The Honorable Tom Cole, Chairman
The Honorable Jim McGovern, Ranking Member
Committee on Rules
U.S. House of Representatives
H-312, The Capitol
Washington, DC 20515
Dear Chairman Cole, Ranking Member McGovern, and Members of the Committee:
On behalf of the National Taxpayers Union (NTU), America’s oldest national taxpayer advocacy organization, I write to offer our views on H.R. 3935, the “Securing Growth and Robust Leadership in American Aviation Act,” as the Committee prepares to meet on rules for floor action and amendments.
NTU has had an abiding interest in the impact of aviation policy on taxpayers since its founding in 1969, including issues that have ranged from federal support for development of the Super Sonic Transport, to more recent debates over transitioning the fiscally troubled air traffic control (ATC) system toward the user fee-based model that is more common to industrialized nations.
NTU remains concerned that the federally-directed NextGen ATC project, well behind schedule and over budget, can better deliver on its promises than a more robust user-driven arrangement could provide. Nonetheless, this Committee must focus on the incremental changes being offered to the underlying bill, rather than wholesale restructuring of the legislation that has been reported unanimously from the Transportation and Infrastructure Committee.
Therefore, NTU offers the following observations on amendments to H.R. 3935, as you deliberate which shall be made in order for floor consideration.
Amendment #313 (Rep. Massie, R-KY) – Oppose. This amendment is listed first in our communication because, in our opinion, it is the most consequential offered so far. The latest version of the proposal would nearly double the permissible level of the airport Passenger Facility Charge (PFC) from $4.50 to $8.50; local government airport authorities choosing a PFC of more than $6.00 would not be eligible for Airport Improvement Program (AIP) funds.
While the PFC has often been described as a “user fee”, and the amendment would appear to reduce federal grant outlays, as NTU has previously noted in several prior communications, the impact of this change would be much more complicated.
- Some argue that the current PFC of up to $4.50 per enplanement (or up to $18 per round-trip) has lost inflationary value since that level was set more than 20 years ago. Yet, PFC collections are surging since the end of the pandemic toward $3.5 billion this year; since 2000, per-passenger airport revenues have risen at more than double the rate of inflation. Congress has likewise voted more funds for airports in legislation such as the Infrastructure Investment and Jobs Act.
- On May 7, 2019, less than a year before the pandemic hit the travel industry, four low-cost airlines of the National Air Carrier Association carriers warned the Committee on Transportation and Infrastructure against a similar PFC increase plan, writing that “Increasing the PFC will not enable more airline competition. To the contrary, it will erode the savings [Ultra Low Cost Carriers] are able to offer over legacy carriers ….” Members concerned about promoting more choice and competition among airlines should take note of this concern today as well.
- Under current policy, large and medium sized airports forfeit up to 75 percent of their AIP funding if they are recipients of a PFC above a certain level. Unfortunately, taxpayers do not necessarily benefit from this exchange -- the “lost” AIP grants are not refunded to customers who pay them, but are simply made available for other airports that qualify. Under this amendment, the amount of AIP funds from a 100 percent forfeiture would be dwarfed by the revenue potential from a nearly doubled PFC. NTU has yet to see a viable plan that would phase out other forms of federal support for airports and truly offset the rise in current PFC revenues -- let alone offset a legislated PFC hike. Again, the net result is a loss for taxpayers.
- The PFC’s very design works to dampen the positive impact that market forces could have in keeping costs reasonable for passengers. The PFC is administered by the federal government, collected by the airlines, but ultimately remitted to airports. A more market-responsive “user fee” would be levied by airports themselves through technologies such as ticket kiosks, so that customers could more directly hold them accountable for rates and services.
In 2020, Members of Congress were given early access to a 215-page RAND Corporation report on PFC options commissioned by the Department of Transportation. Initially thought to be a rubber-stamp for a PFC increase, the RAND report actually contained numerous cautionary notes. On page 164, for example, is this: “Under current law, airport sponsors that manage multiple airports can use PFC funds collected at one of their airports to pay for projects at another of their airports. This occurs rarely, but it challenges the notion that PFCs are a user fee.” (Emphasis added.) The RANDstudy also noted expert opinions at the time that Canada’s uncapped passenger airport charges, sometimes exceeding $19 US (at current rates), may have actually been “deterring air travel.” Would a PFC in the United States of $34 per passenger have a similar effect? Quite possibly, since middle-class air travelers are already likelier to pay a far higher effective tax rate – 20 percent or more – on an airline ticket than they do on their 1040 income tax return.
If Congress intends to make such a sweeping change to aviation policy on a bipartisan bill that passed its authorizing body 63-0, many more discussions beyond Amendment #313 must take place. These include whether to modify or repeal the Anti-Head Tax Act, which could, under certain circumstances, provide a better design for airport charges than PFCs. ATC reform, wholesale regulatory revisions to benefit airports, and AIP restructuring, should likewise be considered. For all these reasons, Amendment #313 is best tabled.
Other Amendments NTU Opposes. While not as massive in their impact, the following amendments are also of serious concern to taxpayers, and should not be allowed in order.
Amendment #12 (Rep. Garamendi, D-CA) – Oppose. This would align aviation construction and procurement with the Infrastructure Investment and Jobs Act’s “Build America, Buy America” rules – a protectionist approach that will raise building and services costs, ultimately passed along to consumers. NTU has opposed this approach in many settings besides aviation.
Amendment #58 (Rep. Garcia, D-Il) – Oppose. This would set minimum wage or prevailing wage requirements for workers at all airports receiving federal funds. Ironically, this would either raise airports’ overhead costs, reduce employment opportunities at airports (or both), making their financial condition worse and contributing to political pressure to increase PFCs.
Amendment #169 (Rep. Schakowsky, D-IL) – Oppose. This would reverse the progress made in the bill’s text toward allowing travelers to better understand in advertisements the component of their airfare attributable to taxes, by requiring ads to show only the “all-in” price. As NTU noted nearly 10 years ago in a letter concerning the “Transparent Airfares Act,” “[w]ith a few exceptions, consumer goods are typically advertised at a base price with taxes and fees added at the point of purchase. Forcing an industry to deviate from this norm has less to do with any perception of ‘fairness’ and more to do with hiding the true cost of overly burdensome taxes.”
Amendments #258 (Rep. Huffman, D-CA) and #287 (Rep. Smucker, R-PA) – Oppose. These would, respectively, reduce local cost-sharing requirements as well as expand authority to provide additional service under the Essential Air Service (EAS) program. NTU has long expressed reservations about EAS, whose tens of millions in annual taxpayer subsidies are inefficient and ill-targeted.
Amendments NTU Supports. We urge the Committee to make the following pro-taxpayer amendments in order; they deserve bipartisan support.
Amendment #52 (Rep. Thompson, D-MS) – Support. This would prevent the diversion of the aviation security fees passengers currently pay to non-passenger screening purposes. Reducing federal deficits is vital, but fee diversion to offset other unrelated spending undermines transparency and accountability in budgeting.
Amendment #251 (Rep. Hageman, R-WY) – Support. This would encourage greater utilization of life-cycle cost analysis (LCCA) in FAA equipment acquisitions. NTU has endorsed the LCCA concept for a variety of infrastructure applications.
Amendment #283 (Rep. Moylan, R-GU) – Support. This would remove Guam from costly Jones Act shipping restrictions, thereby making goods, services, and raw materials more affordable. NTU has commented extensively on the need for Jones Act reform.
Amendment #314 (Rep. Good, R-VA) – Support. This would require Congress to approve any “major” FAA rule with an impact above $10 million. NTU has supported similar reforms across numerous government agencies.
Amendment #328 (Rep. McClintock, R-CA) – Support. This would strike authorization for the Essential Air Service program (for further details on NTU’s position, see #258 above).
NTU may issue subsequent communications on H.R. 3935 as more information on rules and amendments surrounding the legislation becomes available. As the Rules Committee continues its deliberations, we are at your service should you have any questions. Thank you for your consideration.
Sincerely,
Pete Sepp
President