Public Affairs Resources

The following is a summary of the current Airport Improvement Program (AIP) and the Aviation Trust Fund issued March 4, 1999 by the House Committee on Transportation and Infrastructure upon introduction of its proposed FAA reauthorization legislation.

Summary of AIR-21

This summary provides background information on existing collection and distribution breakdowns of Aviation Improvement Program (AIP) funds and the Aviation Trust Fund. This information is NOT reflective of the proposed AIR-21 legislation.

The Airport and Aviation Trust Fund, and therefore the AIP, is currently funded through the following taxes on aviation users:

• 8% passenger ticket tax (decreasing to 7.5% by 2000);
• $2 passenger flight segment fee (increasing to $3 by 2002)
• 6.25% freight waybill tax;
• $12 international departure and arrival taxes;
• 7.5% frequent flyer award tax; and
• Aviation fuel taxes as follows:
• 4.3 cents per gallon on commercial aviation;
• 19.3 cents per gallon on general aviation gasoline; and
• 21.8 cents per gallon on general aviation jet fuel.

For rural airports (those with less than 100,000 passengers) the passenger ticket tax is 7.5% and there is no passenger flight segment fee.

There are more than 18,000 airports in the U.S. but only 3,304 are eligible for Federal funding under the Airport Improvement Program (AIP).

Money for this program is distributed by formulas that are set forth in the law. These formulas are described below.

The law divides AIP money into two broad categories: entitlement funds and discretionary funds. Entitlement funds are further divided into four sub-categories. They are:

• Primary airport entitlements;
• Cargo airport entitlements;
• State entitlements; and
• Alaskan airport entitlements.

Primary airports. If a public airport has commercial air service with at least 10,000 passenger boardings per year, it is considered a primary airport. These airports are entitled to receive AIP money each year in accordance with the following formula:

• $7.80 for each of the first 50,000 passengers boarded;
• $5.20 for each of the next 50,000 passengers boarded there;
• $2.60 for each of the next 400,000 passengers boarded; and
• 50 cents for each additional passenger boarded.

Regardless of the number of passengers boarded, the minimum entitlement is supposed to be $500,000 per year and no primary airport is entitled to more than $22 million per year.

Large and medium hub airports that choose to collect a passenger facility charge (PFC) receive only half their entitlement.

To receive the money, an airport must have a project, such as a runway, terminal, or noise abatement project, that is eligible for AIP funding under the law. An airport can retain the right to receive its entitlement money for 3 years. Entitlement money deferred to a later year is referred to as carryover entitlements.

There are 428 primary airports.

Cargo entitlement. Cargo service airports are airports that are served by cargo-only (freighter) aircraft which all together weigh more than 100 million tons and other airports that DOT finds will be served primarily by freighter aircraft. These airports are entitled to share in a pot of money that equals 2.5% of total AIP funds. A cargo service airport shares in this pot in the proportion to which the total weight of cargo-only aircraft landing there is to the total weight of such aircraft at all other airports. No airport may receive more than 8% of this 2.5%.

102 airports qualify for this entitlement.

State entitlement/general aviation. The States, territories, and possessions share in a pot of money that is equal to 18.5% of total AIP funds. Each State share of this pot is based on a formula that takes into account the population and land area of the State. Money from this entitlement goes to general aviation airports (airports used by private planes) and to airports with less than 10,000 passengers per year.

General aviation airports that are seeking AIP money from this entitlement usually apply directly to the FAA. Some States require their airports to channel their AIP applications through the State aviation agency. The FAA then decides which airports will get the money. Nine States (Illinois, Michigan, Missouri, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin) participate in the State Block Grant program. Under this program, the FAA gives the State aviation agency complete responsibility to manage its AIP allocation and the State, not the FAA, decides which general aviation airports will receive it.

Alaska entitlement. By law, Alaskan airports are entitled to receive at least the same amount of money that they received in 1980. This year, they will receive about $10.5 million. The $10.5 million is in addition to whatever those airports will receive under the above entitlements.

Any money left over after the above entitlements are funded can be spent by the FAA at is own discretion. However, this discretionary fund is subject to two set-asides.

Noise set-aside. The law sets aside 31% of this discretionary fund for noise projects. These could include such things as buying property for a noise buffer or sound-proofing buildings.

Military airports. Under the military airport program, FAA selects 12 current or former military airports to share in a set-aside that is equal to 4% of the discretionary fund. The purpose of this program is to increase overall system capacity by promoting joint civilian-military use of military airports or by converting former military airports to civilian use.

Airports currently in the military airport program (MAP) are Myrtle, Laredo, Smyrna, Pease/ Portsmouth, San Bernadino/Norton, Austin-Bergstrom/ Mueller, Homestead AFB, Millington/Memphis, Williams AFB in Arizona, Alexandria/ England AFB in Louisiana, Rickenbacker/ Columbus, and Sawyer AFB.

Pure discretionary. After the entitlements and set-asides are funded, the remaining money can be spent as the FAA sees fit. This is often referred to as pure discretionary AIP money. Even here, however, there are restrictions. The law requires that 75% of this discretionary money be spent on airport projects that will enhance capacity, safety, or security, or reduce noise.

Minimum discretionary. Until recently, total AIP funding had been declining. At the same time, FAA has been issuing letters of intent (LOIs) to several airports. An LOI is a commitment to pay a certain amount of AIP money to an airport over a specified number of years in order to fund an important project. These commitments are predominantly funded from the discretionary portion of AIP. $159.5 million is committed to LOIs this year.

In the past, as the overall AIP program declined, much of the money was allocated to the entitlements and set-asides. This left little discretionary money and prompted concerns that the FAA would be unable to meet its LOI commitments or fund other important projects from the discretionary fund.

As a result, the law mandates that the discretionary fund have at least $148 million per year plus the amount needed to fund outstanding letters of intent issued before January 1, 1996. If the above-described entitlement and set-aside formulas would not leave at least that amount in the discretionary fund, all entitlements and set-asides must be cut by a proportionate amount. In the past, this has resulted in across the board cuts in entitlements and set asides of as much as 23% to ensure a minimum discretionary fund. With the higher funding levels this year, such cuts were not necessary.

As a corollary to the minimum discretionary fund, the law states that if total AIP funding is high enough so that the discretionary fund is more than the statutory minimum, any amount in that fund above the minimum would be divided 1/3 to general aviation airports, 1/3 to military airports, and 1/3 to noise abatement programs.

Last year, total AIP money was high enough so that the discretionary funds statutory minimum was exceeded. However, the Appropriations Act blocked the additional money for military airports and noise abatement programs. However, it did allow an additional $29.9 million to be spent on general aviation airports.

As a general rule, the Federal share of an AIP project cost is 90%. However, at medium and large hub airports (defined as airports that enplane .25% of the total annual enplanements in the U.S.) the Federal share is 75%. In the case of a project involving an airport terminal building, the Federal share is 85% at non-hubs (defined as airports with .05% or less of the total annual enplanements in the U.S.) and 75% at hubs.

CURRENT PASSENGER FACILITY CHARGE

In 1990, the Committee became concerned that the AIP program would not be able to meet the future infrastructure needs of U.S. airports. Consequently, the 1990 AIP reauthorization law permitted an airport to assess a fee on passengers. This is known as the passenger facility charge (PFC). PFCs are collected by the airlines and paid directly to the airport without going through the Federal treasury. They are intended to supplement AIP by providing more money for runways, taxiways, terminals, gates and other airport improvements.

No airport may charge a PFC of more than $3 per passenger and no passenger has to pay more than $12 in PFCs per round-trip regardless of the number of airports through which the passenger connects. No airport can charge a PFC until FAA approves it.

FAA has approved PFCs at 287 airports and 268 are actually collecting money. The total approved collections are over $17 billion for 1998.

According to the FAA, in 1996, the $1.1 billion in PFC funds were authorized, as follows:

• 35% for airside projects such as runways, taxi-ways and safety related projects;
• 30% for landside projects, primarily terminal buildings;
• 17% to pay interest on bonds;
• 11% for noise abatement projects; and
• 6% for roads.

If a medium or large hub airport charges a PFC, it must forego up to 50% of its AIP entitlement. The foregone entitlements go into a special small airport fund to be distributed as follows:

• 50 % to non-hub airports;
• 25% to general aviation airports
• 12.5% to small hub airports; and
• 12.5% to the discretionary fund.

FAA has discretion to decide which airports within the above categories will receive the grants.

From the standpoint of the type of project, according to the FAA, during the fiscal years between 1982 and 1996, the AIP money was spent as follows:

• 52.76% for runways; taxiways; and aprons;
• 11.2% on noise control projects;
• 7.82% for land purchases;
• 6.03% on safety and security;
• 5.2% on buildings;
• 4.78% on airport roads; and
• the remainder on miscellaneous projects such as lighting and planning.

From the standpoint of airport size, according the General Accounting Office (GAO), in 1997, AIP money was distributed as follows:

• 25% to the 2,764 general aviation airports;
• 24% to the 29 large hub airports;
• 17% to the 42 medium hub airports;
• 16% to the 70 small hub airports; and
• 19% to the 272 nonhub airports.

It should be noted that the reference to hubs here and elsewhere refers to the number of passengers at that airport, not to whether an airline uses the airport as a connecting complex. More specifically –

• Large hubs are airports that enplane more than 1% of the total annual enplanements in the U.S. (more than 6.4 million passengers per year) and include such airports as Chicago, Atlanta, Baltimore, and Tampa;
• Medium hubs are those that enplane more than .25% but less than 1% of annual enplanements in the U.S. (1.6 to 6.3 million passengers) and include such airports as, Cleveland, Providence, Tulsa, and Portland, Oregon .
• Small hubs enplane more than .05% but less than .25% of annual enplanements (324,000 to 1.6 million passengers) and include Buffalo, Norfolk, Birmingham, and Green Bay.
• Non-hubs enplane more than 10,000 passengers but less than .05% of U.S. annual enplanements and includes Akron, Moline, Topeka, and Visalia.