performance goal set forth in the performance agreement described in paragraph (4). Payment of the bonus may be made to the COO only to the extent that such payment does not cause the COO's total aggregate compensation in a calender year to equal or exceed the amount of the President's salary under section 102 of title 3, United States Code.

(6) ANNUAL REPORT.— The COO shall prepare and submit to the Board an annual management report containing such information as the Board shall prescribe.

(7) COORDINATION.— The COO shall coordinate with, but not be subject to, the headquarters and regional administrative structure of the Federal Aviation Administration.

(b) OTHER OFFICERS.— Subject to the approval of the Board, the Chief Operating Officer shall appoint other senior officers who shall each have such duties as the Chief Operating Officer may prescribe. Within the limits of sections 347 and 348 of Public Law 104-50 (109 Stat. 436; November 15, 1995) (as amended), and subtitle B of Title II of the Federal Aviation Reauthorization Act of 1996, and subject to the approval of the Board, the COO has exclusive authority, which may be delegated, to fix the pay of the officers and other employees of the PBO-ATS, except that the Board shall fix the pay of the COO. No such officer or employee may have a base rate exceeding the Administrator's base rate of pay. However, the Administrator shall fix the pay, at a rate not to exceed level III of the Executive Schedule, of the COO until the Board is appointed.

(c) COUNSEL.— Subject to the approval of the Board, the Chief Operating Officer may appoint a counsel who shall be the chief legal officer for all legal matters arising from the activities of the PBO-ATS, or the COO may retain outside legal counsel, or both.

(d) CHIEF FINANCIAL OFFICER.— Subject to the approval of the Board, the Chief Operating Officer shall appoint an officer who shall be the chief financial officer for all financial matters arising from the activities of the PBO-ATS.

(e) OTHER SERVICES.— Subject to the approval of the Board, the COO may contract for personnel management, financial accounting, or budgeting activities of the PBO-ATS.

Sec. 44614. Performance management

(a) The PBO-ATS shall establish a performance management system which—

(1) maintains individual accountability by—

(A) establishing one or more retention standards for each employee related to the work of the employee and expressed in terms of individual performance, and communicating such retention standards to employees;

(B) making periodic determinations of whether each employee meets or does not meet the employee's established retention standards; and

(C) with respect to any employee whose performance does not meet established retention standards—

(i) in accordance with applicable provisions of law and regulation, denying any increases in basic pay, promotions, and credit for performance; and

(ii) taking one or more of the following actions:

(I) reassignment; or

(II) other appropriate action, including termination, to resolve the performance problem; and

(2) strengthens its effectiveness by—

(A) establishing goals or objectives for individual, group, or organizational performance (or any combination thereof), consistent with the annual performance agreement described in section 44613(b) and the PBO-ATS performance planning procedures, including those established under the Government Performance and Results Act of 1993, and communicating such goals or objectives to employees;

(B) using such goals and objectives to make performance distinctions among employees or groups of employees; and

(C) using performance assessments as a basis for granting employee awards, adjusting an employee's rate of basic pay, and other appropriate personnel actions, in accordance with applicable provisions of law and regulation. For purposes of this subparagraph, "performance assessment" means a determination of whether or not retention standards established under paragraph (1)(A) are met, and any additional performance determination made on the basis of performance goals and objectives established under subparagraph (A) of the paragraph.

(b) The PBO-ATS shall establish an awards program designed to provide incentives for and recognition of organizational, group, and individual achievements by providing for granting awards to employees who, as individuals or members of a group, contribute to meeting the performance goals and objectives established under the section by means of a superior individual or group accomplishment, a documented productivity gain, or sustained superior performance.

Sec. 44615. Authority to incur indebtedness

(a) General authority.— Beginning July 1, 2000, and subject to the authority of the Secretary of Transportation pursuant to subsection (d) of this section to disapprove the issuance of indebtedness by the PBO-ATS, the PBO-ATS may issue such notes or other obligations as the PBO-ATS determines necessary to carry out the purposes of section 44611(b)(4)(A) of this title, either to the Secretary of the Treasury pursuant to subsection (b) of this section or to private entities pursuant to subsection (c) of this section. The aggregate amount of any such obligations outstanding at any one time shall not exceed $15,000,000,000.

(b) Treasury borrowing.— The PBO-ATS may issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions, as may be prescribed by the Secretary of the Treasury. Such notes shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obligations of the United States of comparable maturities. The Secretary of the Treasury shall purchase any notes or other obligations issued hereunder, and for that purpose such Secretary is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under that Act are extended to include any purchase of such notes or obligations acquired by him or her under this subsection. The Secretary of the Treasury may at any time sell any notes or other obligations acquired by him or her under this subsection.

(c) Market borrowing.—

(1) After consulting with the Secretary of the Treasury and the Secretary of Transportation, the PBO-ATS is authorized to issue notes and other obligations to private entities consistent with this subsection.

(2) The PBO-ATS may pledge air traffic system assets under its control and pledge and use its user charge collections and receipts for the payment of the principal or interest on its obligations, for the purchase or redemption thereof, and for other purposes incidental thereto, including creation of reserve, sinking, and other funds which may be similarly pledged and used, to such extent and in such manner as the Board deems necessary or desirable. The PBO-ATS is authorized to enter into binding covenants with the holders of such obligations, and with the trustee, if any, under any agreement entered into in accordance with the issuance thereof with respect to the establishment of reserve, sinking, and other funds, application and use of user charge collections and receipts of the PBO-ATS, stipulations concerning the subsequent issuance of obligations or the execution of leases or lease/purchases relating to properties under its control, and such other matters as the Board deems necessary or desirable to enhance the marketability of such obligations. However, the PBO-ATS may not enter into covenants that have the effect of conflicting with any requirement of this Act, as determined by the Secretary in approving the issuance of indebtedness pursuant to subsection (d) of this section.

(3) Obligations issued by the PBO-ATS under this subsection shall be subject to such terms and conditions as the Board determines.

(4) Obligations issued by the PBO-ATS under this subsection shall—

(A) be negotiable or nonnegotiable and bearer or registered instruments, as specified therein and in any indenture or covenant relating thereto;

(B) contain a recital that they are issued under this section, and such recital shall be conclusive evidence of the regularity of the issuance of sale of such obligations and of their validity; and

(C) be treated as an obligation or security of the United States for purposes of the counterfeiting and forgery provisions of title 18, United States Code.

(d) Review of borrowing.— The issuance of indebtedness by the PBO-ATS may be disapproved by the Secretary of Transportation if the Secretary determines that the total revenues of the PBO-ATS are insufficient to satisfy obligations incurred by the PBO-ATS, including those that are held by the United States. Within 30 days of the receipt of a proposal for the issuance of indebtedness, the Secretary shall notify the Board of any disapproval, with justification for a disapproval.'.

(b) Section 106 of title 49, United States Code, is amended by inserting at the end the following new subsection:

(r) Relationship of Administrator and PBO-ATS.—

(1) The Administrator shall delegate such powers, authorities, and responsibilities of the Administration to the PBO-ATS as the Administrator deems are necessary to fulfill the requirements of the Aviation System Performance Improvement Act.'.

(2) To the extent necessary, the Administrator shall, through the PBO-ATS entity, execute and otherwise carry out the decisions of the Board (as established in section 44613) to carry out the functions and responsibilities of the PBO-ATS.

(3) By no later than February 1, 1999, the PBO-ATS and the Administrator must enter into a Memorandum of Understanding concerning the exercise of the PBO-ATS' air traffic system related authorities and responsibilities to ensure clear lines of authority and responsibility for the safe and efficient movement of air traffic.

(4) By no later than February 1, 1999, the PBO-ATS and the Administrator must enter into a Memorandum of Understanding concerning the allocation of the Administration's administrative expenses to the PBO-ATS and providing for reimbursement to Administration of such expenses.'.

SEC. B. AIR TRAFFIC PERFORMANCE FUND.

Section 45303(c) is amended by—

(1) inserting "under this chapter (except for section 45302)" after "Administration" where it first appears; and

(2) striking paragraph (1) and inserting a new paragraph (1) as follows:

"(1) shall be credited as offsetting collections to a separate account in the Treasury, to be known as the Air Traffic Performance Fund, and made available for the activities of the PBO-ATS established under section 44611 of this title and for airport planning and development and noise compatibility and programs;".

SEC. C. FEES TO SUPPORT FAA PROGRAMS THROUGH JUNE 2000.

(a) IN GENERAL.— Chapter 453 is amended by adding at the end the following:

Sec. 45305. Aviation User Charges Through FY 2000.

(a) In General.—There is hereby imposed on the amount paid for leviable transportation of any person a fee equal to 7.5 percent of the amount so paid.

(b) Domestic Segments of Leviable Transportation.—

(1) In general.— There is hereby imposed on the amount paid for each domestic segment of leviable transportation by air a fee in the amount determined in accordance with the following table for the period in which the segment begins:

In the case of segments beginning: The fee is:
After January 31, 1999, and before October 1, 1999 $2.00
After September 30, 1999, and before July 1, 2000 $2.25

(2) Domestic segment.—For purposes of this section, the term `domestic segment' means any segment consisting of 1 takeoff and 1 landing and which is leviable transportation described in section 45306(a)(1).

(3) Changes in segments by reason of rerouting.— If—

(A) transportation is purchased between 2 locations on specified flights, and

(B) there is a change in the route taken between such 2 locations which changes the number of domestic segments, but there is no change in the amount charged for such transportation, the fee imposed by paragraph (1) shall be determined without regard to such change in route.

(c) Use of International Travel Facilities.—

(1) In general.—There is hereby imposed a fee of $12.00 on any amount paid (whether within or without the United States) for any transportation of any person by air, if such transportation begins or ends in the United States.

(2) Exception for transportation entirely leviable under subsection (a).— This subsection shall not apply to any transportation all of which is leviable under subsection (a) (determined without regard to sections 45310 and 45311).

(3) Special rule for Alaska and Hawaii.— In any case in which the fee imposed by paragraph (1) applies to a domestic segment beginning or ending in Alaska or Hawaii, such fee shall apply only to departures and shall be at the rate of $6.

(d) By whom paid.— Except as provided in section 45307(a), the fees imposed by this section shall be paid by the person making the payment subject to the fee.

(e) Special Rules.—

(1) Segments to and from rural airports.—

(A) Exception from segment fee.—The fee imposed by subsection (b)(1) shall not apply to any domestic segment beginning or ending at an airport which is a rural airport for the calendar year in which such segment begins or ends (as the case may be).

(B) Rural airport.— For purposes of this paragraph, the term `rural airport' means, with respect to any calendar year, any airport if—

(i) there were fewer than 100,000 commercial passengers departing by air during the second preceding calendar year from such airport, and

(ii) such airport—

(I) is not located within 75 miles of another airport which is not described in clause (i), or

(II) is receiving essential air service subsidies as of the date of the enactment of this paragraph.

(C) No phase in of reduced ticket fee.—In the case of transportation beginning before October 1, 1999—

(i) In general.— Paragraph (5) shall not apply to any domestic segment beginning or ending at an airport which is a rural airport for the calendar year in which such segment begins or ends (as the case may be).

(ii) Transportation involving multiple segments.— In the case of transportation involving more than 1 domestic segment at least 1 of which does not begin or end at a rural airport, the 7.5 percent rate applicable by reason of clause (i) shall be applied by taking into account only an amount which bears the same ratio to the amount paid for such transportation as the number of specified miles in domestic segments which begin or end at a rural airport bears to the total number of specified miles in such transportation.

(2) Amounts paid outside the United States.— In the case of amounts paid outside the United States for leviable transportation, the fees imposed by subsections (a) and (b) shall apply only if such transportation begins and ends in the United States.

(3) Amounts paid for right to award free or reduced rate air transportation.—

(A) In general.—Any amount paid (and the value of any other benefit provided) to an air carrier (or any related person) for the right to provide mileage awards for (or other reductions in the cost of) any transportation of persons by air shall be treated for purposes of subsection (a) as an amount paid for leviable transportation, and such amount shall be leviable under subsection (a) without regard to any other provision of this subchapter.

(B) Controlled group.—For purposes of subparagraph (A), a corporation and all wholly owned subsidiaries of such corporation shall be treated as 1 corporation.

(C) Regulations.—The Secretary of the Treasury shall prescribe rules which reallocate items of income, deduction, credit, exclusion, or other allowance to the extent necessary to prevent the avoidance of the fee imposed by reason of this paragraph. The Administrator may prescribe rules which exclude from the fee imposed by subsection (a) amounts attributable to mileage awards which are used other than for transportation of persons by air.

(4) Inflation adjustment of dollar rates of fee.—

(A) In general.—In the case of leviable events in a calendar year after the last nonindexed year, each dollar amount contained in subsection (c) shall be increased by an amount equal to—

(i) such dollar amount, multiplied by

(ii) the cost-of-living adjustment determined under section 1(f)(3) of title 26, United States Code, for such calendar year by substituting the year before the last nonindexed year for `calendar year 1992' in subparagraph (B) thereof.

If any increase determined under the preceding sentence is not a multiple of 10 cents, such increase shall be rounded to the nearest multiple of 10 cents.

(B) Last nonindexed year.—For purposes of subparagraph (A), the last nonindexed year is 1998 in the case of the dollar amounts contained in subsection (c) of this section.

(5) Rates of ticket fee for transportation beginning before October 1, 1999.— Subsection (a) shall be applied by substituting for `7.5 percent', `8 percent' in the case of transportation beginning after January 31, 1998, and before October 1, 1999.

(f) Exemption for certain helicopter uses.— No fee shall be imposed under subsection (a) or (b) on air transportation by helicopter for the purpose of —

(1) transporting individuals, equipment, or supplies in—

(A) the exploration for, or the development or removal of, hard minerals, or

(B) the exploration for oil, or gas, or

(2) the planting, cultivation, cutting, or transportation of, or caring for, trees (including logging operations),

but only if the helicopter does not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to sections 44509 or 44913(b) or subchapter I of chapter 471 of this title, during such use. In the case of helicopter transportation described in paragraph (1), this subsection shall be applied by treating each flight segment as a distinct flight.

(g) Exemption for certain emergency medical transportation.— No fee shall be imposed under this section or section 45308 on any air transportation for the purpose of providing emergency medical services —

(1) by helicopter, or

(2) by a fixed-wing aircraft equipped for and exclusively dedicated to acute care medical services.

(h) Application of fees.— The fees imposed by this section shall apply to —

(1) transportation beginning during the period —

(A) beginning on February 1, 1999, and

(B) ending on June 30, 2000, and

(2) amounts paid during such period for transportation beginning after such period.

(i) Collection system.— No later than January 31, 1999, the PBO-ATS shall have in place a system for the collection of fees established under this section.

Sec. 45306. Definition of leviable transportation.

(a) Leviable transportation; in general.— For purposes of this section and sections 45305 and 45307 of this title, except as provided in subsection (b), the term ''leviable transportation'' means —

(1) transportation by air which begins in the United States or in the 225-mile zone and ends in the United States or in the 225-mile zone; and

(2) in the case of transportation by air other than transportation described in paragraph (1), that portion of such transportation which is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if such portion is not a part of uninterrupted international air transportation (within the meaning of subsection (c)(3)).

(b) Exclusion of certain travel.— For purposes of this part, the term ''leviable transportation'' does not include that portion of any transportation by air which meets all 4 of the following requirements:

(1) such portion is outside the United States;

(2) neither such portion nor any segment thereof is directly or indirectly —

(A) between (i) a point where the route of the transportation leaves or enters the continental United States, or (ii) a port or station in the 225-mile zone, and

(B) a port or station in the 225-mile zone;

(3) such portion—

(A) begins at either (i) the point where the route of the transportation leaves the United States, or (ii) a port or station in the 225-mile zone, and

(B) ends at either (i) the point where the route of the transportation enters the United States, or (ii) a port or station in the 225-mile zone; and

(4) a direct line from the point (or the port or station) specified in paragraph (3)(A), to the point (or the port or station) specified in paragraph (3)(B), passes through or over a point which is not within 225 miles of the United States.

(c) Definitions.— For purposes of this section—

(1) Continental United States.— The term ''continental United States'' means the District of Columbia and the States other than Alaska and Hawaii.

(2) 225-mile zone.- The term ''225-mile zone'' means that portion of Canada and Mexico which is not more than 225 miles from the nearest point in the continental United States.

(3) Uninterrupted international air transportation.— The term ''uninterrupted international air transportation'' means any transportation by air which is not transportation described in subsection (a)(1) and in which—

(A) the scheduled interval between (i) the beginning or end of the portion of such transportation which is directly or indirectly from one port or station in the United States to another port or station in the United States and (ii) the end or beginning of the other portion of such transportation is not more than 12 hours, and

(B) the scheduled interval between the beginning or end and the end or beginning of any two segments of the portion of such transportation referred to in subparagraph (A)(i) is not more than 12 hours.

For purposes of this paragraph, in the case of personnel of the United States Army, Air Force, Navy, Marine Corps, and Coast Guard traveling in uniform at their own expense when on official leave, furlough, or pass, the scheduled interval described in subparagraph (A) shall be deemed to be not more than 12 hours if a ticket for the subsequent portion of such transportation is purchased within 12 hours after the end of the earlier portion of such transportation and the purchaser accepts and utilizes the first accommodations actually available to him for such subsequent portion.

(d) Transportation.— For purposes of this part, the term ''transportation'' includes layover or waiting time and movement of the aircraft in deadhead service.

(e) Authority to waive 225-mile zone provisions.—

(1) In general.— If the Administrator determines that Canada or Mexico has entered into a qualified agreement —

(A) the Administrator shall publish a notice of such determination in the Federal Register, and

(B) effective with respect to transportation beginning after the date specified in such notice, to the extent provided in the agreement, the term ''225-mile zone'' shall not include part or all of the country with respect to which such determination is made.

(2) Termination of waiver.— If a determination was made under paragraph (1) with respect to any country and the Administrator subsequently determines that the agreement is no longer in effect or that the agreement is no longer a qualified agreement—

(A) the Administrator shall publish a notice of such determination in the Federal Register, and

(B) subparagraph (B) of paragraph (1) shall cease to apply with respect to transportation beginning after the date specified in such notice.

(3) Qualified agreement.— For purposes of this subsection, the term ''qualified agreement'' means an agreement between the United States and Canada or Mexico (as the case may be)—

(A) setting forth that portion of such country which is not to be treated as within the 225-mile zone, and

(B) providing that the tax or fee imposed by such country on transportation described in subparagraph (A) will be at a level which the Administrator determines to be appropriate.

(4) Requirement that agreement be submitted to Congress.— No notice may be published under paragraph (1)(A) with respect to any qualified agreement before the date 90 days after the date on which a copy of such agreement was furnished to the Committee on Transportation and Infrastructure of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate.

Section 45307. Special rules

(a) Payments made outside the United States for prepaid orders.— If the payment upon which a fee is imposed by section 45305 is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation pursuant to such order shall collect the amount of the fee.

(b) Fee deducted upon refunds.— Every person who refunds any amount with respect to a ticket or order which was purchased without payment of the fee imposed by section 45305 shall deduct from the amount refundable, to the extent available, any fee due under such section as a result of the use of a portion of the transportation purchased in connection with such ticket or order, and shall report to the Administrator the amount of any such fee remaining uncollected.

(c) Payment of fee.— Where any fee imposed by section 45305 is not paid at the time payment for transportation is made, then, under regulations prescribed by the Administrator, to the extent that such fee is not collected under any other provision of this subchapter, such fee shall be paid by the carrier providing the initial segment of such transportation which begins or ends in the United States.

(d) Application of fee.— The fee imposed by section 45305 shall apply to any amount paid within the United States for transportation of any person by air unless the fee-payer establishes, pursuant to regulations prescribed by the Administrator at the time of payment for the transportation, that the transportation is not transportation in respect of which fee is imposed by section 45305.

(e) Round trips.— In applying this subchapter to a round trip, such round trip shall be considered to consist of transportation from the point of departure to the destination, and of separate transportation thereafter.

(f) Transportation outside the northern portion of the Western Hemisphere.— In applying this chapter to transportation any part of which is outside the northern portion of the Western Hemisphere, if the route of such transportation leaves and reenters the northern portion of the Western Hemisphere, such transportation shall be considered to consist of transportation to a point outside such northern portion, and of separate transportation thereafter. For purposes of this subsection, the term ''northern portion of the Western Hemisphere'' means the area lying west of the 30th meridian west of Greenwich, east of the international dateline, and north of the Equator, but not including any country of South America.

Sec. 45308. Imposition of property transportation fee

(a) In general.— There is hereby imposed upon the amount paid within or without the United States for the leviable transportation (as defined in section 45309) of property a fee equal to 6.25 percent of the amount so paid for such transportation. The fee imposed by this subsection shall apply only to amounts paid to a person engaged in the business of transporting property by air for hire.

(b) By whom paid.

(1) In general.— Except as provided by paragraph (2), the fee imposed by subsection (a) shall be paid by the person making the payment subject to fee.

(2) Payments made outside the United States.— If a payment subject to fee under subsection (a) is made outside the United States and the person making such payment does not pay such fee, such fee—

(A) shall be paid by the person to whom the property is delivered in the United States by the person furnishing the last segment of the leviable transportation in respect of which such fee is imposed, and

(B) shall be collected by the person furnishing the last segment of such leviable transportation.

(c) Determination of amounts paid in certain cases.— For purposes of this section, in any case in which a person engaged in the business of transporting property by air for hire and one or more other persons not so engaged jointly provide services which include leviable transportation of property, and the person so engaged receives, for the furnishing of such leviable transportation, a portion of the receipts from the joint providing of such services, the amount paid for the leviable transportation shall be treated as being the sum of (1) the portion of the receipts so received, and (2) any expenses incurred by any of the persons not so engaged which are properly attributable to such leviable transportation and which are taken into account in determining the portion of the receipts so received.

(d) Termination.— The fee imposed by subsection (a) shall apply with respect to transportation beginning after February 1, 1999, and before July 1, 2000.

(e) Collection system.— No later than January 31, 1999, the PBO-ATS shall have in place a system for the collection of fees established under this section.

Sec. 45309. Definition of leviable transportation, etc.

(a) In general.— For purposes of this section and section 45308, except as provided in subsection (b), the term ''leviable transportation'' means transportation by air which begins and ends in the United States.

(b) Exceptions.— For purposes of this part, the term ''leviable transportation'' does not include -

(1) that portion of any transportation which meets the requirements of paragraphs (1), (2), (3), and (4) of section 45306(b), or

(2) under regulations prescribed by the Administrator, transportation of property in the course of exportation (including shipment to a possession of the United States) by continuous movement, and in due course so exported.

(c) Excess baggage of passengers.— For purposes of this part, the term ''property'' does not include excess baggage accompanying a passenger traveling on an aircraft operated on an established line.

(d) Transportation.— For purposes of this part, the term ''transportation'' includes layover or waiting time and movement of the aircraft in deadhead service.

Sec. 45310. Small aircraft on nonestablished lines

The fees imposed by sections 45305 and 45308 shall not apply to transportation by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less, except when such aircraft is operated on an established line. For purposes of the preceding sentence, the term ''maximum certificated takeoff weight'' means the maximum such weight contained in the type certificate or airworthiness certificate.

Sec. 45311. Transportation by air for other members of affiliated group

(a) General rule.— Under regulations prescribed by the Administrator, if —

(1) one member of an affiliated group is the owner or lessee of an aircraft, and

(2) such aircraft is not available for hire by persons who are not members of such group, no fee shall be imposed under section 45305 or 45308 upon any payment received by one member of the affiliated group from another member of such group for services furnished to such other member in connection with the use of such aircraft.

(b) Affiliated group.— For purposes of subsection (a), the term ''affiliated group'' has the meaning assigned to such term by section 1504(a) of title 26, United States Code, except that all corporations shall be treated as includible corporations (without any exclusion under section 1504(b) of title 26, United States Code).

Sec. 45312. Cases Where Persons Receiving Payment Must Collect Fee

Except as otherwise provided in section 45307(a), every person receiving any payment for facilities or services on which a fee is imposed upon the payor thereof under this chapter shall collect the amount of the fee from the person making such payment.'.

SEC. D. TICKETING AND ADVERTISING PENALTY

Chapter 463 is amended by adding at the end the following:

Sec. 46317. Penalty for offenses relating to certain airline tickets and advertising.

(a) Tickets.— In the case of transportation by air all of which is leviable transportation (as defined in section 45306 of this title), the ticket for such transportation shall show the total of —

(1) the amount paid for such transportation, and

(2) the fees imposed by subsections (a) and (b) of section 45305 of this title.

(b) Advertising.— In the case of transportation by air all of which is leviable transportation (as defined in section 45306) or would be leviable transportation if section 45306 did not include subsection (b) thereof, any advertising made by or on behalf of any person furnishing such transportation (or offering to arrange such transportation) which states the cost of such transportation shall —

(1) state such cost as the total of

(A) the amount to be paid for such transportation, and

(B) the fees imposed by sections 45305(a), (b), and (c), and

(2) if any such advertising states separately the amount to be paid for such transportation or the amount of such fees, shall state such total at least as prominently as the more prominently stated of the amount to be paid for such transportation or the amount of such fees and shall describe such fees substantially as: ''user fees to pay for airport construction and airway safety and operations.''

(c) Penalty.— Any person who violates any provision of subsection (a) or (b) is, for each violation, guilty of a misdemeanor, and upon conviction thereof shall be fined not more than $100.'.

SEC. E. FEES TO SUPPORT FAA PROGRAMS BEGINNING JULY 2001

Chapter 453 of title 49, United States Code, is further amended by inserting at the end the following:

Sec. 45313. User fees to Support PBO-ATS and AIP

(a) In general.— Not later than July 1, 1999, the Administrator shall develop an initial proposed fee schedule to pay all the costs of providing the programs and activities (including capital investment) of the PBO-ATS, as established under sections 44611 of this title, and to fully support airport-related programs authorized under section 48402 . In developing the proposal, the Administrator may utilize the services of experts and consultants, and may contract on a sole source basis, notwithstanding any other provision of law to the contrary, to develop air traffic system user fees based on cost accounting data. The Administrator shall cause a copy of the proposed fee system to be published in the Federal Register as a Notice of Proposed Rulemaking. The Administrator must issue a final rule under this section, after public comment and hearing, and consultation with the MAC established under section 106(p) of this title, by March 1, 2000, and such fee schedule shall take effect no later than July 1, 2000. The PBO-ATS Board, established under section 44612 of this title, must approve any proposed fee schedule or system under this section prior to issuance of a final rule. On March 1, 2000, the Administrator shall transmit copies of the proposed final rule to the Committee on Commerce, Science, and Transportation of the Senate, and the Committee on Transportation and Infrastructure of the House of Representatives for review. Section 106(f)(3)(B) of this title is not applicable to any rulemaking undertaken under this subsection.

(b) Requirements.— To the maximum extent feasible, a fee system developed under this section, must—

(1) be based upon the costs of providing services to users based upon the best available data derived from the cost accounting system; and

(2) differentiate between the provision of services related to the landing and takeoff of aircraft and the provision of services related to handling aircraft in flight.

(c) Considerations.— To the maximum extent feasible, in developing a fee system under this section, the Administrator shall consider—

(1) the impact on air fares (including low-fare, high-frequency service), service, and competition;

(2) the existing contributions provided by individual air carriers toward funding of the Administration and the air traffic system;

(3) the promotion of fair and competitive practices;

(4) the unique circumstances associated with interisland air carrier service in Hawaii and rural air service in Alaska;

(5) the impact on service to small communities;

(6) the impact on services provided by regional air carriers;

(7) the use of congestion and peak-period pricing;

(8) the costs of providing services at different size terminals, to different size aircraft, and at different times of day; and

(9) the ease of administration of such fees.

(d) Limitations.—

(1) Certain users.— Fees may be imposed under this section on any user of air traffic control services not subject to taxes under section 4261 of title 26, so long as any such fees are not inconsistent with international agreements.

(2) General aviation aircraft.— No fee may be imposed under this section on aircraft that are not used in the business of providing transportation of persons or property for compensation or hire by air.

(3) On-demand and air taxi operators.— No fee may be imposed under this section on aircraft that are used exclusively for on-demand and air taxi operations under 14 CFR 135 (as of September 30, 1998).

(e) Consultation with Management Advisory Council.— In developing proposals under subsection (a) of this section, the Administrator shall consult with the Management Advisory Council established under section 106(p) and, to the maximum extent possible, seek to develop a consensus.

(f) Termination.— Fees imposed under this section (except under subsection (g)) shall terminate 3 years after going into effect or until replaced by a replacement fee system established under subsection (g), but any amounts collected shall remain available until expended.

(g) Additional system proposals.— After the initial fee system has been imposed under this section, the PBO-ATS Board may propose a replacement fee system. The Administrator shall cause a copy of the proposed replacement fee system to be printed in the Federal Register in the form of a Notice of Proposed Rulemaking. Any final rule setting forth a replacement fee system must be developed in consultation with the Management Advisory Council established under section 106(p) of this title and approved by the PBO-ATS Board after public comment and hearing. The proposed replacement fee system shall take effect upon the termination of the fee system it replaces. Section 106(f)(3)(B) of this title is not applicable to any rulemaking undertaken under this subsection.

(h) Policy for imposition of fees, charges and practices.— The fees, charges and related practices established pursuant to this section shall conform to the following policies:

(1) Fees, charges and practices shall not unreasonably restrain competition by, for example, being unfair, unreasonable, unjustly discriminatory among current or potential users of the air traffic system, or unreasonably disadvantaging new entrants.

(2) Fees and charges shall be consistent with all obligations of the United States Government under international agreements.

(3) Fees and charges shall be maintained at a level sufficient to assure the satisfaction of all obligations incurred by the PBO-ATS (or the Administration, as the case may be), including those that are held by the United States.

(4) Fees and charges need not be based solely on costs if the PBO-ATS determines that public interest or safety would be better served by not doing so.

Sec. 45314. Non-applicability of certain laws

The provisions of the Independent Offices Appropriation Act, as amended (31 U.S.C. 9701), are not applicable to the imposition of any fees under this chapter.'.

SEC. F. MODIFICATION OF CURRENT FUNDING SYSTEM FOR FAA.

(a) PASSENGER TICKET TAX.— Clause (ii) of section 4261(h)(1)(A) of title 26, United States Code, is amended by striking "September 30, 2007" and inserting "January 31, 1999".

(b) CARGO WAYBILL TAX.— Clause (ii) of section 4271(d)(1)(A) of title 26, United States Code, is amended by striking "September 30, 2007" and inserting "January 31, 1999".

(c) ON-DEMAND AND AIR TAXI OPERATORS.— Section 6427(l)(2)(B) of title 26, United States Code, is amended by inserting "(except for such fuel use after June 30, 2000, by on-demand, air taxis or charters operating under 14 CFR 135)" after "section 4041(c)(1)".

SEC. G. EXTENSION OF AIRPORT AND AIRWAY TRUST FUND EXPENDITURES.

(a) EXTENSION OF EXPENDITURE AUTHORITY.— Paragraph (1) of section 9502(d) of the Internal Revenue Code of 1986 is amended by striking `October 1, 1996' and inserting `October 1, 2002'.

(b) EXTENSION OF TRUST FUND PURPOSES.— Subparagraph (A) of section 9502(d)(1) of such Code is amended by inserting before the semicolon at the end `or the Aviation System Improvement Act'.

SEC. H. TRANSFERS TO THE AIR TRAFFIC PERFORMANCE FUND

Part C of Subtitle VII is amended by adding the following new chapter at the end:

CHAPTER 483 — TRANSFERS TO THE AIR TRAFFIC PERFORMANCE FUND

48301. Transfers to the Air Traffic Performance Fund.

48302. Transfer of amounts.

48303. Management of funds.

Sec. 48301. Transfers to the Air Traffic Performance Fund

There are hereby appropriated to the Air Traffic Performance Fund (as established under section 45303(c)(1)) amounts equivalent to—

(1) the taxes received in the Treasury under—

(A) subsections (c) and (e) of section 4041 of title 26, United States Code (relating to aviation fuels),

(B) sections 4261 and 4271 of title 26, United States Code (relating to transportation by air),

(C) section 4081 of title 26, United States Code (relating to gasoline) with respect to aviation gasoline, and

(D) section 4091 of title 26, United States Code (relating to aviation fuel) , and

(2) the amounts determined by the Secretary of the Treasury to be equivalent to the amounts of civil penalties collected under section 47107(n) of title 49, United States Code.

There shall not be taken into account under paragraph (1) so much of the taxes imposed by sections 4081 and 4091 of title 26, United States Code, as are determined at the rates specified in sections 4081(a)(2)(B) or 4091(b)(2) of title 26, United States Code.'.

Sec. 48302. Transfer of amounts

The amounts appropriated by any section of this chapter to the Air Traffic Performance Fund established by section 45303(c)(1) shall be transferred at least monthly from the general fund of the Treasury to such Air Traffic Performance Fund on the basis of estimates made by the Secretary of the Treasury of the amounts referred to in such section. Proper adjustments shall be made in the amounts subsequently transferred to the extent prior estimates were in excess of or less than the amounts required to be transferred.

Sec. 48303. Management of funds

(a) Report.— The Administrator shall be responsible for managing the Air Traffic Performance Fund established by section 45303(c)(1), and, after consultation with the PBO-ATS Board, to report to the Congress each year

(1) on the financial condition and the results of the operations of such Trust Fund during the preceding fiscal year and

(2) on its expected condition and operations during the next 5 fiscal years. Such report shall be printed as a House document of the session of the Congress to which the report is made.

(b) Investment.—

(1) In general.— The Administrator shall invest such portion of the Air Traffic Performance Fund established by section 45303(c)(1) as is not, in his or her judgment, required to meet current withdrawals. Such investments may be made only in interest-bearing obligations of the United States. For such purpose, such obligations may be acquired —

(A) on original issue at the issue price, or

(B) by purchase of outstanding obligations at the market price.

(2) Sale of obligations.— Any obligation acquired by the Air Traffic Performance Fund established by section 45303(c)(1) may be sold by the Administrator at the market price.

(3) Interest on certain proceeds.— The interest on, and the proceeds from the sale or redemption of, any obligations held in the Air Traffic Performance Fund established by section 45303(c)(1) shall be credited to and form a part of such Trust Fund.'.

Sec. I. TERMINATION OF TRANSFERS TO TRUST FUND

Section 9502 of title 26, United States Code, is amended by striking subsection (b) and redesignating subsections (c), (d), and (e) as (b), (c), and (d), respectively.

SEC. J. TRANSFERS FROM THE AIRPORT AND AIRWAY TRUST FUND

Section 9502(d) of the Trust Fund Code of 1981 (Expenditures from Airport and Airway Trust Fund) is amended by the addition of new paragraph (6) as follows:

(6) Transfers from the Airport and Airway Trust Fund related to certain air traffic transition costs.— The Secretary of the Treasury shall pay from the Airport and Airway Trust Fund to the Air Traffic Performance Fund amounts equivalent to the unexpended balance of appropriations available on October 1, 1998, for airport planning and development and noise compatibility and programs, for operation and maintenance of air traffic control, air navigation, communications, or supporting services, and for development or construction of air traffic control, air navigation, or communications facilities (and related research, engineering and development) for the air traffic and airway system by the Federal Aviation Administration. Such amounts shall be transferred on October 1, 1998 and on the basis of estimates by the Secretary of Treasury. Such balances received by the Air Traffic Performance Fund will be used only for the purposes for which they were appropriated, when held in the Airport and Airway Trust Fund.'.

SEC. K. BUDGET TREATMENT

(a) Any transfer under section 9502(d) of the Trust Fund code of 1981, as amended by Section J of this Act, shall be exempt from the requirements of section 251 of the Balanced Budget and Emergency Deficit Control Act of 1985.

(b) Notwithstanding any other provision of law, so long as the receipts and disbursements of the Air Traffic Performance Fund established under section 45303(c)(1) do not result in an increase in the deficit, as determined by the Congressional Budget Office for the period ending with fiscal year 2002, such receipts and disbursements shall not be taken into account for purposes of any budget enforcement procedures under the Balanced Budget and Emergency Deficit Control Act of 1985 except for purposes of section 605(b) of the Congressional Budget Act of 1974. (c) Section 255(g)(1)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985 is amended by inserting after "Appropriations for the District of Columbia (to the extent they are appropriations of locally raised funds);" the following:

"Air Traffic Performance Fund;".

(d) Notwithstanding any other provision of law, the receipts and disbursements of the PBO-ATS that are directly related to indebtedness incurred under section 44615 (as established by this Act), except for repayment of such debt, shall not be counted as new budget authority, outlays, receipts, or deficit or surplus for purposes of—

(1) the budget of the United States Government as submitted by the President;

(2) the congressional budget; or

(3) the Balanced Budget and Emergency Deficit Control Act of 1985.

SEC. L. DISCRETIONARY SPENDING LIMITS.

Upon enactment of this Act, the discretionary spending limits set forth in section 601(a)(2) of the Congressional Budget Act of 1974 (2 U.S.C. 665(a)(2)) (as adjusted in conformance with section 251 of the Balanced Budget and Emergency Deficit Control Act of 1985) for fiscal years 1999 through 2002 are reduced by the following amounts:

(a) For fiscal year 1999, for the discretionary category: $9,172,000,000 in new budget authority and $8,234,000,000 in outlays.

(b) For fiscal year 2000; for the discretionary category: $9,623,000,000 in new budget authority and $9,047,000,000 in outlays.

(c) For fiscal year 2001, for the discretionary category: $9,978,000,000 in new budget authority and $9,665,000,000 in outlays.

(d) For fiscal year 2002; for the discretionary category: $10,161,000,000 in new budget authority and $10,107,000,000 in outlays.

SEC. M. OUTLAY LIMITS ON FAA EXPENDITURES

Part C of Subtitle VII is amended by adding the following new chapter at the end:

CHAPTER 484 — AVIATION PROGRAM AUTHORIZATIONS

48401. Air Traffic Services.
48402. Airport planning and development and noise compatibility planning and programs. 48403. Unavailability of funds.
48404. Aviation Safety.
48405. Aviation Security.
48406. Administrative and other expenses.
48407. Office of Commercial Space Transportation.
48408. Military and public use of the air traffic system.

Sec. 48401. Air Traffic Services; research, engineering and development

(a) General Authorization of Expenditures.— Not more than a total of the following amounts may be outlayed by the Administrator (acting on behalf of the PBO-ATS established under section 44611 of this title) out of monies made available under section 45303 to operate, acquire, establish, and improve air navigation facilities and equipment under Chapter 445 (except for sections 44504, 44507, and 44512) of this title:

(1) $6,718,000,000 for fiscal year 1999;

(2) $7,390,000,000 for fiscal year 2000;

(3) $7,932,000,000 for fiscal year 2001; and

(4) $8,334,000,000 for fiscal year 2002.

(b) Availability of Amounts.— Amounts authorized under this section remain available until expended.

Sec. 48402. Airport planning and development and noise compatibility planning and programs

The total amounts which shall be provided after September 30, 1998, by the Administrator, out of monies made available under section 45303, to make grants for airport planning and airport development under section 47104 of this title, airport noise compatibility planning under section 47505(a)(2) of this title, and carrying out noise compatibility programs under section 47504(c) of this title shall be $2,000,000,000 for fiscal year 1999, $4,000,000,000 for fiscal years ending before October 1, 2000, $6,000,000,000 for fiscal years ending before October 1, 2001, and $8,000,000,000 for fiscal years ending before October 1, 2002.

Sec. 48403. Unavailability of funds


Notwithstanding any other provision of law, none of the monies or funds made available to the Administrator under section 45303(c)(1) may be outlayed by the Administrator on the cost of administration or to carry out duties or obligations under Chapters 441, 447, 449, or 701 of this title.

Sec. 48404. Aviation Safety

(a) Authorization of Appropriations.— Not more than a total of the following amounts may be appropriated to the Administrator under Chapters 441 and 447, and sections 44504, 44507, and 44512, of this title:

(1) $700,000,000 for fiscal year 1999;

(2) $750,000,000 for fiscal year 2000;

(3) $800,000,000 for fiscal year 2001; and

(4) $850,000,000 for fiscal year 2002.

(b) Availability of Amounts.— Amounts authorized under this section remain available until expended.

Sec. 48405. Aviation Security

(a) Authorization of Appropriations.— Not more than a total of the following amounts may be appropriated to the Administrator under Chapters 449 of this title:

(1) $200,000,000 for fiscal year 1999;

(2) $200,000,000 for fiscal year 2000;

(3) $250,000,000 for fiscal year 2001; and

(4) $250,000,000 for fiscal year 2002.

(b) Availability of Amounts.— Amounts authorized under this section remain available until expended.

Sec. 48406. Administrative and other expenses

(a) Authorization of Appropriations.— Not more than a total of the following amounts may be appropriated to the Administrator for administrative expenses, including GSA rent and Staff Offices, under this title (and not otherwise funded under this chapter or reimbursed by the PBO-ATS pursuant to section 106(r)(4)) :

(1) $200,000,000 for fiscal year 1999;

(2) $200,000,000 for fiscal year 2000;

(3) $200,000,000 for fiscal year 2001; and

(4) $200,000,000 for fiscal year 2002.

(b) Availability of Amounts.— Amounts authorized under this section remain available until expended.

Sec. 48407. Office of Commercial Space Transportation

(a) Authorization of Appropriations.— Not more than a total of the following amounts may be appropriated to the Administrator under Chapters 701 of this title:

(1) $7,000,000 for fiscal year 1999;

(2) $8,000,000 for fiscal year 2000;

(3) $8,500,000 for fiscal year 2001; and

(4) $9,000,000 for fiscal year 2002.

(b) Availability of Amounts.— Amounts authorized under this section remain available until expended.

Sec. 48408. Military and public use of the air traffic system

(a) Authorization of Appropriations.— The following amounts are appropriated to the Air Traffic Performance Fund (established under section 45303(c)(1) of this title) to pay the costs of the use of the air traffic system by military and other public aircraft:

(1) $600,000,000 for fiscal year 1999;

(2) $600,000,000 for fiscal year 2000;

(3) $600,000,000 for fiscal year 2001; and

(4) $600,000,000 for fiscal year 2002.

(b) Availability of Amounts.— Amounts authorized under this section remain available until expended.

SEC. N. CONSOLIDATION OF FACILITIES.

The Administrator, with the approval of the PBO-ATS Board as necessary, shall consolidate the nine regions of the Administration into three regions.

SEC. O. MULTIYEAR APPROPRIATIONS.

Chapter 482 is amended by—

(1) in the chapter heading, striking "FOR AIRPORT AND AIRWAY TRUST FUND FACILITIES" after "APPROPRIATIONS";

(2) in subsection (a), striking "for which amounts are to be appropriated from the Airport and Airway Trust Fund established under 9502 of the Internal Revenue Code of 1986" and inserting in the same place "under sections 48404-48408 of this title"; and

(3) in subsection (b), striking "from the Airport and Airway Trust Fund" and inserting in the same place "under sections 48404-48408 of this title".

SEC. P. MANAGEMENT ADVISORY COUNCIL

Subparagraph (c) of section 106(p)(2) is amended by striking "the President by and with the advice and consent of the Senate" and inserting "the Administrator" after "appointed by".

SECTION-BY-SECTION ANALYSIS OF DRAFT LEGISLATION

Section 1. Short title; table of contents

Section 1 cites the title of the bill as the "Aviation System Performance Improvement Act". This section also contains a table of contents for the bill.

Section 2. Amendments to title 49, United States Code

Section 2 provides that, unless otherwise provided, references in the bill to sections or provisions in the law are considered to be sections or provisions of title 49, United States Code.

Section 3. Applicability

Section 3 provides that the Act will only apply to fiscal years beginning after September 30, 1998.

Section 4. Definitions

Section 4 defines the terms "Administration", "Administrator", and "Secretary" for the purposes of the Act.

Section 5. Effective date


Section 5 establishes that, unless otherwise specified in the Act, the provisions of the Act will take effect 30 days after enactment of the legislation.

Section 6. Findings

Section 6 sets forth a series of findings establishing the general basis for enactment of provisions contained in the Act. The findings recognize, for example, the unique character of the FAA's programs and activities and the critical need for reform of its funding system.

Section 7. Purposes

Section 7 sets forth 11 critical purposes underpinning the Act.

Section A. Establishment of the Performance Based Organization for the Air Traffic System

Section A establishes, within the FAA, the Performance Based Organization for the Air Traffic System (hereinafter PBO-ATS). The PBO-ATS is the key part of the governance recommendations made by the NCARC. By establishing the PBO-ATS, a governing Board, and the position of Chief Operating Officer (COO), the NCARC is proposing a bold, new course for management of the air traffic system in the United States. These new entities and positions will provide a more effective and comprehensive approach to overseeing and managing the complex and rapidly changing needs of the air traffic system.

The concept of a PBO, which is run on a day-to-day basis by a COO, came out of the Administration's National Performance Review. The proposal to have a governing board stems from concerns that there are currently too many actors playing a role in the oversight and running of the intensely operational air traffic system, which includes the development of capital infrastructure. Authority is too dispersed and accountability lacking under the current system. The public interest-oriented Board will provide a more singular and coherent measure of oversight than the current system.

The new section 44611 of title 49 specifies the operational authorities and responsibilities of the PBO-ATS over the movement of aircraft in U.S. airspace. Related authority, such as research and development authority in support of air traffic management, is also authorized.

The new section 44612 of title 49 establishes the functions and makeup of the Board that would oversee the PBO-ATS as a whole. In particular, the Board is responsible for the core areas of cost-based user fee determination, the annual budget, the issuance of indebtedness, and appointment of the Chief Operating Officer. The makeup of the Board is directed both toward accountability for the public goals of aviation safety and efficient operation of the system and the goal of closer accountability to the needs of those users that rely most on air traffic services. There would be seven Board members, including the FAA Administrator, who would serve as chairperson. Other than the Administrator, Board members would be appointed by the President with the advice and consent of the Senate. None of these members would serve as representatives of segments of the aviation community.

The new section 44613 of title 49 establishes the broad authorities of the Chief Operating Officer (COO) to manage the day-to-day operations of the PBO-ATS.

The new section 44614 of title 49 requires the PBO-ATS to establish a performance management system which links employee compensation and reward to performance. The system would both maintain individual accountability and strengthen the PBO-ATS's effectiveness in certain specified ways.

The new section 44615 of title 49 authorizes the PBO-ATS, beginning in July 2000, when new cost-based user fees go into effect, to borrow from the U.S. Treasury, or to enter private financial markets to sell bonds or other obligations, to raise capital for development of air traffic facilities and equipment. One of the primary purposes for creation of the PBO-ATS is to provide a means of raising needed capital without affecting the federal deficit. The FAA's existing air traffic facilities require modernization, and the newest technologies coming online may justify further, cost-beneficial investment that is not now even contemplated. Section 106 of title 49 is amended so that the PBO-ATS will act through the Administrator as may be necessary to carry out the decisions of the governing Board. Also, the PBO-ATS and the Administrator would enter into a Memorandum of Understanding to clearly define the lines of authority and responsibility separating the PBO-ATS from the remainder of the FAA.

Section B. Air Traffic Performance Fund

Section B gives a name to the account that was established in the Federal Aviation Reauthorization Act of 1996. This account is a key component of the new funding system for the FAA and its PBO-ATS. The PBO-ATS, including related research and development, and the Airport Improvement Program (AIP) will be funded through this account, which acts as a revolving fund since the Administrator can spend from the account subject only to the amount of money deposited into the account and congressional limits. Because all aviation-related fees will be deposited into the new trust fund, there will now actually be a link between revenues that come from the users of the system and the expenditures on that system. This section also makes clear that all fees would be credited as "offsetting collections" ensuring appropriate budget treatment. This type of scoring is consistent with the scoring of other fees, such as the customs user fees authorized under 19 U.S.C. 58c(f).

Section C. Fees to support FAA programs through June 2000

This section sets forth the basis for funding the FAA through the end of June 2000, at which time there would be a transition to a cost-based user fee structure (as described in Section E of this Act). The language for new sections 45305 through 45312 of title 49 is taken almost word-for-word from the sections of the Internal Revenue Code (title 26, United States Code) that establish the vast majority of the existing financing for the Airport and Airway Trust Fund. In essence, the existing ticket tax, flight segment charge, cargo waybill tax, and international arrival and departure taxes are temporarily converted into an identical set of fees. The existing fuel taxes would remain part of the Internal Revenue Code. Nevertheless, all aviation-derived fees and taxes would flow into the new Air Traffic Performance Fund (see Section H of this Act). These fees would expire at the time when new cost-based user fees go into effect in July 2000. Because all fees flow directly to the Air Traffic Performance Fund, from which the Administrator may spend as needed (subject to congressional authorization), spending would be directly linked to contributions from users.

The purely technical conversion of the "taxes" into "fees" is consistent with the historical uses of such receipts, as well as the Constitutional definition of "revenues". Because the receipts from the current aviation taxes are credited to the Airport and Airway Trust Fund, these monies are ostensibly dedicated to support the programs of the FAA and, thus, are not "revenues" to support government generally. Therefore, there is no clear reason why such user charges must be in the Internal Revenue Code, which exists to raise revenues to support the government generally. Placing the current user charges in title 49 of the United States Code also makes for an easier transition to the cost-based user charges that will eventually replace the current structure. Any argument that an ad valorem user charge (such as for 10 percent of the price of a ticket) is by definition a tax (and therefore must be in the Internal Revenue Code) is unsupported by precedent. There already is at least one ad valorem user fee as in the case of a customs user fee (see 19 U.S.C. 58c(f)). Furthermore, there is no Constitutional requirement that user charges be based directly or indirectly on the costs of the services provided.

Section D. Ticketing and advertising

Section D also is language taken from the Internal Revenue Code and relates to what must appear on an airline ticket and in any advertising related to airfares.

Section E. Fees to support FAA programs beginning in July 2000

This section sets forth the basis on which the PBO-ATS and AIP would be financed beyond FY 2000. This section mandates that the establishment of fees be undertaken using a public process (Notice of Proposed Rulemaking) to permit the input of direct users and other interested parties. In addition, the Management Advisory Council would still retain its role in providing counsel on the development of any such fees. Other statutory limits and considerations are mandated by this section on the imposition of user fees. For example, the fees could not discriminate against similarly situated users. The precise nature and structure of the fees would be subject to the approval of the PBO-ATS Board. Although the fees are to be based on the costs of services provided, there are very few limits on how they may be tailored. For example, it is theoretically possible for the fees to be based, in part or in whole, on the price of a ticket or the purchase of fuel. As previously mentioned, such ad valorem fees are permissible and already exist.

In the case of noncommercial aviation, general aviation excise taxes levied on aviation fuels would continue at their current levels (which now include the former deficit reduction tax of $0.043 per gallon). In addition, Federal Aviation Regulation Part 135 on-demand, air taxi operators would not pay any of the new cost-based fees, but would instead pay at a fuel tax rate to be determined. Furthermore, the aviation excise taxes on general aviation would be reevaluated based on an accurate analysis of the costs of providing air traffic control (ATC) and related services to them.

Section F. Modification of current funding system for FAA

Section F amends the termination dates of the existing statutory provisions relating to the ticket tax, the international arrival and departure taxes, and the cargo waybill tax. The termination dates have been changed to match the dates when taxes are converted into fees. Also, this section applies the existing fuel taxes to Part 135 on-demand and air taxi operators, beginning in July 2000 when cost-based fees take effect.

Section G. Extension of Airport and Airway Trust Fund expenditures

Section G extends through FY 2002 the authority for expenditure of funds from the Airport and Airway Trust Fund. This allows the expenditure of amounts already obligated under the old funding system. Even though Section J provides for the transfer of the bulk of the Airport and Airway Trust Fund to the new Air Traffic Performance Fund, this section is necessary to continue expenditures on safety, security, and administrative obligations made before the changes proposed in this Act.

Section H. Transfers to the Air Traffic Performance Fund

Section H establishes provisions requiring the Secretary of the Treasury to credit to the new Air Traffic Performance Fund any funds deposited into the general fund of the Treasury pursuant to the old aviation excise tax structure. This means that any monies paid to the government under the old system, but after the conversion of most taxes to fees, goes into the new Air Traffic Performance Fund. Because the general aviation fuel taxes would remain, this section also ensures that the monies contributed by those users goes into the new Air Traffic Performance Fund and thereby receives appropriate budget treatment.

This section also requires the Administrator to invest any monies (in the new Air Traffic Performance Fund) in Treasury certificates so that interest may be earned on unexpended balances.

Section I. Termination of transfers to trust fund

Section I terminates the old system of crediting to the Airport and Airway Trust Fund monies that had been received in the Treasury as aviation excise taxes. This is done to conform with the changes made by Section H so that any residual tax receipts are credited to only one Trust Fund.

Section J. Transfers from the Airport and Airway Trust Fund

Section J essentially transfers existing balances from the Airport and Airway Trust Fund to the new Air Traffic Performance Fund. The PBO-ATS will be largely self-supporting from its new user fee system (except for the general fund contribution for government use of the ATC system). However, a transition of funding will be provided to ensure that PBO-ATS is fully capable of undertaking its responsibilities immediately. The estimated "obligated but unexpended balance" of appropriations on October 1, 1998 would be transferred on a one-time basis to the new Air Traffic Performance Fund.

Section K. Budget treatment

Section K exempts the contingent appropriation of amounts from the Airport and Airway Trust Fund to the new Air Traffic Performance Fund authorized by Section J. So long as the balanced budget agreement is not adversely impacted by revenues and spending associated with the Air Traffic Performance Fund, the such revenues and spending would not be subject to most budget restrictions. This section also exempts the Air Traffic Performance Fund from sequestration under the Balanced Budget and Emergency Deficit Control Act of 1985. In addition, this section gives an even greater level of budget protection to any spending associated with borrowed monies.

Section L. Discretionary spending limits

Section L adjusts the "domestic discretionary caps" in the Budget Enforcement Act to reflect moving most of the FAA's spending, including the PBO-ATS, from the discretionary part of the budget to the mandatory part. This provision, in essence, requires a one-time waiver of the pay-as-you-go restrictions that apply to increases in mandatory spending.

Section M. Outlay limits on FAA expenditures

Section M authorizes FAA spending along its new lines of business (LOB) budgeting structure. This section also provides limits on spending out of the Air Traffic Performance Fund so total federal deficit spending prior to FY 2002 will not increase. This section also authorizes appropriations out of the general fund of the Treasury for the following FAA programs or activities: safety, security, administrative and other expenses, the Office of Commercial Space Transportation, and government use of the air traffic system (which is a mandatory appropriation of $600 million each fiscal year through FY 2002).

Section N. Consolidation of facilities

Section N requires the FAA to consolidate its nine regions into three.

Section O. Multiyear appropriations

To conform existing law with the new funding system, section O amends the current requirement that authorizations and appropriations for the FAA be done on a multiyear basis. The new language would require that the parts of the FAA's budget supported by the general fund would be funded on a multiyear basis.

Section P. Management Advisory Council

Section P modifies the requirement that members of the MAC must be appointed by the President and approved by the Senate. Instead, the members of the MAC would be appointed by the Administrator. This is to reflect the role of the new PBO-ATS Board, the members of which must now be confirmed by the Senate. However, the MAC continues to have a vital role in providing needed industry input into the deliberation and decisions at the FAA.


LEGISLATION CREATING THE COMMISSION

Appointments to the National Civil Aviation Review Commission:

Chair:
Norman Y. Mineta, San Jose, CA: Sr.Vice President Lockheed Martin IMS; Member, U.S. House of Representatives 1974-1995; Chair, House Public Works and Transportation Committee 1992-1994; Chair, House Aviation Subcommittee 1981-1988; Mayor, San Jose, CA 1971-1974.

Vice-Chair:
Stephen H. Kaplan, Denver, Colorado: Partner in the firm of Cutler & Stanfield; General Counsel, US Department of Transportation, 1993-1995; City Attorney, Denver, Colorado.

Commissioners:

William Bacon, Rapid City, SD: Director, Rapid City Regional Airport; US Army Aviator 1969-1989.

Charles M. Barclay, Washington D.C.: President, American Association of Airport Executives; Staff member, Aviation Subcommittee of the US Senate Committee on Commerce Science and Transportation, 1977-1983; Member, 1993 Airline Commission.

Linda Barker, Sioux Falls, SD: Owner and Vice President of Business Aviation, Sioux Falls, SD. Member of South Dakota House of Representatives 1992-98.

Robert A. Davis, Seattle: Boeing Corporate Vice President of Engineering and Technology; Member, NASA Advisory Council; Fellow, American Institute for Aeronautics and Astronautics.

Sylvia A. de Leon, Washington, DC: Partner in the firm of Akin, Gump, Strauss, Hauer & Feld; Member, Board of Directors, Amtrak, the National Passenger Railroad Corporation, 1993-Present; Coordinator of Transportation Issues, Clinton-Gore Presidential Transition, 1992.

Robert H. Frenzel, Upper Marlboro, MD: Vice President, United Parcel Service; Chairman, Transportation Infrastructure Task Force, US Chamber of Commerce; J.D. 1981, De Paul University, Chicago, Illinois.

Angela Gittens, Atlanta, GA (Acting for Bill Campbell, Mayor of Atlanta): Aviation General Manager, Hartsfield Atlanta International Airport; Member of FAA Research Engineering Advisory Committee.

Leonard L. Griggs, Jr., St. Louis, MO: Director, Lambert Field-St. Louis International Airport both currently and 1977-1987; FAA Assistant Administrator for Airports 1989-1993.

Mary Kay Hanke, Washington, DC: International Vice President, Association of Flight Attendants, AFL-CIO; flight attendant, United Airlines.

Richard B. Hirst, Minneapolis, MN: Senior Vice President, Northwest Airlines; Vice President and General Counsel, Continental Airlines 1985-90; Associate Professor, University of Puget Sound Law School 1979-83; Staff Member, Civil Aeronautics Board, 1977-1979.

Michael L. Lexton, New York, NY: Managing Director, Lehman Brothers, Manager of the Airport and Transportation Finance Group.

Frederick D. McClure, Dallas, TX: Senior Vice President, Public Strategies Inc.; Assistant to President Bush for Legislative Affairs 1989-1992; Government Affairs Staff Vice President, Texas Air Corporation, 1986-1989.

John O'Brien, Herndon, VA: Director, Engineering and Air Safety Department, Air Line Pilots Association, Int'l; Member of the Board, RTCA 1991 to present; Member of the Board of Governors, Flight Safety Foundation 1992 to present.

Carol O' Cleireacain, Ph.D., New York, NY: economic consultant; Visiting Fellow, The Brookings Institution; Budget Director of the City of New York, 1993; Finance Commissioner of the City of New York, 1990-1993; Chief Economist, AFSCME Council 37, 1976-1989.

John O'Connor, Philadelphia, PA: President, Day and Zimmerman Infrastructure, Inc.;Governor, Airport Consultants Council 1989-90.

Revius O. Ortique, Jr., New Orleans, LA: New Orleans Aviation Board; Retired Supreme Court Justice of LA; Past President, National Bar Association: Past President, National Legal Aid and Defender Association; Has served on four Presidential Boards or Commissions; member of LA Ethics Board; Board of Trustees- Dillard University.

Sen. Larry Pressler Washington DC: President, Pressler & Associates; Lawyer-Investment Banker; Member and Chairman of US Senate Committee on Commerce, Science, and Transportation 1979-1996.

Richard E. Smith, West Point, MS: Director, Golden Triangle Regional Airport; President, Southeastern Airport Managers Assoc./ SEC, 1985, President, Air Force Association 1994-1996.

D. Scott Yohe, Washington DC: Senior Vice President, Government Affairs, Delta Air Lines, Inc.; with Delta Air Lines since 1978.


AGENCY LIAISONS TO THE COMMISSION

Agency Liaisons to the Commission:

Mr. Frank Kruesi
Assistant Secretary for Transportation Policy
Department of Transportation

Ms. Nancy McFadden
General Counsel
Department of Transportation

Ms. Jackie Lowey
Deputy Chief of Staff
Department of Transportation

Ms. Dorothy Robyn
Special Assistant to the President for Economic Policy
National Economic Council

Mr. Monte Belger
Acting Deputy Administrator
Federal Aviation Administration

Mr. Michael Deich
Associate Director for General Government and Finance
Office of Management and Budget

Mr. Mozelle W. Thompson
Principal Deputy Assistant Secretary
Governmental Financial Policy
Department of Treasury

Mr. Frank J. Colson
Executive Director
Department of Defense Policy Board on Federal Aviation


LEGISLATION CREATING THE COMMISSION

SEC. 274. INDEPENDENT ASSESSMENT OF FAA FINANCIAL REQUIREMENTS;
ESTABLISHMENT OF NATIONAL CIVIL AVIATION REVIEW COMMISSION.

(a) INDEPENDENT ASSESSMENT-

(1) INITIATION- Not later than 30 days after the date of the enactment of this Act, the Administrator shall contract with an entity independent of the Administration and the Department of Transportation to conduct a complete independent assessment of the financial requirements of the Administration through the year 2002.

(2) ASSESSMENT CRITERIA- The Administrator shall provide to the independent entity estimates of the financial requirements of the Administration for the period described in paragraph

(1), using as a base the fiscal year 1997 appropriation levels established by Congress. The independent assessment shall be based on an objective analysis of agency funding needs.

(3) CERTAIN FACTORS TO BE TAKEN INTO ACCOUNT- The independent assessment shall take into account all relevant factors,

including—

(A) anticipated air traffic forecasts;
(B) other workload measures;
(C) estimated productivity gains, if any, which contribute to budgetary requirements;
(D) the need for programs; and
(E) the need to provide for continued improvements in all facets of aviation safety, along with operational improvements in air traffic control.

(4) COST ALLOCATION- The independent assessment shall also assess the costs to the Administration occasioned by the provision of services to each segment of the aviation system.

(5) DEADLINE- The independent assessment shall be completed no later than 90 days after the contract is awarded, and shall be submitted to the Commission established under subsection

(b), the Secretary, the Secretary of the Treasury, the Committee on Commerce, Science, and Transportation and the Committee on Finance of the Senate, and the Committee on Transportation and Infrastructure and the Committee on Ways and Means of the House of Representatives.

(b) NATIONAL CIVIL AVIATION REVIEW COMMISSION-

(1) ESTABLISHMENT- There is established a commission to be known as the National Civil Aviation Review Commission (hereinafter in this section referred to as the `Commission').

(2) MEMBERSHIP- The Commission shall consist of 21 members to be appointed as follows:

(A) 13 members to be appointed by the Secretary, in consultation with the Secretary of the Treasury, from among individuals who have expertise in the aviation industry and who are able, collectively, to represent a balanced view of the issues important to general aviation, major air carriers, air cargo carriers, regional air carriers, business aviation, airports, aircraft manufacturers, the financial community, aviation industry workers, and airline passengers. At least one member appointed under this subparagraph shall have detailed knowledge of the congressional budgetary process.

(B) Two members appointed by the Speaker of the House of Representatives.

(C) Two members appointed by the minority leader of the House of Representatives.

(D) Two members appointed by the majority leader of the Senate.

(E) Two members appointed by the minority leader of the Senate.

(3) TASK FORCES- The Commission shall establish an aviation funding task force and an aviation safety task force to carry out the responsibilities of the Commission under this subsection.

(4) FIRST MEETING- The Commission may conduct its first meeting as soon as a majority of the members of the Commission are appointed.

(5) HEARINGS AND CONSULTATION-

(A) HEARINGS- The Commission shall take such testimony and solicit and receive such comments from the public and other interested parties as it considers appropriate, shall conduct 2 public hearings after affording adequate notice to the public thereof, and may conduct such additional hearings as may be necessary.

(B) CONSULTATION- The Commission shall consult on a regular and frequent basis with the Secretary, the Secretary of the Treasury, the Committee on Commerce, Science, and Transportation and the Committee on Finance of the Senate, and the Committee on Transportation and Infrastructure and the Committee on Ways and Means of the House of Representatives.

(C) FACA NOT TO APPLY- The Commission shall not be considered an advisory committee for purposes of the Federal Advisory Committee Act (5 U.S.C. App.).

(6) DUTIES OF AVIATION FUNDING TASK FORCE-

(A) REPORT TO SECRETARY-

(i) IN GENERAL- The aviation funding task force established pursuant to paragraph (3) shall submit a report setting forth a comprehensive analysis of the Administration's budgetary requirements through fiscal year 2002, based upon the independent assessment under subsection (a), that analyzes alternative financing and funding means for meeting the needs of the aviation system through the year 2002. The task force shall submit a preliminary report of that analysis to the Secretary not later than 6 months after the independent assessment is completed under subsection (a). The Secretary shall provide comments on the preliminary report to the task force within 30 days after receiving the report. The task force shall issue a final report of such comprehensive analysis within 30 days after receiving the Secretary's comments on its preliminary report.

(ii) CONTENTS- The report submitted by the aviation funding task force under clause (i)—

(I) shall consider the independent assessment under subsection (a);

(II) shall consider estimated cost savings, if any, resulting from the procurement and personnel reforms included in this Act or in sections 347 and 348 of Public Law 104-50, and additional financial initiatives;

(III) shall include specific recommendations to Congress on how the Administration can reduce costs, raise additional revenue for the support of agency operations, and accelerate modernization efforts; and

(IV) shall include a draft bill containing the changes in law necessary to implement its recommendations.

(B) RECOMMENDATIONS- The aviation funding task force shall make such recommendations under subparagraph

(A)(ii)(III) as the task force deems appropriate. Those recommendations may include—

(i) proposals for off-budget treatment of the Airport and Airway Trust Fund;

(ii) alternative financing and funding proposals, including linked financing proposals;

(iii) modifications to existing levels of Airport and Airways Trust Fund receipts and taxes for each type of tax;

(iv) establishment of a cost-based user fee system based on, but not limited to, criteria under subparagraph (F) and methods to ensure that costs are borne by users on a fair and equitable basis;

(v) methods to ensure that funds collected from the aviation community are able to meet the needs of the agency;

(vi) methods to ensure that funds collected from the aviation community and passengers are used to support the aviation system;

(vii) means of meeting the airport infrastructure needs for large, medium, and small airports; and

(viii) any other matter the task force deems appropriate to address the funding and needs of the Administration and the aviation system.

(C) ADDITIONAL RECOMMENDATIONS- The aviation funding task force report may also make recommendations concerning—

(i) means of improving productivity by expanding and accelerating the use of automation and other technology;

(ii) means of contracting out services consistent with this Act, other applicable law, and safety and national defense needs;

(iii) methods to accelerate air traffic control modernization and improvements in aviation safety and safety services;

(iv) the elimination of unneeded programs; and

(v) a limited innovative program based on funding mechanisms such as loan guarantees, financial partnerships with for-profit private sector entities, government-sponsored enterprises, and revolving loan funds, as a means of funding specific facilities and equipment projects, and to provide limited additional funding alternatives for airport capacity development.

(D) IMPACT ASSESSMENT FOR RECOMMENDATIONS- For each recommendation contained in the aviation funding task force's report, the report shall include a full analysis and assessment of the impact implementation of the recommendation would have on—

(i) safety;

(ii) administrative costs;

(iii) the congressional budget process;

(iv) the economics of the industry (including the proportionate share of all users);

(v) the ability of the Administration to utilize the sums collected; and

(vi) the funding needs of the Administration.

(E) TRUST FUND TAX RECOMMENDATIONS- If the task force's report includes a recommendation that the existing Airport and Airways Trust Fund tax structure be modified, the report shall—

(i) state the specific rates for each group affected by the proposed modifications;

(ii) consider the impact such modifications shall have on specific users and the public (including passengers); and

(iii) state the basis for the recommendations.

(F) FEE SYSTEM RECOMMENDATIONS- If the task force's report includes a recommendation that a fee system be established, including an air traffic control performance-based user fee system, the report shall consider—

(i) the impact such a recommendation would have on passengers, air fares (including low-fare, high frequency service), service, and competition;

(ii) existing contributions provided by individual air carriers toward funding the Administration and the air traffic control system through contributions to the Airport and Airways Trust Fund;

(iii) continuing the promotion of fair and competitive practices;

(iv) the unique circumstances associated with interisland air carrier service in Hawaii and rural air service in Alaska;

(v) the impact such a recommendation would have on service to small communities;

(vi) the impact such a recommendation would have on services provided by regional air carriers;

(vii) alternative methodologies for calculating fees so as to achieve a fair and reasonable distribution of costs of service among users;

(viii) the usefulness of phased-in approaches to implementing such a financing system;

(ix) means of assuring the provision of general fund contributions, as appropriate, toward the support of the Administration; and

(x) the provision of incentives to encourage greater efficiency in the provision of air traffic services by the Administration and greater efficiency in the use of air traffic services by aircraft operators.

(7) DUTIES OF AVIATION SAFETY TASK FORCE-

(A) REPORT TO ADMINISTRATOR- Not later than 1 year after the date of the enactment of this Act, the aviation safety task force established pursuant to paragraph (3) shall submit to the Administrator a report setting forth a comprehensive analysis of aviation safety in the United States and emerging trends in the safety of particular sectors of the aviation industry.

(B) CONTENTS- The report to be submitted under subparagraph (A) shall include an assessment of—

(i) the adequacy of staffing and training resources for safety personnel of the Administration, including safety inspectors;

(ii) the Administration's processes for ensuring the public safety from fraudulent parts in civil aviation and the extent to which use of suspected unapproved parts requires additional oversight or enforcement action; and

(iii) the ability of the Administration to anticipate changes in the aviation industry and to develop policies and actions to ensure the highest level of aviation safety in the 21st century.

(8) ACCESS TO DOCUMENTS AND STAFF- The Administration may give the Commission appropriate access to relevant documents and personnel of the Administration, and the Administrator shall make available, consistent with the authority to withhold commercial and other proprietary information under section 552 of title 5, United States Code (commonly known as the `Freedom of Information Act'), cost data associated with the acquisition and operation of air traffic service systems. Any member of the Commission who receives commercial or other proprietary data from the Administrator shall be subject to the provisions of section 1905 of title 18, United States Code, pertaining to unauthorized disclosure of such information.

(9) TRAVEL AND PER DIEM- Each member of the Commission shall be paid actual travel expenses, and per diem in lieu of subsistence expenses when away from his or her usual place of residence, in accordance with section 5703 of title 5, United States Code.

(10) DETAIL OF PERSONNEL FROM THE ADMINISTRATION- The Administrator shall make available to the Commission such staff, information, and administrative services and assistance as may reasonably be required to enable the Commission to carry out its responsibilities under this subsection.

(11) AUTHORIZATION OF APPROPRIATIONS- There is authorized to be appropriated such sums as may be necessary to carry out the provisions of this subsection.

(c) REPORTS TO CONGRESS-

(1) REPORT BY THE SECRETARY BASED ON FINAL REPORT OF AVIATION FUNDING TASK FORCE-

(A) CONSIDERATION OF TASK FORCE'S PRELIMINARY REPORT- Not later than 30 days after receiving the preliminary report of the aviation funding task force, the Secretary, in consultation with the Secretary of the Treasury, shall furnish comments on the report to the task force.

(B) REPORT TO CONGRESS- Not later than 30 days after receiving the final report of the aviation funding task force, and in no event more than 1 year after the date of the enactment of this Act, the Secretary, after consulting the Secretary of the Treasury, shall transmit a report to the Committee on Commerce, Science, and Transportation and the Committee on Finance of the Senate, and the Committee on Transportation and Infrastructure and the Committee on Ways and Means of the House of Representatives. Such report shall be based upon the final report of the task force and shall contain the Secretary's recommendations for funding the needs of the aviation system through the year 2002.

(C) CONTENTS- The Secretary shall include in the report to Congress under subparagraph (B)—

(i) a copy of the final report of the task force; and

(ii) a draft bill containing the changes in law necessary to implement the Secretary's recommendations.

(D) PUBLICATION- The Secretary shall cause a copy of the report to be printed in the Federal Register upon its transmittal to Congress under subparagraph (B).

(2) REPORT BY THE ADMINISTRATOR BASED ON FINAL REPORT OF AVIATION SAFETY TASK FORCE- Not later than 30 days after receiving the report of the aviation safety task force, the Administrator shall transmit the report to Congress, together with the Administrator's recommendations for improving aviation safety in the United States.

(d) GAO AUDIT OF COST ALLOCATION- The Comptroller General shall conduct an assessment of the manner in which costs for air traffic control services are allocated between the Administration and the Department of Defense. The Comptroller General shall report the results of the assessment, together with any recommendations the Comptroller General may have for reallocation of costs and for opportunities to increase the efficiency of air traffic control services provided by the Administration and by the Department of Defense, to the Commission, the Administrator, the Secretary of Defense, the Committee on Transportation and Infrastructure of the House of Representatives, and the Committee on Commerce, Science, and Transportation of the Senate not later than 180 days after the date of the enactment of this Act.

(e) GAO ASSESSMENT- Not later than 180 days after the date of the enactment of this Act, the Comptroller General shall transmit to the Commission and Congress an independent assessment of airport development needs.

SEC. 275. PROCEDURE FOR CONSIDERATION OF CERTAIN FUNDING PROPOSALS.

(a) IN GENERAL- Chapter 481 is amended by adding at the end the following:

Sec. 48111. Funding proposals

(a) INTRODUCTION IN THE SENATE- Within 15 days (not counting any day on which the Senate is not in session) after a funding proposal is submitted to the Senate by the Secretary of Transportation under section 274(c) of the Air Traffic Management System Performance Improvement Act of 1996, an implementing bill with respect to such funding proposal shall be introduced in the Senate by the majority leader of the Senate, for himself and the minority leader of the Senate, or by Members of the Senate designated by the majority leader and minority leader of the Senate.

(b) CONSIDERATION IN THE SENATE- An implementing bill introduced in the Senate under subsection (a) shall be referred to the Committee on Commerce, Science, and Transportation. The Committee on Commerce, Science, and Transportation shall report the bill with its recommendations within 60 days following the date of introduction of the bill. Upon the reporting of the bill by the Committee on Commerce, Science, and Transportation, the reported bill shall be referred sequentially to the Committee on Finance for a period of 60 legislative days.

(c) DEFINITIONS- For purposes of this section, the following definitions apply:

(1) IMPLEMENTING BILL- The term `implementing bill' means only a bill of the Senate which is introduced as provided in subsection (a) with respect to one or more Federal Aviation Administration funding proposals which contain changes in existing laws or new statutory authority required to implement such funding proposal or proposals.

(2) FUNDING PROPOSAL- The term `funding proposal' means a proposal to provide interim or permanent funding for operations of the Federal Aviation Administration.

(d) RULES OF THE SENATE- The provisions of this section are enacted—

(1) as an exercise of the rulemaking power of the Senate and as such they are deemed a part of the rules of the Senate and they supersede other rules only to the extent that they are inconsistent therewith; and

(2) with full recognition of the constitutional right of the Senate to change the rules (so far as relating to the procedure of the Senate) at any time, in the same manner and to the same extent as in the case of any other rule of the Senate.'.

(b) CLERICAL AMENDMENT- The table of sections for chapter 481 is amended by adding at the end thereof the following:

48111. Funding proposals.'.


WITNESSES AT THE PUBLIC HEARING ON FUNDING THE FAA

Witness List (Drafted 5/27/97)
Public Hearing #1
National Civil Aviation Review Commission

Hearing Agenda
May 28th, 1997

General Aviation
Panel: Aircraft Owners and Pilots Association Phil Boyer, President
General Aviation Manufacturers Association Ed Boyer, President
Doug Mahin, Raytheon
National Business Aircraft Association John W. Olcott, President
National Air Transportation Association Michael J. Pittard, Chairman
Labor
Panel: National Association of Air Traffic Specialists Gary D. Simms, Executive Director
Professional Airway Systems Specialists Jack Johnson, President
Air Carriers
Panel 1: Coalition for FAA Fair Funding Elliott Seiden, Northwest Airlines
Southwest Airlines Herb Kelleher, Founder, C.E.O.
Air Transport Association of America Ed Merlis, V.P. Govt. Affairs
Panel 2: National Air Carriers Association Edward J. Driscoll, President
Air Carriers Association of America Ed Faberman, Exec. Director
Regional Airline Association Walt Coleman, President
Airline/FAA Collaborative Decision Making Team Michael Wambsganss V.P. Metron
Kevin Kollmann, U.S. Air Airlines
Chris Pear, United Airlines
Airline Dispatchers Federation Michael Nadon, President
Giles Okeefe, Regulatory Affairs
Airports / State & Local Government
Mobile Airport Authority Bay Haas, Executive Director
National Association of State Aviation Officials Henry Ogrodzinski, President
Airports Council International—North America David Plavin, President
Solberg Airport Thor Solberg, Owner

Commission Meeting Agendas:

Monday, April 28th

3:30 Welcome by Chairman Norman Mineta

Self-Introduction of Commissioners

Vice-chair selection

4:15 Welcoming remarks, Secretary Rodney Slater

4:30 Travel Briefing

Tuesday, April 29th

8:45 Federal Budget Process

Presentation by Jack Basso, Deputy Assistant Secretary for Budget, DOT

Overview of federal budget process and aviation revenues and spending. Explanation of different types of spending and why they matter including their implications for budget scoring. Status of aviation trust fund. Impact of balanced budget for aviation spending and discussion of the budget reconciliation process.

10:00 FAA Budget and Issues

Presentation by Monte Belger, Acting Deputy Administrator, FAA

Overview of Federal Aviation Administration Budget. Trends in major accounts. Projected issues and problems if no changes are made to current financing situation.

1:00 Congressional Perspectives on FAA Budget

Presentations by Rich Efford, House Appropriations Committee; David Schaffer, House Transportation Committee; Ann Hodges, Senate Commerce Committee; Dan Corbett, Senate Environment and Public Works Committee; Norah Moseley, House Ways and Means Committee; and Lori Peterson, Senate Finance Committee.

Congressional views on the aviation budget and financing and potential changes.

2:45 FAA Costs

Presentations by Richard Golaszewski, Gellman Research Associates; Dr. Jack Fearnsides, MITRE Corporation, Morgan Kinghorn, Coopers and Lybrand.

Discussion of allocating costs to users of FAA services. Cost allocation models and cost accounting system. Potential cost savings in FAA budget and hurdles to achieving them.

4:30 Commission Business and Next Steps

Thursday, May 15th

8:45 Administrative Matters.

9:00 Status of Air Traffic Control Modernization;

Presentations by Dennis DeGaetano, FAA Deputy Associate Administrator for Research and Acquisitions; John S. Kern, Vice President of Aircraft Operations and Chief Safety Officer, Northwest Airlines & Member of FAA Free Flight Steering Committee.

Issues Associated with Advancing the Schedule of Modernization; Issues Associated with Free Flight.

10:45 Potential for Improving Productivity at the FAA.

Presentations by Jack Fearnsides, MITRE Corporation; Bob Levin, U.S. General Accounting Office; Ron Morgan, FAA Air Traffic Service; Michael McNally, National Air Traffic Controllers Association.

1:15 Overview of Airport Capital Requirements and Financial Investment.

Presentation by Susan Kurland, FAA Associate Administrator for Airports.

2:00 Airport Capital Needs and Finance Issues.

Presentations by Gerald Dillingham, U.S. General Accounting Office; David Plavin, Airports Council International; Tom Browne, Air Transport Association; Will Plentl, Director of Aviation, State of North Carolina.

3:30- 4:45 Perspectives from the Financial Community on Meeting Airport Capital Needs.

Presentations by Richard de Neufville, Professor/Chair, Technology and Policy Program, Massachusetts Institute of Technology; William Reed, Booz, Allen, & Hamilton; Andrea Bozzo, Fitch Investor Services; Robert Aaronson, Airport Group International.

Friday, May 16th

8:30 Conceptual Issues and Economic Principals Associated with User Fees; International Approaches; Potential Methods to Charge Users.

Presentations by Richard Mudge, Apogee Research; Tim Hannegan, U.S. General Accounting Office.

10:00 Real Life Experience with User Fees.

Presentations by John W. Crichton, Chairman of the Board, NavCanada;

Discussion of Food and Drug Administration Performance Fees

Paul Coppinger, Associate Commissioner for Planning & Evaluation, Food and Drug Administration; Matthew B. Van Hook, Assistant General Counsel, Pharmaceutical Research & Manufacturers of America.

11:15 Administration Overview on Balanced Budget Agreement and User Fees.

Presentation by Michael Diech, Associate Director for General Government and Finance, Office of Management and Budget.

Wednesday, May 28th

Public Hearing on Finance

9:30 Opening Remarks

9:45 General Aviation Panel

11:30 Labor

1:15 Air Carriers

3:45 Airports / State & Local Government

Thursday, May 29th

8:30 Presentation on the Military’s Role in the Civil Aviation System by Mr. Frank J. Colson, Executive Director of DoD Policy Board on Federal Aviation and DoD Liaison to the Commission.

9:30 Discussion Among Commission Members about Future Treatment of Aviation Revenues and Programs in the Federal Budget Process and Whether the Commission Should Communicate to Congressional Leaders About Resolving This Issue in the Budget Reconciliation Legislation Now Being Developed.

1:00 Discussion by Commissioners Chip Barclay and Sylvia de Leon on the Baliles Commission Recommendation to Create a Federal Corporation for Air Traffic Control.

1:30 Discussion Among Commission Members about Near, Medium, and Long Term Goals for Improving the Performance of the Federal Aviation Administration with respect to the User/Customers;

How should the user/customers’ role in the decision- making process be strengthened?

What are the public interest considerations that must be preserved if governance were changed to strengthen the user/customers’ role?

Should different agency functions have different forms of user/customer governance relationships?

What should the FAA decision-making structure look like one year, five years, and ten years from now?

To what extent should different decision-making processes replace the current degree of Congressional/Executive Branch involvement in agency funding and investment decisions?

Tuesday, June 3

9:00 Appropriate Level of General Fund Support for the FAA

Should there be general fund support? If so, what proportion of the federal aviation system should be supported by the general fund? Should the general fund support be phased out over a period of time given the overall budget constraints on discretionary spending? Should any general fund support be linked to particular aviation programs?

1:00 Issues Associated with Allocation of FAA Costs Among Users

Should the cost allocation analysis by GRA Research be accepted as an interim basis for determining the percentage of costs the user categories impose on the aviation system and determining revenue needs from each? If not, what analysis should be used or what changes to GRA assumptions need to be made? If so, should Ramsey pricing or proportional use be used to allocate the common and fixed costs among the categories of users?

Wednesday, June 4

Guest "Commissioners": John Olcott, NBAA

Phil Boyer, AOPA

James Coyne, NATA

Ed Bolen, GAMA

9:00 Role General Aviation and Air Taxies Should Play in a Future Financing System

By what method should general aviation and air taxies contribute revenue to the aviation system? Should general aviation and air taxies pay a different share of the total aviation revenue than they do today? Should business general aviation be differentiated from other general aviation for purposes of revenue generation?

Tuesday, June 10

9:00 Update on Budget Reconciliation Actions;

Discussion and Approval of Future Schedule;

General Discussion of Overall Goals of the Commission

in light of Reconciliation Actions.

10:30 Discussion of Financial Requirements and Future Governance.

Discussion with FAA officials:

Monte Belger, Acting Deputy Administrator;

George Donohue, Associate Administrator for Research and Acquisitions;

Cathal ‘Irish’ Flynn, Associate Administrator for Civil Aviation Security;

Peggy Gilligan, Deputy Associate Administrator for Regulation and Certification;

Ruth Leverenz, Director, Office of Financial Services (Budget).

1:00 Continue Discussion of Financial Requirements and Governance (with FAA Officials).

3:00 Conclude on Financial Requirements and Governance

(without FAA Officials).

4:00 Commission Member Bob Frenzel on Cost Allocation Issue.

Wednesday, June 11th

9:00 Continued discussion with FAA officials

Thursday, June 26th

9:00 Presentation by DoD Liaison Frank Colson on FAA Financing and Governance.

10:00 Discussions/Decisions on Airport Improvement Program and

Passenger Facility Charge Options.

1:00 Continuation and Conclusion of AIP/PFC Discussions.

2:15 Presentation and Explanation of Air Carrier Financing Options.

Friday, June 27th

9:00 Break Up into Four Small Groups to Discuss Comprehensive Conceptual Package for Resolution of Financing Issues.

10:45 Small Groups Report Back on Reaction to Comprehensive Conceptual Package.

Wednesday, July 16th

9 am Discussion of Old Business

11 am Borrowing Authority

Presentation by Mozelle Thompson, Department of Treasury

1:15 Airport/Airline Task Force Update

2:30 Innovate Finance/Innovative Management Options

Presentation by John Hennigan, FAA Office of Aviation Policy and Plans

Tuesday, July 29th

9am-4pm Review and Discussion of draft one of the Preliminary Report on Finance.

Wednesday, August 13th

9am-5pm Review and discussion of draft two of the Preliminary Report on Finance.

Thursday, August 14th

9am-5pm Continued review and discussion of draft two of the Preliminary Report on Finance.


Commission Staff

David Traynham Executive Director (U.S. House Aviation Subcommittee)
Paul Feldman Deputy Director ( FAA Deputy Administrator’s Office)

(In alphabetical order)

Linda Brown (FAA, Office of Financial Services)
Adria Garvin (FAA, Regulation and Certification Office)
Randy Fiertz (Coopers & Lybrand)
David Knorr ( FAA, System Development Office)
John Hennigan ( FAA, Office of Policy and Plans)
Charles Huettner ( On detail to NASA from FAA)
Denise Hursey ( FAA, Air Traffic Service)
Catherine Lang ( FAA, Airport Planning and Programming Office)
Steven McBrien (MITRE Corporation)
Donna McLean (U.S. House Aviation Subcommittee)
Sandy McRae (FAA, Flight Standards)
Ava Mims (FAA, Regulation and Certification Office)
Charles Monico (FAA, Office of Policy and Plans)
Michael Reynolds ( U.S. Senate Aviation Subcommittee)
Steve Springmann (FAA, Air Traffic Service Office)
Eric Stults (Department of Transportation Budget Office)
Zelma Thomas (FAA, Human Resources Division)
Margie Tower (Hired for term of Commission, Aircraft Operations, Airports, and Public Administration background)

LETTER SENT TO CAPITOL HILL

The Honorable
Newt Gingrich, Speaker, United States House of Representatives
Richard Gephardt, Minority Leader, United States House of Representatives
Trent Lott, Majority Leader, United States Senate
Thomas Daschle, Minority Leader, United States Senate
Franklin Raines, Director, Office of Management and Budget
Rodney Slater, Secretary of Transportation

Dear_________:

On behalf of the entire National Civil Aviation Review Commission (NCARC), I write to seek your firm commitment for ensuring that aviation revenues and spending are given budgetary treatment and scoring this year in budget reconciliation appropriate to the Federal Aviation Administration’s (FAA) unique operational, safety, and airport capital development mission.

When the NCARC was created by Congress and the Administration, the Commission was mandated in no uncertain terms to provide you with recommendations meeting the following objectives: increasing productivity at the agency and reducing user costs; ensuring an equitable, efficient and flexible revenue structure; linking operational and capital investments to performance-based goals and evaluations; and making certain that FAA has the resources it needs to perform its critical safety, security, and operational activities and to continue investing in airport capital development. We are committed to meeting your mandate, but it has become clear that the current budget treatment of aviation revenues and spending, if left unchanged by budget reconciliation, will make virtually impossible any meaningful implementation of our financial reform and performance improvement recommendations.

The success of our efforts hinges, therefore, on providing aviation’s infrastructure with a dedicated, stable, and adequate source of funding. Specifically, the key ingredient is some type of stand-alone budget formulation connecting revenues, which increase with air travel growth, with the spending and investment to meet that growth. We have enclosed a proposed legislative concept to achieve that
objective. (Nothing in this letter presumes any decision regarding the status of the general fund share of funding the aviation program.)

Without providing the type of budget treatment recommended in this concept, the Commission cannot achieve the objectives of the enabling legislation. This failure will only lead to a crisis in the future of safety, delays, bottlenecks and air traffic gridlock. At that point, it will take more time and resources (measured in years and billions of dollars) to fix than if we succeed with our mandate now. We look forward to working with you on this alternative which we believe is the linchpin for ensuring the success of the Commission.

Sincerely,

Norman Y. Mineta

Chair

Enclosure


REVENUE RECONCILIATION ACT OF 1997 (Senate - June 27, 1997)
AVIATION EXCISE TAX

Mr. McCAIN. Mr. President, I rise to express my concern about actions taken in the reconciliation bills by the Senate Finance and the House Ways and Means Committees to modify the current aviation excise tax structure. Although somewhat different from each other, both of the proposed modifications would increase taxes on airline passengers, and represent significant changes in aviation policy.

Last year, Commerce Committee members worked closely with members of the Ways and Means and Finance Committees, during consideration of the Federal Aviation Reauthorization Act of 1996, to establish the National Civil Aviation Review Commission. The members of this Commission have dedicated themselves to developing a consensus within the aviation industry regarding the appropriate financing mechanism for the Federal Aviation Administration [FAA], and the important safety programs it oversees. Together, the committees empaneled the Commission to consider substantive policy changes to the aviation excise tax formula, and I believe that the Commission should be given every opportunity to do so. The reconciliation bill should not make substantive changes to the tax formula without the benefit of the Commission s work.

Mr. LOTT. Mr. President, I would like to agree with the distinguished chairman of the Commerce Committee, of which I am a member. The work of the National Civil Aviation Review Commission could result in a unique opportunity for an often divided aviation industry to reach a consensus on important funding issues. Congress should not force its will on the industry prematurely.

The Commission is in the process of developing legislative recommendations, and plans to complete its work soon. Unfortunately, the reconciliation process is moving faster than the ability of the Commission to reach a comprehensive solution. The Commission recently wrote to the leadership of both the Senate and House on this issue. We should ensure that the reconciliation bill, or budget rules, do not foreclose the ability to consider the commission recommendations in the future. At that time, we will have a full and fair debate on the recommendations themselves.

Mr. McCAIN. I thank the distinguished majority leader for his insight. I plan to continue to work with him and other members of the Commerce Committee to see that the budget reconciliation bill does not foreclose the opportunity for Congress to implement the Commission recommendations in the future. We must continue our efforts to ensure an adequate and stable funding source for the FAA and the safety programs it oversees.

Mr. DASCHLE. Mr. President, I would like to join my distinguished colleagues, the majority leader, the chairman and ranking member of the Commerce Committee, and the chairman and ranking member of the subcommittee, in expressing concern about the reconciliation bill preempting the work of the National Civil Aviation Review Commission. I appointed two of its members, and I would not like to see its important work undermined before it has had an opportunity to achieve a consensus to a very important issue. I believe that after the recommendations of the Commission have been submitted to Congress, we must give them every consideration.

Mr. HOLLINGS. Mr. President, I, too, would like to join my distinguished colleagues in this discussion. The leadership of the Commerce Committee worked very hard in the Senate and during the Senate-House conference to create this Commission. Congress even provided a substantial appropriation to fund its activities. The work of the Commission is extremely important. I know that my colleagues share my concern that aviation monies are not being used for aviation purposes, and we need to work to correct that. During our Commerce Committee markup recently, I expressed my desire to treat the Airport and Airways Trust Fund differently, and many members indicated that we needed to do something different for aviation.

Mr. GORTON. Mr. President, as chairman of the Aviation Subcommittee, I would like to associate myself with the remarks of the distinguished chairman and ranking member of the Commerce Committee, as well as with those of the majority and minority leaders. An efficient FAA will be crucial if our country is to maintain its role as the world leader in the aeronautical and aerospace industries. The FAA must have adequate resources to transform itself into an efficient and productive agency. The anticipated work of the Commission should provide the Congress with valuable guidance in that respect. The proposed changes to the aviation excise taxes in the reconciliation bill should not be a signal to the commission that its ongoing work is meaningless. I intend to work with the leadership of the Commerce Committee and Senate to ensure that the future recommendations of the Commission are not prejudiced by any actions taken in this reconciliation bill.

Mr. FORD. Mr. President, I would like to add to the thoughtful remarks of my distinguished colleagues. We started the debate over how to fund the FAA last Congress when we first proposed a fee system. Senator McCain and I worked very hard on the bill and the entire committee agreed that we needed a Commission to provide a blueprint for how to fund the FAA. The FAA bill last year restructured the agency and gave the FAA the ability to do some creative things. Now the Commission must give us their
best advice on how to meet the needs of the FAA, or how to cut spending. Those are the dilemmas facing
the Commission. I know all of us share a desire to ensure that the work of the Commission is debated and fully aired.

Mr. McCAIN. I would like to thank the distinguished gentlemen for their remarks. The safety of the flying public and the health of an essential, vital industry are at stake. We must give the Commission a chance to fulfill its statutory mandate.


SELECTED REFERENCE MATERIALS REVIEWED BY COMMISSIONERS

"Air Traffic Control—Status of FAA’s Modernization Program." May, 1995. U.S. General Accounting Office.

"Airport Development Needs—Estimating Future Costs." April, 1997. U.S. General Accounting Office.

Basso, J. April 28, 1997. "FAA Budget and Budget Scoring." Office of the Secretary of Transportation.

Belger, M. April 29, 1997. "Briefing for the National Civil Aviation Review Commission." Acting

Deputy Administrator, Federal Aviation Administration.

Browne, T.J. May 15, 1997. "Remarks by Thomas Browne to the NCARC" Air Transport Association of America.

Browne, T.J. May 15, 1997. " ATA White Paper: Airport Capital Requirements" Air Transport Association.

Browne, T.J. May 15, 1997 " Airport Capital Needs and Available Resources." Air Transport Association of America.

"Budget in Brief— FY1998." 1997. Federal Aviation Administration.

Colson, F.J. June 26. "DOD Thoughts on FAA Governance and Financial Reform." U.S. Department of Defense.

Colson, F.J. May 29, 1997. "Department of Defense Policy Board on Federal Aviation Presentation." U.S. Department of Defense.

Crichton, J. May 16, 1997. "Serving a World in Motion." Nav Canada.

Crichton, J. May 16,1997. "Remarks by John W. Crichton, Chairman of the Board Nav Canada. " Nav Canada.

De Gaetano, D. May 15, 1997 "NAS Modernization ." Office of Acquisition and Research, Federal Aviation Administration.

De Neufville, R. May 15, 1997. "Efficiency and Public Interest in Airport Financing— an International Perspective on U.S. Success, with Suggestions for Improvement." Technology and Policy Program, MIT.

Dillingham, Gerald, May 15, 1997 " Airport Development Needs: Estimating Future Costs." U.S. General Accounting Office.

"1995 Federal Aviation Administration Annual Report" Spring, 1996. Federal Aviation Administration.

"1996 Federal Aviation Administration Strategic Plan." January 25, 1996. Federal Aviation Administration.

"FAA Aviation Forecasts, Fiscal Years 1997-2008." March, 1997. Office of Aviation Policy and Plans, Federal Aviation Administration.

"FAA Comments on Coopers & Lybrand Independent Financial Report." February 27, 1997. Associate Administrator for Administration, Federal Aviation Administration.

"FAA Independent Financial Assessment." February 28, 1997. Coopers and Lybrand L.L.P.

Fearnsides, J. J. May 15, 1997 "Air Traffic Controller Productivity." MITRE

Fearnsides, J.J. April 29,1997. "Introduction to FAA Financial Reform Issues." MITRE

"Final Report of RTCA Task Force 3— Free Flight Implementation." October 26, 1995. RTCA, Inc.

"Final Report to President Clinton" February 12, 1997. White House Commission on Aviation Safety and Security.

"Free Flight Action Plan." August 15, 1996. RTCA, Inc.

Golaszewski, R. April 29, 1997. "Cost Allocation and Financing Briefing to National Civil Aviation Review Commission." Gellman Research Associates, Inc.

Golaszewski, R. February 3, 1997. " User Fee Presentation Attachments" Gellman Research Associates, Inc.

Golaszewski, R. April 7, 1997. " GRA Completes FAA Cost Allocation Study" (Fact Sheet) Gellman Research Associates, Inc.

Kern, J.S. May 15,1997 " A Free Flight Air Traffic Management System." Aircraft Operations, Northwest Airlines.

Kurland, S. May 15, 1997 " Airport Capital Requirements." Airports, Federal Aviation Administration.

Kurland, S. May 15, 1997 "Airport Improvement Program and PFCs." Airports, Federal Aviation Administration.

Levin, B. May 15, 1997 "Relationship Between FAA’s Productivity and its Organizational Culture." U.S. General Accounting Office.

Mc Nally, M. May 15, 1997 " Air Traffic Controller Productivity." National Air Traffic Controller Association.

Morgan, R.E. May 15, 1997 "Productivity, Getting the Job Done." Air Traffic Control, Federal Aviation Administration.

Mudge, R. May 16, 1997. "Economic Principles Associated with User Fees." Apogee Research, Inc.

"Organizational Transformation at the FAA." May 9, 1997. Arthur Andersen & Co.

"Performance Based Organizations—a Conversion Guide" April, 1997. National Performance Review.

Plavin, D.Z. May 15, 1997. " 1996 U.S. Airport Capitol Development Needs Survey and Financing Issues." Airports Council International—North America and American Association of Airport Executives.

Reed, W. May 15, 1997. "Funding Capital Requirements of U.S. Airports." Booz, Allen, and Hamilton.

Staff, National Civil Aviation Review Commission. White Paper #1: Budget Treatment Issues for FAA Funding Options; Cost Allocation; Financing the FAA: Comparisons of Existing and Alternative Systems to Provide Funding for Development and Operation of the National Airspace System.

Staff, National Civil Aviation Review Commission. White Paper #2: FAA Financial Requirements; Potential Cost Savings Ideas for FAA and Users; Airport Development Needs and Financing Options.

Van Hook, M.B. May 16, 1997. "Industry Perspectives on FDA User Fees." Pharmaceutical Research and Manufacturers of America.


SPECIAL ACKNOWLEDGMENTS:

We would like to thank the following people for their assistance to the Commission.

Mr. Preston Atkins Department of the Treasury
Ms. Sharon Barkeloo Office of Management and Budget
Mr. Jonathan Ball Office of Management and Budget
Mr. Peter J. Basso Office of the Secretary of Transportation
Mr. Jack Bennett Office of the Secretary of Transportation
Ms. Michelle Brune Federal Aviation Administration
Ms. Brannen Chamberlain Lockheed-Martin
Mr. Giovanni Carnaroli Federal Aviation Administration
Ms. Rochelle Claypoole Federal Aviation Administration
Ms. Arlene Draper Federal Aviation Administration
Mr. Robert Fenton TRW
Mr. Gerald G. Froelke Federal Aviation Administration
Dr. Jonathan Hoffman MITRE
Mr. Tom Herlihy Office of the Secretary of Transportation
Ms. Elena Loboda Federal Aviation Administration
Ms. Jacquelyn Lowey Department of Transportation
Ms. Louise Maillett Federal Aviation Administration
Ms. Michelle Nadeau TRW
Ms. Beverly Pheto Office of the Secretary of Transportation
Dr. William Trigeiro MITRE
Ms. Mary Catherine Nee MITRE