[Senate Hearing 109-501]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-501
 
FY 2007 FEDERAL AVIATION ADMINISTRATION (FAA) BUDGET AND THE LONG-TERM 
         VIABILITY OF THE AIRPORT AND AIRWAY TRUST FUND (AATF)

=======================================================================

                                HEARING

                               before the

                        SUBCOMMITTEE ON AVIATION

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 28, 2006

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation




                    U.S. GOVERNMENT PRINTING OFFICE
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       0SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                     TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona                 DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana                    Chairman
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
JIM DeMINT, South Carolina           FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana              E. BENJAMIN NELSON, Nebraska
                                     MARK PRYOR, Arkansas
             Lisa J. Sutherland, Republican Staff Director
        Christine Drager Kurth, Republican Deputy Staff Director
             Kenneth R. Nahigian, Republican Chief Counsel
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
   Samuel E. Whitehorn, Democratic Deputy Staff Director and General 
                                Counsel
             Lila Harper Helms, Democratic Policy Director
                                 ------                                

                        SUBCOMMITTEE ON AVIATION

                    CONRAD BURNS, Montana, Chairman
TED STEVENS, Alaska                  JOHN D. ROCKEFELLER IV, West 
JOHN McCAIN, Arizona                     Virginia, Ranking
TRENT LOTT, Mississippi              DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas          BYRON L. DORGAN, North Dakota
OLYMPIA J. SNOWE, Maine              BARBARA BOXER, California
GORDON H. SMITH, Oregon              MARIA CANTWELL, Washington
JOHN ENSIGN, Nevada                  FRANK R. LAUTENBERG, New Jersey
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        E. BENJAMIN NELSON, Nebraska
JIM DeMINT, South Carolina           MARK PRYOR, Arkansas


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 28, 2005...................................     1
Statement of Senator Burns.......................................     1
Statement of Senator Inouye......................................     2
    Prepared statement...........................................     2
Statement of Senator Lautenberg..................................    44
    Prepared statement...........................................    44
Statement of Senator Pryor.......................................    40
Statement of Senator Stevens.....................................     3

                               Witnesses

Blakey, Hon. Marion C., Administrator, Federal Aviation 
  Administration.................................................     4
    Prepared statement...........................................     7
Dillingham, Gerald L., Ph.D., Director, Physical Infrastructure 
  Issues, U.S. Government Accountability Office..................    26
    Prepared statement...........................................    27
Zinser, Todd J., Acting Inspector General, Department of 
  Transportation.................................................    12
    Prepared statement...........................................    14

                                Appendix

Response to Written Questions Submitted by Hon. Daniel K. Inouye 
  to Hon. Marion C. Blakey.......................................    51
Response to written questions submitted by Hon. Frank R. 
  Lautenberg to:
    Hon. Marion C. Blakey........................................    54
    Gerald L. Dillingham, Ph.D...................................    59
    Todd J. Zinser...............................................    58


                       FY 2007 FEDERAL AVIATION 
ADMINISTRATION (FAA) BUDGET AND THE LONG-TERM VIABILITY OF THE AIRPORT 
                      AND AIRWAY TRUST FUND (AATF)

                              ----------                              


                        TUESDAY, MARCH 28, 2006

                               U.S. Senate,
                          Subcommittee on Aviation,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:05 a.m. in 
room SD-562, Dirksen Senate Office Building, Hon. Conrad Burns, 
Chairman of the Subcommittee, presiding.

            OPENING STATEMENT OF HON. CONRAD BURNS, 
                   U.S. SENATOR FROM MONTANA

    Senator Burns. We'll call the Committee to order this 
morning. And we're sorry, we probably told you the wrong place. 
But, thank you for coming this morning.
    I want to thank the panel for joining us today. This 
hearing is to kick off the oversight on the FAA reauthorization 
hearings scheduled for this year.
    I'd like to start by wishing my good friend and Ranking 
Member, Senator Rockefeller, a quick recovery. He's in the 
hospital having minor back surgery. And I've been told there's 
no such thing as minor back surgery, so we wish him well. And, 
of course, his staff is here, and very capable staff, and we 
look forward to his return.
    Today, we'll review the Fiscal Year 2007 Federal Aviation 
Administration budget request, and also take a look at the 
long-term viability of the Airport and Airway Trust Fund, 
commonly known as the Aviation Trust Fund.
    The budget request for Fiscal Year 2007 is $13.7 billion, 
which is $562 million less than that enacted in 2006. This 
represents a serious cut to all portions of the FAA budget, 
except the operations account. And I don't think I'm alone when 
I say there are members of this Subcommittee that are very 
concerned about some of the programmatic cuts proposed in the 
budget. Of special concern are the massive cuts in the AIP, or 
the Airport Improvement Fund. I find it very shortsighted to 
cut rural airport funding at a time when aviation is seeing 
record numbers of passengers and projected traffic numbers. 
Everywhere I go I ask controllers, I ask pilots about 
conditions. They indicate number increases in passengers and 
also an increase in traffic. It is a very, very real thing. To 
compound that, the AIP proposal is about a billion dollars 
below the level this Committee authorized for the program. This 
Committee has consistently tried to provide infrastructure 
funding, only to see it carved up by a budget proposal.
    This budget leaves me a little concerned that the current 
budgetary environment of the FAA will not have the funds 
necessary to plan for the next generation of air traffic 
management systems. Modernizing the new system is going to take 
innovation, spending control, and planning. And I'm afraid 
we're not moving quickly enough or properly funding our 
aviation system.
    Modernizing our system will be the primary goal of the next 
FAA reauthorization bill. Modernization means we will need to 
take a serious look at the future of the Aviation Trust Fund. 
Currently, the Trust Fund revenues are increasing, but they 
will not be able to sustain us in our modernization plans. And 
I think that's the question the FAA will soon have to answer, 
working with Congress. Is the Trust Fund providing the revenues 
necessary for true modernization and infrastructure growth of 
our system.
    Again, I want to thank the panel for coming today. And now 
I turn to my good friend from Hawaii, Senator Inouye, welcome, 
sir.

              STATEMENT OF HON. DANIEL K. INOUYE, 
                    U.S. SENATOR FROM HAWAII

    Senator Inouye. Why, thank you very much, Mr. Chairman. I 
don't know what I can add to your statement.
    Senator Burns. Senator Stevens?
    Senator Inouye. I do have a full statement----
    Senator Burns. Oh, I'm sorry.
    [Laughter.]
    Senator Inouye. I just want to make it part of the record.
    Senator Burns. Oh, you want to make the statement part of 
the record.
    Senator Inouye. Yes.
    Senator Burns. Well, I appreciate your courtesy.
    [The prepared statement of Senator Inouye follows:]

    Prepared Statement of Daniel K. Inouye, U.S. Senator from Hawaii
    The Federal Aviation Administration's (FAA) 2007 budget 
demonstrates a startling lack of vision. The Nation's air passenger and 
cargo traffic is expected to triple over the next 20 years, yet 
remarkably, the budget does little to prepare for that enormous 
increase. This Administration has never been particularly adept at 
planning ahead, and the FAA budget is just the latest example.
    In fact, the FAA's budget proposes nearly $1 billion in cuts to the 
Airport Improvement Program (AIP), the grant funding source for capital 
improvements and safety projects at U.S. airports. In other words, it 
cuts the resources specifically designated to help our airports 
accommodate the rapidly growing demand. At the proposed levels, major 
airports across the country would see a more than one-third reduction 
in their annual capital funding and small airports would have their 
funding eliminated.
    The Administration contends that this budget supports development 
of the Next Generation Air Transportation System, the centerpiece of 
the FAA's modernization plan. However, according to the Department of 
Transportation Inspector General's analysis, the FAA's budget will only 
sustain the current system and will not support the integration of any 
new technology.
    Each one of us is on a plane every week. We speak to the airport 
directors in our states regularly. We know quite clearly what they are 
up against, and we experience it first hand. This FAA budget does not 
even begin to reflect the challenges our system is facing.
    Additionally, as we are all aware, the Nation's economic 
competitiveness has elevated to the top of the Committee's agenda over 
the last year. Aviation infrastructure and aerospace research have been 
key competitive advantages for the U.S. Our aviation system's safety 
and efficiency have made it the envy of the world, and our advanced 
aerospace research has allowed us to stay ahead of our global 
competitors.
    Those advantages are eroding, and we are in real danger of losing 
our position as the world's leader in aviation and aerospace. Not only 
is our air traffic system becoming overcrowded, the controllers who 
help guide our planes are beginning to retire in large numbers, and we 
do not, as of yet, have adequate replacements. Similarly, the proposed 
cuts to aerospace research demonstrate that the FAA is willing to cede 
our traditional advantage and renowned expertise.
    In passing Vision 100, several years back, we provided a blueprint 
for you to meet future challenges. This budget suggests that you are 
not following it.
    Making matters worse, the FAA has yet to negotiate an agreement 
with the air traffic controllers. I would like to see the parties 
resolve this matter voluntarily. Congress should not have to be the 
final arbiter.
    1 appreciate that the Federal budget is tight, but the President 
must also understand that the current financial situation is largely a 
crisis of his own making. Not long ago, we were actively reducing the 
deficit, while still fulfilling critical obligations that furthered the 
public good. Now, we are constantly looking for places to cut the 
budget, often at the expense of projects that are widely recognized as 
necessary.
    We need to build a modern, National Airspace System (NAS) that 
meets the public's growing demands, and it will require vision and 
resources. Since the Administration has yet to provide either, it is up 
to Congress to deliver both.

    Senator Burns. Senator Stevens?

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    The Chairman. Mr. Chairman, I also second the statement 
that you've made. I do think, however, we should be quite aware 
of the fact that there's an increasing number of aircraft 
entering this system. And that will be accelerated as these new 
small jets--I call them the ``mosquito fleet''--start entering 
general and private aviation for the business world. This 
system has to be prepared. So, we're going to work with the 
FAA.
    On the other hand, I've got to say, recognizing the costs 
of the war on terror, every department has had cuts, and these 
cuts are tough, and it is hard for us to determine how the FAA 
will survive with those cuts. I think we all have to sit down 
and make certain that the allocation of the funds that come 
before the Appropriations Committee is a fair, balanced one, as 
far as all of the systems. And this is one of the key systems 
of our country. And, of course, in my state 70 percent or more 
of the cities can be reached only by air. Now, we, of all 
Americans, depend upon this system. And I look forward to 
working with all of you to make certain that it will work.
    Thank you.
    Senator Burns. And thank you, Senator Stevens. And your 
full statement will be made part of the record.
    The Chairman. That was my full statement.
    Senator Burns. Oh, that was your full statement?
    [Laughter.]
    Senator Burns. Last night, I introduced the President, and 
he made the statement last night that to listen to Conrad Burns 
speak makes him a Shakespeare.
    [Laughter.]
    The Chairman. Who?
    Senator Burns. The President.
    [Laughter.]
    Senator Burns. OK?
    Director Blakey, thank you for joining us this morning. And 
we look forward to your statement.

  STATEMENT OF HON. MARION C. BLAKEY, ADMINISTRATOR, FEDERAL 
                    AVIATION ADMINISTRATION

    Ms. Blakey. Thank you, Mr. Chairman. Chairman Stevens, 
Senator Inouye, it's a true pleasure to be here. And I hope you 
all will pass on our best wishes for a speedy recovery to 
Senator Rockefeller, as well.
    I do want to thank you for this opportunity to address the 
Committee on what I think is a very important topic. Your 
request for a discussion of the budget and the viability of the 
Trust Fund comes at a most opportune time. As always, safety 
remains our number-one priority, and this is a barometer, I 
believe, of our success.
    As you know, the trends in commercial and general aviation 
show consistent improvement. In terms of sheer numbers alone, 
over 2 billion passengers have traveled in our system in the 
last 3 years. Two billion. That's about seven times the 
population of this great Nation. Without question, it's an 
impressive safety record. But, tragically, during that same 
period of time, we lost 33 people, also in accidents. The 
diligence of an entire aviation community makes this possible--
pilots, mechanics, inspectors, controllers, engineers, and 
technicians.
    With that said, we are equally diligent about conducting 
the business of government and overseeing aviation. We serve 
both the passenger and the taxpayer. That's why Congress 
mandated that we, the FAA, must realign our operations and 
manage more like a business. We are eager to rise to that 
challenge.
    The tangible results of the FAA's efforts over the past 3 
years are reflected in our Fiscal Year 2007 budget request of 
$13.7 billion. It upholds our commitments to increase the 
safety, capacity, and efficiency of the system. But, even so, 
aviation finds itself at a time that's both precipitous and 
precarious.
    The President's budget for 2007 addresses our needs in the 
short term, but the larger issue, the Aviation Trust Fund, is a 
constant reminder that significant challenges loom on the 
horizon. That's why we must move quickly to establish a funding 
mechanism for the FAA that's reliable and consistent, a funding 
stream tied directly to the actual cost of what it takes the 
Federal Government to serve the business of aviation.
    At the forefront is a predicament of enormous consequence. 
The FAA's funding now is beholden to the Airport and Airway 
Trust Fund, which was established all the way back in 1970. The 
Trust Fund receives revenue from a number of sources--aviation 
excise taxes, including a domestic segment tax, an 
international passenger tax, commercial and aviation fuel tax--
but the primary source of income for the FAA's operations and 
capital accounts is a 7.5 percent ticket tax on the price of 
commercial airline tickets. As the price of those tickets fell, 
competition increased, but our revenue stream suffered.
    I think a picture can be worth the proverbial thousand 
words, so indulge me for a couple of moments here just 
illustrating this.
    As you can see from this chart, our revenues simply cannot 
keep up. As recently as 2000, the Trust Fund revenue was 
sufficient to cover the entire FAA budget. That's on the far 
left side over there, where you see the lines intersecting. But 
not anymore. Over the last 5 years, a widening gap has resulted 
in the need for greater Trust Fund--General Fund contributions 
or drawing down the Trust Fund, or both.
    The future looks equally dim. The next chart shows that 
tying the plan to pay for FAA operations to the Trust Fund 
injects substantial uncertainty into our planning process. The 
green line shows what we expected the future of the Trust Fund 
to be back in the year 2000. The premise was based on the 
industry's $8 billion profit that year. Remember that?
    The premise, unfortunately, was wrong. 9/11, the subsequent 
wave of bankruptcies, the dip in ticket prices couldn't be 
forecast by anyone, nor were they. In short, the volatility of 
the Trust Fund pre-empts any long-term planning. Even though 
the Trust Fund revenues show slight recovery, it's still about 
$3 billion below what we forecast in 2000. And the bigger 
problem is this--the shortfall for the entire period of 2001 to 
2007 will likely total $20 billion.
    As you know, regardless of the state of the Trust Fund, the 
FAA's workload continues to rise. The next chart is a 
relatively accurate shorthand method of showing how much the 
FAA's workload is on the increase. Departures are a major 
driver. And, as you can see, they've been on the rise for 15 
years. I draw your attention to the red line, which shows the 
volatility of the Trust Fund during that same period. 
Regardless of the revenues' peaks and valleys, the workload is 
steadily on the rise. History shows that whether revenue goes 
up or revenue goes down, the workload does not decrease.
    No matter what the revenue picture looks like, all of the 
taxes that fuel the Trust Fund will expire on September 30, 
2007, and the Administration is finalizing a proposal to 
address these challenges. The time to act is now. If we don't, 
we're going to be unable to establish a realistic funding 
scheme that will address the potential for gridlock. If we 
don't act, the hard drive of aviation will spin more and more 
slowly, except rebooting aviation and the system in which it 
operates will not happen at the mere press of a button. On this 
issue, there's no middle ground. There's no real safe haven for 
inaction.
    As you well know, the post-9/11 aviation industry has 
undergone enormous change. The market now features a move away 
from the wide-bodied jet to a greater number of smaller jets, 
which carry fewer seats and discount ticket prices, to boot. 
The math here is simple. The passenger numbers continue to 
increase. Forecasts anticipate 1 billion passengers by 2015. We 
are already at 739 million. That's above 9/11 levels. Low-cost 
airlines and regional jets have taken an ever-increasing share 
of the market. The workload increases, but, because of cheaper 
tickets, the revenue to the Trust Fund has not increased 
commensurately.
    The Administration has been taking steps to address this 
situation. Under the leadership of Secretary Mineta, the FAA 
has been moving toward operating more like a business. Our 
business plans mirror the industry we serve. We've organized 
our entire air-traffic services department, cutting multiple 
levels of senior management, reducing our executive ranks by 20 
percent. We've streamlined operations, eliminating and 
consolidating administrative staffs and our accounting 
departments. We've also completed the largest nonmililtary A-76 
program in the history of the Federal Government, reducing the 
number and cost of our Automated Flight Service Stations while 
increasing technology and service to the public--better 
service, lower cost, saving $1.7 billion over 10 years. And we 
continue to negotiate in good faith with our controllers union.
    You have my firm commitment that we cannot, and will not, 
sign a contract we cannot afford. Operating more like a 
business will help us operate more efficiently, but we still 
need to pay for the next generation air transportation system. 
With the number of passengers continually on the rise, we know 
with certainty that the capacity of the system is reaching its 
limits. The technology used by airlines and businesses is 
moving forward with great speed, as well. Very light jets, the 
``mosquito fleet'' that Chairman Stevens refers to, personal 
taxis, they are soon going to start being delivered, be in 
hangars around the country. At a cost of a little more than $1 
million apiece, these jets will expand the service of aviation 
to airports well outside the majors that now dominate our 
transportation industry. We forecast that 100 of these very 
light jets will be delivered this year, ramping up to 500 per 
year by 2010. And that's just the beginning. The next 
generation air transportation system must accommodate business 
jet and regional jet fleets that are significantly larger than 
levels at the turn of the century. The U.S. business jet fleet, 
by 2008, will be approximately 45 percent larger than 2000 
levels. The regional jet fleet will be three and a half times 
bigger.
    That brings us to the question which is most difficult to 
answer, how do we pay for it? Right now, our revenues have no 
direct relation to the cost it takes to run things and invest 
in the future. As I've said before, we might as well link our 
revenues to the cost of a gallon of milk. But, hyperbole aside, 
if the revenue stream bears little relation to actual cost, 
we're stuck on a treadmill that leads absolutely nowhere. The 
unfortunate truth is that the system continues to fully tap the 
resources we have.
    The Secretary has convened six Cabinet-level agencies to 
put together the next generation air transportation system. 
Unless a consistent and cost-based revenue stream is 
established to pay for it, the effort's likely going to be for 
naught. As it is, the agency is heading toward a balancing act 
among competing resources. Do we cut back on air traffic 
services? Do we slow the course of modernization? Do 
certification efforts for the new aircraft take a slow roll? In 
short, it's robbing Peter to pay Paul. And that's untenable.
    But it's not as farfetched as it's likely to be. That's why 
we reached out to Wall Street, to industry, to our 
stakeholders, obviously to you all, our legislative leaders, 
searching for ways to address the Trust Fund issue.
    Our draft proposal is being finalized right now. Our goal 
is to create a funding structure that creates a clear link 
between our revenue stream and the cost of providing services. 
We intend to recognize the unique features of different FAA 
services and different aviation user groups, taking into 
account all the input we've received, as we develop a financing 
structure that's sustainable and supports the development of 
the next generation system. As we do this, we'll make every 
effort to balance, effectively and efficiently, the way the 
system is used and by whom.
    In closing, let me, again, emphasize the need for a stable, 
consistent funding stream. I define ``stability'' as revenue 
driven by the same factors that drive our costs. Simply put, 
our revenue and our costs need to be on the same platform, 
moving in the same direction. Unless and until that happens, 
we'll be moving in a direction that neither the FAA nor the 
industry wants to go. We'll be heading for a destination our 
economy can't afford.
    Thank you very much.
    [The prepared statement of Ms. Blakey follows:]

  Prepared Statement of Hon. Marion C. Blakey, Administrator, Federal 
                        Aviation Administration

    Chairman Burns, Senator Rockefeller, Members of the Subcommittee:
    I welcome the opportunity to be here today, along with my 
colleagues from the Inspector General's Office and the Government 
Accountability Office (GAO), to discuss the state of the Federal 
Aviation Administration's (FAA) financial health, specifically our 
budget for Fiscal Year 2007 and the condition of the Airport and Airway 
Trust Fund (AATF or Trust Fund). The financial health of the Aviation 
Trust Fund is closely linked to the stability of the aviation industry. 
I understand that today's hearing will lay the foundation for a hearing 
in several weeks where future funding options for the FAA will be 
addressed in detail. I look forward to returning and discussing the 
specifics of the Administration's proposal.
    First let me briefly express appreciation for the dialogue that has 
begun with our stakeholder community. Over the past year, under 
Secretary Mineta's leadership, we have conducted a broad outreach to 
the aviation community to explore funding options that would be in the 
long-term best interest of the traveling public, the aviation industry 
and the FAA. We held a public forum last April and have conducted 
numerous group and individual briefings with our stakeholders. To 
inform the dialogue we published detailed industry activity data as 
well as a set of principles which we thought should underlie and guide 
the discussion. In my view the thoughtful comments we have received 
have greatly informed our decision making. We at the FAA have listened 
intently and have benefited from a wide range of expert views.
    As I've often stated over the past year during our outreach, our 
belief in the need for funding reform for the FAA is not fundamentally 
about generating more money for the FAA. It is about creating a more 
rational, equitable and stable system that provides appropriate 
incentives to users and to the FAA to operate more efficiently and 
facilitates modernization of the aviation system on an assured and 
predictable basis.

Fiscal Year 2007 Budget Proposal
    I would like to address the FAA's budget in the near term. As you 
know, the FAA operates 24 hours a day, 7 days a week, 365 days a year. 
We run a multi-billion dollar air traffic control system that in FY 
2005 served 739 million passengers and over 39 billion cargo revenue 
ton miles of freight. We operate and maintain a system comprised of 
more than 70,000 facilities and pieces of equipment. There are FAA-
operated or contract towers at 500 airports, and we are also 
responsible for inspection and certification of about 220,000 aircraft 
and 610,000 pilots. We have some 43,000 dedicated government employees 
working to serve the traveling public and the businesses that depend on 
the air transportation system.
    When Congress mandated the FAA to realign our operations and manage 
more like a business, we rose to the challenge. The FAA's efforts over 
the past three years have paid real dividends, not just to the flying 
public but to the taxpayer as well. By implementing improved management 
tools, including better cost-accounting systems and instituting a pay-
for-performance program, we have been able to make better use of our 
resources. The tangible results are reflected in our FY 2007 budget 
request of $13.7 billion. The request upholds our commitments to 
increase the safety, capacity, and efficiency of the national aviation 
system.
    The FY 2007 budget provides $8.4 billion for our Operations account 
and reflects the rising labor costs and challenges the FAA faces. This 
year, we completed the largest A-76 competition in government and will 
see the first installment of cost savings--$66 million--in FY 2007. 
This contract not only saves money; it also commits the vendor to 
modernize and improve the flight services we provide to general 
aviation pilots. The agency's emphasis on bottom-line results has not 
been easy. The FAA has slashed costs where possible and slowed the rate 
of growth of our labor costs through productivity improvements. We also 
continue to apply effective management and financial principles to our 
labor negotiations. The simple fact of the matter is that we cannot and 
will not sign a contract that the taxpayer cannot afford. Since 1998, 
the first year of the current NATCA contract, the increasing imbalance 
in compensation between NATCA and the rest of the agency has cost the 
taxpayer $1.8 billion. Neither the FAA nor the taxpayer can afford a 
repeat performance. As a result, future labor agreements will be fair, 
affordable and protect management's rights. We have been negotiating 
with NATCA for more than eight months, and I am hopeful that we will be 
able to reach a voluntary agreement, particularly now that both sides 
have been working with the help of a Federal mediator during the last 
few weeks. Both sides recently agreed to a short extension of the 
mediation, and I anticipate this will come to closure shortly, 
hopefully by a voluntary deal.
    Long-term affordable pay structures are only a part of the 
equation. In addition, we are taking steps to achieve savings of 10 
percent by FY 2010 in controller staff costs through productivity 
improvements. We achieved the first 3 percent of this goal in FY 2005 
and, overall we avoided approximately $23 million in costs last year. 
This fiscal year and in FY 2007, we project a minimum of a 2 percent 
productivity improvement each year.
    We expect a continuous wave of controller retirements over the next 
10 years, as 72 percent of our air traffic controllers become eligible 
to retire. Bringing aboard new controllers is a complex process and it 
takes several years to train a controller. Our budget request supports 
our hiring needs for both air traffic controllers and safety 
inspectors.
    For Facilities and Equipment (F&E), we are requesting $2.5 billion 
to improve and modernize the airspace system. We are also scrutinizing 
our capital investments; revisiting business cases and weeding out 
programs whose benefits no longer justify the costs; and we are 
increasing our emphasis on programs that will save the agency money.
    We are making similar inroads with equipment. In FY 2005, we 
removed 177 navigation aids from service, which saved the taxpayer 
about $2.7 million. This year, we plan to remove 100 more, followed by 
another 100 in 2007. We are taking steps to save wherever possible. In 
fact, our five-year strategic plan, the FAA Flight Plan, sets cost 
savings and productivity improvement goals for all organizations in the 
agency.
    Our resources and activities are closely linked with the dynamic 
industry we oversee and serve. The pace and depth of change in aviation 
is unparalleled. Business models evolve as rapidly as the technology 
changes: markets once dominated by wide body aircraft are now giving 
way to smaller jets. Entrepreneurs now are marketing microjets, which 
may one day become the ``personal taxi'' of the sky. Fractional 
ownership is making it easier for businesses to own and operate 
aircraft.
    Even with the financial shake-up in the airline industry, all major 
forecasts project that the demand for air travel will outstrip existing 
capacity. After a very slight decline in projected operations at 
airports with FAA or contract towers, we forecast an average annual 
growth of two percent and forecast a three percent annual growth for en 
route operations (from 2005-2017). Air travel now exceeds pre-September 
11 levels and remains on track to carry more than 1 billion passengers 
by FY 2015.
    The future portends a wide range of aircraft with divergent 
infrastructure, air traffic management, regulatory, and procedural 
requirements. We must be prepared to support a system that includes the 
A380 and the microjet (and everything in between). We must be able to 
support airlines, large and small, national and regional. Recognizing 
that aviation represents about nine percent of America's Gross Domestic 
Product, we must provide this infrastructure in time to keep the U.S. 
economy growing while controlling the costs of that system.

Safety
    Safety remains our number one priority and our number one success 
story, with the trends in both commercial and general aviation showing 
consistent improvement. The safety record we have achieved for air 
carriers is a remarkable accomplishment, which our entire workforce--
inspectors, engineers, technicians, and controllers--shares with the 
broad aviation community. Over the past four years, 3 billion people 
have traveled safely in the air transportation system--that's ten times 
the population of the U.S.
    The FY 2007 budget reflects the agency's steadfast commitment to 
safety. Out of a total request of $13.7 billion, about 70 percent, or 
$9.6 billion, will contribute to our efforts to improve our already 
historic safety record. This includes further progress in reducing 
commercial and general aviation fatality accidents, the numbers of 
runway incursions, and HAZMAT incidents. Our overarching goal is to 
measure and achieve the lowest possible accident rate, while constantly 
improving safety.

Grants-in-Aid to Airports
    In today's challenging budget environment, we have been forced to 
take a long hard look at our funding requirements. Our FY 2007 budget 
request for Grants-in-Aid to Airports is $2.75 billion which is lower 
than recent authorized and enacted levels. Nevertheless, under our 
proposed budget, FAA will be able to support all high priority safety, 
capacity, security and environmental projects. There will be adequate 
funds to meet all current and anticipated Letter of Intent (LOI) 
commitments, which relate to high priority, multi-year projects within 
the national system. The President's Budget includes support of major 
capacity projects such as the Chicago O'Hare redesign, new runway at 
Washington Dulles International Airport and major projects at Atlanta-
Hartsfield International. We will also be able to fund projects to meet 
the FAA's Flight Plan goal for improving runway safety areas (RSAs), 
help airports meet their Part 1542 security requirements, and continue 
work on phased projects.

Technology for the future
    We are laying the foundation for our future with a commitment to 
increasing the system's capacity to accommodate the air transportation 
system's predicted growth. We will meet these future needs by 
harvesting new technologies that will support the Integrated National 
Plan for the Next Generation Air Transportation System (NGATS). This 
Plan, submitted to Congress in December 2004, brings together six 
cabinet-level groups in the Joint Planning and Development Office 
(JPDO) to eliminate duplication and wasted resources. The Plan is a 
roadmap that will leverage Federal funds and allow us to provide the 
national aviation system that can handle the safety, capacity and 
security needs of the future.
    For the FAA, the Plan has already been integrated into our budget. 
Our 2007 budget begins to build this new infrastructure by, for 
example, supporting two promising technologies: Automatic Dependent 
Surveillance-Broadcast (ADS-B) and System Wide Information Management 
(SWIM). The capabilities of ADS-B are already proven in the field. ADS-
B provides: (1) automatic broadcast of aircraft position, altitude, 
velocity, and other data; (2) enhanced ``visibility'' of aircraft and 
vehicle traffic for pilots and air traffic controllers; and (3) use of 
Global Positioning Systems, allowing us to reduce our reliance on 
ground-based infrastructure. SWIM makes advanced information 
distribution and sharing capabilities possible. Every year, FAA builds 
applications for air traffic management systems that require unique 
interfaces between the new application and existing systems. SWIM will 
replace those unique interfaces with a reusable interface and provides 
many operational benefits.
    The above overview of our FY 2007 budget is how we propose to meet 
the challenges over the near term for the FAA, and also provide for the 
long-term with our Integrated National Plan for NGATS. At the same 
time, we are also planning for the next reauthorization of our programs 
and how those programs will be funded. Critical to that endeavor is an 
examination of the status and outlook of the Airport and Airway Trust 
Fund and what that means for the FAA's long term financial picture.

The Airport and Airway Trust Fund
    The Airport and Airway Trust Fund was created in 1970 to provide a 
dedicated source of funding for the aviation system. Before there was a 
Trust Fund, a 5 percent tax on passenger airline tickets, a general 
aviation fuel tax, and a tire and tube tax were deposited in the 
General Fund. Today Trust Fund revenues are generated by a combination 
of taxes that were last authorized in 1997: a domestic passenger ticket 
tax of 7.5 percent of the price of a ticket, a domestic flight segment 
tax of $3.30 per segment per passenger, an international departure/
arrival tax of $14.50 per international passenger, an Alaska/Hawaii 
departure tax of $7.30 per passenger traveling between these states and 
the continental U.S., a 6.25 percent waybill tax on domestic cargo and 
mail, a general aviation (GA) jet fuel tax of 21.8 cents per gallon, a 
GA aviation gasoline tax of 19.3 cents per gallon, and a commercial 
fuel tax of 4.3 cents per gallon. The domestic segment tax, 
international departure/arrival tax, and Alaska/Hawaii tax rates are 
indexed to the Consumer Price Index and have increased each year for 
the last four years, but the airline ticket tax is a fixed percentage 
of the ticket price, so it is dependent on changes in airline ticket 
prices rather than general inflation. These taxes and fees are 
scheduled to expire in September 2007, which also coincides with the 
end of the current authorization for FAA programs under Vision 100.
    Each year, the FAA is funded by annual appropriations drawn both 
from the Aviation Trust Fund and from the General Fund. There has been 
a long history of funding a portion of the FAA's operating costs out of 
the General Fund due to recognition that aviation provides benefits to 
the non-traveling public and to our economy as a whole. However, the 
ratio of General Fund versus Aviation Trust Fund financing has varied 
over the years. The General Fund share of total FAA appropriations has 
been as high as 59 percent (in FY 1984) and as low as zero (in FY 
2000). The trend, however, is not in question. On average over the last 
15 years, the portion of operating costs coming from the General Fund 
has declined steadily. In FY 2005, about 20 percent of the FAA's total 
budget came from the General Fund and 80 percent from the Trust Fund; 
this year it's 18 percent and 82 percent, respectively.
    In recent years, appropriations from the Trust Fund have been 
funded not only from the annual revenue going into the fund and 
interest posted to the Trust Fund, but also from drawing down the 
AATF's balance, which was over $7 billion as recently as 2001. A gap 
exists when you compare the revenue going into the Trust Fund with the 
level of our costs, and this gap is quickly eroding the Trust Fund. 
Since the start of FY02, the uncommitted balance * of the Trust Fund 
has declined by more than $5.4 billion, or an average of 28 percent per 
year. When there is no relationship between the level of revenue being 
raised to the costs being funded from the Trust Fund, factors such as 
fluctuating ticket prices that do not raise enough revenue, volatile 
demand so there are fewer passengers paying for travel, and fundamental 
changes in the airline industry such as the decreasing size of aircraft 
being used for commercial transport, lead to a revenue shortfall that 
has been funded by drawing down the Trust Fund balance. With the 
increasing pressures on the budget to fund military and national 
security needs, the Trust Fund remains a critical necessity in closing 
the funding gap. Last year (FY05), the uncommitted balance at the end 
of the fiscal year was $1.9 billion and, this fiscal year, the 
President's budget projects that it will dip to approximately $1.7 
billion at the end of the fiscal year.
---------------------------------------------------------------------------
    * The uncommitted balance consists of surplus revenues in the Trust 
Fund against which no commitments, in the form of budget authority, 
have been made. This measure provides the most widely-accepted 
estimates of the amount of money available in the Trust Fund for new 
appropriations for aviation purposes.
---------------------------------------------------------------------------
    The FY 2006 projected level of the uncommitted balance is sobering 
because it leaves only a small ``cushion'' in the Trust Fund balance. 
In addition, our ability to rely on an increased General Fund 
contribution to bridge any gap is in question due to competing budget 
pressures as well as the effort to reduce the Federal deficit.
    As we look to the future, we see a complicated air traffic control 
system and workload. As noted above, scheduled commercial passenger 
demand, which dipped severely in the wake of 9/11, exceeded pre-9/11 
levels last year reaching a record 739 million passengers, up from 690 
million in FY 2004. We expect that domestic passenger totals will 
continue to grow at approximately three percent per year with the 
international sector growing five percent per year.
    Low-cost carriers and regional carriers (using smaller jets) are 
continuing to redefine the market. Revenue passenger miles (RPM) for 
the regional carriers are expected to grow almost seven percent per 
year, and we forecast annual RPM growth of almost eight percent for 
low-cost carriers. We forecast that regional carriers will increase 
their share of the U.S. domestic market from 22 percent last year to 
more than 25 percent by 2017. In FY 2005, commercial activity at 23 of 
our 35 major airports exceeded FY 2000 (peak) activity levels. Las 
Vegas (37 percent); Ft. Lauderdale (33 percent); Salt Lake City (30 
percent); and Minneapolis (30 percent) experienced the greatest 
increases in operations.
    It is of course very good news for the aviation industry that 
demand is back, but it is back in different ways than before. While low 
fares are good news for the passenger, they spell trouble for the Trust 
Fund with its heavy reliance on the ticket tax as its primary source of 
revenue. Approximately 50 percent of the Trust Fund revenue currently 
comes from the 7.5 percent tax on domestic airline tickets.
    Industry changes also have implications for the FAA's workload. The 
airlines are trying to control costs by using increasing numbers of 
smaller aircraft. This trend adds to the workload of air traffic 
controllers without increasing tax revenue commensurately. Regional 
jets normally carry fewer passengers than the larger airliners, so the 
movement toward smaller passenger aircraft contributes to the decline 
in the Trust Fund revenue per flight. If an airline carries a given 
number of passengers (paying the same fares) on two regional jets 
instead of one larger jet, ticket tax revenue does not change, but 
controller workload approximately doubles. Our latest forecasts 
indicate that the growth in the number of smaller aircraft is expected 
to continue, driving down the average number of seats of a domestic 
aircraft through 2011. Plainly, our revenue is not tied to the cost of 
the service, which means that there is no nexus between actual workload 
and how it's paid for.
    Increased air traffic operations are not the only source of 
increased workload for the FAA. In recent years the industry has also 
seen more new entrant carriers. While this is good news for 
competition, it also has workload implications for our agency. Right 
now, there are 10 applications in the queue awaiting review and 
certification by our safety staff, and each of these new operators will 
bring additional pilots and crew into the system. Also, with regard to 
our airport grant program, Vision 100's increase in funding for the 
Airport Improvement Program (AIP) coupled with a new entitlement 
formula apportionment for non-primary airports increased our workload 
in processing grant applications by fifty percent.
    Knowing what is happening with Trust Fund revenues and how the 
changes in the aviation industry affect our workload is only part of 
the equation. We know we must also continually work very hard to 
control our costs--to make changes and become more efficient, more 
business like. We are changing the agency's structure with a major 
shift to a performance-based organization, and, as I noted above in 
discussing our budget proposal, making tough choices with our funding. 
We have implemented a cost accounting system in the ATO that provides 
our managers and executives with the information they need to identify 
and eliminate wasteful spending, hold or reduce operating costs, and 
better link financial performance to mission objectives. That cost 
accounting system is being extended throughout the FAA this year to 
help us better assess and control our costs.
    I've already mentioned our cost savings measures by the ATO, our 
challenges with our labor negotiations and with future controller 
hiring. We are also faced with an aging and deteriorating inventory of 
facilities and equipment. The average condition of the FAA's 21 en 
route air traffic control centers is poor and getting worse each year. 
As this Committee well knows, modernization of the air traffic control 
system is critical if the agency is to keep up with what aviation 
brings tomorrow. The price tag for these facilities and equipment alone 
is $2 billion per year in capital funds just to maintain current 
services.
    In addition to maintaining the current infrastructure, the JPDO is 
planning for the emergence of the next generation of the air 
transportation system out to 2025, charting the course for satellite 
based navigation, handling new aircraft classes, on-demand services, 
and the increasing growth in air traffic. However, the move to a 
modern, efficient and technology-driven aviation system is going to 
require sustained, multi-year investments. We will need to invest 
resources in order to make the transition to a new system that will 
significantly reduce operating costs and better serve our customers in 
the long run.
    What I have outlined above--the condition of the Aviation Trust 
Fund in the context of the growth in demand and industry restructuring, 
and the fact that FAA's future funding requirements will significantly 
outpace revenue from aviation taxes--clearly highlights a couple of 
issues. During the most recent reauthorization cycle for the current 
aviation excise taxes (1996-1997), Congress allowed the authority for 
those taxes to expire twice, which resulted in a $5 billion loss in 
revenue to the Trust Fund. We cannot afford to let that happen again. 
Two, the FAA needs a stable source of funding that is based both on our 
costs and the services we provide so that we can meet our mission in an 
extremely dynamic business environment. Airline ticket prices are not 
related to any real measure of productivity for the FAA. Regardless of 
how many operations we run through the national airspace system or how 
quickly we can certify new aircraft products and technologies, or how 
we continue to drive down the already low accident rate, the primary 
source of Trust Fund receipts is linked to the price of a ticket. That 
approach will not sustain us into the future.
    Tying funding to the cost of providing service protects both FAA 
and the customers who use FAA services by not subjecting our ability to 
provide a certain level of service to unrelated factors like ticket 
prices. A stable, cost-based revenue stream can also ensure funding for 
long-term capital needs. We also believe that a cost-based revenue 
structure would provide incentives to our customers to use limited 
resources efficiently and to the FAA to operate efficiently, as 
stakeholder involvement can help us ensure that we are concentrating on 
services that the customer wants and is willing to pay for.

Conclusion
    We believe that the revenue stream that currently funds the FAA is 
not tied to the cost of the services and that there is a need for 
funding reform. FAA's workload continues to increase. The current 
system, largely based on the ticket tax, provides no nexus between the 
actual workload of controlling flights and providing other services and 
how they are paid for. It is time for change.
    Mr. Chairman, ten years after the NCARC recommendations, we are 
tackling probably the hardest part of reform: how the aviation 
transportation system will be financed in the next decade and beyond. 
Our proposal for funding reform for the FAA is now under review within 
the Administration. As I noted at the outset, it is the product of 
extensive public outreach, analysis, and a lot of creative thinking. It 
will propose a cost-based funding structure which will ensure that our 
costs and revenues are aligned and that our stakeholders are treated 
equitably. The details will come soon in the form of a legislative 
proposal, which I hope will be the basis for ongoing dialogue with this 
Committee and others in Congress, our colleagues in the aviation 
community, and the public.
    I look forward to the debate and expect that the discussions will 
be frank, open and spirited. We have an opportunity in the near future 
for positive change, to correct the faults of the current system that 
threaten our ability to meet future demand. Change is always unsettling 
and difficult and requires patience and hard work, but to be ready for 
tomorrow we must begin today. It is the only way that we will be able 
to continue to operate and maintain the world's safest system with the 
capacity our economy needs.
    That concludes my testimony. I would be happy to answer any 
questions you may have.

    Senator Burns. Thank you.
    Now we'll hear from Todd Zinser, Acting Inspector General, 
Department of Transportation. Thank you for joining us this 
morning.

    STATEMENT OF TODD J. ZINSER, ACTING INSPECTOR GENERAL, 
                  DEPARTMENT OF TRANSPORTATION

    Mr. Zinser. Thank you, Mr. Chairman and Members of the 
Subcommittee. We appreciate the opportunity to testify today on 
FAA's 2007 budget and the state of the Aviation Trust Fund.
    An important point we'd like to make this morning, Mr. 
Chairman, is that FAA's 2007 budget focuses mainly on the 
status quo, in keeping things running. Right now, this 
Committee does not have a good handle on FAA requirements with 
respect to what is needed for the next generation air traffic 
system. This will be a critical issue for this Subcommittee and 
FAA as deliberations begin over the next reauthorization.
    For FY 2007, the agency is requesting $13.7 billion, which 
is $561 million less than last year's appropriation, and nearly 
$1.5 billion less than the authorized amount. FAA's overall 
budget has remained relatively flat over the past 4 years, but, 
compared to last year, there are big differences in the 
distribution of that request. The operations account is up 3 
percent over last year, while the capital and airport accounts 
are down 2 and 22 percent, respectively. I'd like to highlight 
some of the key issues within those three accounts.
    First, operations, FAA's biggest account, and over 60 
percent of the budget. FAA is requesting $8.4 billion for 2007 
operations, $262 million more than last year. We see two big 
challenges here. First is completing contract negotiations with 
NATCA. The talks are down to some of the most difficult issues, 
including pay. Ideally, in the end, the contract will be 
mutually agreed to, affordable, and result in much-needed 
productivity gains for FAA.
    The second challenge in the operations account is 
addressing a surge in controller retirements. FAA estimates 
over 70 percent of the existing controllers will leave the FAA 
over the next 10 years. FAA's December 2004 report is a good 
first step, but it has two major gaps.
    One is, it doesn't have an estimated price tag. Hiring and 
training 12,500 new controllers will be an expensive 
proposition, especially since it takes new controllers between 
2 and 5 years to become fully certified.
    Two, the plan doesn't address hiring and staffing by 
location. There are over 300 FAA-operated air traffic control 
facilities, many with significant differences in the complexity 
of the operations, which, in turn, drive the cost of operating 
those facilities. Without such facility-by-facility numbers, 
FAA will lose a significant opportunity for productivity gains 
and cannot reliably project its operation cost for the future.
    For 2007, FAA is requesting $2.5 billion for its F&E 
account, which is about 50 million less than last year. This is 
also the fourth consecutive year that F&E requests are below 
authorized levels. The majority of FAA's capital account now 
goes for keeping things running, not new initiatives. FAA has 
deferred or canceled a number of projects as funding for F&E 
remained flat. Many of the ongoing efforts are maturing and 
completing them within cost and schedule is critical to allow 
room in the budget for future initiatives. Two projects worth 
noting are ERAM and FTI.
    ERAM is intended to replace host computers at en route 
centers. It is one of the most expensive and complex 
acquisitions in FAA's portfolio, with an acquisition cost of 
$2.1 billion. This year is critical for ERAM, because FAA will 
spend a million dollars a day on the program. But, more 
importantly, if it's not kept on track, there will be a 
cascading impact on FAA's ability to deliver future systems. 
This is a critical watch item.
    We have concerns about the FTI program and whether or not 
it can be completed on time. FAA's FTI program is an effort to 
replace and reduce the cost of FAA's entire telecommunications 
systems. It has an estimated life-cycle cost of $2.4 billion 
through 2017. We recently issued a draft report on FTI and 
consider it a high-risk program. Only months after being 
rebaselined in December 2004, the program began falling behind 
its installation schedule and has not recovered. Projected 
savings are diminishing as we speak, and the program needs to 
get on track.
    The biggest reduction in FAA's 2007 request is in the 
airports account. At $2.7 billion, the 2007 budget request is 
$764 million less than 2006, and $1 billion less than the 
authorized amount. The bulk of the planned reductions, $624 
million, will occur in formula grants. With this decrease in 
available AIP funds, FAA will need to better manage airport 
grants. One area we recently examined is how airports dispose 
of land acquired for noise abatement. We found that FAA could 
recover $242 million at just the 11 airports we looked at.
    Let me conclude this morning, Mr. Chairman, with three 
observations about the Trust Fund and the General Fund.
    First, Trust Fund revenues have actually been increasing, 
and now exceed pre-September 11th levels, and 2007 Trust Fund 
revenues are projected to be $11.7 billion. Second, however, 
FAA's 2007 budget request exceeds the projected revenues by $2 
billion, and FAA estimated, in 2007, that the General Fund will 
contribute $2.9 billion, or 21 percent of its total budget. 
That amount is similar to what's been contributed by the 
General Fund over the last 3 years.
    Third, the uncommitted balance in the Trust Fund has been 
depleted, going from $7.3 billion in 2001 to a projected $1.7 
billion in 2006, and may no longer be a viable option as a 
stopgap measure or buffer for FAA funding needs. It is clear 
that other options need to be considered. But a much better 
understanding of FAA's requirements for the next generation air 
traffic control system is also needed. The recent report to 
Congress by the Joint Program and Development Office was silent 
on complex implementation issues and how much funding will be 
needed, and when. This will be a central issue in discussions 
about how best to finance FAA and the shape, size, and 
direction of the Agency's capital needs for years.
    That concludes my statement. I would be happy to answer any 
questions, Mr. Chairman.
    [The prepared statement of Mr. Zinser follows:]

    Prepared Statement of Todd J. Zinser, Acting Inspector General, 
                      Department of Transportation

    Mr. Chairman and Members of the Subcommittee:
    We appreciate the opportunity to testify today regarding the 
Federal Aviation Administration's (FAA) Fiscal Year (FY) 2007 budget 
and the state of the Aviation Trust Fund. Financing FAA is one of the 
most important issues facing the Department, Congress, and the aviation 
industry. It is particularly important in light of the fact that the 
current FAA authorization--Vision 100--and the current ticket taxes 
expire in 2007.
    Our office has an extensive body of work regarding cost control and 
financial issues within FAA. For example, in 1999 we reported that 
persistent cost growth in the agency's operating account was ``crowding 
out'' critical capital investments in air traffic modernization and 
capacity-enhancing projects within the existing revenue base. This is 
still a concern today.
    First, it is important that we recognize that FAA oversees the 
safest aviation system in the world. Prior to December 2005, when a 
Southwest Airlines aircraft skidded off the runway at Chicago Midway 
and struck a car killing a child in the vehicle, there had not been a 
large commercial air carrier fatal accident in this country in 4 years. 
Notwithstanding that tragic accident, the United States has maintained 
a remarkable safety record considering the many changes occurring 
within the industry, including financial uncertainty and rebounding air 
traffic.
    In terms of traffic, FAA estimates that between FY 2004 and FY 2005 
domestic passenger enplanements have risen about 7 percent (from 628 
million in 2004 to 670 million in 2005). FAA also estimates that 
international passenger enplanements have risen about 12 percent over 
this same time frame (from 61 million in 2004 to 69 million in 2005). 
By 2015, FAA estimates that 1 billion passengers will board planes 
(both domestically and internationally) each year.
    Although traffic is up, network air carriers continue to suffer 
huge losses as a result of soaring fuel costs and their high cost 
structures. Last year, eight air carriers were in bankruptcy, which 
represented about 35 percent of available capacity. Today, four remain 
under bankruptcy protection, representing about 17 percent of available 
capacity. But all the network carriers continue to work aggressively to 
move away from high cost structures by reducing in-house staff, 
renegotiating labor agreements, and increasing the use of outside 
repair stations.
    It is against this backdrop that we would like to discuss FAA's FY 
2007 budget request. An important message of our testimony this 
morning, Mr. Chairman, is that FAA's FY 2007 budget primarily focuses 
on short-term requirements, such as sustaining existing systems and 
equipment.
    The long-term initiatives to address future capacity and the 
funding mechanisms necessary to implement them have not yet been 
defined. That is a critical issue for this Subcommittee and FAA as 
deliberations begin concerning FAA's next reauthorization and 
alternative methods for financing FAA.
    Today, I would like to focus on two issues:

   Progress and challenges within FAA's three major accounts--
        Operations, Facilities and Equipment (F&E), and the Airport 
        Improvement Program (AIP), and

   Observations on the current funding mechanisms for FAA.

FAA's FY 2007 Budget Request
    Like the air carriers, FAA is in a tough financial environment and, 
like most Federal agencies, is facing the realities of an austere 
budget environment. Over the past 4 years, FAA's overall budget has 
remained relatively flat--between $13.7 billion and $14.3 billion. For 
FY 2007, FAA is requesting $13.7 billion, which is $561 million less 
than last year's appropriation. However, there are significant 
differences in the distribution of FAA's FY 2007 budget request among 
the agency's various accounts. As shown in Table 1, the Operations 
account increased a little over 3 percent from last year's 
appropriations while the other 3 accounts were reduced. The F&E account 
is 2 percent less than last year, and the AIP account is almost 22 
percent less than last year. Compared to the authorized levels in 
Vision 100, the budget request is $1.48 billion less--primarily in the 
AIP and F&E accounts.

  Table 1: Comparison of Recent FAA Enacted Budgets and FY 2007 Requested and Authorized Levels ($ in millions)
----------------------------------------------------------------------------------------------------------------
                                                                                      FY 2007        FY 2007
                                                    FY 2004    FY 2005    FY 2006    (request)     (authorized)
----------------------------------------------------------------------------------------------------------------
Operations                                            $7,479     $7,707     $8,104       $8,366           $8,064
F&E                                                   $2,871     $2,525     $2,555       $2,503           $3,110
AIP                                                   $3,382     $3,497     $3,514       $2,750           $3,700
RE&D                                                    $119       $130       $137         $130             $356
----------------------------------------------------------------------------------------------------------------
    Total                                            $13,851    $13,858    $14,310      $13,749          $15,230
----------------------------------------------------------------------------------------------------------------

    What we observed in 1999 continues to happen today. With FAA's 
overall budget remaining relatively flat, the increasing cost of FAA's 
operations continues to ``crowd out'' investments in FAA's capital and 
airport accounts. For example, between FY 2004 and FY 2007, FAA's 
overall budget decreased by about $100 million. However, during that 
period, FAA's operating costs increased by $887 million while FAA's F&E 
and AIP accounts were reduced by $368 million and $632 million, 
respectively.

Operations
    FAA is requesting $8.4 billion for its FY 2007 operating budget, 
which is about $262 million above last year's enacted amount of $8.1 
billion. The Air Traffic Organization represents $6.7 billion or nearly 
80 percent of that request. The operations account is the largest 
portion of FAA's budget, representing nearly 61 percent of the agency's 
FY 2007 request, whereas FAA's capital and airport account represent 18 
and 20 percent respectively.
    Since FY 1996, the first year of personnel reform, FAA's operating 
costs have increased from $4.6 billion to $8.4 billion requested for FY 
2007, an increase of over 80 percent. Controlling operating cost growth 
remains a significant challenge for FAA--one that Administrator Blakey 
and her staff have consistently demonstrated a clear commitment to 
addressing.
    Progress This Past Year. We would like to point out two notable 
accomplishments FAA made this past year to better manage its operating 
cost growth. First, FAA completed the A-76 process for its flight 
service functions. On October 4, 2005, employees of 58 flight service 
stations transitioned from Government service to the contractor--
Lockheed Martin. FAA estimates that outsourcing this function should 
save the agency more than $1.7 billion over the next 10 years. We plan 
to begin a review of this transition later this year to ensure that 
services continue to meet user needs and that the estimated savings are 
being realized.
    In August 2005, FAA also completed deployment of its labor 
distribution system, which is critical for getting a handle on the 
actual costs and productivity of the Air Traffic Organization's 
employees--FAA's largest workforce. Labor distribution is the process 
of associating labor cost directly with activities and services by 
requiring employees to record their time worked on specific activities. 
The system is a critical component of FAA's cost accounting system, 
which was mandated by Congress in 1996.
    Clearly, those efforts represent progress on the part of FAA toward 
its goal of becoming a performance-based and cost-driven organization. 
However, getting significant reductions in operating costs is difficult 
since over 70 percent of FAA's operating costs are made up of employee 
salary and benefits.
    Some stakeholders, including FAA's own Management Advisory 
Committee, have advocated taking dramatic steps to reduce the agency's 
costs, such as consolidating numerous facilities throughout the country 
and increasing outsourcing efforts. But those are complicated and 
difficult undertakings that require the collaboration of FAA's many 
stakeholders and may be the subject of further discussions during 
deliberations over the next reauthorization.
    Challenges This Coming Year. FAA faces several challenges this year 
that have implications for the agency's ability to live within its 
proposed FY 2007 operating budget. Those include completing 
negotiations for a new contract with controllers, addressing the 
expected surge in controller attrition, and maintaining a sufficient 
number of safety inspectors. FAA will also need to determine how to 
address the 1-percent Government-wide rescission for its FY 2006 
appropriations.

   Completing Negotiations Over a New Contract with 
        Controllers. A major challenge that FAA is currently facing is 
        completing negotiations over a new collective bargaining 
        agreement with the National Air Traffic Controllers Association 
        (the union representing FAA's largest bargaining unit). A 
        primary principle for FAA going into the negotiations was that 
        it could not afford a new agreement similar to the existing 
        agreement. According to FAA, the existing agreement cost the 
        agency $1.1 billion over the first 3 years of the contract. FAA 
        has proposed several significant changes including hiring new 
        controllers under a new pay system with pay bands that are less 
        than the current pay system for controllers.
        Formal negotiations began in July 2005 and as of March 10, 
        2006, the parties had either agreed to or withdrawn 121 of 152 
        articles. However, the remaining 31 unresolved articles are 
        some of the most difficult issues, including pay, annual leave, 
        and work rules. FAA and the union recently agreed to mediation 
        and extended the latest round of talks. That is an encouraging 
        sign.
        There is a lot at stake. The outcome of the current 
        negotiations has significant implications for FAA's future 
        operating costs. It will also set the stage for labor/
        management relations between the agency and the union over the 
        next several years. Clearly, it is in the best interest of all 
        stakeholders to complete the negotiations.

   Addressing the Expected Surge in Controller Attrition. 
        Another challenge facing FAA is the hiring and training of 
        nearly 12,500 new controllers through FY 2014 as controllers 
        hired after the 1981 strike begin retiring. In December 2004, 
        FAA issued the first in what will be a series of annual reports 
        outlining FAA's plans for addressing that challenge. In our 
        opinion, the plan is a good first step in that it lays out the 
        magnitude of the issue and establishes broad measures for 
        meeting the challenge. However, as we reported in May 2005, 
        subsequent reports will need further details about the plan in 
        two key areas.
        First, FAA's initial report did not identify how much the plan 
        will cost to implement. The cost of hiring and training 12,500 
        new controllers will be substantial, particularly since it 
        currently takes new controllers 2 to 5 years to become fully 
        certified. During that time, FAA incurs the cost of the 
        trainee's salary and benefits as well as the cost of the salary 
        and benefits of the certified controllers who instruct them 
        one-on-one. The outcome of the negotiations with the 
        controllers union will have a significant impact on the costs 
        of the plan as well.
        Second, the plan does not address hiring and staffing needs by 
        location. Without this information FAA cannot have confidence 
        in the number of controllers it needs. That level of detail is 
        critical because there are over 300 FAA-operated air traffic 
        control facilities--many with significant differences in the 
        levels of air traffic they manage and the complexity of 
        operations they handle, which are factors used to set 
        controller salaries at individual locations.
        We recommended that FAA address these issues in its next report 
        to Congress, and establish baseline metrics for numerous 
        productivity gains it plans to achieve over the life of the 10-
        year plan. FAA agreed with our recommendations and expects to 
        issue its next report in April.
        Identifying ways to reduce the costs and time of hiring and 
        training new controllers will be an ongoing and critical issue 
        for FAA for years to come. FAA will need to consider all 
        opportunities to improve its hiring and training process. For 
        example, in December 2005, we reported that FAA could reduce 
        the time and costs of training new controllers by making 
        certain educational requirements a prerequisite for candidates 
        before they are hired. FAA agreed with our recommendation to 
        evaluate this concept and has convened a task force to study 
        the feasibility, with an expected completion date of October 
        2006.

   Maintaining a Sufficient Number of Safety Inspectors. While 
        replacing retiring controllers is a critical issue for FAA, it 
        is also important to maintain a safety inspector workforce 
        sufficient to achieve the agency's mission of safety oversight. 
        In June we reported that while FAA has made progress in moving 
        to a more risk-based approach to safety oversight, FAA 
        inspectors could not effectively use the systems to monitor the 
        rapidly occurring changes within the industry.
        In FY 2007, FAA's budget calls for an increase of 116 safety 
        inspectors. However, it is unlikely that staffing gains over 
        the next few years will be enough to offset the number of 
        safety inspectors eligible to retire in coming years. For 
        example, this year, 28 percent of the current inspector 
        workforce (1,008 of 3,628) will be eligible to retire. By 2010, 
        however, half of the safety inspector workforce (1,820 of 
        3,628) will be eligible to retire. In our opinion, until its 
        risk-based approach to safety oversight is effectively 
        targeting resources to the areas of greatest risk, FAA needs to 
        carefully evaluate its inspector staffing levels to sustain 
        sufficient oversight in light of the potential attrition within 
        that workforce.

   Addressing the FY 2006 Government-wide Rescission. Another 
        challenge facing FAA this year is the 1-percent Government-wide 
        rescission for FY 2006. The rescission will require FAA to cut 
        about $82 million from its operating account. While the agency 
        is still determining how to incorporate the cut, FAA has 
        included a long list of possible reductions in its FY 2007 
        budget request. Those possible reductions include deferring 
        seven new starts for contract towers until 2007, reducing 
        training for technical workforces, reducing overtime, 
        continuing attrition in non-safety staff positions, and 
        reducing expenditures in infrastructure support and 
        maintenance, among many others.
        However, FAA is also considering reducing the planned number of 
        controllers and safety inspectors it plans to hire in 2006, 
        which could affect safety or operational efficiency. For 
        example, in the FY 2006 Conference Report on the Department's 
        appropriations, Congress provided FAA with a $12 million 
        increase to fund additional safety inspectors.
        FAA has informed us that instead of increasing inspector 
        staffing by 238 in FY 2006, it may only add 87. FAA needs to 
        carefully evaluate this position given the changes in the 
        industry and increased inspector workload demands.
        FAA is also considering reducing funding for various airspace 
        redesign projects. As we noted in May 2005, airspace redesign 
        efforts are important to enhance the flow of air traffic, 
        reduce delays, and get the most benefits from new runways. FAA 
        is still considering how it plans to address the cuts, but with 
        the fiscal year now half over, decisions need to be made and 
        articulated to Congress.

Facilities and Equipment
    FAA's capital account--or the F&E account--is the principal vehicle 
for modernizing the National Airspace System. It represents about 18 
percent of the agency's FY 2007 budget request. For FY 2007, FAA is 
requesting $2.5 billion for the Facilities and Equipment account, which 
is $50 million less than last year's appropriation. This is the fourth 
consecutive year that funding requests for the capital account are 
below authorized levels called for in Vision 100.
    As illustrated in Figure 1, only about 55 percent of FAA's FY 2007 
request for F&E (or $1.4 billion) will actually go for acquiring air 
traffic control systems, the remainder will be spent on personnel, 
mission support, and facilities.



    As we have noted in the past, the majority of FAA's capital account 
now goes for keeping things running (i.e., sustainment), not new 
initiatives. A review of the top 10 projects by dollar amount in the FY 
2007 request shows that while some projects will form the platforms for 
future initiatives, the bulk of funds are requested for projects that 
have been delayed for years as well as efforts to improve or maintain 
FAA facilities or replace existing radars. Enclosure 1 provides 
information on the top 10 projects in FAA's FY 2007 budget request.
    Over the last several years, FAA has deferred or cancelled a number 
of projects as funding for the capital account has remained essentially 
flat. This includes efforts for a new air-to-ground communication 
system, controller-pilot data link communications, and a new satellite-
based precision landing system. FAA has also postponed making decisions 
on projects like the billion dollar Standard Terminal Automation 
Replacement System. These are some of the reasons why there is so much 
discussion about the next generation air traffic management system.
    Notwithstanding a lack of clarity with respect to the cost and 
schedule of the next generation system, FAA is requesting F&E funds for 
two projects that are considered ``building blocks'' for the next 
generation system. These are not new programs per se and have been 
under development or been funded in previous budgets.

   Automatic Dependent Surveillance-Broadcast (ADS-B) is a 
        satellite-based technology that allows aircraft to broadcast 
        their position to others. In FY 2007, FAA is requesting $80 
        million for this satellite-based technology. In prior budgets, 
        ADS-B was funded under the Safe Flight 21 initiative which 
        demonstrated the potential of ADS-B and cockpit displays in 
        Alaska and the Ohio River Valley. FAA expects to make a 
        decision about how quickly to implement ADS-B and at what cost 
        later this year.

   System Wide Information Management (SWIM) is a new 
        information architecture that will allow all airspace users to 
        securely and seamlessly access a wide range of information on 
        the status of the National Airspace System and weather 
        conditions. It is analogous to an Internet system for all 
        airspace users. FAA is requesting $24 million for this program 
        in FY 2007.

    Progress and Challenges with Key Air Traffic Control Modernization 
Projects. We are not seeing the massive cost growth and schedule delays 
we have seen with FAA major acquisitions in the past. This is due to 
this Administration's efforts to take a more incremental approach to 
major acquisitions and decisions to defer several complex and 
challenging efforts. Last year, we reported that 11 of 16 major 
acquisitions accounted for a cost growth of $5.6 billion. \1\ Most of 
this cost growth occurred before the establishment of the Air Traffic 
Organization. It was also a reflection of efforts to re-baseline 
programs, which identified costs that had been pent up for years, and 
not reflected in prior cost estimates.
---------------------------------------------------------------------------
    \1\ OIG Report Number AV-2005-061, ``Report on the Status of FAA's 
Major Acquisitions: Cost Growth and Schedule Delays Continue to Stall 
Air Traffic Modernization,'' May 26, 2005. OIG reports and testimonies 
can be found on our website: www.oig.dot.gov.
---------------------------------------------------------------------------
    Many efforts are maturing and completing them within existing cost 
and schedule parameters is critical to allow room for future 
initiatives. Only one initiative, FAA Telecommunications 
Infrastructure, has the potential to reduce FAA's operating costs which 
is a top priority within the agency. There are a number of programs 
that require attention.

   En Route Automation Modernization (ERAM) is intended to 
        replace the Host computer network--the central nervous system 
        for facilities that manage high-altitude traffic. FAA is 
        requesting $375.7 million for ERAM, which is this program's 
        peak single year funding level according to FAA's Capital 
        Investment Plan. With an acquisition cost of $2.1 billion, this 
        program continues to be one of the most expensive and complex 
        acquisitions in FAA's modernization portfolio. The monthly burn 
        rate for ERAM will increase from $28 million a month in FY 2006 
        to $31 million per month in FY 2007. This year is critical for 
        ERAM because the system is scheduled to come out of the lab 
        environment and begin real world testing. Cost increases or 
        schedule slips with ERAM will have a cascading impact on other 
        capital programs and directly affect the pace of efforts to 
        transition to the next generation system.

   FAA Telecommunications Infrastructure (FTI). FAA is 
        requesting $28 million for its effort to replace its entire 
        telecommunications system for air traffic control. In a 
        recently issued draft report to FAA, we concluded that FTI is a 
        high-risk program--with a lifecycle cost estimate of $2.4 
        billion ($310 million estimated acquisition costs and $2.1 
        billion estimated operations costs) through 2017--five years 
        longer than originally planned. We also concluded that FAA is 
        unlikely to meet its December 2007 revised completion date. In 
        fact, only months after being re-baselined in December 2004, 
        the program began falling behind its site acceptance schedule 
        (which is primarily the installation of FTI equipment) and has 
        not recovered.
        After site acceptance, three other critical steps are required 
        to transition FTI services into the NAS and begin achieving 
        cost savings. FTI is not likely to be completed on time because 
        FAA has not developed a detailed, realistic master schedule for 
        all critical steps, including identifying when each service 
        will be accepted, when services will be cut over to FTI, and 
        when existing (legacy) services will be disconnected. Further, 
        until FAA develops a realistic master schedule, it will be 
        difficult to obtain a binding commitment from the FTI 
        contractor to complete the transition by December 2007.
        Because the primary purpose of the FTI program is to lower 
        operating costs, which depend on deploying the system on 
        schedule, expected benefits from reducing operating costs are 
        eroding. For example, FAA did not realize $32.6 million in 
        reduced operating costs in FY 2005 that it expected due to the 
        limited progress made in disconnecting legacy circuits. 
        Additionally, unless FAA accelerates FTI service cutover and 
        legacy circuit disconnect rates substantially (almost 10-fold 
        over FY 2005), the agency will not realize about $102 million 
        in estimated cost savings for FY 2006.

   Advanced Technologies and Oceanic Procedures (ATOP). FAA is 
        requesting $31.3 million for ATOP. ATOP is a new automated 
        system for managing oceanic air travel. FAA is now using ATOP 
        in New York and Oakland full time, and Anchorage began initial 
        operations earlier this month. Experience thus far indicates 
        that ATOP can reduce flight times and has significant 
        productivity benefits for controllers. We note that software 
        development for ATOP has proven far more difficult and time-
        consuming than expected. FAA has increased the value of the 
        fixed-price contract several times to keep the effort on 
        schedule and is using more non-fixed-price elements of the 
        contract, which are at higher rates than what was established 
        at contract award. FAA needs to establish metrics for ATOP's 
        productivity enhancements that will help the agency determine 
        how many controllers it needs at facilities that manage oceanic 
        traffic.

   Terminal Modernization and Aging Displays. The cost to 
        complete terminal modernization remains an unknown, long 
        standing issue. FAA is now requesting $93.5 million for 
        terminal automation in FY 2007. Facing cost growth of over $2 
        billion for the Standard Terminal Automation Replacement System 
        (STARS), FAA changed its approach to terminal modernization and 
        created a new effort, called Terminal Automation Modernization/
        Replacement (TAMR). Based on TAMR results, FAA decided to 
        upgrade the displays at four sites and replace the entire 
        system at five small sites. This leaves over 100 sites that 
        still need modernization.
        Of particular concern is the replacement of aging displays at 
        four large terminal sites, such as Chicago and Denver. As we 
        noted in November 2004, recurrent problems with the aging 
        displays have safety implications. FAA decided to award a 
        competitive contract to replace the displays. FAA has not yet 
        issued the proposal to replace these displays, but expects to 
        complete this effort by 2008 and is exploring ways to expedite 
        the deployment.

    FAA Must Strengthen Controls Over Support Service Contracts. FAA 
needs to strengthen its controls over its support service contracts to 
eliminate overspending and ensure that quality services are being 
procured. In FY 2005, FAA invested about $750 million in F&E funds for 
acquiring support services. About $300 million of these services were 
obtained under three multiple-award ``umbrella'' procurement programs, 
under which companies are pre-qualified to perform individual tasks. We 
reviewed one of these procurement programs and found that it was not 
meeting FAA's needs for rapid acquisitions, quality services, or fair 
prices. We found the agreement was not structured to take advantage of 
innovative procurement techniques and contained no incentives for 
suppliers to save costs.
    Contracts awarded under this program were also poorly managed. For 
example, 87 of the 114 contracts awarded under the agreement were 
either sole-sourced or based on one bid. Our review of 10 sample 
contracts found that if all options were exercised, FAA would have 
spent at least $12 million and possibly up to $22 million more on these 
contracts alone than if it acquired these same services through one of 
FAA's other contracting vehicles.
    FAA agreed with our recommendation to terminate the program and is 
in the process of implementing corrective actions to strengthen its 
controls over support service contracts. The Administrator has issued 
instructions that FAA take a fundamental look at its controls to avoid 
unnecessary payments for these services. New controls are being added, 
including amending policies to require competitive bidding on all 
support service contracts of $1 million or more and requiring the 
Deputy Administrator's approval before allowing awards with fewer than 
three bids.
    Clearly, these are steps in the right direction--the key now is 
follow through. Moreover, given the current budget environment, we 
believe that better management of support service contracts represents 
an important area for potential savings.
    The Joint Program and Development Office and the Next Generation 
Air Traffic Management System. Major questions facing the Congress and 
the aviation community focus on how quickly and at what cost FAA can 
transition to the next generation air traffic management system to meet 
the forecasted demand for air travel. FAA's Joint Program and 
Development Office (JPDO) was mandated by Congress to develop a vision 
for the next generation air traffic management system and align the 
research efforts of several Federal agencies. FAA is requesting $18 
million specifically for the JPDO through the Agency's Research, 
Engineering, and Development account.
    The capital requirements and timeframes for implementing the next 
generation system remain unknown. Although the JPDO recently provided a 
progress report to the Congress, it was silent on complex 
implementation issues about how much funding will be needed and when. 
We understand that FAA plans to convene workshops with industry to help 
determine the requirements and cost of the next generation system. This 
will be a central issue in the discussion about how best to finance FAA 
and the shape, size, and direction of the capital program for the next 
decade. Also, to move forward FAA will have to decide what 
modifications to existing efforts are needed and which ones need to be 
accelerated or cancelled.

Airport Improvement Program
    After several years of funding increases for AIP, FAA is proposing 
a reduction in AIP funding for the second year in a row. FAA's FY 2007 
request of $2.7 billion is $764 million less than last year's 
appropriation and nearly $1 billion less than called for in Vision 100. 
FAA's FY 2007 budget request results in a 23 percent reduction in 
airport grants from last year's appropriation. The bulk of the planned 
reductions ($624 million) will occur in ``formula'' grants as 
illustrated in Table 2.

  Table 2: Reduction in AIP Formula Grants FY 2006 versus FY 2007 ($ in
                               Thousands)
------------------------------------------------------------------------
                         FY 2006    FY 2007
                         Enacted    Estimate   $ Reduction   % Reduction
------------------------------------------------------------------------
Primary Airports         $887,980   $496,000      $391,980          44.1
Cargo Service Airports   $119,851    $92,651       $27,200          22.7
Alaska Airports           $21,345    $10,673       $10,672          50.0
States (General          $684,863   $489,724      $195,139          28.5
 Aviation)
------------------------------------------------------------------------

    The significant reduction to those grants occurs because of special 
provisions of FAA's current authorization. Those provisions require 
that whenever AIP funding is $3.2 billion or more, as has been the case 
in recent years, grant funding levels were calculated based on the 
individual formula and that amount was then doubled. However, since 
this year's request is less than $3.2 billion, grant funding levels are 
calculated based on the formula alone and are not doubled.
    With the decrease in available AIP funds, FAA needs to better 
manage airport grants. One area we examined was how airports disposed 
of land acquired for noise mitigation purposes. Based on a review of 11 
airports, we found that FAA could recover an estimated $242 million for 
the Trust Fund or for other noise mitigation projects with improved 
oversight of noise land and its disposal. Each of the 11 airports in 
our review had AIP-funded noise land, ranging from nominal acreage at 
several airports to hundreds of acres at others, that either was no 
longer required for noise compatibility purposes or did not have a 
documented need for airport development. Given the current budget 
environment, we believe this is another area for potential savings.
    In addition to AIP funds, 326 of the larger U.S. airports collect 
passenger facility charges (PFCs) to finance capital projects. FAA 
estimates that airports will collect $2.5 billion in PFCs during 2006. 
Currently, PFCs are capped at $4.50 per segment of flight (a maximum of 
$18.00 on a round trip). The current cap on PFCs is an important matter 
for this Committee and has significant implications for major airport's 
capital expenditure plans. For example, one major airport--Chicago 
O'Hare--based part of its financing plan for expanding the airport on a 
PFC increase from the current maximum of $4.50 to $6.00 per segment. 
How airport projects are funded and the level of the PFC charge will be 
important issues as the Congress decides how to best finance FAA.

Observations on FAA's Current Funding Mechanisms
    The Airport and Airway Trust Fund was created in 1970 to provide a 
dedicated revenue source for funding aviation programs. Initially 
envisioned as a means to fund the infrastructure and modernization 
needs of the National Airspace System, the Trust Fund also pays for 
large portions of FAA's operating budget and for one time items such as 
security funding after the September 11th attacks.
    After several years of decline, Trust Fund revenues are increasing 
and now exceed pre-September 11th levels. As shown in Figure 2, in FY 
2005 the Trust Fund collected $10.7 billion in revenue, the second 
consecutive year Trust Fund revenues have increased. FAA estimates that 
revenues will increase to $11.1 billion in FY 2006 and $11.8 billion in 
FY 2007.



    There are several reasons for this increase. First, airfares are 
slowly rising. According to the Air Transportation Association, the 
average cost of a ticket for a 1,000-mile flight increased from $108.70 
in September 2004 to $117.90 in September 2005, an increase of over 8 
percent. In addition, the number of people flying has increased 
substantially over the past year. In its recently released aviation 
forecast, FAA estimates that domestic passenger enplanements rose an 
estimated 7 percent between FY 2004 and FY 2005, and international 
passenger enplanements have risen an estimated 12 percent over this 
same time frame.
    These changes have resulted in more passengers paying higher 
airfares, increasing collections of the 7.5 percent ticket tax. FAA 
estimates that collections of this tax rose from $4.6 billion in FY 
2004 to $5.0 billion in FY 2005. In addition, increasing domestic and 
international passenger traffic have resulted in higher segment and 
international tax collections. FAA estimates that segment tax 
collections rose from $1.7 billion in FY 2004 to $1.9 billion in FY 
2005, while international tax collections rose from an estimated $1.4 
billion in FY 2004 to an estimated $1.8 billion in FY 2005.
    Even though Trust Fund revenues are returning to levels seen in FY 
2000, they have not kept pace with FAA's budget. For FY 2007, FAA's 
budget request exceeds projected Trust Fund revenues by nearly $2 
billion. In addition, FAA's current 4-year authorization (Vision 100) 
calls for higher funding levels of modernization projects than has been 
enacted in recent years. These authorized levels are also significantly 
higher than Trust Fund revenues. As shown in Figure 3, FAA's authorized 
spending level for FY 2007 is more than $3.4 billion higher than 
projected Trust Fund revenues.



    General Fund Contribution. Historically, the General Fund has been 
used to make-up some of the difference between Trust Fund revenues and 
FAA's budget and many would argue that it is appropriate for the 
General Fund to play a part in funding FAA. As shown in Figure 4, FAA 
estimates that the General Fund will contribute $2.9 billion toward 
FAA's FY 2007 total budget, or about 21 percent of the request. This 
amount is similar to what has been contributed in the previous three 
FAA budgets.



    However, the Federal Government is operating in a deficit 
environment and is seeking ways to reduce discretionary spending. This 
year's 1-percent across-the-board spending reduction is a result of 
this environment, and FAA may not be able to rely on the General Fund 
to subsidize larger parts of its budget not covered by the Trust Fund.
    Uncommitted Balance of the Trust Fund. In the past, differences 
between FAA's budget and the Trust Fund revenues and General Fund 
contribution have been made up by drawing down the Trust Fund's 
uncommitted balance. But those actions have depleted that balance. As 
shown in Figure 5, between the end of FY 2001 and the end of FY 2006, 
the uncommitted balance of the Trust Fund has gone from $7.3 billion to 
a projected $1.7 billion. Over the next several years, using the 
uncommitted balance of the Trust Fund to make up differences between 
the Trust Fund revenues and General Fund contributions may no longer be 
a viable option as a stop-gap measure. The low uncommitted balance 
would also provide no buffer for FAA's budget should the excise taxes 
lapse, as was the case in 1997.



    As we face the next reauthorization, it is clear that other options 
need to be considered. Both Secretary Mineta and Administrator Blakey 
have begun discussions with FAA's stakeholders about alternative 
methods for financing FAA. However, as discussions regarding the next 
reauthorization begin, a much better understanding of FAA's 
requirements for the next generation air traffic control system is 
needed. Although FAA's JPDO recently provided a progress report to 
Congress, it was silent on complex implementation issues and how much 
funding will be needed and when. This will be a central issue in 
discussions about how best to finance FAA and the shape, size, and 
direction of FAA's capital needs for the next decade.
    That concludes my statement. I would be happy to answer any 
questions that you or other members of the Committee might have.
                              Enclosure 1

                Fiscal Year 2007 10 Largest F&E Projects
------------------------------------------------------------------------
                               FY 07
         Project            Request ($               Comments
                           in Millions)
------------------------------------------------------------------------
ERAM                             $375.7  En Route Automation
                                          Modernization: Replaces the
                                          Host computer hardware and
                                          software, including the Host
                                          back-up system and associated
                                          support infrastructure at 20
                                          air route traffic control
                                          centers.
Terminal ATC Facilities          $124.0  The air traffic control towers
 Replacement                              (ATCT) and terminal radar
                                          approach control (TRACON)
                                          facilities that cannot meet
                                          present day requirements are
                                          being identified for
                                          replacement. The proposed list
                                          of projects for FY 2007 will
                                          be based on FAA's Facilities
                                          Master Plan for infrastructure
                                          replacement and improvement.
WAAS                             $122.4  Wide Area Augmentation System:
                                          Provides the augmentation
                                          needed to make the GPS
                                          satellite signal fully usable
                                          for en route, terminal and non-
                                          precision approaches. We note
                                          that WAAS will primarily
                                          benefit general aviation users
                                          because commercial airliners
                                          already have on-board
                                          capabilities similar to WAAS.
ADS-B National                    $80.0  Automatic Dependent
 Implementation                           Surveillance-Broadcast: An air-
                                          to-air/air-to-ground
                                          communications, navigation,
                                          and surveillance technology
                                          that relies on GPS to
                                          broadcast the positions of
                                          properly equipped aircraft and
                                          surface vehicles.
TFM-Infrastructure                $78.9  The Traffic Flow Management
 Modernization                            (TFM) system provides direct
                                          mission support to FAA by
                                          ensuring efficient flow of air
                                          traffic through the National
                                          Airspace System.
ASDE-X                            $63.6  Airport Surface Detection
                                          Equipment-Model X: Provides
                                          surveillance equipment to help
                                          prevent runway incursions at
                                          airports.
ARTCC Modernization               $51.0  Part of FAA's continued efforts
                                          to modernize and sustain the
                                          21 Air Route Traffic Control
                                          Centers (ARTCC), and the San
                                          Juan and Guam Combined Center
                                          Radar Approach Control
                                          facilities in order to
                                          minimize delays or outages
                                          caused by infrastructure
                                          failure.
Terminal Modernization            $93.5  Standard Terminal Automation
 and Aging Displays                       Replacement System (STARS):
                                          Replaces controller and
                                          maintenance workstations with
                                          color displays, processors,
                                          and computer software at
                                          terminal air traffic control
                                          facilities. Facing cost growth
                                          with STARS, FAA changed its
                                          approach to terminal
                                          modernization limiting STARS
                                          deployments to analyze its
                                          options beyond the initial
                                          deployment phase for STARS and
                                          created a new effort called
                                          Terminal Automation
                                          Modernization/Replacement
                                          (TAMR).
Airport Traffic Control           $44.2  To upgrade and improve aging
 Tower/TRACON Facilities-                 ATCT/TRACON facilities and
 Improvements                             equipment to provide an
                                          acceptable level of service
                                          and to meet current and future
                                          operational requirements. This
                                          program also improves the
                                          capability of facilities to
                                          withstand a seismic event in
                                          accordance with FEMA and DOT
                                          directives.
ASR-11, ASR-7 & 8                 $44.1  Airport Surveillance Radar-11:
 Replacement                              Replaces aging analog radar
                                          with digital radar at small
                                          terminal facilities.
------------------------------------------------------------------------
    Total                      $1,077.4
------------------------------------------------------------------------

                              Enclosure 2

Related Office of Inspector General Reports 1998-2005
Operations
    FAA Has Opportunities To Reduce Academy Training Time and Costs by 
Increasing Educational Requirements for Newly Hired Air Traffic 
Controllers--AV-2006-021, December 7, 2005

    Audit of the Management of Land Acquired Under Airport Noise

    Compatibility Programs--AV-2005-078, September 30, 2005

    Chicago's O'Hare Modernization Program--AV-2005-067, July 21, 2005

    Report on Controller Staffing : Observations on FAA's 10-Year 
Strategy for the Air Traffic Controller Workforce--AV-2005-060, May 26, 
2005

    Airspace Redesign Efforts Are Critical To Enhance Capacity but Need 
Major Improvements--AV-2005-059, May 13, 2005

    FAA Administration and Oversight of Regionally Issued Contracts--
AV-2004-094, September 28, 2004

    FAA's Actions To Address Leave and Overtime Abuse at Five 
Locations--AV-2004-081, September 9, 2004

    Short- and Long-term Efforts to Mitigate Flight Delays and 
Congestion--CR-2004-066, June 17, 2004

    Opportunities To Improve FAA's Process for Placing and Training Air 
Traffic Controllers in Light of Pending Retirements--AV-2004-060, June 
2, 2004

    Using CRU-X To Capture Official Time Spent on Representational 
Activities--AV-2004-033, February 13, 2004

    FAA's Management of Memorandums of Understanding with the National 
Air Traffic Controllers Association--AV-2003-059, September 12, 2003

    Safety, Cost and Operational Metrics of the Federal Aviation 
Administration's Visual Flight Rule Towers--AV-2003-057, September 4, 
2003

    FAA's Oversight of Workers' Compensation Claims in Air Traffic 
Services--AV-2003-011, January 17, 2003

    FAA's National Airspace System Implementation Support Contract--AV-
2003-002, November 15, 2002

    FAA's Air Traffic Services' Policy of Granting Time Off Work To 
Settle Grievances--CC-2002-048, December 14, 2001

    Automated Flight Service Stations: Significant Benefits Could be 
Realized by Consolidating AFSS Sites in Conjunction with Deployment of 
OASIS--AV-2002-064, December 7, 2001

    Compensation Issues Concerning Air Traffic Managers, Supervisors, 
and Specialists--AV-2001-064, June 15, 2001

    Technical Support Services Contract: Better Management Oversight 
and Sound Business Practices Are Needed--AV-2000-127, September 28, 
2000

    Contract Towers: Observations on FAA's Study of Expanding the 
Program--AV-2000-079, April 12, 2000

    Staffing: Supervisory Reductions Will Require Enhancements in FAA's 
Controller-in-Charge Policy--AV-1999-020, November 16, 1998

    Personnel Reform: Recent Actions Represent Progress but Further 
Effort Is Needed To Achieve Comprehensive Change--AV-1998-214, 
September 30, 1998
Acquisition and Modernization
    FAA's En Route Modernization Program Is On Schedule But Steps Can 
Be Taken to Reduce Future Risks--AV-2005-066, June 30, 2005

    Status of FAA's Major Acquisitions: Cost Growth and Schedule Delays 
Continue To Stall Air Traffic Modernization--AV-2005-061, May 26, 2005

    Report on Terminal Modernization: FAA Needs To Address Its Small, 
Medium, and Large Sites Based on Cost, Time, and Capability--AV-2005-
016, November 23, 2004

    Observations on FAA's Controller-Pilot Data Link Communications 
Program--AV-2004-101, September 30, 2004

    FAA's Advanced Technologies and Oceanic Procedures--AV-2004-037, 
March 31, 2004

    FAA Needs To Reevaluate STARS Costs and Consider Other 
Alternatives--AV-2003-058, September 10, 2003

    Status of FAA's Major Acquisitions--AV-2003-045, June 27, 2003

    Integrated Terminal Weather System: Important Decisions Must Be 
Made on the Deployment Strategy--AV-2003-009, December 20, 2002

    FAA's Progress in Developing and Deploying the Local Area 
Augmentation System--AV-2003-006, December 18, 2002

    Follow-up Memo to FAA on STARS Acquisition--CC-2002-087, June 3, 
2002

    Letter Response to Senator Richard Shelby on FAA's Advanced 
Technologies and Oceanic Procedures (ATOP)--CC-2001-210, April 12, 2002

    Status Report on the Standard Terminal Automation Replacement 
System--AV-2001-067, July 3, 2001

    Efforts to Develop and Deploy the Standard Terminal Automation 
Replacement System--AV-2001-048, March 30, 2001
Aviation Safety
    Review of Air Carriers' Use of Non-Certified Repair Facilities--AV-
2006-031, December 15, 2005

    FAA Safety Oversight of an Air Carrier Industry in Transition--AV-
2005-062, June 3, 2005

    Report on New Approaches Needed in Managing FAA's Hazardous 
Materials Program Federal Aviation Administration--SC-2005-015, 
November 19, 2004

    Report on FAA Controls Over the Reporting of Operational Errors--
AV-2004-085, September 20, 2004

    Review of Air Carriers' Use of Aircraft Repair Stations--AV-2003-
047, July 8, 2003

    Operational Errors and Runway Incursions--AV-2003-040, April 3, 
2003

    Air Transportation Oversight System (ATOS)--AV-2002-088, April 8, 
2002

    Oversight of FAA's Aircraft Maintenance, Continuing Analysis, and 
Surveillance Systems--AV-2002-066, December 12, 2001

    Further Delays in Implementing Occupational Safety and Health 
Standards for Flight Attendants Are Likely--AV-2001-102, September 26, 
2001

    Despite Significant Management Focus, Further Actions Are Needed To 
Reduce Runway Incursions--AV-2001-066, June 26, 2001

    These reports can be reviewed on the OIG website at http://
www.oig.dot.gov.

    Senator Burns. Thank you very much.
    Now we'll hear a statement from Dr. Gerald Dillingham, 
director of physical infrastructure for the GAO. And thank you 
for coming this morning.

 STATEMENT OF GERALD L. DILLINGHAM, Ph.D., DIRECTOR, PHYSICAL 
            INFRASTRUCTURE ISSUES, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Dr. Dillingham. Thank you, Chairman Burns, Chairman 
Stevens, Senator Pryor.
    My testimony this morning is in response to your request 
that the GAO undertake an analysis of the financial viability 
of the Aviation Trust Fund to support FAA's budget request 
under Vision 100 authorization and the President's 2007 budget 
proposal. Historically, annual revenues going into the Trust 
Fund have fluctuated, but generally they have exceeded the 
amount appropriated from the Trust Fund for FAA's budget. 
However, for each of the past 5 years, Trust Fund revenues have 
been below the level forecasted by FAA. As a result, the 
uncommitted balance of the Trust Fund has been used to 
substitute for the revenues that were forecasted, but did not 
materialize, to fund the FAA. This has caused the uncommitted 
balance to decline. By the end of 2006, we expect that the 
uncommitted balance will have declined by about $5.6 billion, 
or 77 percent, since FY 2001. This trend of declining Trust 
Fund balances is particularly important if actual revenues are 
lower than forecasted revenues due to unforeseen events, such 
as another 9/11 terrorist attack, a pandemic, or even a lapse 
in the aviation taxes. If there is a revenue shortfall and 
there is no uncommitted balance, either FAA would have to 
reduce spending or Congress would have to appropriate 
additional money from the General Fund.
    Our work shows that if Congress continues to follow the 
Vision 100 formula for FY 2007, there will be little change in 
the uncommitted balance, which is forecasted to be about $1.7 
billion at the end of this year. If, instead, Congress adopted 
the President's budget proposal for 2007, the fund's 
uncommitted balance is expected to rise to about $2.7 billion. 
This higher uncommitted balance would occur, because the 
President's budget calls for an appropriation from the Trust 
Fund which is about a billion dollars less than under Vision 
100. The largest share of this spending reduction comes from 
the AIP program.
    Mr. Chairman, I want to underline the fact that these Trust 
Fund projections are very much dependent upon achieving 
forecasted traffic levels and airfares. We note, however, that 
in each of the last 5 years, FAA has overestimated the revenues 
expected to go into the Trust Fund. During 2003 and 2004, the 
actual revenues fell short of forecasted revenues by almost a 
billion dollars each year.
    Mr. Chairman, as the Administrator said in her statement, 
we recognize that one of the difficulties in making more 
accurate forecasts is because when FAA makes the forecast 
that's contained in the President's budget, it is based on 
information available in the first quarter of the preceding 
year. To take this possibility of revenue shortfalls into 
account, we conducted a sensitivity analysis in which we 
examined the viability of the Trust Fund assuming 5 and 10 
percent less than forecasted tax revenues. The results of that 
analysis shows that if the revenues are 5 percent lower than 
the projected levels for both 2006 and 2007, the Trust Fund's 
uncommitted balance would fall to less than $1 billion dollars 
under both the President's proposal and the Vision 100 
authorization by the end of FY 2007. If revenues are 10 percent 
lower than projected for those 2 years, the uncommitted balance 
would reach zero by the end of FY 2007 under Vision 100, and 
about $500 million under the President's budget proposal.
    The question that remains is how revenues beyond 2007 
compare with projected costs for the development, operation, 
and maintenance of the Nation's ATC system. As has been pointed 
out by the previous witnesses, FAA will incur significant costs 
to maintain and modernize the current ATC system and create the 
infrastructure that will be the basis of the next generation 
air traffic control system.
    Mr. Chairman, we believe that the discussion about how to 
fund FAA beyond 2007 must focus not only on providing a funding 
regime in which revenues are better aligned with FAA costs, the 
discussion should also focus on cost control, air traffic 
facilities, and regional office consolidation, as well as 
continuing improvement in the FAA's management of operations.
    At the request of this Committee, we are currently 
examining a variety of potential funding options and a range of 
possible cost-saving opportunities. We expect to report to you 
on these analyses in the coming months.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Dillingham follows:]

 Prepared Statement of Gerald L. Dillingham, Ph.D., Director, Physical 
      Infrastructure Issues, U.S. Government Accountability Office

    Mr. Chairman and Members of the Subcommittee:
    We are pleased to be here today to discuss the financial viability 
of the Airport and Airway Trust Fund (Trust Fund) and the President's 
proposed 2007 budget for the Federal Aviation Administration (FAA). 
Over the course of FAA's last two authorizations, FAA's appropriations 
increased from $9.8 billion in Fiscal Year 1999 to $14.3 billion this 
Fiscal Year (2006), and Fiscal Year 2007 is projected to be $15.2 
billion. \1\ In this testimony, we will present the results of our 
analysis of the uncommitted balance \2\ of the Trust Fund and related 
issues as requested by this Committee.
---------------------------------------------------------------------------
    \1\ Unless otherwise specified, all dollar amounts in this 
testimony are in nominal dollars and all data discussed and presented 
are on a fiscal year basis.
    \2\ The Trust Fund's uncommitted balance represents money against 
which there is no outstanding budget commitment or budget authority to 
spend.
---------------------------------------------------------------------------
    FAA is currently funded by a combination of Trust Fund revenues 
derived from excise taxes levied on a variety of aviation activities 
and from General Fund revenues. The Trust Fund's uncommitted balance 
depends on the revenues flowing into the fund and the appropriations 
made available from the fund for various spending accounts. Policy 
choices, structural changes in the aviation industry, and external 
events have affected revenues flowing into and out of the fund. For 
example, the uncommitted balance has been declining in recent years 
because Trust Fund revenues for the last 5 years have been less than 
FAA's forecasted levels. Our analysis includes scenarios in which Trust 
Fund revenues continue to fall short of forecasted levels. Under these 
scenarios, the Trust Fund balance continues to decline, and in one 
scenario, the balance reaches zero by the end of 2007. We believe these 
scenarios raise concerns because in the past the Trust Fund's 
uncommitted balance was used to offset lower-than-expected Trust Fund 
revenues and decreased General Fund contributions. FAA could help 
address these concerns by continuing to look for ways to improve 
efficiency and reduce costs. However, the zero-balance scenario would 
most likely have implications for the Congress in funding FAA programs. 
In addition, we believe that the information about the financial 
viability of the Trust Fund will be critical to congressional decision 
making regarding appropriations for FAA's 2007 budget.
    The Trust Fund was established by the Airport and Airway Revenue 
Act of 1970 (Pub. L. 91-258) to help fund the development of a 
nationwide airport and airway system and to fund investments in air 
traffic control facilities.
    It provides all of the funding for FAA's capital accounts, 
including: the Airport Improvement Program (AIP), which provides grants 
for construction and safety projects at airports; the Facilities and 
Equipment (F&E) account, which funds technological improvements to the 
air traffic control system; and the Research, Engineering, and 
Development (RE&D) account, which funds continued research on aviation 
safety, mobility, and environment issues as well as the FAA's portion 
of the Joint Planning and Development Office. In addition, at various 
times during its history, the Trust Fund has funded all or some portion 
of FAA's operations. In 2005, expenditures from the Trust Fund were 
made among the four accounts shown in figure 1.



    To fund these accounts, the Trust Fund is credited with revenues 
from a variety of excise taxes related to passenger tickets, passenger 
flight segments, international arrivals/departures, cargo waybills, and 
aviation fuels. These taxes are scheduled to expire at the end of 2007. 
Including interest earned on its balances, the Trust Fund received 
$10.8 billion in 2005. Table 1 shows the distribution of Trust Fund 
revenues for 2005 by source.

  Table 1: Sources of Trust Fund Revenue, Fiscal Year 2005 (Dollars in
                                millions)
------------------------------------------------------------------------
                  Revenue source                      Amount    Percent
------------------------------------------------------------------------
Passenger ticket tax                                   $5,161         48
Passenger flight segment tax                            1,900         18
Cargo tax                                                 461          4
Fuel tax                                                  971          9
International departure/arrival tax                     1,922         18
Interest                                                  440          4
Refunds *                                               (101)        (1)
------------------------------------------------------------------------
    Total                                             $10,754        100
------------------------------------------------------------------------
Source: GAO analysis of FAA data.
* Refunds include: refund of aviation fuel other than gas
  (noncommercial), refund of aviation gasoline (noncommercial), and
  other refunds/credits.

    Although expenditures from the Trust Fund exceeded revenues in 
2005, since the Trust Fund's creation in 1970, revenues have in 
aggregate exceeded spending commitments, resulting in a surplus or an 
uncommitted balance. At the end of 2005, the Trust Fund's uncommitted 
balance was about $1.9 billion.
    Policy choices, structural changes in the aviation industry, and 
external events have affected revenues flowing into and out of the fund 
and have caused some aviation stakeholders to speculate about the 
fund's financial status. Some aviation stakeholders have said that 
there is a reason to be concerned about the financial condition of the 
Trust Fund because in recent years, revenues have not kept pace with 
funding commitments and the uncommitted balance has been used to close 
the gap. Other aviation stakeholders state that the fund is healthy 
because revenues are currently increasing and are expected to continue 
to increase.
    The focus today is the Trust Fund's revenues and balances over the 
past few years; the projected near-term future of the Trust Fund, 
considering the President's 2007 budget request for FAA; and policy 
decisions that may affect longer-term Trust Fund balances. The scope of 
our work and the specific methodology are discussed at the end of my 
statement.

Recent Trends of the Trust Fund and the Effect on the Fund's 
        Uncommitted Balance

Revenues Have Generally Increased with Some Fluctuations
    The Trust Fund's uncommitted balance depends on the revenues 
flowing into the fund and the appropriations made available from the 
fund for various spending accounts. The amount of revenue flowing into 
the Trust Fund has fluctuated from year to year but has generally 
trended upward, as shown in figure 2. Some of the fluctuation has 
resulted from changes in economic conditions, but some has been due to 
other factors. For example, during 1981 and 1982, revenues (including 
interest) flowing into the fund averaged about $629 million--the lowest 
amount in the fund's history--because of a lapse in the collection of 
aviation taxes. In 1999, revenue flowing into the fund totaled about 
$11.1 billion, the largest amount in the fund's history.



    However, after revenues peaked in 1999, the amount of revenue 
flowing into the Trust Fund decreased in each of the next 4 years, 
reaching a level of about $9.3 billion in 2003. A number of factors 
contributed to this decrease. For example, within the airline industry, 
the growth of the Internet as a means to sell and distribute tickets, 
the growth of low-cost airlines, and fare reductions by legacy carriers 
\3\ all transformed the industry and led to lower average fares. These 
lower fares have resulted in lower ticket taxes and less revenue going 
into the Trust Fund. In addition, in the same time period, a series of 
largely unforeseen events, including the September 11, 2001, terrorist 
attacks, war in Iraq and associated security concerns, the Severe Acute 
Respiratory Syndrome (SARS), and global recessions seriously affected 
demand for air travel, resulting in a decrease in airline industry and 
Trust Fund revenue.
---------------------------------------------------------------------------
    \3\ Generally, legacy carriers are those network airlines whose 
interstate operations predate airline deregulation of 1978 and that 
have adopted a hub-and-spoke network model.
---------------------------------------------------------------------------
    Since the beginning of 2004, however, Trust Fund revenues have been 
increasing. In fact, revenues from tax sources in 2005 were nearly as 
high as in 1999, although total revenues were still below peak level 
because less interest was earned due to a lower Trust Fund balance.

Expenditures from the Trust Fund Have Also Generally Increased
    Similar to the revenue picture, the annual amount of expenditures 
from the Trust Fund also has generally increased since the fund's 
inception, but with some fluctuation. One source of fluctuation has 
been that the share of FAA operations paid by the Trust Fund has varied 
over time. \4\ Figure 3 shows how expenditures from the fund have 
changed over time and how they have compared with revenues. In some 
years, they have exceeded revenues, but in other years they have been 
less than revenues.
---------------------------------------------------------------------------
    \4\ In a majority of years since its inception, the Trust Fund has 
funded some portion of FAA's operations.



Appropriations from Trust Fund Are Now Linked to Projected Revenues
    In the Wendell H. Ford Aviation Investment and Reform Act for the 
21st Century (AIR-21), the Congress created a link between Trust Fund 
revenues and appropriations from the fund to try to ensure that all 
fund receipts, including interest, were committed to spending for 
aviation purposes on an annual basis. According to a provision of AIR-
21, which was continued in the Century of Aviation Reauthorization Act 
(Vision 100)--FAA's current authorizing legislation--total 
appropriations made available from the fund in each fiscal year shall 
equal the level of receipts plus interest in that year, and these 
appropriations can be used only for aviation investment programs, which 
are defined as FAA's capital accounts plus the Trust Fund's share of 
FAA operations. Further, the level of receipts was specified to be the 
level of excise taxes plus interest credited to the fund for a fiscal 
year as set forth in the President's budget baseline projection for 
that year.

Trust Fund's Uncommitted Balance Has Been Declining in Recent Years
    As shown in figure 4, with the exception of its first four years, 
the Trust Fund has ended each year with an uncommitted balance; 
however, the amount of the uncommitted balance has fluctuated 
substantially over time, generally increasing when Trust Fund revenues 
exceed appropriations from the fund and decreasing when they are less 
than appropriations. As noted in the figure, the uncommitted balance 
has decreased substantially in recent years. The Trust Fund's 
uncommitted balance peaked at over $7 billion in 1991, 1999, and 2001. 
In contrast, because of lapses in the taxes that accrue to the fund, at 
the end of 1982, the uncommitted balance was about $2.1 billion, and at 
the end of 1997, it was about $1.4 billion. Specifically, the Trust 
Fund's uncommitted balance decreased from $7.3 billion at the end of 
2001 to $4.8 billion at the end of 2002 and has continued to decrease 
since then, reaching about $1.9 billion at the end of 2005. However, 
the rate of decrease has slowed; in 2005, the uncommitted balance 
decreased by about $500 million, after falling by at least $900 million 
in each of the previous 3 years.



    The uncommitted balance has fallen in recent years because Trust 
Fund revenues have fallen short of forecasted levels by over $1 billion 
in 3 out of the last 4 fiscal years. For example, in 2001, the 
difference between forecasted revenue and actual revenue coming in to 
the Trust Fund was $383 million less than expected. In 2002, the 
difference jumped to $2.3 billion due to the impact that unanticipated 
external events such as the September 11, 2001, terrorist attacks had 
on the aviation industry. Residual effects and other factors such as 
the war in Iraq and the SARS outbreak lasted through 2003 and 2004, 
with each year's actual revenues coming in at least $1 billion below 
forecasted revenues.
    As mentioned above, under Vision 100 and its predecessor, AIR-21, 
appropriations made available from the Trust Fund are based on 
forecasted revenues. \5\ Thus, if actual revenues approximate 
forecasted revenues, there should be no substantial change in the 
uncommitted balance. However, as shown in figure 5, for each year 
beginning with 2001, actual revenues, including interest, have been 
less than forecasted, so that in each year since then, the uncommitted 
balance has fallen.
---------------------------------------------------------------------------
    \5\ FAA has developed econometric forecast models and established a 
forecast process that attempt to anticipate changes that may affect the 
future direction of the aviation industry. Using this forecast process, 
FAA annually provides 12-year forecasts of aviation demand and activity 
measures that are used for aviation-related personnel and facility 
planning. FAA also occasionally sponsors workshops that focus on the 
forecasting process and ways to improve the reliability and utility of 
forecasting results. Some errors in forecasting can be attributed to 
unanticipated external events and their impact on activity (e.g., 
terrorism, the outbreak of SARS, rapid rise in oil prices); others can 
be attributed to errors in the assumptions (e.g., passenger trip 
length, seats per aircraft, economic growth) behind the forecasts.



Fund's Uncommitted Balance Is Projected to Be Positive through 2007 but 
        Depends on Realization of Forecasted Passenger Traffic Levels 
        and 
        Airfares
    Based on its revenue forecast and appropriations for 2006, FAA 
forecasts that the Trust Fund's uncommitted balance will decrease by 
the end of 2006 to about $1.7 billion. FAA forecasts that if, for 2007, 
the Congress continues to follow the Vision 100 formula for linking 
budget resources made available from the fund to expected revenues, 
then there will be little change in the uncommitted balance--$1.7 
billion--during that year. If, instead, the Congress adopts the 
President's budget request for FAA for 2007, FAA forecasts that the 
fund's uncommitted balance by the end of 2007 will rise to about $2.7 
billion. This higher forecasted uncommitted balance occurs because the 
President's budget calls for an appropriation from the Trust Fund that 
is about $1 billion lower than the Vision 100 formula. In addition, 
compared with Vision 100, the President's budget calls for a reduction 
in the appropriation to FAA from the General Fund of about $500 
million. Thus, in total, compared with Vision 100, the President's 
budget calls for a reduction of about $1.5 billion in FAA's 
appropriation. Figure 6 shows the forecasted year-end uncommitted 
balance under both scenarios through 2007.



    While the President's budget calls for making a smaller 
appropriation available from the Trust Fund than under Vision 100, 
largely due to reductions in the AIP, it calls for greater reliance on 
the Trust Fund to fund FAA's operations. Vision 100 uses the formula 
created in AIR-21 to determine how much funding for FAA operations 
should come from the Trust Fund, but the President's budget proposal 
does not use this formula. Under Vision 100, the formula makes the 
amount of Trust Fund revenue that will be authorized for FAA operations 
and RE&D in a given year equal to projected Trust Fund revenues (as 
specified in the President's budget) minus the authorizations for the 
capital accounts (AIP and F&E) in that year. Thus, under Vision 100, 
the Trust Fund is projected to support $4.6 billion of FAA's 
operations, or 57 percent. In contrast, the President's budget 
specifies a set amount of Trust Fund revenue to be used for FAA 
operations. Therefore, if Congress enacts the President's budget 
request for FAA, the Trust Fund would provide $5.4 billion for FAA's 
operations in 2007, or 65 percent of its total estimated cost for 
operations.
    Although the Trust Fund is projected to have a surplus at the end 
of 2007 under each of the expenditure proposals, this projection 
depends to a significant extent on achieving forecasted commercial 
passenger traffic levels and airfares, as they have the largest impact 
on the amount of revenues flowing into the Trust Fund. We recognize 
that it is difficult to anticipate future events that may significantly 
affect the demand for air travel, particularly since FAA makes a 
forecast that is contained in the President's budget based on 
information available in the first quarter of the preceding fiscal 
year. However, our analysis shows that for each of the last 5 years, 
FAA's projected revenue forecast for the President's budget was higher 
than the actual amount of revenue received, as shown in figure 5.
    Given the differences in recent years between the forecasted 
revenue and actual amount of revenue received, we conducted sensitivity 
analyses to estimate what would happen to the Trust Fund's uncommitted 
balance if Trust Fund revenues in 2006 and 2007 fall below the levels 
that FAA projected in March 2006. \6\ For example, table 2 shows the 
projected Trust Fund balances under Vision 100 and the President's 
proposal and the impact if revenues, for whatever reason, are 5 percent 
or 10 percent less than currently projected. If revenues are 5 percent 
lower than projected, which they were in 2001, the Trust Fund would 
have a small but positive uncommitted balance under both expenditure 
proposals--Vision 100 and the President's budget proposal. However, if 
the revenues were 10 percent lower than projected, as they were in 
2004, the uncommitted balance would drop below half a billion dollars 
under the President's proposal and would fall to zero by the end of 
2007 under Vision 100.
---------------------------------------------------------------------------
    \6\ We did not conduct a sensitivity analysis beyond 2007 because 
both the current FAA authorization and the excise taxes that fund the 
Trust Fund are scheduled to expire at the end of 2007, making it 
difficult to project the long-term financial outlook of the Trust Fund.



    We believe these scenarios raise concerns because, in the past, the 
Trust Fund's uncommitted balance was used to offset lower-than-expected 
Trust Fund revenues and decreased General Fund contributions. FAA could 
help address these concerns by continuing to look for ways to improve 
efficiency and reduce costs. However, the zero-balance scenario would 
most likely have implications for Congress in funding FAA programs.
    To keep the Trust Fund from declining, the Congress could use an 
alternate basis for authorizing and appropriating money out of the 
Trust Fund that does not rely on the revenue forecast in the 
President's budget. One alternative that would still maintain the link 
between revenues and spending would be for appropriations from the 
Trust Fund to be based on the actual Trust Fund revenues from the most 
recent year for which data are available. That would mean, for example, 
that the Congress would appropriate for 2007 the Trust Fund revenues 
received in 2005. Although that would make it less likely that the 
Trust Fund balance would decline further, it could also mean that a 
smaller appropriation would be made available for aviation. Whereas 
Trust Fund revenues in 2005 were about $10.8 billion, the President's 
budget for 2007 forecasts Trust Fund revenues of about $11.8 billion.

Future Policy Decisions Will Affect the Trust Fund Balance beyond 2007
    Future policy decisions concerning spending for aviation will 
affect the Trust Fund balances beyond 2007. If General Fund 
appropriations for FAA's operations are maintained at recent levels, 
future projected Trust Fund revenues under the current tax structure 
may be insufficient to pay for the expenditures that FAA says are 
needed to maintain and modernize the current system. According to FAA, 
its aviation infrastructure is aging, and replacing it will cost $32 
billion. Even more, Trust Fund revenues would be needed to pay for 
those expenses if General Fund appropriations for operations are 
reduced. Insufficient Trust Fund revenues could result in critically 
needed capacity-enhancing air traffic control modernization investments 
being deferred or canceled at a time when commercial activity is 
returning to or exceeding pre-September 11 levels. \7\
---------------------------------------------------------------------------
    \7\ We note that the Trust Fund projections for 2008-2011 contained 
in the President's budget show a large increase in the fund's 
uncommitted balance, reaching $15.5 billion by the end of 2011. 
Officials at the Office of Management and Budget told us that the 
underlying assumption for the commitment of budget resources from the 
fund that yields this projection is based on Administration policies 
for reducing--or limiting the increase in--nondefense, nonhomeland 
security discretionary spending. Thus, the projection does not account 
for challenges particular to any agency, such as FAA's projected 
increase in workload or future air traffic control modernization 
spending. Accordingly, we think the $15.5 billion projection is of 
limited value.
---------------------------------------------------------------------------
Funding Will Be Needed for the Next Generation Air Transportation 
        System
    In addition to costs projected just to maintain FAA's current 
system, additional capital expenses are on the horizon to modernize the 
system. Vision 100 directed the administration to develop a 
comprehensive plan for a Next Generation Air Transportation System 
(NGATS) that can accommodate the changing needs of the aviation 
industry and meet air traffic demands by 2025. The act chartered the 
Joint Planning and Development Office (JPDO) within FAA to coordinate 
Federal and private-sector research related to air transportation. FAA 
leads the interagency effort that leverages expertise and resources 
within the Departments of Transportation, Defense, Homeland Security, 
and Commerce as well as at the National Aeronautics and Space 
Administration and the White House Office of Science and Technology 
Policy. The Congress appropriated $5 million to FAA in seed money in 
2005, and appropriated $18 million to FAA for JPDO in 2006, while 
additional funding and in-kind support comes from the participating 
agencies. For 2007, the President's budget requests $18 million for 
JPDO critical system engineering and planning efforts for NGATS, as 
well as funding for two NGATS systems at a combined cost of $104 
million. \8\
---------------------------------------------------------------------------
    \8\ The President's Fiscal Year 2007 budget requests $80 million 
for the Automatic Dependent Surveillance-Broadcast system to replace 
antiquated radars and outmoded technology. The budget also requests $24 
million to begin developing System Wide Information capabilities that 
will make advanced information distribution and sharing capabilities 
possible.
---------------------------------------------------------------------------
    JPDO published the Integrated Plan for the Next Generation Air 
Transportation System in December 2004, but the plan did not specify 
what new capabilities would be pursued or how much they would cost to 
implement and maintain. Vision 100 also directed that an annual 
progress report, including any changes to the Integrated Plan, be 
submitted at the time of the President's budget request. In March 2006, 
JPDO published its 2005 Progress Report to the Next Generation Air 
Transportation System Integrated Plan and reported it is working to 
identify the longer-term costs. JPDO conducted a financial analysis of 
the air traffic management portions of NGATS, including examining the 
existing 2025 operational vision, to understand the hardware and 
software components that may be required to implement NGATS. However, 
because of the high level of uncertainty in some areas and a 
significant number of assumptions in others, JPDO reported more work is 
required before this analysis can be useful and credible. \9\ A clear 
understanding of proposed future capabilities for NGATS (and how they 
will be paid for) will be important as the Congress prepares to 
reauthorize FAA programs and explores financing mechanisms.
---------------------------------------------------------------------------
    \9\ In order to address these matters and to better understand the 
costs and benefits of NGATS, JPDO has asked the NGATS Institute to host 
a forum in the spring of 2006, so that the critical assumptions and 
uncertainties underlying any cost-benefit effort can be scrutinized and 
validated. In addition, further detailed studies will focus on the 
near-term costs and benefits that will be used to inform agency 
planning activities over the next 5 years. JPDO will then expand its 
cost analysis to consider the expected total systems costs for NGATS.
---------------------------------------------------------------------------
Continued Efforts for Cost Control Are Necessary
    While FAA has made great efforts in its cost-control program, 
cutting costs will remain a challenge for FAA well into the future. In 
2005, FAA outsourced its flight service stations to a private 
contractor, resulting in total savings estimated at $2.2 billion. Also 
in 2005, FAA put in place a number of cost-control initiatives that 
affected smaller programs and that, if successful, will generate 
smaller levels of savings. We are reviewing options to fund FAA, at the 
request of this Subcommittee, and we will address this issue in detail 
later this year.
    Although FAA has initiated several of these cost-control measures, 
these initiatives alone cannot reduce expenses enough to free up 
sufficient Trust Fund revenues to pay for the expenditures that FAA 
says are necessary to maintain and modernize the current airspace 
system, let alone finance future NGATS initiatives. Through the 
reauthorization process, the Congress will determine both the level of 
appropriations for aviation and the way in which that commitment will 
be funded. Congressional decisions pertaining to the link between 
annual Trust Fund revenues and appropriations made available for 
aviation programs, as well as the method for funding the Trust Fund, 
will continue to influence future Trust Fund balances.
    To assess the current financial status and projected financial 
viability of the Airport and Airway Trust Fund, we obtained financial 
data from FAA and interviewed FAA officials familiar with the 
information. To assess the comparisons of Vision 100 with the 
President's budget, we analyzed the legislation and the 
Administration's 2007 budget proposal. We used a sensitivity analysis 
to project what would happen if Trust Fund revenues in Fiscal Years 
2006 and 2007 were 5 percent and 10 percent lower than the levels 
projected by FAA in March 2006 under each of these proposals. 
Accordingly, our findings on the financial outlook of the Trust Fund 
are based on GAO projections, not FAA's. We performed our work in 
February and March 2006 in accordance with generally accepted 
government auditing standards.
    Mr. Chairman, this concludes my prepared statement. At this time, I 
would be pleased to answer any questions that you or other Members of 
the Subcommittee may have.

    Senator Burns. Thank you. We appreciate the work that you 
do.
    We've been joined by Senator Pryor from Arkansas. And, 
Senator Pryor, do you have a statement or----
    Senator Pryor. No, thank you.
    Senator Burns. We'll go into our questions. And I 
appreciate the testimony from all of you.
    Ms. Blakey, FAA has forecast dramatic growth in the 
aviation industry. And I just want us to start off with the 
question, if we have increased load factors--in other words, 
the passengers are coming back--and yet, we depend on that 7.5 
percent for the majority of the lion's share of your support in 
the--of this department, has those increased riderships had any 
effect on the revenue that comes into the FAA?
    Ms. Blakey. Certainly as the numbers of passengers go up, 
we see increased revenue. The question, of course, is what will 
happen with ticket prices, because when those prices begin to 
fall, obviously there's an offset there, and we've watched 
ticket prices falling dramatically----
    Senator Burns. In other words the----
    Ms. Blakey.--over the last few years.
    Senator Burns.--the increase in load factors hasn't taken 
up the slack for the loss of the price of a ticket.
    Ms. Blakey. No. We do think there's going to be a bit of an 
uptick this year in the price of tickets, maybe as much as 10 
percent. But, then we think it's going to start dropping again. 
So, it's a very volatile thing, and it really doesn't relate to 
the workload.
    Senator Burns. How can we justify the $765 million cut to 
the AIP program, then?
    Ms. Blakey. Mr. Chairman, it's a very, very tight budget 
environment. I will have to just start right there. Because I 
think that we see over the last 5 years that there has been 
very substantial investment in the airport community. And last 
year we pointed out that the airport community's own assessment 
projecting future investments--this is a report called the 
NPIAS, which looks at all kinds of capital investments--was 
down about 15 percent. We also saw that private investment out 
there, in terms of bond issuance, et cetera, was down in the 
airport arena. This year, it is not as clear as that. We see 
about a 3 percent uptick in that same measurement.
    But the fact of the matter is, there has been very 
substantial investment, and the funds are very much needed in 
other aspects of aviation investment.
    Senator Burns. When I look at this--and, of course, your 
request for the cuts that are being indicated now by the 
President's budget--do you go down to OMB and try to make your 
case that this is not a good idea?
    Ms. Blakey. Senator, as you can appreciate, we have robust 
debates within the Administration, talking about relative 
needs. There's no question about the fact that healthy 
investment in airports is critical to our Nation's economy. I 
think the question is at what pace. And at this point, given 
competing needs, that's where these decisions get sorted out.
    Senator Burns. Mr. Dillingham, you've done good work and 
reviewed the AIP program over the years. Give me your bottom 
line. What do you think the effect of that is going to have on 
the system? And how do we approach this? Do we approach it from 
a revenue side, or is there any room for efficiency and 
efficiency savings?
    Dr. Dillingham. Mr. Chairman, I want to start with 
reiterating what the Administrator just said, that after 9/11 
there was a slowing of need for infrastructure, the passenger 
level was down, and, therefore, there were not that many 
requests for AIP money. And that's sort of reflected at this 
point. Also, what we found in our analysis is that in a couple 
of cases the AIP program has been used almost as a contingency 
fund. And, by that example, I mean, that right after 9/11 about 
a half a billion dollars was taken from the AIP program for 
security purposes. And as recently as last year, there was 
another hundred million or so taken to use for Katrina relief.
    So, I think in the short term, the AIP request is probably 
around the right mark, at this point. But, again, I emphasize 
that this is probably in the short run, rather than in the 
longer term, because traffic is increasing. And, as the 
Administrator said, they're seeing, now, an uptick in requests 
for AIP funds. And, as always, the priorities across the Nation 
in the budget are such that, tough choices have to be made.
    Senator Burns. Thank you.
    Senator Stevens?
    The Chairman. Thank you very much, Mr. Chairman.
    It will surprise no one that I want to get a little 
provincial here today. But, as I said, we have 241 different 
little villages that, of them, 159 can be reached only by air. 
Under this proposal, the funding for those small airports is 
zero. We have the largest cargo landing airport in tonnage, in 
the country, I believe, now, at Anchorage. And the funding for 
cargo airports is reduced by $27.2 million. Now, that is one 
function that earns money. And yet it has seen a substantial 
reduction.
    The Capstone and weather camera functions of Alaska, which 
are part of the safety system we started when we first started 
reviewing safety in Alaska, we found that one out of 11 pilots 
in Alaska die. And we have turned around the death rates. And 
we turned around the crash rates. It is safer now to fly in 
Alaska than it is in most parts of the country. But this budget 
reduces, by $23.3 million, the funding for the Alaska Weather 
and Capstone. We had a $5 million contribution to the Aviation 
Safety Program in Alaska. That is zeroed out.
    One of our volcanoes is spewing out as I speak, and Alaska 
Observatory funding for the FAA functions associated with that, 
which is the--really, the wind profiling and to determine where 
the ash goes when the volcanoes go up--and we have more 
volcanoes in Alaska than any other State of the Union. We, as 
you know, almost lost a Korean liner, because they did not know 
where the ash was. We have not had any such incident, although 
we've had several volcanoes erupt since that time. That 
contribution of FAA has been zeroed out.
    And we have waited in line to be--have the LORAN-C 
upgrades. Strangely enough, although they're the most 
functional and the most--we depend on them more than anyone, 
the LORAN-C upgrades that have not been completed are in 
Alaska. These are the last stations to be upgraded. Once again, 
our stations were last in line, and now that function is zeroed 
out.
    I have reason to believe that this budget was prepared 
before the fight over earmarks was started. And I'm certain 
that people at the budget, and perhaps even in the FAA, thought 
that this former Chairman of the Appropriations Committee, and 
now Chairman of Commerce, would find ways to restore those 
moneys. It appears now that's going to be almost impossible.
    Now, my question to you is, How do we function in Alaska, 
where there are no trains, there's one train, but into those 
villages, no trains, no buses, no taxis, no access, except by 
air--how do we function in Alaska, which is one-fifth the size 
of the United States, if the bulk of the cuts of the FAA are 
assessed to Alaska?
    Ms. Blakey. Well, I can promise, Mr. Chairman, there is 
certainly no intent that the bulk of the cuts, in any way, 
would be assessed to Alaska, because I cannot think of a state 
in the Nation where aviation is more critical. Montana, of 
course, certainly, Chairman Burns, is also one that depends a 
great deal on aviation. And we're acutely conscious of the fact 
that the program that you mentioned, Capstone, has been a 
tremendous success. In fact, I think----
    The Chairman. It's now being demonstrated worldwide. And 
I----
    Ms. Blakey. Yes.
    The Chairman.--flew on one of the first Capstone missions, 
to determine if that's--but, again, I have no way to explain 
this to my people, other than to say, well, I think they 
expected me to put them back in as we adjusted the budget. But 
that, as I said, under the current circumstance, I think, is 
next to impossible this year.
    Ms. Blakey. Well, what I would point out is this. On the 
airport funding, despite the fact that the funding under the 
formulas that are there for the AIP program currently, the 
small nonprimary airports do not receive passenger entitlement 
funds like they have in the past. They've, on average, gotten 
about $900,000 over the last 5 years. And this year that would 
not be the case under the existing formulas.
    I would also point out, however, they are eligible for 
discretionary funding. And, certainly, where there is great 
need, I would expect, from a safety standpoint, that will be a 
top priority from our standpoint. We're anticipating that the 
AIP funds will be able to cover all of those requests that go 
to critical safety needs, as well as the existing letters of 
intent and commitments that we have made.
    On Capstone, what I would also point out is, of course, 
there is funding in the budget for Capstone. We do consider it 
a very successful program, with a 40 percent reduction in the 
fatal accident rate in Alaska. So, the intent is to sustain 
that program and move it along, while at the same time, we are 
moving toward national deployment of ADSB. And there is the 
intent to ultimately merge those programs. So, some of this 
goes to transition periods, as well.
    As you know, there has not been a request in the budget for 
LORAN-C for a number of years, and it has been something that 
has been put in by Congress each year. You're quite right that 
it has been previously dealt with by an earmark. But the budget 
request on LORAN-C is consistent with previous years.
    What I can----
    The Chairman. It's zero.
    Ms. Blakey. Yes, exactly. Well, that's where it has also 
been in previous----
    The Chairman. That was----
    Ms. Blakey.--Presidents' budgets.
    The Chairman.--depending on those of us who came from areas 
where they had to have LORAN-C upgraded, moving money around 
and putting money in every year. Now, as I tell you, I don't 
think that's possible here. But the real problem that I have is 
that when you look at this budget--you don't see it from my 
eyes, but I remember sitting at the Commerce table with Senator 
Cannon, when he was chairman. He wanted to do away with the 
CAB. I opposed that. Under the CAB, the CAB mandated that these 
small villages be served. Now it's no longer a mandate. We have 
Essential Air Service programs. It's another budget. But it, 
too, has been cut back. Each one of those airports has an 
entitlement of $150,000 a year, because the flight service 
station was closed, all other aspects of assistance to that 
area was closed. And each one of them was deemed essential to 
survival. And yet, every one of those small villages has been 
deleted now, in terms of that small payment of $150,000, which 
is used to maintain and keep those airports open. They're the 
only access to the outside world. The only. As a matter of 
fact, we just finished, this last year, getting lights on some 
of them and they're dark half of the year.
    Now, I find it very difficult to deal with this issue under 
the current anti-earmark syndrome. I, frankly, don't know what 
the Committee's going to do yet, but I know, when we get to the 
floor, people are going to say, ``There you go again, you're 
earmarking.'' We had to earmark every year, because we were 
left out. And, as you say, for the LORAN-C, zero all the way 
back. But I can't remember a budget that didn't have some money 
for LORAN-C upgrades. And now, as we get to the point--we're 
last--as we get to the point where the last to be upgraded are 
in Alaska, the zero can't be filled in. And you can't fund it 
because of this penchant against congressional earmarks.
    So, I really don't know how to handle this. And I urge 
you--I urge you to go back. We're going to have to get a budget 
amendment so that these are not earmarks. These people made the 
assumption that I would change that, as I have for years. And 
it's a distressing situation to be in. I do understand the 
overall budget situation, but I don't understand small amounts 
like this being deleted. The total to keep Alaska safe would be 
less than, I think, about $30 million. But enough said.
    Thank you, Mr. Chairman.
    Senator Burns. Senator Pryor?

                 STATEMENT OF HON. MARK PRYOR, 
                   U.S. SENATOR FROM ARKANSAS

    Senator Pryor. Thank you, Mr. Chairman.
    And I must echo some of the same concerns that Senator 
Stevens has about the budget and zeroing out some programs that 
really help rural America.
    Administrator Blakey, let me ask you about the next 
generation air transportation system. There are various 
estimates on this. And I've heard estimates as high as $40 
billion over the next 20 years. As I understand it, FAA has not 
made an estimate on it. Do you have an estimate on the cost of 
that today?
    Ms. Blakey. No, we do not. As you can appreciate, this is 
something that is fairly complex, with a lot of variables. We 
tried this last year, in fact, to do what I would call a low-
fidelity analysis. And it turned out that there were enough 
unknowns and variables that the numbers really weren't 
reliable. What we have done, though, Senator Pryor--and I think 
you'll take encouragement out of this--is, we're looking to the 
industry to work with us on this, to the experts in the 
academic fields, as well. And we have pulled together an 
investment analysis meeting at the end of this next month, 
where we will be spending 2 days going over the various figures 
and estimates on this. A lot of it depends on things that are 
outside of our control. How fast will the industry want to 
equip? There are billions and billions of dollars involved. 
What is the cost-benefit there? And what makes sense?
    Depending upon the schedule and how you approach it, the 
variables are very significant. But what we'd like to do is 
come up with three buckets, if you will. The first would be an 
estimate for the next 5 years, which I think we can work to 
get, with some degree of high accuracy. The next would go out 
another 10, and then to the end of what we are projecting the 
schedule for this, which is 2025.
    Senator Pryor. OK. Let me also say, I'm glad to know 
meetings are continuing, but do you have a sense of when you'll 
have a complete plan? I mean, do you have a sense of when 
you'll come back to the Congress with a plan?
    Ms. Blakey. This is really not like building a power plant. 
This is something where you're going where no one's gone before 
and you're projecting new systems here that really do change--
in fact, transform--the entire system, not just in terms of air 
traffic control, but the way we approach security. It is 
developing weather systems that really don't exist right now. 
Some of this is technology that is very predictable. Some of it 
has not been developed in any way. And because of those kinds 
of things, it's not really like ``name a number'' and we'll 
know it with any kind of exactitude.
    This year, what we are striving to do is to nail down the 
enterprise architecture, how all these pieces will fit 
together, and a broad concept of operations. If we and industry 
can agree on that with the other parts of government--remember, 
Department of Defense and Homeland Security have a big stake in 
this--if we agree on this, it will give us a lot greater degree 
of being able to project these costs, near term.
    Senator Pryor. OK.
    Ms. Blakey. And I think that will be reliable.
    Senator Pryor. How much of this factors into your concern 
that you talked about a few moments ago, about the revenue 
stream? Because it sounds like the next generation project is 
an open-ended question, and you have no idea what it will cost. 
And, therefore, I would think it would be hard to say if the 
revenue stream you have today would be adequate to even get 
close to covering that.
    Ms. Blakey. Well, since the revenue stream we have today is 
not tied, in any way, to costs, I would guarantee you that the 
way we are approaching it right now is going to be highly 
unpredictable from that standpoint. What we are looking to do, 
of course, is a way of paying for operational costs and capital 
investments in the future that is tied to cost, is predictable, 
and has a high degree of involvement with the stakeholder 
community. So, they're a part of the kinds of decisions about 
cost benefit. Is it worth it to move at this pace, with these 
kinds of investments, with the concomitant investments, from 
the airlines and others in the system? I think that kind of 
decisionmaking is going to give a very good, reliable way of 
paying for these costs. Some of it will also depend on 
structure. If you're doing it on a pay-as-you-go basis, as 
opposed to looking at capital investments the way the corporate 
community does, it obviously will have real impact on how much 
it costs.
    Senator Pryor. All right. Let me ask a question regarding 
the FAA budget. There's money in the budget to consider the 
consolidation of some air traffic control facilities. What is 
your opinion regarding consolidation? What is the criteria that 
you look at when you're thinking about consolidating various 
facilities? And, second, is there a list yet of targeted 
facilities for consolidation?
    Ms. Blakey. Basically, what we try to do is look at the 
questions of where we are going to have needs for new 
construction, new towers, new TRACONs. What makes sense as you 
are planning these major investments in new facilities? And 
what kind of growth do you see in that area, in terms of air 
traffic? What will the needs be? You try to do that, vis-a-vis 
the costs of installing the technologies and the number of 
people you will need. If you do it on a consolidated basis, 
obviously there are economies of scale in pulling facilities 
together, in being able to use technology in one installation 
rather than in multiple installations. And you also can 
potentially use your workforce on a more efficient basis. It 
also provides some benefits to the workforce, because there are 
opportunities for controllers to move up, in terms of 
complexity and management of traffic. So, there are a number of 
advantages. And you have the potential to reuse existing 
facilities for other kinds of needs.
    So, those are the kinds of benefits, versus the cost of 
relocation, the cost of building a larger facility, rather than 
keeping the existing structures. And that's done on a very 
individualized basis. And, no, there is no set list where we 
have a group of facilities that we are committed to closing. 
What we're trying to do is, on a smart basis, look at each one 
of these facilities and do that analysis. And then we, of 
course, will be sharing that analysis with affected districts 
and with Members who are representing those districts in those 
States.
    Senator Pryor. And what's the timeline on sharing that 
information with the districts and with the representatives 
that represent those districts?
    Ms. Blakey. We're beginning to do it right now----
    Senator Pryor. OK.
    Ms. Blakey.--as a matter of fact. As you could appreciate, 
construction's ongoing, and there are a number of towers that 
are planned as new construction that are stipulated in the 
budget from Congress.
    Senator Pryor. Is it safe to say that communities feel more 
comfortable with air traffic control located in their 
community? I guess, though, what I'm hearing you say is, where 
the air traffic control facility is isn't as important as just 
making sure you have a state-of-the-art facility, because they 
can regulate air traffic hundreds of miles away. Is that fair 
to say?
    Ms. Blakey. Basically, remember that what we're talking 
about here, largely, are the radar control facilities, the 
TRACONs, which have no windows. So, when you think of it in 
those terms, it really doesn't matter where the TRACON is 
located. And some of the new technology that has been 
developed, and that the taxpayers invested in heavily, the 
STARS system, for example, allows you to operate facilities 
within a 300-mile radius on a remote basis, which works very 
well. So, there's a lot of that, that can be done. Towers 
remain towers at those airports, but the issue of how you 
control, with radar control, is where you really can see that 
there is not a material difference to the community whether it 
is done there or at another location.
    Senator Pryor. Thank you, Mr. Chairman.
    Senator Burns. Ms. Blakey, while we're going along that 
timeline of reports and everything, as you know we're going to 
move into reauthorization. And the proposal was to come back to 
us with whatever you would like to see in it. When will you 
have your idea of how you want this bill reauthorized and what 
you would like to see in it?
    Ms. Blakey. Mr. Chairman, no one wishes more than I do in 
this room right now that I had a precise answer for you. I will 
tell you, though, that we are working very hard on this. And I 
fully expect that the Administration's proposal will reach the 
Congress this spring. It is complex. And we've tried very hard 
to factor in a lot of input from the various stakeholders, this 
Committee, and this Congress. So, I hope that when we present 
the proposal, the nature of it will show that the time and the 
work that's gone into it was worth it.
    Senator Burns. All of you might want to take a shot at this 
one. We passed a highway bill. It contains a change in 
collection of fuel taxes for business and general aviation 
operators in that bill. Under the provision, when the fuel is 
initially purchased it is deposited in the Highway Trust Fund. 
Only when an operator applies to the IRS for a refund does the 
21.9 cents transfer from the Highway Trust Fund into the 
Aviation Trust Fund. Now, we're hearing Montana constituents 
say that the process is very burdensome. And I'm drafting 
legislation now to alleviate that problem. But it might also be 
made as a permanent solution when we reauthorize FAA.
    I've got some concern about that. And do you want to share 
your ideas on how we handle that and how we can streamline that 
process?
    Mr. Zinser, do you have an idea on that?
    Mr. Zinser. Yes, sir. Mr. Chairman, I think that that 
change was trying to address an issue of fuel tax diversion, 
where there is a problem with people buying the fuel tax-free 
for aviation purposes, but then diverting the fuel to on-the-
road use. And, as a result of that, they committed a fraud and 
beat the Trust Fund out of money. And I think that was the 
purpose of the change in the rule there.
    In terms of fixing it for the burdensome aspects of 
administering that, we haven't looked into that. We'd be happy 
to look at that and see what kind of burdens are being placed 
on the general aviation users.
    Senator Burns. Should that whole mechanism be changed? Mr. 
Dillingham, do you have a view?
    Dr. Dillingham. Again, Mr. Chairman, we have not looked at 
that, either. But, generally, opposition is, if there is a way 
to streamline a process and make it less burdensome, we would 
be in support of that. And, again, if you need our assistance 
with this issue, just please let us know.
    Senator Burns. Have you not made any recommendations with 
the knowledge you have now?
    Dr. Dillingham. No, sir, we haven't.
    Senator Burns. This coming year, what issues, programs, do 
you think we should keep a close eye on, and why? And I'm going 
to ask both of you to respond to those. What areas are you 
mainly concerned about?
    Mr. Zinser?
    Mr. Zinser. The areas that we're mainly concerned about are 
in the F&E account with the two programs that I mentioned in my 
statement. The ERAM program, which is modernizing the en route 
center air traffic control system is important to watch. We 
issued a report last year and made recommendations to 
strengthen the program. We think that FAA is doing a good job 
on ERAM. However, they are ramping it up and it's coming out of 
the lab and being tested in the field. FAA will be spending a 
million dollars a day on ERAM. And if this program doesn't work 
right, it's going to have an effect on FAA's ability to deliver 
future systems.
    We also have concerns about the FTI program. It's the only 
program in FAA that is designed to reduce operating costs. 
Initially, the FAA projected that by modernizing their 
telecommunications systems, they'd save $800 million over 10 
years. FTI was rebaselined in December 2004, and projected 
savings are down to $600 million, and they've spread them out 5 
additional years.
    Right now, the program's not on track. We've issued a draft 
report, and FAA and the Department are taking it seriously. If 
the program gets back on track, FAA can still save some money.
    Senator Burns. When do you expect that report to be 
completed?
    Mr. Zinser. We are waiting for FAA to get back to us with 
their formal response. And I think the date that we're 
expecting that is early April.
    Senator Burns. Do you want to respond to the original 
question, Dr. Dillingham?
    Dr. Dillingham. Well, Chairman Burns, I think it's only 
fair to put the other side of the equation up. We, also, are 
concerned with some of the F&E programs, as the DOT IG has 
suggested. But I think the other side of the coin is that we 
need to recognize that over the past 2 years the FAA has done--
made tremendous strides in achieving its F&E goals, and has met 
their schedules and costs for those 2 years, which we think is 
a very good sign that things are changing. I think a lot of 
effort will be involved in trying to get ready for the next 
reauthorization. The issues that the Senators have raised this 
morning with regard to the cost for NGATS and things related to 
it.
    Senator Burns. Senator Lautenberg, welcome to the 
Committee----

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. I thank you.
    Senator Burns.--up here in the middle of the day.
    Senator Lautenberg. And I commend you for holding this 
hearing. We face lots of problems that we're concerned about. 
And I ask consent that my statement--opening statement----
    Senator Burns. Without objection, it'll be made part of the 
record.
    Senator Lautenberg. OK.
    [The prepared statement of Senator Lautenberg follows:]

            Prepared Statement of Hon. Frank R. Lautenberg, 
                      U.S. Senator from New Jersey

    Mr. Chairman,
    Thank you for holding this important hearing.
    Mr. Chairman, the President's budget calls for us to continue 
cutting aviation infrastructure funding--this time by more than 800 
million dollars. Instead of laying the groundwork for a safe future for 
aviation, the President's short-sighted budget proposal would undermine 
our ability to travel safely and efficiently.
    We all know that our highways are crowded. The same is true of our 
airspace. How many times have we been forced to sit in airplanes that 
waited an hour or more to take off ? Sometimes the wait takes longer 
than the flight itself.
    We can't create more airspace. The only way to handle more aviation 
traffic is to upgrade the equipment that is used by air traffic 
controllers on the ground.
    The Bush Budget proposal wouldn't move us forward--it would take a 
step backward. Some would blame budget pressures in aviation on the pay 
of air traffic controllers. But the fact is, we are already at terrible 
risk of not having enough controllers to operate the system safely. 
Because the Bush Administration has been dragging its feet when it 
comes to hiring new controllers, we are in a position where 3,200 
controllers could retire today--almost 20 percent of the workforce.
    Mr. Chairman, you can't just get air traffic controllers off the 
street--it takes, on average, four years to train a controller.
    The Administration projects that air passengers and cargo will 
triple by 2025. The result could be a nightmare of unbearable aviation 
delays. This could have a crippling effect not only on the aviation 
industry, but on commerce in our Nation.
    The Bush Administration recently proposed a new aviation security 
tax increase that would hit family travel especially hard. The Senate 
adopted my amendment to the Fiscal Year 2007 Budget Resolution to strip 
out this unfair proposal, and I hope my colleagues on this Subcommittee 
will support my efforts as the resolution goes to conference.
    Thank you, Mr. Chairman.

    Senator Lautenberg. I'm glad to see our Administrator and 
our other distinguished witnesses here today.
    I suffer from a disease called ``delay while traveling.'' 
And since I fly frequently----
    Senator Burns. Is that contagious?
    Senator Lautenberg. I think so.
    [Laughter.]
    Senator Lautenberg. Yes, it's spread around the country, 
there's no doubt about it.
    [Laughter.]
    Senator Lautenberg. Sometimes the flight that I take back 
up to the New Jersey/New York region has a longer waiting time 
on the ground than it has flying time. And that's often at 
departure, as well as landing.
    Senator Burns. I'll loan you my pickup. You can drive it, 
you know.
    [Laughter.]
    Senator Lautenberg. I'll borrow your horse, instead.
    [Laughter.]
    Senator Lautenberg. Enough of this personal stuff. Excuse 
us for the alacrity.
    Administrator Blakey, we've talked lots of times over the 
years about functioning at Newark and the air traffic safety 
around airports. And you know that I sit in the second seat 
often enough to be a nuisance, but how many more air traffic 
controllers do you think we need to move air traffic safely at 
Newark Airport? Do you have any idea?
    Ms. Blakey. Senator, I haven't looked at the exact numbers 
on Newark very recently, so I won't try to hazard a number, but 
I'd be happy to get with you.
    Senator Lautenberg. Yes, please do.
    Ms. Blakey. As you know, right now we are, for the most 
part across the country, staffing at about the level where we 
feel we are both--certainly accomplishing the safety mission, 
without question, and also have the kind of staffing that is 
handling the traffic. Traffic is a bit down right, as may not 
be apparent at Newark, because you're flying in----
    Senator Lautenberg. It's not apparent at all, yes.
    Ms. Blakey.--some of the most congested airspace of the 
country. But, overall, our staffing is right about the level it 
needs to be. We're staffing up in the en route centers more, 
because that's where we see that we have greater needs. But 
I'll be happy to get with--you a figure----
    Senator Lautenberg. Please----
    Ms. Blakey.--on Newark.
    Senator Lautenberg.--please look at that, because I keep 
seeing reports that we are not fully staffed. And when we 
anticipate, as a national concern, retirements----
    Ms. Blakey. Yes.
    Senator Lautenberg.--and the time needed for training and 
recruiting and so forth, do you think we have enough people to 
take care of that? Because a little over a year ago you said 
that 1,248 controllers would be--need to be hired in Fiscal 
2007. But I think the President's request differs, and he's 
only looking at--about a hundred less, about 1,136, compared to 
the 1,248 objective that you've laid out. How many air traffic 
controllers do you intend to hire in the next year?
    Ms. Blakey. Basically, the way we are approaching this is 
with a dynamic that obviously has to adjust as a number of 
variables change here. The numbers that you're referring to 
were generated in the controller staffing plan that we issued 
about a year--more than--well more than a year ago, and were 
based on three forecasts ago. So, that tells you there's a 
question of trying to keep these things up to date. As you 
know, we also, of course, are going for greater productivity 
enhancements so that we are able to, in fact, achieve 
productivity levels that we had not been able to previously. 
So, all of those variables come into play.
    We will be issuing a new controller staffing plan. And we 
have adjusted our timing on that so it comes out right after 
the new forecast. We've just had a forecast, as you may know, 
that came out about a month ago. And so, we are looking to have 
a new controller staffing plan on the street, which will have 
numbers that are much more closely correlated to the best 
estimates we have.
    What I can tell you is this. We are looking at net 
increases over and above the retirements that we are having, 
because we do need to overlap a larger number of controllers 
with those in the towers and TRACONs that are going to be 
leaving, so they can train up and move out. And the figures are 
going to reflect net increases as we move along.
    Senator Lautenberg. Well, I don't know how we account for 
the traffic delays and, at the same time, assure ourselves--or 
support the notion that traffic is down. There is something 
wrong someplace. There are constant delays. And here, almost 
every one of us travels long distances, or gets on an airplane, 
to get home or to get around the country. Delays are 
interminable. It's constant. And when we face the prospect, Dr. 
Dillingham, of the light jets, I think the figure is estimated 
to be 5,000 over the next 10 years, and we've produced 
separations, and we look at a heavier workload for 
controllers--I don't understand where it's all going to go. The 
sky, as you folks know, is finite. And if we add that number of 
new craft there, and flights that I travel on seem to be fairly 
well filled, but the delays, again, are constant, how do we 
adjust to that condition? Is this not really the case, that 
delays are being reduced?
    Ms. Blakey. Actually, Senator, I would comment on this. The 
delays abound. So, this is a nationwide problem right now. The 
unfortunate thing is, you're experiencing what a number of 
people are, believe me. I mean, if you're flying in some of the 
most congested airspace we have, which the East Coast is, 
there's no doubt about the fact that we are, at this point, 
packing a lot of aircraft into the upper level airspace. So 
even the ability to get up and into the traffic streams doesn't 
solve the problem. In addition, airports such as the ones that 
you're flying out of, there really is no place to expand. I 
mean, if we could get some more tarmac, it would help. But 
there's really no way to do that. So, a lot of it does go to 
things like airspace redesign. And, as you know, we have a plan 
on the street right now where we're having public hearings for 
redesign of the airspace in the New York/New Jersey area, four 
different options. And we're looking forward to seeing how that 
will proceed.
    Senator Lautenberg. Ms. Blakey, doesn't that affect traffic 
nationwide?
    Ms. Blakey. Yes.
    Senator Lautenberg. I mean, if it's congested here, then it 
affects the whole system.
    Ms. Blakey. It can have a ripple effect through the entire 
system. It's one of the reasons why we pay so much attention to 
the New York/New Jersey/Philadelphia area, because those 
airports are critical for the flow.
    Senator Lautenberg. Mr. Chairman, your patience is 
appreciated. I want to ask one more thing.
    Will the Administration propose a new user fee for any 
segment of the general aviation community, including business 
aviation? There's constant griping by the airlines to the fact 
that private or general aviation gets a kind of a free pass on 
the costs for entering the airspace. There's a ticket tax for 
every passenger that goes on commercial. And that's not the 
case in general aviation. And I wonder whether anything is 
contemplated, by way of a fee for general aviation, to 
compensate for that.
    Ms. Blakey. Senator, as I mentioned to the Chairman before 
you arrived, I would be the happiest person in this room if the 
Administration's proposal were before us all to discuss. I'm 
not able to comment on it, because it still is under review. 
And so, I can't discuss the final characteristics--but I would 
tell you this, we have heard, in a great degree of detail, from 
the affected stakeholder groups. We have heard from the general 
aviation community, about their view that they are marginal 
users of the system, and from the air carriers, about their 
view that they are picking up too large a burden of the cost. 
So, we have factored all of those kinds of concerns and 
comments into the proposal we will be putting forward. And I 
hope that you will see that it is taking an approach that we 
seek to balance those competing concerns and interests.
    At this point, our chief concern is that we are able to tie 
the costs of the system to the revenue, and to come up with a 
stable cost-based system that is more equitable than the 
current system is.
    Senator Lautenberg. Thank you, Mr. Chairman.
    Senator Burns. Thank you, Senator Lautenberg.
    The budget commits $18 billion to the Joint Program and 
Development Office. Can you explain to us, all three of you 
take a shot at this, the main purpose of this office and how 
this $18 billion to that Joint Program Development is used----
    Dr. Dillingham. I'll take the first shot.
    Senator Burns.--for the Committee?
    Dr. Dillingham. Chairman Burns, the JPDO is----
    Senator Burns. Million. I'm sorry. I said billion. Million.
    Dr. Dillingham. The JPDO is the organization that consists 
of several Cabinet-level agencies that has been mandated by the 
Congress to develop the plan for the next generation air 
traffic control system. And the process that they're using is a 
process--at least initially, of leveraging resources from the 
constituent partner agencies. NASA and FAA are putting in 
approximately the same amount of money for the JPDO. The JPDO 
is using that money ostensibly to plan and do demonstration 
projects and activities. We recently did an analysis of where 
the JPDO was, and what the status was. I think it's fair to say 
that, based on the complexity of what they've been asked to do, 
that they are doing a relatively good job. We also identified 
some challenges that they have to face as they move forward, 
including the fact that it is an organization that doesn't 
really have the authority to control other Cabinet agency 
budgets and personnel, and also that they have to maintain this 
stakeholder involvement as they move down the line. And some 
stakeholders--some critical stakeholders are not involved in 
it. In the history of that kind, the situation has not been 
real good with the current ATC modernization system.
    So, I mean, that's what it's put up to be, that's why it 
was mandated. And that's how it is proceeding at this point in 
time. It's about 2 years old, a little over 2 years old, 
headquartered or housed primarily in FAA.
    Senator Burns. Mr. Zinser----
    Mr. Zinser. Yes, sir, the----
    Senator Burns.--any comments on the----
    Mr. Zinser. The $18 million that is in FAA's budget is also 
leveraged with appropriations from other agencies that 
participate. And Dr. Dillingham is correct, it's primarily a 
planning exercise at this point, trying to integrate the 
interests of all the stakeholders, the six different 
departments involved, or agencies involved, in trying to 
design, develop, and deploy the next generation air 
transportation system. But right now they're trying to develop 
those requirements. The JPDO is not really producing any 
products or real air traffic control systems with that money 
yet.
    Ms. Blakey. Mr. Chairman, if I could mention one thing, 
though, because I'd love to show it to this Committee, if 
there's an opportunity at some point. Mr. Zinser's right, of 
course. This is not where the primary funding for major capital 
investments is going to be. But, in addition to all of the very 
difficult work of coordinating Cabinet-level agencies, and all 
of the precise work of looking at budgets and research and 
trying to make sure that they are well aligned, and ultimately 
presenting a unified budget to the OMB that shows exactly how 
these programs satisfy the needs to develop an enterprise 
architecture and a concept of operations for the future, it's 
tough work. It's very difficult. But, what I'd love to have the 
Committee see at some point is, one of the demonstration 
programs that was funded. There was one this fall called 
Network Enable Operations, NEO, where legacy communications 
systems--these are not new communications systems, all were 
linked up and talking to each other in realtime. This is our 
air traffic control system, this is dispatch from the airlines, 
this is military information coming in, this is security 
information. This means, unlike the situations that we have 
seen where there are aircraft coming into the Washington 
airspace that no one can identify, and then there is this 
enormous scramble, often too late, to determine exactly what's 
going on. Is this an aircraft that has no business being there, 
and is it one that poses a threat? These systems are able to 
anticipate much earlier actually what it is, who should be 
tracking it, what kind of information you already have, what 
kind of information you need. And I always found it a very 
impressive thing that, for relatively little money, you could 
have all these existing legacy systems talk as though they were 
one.
    Senator Burns. Well, I looked at this, and I said, ``Well, 
now, if they haven't turned out anything, they've not made any 
recommendations. I don't know what it is and how come it's 
costing us $18 million?'' I mean, do we have some other way of 
designing a modernization program and presenting a master plan, 
then everything that we do has to fit within that master plan 
as we modernize? I don't see any reason we couldn't be using 
that $18 million someplace else. That's the bottom line. That's 
the bottom line I drew. And you'll have to convince me 
otherwise.
    Dr. Dillingham. Well, Mr. Chairman, I think that the 
demonstration projects that the Administrator referred to are, 
in fact, very costly. And the research that they are 
contracting for to support the decisions that they have to make 
is costly, as well. And as it is now, only NASA and FAA are 
putting in equal shares of money. I think that the Europeans 
are conducting a similar effort, on a smaller scale, and 
they're putting in, if not the same kinds of money, more kinds 
of money, or greater amounts of money, to try and move in the 
same direction. And I think it's worth noting that, as Senator 
Lautenberg started asking about, How can we break up some of 
this congestion, and how can we move to deal with some of the 
delays that--part of the efforts of the JPDO is to not just 
reach out to 2015 or 2025, but to sort of transition the 
current system into the next generation, and, with that, 
introduce technologies, as appropriate, that would address some 
of the delays and some of the congestion. And to move in the 
direction of--we talked about--Senator Stevens talked about the 
``mosquito fleet,'' and we're also talking about UAVs and all 
those kinds of things. Part of the next generation will allow 
these kind of aircraft to use existing regional airports, so 
that you take some of the congestion out of the main airports.
    So, I guess we're at the point of thinking that it's 
probably a relatively inexpensive investment for the payoff 
that is expected from it.
    Senator Burns. It's only been in effect 2 years, so that 
has to be taken into consideration. We don't do anything around 
here with lightning speed. So, do that.
    That's about all the questions I have for today's hearing. 
There are some things that I think we've got to discuss as we 
move forward on reauthorization. I would hope that we could get 
some kind of an idea out of the Administration down there of 
FAA, what they want to see in that reauthorization right away. 
It would certainly help us. It would start that discussion and 
make sure it's all incorporated in the draft proposal. We'd 
like to see that as soon as we can.
    There's other Members that had questions. If you could 
respond to those questions, both to the individual Member and 
to the Committee, I'd certainly appreciate that.
    I appreciate you coming, this morning, and sharing your 
views. I'd like to think that we're very frank and we're very 
open, and we've got some tremendous problems and challenges 
ahead of us as passengers--that list continues to grow, and 
load factors continue to grow, but it's being done on more 
aircraft now, and that sort of concerns all of us. We always 
have to come down on the side of safety. I think that's what 
this is all about up here.
    Thank you very much for coming this morning. I appreciate 
your testimony.
    [Whereupon, at 11:20 a.m., the hearing was adjourned.]

                            A P P E N D I X

  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                         Hon. Marion C. Blakey

Airport Improvement Program (AIP)
    Question 1. The FAA budget would cut almost $800 million from the 
AIP account. This cut comes at a time that the Airports Council 
International--North America (ACI-NA) indicates airport capital 
development needs across the country are roughly $70 billion over the 
next five years. How do you justify such a large cut to the AIP 
program? Do you have any concerns about the proposed cut?
    Answer. Before proposing the $2.75 billion AIP level, we looked 
very closely at the impact on airport capital development. In reviewing 
the issue for the FY 2006 budget, we had noted that the National Plan 
of Integrated Airport Systems (NPIAS) published in September 2005 
showed a 15 percent reduction over previous NPIAS (published in 2002) 
reporting periods. Our FY 2006 proposed AIP funding level of $3.0 
billion reflected this reduction. As FAA works on the latest issue of 
the NPIAS (pending), current capital trends show only modest growth--
about three percent or $1 billion over five years. The pending NPIAS 
figure is still well below the peak level of capital needs identified 
in the 2002 NPIAS. We also compared the $2.75 billion budget number to 
our airport capital improvement plan (ACIP) for projects in FY 2007.
    Looking at our ACIP data, the FAA will be able to reach all high 
priority safety, capacity, security and environmental projects. In 
particular, there will be adequate funds to meet all current and 
anticipated Letter of Intent (LOI) commitments, fund projects to meet 
the FAA's Flight Plan goal for improving runway safety areas (RSAs) and 
help airports meet their Part 1542 security requirements. We will also 
be able to continue work on phased projects. It will slow some 
rehabilitation projects and projects to bring airports up to current 
FAA design standards.
    The President's Budget includes support of major capacity projects 
such as the Chicago O'Hare redesign, new runways at Washington Dulles 
International Airport and major projects at Atlanta-Hartsfield 
International. The major capacity projects are multi-year projects that 
are unaffected by the decrease in the AIP budget due to their high 
priority within the national system.

    Question 2. Funding the AIP program below $3.2 billion triggers a 
formula change that would eliminate guaranteed annual entitlements for 
non-primary or General Aviation (GA) airports. Did this factor into 
your budget calculations? Would you seek a legislative fix from 
Congress to ensure that all airports would receive a portion of the 
lower funding total or would you focus only on priority projects? Do 
you anticipate annual AIP requests for the duration of your tenure will 
be below the $3.2 billion level that triggers this adjustment?
    Answer. Since the first year that the nonprimary entitlements 
authorized in AIR-21 became available, these airports have received up 
to $900,000 in entitlement funds dedicated to their individual 
airports. Many airports have been able to use that money to fund their 
capital projects and even have begun to construct fuel farms and 
hangars--projects that were previously ineligible for AIP. For the 
nonprimary airports, (general aviation (GA) and the smallest of the 
commercial service airports) we have seen a dramatic increase in the 
amount of general aviation entitlement funds being carried over. In 
fact, 52 percent of the total AIP carryover, or over $200 million, is 
from general aviation airports. GA airports carried over nearly 60 
percent of the total entitlement that was allocated to them. While the 
nonprimary entitlement would not be available in FY 2007 under the 
President's budget, the unassigned state apportionment, which is also 
directed toward nonprimary airports, would increase by 63 percent.
    For these reasons, we do not believe that a legislative change to 
preserve the nonprimary entitlement is necessary in FY 2007. Indeed any 
effort to preserve the nonprimary entitlement at the President's 
requested funding level for AIP without also preserving a minimum 
amount of discretionary funds would impair our ability to meet the 
national priorities outlined above.
    When we consider an appropriate level for the AIP budget, we look 
at the airport planning data, our LOI and other high priority and 
phased projects. As we look toward the FY 2008 reauthorization, we are 
reviewing the formula changes as well as overall funding level to 
ensure the maximum utility of the AIP investment.

    Question 3. China has announced its intention to provide $17.4 
billion over the next five years to improve its airport 
infrastructure--almost $3.5 billion a year. Effectively investing more 
than the U.S. on airports for the first time ever. Do you have any 
thoughts about the Chinese commitment to its aviation future?
    Answer. The FAA is encouraged by the Chinese Government's 
commitment to improve and expand its airport infrastructure. This 
responsible investment to meet the challenges posed by an aviation 
system that analysts project will experience double digit growth in 
coming years is an indication that China intends to be a preeminent 
aviation destination and hub. Even with such an investment, the number 
of airports available in China's less mature aviation system for 
civilian use is far below the extensive system in place in the United 
States.
    A comparison of China's current plan for airport investment with 
the FY 2007 budget request for AIP is not an accurate basis for 
comparing each country's long-term commitment to aviation. Although the 
United States has invested over $16.7 billion since FY 2001 in its 
airports, with more than $3.4 billion in additional funds to be 
provided this fiscal year, AIP funds only account for approximately 20 
percent of capital expenditures at U.S. airports. The remainder comes 
from airport operators, and thus mainly from local and state 
governments. Thus, looking at the total commitment of funds for airport 
development from all levels of government in the United States, the 
United States' commitment exceeds that being made China.

Facilities and Equipment (F&E)
    Question 1. Although the FAA FY07 budget claims it ``supports an 
interagency effort to develop the Next Generation Air Transportation 
System (NGATS) to meet growing demand for airspace capacity,'' a 
preliminary analysis by the DOT Inspector General's Office finds that 
the level of funding contained in the Administration's F&E request and 
five-year capital investment program (CIP) will not support the Next 
Generation system. Do you believe the current budget numbers do enough 
for NGATS? How much funding do we actually need through 2025 to meet 
the needs of NGATS? When will the FAA put forward a comprehensive plan/
blueprint for NGATS?
    Answer. The cost levels in the FY 2007 CIP are adequate to begin 
NGATS implementation for those JPDO initiatives that are sufficiently 
developed. The FAA plans to begin implementation of two foundational 
JPDO projects with the FY 2007 budget: Automated Dependent Surveillance 
Broadcast (ADS-B) and System Wide Information Management (SWIM). The 
budget also allows for continued concept development of future 
initiatives.
    In addition, two of today's major modernization initiatives 
contained in the CIP will help the NAS transition towards the needs of 
NGATS. This includes working with the FAA to analyze the changes that 
will be needed to both the En Route Automation Modernization (ERAM) 
system and the Traffic Flow Management (TFM) system that is necessary 
in order to meet the needs of 4-dimensional air trajectory-based 
operations--a key NGATS capability. This is a critical element in 
transforming flight planning and air traffic paradigms into a system 
that manages operations based on aircraft trajectories, regularly 
adjusts the airspace structure to best meet user and security/defense 
needs and relies on automation for trajectory analysis and separation 
assurance.
    In order to address the funding issue, we have asked the NGATS 
Institute to host a series of forums so that the critical assumptions 
and uncertainties underlying any cost benefit effort can receive 
scrutiny and be validated for further use. The forums will involve a 
wide cross-section of aviation decision-makers. In addition, further 
detailed studies will focus on the near term costs and benefits which 
will be used to inform more immediate agency planning activities over 
the next 5 years. We will then expand our cost analysis to consider the 
expected total systems costs for NGATS.
    An initial operational improvement roadmap is now under technical 
review and later this year the JPDO will unveil its first iteration of 
the NGATS Enterprise Architecture and Concepts of Operation. As the 
JPDO increases the level of specificity of the technical documentation 
and validates it through simulation, the confidence in the cost 
estimates will increase.

    Question 2. The FAA's FY07 budget provides some funding to consider 
consolidation of air traffic control (ATC) facilities. What is the 
status of the FAA's efforts on considering consolidation of facilities? 
Has the FAA made any determination or targeted any facilities to date?
    Answer. FAA's policy is to consider relocating a Terminal Radar 
Approach Control (TRACON) facility to another location anytime 
construction of a new Airport Traffic Control Tower is considered. 
Other opportunities where existing facilities are currently capable of 
accepting a collocation are also considered. In the FY 2007 budget 
request, the agency is proposing the following collocations: Lincoln to 
Omaha, West Palm Beach to Miami, and Reno to Northern California 
TRACON. In addition, Palm Springs is planned to be collocated to 
Southern California TRACON in FY 2006. Other collocations are being 
evaluated and may be submitted in future budget requests.

Airport and Airways Trust Fund Status
    Question. The Congressional Budget Office's (CBO) most recent 
projections of Trust Fund balances indicate steadily increasing 
revenues and uncommitted balances for the Trust Fund through the next 
decade, up to more than $49 billion by FY 2016 based on a re-estimate 
of the President's FY 2007 budget request. What is your reaction to the 
CBO estimates? What are the FAA's longest current projections for the 
Trust Fund? Please provide those estimates.
    Answer. The FAA forecasts tax revenue into the Trust Fund for a 
ten-year period, but does not issue specific long-term projections for 
the Trust Fund balance due to the significant uncertainty surrounding 
out-year budget authority assumptions. However, like the CBO, we do 
look at several different scenarios for the Trust Fund balance as part 
of our normal business planning process. We have attached the tax 
revenue forecast FAA provided to the CBO in December 2005. These 
figures are generally consistent with the numbers in the CBO 
projections (which also include interest earned on the Trust Fund's 
cash balance).
    Based on the budget authority assumptions for FY 2007 through FY 
2011 in the FY 2007 President's Budget request, the referenced CBO 
uncommitted balance estimates are generally consistent with the 
Administration's estimates. (Both project an uncommitted balance of 
$15.5 billion in FY 2011.) As the alternate CBO runs demonstrate, the 
uncommitted balance projections are highly sensitive to changes in the 
budget authority assumptions. For instance, CBO's ``Vision 100'' 
estimate shows the Trust Fund's uncommitted balance remaining flat at 
approximately $1.5 billion through FY 2016--meaning that there would be 
very little reserve in the case of unforeseen changes in the aviation 
industry.
    It is important to emphasize that the FAA's belief in the need for 
a new funding mechanism is not fundamentally about generating more 
money for the FAA. It is about creating a more rational, equitable and 
stable system that provides the right incentives to users and to the 
FAA, and thereby reducing the likelihood that there will be a 
persistent gap between revenues and costs.

Air Transportation Oversight System (ATOS)
    Question. Last year, the agency estimated that it would take 
approximately 300 additional inspectors to bring remaining carriers 
into ATOS compliancy. How many staff have you added to meet this goal? 
Considering the current shortage of inspector staffing, how does the 
agency expect to have ATOS fully implemented by the end of next year? 
Are you presently concerned about creating any gaps in the inspections 
system as a result of the shortages?
    Answer. The FAA is requesting an additional 101 inspectors for risk 
management and safety oversight. Some of these inspectors will be 
assigned to ATOS air carriers which will allow full implementation of 
ATOS by the end of next year.
    We are able to realize full implementation with fewer than 300 
additional staff due to the efficiencies that will result from the 
expansion of ATOS to all part 121 air carriers, e.g., sharing certain 
resources amongst multiple air carrier certificate management teams and 
through improvements to ATOS automation capabilities. FAA is not 
currently concerned about any inspection gaps. We are confident that 
System Safety Oversight will be strengthened through a more efficient 
use of resources and improved automation.

FAA's Telecommunications Infrastructure (FTI)
    Question. Do you believe that the FTI transfer will be completed by 
its scheduled December 2007 completion date? Has the current schedule 
kept pace with any transition plans or master schedules you have 
developed for the program? What benefits were identified prior to 
implementation of the FTI program? Are these goals being met?
    Answer. The FTI transition master schedule calls for completing the 
transition of all services on the LINCS network by December 2007. There 
are services supported by other legacy networks that do not have the 
same time criticality and may be transitioned after December 2007. The 
LINCS Bridge contract ends on March 13, 2007, and there is a one-year 
Continuity of Service option that the FAA can exercise to extend the 
period of performance to March 2008. However, at this point, the 
planned end date for FTI transition remains December 2007.
    The FTI program was re-baselined in December 2004. The associated 
schedule called for a relatively steep ramp-up in the number of sites 
to be transitioned to the FTI network. By April 2005, it became 
apparent that the ramp-up was not achievable. The FAA and the FTI 
Service Provider implemented extensive process improvements to increase 
transition rates. As part of this activity, revised planning targets 
were set for the remainder of the transition period from April 2005 
through December 2007 and documented within the program's Exhibit 300 
that is submitted to OMB. Over the past 13 months, the FTI program has 
kept pace with the revised planning targets for site transitions and 
has significantly increased the number of service transitions from less 
than 100 per month to over 700 per month.
    The FTI program is expected to provide a wide range of benefits to 
the FAA. Some of the benefits are quantifiable while others are more 
qualitative. Examples of the quantifiable benefits include:

   Improved service availability: FTI services are specified to 
        provide a higher level of availability than the FAA's legacy 
        services. In addition, FTI services eliminate the need for FAA-
        provided communications equipment that lowers the end-to-end 
        availability observed by the end user.

   Faster service delivery: Once the FTI transition is 
        completed, FAA users will be able to order and have an FTI 
        service delivered in as few as 15 days. This represents a 
        three-fold improvement compared to legacy networks.

   Lower unit cost of service: The FAA's recurring costs for 
        telecommunications will be lower under FTI compared to what it 
        is under the legacy networks. This translates into significant 
        costs savings/cost avoidance benefits. It should also be noted 
        that FTI prices are capped and can never exceed the price 
        levels negotiated for contract year 7. In addition, there is a 
        price management mechanism for adjusting prices downward if the 
        cost of services in the commercial or government marketplace 
        declines.

    The non-quantifiable benefits include:

   Performance-based Contracting: The FTI program has a balance 
        of positive and negative incentives to ensure that FAA 
        objectives for the program are met. FTI has a detailed Service 
        Level Agreement (SLA) that provides invoice credits to the FAA 
        if services do not perform as required.

   Improved information security: FTI provides an enterprise-
        wide approach to information security assurance. The FTI 
        service provider is contractually required to comply with the 
        latest government standards for information security. In 
        addition, FTI provides a wide range of enhanced security 
        services like encryption and fire walling that can be ordered 
        as an add-on feature with any service.

   Consolidated management of the FAA's Telecommunications 
        Operating Environment: By replacing the services provided by 8 
        different legacy networks, FTI enables the FAA to streamline 
        its management of its telecommunications enterprise. Today, 
        each of the legacy systems is separately managed, separately 
        invoiced, and separately operated. With the implementation of 
        the FTI network, the FAA can consolidate these functions and 
        operate more efficiently.

   Broad portfolio of service offerings: FTI provides a broad 
        range of service offerings that enables the FAA to match price 
        to performance and ensure that the FAA only pays for the level 
        of service that it requires.

    The FTI program is meeting its goals in terms of providing the 
benefits listed above. However, it should be noted that there has been 
some erosion of cost savings/avoidance benefits due to the transition 
shortfalls noted earlier. That notwithstanding, previous analysis has 
shown that even with a one year delay, the FTI program still has 
positive net present value (NPV) in excess of $350 million.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                         Hon. Marion C. Blakey

    Question 1. Does FAA have a staffing standard for air traffic 
controllers?
    Answer. Yes, the FAA has staffing standards for air traffic 
controllers. These standards are mathematical models used to compute 
the number of personnel required to perform a job or set of tasks. FAA 
staffing standards are developed through industrial engineering 
techniques and operations research analysis such as time study, work 
sampling, and statistical analysis. FAA standards include appropriate 
allowances for leave, training, travel, and necessary administrative 
activities needed to accomplish a function.

    Question 2. How many air traffic controllers are needed to move air 
traffic safely at Newark Liberty Airport?
    Question 2a. When will the FAA know the answer to this?
    Answer. The initial staffing level for Newark Liberty Airport 
Traffic Control Tower is estimated to be 35 air traffic controllers. 
This staffing level is adequate for shift coverage, controller training 
and annual leave requirements. We will continue to review staffing 
requirements as the ATO implements efficiency and productivity 
initiatives to provide optimal staffing while maintaining safe 
operations.


    Question 3. How many air traffic controllers do you intend to hire 
next year?
    Answer. The FAA intends to hire 1,136 air traffic controllers in FY 
2007.

    Question 4. How many were hired last year?
    Answer. In FY 2005, 438 air traffic controllers were hired.

    Question 5. Does the FAA have any future plans to outsource or 
privatize any part of the air traffic control system?
    Answer. The FAA has no plans to privatize the entire air traffic 
control system. We will continue to look for opportunities to achieve 
cost savings and efficiency improvements throughout the FAA, consistent 
with our mandate from Congress to operate more like a business. Some of 
these opportunities may involve partnering with the private sector. For 
instance, we will continue the contract tower program and are 
implementing the recent contract awarded to Lockheed Martin through the 
A-76 process to operate flight service stations. The contract tower 
program saves taxpayers over $54 million per year. The A-76 competition 
for the flight service station program will save $66 million in FY 
2007, and a total of $2.2 billion over 13 years, while providing better 
service to the flying public.
    In everything the FAA does, safety will remain our number one 
priority. Our overarching goal is to achieve the lowest possible 
accident rate, while constantly improving safety. Therefore, we always 
undertake our efforts to control operating costs in the context of 
maintaining the safest aviation system in the world.

    Question 6. Has the FAA performed a cost estimate of the ``Next-
Generation Air Transportation System'' ? If so, what is that estimate?
    Answer. The FAA and the JPDO realize the necessity of developing a 
comprehensive cost model for NGATS. This is critical for the program's 
budgeting and planning and naturally is a matter of considerable 
interest to Members of Congress. However, in order to develop a working 
cost model that reflects the near-term and long-term cost for NGATS, it 
is critically important to specify the NGATS system and transition 
roadmap to a greater level of detail and develop a consensus, not just 
between governmental entities, but with industry, regarding the key 
assumptions that will govern the development of the estimate.
    In order to address the funding issue, we have asked the NGATS 
Institute to host a series of forums so that the critical assumptions 
and uncertainties underlying any cost benefit effort can receive 
scrutiny and be validated for further use. The forums will involve a 
wide cross-section of aviation decision-makers. In addition, further 
detailed studies will focus on the near term costs and benefits which 
will be used to inform more immediate agency planning activities over 
the next five years. We will then expand our cost analysis to consider 
the expected total systems costs for NGATS.

    Question 7. Has FAA performed or analyzed recent studies regarding 
the adequacy of the ``Age 60'' rule for pilots? Is FAA considering 
revising this rule?
    Answer. The FAA has conducted five studies, using various analytic 
methodologies, on the relationship of pilot age to accidents. The most 
recent study, published in April 2004, corroborates the findings of two 
previous empirical studies--specifically that accident rates appear to 
increase with pilot age. Recent non-FAA research, published in 2005 in 
open, peer-reviewed scientific literature, reported that the risk of 
violations of flight regulations increased with age in a longitudinal 
study of commuter air carrier and air taxi pilots. Violations of flight 
regulations are important indicators because pilots with violations are 
more likely to be involved in accidents or incidents than pilots 
without violations.
    The ``Age 60 rule'' has served well as a regulatory limit in the 
United States. The FAA recognizes that science does not absolutely 
dictate what age is most appropriate for retirement. No absolute, 
scientific formula may readily be applied to predict progressive, 
anatomic, physiological, and cognitive decline associated with aging 
because it is variable in severity and onset among individuals. The 
consistency of findings across empirical studies, however, suggests 
that changes to the ``Age 60 rule'' should be approached cautiously; 
so, we presently have no plans to revise the rule.

    Question 8. Can the FAA meet the requirement of Public Law 109-115 
which states: ``Provided further, That not later than December 31, 
2015, the owner or operator of an airport certificated under 49 U.S.C. 
44706 shall improve the airport's runway safety areas to comply with 
the Federal Aviation Administration design standards required by 14 CFR 
part 139: Provided further, That the Federal Aviation Administration 
shall report annually to the Congress on the agency's progress toward 
improving the runway safety areas at 49 U.S.C. 44706 airports.'' ? If 
not, why not?
    Answer. FAA's goal, and now Public Law 109-115's requirement, to 
improve all runways subject to 14 CFR Part 139, Certification of 
Airports (Part 139), to meet standards for runway safety areas (RSA) is 
on schedule. It must be noted, however, that Part 139 requires RSAs to 
meet design standards ``in a manner authorized by the Administrator.'' 
We have consistently interpreted this to mean ``to the extent 
practicable,'' in recognition that it is simply not feasible to get a 
full standard RSA at every runway. When we started the special emphasis 
on accelerating RSA improvements in FY 2000, we identified a total of 
456 RSAs needing improvement. From FY 2000 through the end of FY 2005, 
improvements had been completed at 208 RSAs. Thirty four RSA's are 
scheduled for completion in FY 2006. By FY 2010, ninety-two percent of 
the total 456 RSA improvements will be completed. The remaining RSAs 
(39) are scheduled to be upgraded between FY 2011 and prior to December 
31, 2015.
    We would also emphasize that our policies require constant 
reevaluation of any RSA that cannot fully meet design standards. As 
conditions at and/or near an airport change, or technology for 
arresting systems advances, it may be practicable in the future to meet 
RSA standards where today it is not.

    Question 9. Does FAA have data that indicates simultaneous 
extension of the landing gear and landing flaps on the Mitsubishi MU-2 
presents a safety problem? Has FAA investigated this situation? Do you 
believe it is a safety concern?
    Answer. There is no FAA data to show that the simultaneous 
extension of the landing gear and flaps has caused an accident or 
presented a safety problem.

    Question 10. According to FAA data and other accident data, what is 
the prevalence of false fire warnings involving the Mitsubishi MU-2? 
Has FAA investigated this? Does FAA consider the potential for false 
fire warnings a safety concern? If so, what has FAA done to address it?
    Answer. False fire warnings were reported in the earliest models of 
MU-2. This problem was corrected and there is little data indicating 
this is now a problem. The FAA considers false fire warnings or any 
false warning a safety concern and addresses those issues immediately. 
Pilots operating under 14 CFR part 135 are required by the FAA to be 
trained, qualified, and tested on normal, abnormal and emergency 
procedures including engine fires and fire warnings that may occur in 
any phase of flight.

    Question 11. According to the MU-2 maintenance manual, the pilot 
should visually confirm if there is a fire prior to securing the 
engine. Does FAA believe this is appropriate, given the aircraft's 
operational history and the prevalence of false fire warnings?
    Answer. The Aircraft Flight Manual and the aircraft checklist, not 
the maintenance manual, require the pilot to confirm if there is a fire 
prior to securing the engine. Best practice would be to visually 
confirm evidence of the problem. The recommendation to visually confirm 
the existence of a fire is standard procedure in operation of light 
twin engine aircraft, including the MU-2. The FAA will continue to 
investigate and validate alleged false fire warnings and will take 
appropriate action.

    Question 12. Is there any reason to believe that the Mitsubishi MU-
2 aircraft's fire warning device is not accurate or reliable? For 
similar aircraft, does FAA require visual checks for fire in order to 
confirm a fire warning device before securing the engine? If so, which 
aircraft? Which aircraft did FAA certify that do not require a visual 
check for fire to confirm a warning device before securing the engine?
    Answer. No. Currently the FAA does not have any indication through 
Service Difficulty Reports, manufacturer's information or safety 
recommendations that the Mitsubishi MU-2B fire warning system is 
inaccurate or unreliable. National Transportation Safety Board (NTSB) 
investigations on some MU-2B accidents are still pending. If the NTSB 
investigation finds evidence that the aircraft's fire warning is not 
accurate or reliable we will take appropriate action.
    With regard to other aircraft the FAA does not require visual 
checks. FAA policy (14 CFR part 23) states that the airplane flight 
manual (AFM) should include procedures for ``proper pilot response to 
cockpit warnings.'' The FAA evaluates the procedures during the normal 
certification process. It may be prudent to proceed directly to 
securing the engine if it is not physically possible for the pilot to 
visually confirm the presence of a fire due to an aircraft's particular 
geometry, engine location, fire location, etc.
    In order to provide a complete list of aircraft that the FAA 
certified that do not require a visual check we would have to review 
the AFM's of every airplane. The FAA reviewed a sample of five 
different flight manuals to identify procedures for responding to in-
flight engine fire indications. The AFMs reviewed were those for the 
Cessna 208, Pilatus PC-12, Pilatus PC-6 (turboprop), Aero Vodochody Ae 
270, and PZL-Mielec PZL M28-05. All AFMs directed the pilot to proceed 
directly to securing the engine based on fire warning lights.

    Question 13. Has the FAA tested the Mitsubishi MU-2's propensity to 
roll inverted faster than a pilot could react when stalled or with only 
one engine running?
    Answer. Members of the Flight Standardization Board evaluated the 
Mitsubishi MU-2 aircraft using the current Practical Test Standards 
that would be used for a private pilot, commercial pilot or airline 
transport pilot applicant who chose to use the MU-2 aircraft for the 
practical test. All of the various stall maneuvers for each test were 
evaluated and in all cases, the MU-2 aircraft did not display any 
propensity to roll when stalled.
    Operations with the critical engine inoperative were demonstrated 
including all of the single engine maneuvers required by the 
appropriate practical test standard. During this portion of the 
evaluation, the aircraft did not display any propensity to roll.
    As part of the review conducted in 2005, comments from training 
establishments and operators (commercial and private) were taken into 
consideration and at no time was there any feeling that the roll rate 
was a factor.
    As in any aircraft, if a pilot is ``behind the aircraft'' for any 
reason, whether it be complacency, distractions or work load at that 
particular time, it would contribute to a loss of control following 
engine failure. Training for engine out in a multiengine aircraft 
emphasizes the need to maintain sufficient airspeed to avoid a stall 
with one engine inoperative and a pilot is required to demonstrate 
flight at the minimum controlled airspeed in that mode.

    Question 14. When will FAA propose an airworthiness directive 
regarding the Mitsubishi MU-2's fuel delivery system?
    Answer. Reviewing engine failures in the MU-2B airplane was a part 
of the safety evaluation. You may find the FAA final report with more 
detailed information at the following internet site: www.faa.gov/
aircraft/air_cert/design_approvals/small_airplanes/cos/
mu2_foia_reading_library/.
    FAA review of the available in-flight shut down data for the 
Honeywell TPE331 series engines from the past 10 years does not 
indicate a trend in engine problems. Occasionally, service difficulties 
are submitted to the FAA and to Honeywell without identifying the root 
cause of the in-flight shut down. The FAA is not aware of specific 
engine or aircraft fuel delivery problems. However, as indicated in the 
proposed action for the airframe and engines, the FAA is evaluating the 
need to mandate several Japanese Civil Aviation Bureau (JCAB) engine 
and propeller related airworthiness directives (AD). These JCAB ADs 
include two that address fuel flow and the fuel control, although 
neither is suspected as a contributing factor in any accident. The 
Notice of Proposed Rulemaking (NPRM) concerning the flight idle fuel 
flow setting was issued on April 21, 2006. (Reference Docket No. FAA-
2006-23884.) This comment period closes on June 15, 2006. Additionally, 
the NPRM concerning the inspection of the engine torque indication 
system was issued on April 21, 2006. (Reference Docket No. FAA-2006-
23883.) That comment period also closes on June 15, 2006.

    Question 15. Does the FAA feel that proper pilot training could 
have prevented all crashes involving the MU-2?
    Answer. The FAA believes that training is integral to the safe 
operation of any aircraft and places a high level of importance on it. 
The December 2005 FAA MU-2B Series Safety Evaluation Report determined 
that a number of factors contributed to the MU-2 accidents. Training 
alone is unlikely to have prevented all accidents. Nevertheless, the 
FAA is, at this time, evaluating options to address all of the factors, 
including training. Some changes that are expected to be made in 
training are:

   All initial, recurrent, transition, re-qualification or 
        differences training be required in the MU-2 exclusively in 
        accordance with the manufacturers approved training program.

   Flight reviews for operators of MU-2 conducted under the 
        Code of Federal Regulation 14 CFR 61.56 will be required in the 
        MU-2 itself as opposed to any airplane multi-engine, land.

   Landing currency requirements under 14 CFR 61.57 must be 
        maintained in the MU-2 exclusively. Landing done in other 
        multi-engine airplanes will not be credited for landing 
        currency in the MU-2.

    Question 16. How does the FAA enforce regulations concerning 
maintenance/repair of smaller (non-commercial passenger) aircraft by 
non-FAA certified repair stations?
    Answer. FAA oversees these maintenance activities by inspection of 
the aircraft, review of the aircraft maintenance records and performing 
surveillance on the certificated mechanics and inspection authorization 
holders that provide the maintenance and inspection of these aircraft. 
This surveillance includes verification that the work was done in 
accordance with appropriate data using the proper equipment to perform 
the maintenance.

    Question 17. How does FAA enforce regulations requiring FAA 
Inspection Authorizations for certain repair work by non-certified 
repair stations?
    Answer. Aircraft mechanics with inspection authorization are 
certificated in accordance with 14 CFR part 65 to perform aircraft 
maintenance. These mechanics are overseen through planned scheduled 
surveillance with National Work Program Guidance and non-scheduled 
surveillance of the mechanic including verification that the work was 
done in accordance with appropriate data using the proper equipment to 
perform the maintenance, inspection of aircraft they maintain, review 
of the aircraft maintenance records they make, and review of the FAA 
Form 337 they complete for each major repair and alteration. 
Furthermore, each inspection authorization holder's authorization is 
renewed once a year verifying that they continue to meet performance 
and currency requirements to retain their inspection authorization.

    Question 18. As part of FAA's ``comprehensive safety evaluation of 
the Mitsubishi MU-2,'' did the agency review all the flight test data 
that was generated to comply with certification provisions? Was that 
data actually used to satisfy compliance, especially with respect to 
``controllability'' and ``stalls'' ?
    Answer. The FAA evaluation team reviewed the flight test reports 
from the original validated type certificate (TC) (TC No. A2PC) and the 
original type certificate (TC No. A10SW). In addition, the team 
reviewed the test reports from the 1984 and 1996 Special Certification 
Reviews (SCR). All of these reports included ``controllability'' and 
``stalls'' compliance.
    The data used for showing compliance for the original type 
certificates were used to verify the airplane met its certification 
basis during the two SCRs and this most recent Safety Evaluation.

                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                             Todd J. Zinser

    Question 1. Has anyone at USDOT performed a cost estimate of the 
NGATS? If so, what was the result?
    Answer. The costs associated with the next generation air 
transportation system for FAA (new ground systems) and airspace users 
(new avionics) remain undefined. The JPDO's recent progress report to 
Congress was silent on financial requirements and there are no formal 
cost estimates for NGATS. We have seen some preliminary estimates 
developed by FAA but caution there are considerable unknowns, and costs 
depend on, among other things, performance requirements for new 
automation and weather initiatives and to what extent FAA intends to 
consolidate facilities. The JPDO is conducting workshops with industry 
to help refine the costs, requirements, and milestones associated with 
the next generation system. However, FAA will have to analyze this 
information and provide Congress with expected funding requirements and 
when the funding will be needed.

    Question 2. Does FAA have an adequate system in place to determine 
whether the number of air traffic controllers assigned to a particular 
facility will provide for the safety of air traffic operations?
    Answer. No, the current staffing standards used by FAA do not 
adequately reflect staffing needs at individual facilities. FAA has 
used the current staffing standard models to determine controller 
staffing levels since the 1970s. The models are generally accurate at 
the ``macro'' level because they were designed to generate national 
estimates, but they do not adequately reflect staffing needs at the 
facility level.
    FAA is aware of the need for staffing standards at the facility 
level. In FAA's controller workforce plan, issued in December 2004, FAA 
committed to reassessing its air traffic staffing models for terminal 
and en route operations. According to FAA, the reassessment will be 
conducted with a view towards achieving a staffing estimating 
methodology (either a revised staffing standard model or another 
estimating model) that yields high confidence staffing estimates at the 
national and facility levels.
    In May 2005, we recommended that FAA begin its planned reassessment 
of the current staffing standards as quickly as possible. Accurate 
facility staffing requirements are particularly important as FAA begins 
implementing its workforce plan to hire 12,500 new controllers over the 
next 10 years. FAA has begun its assessment of staffing standards at en 
route facilities, the first planned locations: however, as of April 
2006, those actions had not yet been completed.

    Question 3. Is the FAA on track to meet its staffing plan for air 
traffic controllers?
    Answer: In FY 2005, FAA hired 438 new controllers, which was inline 
with the plan's projection. For FY 2006, FAA plans to hire 1,249 
controllers, which is also inline with the plan's projection. However, 
in its FY 2007 budget request, FAA has stated that it may need to 
revise its planned number of new hires for FY 2006 in order to meet the 
1 percent government-wide rescission.
    In addition, actual controller retirements have been more than what 
was projected in the agency's workforce plan. In FY 2005, 465 
controllers actually retired compared to 341 projected in the plan--36 
percent more than what was projected. FAA needs to review and update 
the methodology it uses in calculating projected retirements before the 
next update to the plan.

                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                      Gerald L. Dillingham, Ph.D.

    Question 1. Does FAA have an adequate system in place to determine 
whether the number of air traffic controllers assigned to a particular 
facility will provide for the safety of air traffic operations?
    Answer. We have not evaluated the adequacy of FAA's procedures for 
staffing its air traffic control facilities. Historically, FAA has 
computed the number of controllers needed on a system-wide basis, but 
distribution of these totals to the facility level was a negotiated 
process. The Department of Transportation Inspector General reported 
that FAA's staffing standards do not take into account the significant 
difference in complexity and workload among FAA's 300 terminal and en 
route control facilities and can lead to staffing imbalances.
    FAA has begun developing and implementing new staffing standards 
that use an algorithm that incorporates traffic levels and complexity 
of traffic at the facility level to determine the number of controllers 
needed, according to an FAA official. The official stated that FAA 
plans to address specific facilities whose characteristics do not lend 
themselves to formulaic evaluation, such as the Cleveland en route 
center, where domestic airspace and international airspace are mixed. 
At such facilities, FAA plans to conduct on-site reviews to develop 
qualitative data to determine the number of controllers needed.
    FAA is working with Mitre Corp. to further refine its process for 
determining controller staffing needs. The ultimate objective is to 
assess the traffic level and complexity on a sector-by-sector basis to 
develop more accurate controller staffing requirements. FAA expects 
that the new process will also consider the anticipated losses at each 
facility to determine the hiring needs. Facilities with fewer losses 
would get fewer trainees. In the past, the number of trainees was 
computed as a percentage of total facility staff.

    Question 2. Is the FAA on track to meet its staffing plan for air 
traffic controllers?
    Answer. While FAA met its Fiscal Year 2005 staffing plan by hiring 
438 controllers (3 more than its target), FAA is not keeping pace with 
its updated air traffic controller staffing plan to hire 930 
controllers in Fiscal Year 2006. As of early May 2006 it had hired 
about 400 or less than 50 percent, according to an FAA official. To 
meet its 2006 staffing plan, FAA needs to hire about 530 controllers in 
the remaining five months of this fiscal year.
    FAA's soon-to-be-published staffing plan update will show reduced 
hiring needs for the next few years, compared to those published in its 
2004 plan, according to an FAA official. The 2004 plan was based on 
FAA's 2004 air traffic forecast. FAA's 2006 air traffic forecast shows 
less air traffic over the next few years, compared to 2004. 
Consequently, FAA has reduced its near term controller hiring plans 
accordingly, and plans to revise its staffing plans annually based on 
the air traffic forecast. While the controller hiring target was 
constrained by the Fiscal Year 2005 budget, FAA has the budget needed 
to hire the planned number of controllers in Fiscal Year 2006, 
according to an FAA official.

    Question 3. Has anyone at USDOT performed a cost estimate of the 
``Next-Generation Air Transportation System? '' If so, what was the 
result?
    Answer. To our knowledge, no formal cost estimates exist for the 
NGATS. However, FAA's Research, Engineering and Development Advisory 
Committee (REDAC) and Air Traffic Office (ATO) have separately 
developed preliminary estimates. In both cases, these estimates were 
presented as unofficial and had not received any formal approval from 
any agency. REDAC estimated FAA's costs to implement NGATS under 3 
scenarios. Two scenarios assume varying levels of productivity 
improvements under NGATS. Under these scenarios, FAA's total cost to 
operate the NAS over the next 20 years will average about $15 billion, 
in constant $2005 dollars, with or without implementing NGATS. Only 
under the third scenario, where there would be no productivity 
increases, would NGATS cost more than the status quo. REDAC notes that 
continuing the status quo, without implementing NGATS, is not a viable 
option because, without the capacity increases from the NGATS, demand 
would exceed the capacity in enough places in the United States to have 
a significant impact on the overall economy.
    FAA's Air Traffic Organization estimates that FAA's Facilities and 
Equipment cost for NGATS will total about $15 billion between 2006 and 
2025, in addition to projected Facilities and Equipment costs without 
NGATS. In contrast to the REDAC estimate, the ATO did not estimate the 
NGATS' impact on FAA's operating or other costs. The ATO's estimate for 
Facilities and Equipment is higher than the Facilities and Equipment 
component of REDAC's estimate. We have not analyzed reasons for the 
differences between these estimates.
    Developing a cost estimate for the NGATS is difficult due to the 
many assumptions that must be made about the policies and technologies 
that will be used in the future system. The difficulty is compounded in 
obtaining consensus among numerous stakeholders on what these 
assumptions should be. An additional factor is the amount of success 
that the Air Traffic Organization (ATO) will achieve in cutting its 
costs. For example, an annual savings of $500 million per year could 
substantially offset the cost of NGATS. We are currently reviewing the 
ATO's efforts to reduce its costs and expect to issue a report later 
this year.
    To develop better estimates of the cost of NGATS, the Joint 
Planning and Development Office (JPDO) recently held the first in a 
series of three workshops with stakeholders. The first workshop 
convened representatives of commercial and business aviation--operators 
of high performance aircraft including airliners, regional jets, 
business jets and turboprops operated by major and regional air 
carriers, cargo air carriers, on-demand air carriers (traditionally air 
taxis), corporate aviation, fractional ownership programs and others. 
JPDO plans to target the second workshop to focus on the military and 
public safety concerns, and the third to focus on airports and state/
regional aviation groups--airports and other public and local, state 
and regional planning bodies. Although one of the goals of the meeting 
was to develop better cost estimates of the cost of NGATS, the first 
workshop did not result in any cost estimates. Workshop participants 
noted that before cost estimates can be developed, they need FAA's 
description of system-wide operational capabilities and benefits for 
users.

                                  
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