FAA Reauthorization Mostly a Bad Deal for Taxpayers

Earlier this week, The U.S. House of Representatives passed H.R. 302 to reauthorize the Federal Aviation Administration (FAA) program through 2023. The final legislation is a mixed bag for taxpayers; while it didn’t increase fees and taxes or allow for price controls, it did fail to include reforms to the Air Traffic Control (ATC) system and to wasteful taxpayer-funded programs in desperate need of improvement. Worse yet, the FAA bill was stuffed with provisions that were not even germaine to the air transportation system and included no CBO cost study to gauge the full effects it would have on taxpayers and the growing federal budget.

Taxpayers will be disappointed to know H.R. 302 did not include any comprehensive reform to the ATC system, which is a big missed opportunity on the part of lawmakers. As we have noted, the FAA has struggled to implement the Next Generation Air Transportation System (NextGen) to modernize the outdated ATC system. Bureaucratic management of the program has been plagued by inefficiency, cost overruns, and delays - all of which are to be expected by a government agency. One free-market solution is to transfer control of the ATC system to a non-profit entity funded by user-fees instead of tax dollars. Such an entity would be far more capable of delivering improvements in an innovative, timely, and cost effective manner. It appears that the likelihood of any pragmatic reform will be sidelined until the FAA comes back up for reauthorization in 2023.

H.R. 302 unfortunately reauthorizes the wasteful Essential Air Service (EAS) program. The EAS program provides subsidies to commuter and regional airlines in order to provide service to rural airports that are not economically viable absent federal subsidies. In other words, taxpayers foot the bill for airline tickets for passengers in small markets. Though the EAS was only intended to last for ten years, until 1988, like many other wasteful federal programs, entrenched political interests has kept the program alive well past its sell by date. And instead of keeping the funding constant at $155 million as it is for FY18, H.R. 302 actually gradually increases the funding to $172 million in 2023. NTU constantly calls for the elimination of the program and was a recommendation for deficit reduction in the 2017 “Common Ground” report, a joint project by NTU’s research arm and U.S. Public Interest Research Group.

Further, taxpayers should be concerned that the reauthorization expands the State Block Grant Program from 10 states to 20 states and increases the size of a taxpayer-funded federal program.

It wasn’t all bad news though. Thankfully lawmakers omitted the “Forbid Airlines from Imposing Ridiculous Fees Act of 2017,” better known as the FAIR Fees Act. This misguided legislation, sponsored by Senator Ed Markey (D-MA), would have given the Department of Transportation the power to determine what constitutes a “reasonable” fee for ticket changes, cancellations, baggage, and seat selection. While proponents argued that such legislation would benefit consumers, in reality it would directly harm them. The results will be the same as they have for any good or service subject to price controls: the commodity will become scarcer, or the price “balloon” will be squeezed to affect something else.

As a defender of taxpayer and consumer interests, NTU strongly opposed efforts to include FAIR Fees Act in the FAA reauthorization legislation. That is why earlier this month NTU led a letter signed by nine other free market, pro-taxpayer groups to the House Transportation Committee and Senate Commerce Committee highlighting our concerns. From our letter, we wrote:

Allowing Washington to re-regulate airfare pricing through schemes like the FAIR Fees Act would turn back the clock four decades to a time when only better-off Americans could afford to fly. It would also send a signal that pro-market reforms in other segments of transportation could come under attack. We therefore urge your committees to keep the FAIR Fees Act out of the FAA Reauthorization Bill, as well as any future legislation.

Lawmakers should continue to look for ways to reduce burdens on taxpayers and air travelers. Misguided attempts to place the government between carriers and travelers will backfire, leaving consumers with higher ticket costs and a less favorable experience. As we have seen since the deregulation of the airline industry, it is less government, not more government, that will ensure an affordable and efficient market for all.