[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]






 
            FEDERAL AVIATION ADMINISTRATION REAUTHORIZATION

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

                                (110-17)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                                AVIATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                     MARCH 14, 21, 22, and 28, 2007

                               __________


                       Printed for the use of the
             Committee on Transportation and Infrastructure













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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia    JOHN L. MICA, Florida
PETER A. DeFAZIO, Oregon             DON YOUNG, Alaska
JERRY F. COSTELLO, Illinois          THOMAS E. PETRI, Wisconsin
ELEANOR HOLMES NORTON, District of   HOWARD COBLE, North Carolina
Columbia                             JOHN J. DUNCAN, Jr., Tennessee
JERROLD NADLER, New York             WAYNE T. GILCHREST, Maryland
CORRINE BROWN, Florida               VERNON J. EHLERS, Michigan
BOB FILNER, California               STEVEN C. LaTOURETTE, Ohio
EDDIE BERNICE JOHNSON, Texas         RICHARD H. BAKER, Louisiana
GENE TAYLOR, Mississippi             FRANK A. LoBIONDO, New Jersey
JUANITA MILLENDER-McDONALD,          JERRY MORAN, Kansas
California                           GARY G. MILLER, California
ELIJAH E. CUMMINGS, Maryland         ROBIN HAYES, North Carolina
ELLEN O. TAUSCHER, California        HENRY E. BROWN, Jr., South 
LEONARD L. BOSWELL, Iowa             Carolina
TIM HOLDEN, Pennsylvania             TIMOTHY V. JOHNSON, Illinois
BRIAN BAIRD, Washington              TODD RUSSELL PLATTS, Pennsylvania
RICK LARSEN, Washington              SAM GRAVES, Missouri
MICHAEL E. CAPUANO, Massachusetts    BILL SHUSTER, Pennsylvania
JULIA CARSON, Indiana                JOHN BOOZMAN, Arkansas
TIMOTHY H. BISHOP, New York          SHELLEY MOORE CAPITO, West 
MICHAEL H. MICHAUD, Maine            Virginia
BRIAN HIGGINS, New York              JIM GERLACH, Pennsylvania
RUSS CARNAHAN, Missouri              MARIO DIAZ-BALART, Florida
JOHN T. SALAZAR, Colorado            CHARLES W. DENT, Pennsylvania
GRACE F. NAPOLITANO, California      TED POE, Texas
DANIEL LIPINSKI, Illinois            DAVID G. REICHERT, Washington
DORIS O. MATSUI, California          CONNIE MACK, Florida
NICK LAMPSON, Texas                  JOHN R. `RANDY' KUHL, Jr., New 
ZACHARY T. SPACE, Ohio               York
MAZIE K. HIRONO, Hawaii              LYNN A WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa                CHARLES W. BOUSTANY, Jr., 
JASON ALTMIRE, Pennsylvania          Louisiana
TIMOTHY J. WALZ, Minnesota           JEAN SCHMIDT, Ohio
HEATH SHULER, North Carolina         CANDICE S. MILLER, Michigan
MICHAEL A. ACURI, New York           THELMA D. DRAKE, Virginia
HARRY E. MITCHELL, Arizona           MARY FALLIN, Oklahoma
CHRISTOPHER P. CARNEY, Pennsylvania  VERN BUCHANAN, Florida
JOHN J. HALL, New York
STEVE KAGEN, Wisconsin
STEVE COHEN, Tennessee
JERRY McNERNEY, California

                                  (ii)

  




























                        Subcommittee on Aviation

                 JERRY F. COSTELLO, Illinois, Chairman

BOB FILNER, California               THOMAS E. PETRI, Wisconsin
LEONARD L. BOSWELL, Iowa             HOWARD COBLE, North Carolina
RICK LARSEN, Washington              JOHN J. DUNCAN, Jr., Tennessee
RUSS CARNAHAN, Missouri              VERNON J. EHLERS, Michigan
JOHN T. SALAZAR, Colorado            STEVEN C. LaTOURETTE, Ohio
DANIEL LIPINSKI, Illinois            FRANK A. LoBIONDO, New Jersey
NICK LAMPSON, Texas                  JERRY MORAN, Kansas
ZACHARY T. SPACE, Ohio               ROBIN HAYES, North Carolina
BRUCE L. BRALEY, Iowa                SAM GRAVES, Missouri
HARRY E. MITCHELL, Arizona           JOHN BOOZMAN, Arkansas
JOHN J. HALL, New York               SHELLEY MOORE CAPITO, West 
STEVE KAGEN, Wisconsin               Virginia
STEVE COHEN, Tennessee               JIM GERLACH, Pennsylvania
NICK J. RAHALL, II, West Virginia    MARIO DIAZ-BALART, Florida
PETER A. DeFAZIO, Oregon             CHARLES W. DENT, Pennsylvania
ELEANOR HOLMES NORTON, District of   TED POE, Texas
Columbia                             DAVID G. REICHERT, Washington
CORRINE BROWN, Florida               CONNIE MACK, Florida
EDDIE BERNICE JOHNSON, Texas         JOHN R. `RANDY' KUHL, Jr., New 
JUANITA MILLENDER-McDONALD,          York
California                           LYNN A WESTMORELAND, Georgia
ELLEN O. TAUSCHER, California        MARY FALLIN, Oklahoma
TIM HOLDEN, Pennsylvania             VERN BUCHANAN, Florida
MICHAEL E. CAPUANO, Massachusetts    JOHN L. MICA, Florida
DORIS O. MATSUI, California            (Ex Officio)
MAZIE K. HIRONO, Hawaii
JAMES L. OBERSTAR, Minnesota
  (Ex Officio)

                                 (iii)






























                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    ix

Proceedings of:

  March 14, 2007.................................................     1
  March 21, 2007.................................................   120
  March 22, 2007.................................................   340
  March 28, 2007.................................................   744

           THE ADMINISTRATION'S FAA REAUTHORIZATION PROPOSAL
                             MARCH 14, 2007

                               TESTIMONY

Blakey, Hon. Marion C., Administrator, Federal Aviation 
  Administration, U.S. Department of Transportation..............     8

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Carnahan, Hon. Russ, of Missouri.................................    37
Costello, Hon. Jerry F., of Illinois.............................    39
Johnson, Hon. Eddie Bernice, of Texas............................    42
Larsen, Hon. Rick, of Washington.................................    47
Mica, Hon. John L., of Florida...................................    48
Mitchell, Hon. Harry E., of Arizona..............................    53
Oberstar, Hon. James L., of Minnesota............................    59
Petri, Hon. Thomas E., of Wisconsin..............................    63
Rahall, Hon. Nick J., of West Virginia...........................    67

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Blakey, Marion C.................................................    69

                       SUBMISSIONS FOR THE RECORD

Blakey, Hon. Marion C., Administrator, Federal Aviation 
  Administration, U.S. Department of Transportation, ``Making the 
  NextGen Vision a Reality,'' 2006 Progress Report to the Next 
  Generation Air Transportation System Integrated Plan...........    84
Federal Aviation Administration, response to questions from Rep. 
  Sestak and Rep. Andrews........................................   110

                        ADDITIONS TO THE RECORD

American Federation of State, County and Municipal Employees, 
  written statement..............................................   117

                        FAA's FINANCING PROPOSAL
                             MARCH 21, 2007

                               TESTIMONY

Alterman, Stephen A., President, Cargo Airline Association.......   158
Barrow, Hon. John, a Representative in Congress from the State of 
  Georgia........................................................    00
Bolen, Ed, President and CEO, National Business Aviation 
  Association....................................................   158
Boyer, Phil, President, Aircraft Owners and Pilots Association...   158
Cohen, Roger, President, Regional Airline Association............   158
Dillingham, Dr. Gerald, Director, Physical Infrastructure Issues, 
  U.S. Government Accountability Office..........................   129
Elwell, Daniel K., Assistant Administrator, Aviation Policy, 
  Planning and Environment, Federal Aviation Administration......   129
Faberman, Edward P., Executive Director, Air Carrier Association 
  of America.....................................................   158
May, James C., President and CEO, Air Transport Association of 
  America........................................................   158
Scovel, III, Hon. Calvin L., Inspector General, U.S. Department 
  of Transportation..............................................   129
Tiahrt, Hon. Todd, a Representative in Congress from the State of 
  Kansas.........................................................   122
Zuccaro, Matthew, President, Helicopter Association International   158

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Barrow, Hon. John, of Georgia....................................   185
Costello, Hon. Jerry F., of Illinois.............................   196
Matsui, Hon. Doris O., of California.............................   199
Mitchell, Hon. Harry E., of Arizona..............................   200
Oberstar, Hon. James L., of Minnesota............................   207
Petri, Hon. Thomas E., of Wisconsin..............................   211
Salazar, Hon. John T., of Colorado...............................   215
Tiahrt, Hon. Todd, of Kansas.....................................   217

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Alterman, Stephen A..............................................   224
Bolen, Ed........................................................   231
Boyer, Phil......................................................   244
Cohen, Roger.....................................................   253
Dillingham, Gerald L.............................................   259
Faberman, Edward P...............................................   287
May, James C.....................................................   297
Scovel, Calvin L.................................................   315
Zuccaro, Matthew.................................................   335

                       SUBMISSIONS FOR THE RECORD

Dillingham, Dr. Gerald, Director, Physical Infrastructure Issues, 
  U.S. Government Accountability Office, reponse to questions 
  from Rep. Costello.............................................   283

                  FAA OPERATIONAL AND SAFETY PROGRAMS
                             MARCH 22, 2007

                               TESTIMONY

Baker, Steve, President, FAA Managers Association................   382
Brantley, Tom, President, Professional Airways Systems 
  Specialists (AFL-CIO)..........................................   343
Dillingham, Dr. Gerald, Director, Physical Infrastructure Issues, 
  U.S. Government Accountability Office..........................   382
Forrey, Pat, President, National Air Traffic Controllers 
  Association....................................................   343
Friend, Patricia, International President, Association of Flight 
  Attendants-CWA.................................................   371
Kroeppel, Warren, General Manager of Laguardia Airport, The Port 
  Authority of New York and New Jersey...........................   382
McVenes, Captain Terry, Executive Air Safety Chairman, Air Line 
  Pilots Association.............................................   371
Renninger, James B., Director, Aviation Center of Excellence, 
  Florida Community College of Jacksonville......................   382
Roach, Jr., Robert, General Vice President, International 
  Association of Machinists......................................   371
Sliwa, Steve, CEO and President, The Insitu Group, Inc...........   382
Waters, Tom, President, American Federation of State, County and 
  Municipal Employees (AFSCME) Local 3290........................   343

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Costello, Hon. Jerry F., of Illinois.............................   395
LoBiondo, Hon. Frank A., of New Jersey...........................   397
Matsui, Hon. Doris O., of California.............................   400
Mitchell, Hon. Harry E., of Arizona..............................   402
Oberstar, Hon. James L., of Minnesota............................   406
Petri, Hon. Thomas E., of Wisconsin..............................   409
Rahall, Hon. Nick J., of West Virginia...........................   411
Salazar, Hon. John T., of Colorado...............................   412

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Baker, Steve.....................................................   414
Brantley, Tom....................................................   421
Dillingham, Gerald L.............................................   435
Forrey, Patrick..................................................   465
Friend, Patricia A...............................................   497
Kroeppel, Warren D...............................................   523
McVenes, Captain Terry...........................................   544
Renninger, James B...............................................   687
Roach, Robert Jr.................................................   693
Sliwa, Steven M..................................................   704
Waters, J. Tom...................................................   712

                       SUBMISSIONS FOR THE RECORD

Forrey, Pat, President, National Air Traffic Controllers 
  Association, letters to Rep. Mica..............................   492
McVenes, Captain Terry, Executive Air Safety Chairman, Air Line 
  Pilots Association:

  ``The Current State of the Cargo Industry_an Alpha 
    Perspective''................................................   568
  ``Concept of Safety Management System Embraced by Many 
    Countries''..................................................   599
  ``Background and Fundamentals of the Safety Management System 
    (SMS) for Aviation Operations''..............................   604

                        ADDITIONS TO THE RECORD

Association of Air Medical Services, written statement...........   717
Air Transport Association of America, Inc., written statement....   724

                   FAA's AIRPORT IMPROVEMENT PROGRAM
                             MARCH 28, 2007

                               TESTIMONY

Barclay, Charles, President, American Association of Airport 
  Executives.....................................................   747
Bennett, James E., President and CEO, Metropolitan Washington 
  Airports Authority.............................................   781
Bogan, Robert L., Deputy Director, Morristown Municipal Airport, 
  on behalf of The Sound Initiative..............................   798
Clark, John, Executive Director, Jacksonville Aviation Authority.   781
Dillingham, Dr. Gerald, Director, Physical Infrastructure Issues, 
  U.S. Government Accountability Office..........................   747
Fernandez, Hon. Nuria I., Commissioner of Aviation, City of 
  Chicago........................................................   781
Healy, Hon. James D., County Board Member, DuPage County, Il, on 
  behalf of National Association of Counties.....................   798
Kimmel, Douglas, Airport Manager, Williamson County Regional 
  Airport........................................................   781
LeTellier, Gary W., Airport Manager, Southwest Oregon Regional 
  Airport........................................................   781
Piccolo, Frederick J., President and Chief Executive Officer, 
  Sarasota Manatee Airport Authority.............................   781
Principato, Greg, President, Airports Council International-North 
  America........................................................   747
Ramsdell, Karen, Airport Director, Santa Barbara Municipal 
  Airport........................................................   781
Roberts, Elaine, A.A.E., President and CEO, Columbus Regional 
  Airport Authority..............................................   781
Shaffer, D. Kirk, Associate Administrator for Airports, Federal 
  Aviation Administration........................................   747
Vallin, Travis, Director, Division of Aeronautics, Colorado 
  Department of Transportation, on behalf of The National 
  Association of State Aviation Officials........................   798

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Cohen, Hon. Steve, of Tennessee..................................   807
Costello, Hon. Jerry F., of Illinois.............................   808
Frelingkhuysen, Hon. Rodney P., of New Jersey....................   810
Johnson, Hon. Eddie Bernice, of Texas............................   812
Kagen, M.D., Hon. Steve, of Wisconsin............................   816
Matsui, Hon. Doris O., of California.............................   817
Mitchell, Hon. Harry E., of Arizona..............................   818
Oberstar, Hon. James L., of Minnesota............................   826
Salazar, Hon. John T., of Colorado...............................   830

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Barclay, Charles M...............................................   832
Bennett, James E.................................................   853
Bogan, Robert L..................................................   859
Clark, John......................................................   868
Dillingham, Gerald L.............................................   876
Fernandez, Nuria I...............................................   903
Healy, James D...................................................   907
Kimmel, Douglas S................................................   912
LeTellier, Gary W................................................   923
Principato, Greg.................................................   928
Ramsdell, Karen S................................................   940
Roberts, Elaine..................................................   947
Shaffer, D. Kirk.................................................   954
Vallin, Travis L.................................................   968

                        ADDITIONS TO THE RECORD

American Road and Transportation Builders Association, written 
  statement......................................................   977
Arlene J. Mulder, Mayor, Arlington Heights, Illinois, written 
  statement......................................................   981
Illinois Department of Transportation, Division of Aeronautics, 
  Susan R. Shea, Director, letter to Rep. Mica...................   985
American Council of Engineering Companies, Airport Consultants 
  Council, American Road & Transportation Builders Association, 
  American Institute of Architects, and American Society of Civil 
  Engineers, joint letter to Rep. Oberstar and Rep. Costello.....   988
American Society of Civil Engineers, written statement...........   991



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    HEARING ON THE ADMINISTRATION'S FEDERAL AVIATION ADMINISTRATION 
                        REAUTHORIZATION PROPOSAL

                              ----------                              


                       Wednesday, March 14, 2007

                  House of Representatives,
    Committee on Transportation and Infrastructure,
                                   Subcommittee on Aviation
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Jerry 
F. Costello [Chairman of the Subcommittee] presiding.
    Mr. Costello. The Subcommittee will come to order.
    The Subcommittee is meeting today to hear testimony on the 
President's fiscal year 2008, actually, the Federal Aviation 
Reauthorization Proposal submitted by the Administration and by 
the Administrator.
    I would ask all Members, staff and everyone in the room to 
turn off their electronic devices or to put them on vibrate.
    I will give an opening statement and call on the Ranking 
Member, Mr. Petri, to give his opening statement as well.
    I welcome everyone to our first of a number of hearings on 
the FAA Reauthorization. In particular, I would like to welcome 
the FAA Administrator, Administrator Blakey, here today to 
present the Administration's FAA Reauthorization Proposal to 
the Subcommittee.
    Following this hearing, the Subcommittee will give detailed 
consideration to specific aspects of the FAA reauthorization 
proposal in upcoming hearings in the month of March. On March 
21st, we will examine the FAA's financing proposal. March 22nd, 
we will examine the FAA's Operational and Safety Programs, and 
March 28th, the FAA's Airport Improvement Program. The 
Subcommittee will look at the Essential Air Service Program and 
small community air service issues in a hearing in the month of 
April.
    On February 14th, the FAA submitted its reauthorization 
proposal to the Congress. The FAA's proposal includes a new 
financing plan to transform the FAA's current excise tax 
financing system to a hybrid cost-based user fee system as well 
as major changes to the Airport Improvement Program. In 
addition, the reauthorization proposal includes provisions on 
the environment, airport congestion, war risk insurance as well 
as other items affecting the aviation community.
    At the outset, I would like to make a few observations 
about the FAA's reauthorization proposal.
    As I noted in our hearing on February 14th, when we 
received the President's budget proposal, the FAA's new 
proposal would hypothetically yield approximately $600 million 
less in fiscal year 2008 than maintaining the current tax 
structure and over $900 million less from fiscal year 2009 to 
fiscal year 2012. This is partially because the FAA's estimated 
cost requirements for its major capital programs are actually 
lower than what they were four years ago.
    For example, the FAA's estimated total requirement for 
facilities and equipment in this new three year proposal is 
approximately $380 million less than what it requested for the 
first three years of its last reauthorization proposal, the 
Centennial of Flight Aviation Authorization Act. This is 
despite the fact that the FAA has cited the need to finance a 
major new air traffic control modernization initiative as 
reason for reforming the current tax structure.
    At the same time, I have major reservations about 
implementing a user fee for which there does not appear to be a 
hard ceiling and for which FAA would have broad authority to 
raise fees to match whatever costs were incurred. Air traffic 
control modernization is a technologically intensive and 
financially high risk endeavor. In the past, the FAA has 
incurred major cost overruns in its modernization program. 
While the FAA believes that its user fee system would be more 
transparent, I am concerned that the airline passengers and the 
other air space users could end up paying hidden costs for 
future problems and delays with the FAA's modernization 
program.
    Therefore, it is imperative that the FAA give Congress a 
straightforward assessment of its cost requirements for the 
Next Generation system and for Congress to consider whether to 
authorize its request.
    In terms of capacity, airport runways may provide an even 
greater benefit than the air traffic modernization and, in 
fact, the FAA's operational evolution plan states that new 
runways and runway extensions provide the most significant 
capacity increases. However, the FAA has requested 
approximately $1.5 billion less for the AIP, the Airport 
Improvement Program, in its new three year proposal than what 
it requested for the first three years of its last 
reauthorization proposal. Given the fact that the FAA 
acknowledges that the airport capital requirements have 
increased, I believe that this funding request is extremely 
shortsighted.
    The FAA's proposal to increase the cap on Passenger 
Facilities Charges, the PFCs, from $4.50 to $6.00 is worthy of 
consideration. The PFC cap has not been raised since 2000, and 
inflation and construction cost increases have eroded the PFC's 
values. However, I have some concerns with expanding the 
eligibility for PFC projects. Expanding PFC eligibility and the 
proposed cuts to the AIP could result in moving funding away 
from capacity-enhancing air side projects.
    The FAA has also proposed to restructure the Non-Primary 
Entitlement Program into a tiered system of apportioning AIP 
entitlements so that the larger general aviation airports get 
more funding. The FAA believes that its proposal would meet the 
demands of emerging markets, such as very light jets, air taxis 
and fractional ownership which land primarily at general 
aviation airports. We need to examine this proposal carefully 
to determine the impacts on these smaller general aviation 
airports.
    I welcome and look forward to hearing the testimony of the 
Administrator, Administrator Blakey, this morning.
    I will call on the Ranking Member of the Committee, but 
before I do, I would ask unanimous consent to allow two weeks 
for all Members to revise and extend their remarks and to 
permit the submission of additional statements and materials by 
Members and witnesses.
    Hearing no objection, so ordered.
    At this time, I would recognize the Ranking Member of the 
Committee, Mr. Petri, for any opening statement or remarks that 
he may have.
    Mr. Petri. Thank you very much, Mr. Chairman.
    I would like to join you in welcoming the Administrator of 
the Federal Aviation Administration, Marion Blakey, to the 
witness stand and, at that same time, thank her for the years 
of strong leadership that she has provided to the organization.
    I have some not too extensive remarks that I would like to 
include in the record.
    I will just say that many of the concerns that you 
expressed, I think are shared by all Members of the Committee 
about certain aspects of this program, but the important thing 
is that we get on about the business of reauthorizing these 
programs so that we can facilitate the deployment of Next Gen. 
It is absolutely essential to accommodate the needed growth in 
aviation services. If we don't modernize and expand the 
capacity of the system, it will start constraining our economy 
and will have lots of ripple effects.
    Plus, getting this system deployed will help provide a 
renewal of leadership for the world aviation community, for 
American aviation interests and a platform for them to compete 
around the world, and that is important as well.
    This is very important business, and I am hoping that while 
there will be differences, that at the end of the day, we can 
agree on the importance of the task at hand and find reasonable 
accommodation for these differences so as to get the main job 
done.
    With that, I yield back.
    Mr. Costello. I thank the Ranking Member and at this time 
would recognize the Ranking Member of the Full Committee for 
any opening statement or comments that he may have. Mr. Mica is 
recognized.
    Mr. Mica. Thank you, Mr. Costello, and I want to thank you 
for convening this hearing this morning.
    This is a very important topic. We are about six months and 
a few days away from the September expiration of our current 
authorization. Really, the basic fundamental question of the 
authorization process for FAA is how we fund the new system. 
Now I know I am beginning to sound like the lone stranger 
supporting the Administration's proposal, but I think people 
are going to have to sober up and see that we are not going to 
be able to fund what the Ranking Member of the Subcommittee 
said, Next Generation air traffic control system, without a 
method to fairly finance it.
    The Administration has proposed a hybrid system. It 
involves several areas of raising revenue, some from general 
aviation, some from user fees, some from the current tax that 
we have on passenger tickets. It is going to take all of the 
above plus the Administration's proposed increasing of the 
PFCs, which I also support in giving airports additional 
flexibility to utilize those funds.
    I don't have one of the pictures here, but all you have got 
to do is look at the traffic in the air today, the air traffic 
in the day, and we have returned to congested skies. General 
aviation isn't going to be able to move the new generation of 
ultra light jets. They might just as well keep those parked in 
other general aviation if we don't find a way to fund this 
system and improve its operations because there will be total 
gridlock and total meltdown.
    So it is a very serious subject. We have got to stop 
playing the games, get behind some meat and potato proposals to 
fund this.
    The other thing too that the Administration has proposed 
and I have recommended, a lot of games are being played with 
FAA and trying to modernize it. I have great concern with the 
departure of Russell Chew, our COO, who brought some of the 
bureaucracy under control. He instituted a businesslike 
structure and plan for FAA which has been partially 
implemented. We have seen the difficulty in consolidating, 
modernizing, replacing human to human activity with high tech 
and data to data operations. But the BRAC-like provision that I 
recommend, that has been included by the Administration, I 
strongly advocate because we have got to do a better job both 
with technology and with funding this critical system to our 
future.
    With that, those comments, I thank you for this very 
important beginning of finding a way to make all that happen.
    Mr. Costello. Thank you.
    The Chair recognizes Mr. DeFazio.
    The Chair recognizes Mr. Lampson for an opening statement.
    Mr. Lampson. Thank you, Mr. Chairman.
    I will submit my comments for the record but make just a 
very short statement to thank you and the Ranking Members for 
conducting this hearing and for Administrator Blakey to come 
over. We are anxious to hear her comments.
    Aviation is one of the most important modes of 
transportation in the United States, and it is also an issue of 
great importance in my district in Houston where we have some 
serious issues regarding capacity. It is always important to be 
able to sit down and hear from key witnesses with regard to the 
Administration's proposal for the FAA reauthorization.
    I look forward to hearing from Administrator Blakey 
concerning the new cost-based user fees that will be used to 
fund some FAA services as well as the discrepancy of congestion 
fees among major airports using the same facilities and air 
space in many instances.
    I am anxious to hear about the crisis facing the FAA with 
regard to the retiring air traffic controllers. It is my 
understanding that FAA estimates that over 70 percent of its 
controller workforce will be eligible to retire in 10 years. It 
is vitally important that we have as many well qualified 
controllers as possible ready to replace these retiring workers 
so that in no way is the safety of passengers compromised.
    Again, I look forward to hearing from the speakers, and I 
thank you, Mr. Chairman, for calling this meeting.
    Mr. Costello. Thank you.
    The Chair recognizes Mr. Ehlers for an opening statement or 
remarks.
    Mr. Ehlers. Thank you, Mr. Chairman. I appreciate this, and 
I appreciate the hearing.
    I want to begin by publicly apologizing to the 
Administrator. At the last hearing we had, there was 
considerable frustration and anger among Members of the 
Committee about the huge increase in the gas tax. As everyone 
in the Congress knows, if we try to raise the gas tax on 
automobiles by one cent, there is an incredible reaction from 
the public, and the huge increase in the gas tax that was being 
discussed triggered a strong reaction. I see Mr. Boswell 
smiling. I think he was part of the reaction.
    I was impolite enough to say that that proposal was dead on 
arrival. I apologize to the Administrator for implying somehow 
that everything she said was dead on arrival. It was only the 
tripling of the gas tax.
    I do appreciate your work and the incredible amount of 
effort it takes to try to run the FAA and modernize it.
    In terms of what is on the table today, I think the NextGen 
air traffic control system is the key factor in increasing 
safety and decreasing costs in the future, and I will be 
watching that very closely in the next few years because I have 
great interest in it.
    Also, I am very interested in how ADS-B is going to impact 
on the air traffic control system. Will it, in fact, improve 
the situation, reduce costs of air traffic control or not? So I 
am eager to see what the developments are on that, what the 
long term plans are and what the timeframe is.
    With that, and we have others who want to make comments, so 
I will yield back the remainder of my time, Mr. Chairman.
    Mr. Costello. I thank the gentleman.
    The Chair recognizes, for an opening statement or comments, 
the gentlelady from California, Ms. Matsui.
    Ms. Matsui. Thank you, Mr. Chairman. Thank you and Ranking 
Member Petri for holding this important hearing and to 
Administrator Blakey for providing testimony.
    It is the duty of this Committee to craft the best possible 
policy for the future of the Nation's aviation system. Air 
travel is more important than ever to America's commerce and 
our way of life.
    In and around my district, I have a large commercial 
airport and the reliever report. I fly back and forth to 
Sacramento and to D.C. a lot, and so I am personally very 
dependent on the system.
    It is clear that our aviation system faces tremendous 
challenges. We have an aging infrastructure that needs to be 
modernized, and we need to expand capacity to meet future 
demand. So we have to look at this situation strategically in 
the near, medium, and long term.
    I know there are many different objections voiced about 
this proposal. For example, the airports have been very clear 
that they think the increase to a $6.00 PFC is not sufficient 
to meet their infrastructure demands. In Sacramento, we are 
constructing a new terminal, so this is something that really 
affects my constituents.
    In general, there is going to be a lot of debate about how 
we allocate the burden of maintaining, modernizing and 
expanding the aviation system. It is this Committee's job to 
make sure the allocation is fair and that it yields sufficient 
resources to support future demands. This is certainly not an 
easy task, but it is essential for the long term success of the 
Nation's aviation system and for its economy.
    I appreciate the thought and effort that Administrator 
Blakey and her colleagues have put into this reauthorization 
proposal and look forward to working with all of you as we 
continue this debate this month. Thank you very much.
    Mr. Costello. The Chair recognizes Mr. Salazar for an 
opening statement or comments.
    Mr. Salazar. Thank you, Mr. Chairman.
    Administrator Blakey, thank you so much for being here 
today. I think I speak for most of my colleagues on the 
Committee when I say I look forward to working with you and 
your staff in the coming months on this very important issue. I 
appreciate that we will be having several hearings on various 
aspects of the Administration's FAA reauthorization proposal.
    As I have indicated before, I am concerned about the 
specific issue of user fees. I am still concerned, and I 
associate my remarks with Mr. Mica's remarks about the meat and 
potatoes way of funding this reauthorization and the NGATS. I 
am still unconvinced that the current system of aviation excise 
taxes, which has provided a stable and ample trust fund, needs 
to be changed so drastically, and I am very concerned about its 
impact on general aviation.
    We keep hearing about the cost of modernization and NGATS. 
While we agree that updating our aviation industry will require 
a substantial amount of money, CBO has already indicated that 
both the modernization and NGATS can be accomplished under the 
existing FAA financial structure.
    In the coming weeks and months, we will be focusing on the 
aviation needs of rural communities. Often times, these small 
communities get overlooked and sidelined, and I want to ensure 
that the Administration's proposal adequately addresses the 
needs of such communities.
    I believe that we are working toward the same goal, to 
ensure that the United States continues to have the safest and 
most efficient transportation system in the world, and the 
purpose of these hearings is to decide how to best get there.
    I look forward to your testimony today, Ms. Blakey, and I 
am confident that we will address the issues I raised.
    Thank you, Mr. Chairman, and I yield back.
    Mr. Costello. I thank the gentleman.
    Mr. Boswell is recognized for an opening statement or brief 
remarks.
    Mr. Boswell. Thank you, Mr. Chairman, and I appreciate 
again your having this continuing dialogue.
    I guess I would join Mr. Ehlers, Ms. Blakey, in saying that 
I said, yes, almost internally as he said what he did the other 
day. I wasn't quite ready to use DOA, but we have got to talk. 
We have to talk.
    I would say this: You have got your job to do. We respect 
your job, and you have to perceive it as you see it, and we 
respect that. However, we do too, and I think you respect that. 
I believe that for the moment at least. You just nodded. I 
thank you. So we will endeavor to respect your position and 
talk as you see it, and hopefully you will appreciate our 
responsibility to do oversight and to stand strongly for that 
which we believe and seek your willingness to work with us for 
solutions.
    I am not into games. I don't think any of us are. We must 
engage in solutions.
    Of course, you know that many of us advocate for general 
aviation. We are not making any secret about that and for many 
reasons. Yes, we use it. We greatly appreciate the impact of 
general aviation on the National economy, jobs, manufacturing, 
moving people, moving people with tight schedules, moving 
priority goods, et cetera, et cetera, et cetera. I personally 
believe that GA is at the table and willing to pay their or our 
part through current resources.
    Let us see if we can't find a solution. It is not we, they, 
you, us. It is a solution. That is what we need. I think you 
have got the wherewithal to come a little further than you have 
come so far, so we will just have to work on it together. But 
stand your ground. We will stand ours. But at the end of the 
day, if we have just argued and no solution, what have we 
accomplished?
    General aviation is at the table. I hope you are talking to 
them and talking to them openly, and I seek that very much.
    Thank you, Mr. Chairman. Let us carry on.
    Mr. Costello. I thank the gentleman.
    The Chair recognizes Mr. Hayes for an opening statement or 
brief remarks.
    Mr. Hayes. Thank you, Mr. Chairman.
    Welcome, Ms. Blakey.
    I would like to reflect what Chairman Boswell--he is 
Chairman on the Agriculture Committee--has already said, just 
briefly. This is a terrible imposition on a segment of the 
marketplace which will have incredible impact on that industry. 
We are all friends here.
    I would like to follow up on what I said in an earlier 
hearing. I would like to have some way to sit down with some of 
the potential providers of air traffic control upgrades and 
look and see what they are saying.
    But as I look, and you all have some wonderful numbers. 
There are some number crunchers out there that can give you 
numbers that will dazzle you, but they just don't, I think, 
accurately reflect. I am not that well prepared. We will talk 
about it in questions later, to go over that, but when you look 
at the percentage increase, the guy flying a 747, it is an 18 
percent cut for a guy flying a Bonanza. It is a 275 percent 
increase.
    Again, we welcome the debate and welcome your interest and 
activity and commitment to the job, but let us keep all the 
doors and dialogues open going forward so that we don't lose a 
vital and dynamic part of the U.S economy which is suppliers 
and everything else that are providing. We don't want the 
impact of the luxury tax that took place a few years ago. The 
airlines are critically important. We have given them billions 
of dollars in subsidies. Let us just be careful going forward 
that we don't do the wrong thing.
    Again, thanks for being here.
    Thanks, Mr. Chairman, for having the hearing.
    Mr. Costello. I thank the gentleman.
    The Chair recognizes the gentleman from Wisconsin, Mr. 
Kagen, for an opening statement or brief remarks.
    Mr. Kagen. Thank you, Mr. Chairman. I am very pleased to be 
here today, and I want to thank Administrator Blakey for being 
here and joining us as well.
    I would also like to thank Chairman Costello, Chairman 
Oberstar, Ranking Member Mica and my good friend and colleague 
from Wisconsin, Tom Petri, because by working together, these 
hearings on FAA will help us to reauthorize something that will 
be proud for everyone to stand by.
    I believe that everyone here today will agree that by 
examining and understanding all the complexities surrounding 
this issue, we will ensure that the future trust fund will be 
successful, and it is immensely important to us all.
    As our Nation's infrastructure continues to grow and to 
expand, the need to address the problems associated with such 
growth become apparent. Nowhere is this clearer than in our 
aviation infrastructure and operations. With the numbers of air 
passengers increasing every year, delays growing longer, not 
just for passengers but for everyone in this room and Members 
of this Congress, the air traffic congestion is increasing. 
Fuel prices are rising, and the air personnel shortages are 
obvious to everyone. They are becoming a reality.
    I believe we must look at this as a real opportunity, a 
unique opportunity to create a better and more efficient 
technologically advanced system that will serve our citizens 
with the best service possible. I am particularly interested in 
hearing Administrator Blakey's thoughts on the Small Community 
Air Service Development Program which could greatly benefit my 
constituents in northeast Wisconsin and bring in economic 
development to our area.
    During this hearing, it is my hope that we can start to 
work towards putting together reauthorization legislation that 
will successfully address the financial, the developmental and 
modernization demands to design an aviation system that will 
serve all of its users.
    Thank you, Mr. Chairman. I yield back.
    Mr. Costello. I thank the gentleman.
    At this time, the Chair recognizes the Administrator of the 
FAA, Administrator Blakey, for her statement, and we welcome 
you here today.
    I want to let the Members know that we had a long 
conversation yesterday and talked about some of the issues that 
we will be addressing here today.
    Administrator Blakey?

  TESTIMONY OF THE HONORABLE MARION C. BLAKEY, ADMINISTRATOR, 
      FEDERAL AVIATION ADMINISTRATION, U.S. DEPARTMENT OF 
                         TRANSPORTATION

    Ms. Blakey. Good morning, Chairman Costello. It is a 
pleasure to appear before you and Congressman Petri and all the 
Members of this dedicated Subcommittee. I appreciate your focus 
on FAA's move toward financial reform.
    In my view, the future of this system and this bill are 
inextricably linked. As plainly as I can say it, without the 
funding provided for the Next Generation financed through the 
Next Generation Financing Reform Act of 2007, there will be no 
NextGen system in time to prevent gridlock in the skies. 
Without the program flexibility, financial stability and 
beneficial budget treatment that this bill brings, our plan for 
the Next Generation air transportation system is likely to limp 
along far behind the traffic.
    The act provides for financing through fuel taxes and user 
fees. Significantly, the user fees will be treated as 
offsetting collections that ensure that aviation revenues are 
used for aviation purposes. The act allows for borrowing 
authority, an important tool in any financial tool box.
    Without a firm foundation of financial stability, the year 
to year uncertainties of budgets and revenues will neutralize 
the impact of our having a long term plan. Instead, NextGen 
will be the solution to a problem that we anticipated and 
studied but failed to really address, a legacy of starts and 
stops, very much too little too late. It is my firm belief that 
our status quo financing structure cannot deliver the NextGen 
system we need when and where we need it.
    Remember, this is a system that uses the latest satellite 
technology to expand capacity, reduce delays, lower unit cost, 
provide major environmental benefits and substantially improve 
safety. Satellite technology has revolutionized everything in 
America, from cars on the highway to GPS embedded in our 
toddlers' sneakers. Isn't it time that we brought it into 
aviation?
    Make no mistake, NextGen is not about pie in the sky. We 
have a clear vision and a plan to execute it. Both were 
developed in partnership with stakeholders from across the 
spectrum of aviation, from pilots and airlines to the GA 
community at every level to mechanics to Wall Street and 
beyond. They agree. We agree. NextGen will get us where 
aviation needs to go. But we do need to act quickly if we hope 
to avoid the aviation system resembling the L.A. freeway on a 
hot Friday afternoon.
    A cost-based system, such as we advocate, will be much more 
transparent and accountable for the FAA, the passengers and the 
users, and significantly, it will give Congress more insight 
into our costs, helping you conduct much more detailed and 
effective oversight.
    Yes, changing our financing structure is hard. I 
acknowledge that. But if we fail to create a direct link 
between FAA costs and revenues, if we just circle the runway, 
waiting for the weather to clear, aviation users across the 
spectrum will suffer. To put it mildly, and I think many of you 
noted this here today, the system is in trouble. While it is 
the safest system in the world, it is grossly inefficient and 
everyone who flies it, knows it. It is built on a series of 
fixed way points from the days of flying the mail in the 
twenties and thirties. We have squeezed every ounce of capacity 
out of the current air traffic system.
    Even so, in the future, congestion will rule the day. The 
undeniable fact is that we face a billion passengers by 2015. 
An ever increasing number of very light business jets is going 
to be fueling that. Traffic levels will double, perhaps in some 
areas, even triple in the not too far distant future. We have 
to plan for this.
    I am here today to say that the band-aid solutions of the 
past will not be enough. We can't keep trying to scale up an 
air traffic control system that is based largely on 1960s 
technology. We need to take bold action, and with taxes and 
user fees expiring in September, we have to get it right this 
first time. We really have to take action now. The next six 
months are pivotal. If we let this once in a lifetime 
opportunity pass, we will begin to watch world leadership slip 
through America's grasp, in aviation.
    The challenges I just described aren't limited to our air 
space. The problems of crowded skies and airports are 
worldwide. Europe is already moving ahead with Sesar, their 
version of NextGen, and they have got the funding to do it.
    My assessment, the rest of the world already knows how 
critical this is, but they aren't waiting around for the United 
States. They like our help and leadership, but they also know 
how to do it. We may have been the birthplace of aviation, but 
success at Kitty Hawk is not going to be enough to keep us out 
front now. Someone else's technologies and someone else's 
standards will pave the way if we don't.
    While the rest of the world has their action plan in high 
gear, we risk getting bogged down in a debate over who is going 
to pick up the tab. Truth be told, right now, the passenger in 
the middle seat is footing the lion's share of the bill for 
operating the system. The folks back home, buying airline 
tickets, pay 95 percent of the cost, but they are imposing only 
73 percent of the requirements. That is not right.
    Imagine a restaurant that required you to pick up the tab 
for the people sitting at the next table. It is not as far 
fetched as it sounds because it is what happens in our skies 
every day. A seat on a commercial jet liner is the most heavily 
taxed spot in all of aviation.
    General aviation represents 16 percent of the cost to 
operate the system, yet it currently only pays 3 percent. 
Everyday passengers shouldn't have to pick up the tab for a CEO 
flying across the Country in a private jet.
    This year represents a rare opportunity to leave an 
important legacy for our children, but to successfully develop 
that NextGen system, we need a revenue stream that is tied to 
the actual cost of our operations. We need a revenue stream 
that is reliable and equitable where all users pay their fair 
share. The hybrid financing scheme that we have put on the 
table last month is balanced, it is fair and it delivers on all 
these counts. We can indeed alter the future of aviation by 
creating a NextGen system that keeps America, number one.
    If we fail to act on the NextGen financing reform, we will 
be headed overseas to ask world leaders of aviation to help us 
catch up.
    Thank you very much.
    Mr. Costello. I thank you.
    I have a few questions, and then I will reserve some time 
and come back and have a few more later.
    I wonder, Administrator Blakey, concerning the user fee 
proposal by the Administration, I think there is a lot of 
questions and confusion as to how this system would operate. So 
I wonder if you would take the time to walk us through from an 
administrative standpoint, how the fees would be assessed, how 
they would be collected, how the system would work.
    Ms. Blakey. Certainly. As you all may have observed from 
looking at our proposal, the taxes and fees expire in September 
of this year. We would take fiscal year 2008 to continue the 
current system of taxes and fees while we put together the 
administrative apparatus that is necessary to then begin 
setting the new system, turning the new system on for 2009.
    What you would expect is this: The GA community continues 
to pay exactly as they do today. This has been their 
preference. So when we talk about increasing a fuel tax, it was 
their preference that they pay at the pump through a fuel tax, 
and that will continue just as it does now.
    For those who will be paying user fees, and this is largely 
commercial aviation, they will be paying as they pay all of 
their other bills. For the most part, these are significant 
companies. They pay vouchers just like everyone else. There are 
only about 500 of them that we expect to be issuing on a 
monthly basis. So it is not a particularly complicated system. 
Remember that we charge overflight fees right now on a monthly 
basis to air carriers all over the world. We do it efficiently 
and well and no complaints.
    But I would expect under the new system, that what we will 
do is put out a request for proposals and find out who can most 
efficiently do the billing, and we will issue a contract so it 
will not be an increase in bureaucracy for the FAA. Those fees, 
the charges for those fees would begin going out after the 
services are rendered, and we would expect payment within two 
months of when the service was rendered.
    Mr. Costello. You know you have heard from Members of the 
Subcommittee concerning how user fees would impact general 
aviation for the recreational person or for the person who does 
not fly commercially or does not charter. How do you see the 
user fees impacting that type of person or that sector of the 
people who will be affected by the user fees?
    Ms. Blakey. I don't see them affected at all. That is one 
of the great myths in all of this. There was a great fear on 
the part of general aviation pilots that they would suddenly be 
charged user fees, and for two years, there were magazine 
articles and in the press, there were questions about how a 
user fee would affect general aviation.
    The only circumstance in which the recreation flyer would 
pay any form of fee, and this is something that is 
discretionary under our proposal. All of this has not been 
determined that it will actually occur this way, but it would 
be if the recreational flyer decided to fly into one of the 30 
most congested airports in the Country. There, we would expect 
that we would be charging a terminal fee.
    But let me give you an example of what we are talking about 
in fees because, again, I think this is something that is 
looming much larger than is in any way, shape or form likely. 
If you are talking, for example, about a small plane like a 
Cessna 182 flying into a large hub, the fee for landing there 
would be $3.86 if you use the kind of weight measure that is 
used around the world. Let me repeat that, $3.86. Now whoever 
flew that plane is going to pay a lot more than that to park in 
the parking garage.
    But I can go up. A Beech Bonanza would pay $5.07. Now, is 
this an onerous fee to fly into the most congested airports in 
America?
    Even going into the jets, a Cessna Citation, now here, we 
are over $10 million in aircraft so presumably there is some 
wherewithal there, but you are talking $15.93. Again, I don't 
think we have got a parking garage in Washington where you are 
going to be able to park for 24 hours for that.
    So I ask you, does this look to you like this is an onerous 
burden? I think when people look at the actual facts, they will 
realize that general aviation, 99 percent of the time, the 
recreational flyers pay no user fees, and if they should want 
to fly into O'Hare, those are the kinds of fees we are talking 
about.
    Mr. Costello. I have several other questions, but I will go 
to other Members now and come back later to ask my questions.
    At this time, the Chair recognizes the Ranking Member.
    Mr. Petri. I think many of the Members will have questions.
    I wonder if you could outline for us, the best you can, the 
projected cost, additional cost of what is expected to be 
deployed of the new system during the reauthorization period 
before us. Do you have an idea of what we are talking about, 
what we are going to be buying during those five years and what 
it would cost?
    Ms. Blakey. Absolutely, absolutely. In fact, I think we 
have a very detailed plan for the NextGen system for the next 
five years. You will look in the out years in the budget, and 
you will see there that the Administration is proposing a total 
of $4.6 billion additional over five years for deployment of 
next year. Now that is very significantly for ADS-B which I 
have heard a number of the pilots here already speak about.
    ADS-B is the backbone of the new system. It is an 
absolutely critical technology that is becoming deployed 
worldwide. We are not the only Country moving toward it. It is 
because it provides great precision in terms of surveillance, 
knowing exactly where aircraft are, and giving pilots and 
controllers the same picture on a screen of where they are in 
relation to all the traffic around. It updates every second 
versus the best of our radar, the very best, is every six 
seconds. So you can see the potential in that kind of precision 
as you go down the road for all sorts of efficiencies and 
safety that is involved.
    We will put a lot of money into ADS-B during that period. 
We also will be putting money into what is called SWIM, and 
this is essentially the internet for aviation. This is the 
ability to move data and to provide from a number of key 
databases for both security, defense as well as critical 
information for us, a network of information that can be called 
on.
    There are a number of other demonstration programs in there 
as well. Data link, the concept that you do not want to 
continue to rely solely on voice communication, one controller 
talking to one pilot, but rather use data as we do in every 
other form of life, email, if you will, to communicate so that 
you can do so much, much more efficiently.
    There is tremendous safety in all of this as well. One of 
the big errors that you have in aviation now is what are called 
hear back, read back errors, when a pilot does not hear 
correctly what the controller said or vice versa. The precision 
of data, having it right there in front of you in black and 
white, is huge.
    So that is the kind of investment. That is what we are 
looking for over the next five years. As we move into the out 
years, there are spikes. Some of the investments get higher 
because, as you would appreciate, when you are moving into full 
deployment on all of this, it gets to be increased in the 
years, in the early teens, if you will. Then as you go down 
toward 2025, the investments begin to decline. We are 
projecting for infrastructure for the entire NextGen, a range 
of between $15 to $22 billion out to 2025.
    Mr. Petri. Could you describe at all the impact of a delay 
in the reauthorization on this? Would it be possible to begin 
contracting and deploying this system? You are already probably 
studying and doing some pieces of it even as we speak.
    Are there ways we could, if the reauthorization should, 
heaven forbid, be delayed for some reason, accommodate the 
needed financing and steps that would be required to 
nonetheless begin with this new system?
    Ms. Blakey. One of the most important aspects of the new 
system is it provides certainty. It provides predictability, 
stability in the financing, so that all who are out there 
contracting, bidding and providing, know what to count on. That 
has been one of the most enormous problems in the FAA's capital 
investments up until this point, the ups and downs in the 
funding streams that have often put contracts at risks, have 
sometimes caused them to stop, change course. As that went on, 
they were prolonged. The costs went up, and on it went.
    We don't want to see that happen with this. The stakes are 
too high to get in front of the congestion, and frankly the 
costs will go up if we do it that way.
    Now if we miss the 30th of September as a date, what is 
likely to happen? I can't tell you. We only have two months 
left in the trust fund to operate the FAA. We are having to let 
a major ADS-B contract this summer. We have all of these 
airport projects that you all referenced that are critical to 
stay on track. If the Congress lets the taxes and fees lapse, 
there will be no money for any of that.
    If, on the other hand, Congress decides to do what was done 
with the Highway Bill, and I know a number of the Members of 
this Committee remember the agony that you all went through on 
that, that is a series of short term extensions. That doesn't 
work in aviation. These projects are too big. Once you start 
saying, well, we are going to authorize for two months, three 
months, construction on runways doesn't work that way. People 
can't operate without having the knowledge that they are going 
to be able to get through a construction season and through a 
critical phase of a project.
    We have dollar figures, and they are pretty staggering, and 
I would be happy to provide the Committee, based on the 
scenario that might be likely. So if you all would like to 
discuss it further, if you think that is becoming a likelihood, 
but I would certainly beg you, please, do not miss the 
deadline. This is very critical.
    Mr. Costello. The Chair recognizes Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman.
    Madam Administrator, great to see you here again. You 
received such a warm reception last time. I bet you were 
looking forward to coming back. You are doing a great job of 
defending the indefensible so far, but I do have a few 
questions.
    Since this is a supposed to be cost-based system, there is 
a certain percentage contributed by the general fund which I 
have always felt was inadequate. As I look at the 
Administration's projections, you apparently project you will 
continue at approximately that percentage into the future or 
that amount of contribution which would become a smaller 
percentage into the future, is that correct?
    Ms. Blakey. It is about 19 percent.
    Mr. DeFazio. Right, but I think the numbers for the general 
fund are fairly stable and we are expecting costs to increase, 
so it would become a smaller percent.
    Ms. Blakey. That is probably true.
    Mr. DeFazio. But then I look at another portion that really 
puzzles me about your user fee. Now that is paid for by 
taxpayers in the United States, correct?
    Ms. Blakey. And let me know one thing about the general 
fund. As you see for the first time, what we are doing is 
putting certain kinds of costs that the general fund should 
cover, categories of costs, which we think is a good and fair 
thing to do because we see them either supporting the smallest 
of GA in a way that GA cannot support for their safety 
functions, that we believe it is appropriate.
    Mr. DeFazio. No, and I saw that, and those things are all 
eminently justifiable. I would say that given the role aviation 
plays in our National economy, that you could easily justify a 
larger contribution, but we won't debate that here. That is 
probably not your choice to make with this Administration.
    Here is a concern since this is supposed to assess the 
costs where they lie. We have an international arrival and 
departure tax. A very large proportion of people arriving and 
departing are foreign citizens. Foreign citizens do not pay 
taxes in the United States. Yet, you are proposing to reduce 
their contribution by 60 percent which would be about $1.1 
billion in 2008 and up to $1.6 billion in 2012. Yet, at the 
same time, we are levying taxes on the people of the United 
States and asking them to contribute to aviation, but now we 
are saying foreigners should contribute less. I am curious why 
we would walk away from $1.1 billion up to $1.6 billion in part 
paid for by foreign travelers.
    Ms. Blakey. Well, as you can appreciate, there are several 
ways that people pay under this system. We felt a hybrid system 
was the most flexible way to accommodate people. They will pay 
user fees, and that is where that money is made up.
    Mr. DeFazio. No, these are not fees paid by airlines. These 
are paid by individual citizens of other nations when they 
arrive or depart the United States. I know the industry likes 
to think that every fee paid by everybody is paid by them. It 
isn't. It is paid by people who arrive on their planes, and 
they are now going to contribute $1.6 billion less toward the 
system in 2012.
    Since we are trying to do something which is impossible, 
and that is assess where the costs lay, I am just puzzled 
because I doubt that any foreign country is going to 
dramatically drop their arrival and departure tax. It is a big 
source of revenue for a lot of countries, but the U.S. would 
unilaterally drop ours. It just seems to me a very puzzling 
thing, and I am not certain why we are doing that.
    Let me go to another conjecture we make. I did have the 
misfortunate of studying economics as a young man. You reach a 
certain point where you have to add capacity at a margin, but 
before that margin, you don't have to add capacity.
    In your statement, where you talk about two identical 
aircraft flying from Boston to Miami, you are saying one is 
full of passengers and the other is half full, and then you are 
talking about that or you talk about flying two planes and how 
that adds cost. If someone flew two planes, that adds cost to 
the system. Well, actually it doesn't. The air traffic 
controller is there. It may add to their workload, but until 
you reach the point where you have to add another air traffic 
controller, they aren't increasing cost to the system because 
the air traffic controller is there.
    That is part of what underlays your supposition here which 
is that there isn't an underlying cost to the system to be 
maintained, that actually every increment counts. Now we are 
going to move to this extraordinary billing system, and I just 
have got to say, how much do you expect this billing system is 
going to cost? How much per unit?
    There is going to be, I can't remember in here how many 
billable activities. It was many millions of billable 
activities on an annual basis. How much do we expect the 
overhead is going to be for the private entity which is going 
to administer the billing system?
    Ms. Blakey. It is tiny.
    Mr. DeFazio. It is tiny? It will be tiny? I mean if you 
look at the insurance industry in America, their overhead is 26 
to 28 percent. Medicare's is 2 to 3 percent.
    You are saying, well, we are going to put this out to the 
private sector. We are going to bid this out. We are going to 
outsource it. It will be so much more efficient. Well, if they 
follow the insurance model, we will actually lose a quarter of 
what we are raising to costs for those folks. If we follow the 
Medicare model, the Government model, we would lose 2 to 3 
percent.
    Ms. Blakey. I assume what you are talking about is the 
entire administrative cost of running those programs. If it is 
costing our insurance system $27, 27 percent to issue a bill, 
that accounts for a lot of what is wrong with our insurance 
system. I can guarantee you in aviation, that is not the case.
    Mr. DeFazio. No, their overhead, but the point is have you 
done an analysis?
    I mean, first off, I think the billing system is going to 
be impossible, and it is going to be a mess. Secondly, have you 
done a study to show that it can be done cheaper by the private 
sector or is that just an ideological assumption by this 
Administration who wants to outsource everything?
    Ms. Blakey. There is no ideology in this. It is a question 
of efficiency. I do not have any preference where it is done.
    Mr. DeFazio. Have you assessed then? Have you run two 
models? Here is the Government model; here is the private 
sector model. Have you gone out to some private sector folks 
and say, what would you bid for this?
    Ms. Blakey. Yes, we are doing that now.
    Mr. DeFazio. And you compared to the public sector?
    Ms. Blakey. We are doing that now.
    Mr. DeFazio. Okay.
    Ms. Blakey. I will be happy to show you the study as soon 
as it is done. We have undertaken that.
    Mr. DeFazio. Right, okay.
    Ms. Blakey. Believe me, whatever is the most efficient. But 
you have to remember, we are already billing right now for our 
overflight fees, and it is minuscule. This is the assumption 
that somehow it costs a lot of money to put an invoice.
    Mr. DeFazio. But how many million operations is that per 
year versus what you are going to bill under the new system?
    Ms. Blakey. You know I can get some calculations.
    Mr. DeFazio. Right.
    Ms. Blakey. But the top 110 companies that are involved in 
commercial aviation are going to be paying 87 percent of this. 
You can't tell me it is that difficult to bill that.
    Mr. DeFazio. But still, it is millions of operations, Madam 
Secretary.
    My time is expired, Mr. Chairman. Thank you, Mr. Chairman.
    Mr. Costello. You are quite welcome.
    The Chair recognizes Mr. Mica.
    Mr. Mica. Thank you, Mr. Costello.
    I just got some interesting news. It says the U.K. has 
signaled that it is likely to approve the Open Skies Aviation 
Pact between the E.U. and the United States which to me is very 
good news, something I have worked for. There are some special 
interests that have tried to keep this from happening, who 
unfortunately maybe thwarted. For the interest of the Members 
of the Committee, if you don't have international service now, 
its biggest promise is to bring into our world, 27 countries 
all at once, both for expansion of aviation and passenger 
service. The consumer will benefit. So I think it holds some 
great promises.
    Now one of the things that might stand in our way is even 
the capacity to deal with this new tremendous increase in air 
traffic on both sides of the Atlantic. Wouldn't you agree that, 
first, this is a very positive step, but secondly, if we are 
going to play in this global market, see jobs increase and 
aviation expand on both sides of the Atlantic, that we would 
have to have a system to deal with that?
    Ms. Blakey. Absolutely, absolutely, and the skies around 
JFK as well as Heathrow are going to have to have the advantage 
of these new technologies which Britain has committed to.
    Mr. Mica. Right. A little bit was talked about who pays for 
this system, and I have spent some time looking at the European 
system, the Canadian system. It is my understanding that those 
are pretty much paid for by the users. There is not much of a 
general federal contribution in any of those instances. Is that 
your knowledge?
    Ms. Blakey. Yes, as a general matter.
    Mr. Mica. Right now, it is about 19 or 20 percent that the 
average citizen pays, and I think what you are proposing is a 
little bit fairer. I would like to see the whole thing paid by 
the users, not some poor guy in Iowa or North Carolina or 
Hawaii who never gets on an airplane and doesn't have the 
benefit of a $15 million jet with maybe six seats or a $750 
plane ticket. But he, right now, is underwriting, to the tune 
of 20 percent, the system and the services, is that correct?
    Ms. Blakey. That is correct.
    Mr. Mica. Okay. It does cost us about $14 billion, and we 
take about $2 billion out of the general treasury, is that the 
ballpark?
    Ms. Blakey. Yes.
    Mr. Mica. You have tried to put together a fair system so 
everybody pays based on use. That is your basic criteria.
    Ms. Blakey. Equity was one.
    Mr. Mica. I see you have advocated some increases for 
general aviation based on, I guess it is their fuel tax, 21 and 
19 going to 54--I am sorry--56.4. Your calculations determine 
that that is based on their actual cost to operate in the 
system.
    Ms. Blakey. It is. The way this works is this, that when we 
look at general aviation across the board. This includes high 
end as well as the recreational flyer. They impose about 16 
percent of the cost on the system. We then took a look at what 
we thought very legitimately the general fund could support.
    Congressman Mica, I hear your concern on that, but our 
position was that the general fund could pick up a number of 
costs that benefit GA like the flight service stations, which 
are an important measure of safety there, and low activity 
towers where the towers really don't have a cost benefit but 
they are important again to the GA community. So we took those 
off, and that dropped then the percentage down to about 11 
percent of the costs that have to be covered.
    Out of that 11 percent, the way the weight of the fuel tax 
will go is the GA community is only picking up 1 percent for 
the recreational flyer. The 10 percent is picked up by the 
turbine pilot, by the turbine aircraft, which is, of course, 
for the most part, your business aircraft, your high end GA.
    Mr. Mica. Okay. One final question, my time is about to 
expire, but I made this radar screen up for you. This is a 
mock-up. It is a Mica radar screen. Each of these dots indicate 
either a commercial jet, a general aviation jet or general 
aviation aircraft. Now, of course, a lot of general aviation 
doesn't get into this range of this radar screen. Maybe some 
flying lower, whatever, close to the ground. But for the most 
part, what is the difference in your cost of service and can 
you identify or can you tell me which is which of my dots?
    Ms. Blakey. Well, not at this distance, and I am squinting.
    [Laughter.]
    Mr. Mica. They are all the same. These are perfectly round 
symmetrical dots, all equal.
    Ms. Blakey. Yes, yes. We can pull up N numbers, and we know 
exactly who each one of those dots would be if it were a real 
radar screen, and the cost to provide air traffic control is 
essentially the same to all the dots.
    Mr. Mica. Thank you. You have answered my questions.
    Just for the record, I didn't have time. You mentioned 
flight service stations, and you know the problem we have had 
with consolidation. At some point, you might want to talk to 
folks about that and the BRAC provision.
    Thank you.
    Mr. Costello. The Chair recognizes the gentleman from 
Missouri, Mr. Carnahan.
    Mr. Carnahan. Thank you, Mr. Chairman, and thank you, 
Ranking Member, for this ambitious schedule to get through this 
authorization.
    To Administrator Blakey, thank you for being back and for 
your work on this proposal. I consider this a starting point, 
but there is obviously a lot of concern about many of the 
provisions in this proposal.
    I want to express my concern particularly about the general 
aviation fees. My State, while it has several urban hubs, we 
have a lot of rural area in between. General aviation is vital 
to those individual recreational flyers as well as small 
business. So I think it has got to be addressed in a more fair 
and even way.
    You mentioned the CEOs flying the corporate jets. That is 
certainly one segment of general aviation, but I think we have 
a whole lot of other folks flying the smaller planes. We have 
got to be careful on the burden we put on them.
    I also want to follow up on the prior questioning about the 
privatization of the billing system that has been proposed. I 
understand you are doing a study about that. I, too, would very 
much like to see that comparison. To be frank, the 
Administration does not have a very good track record on 
privatization in general. So I have that concern.
    In particular, I would like to ask would the privatization 
proposals that you are discussing allow these billing 
operations to be outsourced, say, to India or somewhere outside 
the United States?
    Ms. Blakey. Well, I will tell you. We have looked at the 
issue of how you send the bills out and get the receipts in as 
a purely administrative function, a very small one, which we 
don't come to this with the conviction that it should be 
private or public or some in between organization. I think our 
view was we would like to just do it with the best, most 
efficient system through good analysis, and we are using an 
outside accounting firm and their expertise to look at this, to 
tell us what might make the most sense. But we don't have 
conviction that it has to be private any more than we do that 
it needs to be public or one of the non-profit organizations 
that serve aviation. For example, a lot of this is done outside 
the United States by the International Air Transport 
Association which is a non-profit.
    So we don't know. I certainly don't have, and if Congress 
has some views that there should be certain kinds of parameters 
or constraints on that. I think our intent would be to consult 
with the stakeholder community and you all, look at the best 
method to do it and see.
    No one has taken any great interest to this point in how we 
collect the fees from foreign airlines, which we do on a 
monthly basis, but there may be some things to learn there. It 
is going very efficiently, and it is being run in house. We are 
doing that ourselves.
    Mr. Carnahan. Thank you. I am going to jump on to another 
question.
    The other thing I would like to touch on before my time is 
up, we talked at the prior hearing about my concern with the 
high rate of retirement among active controllers and their 
treatment. I want to ask you to address the issue. Under the 
NextGen proposal that was released, it details a need to hire 
15,000 new controllers over the next 10 years while 
simultaneously FAA is actively planning the NextGen system 
which will rely heavily on satellite and network-based air 
traffic control. How does your plan to hire these new 
controllers mesh with the need to move to increasingly more 
technology-driven systems and do you anticipate that air 
traffic controller positions will be eliminated through this 
process?
    Ms. Blakey. No, I will tell you. The two plans mesh very 
closely because obviously when you are planning 10 years out as 
we are with our controller hiring plan, you want to take 
advantage of all of the NextGen systems that will be coming 
into place. Remember that we have known that this group of 
controllers was going to be retiring at approximately the rate 
they are for the last 20 years. It was a group of people that 
were hired at one point 20 years ago following the PATCO 
strike, and they must retire by age 56.
    So this is something we have long planned for, and the plan 
we have is really moving along with great precision and working 
well. We are bringing in new controllers. We have got our 
academy classes filled. We are committed this year to hiring 
1,386 controllers which exactly meets our end of the year 
totals for traffic.
    The 15,000 that you mentioned for the 10 years out, we are 
not seeing a need to diminish the need for controllers. In 
fact, as you see, we are increasing the number of controllers 
because there will be more traffic. We see that more traffic 
means they will be able to take advantage of this new 
technology which will make their monitoring and managing 
traffic and looking at anomalies and working on the issues of 
traffic flow. So it will change their jobs. Frankly, their jobs 
will be less stressful.
    I would love to share with you a study that was just done 
by MITRE, looking at the application of NextGen technologies in 
a simulation with controllers doing the traffic that we are 
anticipating in 2014 without it and then what their workload is 
like if they have the advantage of this technology. It is like 
night and day, and they will have a tremendous advantage and a 
great deal more information, a lot more automation and the 
ability, as I say, to manage a broader range of traffic without 
that constant pressure of talking to every single aircraft. It 
is, frankly, a great improvement in the job and a big boost for 
safety.
    Mr. Carnahan. Thank you. I would be very interested in 
seeing that.
    Ms. Blakey. But there will be more controllers, not less 
controllers.
    Mr. Carnahan. I would be very interested in seeing the 
study. Thank you.
    Ms. Blakey. Sure.
    Mr. Costello. I thank the gentleman.
    The Chair recognizes Mr. LaTourette.
    Mr. LaTourette. Thank you very much, Mr. Chairman.
    Administrator, welcome. I have just a couple of 
observations. Picking up on what Mr. Mica was mentioning 
earlier with more and more governments going to cost-based user 
fee systems, I think that you and your team should be commended 
for putting forward the proposal that you have. Even though we 
may not agree on all the pieces, I think it is important that 
we have this dialogue.
    I also want to commend you and your team for the cost 
allocation study, and I think it does give us a clear picture 
of who has been bearing the bulk of the costs of who has been 
using the system. No matter what the outcome of this tax-based 
system versus user fee discussion that we are going to be 
having over the next couple of months, I do find the 
information that you put together to be valuable.
    There are some pieces of the proposal, though, that cause 
me some concerns. While I don't expect you to have all the 
answers today, maybe you could tell me what the thought process 
was. First, congestion fees, I get congestion fees. I think 
that is an important piece of the plan, but I am wondering why 
they are assessed by airport. It seems to me that it doesn't 
matter whether you are a big plane or little plane if you are 
going to New York, Chicago or San Francisco, I think you should 
pay a congestion fee. But why do we pick one airport in New 
York, for instance, when others are served by the same TRACON?
    Following some of the answers you have given to people 
already on this and Mr. Mica's radar screen which I really 
couldn't see from where I was seated, what does it matter if 
that dot is going to the airport at White Plains versus JFK or 
LaGuardia? Why is the congestion fee based by airport as 
opposed to TRACON?
    Ms. Blakey. Well, of course, there is a certain amount of 
history in this that goes back to existing legislation. Our 
current statutes actually allow for congestion fees by airport 
under certain very restrictive circumstances. So it is, in a 
way, an elaboration on that.
    There is also, in terms of the specific airport that I 
believe you are referring to and that is LaGuardia, a history 
here that shows that there really is no way that we currently 
area aware of to expand the footprint of LaGuardia and bring in 
more aircraft. When the cap was lifted--as you know, that was 
back in 2000--it was a fire sale on everyone rushing in there. 
Really, not only LaGuardia gridlocked, but it really put the 
whole system into vast delays.
    So the issue of how do you best allot the capacity at 
LaGuardia has been a subject of long debate. The proposal that 
we have does give the port authority the ability to step into 
this. But at the same time, we are looking at incentivizing GA 
to land at other airports through this because if you put a 
congestion fee on LaGuardia, if you are GA and you can use 
another airport anywhere such as Teterboro, there are 
incentives for that for start. We hope that it will have those 
effects.
    We would be very happy to come up, though, and talk to you, 
Congressman LaTourette, at some length about this because there 
have been a number of theories about it. As you know, this bill 
also allows for auction-based allocations, et cetera of the 
existing slots. So there is a lot to it, to be honest with you.
    Mr. LaTourette. I get that. I would appreciate a visit, I 
think, because what I am having trouble getting my head around 
if we are moving to a system where you are going to pay for how 
much of the system you use, it seems to me that the user that 
lands at Teterboro is using the same business in the system as 
the guy that lands at LaGuardia, but I understand what you say 
about slots at LaGuardia. Maybe we can have a conversation 
about that.
    The other thing that concerns me is the PFCs. I think all 
the airports would love to see the increased PFCs that you have 
outlined in your proposal. What seems to be missing, though, at 
least from my first review, is input from the users of the 
airports in terms of having the ability to have a PFC project 
altering discussion with the people that run the airport. I am 
wondering if you see it the same way and whether that is 
intentional or you think that we should have the users and the 
commercial airlines and the people that actually use the 
airport have more say as to how these PFC charges are going to 
be used at those airports.
    Ms. Blakey. Let me understand. By users, do you mean the 
passengers, the groups in the community that are using the 
terminal and facility?
    Mr. LaTourette. As well as the commercial air carriers.
    Ms. Blakey. You know I think the best run airports in this 
Country do that and do it well, and if they don't, it is to 
their peril because they often encounter real community 
resistance. So I think that is a very smart thing to do.
    The proposal is intended to encourage real collaboration 
and dialogue between the airlines, the user community, et 
cetera. Now whether we have completely covered that as well as 
we should, I would be happy to look at that again because I am 
very much behind the spirit of what you are saying, although we 
also want to take some of the Federal restrictions and the 
Federal requirements to be a little less heavy-handed with all 
of this because as we watch PFCs over the years, for the most 
part, the requests have been very reasonable, without 
opposition. All the filings and paperwork, we probably could do 
a good bit less of that and still have a very good system.
    Mr. LaTourette. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Costello. The Chair recognizes Mr. Hall for any 
questions he may have.
    Mr. Hall. Thank you, Mr. Chairman.
    Thank you, Administrator. Thank you for coming back again. 
It is good to see you again.
    I want to say I am happy to see the continuous descent 
approach at the end of the lovely packet that you had prepared 
for us. I am wondering how far out. Is that going to extend the 
descent out to an earlier point from what it is currently for 
most flights?
    Obviously, if you are rolling downhill in your car, you are 
using less fuel, and it is the same principle. Could it be a 
matter of extending that out to the greatest safe distance from 
the airport?
    Ms. Blakey. Yes. I mean the concept behind CDA is that you 
have a glide path that you set up as the most efficient, and it 
does start higher. So it may be further out, of course, but it 
also would be higher. One of the things that we are observing 
on the airports where CDA is being used, such as in Louisville, 
is that you have a 30 percent reduction in noise below 6,000 
feet which is great for the communities there as well as a 34 
percent reduction in emissions because of the less fuel burned. 
But the glide path looks more like this kind of slide, if you 
will, going in.
    Mr. Hall. Right, that is good news. Thank you.
    I wanted to ask about the President's proposal to move from 
excise taxes to fees, one that, well, may put even more 
budgetary constraints, from what I see, on the FAA operations. 
All airports could use more funding, but I am particularly 
concerned about small and growing airports that are already 
scrapping for capital improvement funding.
    At its height, your proposal for AIP just cracks the $3 
billion mark and only provides $8.7 billion overall. I was 
wondering how this proposal can fund capital improvements to 
small and mid sized airports like those in my district if it 
provides almost $2 billion less over the next three years than 
it did over the last three years.
    Ms. Blakey. I think you really have to look at the proposal 
as a whole, the programmatic changes, the changes we are 
suggesting in allocations as well as the dollar figures because 
it was our view that the very large airports do very well in 
generating their own funding through bonding sources and 
through PFCs. If we give them the authority to raise the PFC to 
$6.00, we can take them off our discretionary funding which 
then frees up a lot of money for the smaller airports.
    We also felt that all small airports are not created equal, 
and the way we have been treating them up until recently in 
this category of the smaller GA airports is everyone gets 
$150,000 regardless of need and regardless of size. Your 
Teterboro and your tiniest GA were getting the same thing. That 
doesn't make sense either. So we have created a four tier 
system, so that you can pump more money and keep significant 
projects at those airports going, whereas at the smaller ones, 
you have less.
    Frankly, at the very small ones, we have taken them off of 
that minimal funding, and they need to come in to us for 
specific safety projects which then we can fund from 
discretionary funds. One of the problems about the way we were 
funding the smallest is they were getting a little bit of 
money, but it wouldn't cover the cost of a project which maybe 
they have a project once every six to ten years, but then they 
want it funded then. So it is important for us to be able to 
give them what they need when they need it, and I think that is 
the other structure we are looking at.
    But PFCs, frankly, enable that AIP money to go a lot 
further.
    Mr. Hall. Thank you.
    Another question, you mentioned a couple times in answers 
to other Members' questions about different studies, one on, 
for instance, the effect on NextGen on controllers' work 
conditions and stress level. You said you would love to share 
that study with us. There was another question back here, I 
believe from Mr. Carnahan on another topic, and you said you 
had another study that you would love to share with us. I was 
wondering if you could share both of those studies with us, 
please.
    Ms. Blakey. I would be happy to.
    Mr. Hall. Before we have to take action on this.
    Ms. Blakey. I would be delighted.
    Mr. Hall. Has a contract request for proposals for the 
system been sent out? I see that the contract is to be awarded 
this summer which isn't that far away. So I was just wondering 
what the timeframe was and who we expect to be applying for it.
    Ms. Blakey. We now know. We have gone through a whole 
process, as Government procurement requires, in issuing the 
requirements and having the bidders come in and offer their 
initial proposals. Now we are at the stage of having three 
major consortia which represent a number of companies in each 
case, who are proposing their solution and their proposed 
contract to us, and we are evaluating those at this point. We 
will expect in July to make the selection.
    One of the things that I think is significant here is these 
are performance-based contracts. What we are doing is putting 
out the requirements that must be met and looking to them for 
the kinds of innovation, cost efficiencies, added value that 
they may be able to bring when you apply real creativity and 
the experience of companies, many of whom candidly have worked 
in the defense sector and other sectors. So they bring a lot to 
this in terms of the thinking of how to get the most out of the 
Government dollar in providing this service.
    I am looking forward to those evaluations, and we expect it 
to be complete in July.
    Mr. Hall. Mr. Chairman, my time is expired, but I just 
wanted to remark that I, for one, could use more specifics. 
There are a lot of generalities in here and a lot of acronyms.
    We heard it was a satellite-based system the last time 
around. Now it appears that we are using the existing GPS 
satellite system, and we are not going to be launching any new 
satellites specifically for NextGen, is that the case?
    Ms. Blakey. Well, I will tell you.
    Mr. Hall. Those kinds of technical things are missing.
    Ms. Blakey. Sure.
    Mr. Hall. I feel they are missing from the information that 
I have seen so far, and I would like to have a little bit more 
depth in terms of the physical and scientific nature of the 
program.
    Ms. Blakey. I would be delighted. One just small comment on 
that, yes, we are relying on the U.S. GPS system which there is 
a plan to update and increase its capacity very significantly 
that the Air Force has, and we have a role to play in that as 
well. So we would be happy to discuss that with you.
    I believe it is this Thursday, and I am looking back at 
staff, that we have a briefing planned on NextGen up here for 
Members and staff. What time? We will get the details. It is 
Thursday, and we would love for you all to take advantage of 
it.
    I will tell you, in fact, we really want to give you all a 
chance to touch and feel this whole thing because you can. I 
mean this is reality. We are bringing up the ADS-B equipment 
and displays of how it works and all of that. So if you 
possibly can come by and see it, I think you would find it very 
interesting.
    Mr. Costello. The Chair recognizes Mr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman.
    Just to follow up on your previous comment, I encourage all 
Members to participate. I look forward to that. I hope, as you 
go through this project, we could have those regular sessions 
here. I recall last year we hadn't heard anything, so I 
requested a presentation and your staff came up and gave a very 
good, a very technical presentation, and I found that extremely 
helpful. Hopefully, we will have many more in the future, and I 
hope other Members will participate.
    Relating to that question, although your financing here is, 
of course, based on your expected cost, how well do you think 
you have pinned this down?
    There has been a history, not so much under your 
administration but under previous ones, where we had major 
changes coming along, and the cost estimates were far lower 
than the actual cost. Are you comfortable with the cost 
projections for the systems that you are proposing?
    Ms. Blakey. Yes, in fact, I am very confident of them. One 
of the things that we have worked the hardest on is to bring 
our capital programs in line with the way you monitor programs, 
best practices across business and Government. Last year, our 
major capital programs ended on schedule and on budget, 97 
percent. Right now, we are 100 percent on schedule and on 
budget, and we intend to keep it that way. This is doable. It 
requires discipline.
    I can tell you that we are working very hard, and at this 
point, I have no reason to think that rigor that we are 
applying there will dissipate. But it also depends, I will tell 
you candidly. We have to have stable funding for the capital 
investments. Otherwise when you start shortchanging them and 
pulling back on those contracts, then the costs go up and the 
schedule lags.
    The operating costs for the FAA, again, I think are very 
predictable. As you know, we have very detailed plans. It does 
mean we have to control our labor costs. Labor are the single 
largest cost by far, almost 75 percent of our operating costs. 
So we have to stay on track in having reasonable, sustainable 
operating costs from the standpoint of our personnel. I simply 
stress that because in the past, that has been a wild card.
    Mr. Ehlers. Yes, I understand that. I am more worried about 
the NextGen system. Whenever you have research going on and you 
haven't finalized, it is very easy for costs to occur.
    Ms. Blakey. That is right.
    Mr. Ehlers. Let me also just try to clarify something on 
your proposal for fees. One thing that I think is very good, 
you break out the AIP, RE&D and EAS costs and apply them 
equally across the spectrum of planes, and I think that is a 
step forward.
    On the proposal for the air traffic control costs, the 
general aviation jet fuel is the same per gallon as the 
aviation gasoline, the piston engine gasoline, the 100LL. That 
is where I worry about equity because just to take my own 
example, and I don't mind paying for it. We have to pay to 
maintain the system.
    I am flying. I am taking lessons, flying out of a small 
airport, no tower. I go off and practice. I fly across country, 
et cetera, no use of the air traffic control system. That is 
typical of most general aviation flyers. I think it is very 
important to encourage that because with a reduction of the 
number of pilots in the Armed Forces, I think general aviation 
is going to be the feedstock for the pilots of the airlines of 
the future.
    I wonder how you can justify the 56.4 cent increase in 
aviation fuel across the board for general aviation when a good 
share of general aviation does not use the air traffic control 
system. I recognize many do, but there are a lot of, 
particularly the new recreational pilots of light sport 
airplanes do not make use of air traffic control and, to my 
knowledge, don't plan to make use of it. How can you achieve 
greater equity there, recognizing those pilots who fly 
regularly on business purposes and use air traffic control and 
those who are simply recreational pilots who tend not to make 
any use of air traffic control?
    I would appreciate your response to that.
    Ms. Blakey. Well, I think what we are seeing is this, that 
there is a dramatic difference in the recreational flyer, 
usually, who is flying as you are suggesting, in terms of the 
amount of fuel they use. In other words, you are talking about 
very light planes. You are not usually talking about a lot of 
hours flown. I realize some people commute back and forth to 
their district, and that does add up to a lot of hours over 
time. But when you look at the GA community, the recreational 
flyers on the whole, they are flying the planes, and many of 
these planes, remember, are shared among a number of people and 
are flown on average about 100 hours a year.
    When you start looking at the cost over a year of that kind 
of flying of our proposal, we are talking about around $500. I 
guess you could debate as to whether that is affordable or not, 
but when we look at it as a percentage of the overall operating 
costs of owning and operating a plane, it is still less than 5 
percent of the overall costs.
    I realize no one wants to pay additional taxes. I mean that 
is a given. I don't either. But it is small, and we were very 
conscious of the fact that because fuel usage is relatively 
little for small piston planes, the actual hit on the wallet is 
so monumental. Those would be my thoughts about it.
    Mr. Ehlers. It is bigger than you might think but also you 
are charging for service that they don't use.
    Ms. Blakey. Could I mention one thing about service they 
don't use, though, because I appreciate that? We, of course, do 
encourage everyone to file with our flight service stations. We 
certainly also remember that we do a lot of monitoring of 
planes up there, even if they are flying a VFR, and we 
certainly provide help and support if there become problems in 
the system. So all of that is there right now.
    But what we also think is that GA pilots are going to be 
moving increasingly to the WAAS approaches, to use of GPS and 
ultimately to the use of ADS-B. Let me remind you that ADS-B 
for the general aviation pilot, and these are small pilots in 
Alaska, has reduced the accident rate in Alaska between 40 and 
50 percent. Now how much is one's life worth? That is huge.
    The ability to see aircraft around you, to have those sorts 
of services in the cockpit, we believe that the GA community is 
going to want to take advantage of that soon and well, and that 
definitely means you are a part of the system and you are using 
the services. We are going to be encouraging that, but the way 
you are going to be paying is still on what I consider and just 
laid out is a pretty modest basis.
    Those are the big, big advantages, the overall safety and 
the capacity benefits, because Congressman Ehlers when you 
decide that you do want to fly into Teterboro or you want to 
fly into a more congested airport, you will be able to get in 
because you will be equipped and we will be providing the 
service. I don't think GA wants to be closed out of a lot of 
the air space because they truly are marginal in every way.
    Mr. Ehlers. I doubt if the FAA will ever want me to fly 
into Teterboro.
    [Laughter.]
    Mr. Ehlers. I yield back.
    Mr. Costello. The Chair recognizes Mr. Lipinski.
    Mr. Lipinski. Thank you, Mr. Chairman.
    It is always good to see you, Administrator Blakey.
    A couple questions, starting first with the concerns over 
the air traffic controllers and the talk about maybe a 70 
percent reduction of air traffic controllers because of a 70 
percent turnover, that is. How does this reauthorization 
address that situation in needing to hire more air traffic 
controllers in the future to take care of the turnover to make 
sure we have safe skies?
    Ms. Blakey. Well, it provides us a stable, predictable 
revenue stream that guarantees that we will not have 
difficulties knowing that we have operating costs covered. It 
is a cost-based system. So the cost of our controller, their 
salaries, benefits and all the equipment they rely on is built 
into the costs. That is a big advantage.
    The 70 percent turnover between now and 2015, we are 
expecting that. We have been planning for it because it is 
built into the age they were when they were hired and when they 
retire.
    Mr. Lipinski. The funding will be there to replace air 
traffic controllers then?
    Ms. Blakey. On this system, it will be.
    Mr. Lipinski. Another issue, in the proposal, you want to 
increase, expand the program for airport privatization from the 
current 5 up to 15. A question more specifically on what impact 
privatization is because so much Federal funding goes for 
airport capital improvements right now, airports that are 
privatized, would they still be eligible for AIP funding? Would 
the Federal Government be funding the private airports?
    There still would be Federal money going into these 
privately run, for profits of whomever has the lease on them, 
those airports then.
    Ms. Blakey. For the benefit of the flying community and all 
of that, yes.
    Mr. Lipinski. I am sure that is something that we will be 
talking about more in the future on that.
    One other issue I wanted to ask you about, the proposal to 
expand the PFC eligibility to encompass any airport capital 
projects that are eligible to be funded with airport revenue. I 
am just wondering what types of projects that you cannot right 
now use AIP funding for, could an airport use that for under 
this proposal? How does it expand?
    Ms. Blakey. The caveat we have is it could be used for a 
variety of things as long as they are anti-competitive, meaning 
putting one carrier that serves that airport at a disadvantage 
versus another.
    But it would allow for improvements in the terminals. It 
would allow for new hangars. It would allow for improvements on 
the fuel farms as well as building new fuel farms. All of those 
kinds of things are areas where the airport would be able to 
use funding, we think, very legitimately and on a broader 
basis.
    Those would be just thoughts and examples. I could probably 
go on, as they say.
    Mr. Lipinski. All right, I yield back the balance of my 
time. Thank you very much.
    Mr. Costello. The Chair recognizes Mr. Hayes.
    Mr. Hayes. Thank you, Mr. Chairman.
    Ms. Blakey, I am going to change gears just a minute and 
give you a chance to catch your breath. Thank you for speaking 
up about age 65 for pilots, moving the age limit up. We are 
working here on H.R. 1125 to help you implement that. With ICAO 
standards now being 65, we would love to see that implemented, 
a tremendous cost savings to the Government by keeping those 
pilots active to 65. Any suggestions you may have--you don't 
have to do that today--would be very helpful.
    Again, thank you for being here. As I have listened around 
the room to the comments today, there seems to be a general 
lack of support for the overall plan. Mr. Mica seems to have 
been sipping the Kool-Aid a little bit, but we are going to try 
to get him some antidote.
    Just listening, and this is very, very important, and you 
have handled the issue and the process with dignity and 
professionalism. There just seems to be a huge emphasis on, at 
this point, a very costly solution, and that is appropriate, 
but it seems to me we need to back up a little bit and spend a 
little bit more time on the problem. We have got a solution 
that has been massaged with all these numbers.
    You used an example, and my friend, Leonard, is in the $5 
category. If I understand the process correctly, he comes from 
Iowa to Dulles in a Commanche, and you said he is only going to 
pay $5.00 in this new system, but the way I do the math, by the 
time he gets home, the new fees are going to cost $285, not 
just the $5 fee. It already is going to cost him $80 to land at 
Dulles anyway, not counting the ramp fee. It is just a 
tremendously disproportionate share.
    I look at some of the figures. Airline traffic and 
competition have done incredible things for commerce and the 
industry. Airlines are carrying more and more people to more 
and more places, and that is a good thing. The guy in the 
middle seat, that is typically me on a Friday afternoon, can 
fly to Los Angeles to the East Cost for $300. You talk about 
the unusual value. That is an incredible value, and the 
airlines are doing a good job competing among themselves. That 
is where the money is coming from.
    The system we have got is not that bad. Again, let us focus 
some more on the problem, make sure to define it going forward. 
As I said earlier, 16 percent decrease for the 747 from Tokyo 
to Los Angeles and 271 percent--I am being a little bit loose 
with the math--for Leonard and I to come from Iowa and back in 
the Commanche.
    Again, it doesn't solve the problem, but it does force 
people out of the market. General aviation is a guy in Norwood, 
North Carolina, making tires. He is a guy in Iowa or wherever, 
making other components that are important.
    GPS, pilots now, I got Sam. Sam is a stick and rudder guy. 
That is the way everybody used to train. Now we have got 
systems operators. The cost of GPS to the pilot and other 
technological aids has gone down dramatically, so I think that 
kind of savings is available.
    Just to kind of wrap up and not have the red light, as we 
go forward, again I welcome the dialogue and hopefully again we 
will make sure that this part of the aviation industry, we call 
it general aviation.
    But a corporate CEO, and they seem to be bearing the brunt 
of the criticism here, it is a cost item to them. They know how 
much it costs. The airplane has an initial cost which a lot of 
these figures are based on, but it doesn't figure in 
depreciation expense, bottom line to them. So I don't think the 
system can compare whatever the start-up cost is simply on its 
face. It is what they are going to use. If they stop buying 
those aircraft, whatever the level may be, we have hurt the 
economy overall.
    Do you think that general aviation is potentially going to 
be harmed by this if we don't do our job of making sure that we 
allocate costs accurately and properly?
    Ms. Blakey. No, I don't.
    Mr. Hayes. Okay.
    Ms. Blakey. I would not have proposed it if we did. You 
have to remember that general aviation manufacturing is on an 
enormous boom, 35 percent increase in terms of sales and 
deliveries this year. That is huge.
    Again, the costs to the little guy are very small, but when 
you look at where we are seeing a huge increase in traffic and 
real cost to the system, it is in congested air space. It is at 
congested airports. It is up and down the East Coast. It is 
when folks want to fly in their jets down to the Super Bowl, 
and they all want to be there in front of the 320 with a full 
load.
    Those are real costs and real problems in this system. This 
is not a question of a solution looking for a problem. That 
problem is there.
    What I would suggest is because all of you have the vast 
majority of your constituents are the guy in 22B, the guy who 
is flying coach. Right now, he is paying more than 22 percent 
more than he needs to for the cost of our air traffic control 
system and all the infrastructure. We are asking for basic 
equity here. That is important. It really isn't fair to say, 
oh, well, the airlines are able to offer some cheaper fares 
these days, so let us don't worry about the fact that the 
passenger is paying too much of the bill.
    You know this is a 10 year bill. This is the time to try to 
get it right. We do believe that it is certainly possible for 
everyone to step up to the requirements here and to try to be 
both fair and then put in place a system that is stable and we 
can all count on it.
    Now, Congressman Hayes, I have said at the outset and all 
the way through, I don't pretend we have a perfect bill. I 
didn't say we got it all right. As I listen to the comments, 
both here and otherwise, people have specific things they don't 
like. I do understand that. But it is not that people are 
rejecting the bill out of hand, and may I suggest it is the 
only proposal out there. Change is hard, and people always find 
something at the beginning that they don't want to support, 
that they don't like, but let us be fair and give it a fair 
shake because the principles behind this, I think, deserve real 
attention.
    Mr. Hayes. Absolutely, thank you very much.
    Mr. Costello. I thank the gentleman.
    We are going to have some recorded votes very shortly, so I 
would ask you, if you would, to stay within the allotted time 
and to be as brief as possible and ask the Administrator to be 
as brief as possible with her answers.
    At this time, the Chair recognizes the gentlelady from 
Texas, Ms. Johnson.
    Ms. Johnson. Thank you, Mr. Chairman.
    My questions have been answered, so I pass.
    Mr. Costello. I thank the gentlelady.
    The Chair recognizes Ms. Fallin.
    Ms. Fallin. Thank you, Mr. Chairman.
    Thank you once again for coming to our Committee. We have 
been seeing a lot of you. We appreciate all your explanation of 
the different issues.
    I was listening as you were talking about the 
reauthorization and the funding coming forth, and you talked 
about the ups and downs and the contracting and not having the 
stability and the funding and the people involved in the system 
needing to know about timing of the funding itself and about 
projects and short term extensions and the different contracts 
and that they don't work well and it is not good for those who 
are receiving the contracts, not knowing the timing of things. 
So I had a question for you.
    As you know, in Oklahoma City, we have the FAA Mike 
Monroney Center which trains the controllers, and we have had a 
lot of discussion about the controllers who are retiring and 
the need to get new controllers online, air traffic 
controllers. It is my understanding that in Oklahoma on our 
contract with the Mike Monroney Center, that the University of 
Oklahoma has a contract with the FAA training center and has 
had that since 1981 to help train the air traffic controllers. 
Since that time, they have trained over 25,000 air traffic 
controllers at that facility.
    They had a five year contract which expired January 31st of 
2006. So it is way past due on its expiration which is 14 
months ago. Since that time, they have been getting short term 
extensions, a six month extension, a two month extension, a one 
month extension, and now it is all set to expire on July 31st 
of 2007 which is coming up in a couple of months.
    In listening to you talking about how hard it is with the 
ups and downs of the contracting and the extensions and no 
stability within the system and then also the discussion we 
have had about the air traffic controllers and how important it 
is that we bring more online and have them trained because of 
the retirement age.
    Can you give me any advice on what you think might happen 
with the training that is currently going on at different 
facilities and what we can expect with the contracts of those? 
Maybe you are telling us that it is going to be affected by the 
reauthorization bill.
    Ms. Blakey. Congresswoman Fallin, I will tell you this. I 
will start by saying I will get back to you with the specifics 
on that contract. What you are describing sounds correct, but I 
don't have the latest on it.
    I can tell you broadly that what we have been trying to do 
is to improve training. We do a great job in Oklahoma City, and 
we are very proud of it. But like everything else, as time goes 
on, we want to begin using more simulators. We want to use more 
simulators in our facilities that are right there for 
controllers to use. We also want to take advantage of a number 
of the colleges and universities around the Country that would 
like to join our CTI program. As you know, those graduates are 
very successful, and when they get to the academy, they can 
expedite their training at the academy because they are very 
good and well trained and often come with college degrees. All 
of that has gone to the idea of developing a plan for our 
training for the next 10 years, and that is one of the reasons 
why we have not committed to a long term contract because we 
are trying to incorporate all those factors.
    I am very proud to say that if you look at the controller 
staffing plan, we just issued about a week ago, you will see 
that the amount of time it takes to fully train and certify a 
controller is diminishing. It used to be three to five years. 
Now for en route, we are able to get it down to right at three, 
a little less, and we are also decreasing the amount of time it 
take to fully train and certify a terminal controller. So it 
shows that these approaches and new technologies are all paying 
off.
    Ms. Fallin. Mr. Chairman, if I may just finish, what I am 
hearing back from my folks at home is that when they have a two 
month extension or shorter periods of time, that it is hard to 
keep the workforce. It is hard to keep the people who are 
involved in the system, and they get frustrated, and they leave 
which hurts the quality of the system, of the training that we 
are delivering because they never know from one month to the 
next, if it is still going to be there. So people leave and 
come and go, and it is hard to keep that consistency of quality 
of service of the training.
    Ms. Blakey. Let me look into it. I know we have a full 
pipeline of enrollees at the academy for all our classes, so we 
certainly want it stable.
    Ms. Fallin. Thank you so much.
    Ms. Blakey. Sure, I would be happy to.
    Mr. Costello. The Chair recognizes Mr. Boswell.
    Mr. Boswell. Thank you, Mr. Chairman.
    In the interest of time, I have two or three things. I will 
just try to be brief on those.
    Ms. Blakey, I am concerned, back to what Mr. DeFazio said, 
that we all, all Americans participate in the safety and the 
economy and everything else of aviation. So I am curious why 
you propose reducing the general fund when we all benefit.
    Secondly, would you clarify the effect of the new funding 
on Part 135 On Demand Air Charter Industry?
    Currently, they have to get a refund from the IRS. Will 
they pay 70 and get refund at 56.4? Will that be the way it 
works?
    If this should move forward--if this should move forward 
and the trust fund, what would be your consideration of using 
the method that 135 operators pay strictly through the general 
aviation fuel tax? Would you comment on that?
    Lastly, have you given much thought, you probably have, 
about the envisage or factor of the equipment costs that will 
be faced by general aviation to a lot of people like myself and 
Mr. Hayes and Mr. Graves and others, the impact on the industry 
that will have?
    Could you address those, please?
    Ms. Blakey. I hope I have kept up with all of it. The 
general fund contribution, I certainly agree that there is 
great public good in the aviation system for the broad 
taxpayer. We have retained the general fund contribution at 
about where it has been for the last several years, so we have 
not diminished it. We have kept it stable.
    I think the long term problem is one that this Congress has 
recognized and been a party to as well as this Administration, 
and that is that there are huge competing interests for the 
discretionary part of the budget--health care, education, et 
cetera. As time has gone on, that has squeezed the ability of 
taxpayers to fund more of aviation. That is just the reality, 
but it has certainly proven true historically, and it is pretty 
hard to see that changing under current budget circumstances 
with the pressures on the Federal budget.
    Referring to your question about Part 135, I believe what 
you are referring to is the question of when they are flying 
paying passengers and therefore would be required to reimburse 
because they would be charged differently under those 
circumstances. I would like to get you a written answer on that 
because it is a little technical, and I do need to give you the 
precision on that, if I might.
    Mr. Boswell. Okay, I appreciate that.
    Ms. Blakey. I can do that.
    Did that cover it or did I miss one?
    Mr. Boswell. Yes, the safety factor, I think is something 
that Mr. DeFazio was talking about. In the sense that I would 
guess that I can think of more than a few people that would 
probably avoid using the system and try to figure out how they 
could do some alternative to get to where they want to go 
without paying the fees. I am concerned about the safety factor 
which I know you are very concerned about. We all are. Do you 
have some reasonable assurance that that won't be compromised?
    Ms. Blakey. Well, again, this gets back to what was an 
earlier assumption that is not true of our bill. There are no 
fees that general aviation is going to paying. There is no 
ability to say, you know, I don't want to pay a fee, because 
there is no fee. Flight service stations, which are the primary 
way that we help general aviation--weather, filing flight 
plans, all of that--are free. They are funded by the general 
fund.
    The only way that general aviation is paying a fee is if 
they fly into of 30 of the most congested airports which, for 
the most part, is your corporate high end aviation, not your 
recreational flyer flying into O'Hare.
    Mr. Boswell. I understand. Because of time, Mr. Ehlers, oh, 
he is gone. If he goes into Teterboro, I want him to take Mr. 
Hayes with him. I don't even want to go. So, okay, thank you 
very much.
    Mr. Costello. I thank the gentleman.
    The Chair recognizes Mr. Poe.
    Mr. Poe. Thank you, Mr. Chairman.
    I have a couple of questions, of course. The area I 
represent is the Houston area. The Intercontinental Airport is 
real close, and then I have Beaumont Airport.
    My questions basically are about the air traffic 
controllers. I meet with those guys a lot, and one thing that 
concerns me is that they all seem like they could qualify to be 
AARP members or senior members in AARP. I am concerned about 
our workforce and replenishing them with what I think are very 
qualified individuals at this time.
    Consolidation of TRACON facilities, specifically, the 
Beaumont facility being consolidated probably with 
Intercontinental Airport, a simple question, will that mean the 
loss of air traffic controller jobs?
    Ms. Blakey. All right, on the consolidation of Beaumont 
with the Houston TRACON, it certainly will not anticipate loss 
of jobs. One of the things that we are trying to do is to have 
the best possible technology. I will have to get back with you 
on specifics, but I believe that Houston uses the STARS system. 
Am I correct about that?
    Mr. Poe. Yes, ma'am.
    Ms. Blakey. Of course, STARS offers tremendous advantages 
in terms of its precision and reliability, 16 different sensors 
and radars, and that is what then becomes available to Beaumont 
by doing that. The anticipation is that you get better 
technology. That is the key thing. We have been, so far, able 
to accommodate these consolidations without much disruption to 
the workforce or diminishment in numbers of people. Again, 
traffic is going up down there.
    Mr. Poe. Well, that is really my question. Will the 
consolidation, whether it is in Beaumont, in Houston or other 
parts of the Country, will that mean a general overall loss of 
air traffic controller jobs or will they stay the same or will 
they increase?
    Ms. Blakey. As a general matter, it does not impact air 
traffic controller jobs, but let me look at the specifics 
there, and then I can get back to you and tell you with greater 
precision. I don't honestly remember what kind of timeframe it 
is on and all of the specifics that are involved.
    But what we find as a broad matter is, because traffic is 
increasing, there are good jobs for all of these controllers. 
It may not be exactly the same job they were doing five years 
ago, but there are good jobs. I mean after all, we are hiring 
at a fast pace, so we certainly are not trying to, in any way, 
diminish controllers and the jobs they have right now.
    Mr. Poe. The second question has to do with the $5 billion 
loan part of the proposal. What is that money going to be used 
for?
    Ms. Blakey. It is a good question. It is in the second half 
of the 10 year period of the bill, and it is borrowing 
authority for some of these capital investments that, like any 
major capital program, often involve big investment spikes. 
Rather than trying to pay for them in a one year basis on a 
cash and carry basis, it allows the ability to smooth out that 
capital cost and yet get the benefits of these programs up 
front, the technology sooner than you would if you had to pay 
for it every year.
    I mean no one pays for any capital investment in the 
private sector and in our personal lives, obviously, pay for 
your house all up front. Corporations don't. We believe we need 
that tool here as well, and the spikes are coming in the second 
five years.
    Mr. Poe. Will there any input from Congress on how that 
money is going to be spent?
    Ms. Blakey. Absolutely, you all will have to approve all of 
those programs with all of the money that is attached.
    Mr. Poe. Overall, in your opinion, what position or policy 
or manner in which that $5 billion is going to be spent?
    I mean just give me some ideas. I mean $5 billion here, $5 
billion there. To Congress, it doesn't mean much, it seems, but 
it is a lot of money, and I am just asking you where you think 
generally that money is going, if you could be specific.
    Ms. Blakey. Well, I think it will be going to some of the 
big investment costs that we see out there. Some of the things 
that we need to do go to the ability to network all of these 
systems. When I was talking about SWIM, there is another system 
also that goes to being able to hook up all of our security and 
surveillance, et cetera. That can be quite expensive. ADS-B, in 
the out years, gets to be quite expensive. And so, those are 
some of the things that we would anticipate putting the $5 
billion against if we need to.
    Now, if we don't need to, that is another call, and that is 
certainly something that we would be discussing with the 
Congress well up front as well as with the stakeholder 
community well up front. Does it make sense to go fast and 
therefore need to incur that kind of borrowing or can we do it 
on a more gradual basis so you need to borrow?
    Mr. Poe. That would be three, okay. Just to follow-up, I 
look forward to an answer to my earlier question about the 
consolidation specifically with Beaumont and Intercontinental 
Airport, what that will mean on air traffic controllers' 
positions. Thank you.
    Ms. Blakey. I am sorry, I didn't know the specifics. I will 
get them for you.
    Mr. Costello. I thank the gentleman.
    At this time, the Chair recognizes the distinguished 
Chairman of the Full Committee, Mr. Oberstar.
    Mr. Oberstar. Thank you, Mr. Chairman.
    These are very, very important hearings, the launch 
hearings as we being our process of reauthorization of FAA for 
the next three years. It is evident how important these 
hearings are, given the number of Members who have turned out 
for the hearing this morning and the questions asked.
    Madam Administrator, you have immersed yourself in this 
subject matter, and I applaud you for that. You have mastered 
the issues, and you speak from a fount of knowledge and from 
the heart and not from prepared statements, prepared guidance. 
That is refreshing as we hold these hearings.
    I see that the bells have rung for a vote.
    I have very serious reservations about the overall proposal 
from the funding aspect of the overall proposal. It will be a 
major shift in policy from the ticket tax user fee approach to 
some other sort of fee that I used to call a cash register in 
the sky. As you leave from one airport, you pay a fee. You are 
handed off, you pay a fee. You go some place else, you pay 
another fee.
    You have 13 safety and certification activities from which 
to collect fees. Better, not you, I don't mean to personalize 
this. The FAA proposal has 13 safety and certification 
activities for which fees, but yet there is no evidence of a 
cost accounting procedure in place for it.
    Many of the questions that I have are the New York-New 
Jersey airport operations and the proposal to allow the Port 
Authority to use ``market-based mechanisms to control 
congestion.'' How are they going to do that?
    I have had this discussion over 20 years with the congested 
airports and, at various times, it was suggested spreading out 
operations over the period of the day. Instead of having the 
three major banks, now it is four major banks. Now it is 
getting to be five. Airlines, on the one hand, offer a more 
economical ticket price to travelers to fly somewhere between 
9:00 a.m. and noon or somewhere between noon and 4:00 or after 
9:00 at night. Can airports offer lower landing fees to 
encourage airport use at those times? Is that what you have in 
mind?
    Ms. Blakey. Well, I will tell you. You know this is 
complex, and there are a number of ways of doing it. Part of 
it, of course, is you determine in doing it, how elastic is the 
demand because I think that is a big part of the question. It 
could be done that way. Yes, you are right. There are several 
different approaches in terms of how to do it. Auctions are 
another way. So there is some very creative, innovative 
thinking about this.
    But since this is something that we would work with the 
Port Authority of New York and New Jersey on what they thought 
would be most effective there. I would say that this is 
something that still is very to be determined. This is carving 
new ground, and I understand that it hasn't been easy to come 
up with these approaches.
    Mr. Oberstar. Not really carving out new ground because if 
you remember a few years ago, before you were Administrator, we 
had very serious congestion problems at airports all across the 
Country. Aviation was exploding in growth until September 11th. 
We did a look at Dallas Fort Worth. They had 57 departures at 
7:00 a.m. Well, the airlines know 57 aircraft can't take off at 
the same time. They are deluding their passengers, and the FAA 
was part of the delusion. We pointed this out in the course of 
Committee hearings. That doesn't make sense. Do something.
    Eventually, FAA, airports, airlines, all got together and 
figured out how we can spread those operations out over a 
period of time. In the end, it comes down the passengers. If 
they said, we want to leave at 7:00 a.m. because we have to get 
to our business meeting or so and so, and they are not willing 
to travel at some other time. So they are paying that premium.
    What thinking has gone into, either on the airport side or 
the FAA side, making a significant enough incentive to air 
travelers and to airlines that they will move from those big 
bank periods of the day and relieve congestion?
    Ms. Blakey. Well, I will tell you. We spent the better part 
of two years, looking at these kinds of models and the way this 
could work. We actually did some mock auctions, et cetera. All 
of this was theoretical. We were looking at this to see how it 
could work, et cetera. I would be delighted to have us come up 
and brief you on that because I think that there was some 
interesting results from this. Several of the airlines did 
participate in this, so you had some real world results.
    The one thing, though, that I would point to that is 
specific in our bill and is very real world is we have some 
language in the bill that is complementary to an NPRM that is 
now out on the streets, focusing specifically on LaGuardia. So 
within the port authority's domain on LaGuardia as an airport, 
we have an NPRM there to deal with the question of the current 
cap on slots and how this should be allocated. I would be 
delighted to have us come up and talk with you specifically 
about that because I think that does need attention.
    Mr. Oberstar. I would be very delighted to have that 
conversation with Mr. Costello and our colleagues on the 
Republican side as we are all in this together. If there are 
some lessons to be learned, maybe they can also be applied to 
Heathrow in conjunction with our current U.S.-E.U. 
negotiations.
    Second, very quickly, the FAA proposal would raise the 
Passenger Facility Charge to $6.00. Do you have any limitations 
on that increase or on the incremental increase?
    I am not trying to trap you. What I am getting at, and I 
think you know my feelings on the subject, is 23 percent over 
the past 17 years. Isn't it? Yes, since I was Chair and we 
authorized the PFC. It was 1990, in this room, Sam Skinner was 
Secretary.
    Ms. Blakey. Right.
    Mr. Oberstar. Twenty-three percent has gone into airside 
capacity improvements only. That is a disappointment to me. Now 
there are a great many airport terminal needs that have been 
addressed with the PFC, but I don't think passengers ought to 
be paying additional an Passenger Facility Charge if it is just 
going to go to help the airport create more malls where they 
can go and shop because schedules are so bad and they have got 
so much free time between flights that they can spend millions 
of dollars at airport shopping malls.
    If there is going to be an increase, and that is by no 
means decided, in a PFC, then I want to see some movement in 
the direction of making sure that the original purpose was to 
create capacity on the air side of airports and help airports 
do a few other things such as make transportation in the 
airport vicinity on airport grounds more compatible with 
operations. Just a quick comment and then I will have to close.
    Ms. Blakey. Certainly, capacity enhancements have been 
enormous. We think they have been very successful, but we would 
like to work with you on any concerns you might have about the 
issue.
    Mr. Oberstar. Aren't you troubled by only 23 percent of the 
money going into capacity?
    Ms. Blakey. I think that enhancing the financial 
independence and stability of these airports is what a lot of 
these other improvements are. Hangars, the fuel farms, getting 
into terminal improvements, all that make the airport more 
stable, independent and successful.
    Mr. Oberstar. That is right. That is a good hedge answer. 
Thank you.
    Mr. Costello. That concludes our hearing.
    I thank the Administrator for being here. We look forward 
to seeing you again in the coming weeks as we get into specific 
areas of the reauthorization.
    The Subcommittee stands adjourned.
    [Whereupon, at 12:07 p.m., the Subcommittee was adjourned.]




[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


  HEARING ON THE FEDERAL AVIATION ADMINISTRATION'S FINANCING PROPOSAL

                              ----------                              


                       Wednesday, March 21, 2007

                   House of Representatives
    Committee on Transportation and Infrastructure,
                                  Subcommittee on Aviation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Jerry 
F. Costello [Chairman of the Subcommittee] presiding.
    Mr. Costello. The Subcommittee will come to order.
    The Chair would ask that all Members, staff, and everyone 
in the room turn off their electronic devices or turn them on 
vibrate.
    The Subcommittee is meeting today to hear testimony on the 
Federal Aviation Administration's financing proposal. We have a 
long list of witnesses. We have two Members, a Member panel 
that will testify and then 10 other witnesses, and apparently 
someone with a hammer around here.
    [Laughter.]
    Mr. Costello. I guess Jimmy Miller is working on that.
    I will have an opening statement and will recognize the 
Ranking Member, Mr. Petri, for an opening statement, and we 
would encourage, because of the number of witnesses that we 
have, that other Members submit their opening statements for 
the record.
    But before I give my opening statement, I want to recognize 
two of our colleagues who will be appearing here this morning 
to present testimony to the Subcommittee, both the Honorable 
Todd Tiahrt from the 4th District of Kansas, and the Honorable 
John Barrow from the 12th District of Georgia.
    And at this time we will take your statements. We will 
waive the normal questioning of witnesses. We have extended 
that courtesy to Members in the past. We will extend it to you 
because we understand that your schedules will not permit you 
to be here very long this morning.
    So at this time I would recognize our colleague, the 
Honorable John Barrow, for his opening statement and any 
remarks he would like to make.

  TESTIMONY OF THE HONORABLE JOHN BARROW, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Barrow. Thank you, Mr. Chairman. I appreciate your 
consideration this morning.
    Mr. Chairman, it is an honor to appear before this 
Subcommittee to discuss my concerns about the FAA 
reauthorization bill, especially the FAA's proposed funding 
mechanisms.
    Mr. Chairman, I represent Savannah, Georgia, which is home 
to Savannah International Airport and Gulfstream Aerospace 
Corporation. That means that this bill is especially important 
to a lot of folks that I represent.
    Gulfstream employs more than 5,000 people at their Savannah 
facility. Their annual payroll at this place is $360 million. 
And in the district alone they spend another $80 million a year 
with suppliers in support of their vendor operations. As a 
result, the impact of the FAA reauthorization bill in my 
district is huge.
    I strongly endorse the necessity to modernize our air 
traffic control system. However, the President's proposal fails 
to address the critical need for a comprehensive plan for 
modernization. I urge the Subcommittee to insist that the FAA 
present a modernization plan, including timetables, milestones, 
and its estimated cost, before they initiate a debate on 
funding.
    As with many of my colleagues in Congress, I don't agree 
with the Administration's attempt to link user fees to 
modernization of the Nation's air traffic control system. The 
system needs to be modernized no matter how we pay for it, and 
we can modernize it using the existing tax and oversight 
structure. But we need to organize a comprehensive plan first.
    The Administration proposes to dismantle the current 
funding mechanism and tax structure that has built the safest, 
most efficient air traffic control system in the world. In 
contrast to the current system of aviation excise taxes set by 
Congress, user fees would be set annually by the FAA without 
congressional approval. Given the monopoly power of the FAA as 
the sole provider of air traffic services in the United States, 
and given the FAA's poor track record of fielding new 
technology to modernize the air traffic control system, we 
can't afford to put all of our right to make cost control 
decisions, all of our power to tax, and all of our power to 
spend on the FAA. We can't afford to put all of our government 
eggs in one FAA basket.
    Giving the FAA the right to set user fees is a blank check 
and it would totally remove congressional oversight from the 
funding and governance of our Nation's air traffic control 
system. Now that we are trying to expand oversight is not the 
time to give it all away. User fees would require the FAA 
establish some sort of IRS organization to administer a system 
which would be much more inefficient than the current system.
    In addition to user fees, the proposal raises general 
aviation fuel taxes by over 200 percent. That is nearly a 50 
percent per gallon increase in fuel taxes and will have a huge 
adverse impact on the general aviation industry just as it is 
recovering from the economic downturn caused by the last 
recession and 9/11.
    I think there are areas where the FAA should be independent 
of Congress. For example, I strongly support the FAA's 
independence in the area of safety oversight of designees and 
certified organizations such as repair stations and 
manufacturing facilities. But this argues for the current 
system, because safety oversight is an inherently governmental 
function and should not be paid for on a pay-for-service basis. 
If we are going to protect safety oversight as an inherently 
governmental function, we should reject user fees for the 
certification of new aviation products and technologies as a 
way to pay for it.
    Once again, thank you very much for letting us appear 
before you this morning and thank you for your consideration in 
accommodating our schedules, and I yield back the balance of my 
time.
    Mr. Costello. I thank you, Congressman Barrow, for your 
testimony here today, and we not only receive your testimony, 
but you and I have had conversations concerning this issue as 
well, and I appreciate that.
    Let me now call on our friend from Kansas, the Honorable 
Todd Tiahrt.

  TESTIMONY OF THE HONORABLE TODD TIAHRT, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF KANSAS

    Mr. Tiahrt. Thank you, Mr. Chairman. I have a written 
testimony that I would like unanimous consent to submit for the 
record.
    Mr. Costello. Without objection.
    Mr. Tiahrt. Today I hope to convince you that general 
aviation is a vital part of our economy, that it is necessary 
for the future growth of our economy, that general aviation is 
extremely vulnerable to Federal policy, and that the FAA's 
proposal is a plan to fail according to the FAA itself. It will 
raise less revenue than the current system of fuel taxes and 
contributions to the General Fund, and it will set up, as 
Congressman Barrow said, an IRS within the FAA; and as a result 
of that, less people will fly and their current projections 
will have even less revenue. On top of all of that, their plan 
will give us less congressional oversight.
    I represent the air capital of the world, the 4th District 
of Kansas. It is the home of Cessna, Hawker Beechcraft, 
Bombardier, which builds LearJets; Boeing; Spirit AeroSystems, 
which used to be Boeing Commercial; EADS Engineering; civil 
design shops; suppliers; contractors; maintenance facilities; 
and a world-class research facility called the National 
Institute of Aviation Research at Wichita State University.
    Kansas companies deliver over 50 percent of all general 
aviation aircraft. These companies provide 32,000 well paying 
jobs in my district alone. In 2006, the three largest Kansas-
based general manufacturers--Bombardier LearJet, Cessna, and 
Raytheon--manufactured over 1700 airplanes at a value of $5.8 
billion. Forty percent of them went overseas in exports.
    So it is a national importance that general aviation brings 
to us. Not only my district, but each one of the congressional 
districts throughout the Congress, all 435 districts, have 
either direct manufacturing jobs, fix-based operations, 
suppliers, subcontractors, or maintenance. In Congressman 
Barrow's instance, he has a huge manufacturing facility with 
over 5,000 jobs. Aviation is linked to a total of $142 billion 
of payroll alone in our economy and affects more than 600,000 
jobs nationwide. But more important than that, employers across 
the United States depend on general aviation just to get their 
job done, especially in rural areas.
    But I want to explain to you why general aviation is so 
vulnerable to Federal policy. It is a delicate industry in some 
senses . Let me give you an example. In 1994, my predecessor, 
Dan Glickman, worked very hard to get the general aviation 
revitalization act passed. In South Central Kansas, it created 
4,000 jobs. But, yet, following September 11th, 2001, when our 
economy took a $2 trillion hit, Wichita lost 25,000 jobs.
    Then there was the luxury tax back in 1991. Beechcraft 
alone lost 39 airplane sales in the first quarter when the tax 
went into effect. They lost 500 jobs that were planned at that 
time. That doesn't account for what happened at Learjet or what 
happened at Cessna as well.
    More recently, accelerated depreciation was what turned 
around general aviation. When we allowed companies to write off 
two-thirds of the cost of a new airplane in the first year or 
purchase, that revitalized again general aviation, and those 
25,000 people who were laid off are back at work and now there 
are backlogs.
    Finally, if you look at certification the FAA is supposed 
to be doing, they have not put the number of certifiers in 
place, and, as a result of that, we can't get new products on 
the market, even as small as safety parts, safety issues, 
because they are not certified. So here we have, once again, an 
industry that is so vulnerable to Federal policy held at a 
standstill, not being able to get new parts on the market or 
new safety issues in practice.
    Now I want to move on to the Next Generation Air Transfer 
System, because it does not require user fees. The former 
Secretary of Transportation, Norm Mineta, one of his last 
comments, he said he did not want the Department of 
Transportation to be a choke point for economic activity. And I 
am sure you would all agree with that as well. Unfortunately, 
this current proposal is going to be a choke point.
    There is a chart that is going to be shown later today that 
shows that the average daily use of an airline, a commercial 
jet, is about 3800 hours per year. A commercial jet flies about 
3800 hours per year. A general aircraft flies less than one-
tenth of that, about 370 hours per year. Yet, what is happening 
is that they are trying to shift the burden from commercial 
airlines to general aircraft.
    I want to make sure that the United States is fully 
supporting an air traffic controller system. That is the plan. 
But to do it on the backs of general aviation is not a good 
part of that plan. It is difficult to see, and false to make 
the assumption, that the problem with having an airplane that 
carries 300 passengers has the same type of needs as an 
airplane that carries 3 passengers.
    We have heard a blip is a blip is a blip. It is really not 
a blip, there is much more to it. In fact, if you look at 
following September 11th, 2001, there was absolutely no layoffs 
at Reagan National Airport, even after general aviation was 
completely closed out of that market. We didn't lay off any air 
traffic controllers. So to say that air traffic control should 
be paid for on the backs of general aviation I think is a 
misnomer and doesn't accurately represent what the costs of air 
traffic control area. In fact, if you look at where the big 
costs are for air traffic controllers, they are in hub areas, 
where you have a lot of commercial traffic.
    I see that my time is up. Let me just summarize by telling 
you that this plan will generate less revenue. This plan will 
give less government oversight. This plan will have a crushing 
effect on the economy and it will certainly damage the general 
aviation manufacturing, the maintenance, the suppliers, the 
fixed base operations, and our future economy because of the 
rolling impact that it will have throughout the economy. So it 
is my suggestion that we do not have user fees, and if I can 
make it any clearer, I will try to do so in the future.
    [Laughter.]
    Mr. Tiahrt. Thank you for your time.
    Mr. Costello. Well, Congressman Tiahrt, we appreciate your 
testimony as well, and you, Mr. Barrow. I think you have made 
your points very clear to us, and at this time, as I said, we 
will waive the questioning. We know you have other commitments, 
so we thank you for being here.
    At this time, the Chair will give an opening statement and 
then recognize Mr. Petri for his opening statement, and then 
ask other Members to submit their statements in the record.
    I welcome everyone to the second of our hearings on the FAA 
reauthorization. This hearing focuses on the FAA's financing 
proposal. Tomorrow the Subcommittee will give consideration to 
the FAA's operational and safety programs.
    On February 14, the FAA submitted its reauthorization 
proposal to the Congress. The FAA's proposal includes a new 
financing plan to transform the FAA's current excise tax 
financing system to a hybrid cost-based user fee system. The 
FAA has cited the need to finance a major new air traffic 
control modernization initiative, the Next Generation Air 
Transportation System, as a primary reason for reforming the 
current tax structure.
    After a review of the FAA's proposal, I do not believe that 
the FAA has made a strong case for its proposed changes. Last 
September I said that, based on the CBO projections, the 
current tax and financing system could probably support the 
requirements of the next generation system. Today you will hear 
from the GAO and they will testify that, in fact, the FAA's 
current tax and financing structure has kept up with the demand 
for many years and can provide funding to cover the development 
and implementation of the NextGen system.
    In addition, at the February 14th hearing, I noted that, 
based on the Administration's own cost assumptions and data, 
the FAA's proposal would hypothetically yield approximately 
$600 million less in fiscal year 2008 than maintaining the 
current tax structure and over $900 million less from fiscal 
year 2009 through fiscal year 2012.
    I want to repeat that so everyone understands that the 
FAA's current proposal would generate $600 million less in 
fiscal year 2008 than maintaining the current system and $900 
million less than the current system in fiscal year 2009 
through fiscal year 2012.
    The GAO will testify today that the FAA has not taken in to 
account changes in demand that could happen with an increased 
fuel tax, and this could result in even less revenue collected 
by the fuel tax than anticipated.
    While the FAA states that we need an entirely new funding 
system to cover the capital costs of the Next Generation 
system, the FAA's estimated cost requirements for its major 
capital programs are actually lower than what they were four 
years ago.
    The FAA's estimated total requirements for facilities and 
equipment, and the airport improvement program in its new 
three-year proposal are approximately $380 million and $1.5 
billion less, respectively, than the FAA requested for the 
first three years of its last reauthorization proposal, the 
Centennial of Flight Aviation Authorization Act. In my opinion, 
this new proposal's lower funding levels for capacity enhancing 
capital programs further weakens the FAA's argument that a 
radical financing reform is necessary.
    But, more importantly, I believe that the FAA's proposal is 
bad for consumers, namely, airline passengers and other 
airspace users. The FAA believes that its proposal will make it 
operate like a business. I disagree. The truth is the FAA will 
never be able to compare itself to a business. Most businesses 
have competition to spur efficiency. The FAA has no 
competition. As I noted in February, airline passengers and 
airspace users either get their services from the FAA or they 
stay on the ground.
    I don't believe it is in the public's interest to give the 
agency almost unilateral authority to raise its fee rate to 
match whatever costs are incurred. I believe that linking a new 
user fee rate to the air traffic control modernization program, 
in particular, could result incentives for the program to be 
carried out efficiently. The pressure for efficiency will be 
much less if the FAA can require airline passengers and system 
users to bear the burden of cost overruns or delays.
    While the FAA argues that airline passengers will pay less 
under its proposal, I believe that they in fact ultimately 
could pay more, and they may wind up paying much more if user 
fee rates grow unchecked and airlines pass those costs onto 
their customers.
    The Department of Transportation Inspector General has 
reported that the FAA's major acquisitions have experienced 
billions of dollars, and we have heard this in hearings 
before--they have experienced billions of dollars in cost 
growth and years of scheduled delays directly traceable to 
overly ambitious plans, complex software development, changing 
requirements, and poor contract management. The GAO has listed 
the ATC modernization as a high-risk program for the last 12 
years.
    It is true, as the FAA Administrator testified before this 
Subcommittee, that the FAA has met its acquisition costs and 
schedule performance targets. At least 80 percent of its 
acquisitions have been on schedule and within 10 percent of the 
budget. However, at least some of the FAA's recent success is 
due to the re-baselining of certain modernization programs.
    When an acquisition is restructured in this manner, its 
historical cost overruns may not be fully reflected in the 
FAA's performance measures. The Inspector General of the DOT 
has noted that the FAA's Next Generation effort will, without 
question, be a high-risk endeavor and that there is 
considerable potential for cost-growth, schedule delays, and 
performance shortfalls, particularly with regard to new 
software intensive automation systems. The FAA should not be 
able to pass such potential cost growth directly onto consumers 
through its fee rate without congressional oversight or 
approval.
    In addition, I believe that there are some very significant 
unknowns in this proposal that have not been addressed. For 
example, the FAA has not fully explained the potential 
administrative costs associated with tracking and billing 14 
million flights a year. When I specifically asked the 
Administrator about administrative costs, they have not 
developed a plan to determine what the administrative costs 
would be.
    What we do know, as the Administrator indicated here last 
week, that, in fact, time is not on our side. I believe that 
these factors argue strongly in favor of working within the 
current tax and financing structure.
    With that, I would like to welcome our witnesses here today 
and to recognize our Ranking Member, Mr. Petri, for an opening 
statement or any remarks he would like to make.
    Mr. Petri. Thank you, Mr. Chairman. I join in welcoming our 
witnesses today and appreciate the effort that went into the 
statements that will be made a part of the record, as well as 
the summaries they will be presenting orally to the panel.
    As you are all aware, we are in the midst of a very busy 
month here on this Subcommittee, and today's hearing will 
address a fundamental question: how we finance the FAA and, 
most importantly, the modernization of our air traffic control 
system. We are pleased to have all the panelists here to share 
their thoughts on the Administration's financing proposal. 
There is obviously a lively debate on the financing issue and, 
where there are disagreements, it is going to be our job to try 
to find the path forward and some kind of consensus.
    In order for the United States to maintain its historical 
role as a leader in the global aviation industry, we must be 
certain to advance our modernization efforts. Other countries 
around the world are making great strides in that regard. The 
EU plans to have a constellation of its own satellite-based 
navigation system, known as Galileo, completed by 2010. The 
Russians are advancing their own program, GLONASS. Elsewhere in 
the aviation industry, China expects to be manufacturing its 
own regional aircraft by 2008 and is striving to produce a wide 
bodied aircraft by 2020.
    For a century, the U.S. has led the aviation industry and 
our industry is, as we have heard from several witnesses 
earlier, crucial to our economy, and we can't afford to fall 
behind. Whichever financing mechanism is put into place, we 
must be sure that it can support the costs of modernizing the 
system.
    So again I would like to thank all the witnesses for 
participating in this important hearing, and I look forward to 
your testimony.
    Mr. Costello. The Chair, at this time, would recognize the 
distinguished Chairman of the Full Committee, Chairman 
Oberstar, for any opening statement or remarks he would like to 
make.
    Mr. Oberstar. Thank you, Mr. Chairman, and thank you for 
your opening statement, which is comprehensive, deals with all 
the policy issues that we need to address in the course of this 
authorization process, and shows your grasp of the subject 
matter and understanding of its significance.
    I want to thank Mr. Petri for his comments and his 
participation, his diligence in taking control of aviation 
issues, moving from surface transportation in the past 
Congress. Welcome to the great exciting world of aviation.
    I want to thank our two colleagues who testified earlier, 
Mr. Barrow and Mr. Tiahrt. I was not in the room, I was meeting 
in the waiting room with other folks, but I heard their 
testimony and it shows the level of interest among our 
colleagues in the House on the reauthorization. And I know 
there is a great deal of skepticism on both sides of the aisle 
about this financing scheme. While we will be receptive, we are 
going to listen to views in the course of this hearing and 
several subsequent hearings that we will have, my intention is 
to give it a decent burial.
    I have been through this reauthorization process for a 
little over 22 years. When FAA was emerging from the air 
traffic control of the 1960s, from which it had just emerged 
from the air traffic control of the 1930s, with radio beacons, 
preceded by lighthouses, preceded by bon fires, it was evident 
that we needed a robust management, robust technology system to 
manage the growing air traffic.
    The air traffic growth accelerated in the aftermath of 
deregulation--it was voted in this committee room--and in the 
early 1980s, with industry, with the airlines and with the 
manufacturers--particularly at that time it was IBM--began 
design of the advanced automation system, which is a very 
comprehensive approach of modernizing air traffic in all of its 
aspects.
    FAA had been criticized for moving too slowly, moving too 
fast; of being overly ambitious, not thinking far enough ahead. 
You can't be all of those things. You can't be wrong on all 
those accounts. I remember very distinctly 1986, 1987 people 
said, we just buy it off the shelf. We have got plenty of 
technology, just go and buy it.
    You don't go buy these things off the shelf at Radio Shack, 
for heaven sakes. You are designing a totally new system. This 
is not data retrieval; you are not querying the Library of 
Congress for information, you are dealing with aircraft moving 
at 10 miles a minute, 7 miles in air, no curb to pull over, 
look under the hood and figure out what is going on. It has to 
be real-time. It has to be designed with a robust platform for 
adaptation off into the future.
    And, yes, FAA did sort of over-promise and over-propose in 
developing the AAS that became the display system replacement, 
the DSR, but they went from 300,000 lines of computer code to 
1,300,000 lines of computer code. They went from a system being 
down 10 to 12 hours a year to one that would be down 5 to 10 
minutes a year. And now we need to evolve that system. It is 
not a matter of taking today's cell phone, throwing it out and 
buying a new one. You are building on a robust platform to move 
and evolve ever into the future into a system in which air 
traffic controllers, en route controllers, tower controllers, 
TRACON controllers, are managers of a system and thinking ahead 
looking ahead to where traffic is going to be five and ten 
minutes from now, not just to where they are at the moment. 
That is going to take robust investment.
    This plan, submitted to us by the green eye shade 
budgeteers at OMB, does not move in that direction; it 
provides, as the Chairman said--and I hope everyone paid 
attention to it--less money, $900 million less money, 
$1,500,000,000 less money than we know; and unfairly 
distributes the cost around the system.
    We encountered such a scheme in 1993, then proposed by Vice 
President Al Gore, in which he proposed to have sort of a semi-
privatized air traffic system with the airlines in charge. We 
weren't going to allow the fox in charge of the chicken coop, 
and we are not going to allow it today either. Get ready, we 
are going to do something good for aviation. We are going to 
make good decisions for the future of aviation in this Country. 
But we are not going to do it half-baked. We are going to make 
a continued robust investment that embraces all of aviation: 
airlines; domestic; international; general aviation, meaning 
corporate jets and private aircraft.
    We need to deal with the North Atlantic system, the North 
Atlantic aviation for which the United States has 
responsibility over 3 million square miles of the Atlantic 
airspace. The oceanic guidance system has not been completed 
yet. That has been in the works for 10 years. That is a $30 
billion market. We have to do better and move faster. We are 
responsible for 18 million square miles of the Pacific 
airspace. That is a $25 billion market growing at 9 percent a 
year. We have to have a robust system in place to manage that 
air traffic so that we don't have an aircraft, as we did with 
KAL 007, because it strayed out of control, out of recognition 
of our radar system.
    Those are the big challenges ahead of us, not nickel-and-
diming the system to death, as this proposal would do.
    Excuse my enthusiasm, Mr. Chairman, colleagues, but I have 
been here a long while and have seen a lot of this happen. I am 
determined, under your leadership, Mr. Petri's participation, 
and all the Members of this Committee and the aviation 
community, we are going to do right by aviation. Thank you.
    Mr. Costello. I thank the distinguished Chairman for his 
remarks.
    Before we go to our first panel, I would note to all 
Subcommittee Members that we have two panels remaining, this 
panel and another. We have a total of 10 witnesses, so I would 
ask Members to consider submitting their opening statements in 
the record.
    And at this time I would ask unanimous consent to allow two 
weeks for all Members to revise and extend their remarks and to 
permit the submission of additional statements and materials by 
Members and witnesses. Without objection, so ordered.
    Let me recognize, at this time, Members of the first panel 
that are here this morning. We welcome you and we appreciate 
your being here to present your testimony and also to answer 
questions of Members of the Subcommittee.
    First, I would recognize Mr. Daniel Elwell, the Assistant 
Administrator for Aviation Policy, Planning and Environment for 
the FAA; Dr. Gerald Dillingham, who has testified before this 
Subcommittee many times, who is the Director of Physical 
Infrastructure Issues with the GAO; The Honorable Calvin 
Scovel, who has testified here just in the last few weeks, who 
is the Inspector General for the U.S. Department of 
Transportation.
    At this time I would recognize Mr. Elwell for your opening 
statement.

    TESTIMONY OF DANIEL K. ELWELL, ASSISTANT ADMINISTRATOR, 
  AVIATION POLICY, PLANNING AND ENVIRONMENT, FEDERAL AVIATION 
   ADMINISTRATION; DR. GERALD DILLINGHAM, DIRECTOR, PHYSICAL 
 INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; 
  AND THE HONORABLE CALVIN L. SCOVEL, III, INSPECTOR GENERAL, 
               U.S. DEPARTMENT OF TRANSPORTATION

    Mr. Elwell. Chairman Costello, Chairman Oberstar, 
Congressman Petri, Members of this Subcommittee, thank you for 
putting the spotlight this morning on the state of aviation's 
finances. While this is my first appearance at a Congressional 
hearing and it is an honor to be here, I recognize that I have 
been invited primarily to listen to the views of others, 
including my fellow panelists, the DOT Inspector General, and 
the GAO. Their views and the views of other witnesses here 
today are vital to the current debate over our legislation.
    You know, I have spent close to two decades in one cockpit 
or another. I have flown military aircraft all around the world 
and I have had the pleasure of flying lawmakers home to their 
districts. No matter who or what I have transported, the point 
is to get there safely and on time. Nobody wants to be late.
    Yet, without the funding provided by our legislation, there 
will be no NextGen system in time to prevent gridlock in the 
skies. Without the program flexibility, financial stability, 
and beneficial budget treatment that our bill brings, our plans 
to use satellite technology to control air traffic will likely 
just limp along while congestion races ahead. We have to plan 
for the future now.
    In the meantime, the FAA is making headway in reducing 
delays on a variety of fronts. For example, in just the last 
year alone, we have added new runways at five of our busiest 
airports. They include Atlanta Hartsfield, Boston Logan, and 
St. Louis Lambert. Together, those runways will account for 
thousands and thousands of additional takeoffs and landings. 
But pouring concrete, while important, isn't the only answer. 
We have got to get started on NextGen now. Our bill will help 
put the infrastructure together piece by piece.
    NextGen is an enormous undertaking, and it is not going to 
drop into place just like that. It is going to take time and 
money to make this system of tomorrow a reality. Everyone has a 
stake in this endeavor, so, naturally, we feel everyone should 
help make it come about. It is all about fairness and balance.
    Yet, if you look at how the Trust Fund is structured today 
and who is paying what, you will find that it is mostly one-
sided, and we at the FAA don't think that is fair. At least 
week's hearing, it became clear that this issue of balance is 
very important to this Subcommittee. We agree. And we believe 
that our proposal strikes the balance that has been missing in 
aviation financing for the last three decades. Our measure 
stands on two principles: first, the revenue that we collect 
should tie directly to the costs of providing the services; 
second, everyone who uses our services should pay their fair 
share. These principles come straight out of Business 101.
    At last week's hearing, also, several Members talked about 
the importance of equity in funding FAA. Frankly, without 
implementing these concepts, equity will not exist. It 
certainly doesn't exist today. Administrator Blakey has talked 
about how the current funding system treats the guy flying on a 
commercial flight in seat 22B, the passenger in the middle seat 
on a crowded flight at the end of a long day. We all know him. 
You represent him. You have been him. We have all been him. 
Right now, that guy is subsidizing the corporate CEO flying in 
the company jet and, yes, the general aviation pilot flying his 
Cessna as well. He is the most over-taxed individual in the 
system.
    The Administrator has compared this to sitting in a 
restaurant and being asked to pay for the meal of the party at 
the next table. It doesn't make sense in a restaurant and it 
shouldn't make sense in aviation. That is because commercial 
aviation foots 95 percent of the bill, even though they use 73 
percent of our services. General aviation, on the other hand, 
uses 16 percent but pays just 3 percent into the Trust Fund. 
This inequity becomes all the more glaring as our airspace 
braces for one billion passengers in 2015.
    Year after year, passenger numbers in general aviation 
activity are rising at a record-setting pace. Last year we had 
741 million travelers. Tops so far, but it won't be that way 
for long. We also set another record in 2006: delays. More than 
490,000 flights didn't take off or land on time. From the looks 
of things so far, 2007 isn't shaping up any better.
    It doesn't have to be like this. Under our reform proposal, 
we will be able to implement our NextGen transformation efforts 
a lot faster than under the current system. To get there we 
need everyone, commercial and GA operators, to pay for the 
costs that they impose on the system.
    I appreciate that change is hard and the known is 
comfortable, but this concept of paying for what you use isn't 
a new one. I think it is even harder to justify an exception 
for aviation when you realize how much our Nation depends on 
flying. The next six months are pivotal. With the current 
financing structure expiring in September, we have to get this 
right the first time.
    Once again, I appreciate the Subcommittee bringing this 
situation to everyone's attention, and I look forward to a fair 
hearing on our proposal. Thank you for inviting me to 
participate today. I look forward to answering your questions.
    Mr. Costello. Thank you.
    Dr. Dillingham, the Chair recognizes you at this time for 
your testimony.
    Mr. Dillingham. Thank you, Mr. Chairman, Mr. Petri, Mr. 
Oberstar, Mr. Duncan. This morning I will be discussing GAO's 
analysis of changes to FAA's funding and budget structure that 
are contained in the Administration's reauthorization proposal.
    Before I talk about those changes, I want to briefly 
discuss the ability of FAA's current funding system to provide 
enough revenues for FAA's activities, including the Next 
Generation Air Transportation System.
    As you know, FAA is currently funded through a series of 
excise taxes and a contribution from the General Fund. This 
funding structure, with some changes to the excise taxes and 
the level of General Fund contribution, has successfully funded 
the FAA budget, a budget that has consistently trended upward.
    The Congressional Budget Office recently projected that the 
revenues that could be obtained through the current funding 
structure would increase substantially over the next 10 years. 
Given certain assumptions, including no change in the excise 
tax rate, CBO estimates that through 2016 the Aviation Trust 
Fund could support about $19 billion in additional spending.
    If Congress thinks that additional revenues are needed to 
fund NextGen, or for other reasons, Congress can also make 
additional revenues available under the current funding 
structure by increasing the excise tax rates or by increasing 
the General Fund contribution, or both.
    Our bottom line is that the current funding system is able 
to provide enough revenues to support FAA's activities, 
including the early development of NextGen. However, the 
concerns that have been voiced about the equity and efficiency 
of the current system would not be addressed. In addition, 
keeping the current funding system would not address the 
Administration's desire to link FAA's revenues closer to its 
costs.
    Now I would like to turn to the Administration's proposal.
    Our analysis shows that some of the proposed changes to the 
current funding system may create a better alignment of FAA 
revenues and costs, and this alignment could address the 
concerns about revenue adequacy, equity, and efficiency that 
have been raised about the current system. However, the ability 
of the Administration's proposal to address these concerns is 
critically dependent on two considerations: first, how 
reasonably does FAA's cost allocation system allocate cost to 
users and, second, how closely does the proposed funding 
structure adhere to the principle of cost-based funding.
    In the first instance, the key component of the proposed 
funding system is FAA's cost allocation report. That report was 
only recently made public and we have had only a short time to 
review it. So although we can't definitively answer the 
question about the reasonableness of the proposed allocation, 
our preliminary analysis raised some concerns that we think 
require further study. We currently have a detailed study of 
FAA's cost allocation methodology underway for this 
Subcommittee.
    With regard to adherence to the principles of cost-based 
funding, we have also identified some concerns in this area, 
such as the policy decision not to apply a congestion charge to 
all users of terminal airspace near busy airports. These types 
of policy decisions on pricing may be appropriate in some 
instances, but they do not necessarily adhere to the principle 
of cost-based funding.
    Let me now turn to the Administration's proposed changes to 
FAA's budget structure, which are designed to align FAA budget 
accounts with its lines of business. On one hand, such an 
alignment could allow for greater transparency and provide a 
better link between cost and revenues. For example, the new ATO 
account, which would fund operations, maintenance, and upgrades 
to the National Airspace System, could better enable FAA to 
charge for direct usage and modernization of the system. On the 
other hand, some FAA activities, such as those related to 
safety, may not be easy to divide into discreet categories. As 
a result, it may be difficult to allocate their costs between 
aviation users that benefit directly from a safe air traffic 
control system and the public that receives general safety 
benefits.
    Mr. Chairman, in the final analysis, the Administration has 
introduced a complex proposal for funding FAA, and we believe 
that it deserves thoughtful consideration. However, adopting 
this proposal is not necessary to provide more money to FAA, 
but it does address some of the concerns that FAA and other 
stakeholders have raised with the current funding system.
    We also think that a more detailed analysis is called for 
to determine whether FAA's cost allocation methodology can 
support a fair and efficiency-driven cost-based funding 
structure for FAA. Members of the Subcommittee, a timely 
reauthorization of the current excise tax is critical even if 
Congress chooses to continue its consideration of the 
Administration's proposal or other alternatives for funding FAA 
beyond this year.
    Thank you, Mr. Chairman.
    Mr. Costello. Thank you, Dr. Dillingham.
    Mr. Scovel?
    Mr. Scovel. Chairman Costello, Ranking Member Petri, 
Members of the Subcommittee, I appreciate the opportunity to be 
here today to discuss FAA's financing proposal.
    I would like to make five points today regarding FAA 
financing and FAA's proposal.
    First, there are important reasons to consider alternative 
mechanisms to finance the FAA that have been well documented in 
previous reports and commissions on reforming FAA. While 
airspace users pay for the system, the current financing 
mechanism bears little relationship to the services they 
actually use, and whether they use them at busy or slack times. 
And concerns have been raised about whether the current system 
is fair, equitable, or flexible enough to meet FAA's evolving 
needs. However, it is important to note that FAA's current 
financing mechanism could support both FAA's ongoing efforts 
and the potential cost of developing the next generation air 
traffic control system (NextGen), now pegged at $4.6 billion 
between fiscal year 2008 and fiscal year 2012. This assumes 
revenue projections materialize.
    Second, at the request of this Subcommittee, we examined 
the use of the National Airspace System and who contributes to 
its congestion. Our bottom line conclusion is that there are no 
marginal users. Specifically, general aviation activity 
accounts for a not insignificant amount of FAA's workload. 
Therefore, it is appropriate to consider this activity if the 
allocation of costs among users of the NAS is going to be 
included as part of any effort to move to a new financing 
system.
    Third, FAA's cost accounting system provides the underlying 
data upon which user fees would be based. As we noted in 
testimony before this Subcommittee in February, FAA's cost 
accounting system can support the user fees currently 
envisioned by FAA. Some adjustments to the cost accounting 
system may be required, depending upon structure of the fees 
ultimately decided upon. In addition, FAA's method for 
allocating costs among user groups, which underlies what each 
group would pay under FAA's proposal, is reasonable. FAA's goal 
was to allocate costs in a manner that was simple, transparent, 
and repeatable. Further, FAA's cost allocation method reflects 
tradeoffs and assumptions made by the agency. For example, FAA 
determined that the NAS was built to meet the needs of large 
air carriers. This resulted in fewer costs being allocated to 
general aviation and some air carriers using medium activity 
airports than other possible methods. Congress will have to 
decide if it wants to make similar tradeoffs.
    Fourth, FAA's cost recovery proposal does not completely 
link costs and fees and, therefore, is not fully consistent 
with its stated rationale for moving to user fees. For example, 
FAA chose not to recover either the cost of towers at airports 
that board less than 100,000 passengers annually or flight 
service stations from general aviation operators. Instead, 
these costs will be recovered through the General Fund. 
Nonetheless, there is more of a link between costs and fees 
under this proposal than currently exists.
    Fifth, how best to finance FAA is a policy call for 
Congress. Nevertheless, a number of issues need to be 
addressed. FAA must continue to take steps to control costs 
regardless of whether it is funded in the future by excise 
taxes or user fees. We also think greater clarity is needed 
with respect to how FAA will manage and execute NextGen 
initiatives, particularly given past experiences with cost 
growth and schedule slips. In addition, FAA's proposed 
borrowing authority presents serious risks unless it is 
accompanied by strong controls.
    Finally, FAA's proposal provides one year for the new board 
to be appointed and reach agreement on a fee structure and fee 
levels, and for FAA to implement a billing system. This 
timetable is ambitious even if FAA employs a contractor for the 
billing process.
    In sum, FAA is at a critical juncture with regard to how it 
is financed. Decisions should be made with an eye on FAA's 
projected workload and funding requirements. Excise taxes are 
one funding mechanism that could provide sufficient resources 
to support FAA's needs, but fall short in other regards. User 
fees are another alternative that are not without controversy, 
particularly regarding how costs are allocated among users.
    Mr. Chairman, that concludes my remarks. I would be happy 
to answer any questions you or other Members of the 
Subcommittee may have.
    Mr. Costello. Mr. Scovel, thank you.
    We, I am told, are going to have votes here pretty soon, 
but let me just say to the Subcommittee Members that, when 
votes are called for, we will go to the floor, take a short 
recess only to allow time for votes, and then we will come back 
immediately after the last vote and continue the hearing.
    I have a comment, Mr. Elwell, concerning the FAA 
Administrator's statement to the Subcommittee last week and the 
issue of time, that time is not on our side; and I agree with 
the Administrator. She stated very clearly that we have to do a 
reauthorization this year and time is not on our side.
    But I want to note, and I think it is worth noting, that 
one of the reasons why time is not on our side is that the FAA 
did not produce its reauthorization plan until February the 
14th of this year. We asked continually last year when the FAA 
proposal would be coming out. There was an indication early on 
that there would be a radical proposal to change the current 
tax structure and the way to collect revenue to finance and 
fund the system, including the modernization program. There was 
an indication that we would get the plan somewhere around last 
summer, and then it was September, and then it was by the end 
of the year, and then it finally came in on February the 14th.
    So, you know, I just want to say that we now are dealing 
with hearings concerning the reauthorization proposal that we 
just received 30 days ago, and you are proposing a radical 
change to the system. A Member on the minority side declared 
the user fee proposal dead on arrival and you heard the 
Chairman of the Full Committee say today that he wants to give 
it a proper burial. I want to tell you that if in fact this was 
a serious proposal, it should have been delivered to the 
Congress on time, and to the American public and the users of 
this system, so that they could understand the ramifications, 
as opposed to delivering it to us and expecting us, in a very 
short period of time, to radically change the system.
    Now, I don't expect a response from you, but I do want to 
make that point for the record.
    Dr. Dillingham, in your statement you indicate, and I will 
quote: ``The current funding structure has supported FAA as 
FAA's budget has grown, and it can continue to do so to fund 
planned modernization. Excise tax revenues are forecasted to 
increase if the current taxes are reauthorized without change 
and thus could support additional spending.'' Then you go on to 
say that, ``If necessary, Congress can obtain more revenue by 
increasing the excise tax rates or the General Fund 
contribution to the FAA's budget,'' and it goes on and on.
    I want to ask you two questions and ask you to give a very 
short response, if possible.
    I asked the Administrator, when she was here, concerning 
the FAA's proposed budget, the Administration's budget, if, 
after we reviewed it, it was apparent to us that the new 
proposal would generate $600 million less than the current tax 
structure in fiscal year 2008 and $900 million less in fiscal 
year 2009 through 2012. And I asked her if she would dispute 
those figures, and she said that she could not really dispute 
those figures.
    In your review, I ask you to comment. Is there any question 
that the new proposal that the FAA is proposing, the user fee 
system, is there any question that it would not generate less 
in fiscal year 2008 than the current system?
    Mr. Dillingham. According to the work that we have done to 
date, Mr. Chairman, that is correct, there is no evidence.
    Mr. Costello. So it is very clear that, if we enacted the 
proposed plan by the FAA, we would generate $600 million less 
the first year--those are my figures--and $900 million less 
from 2009 to fiscal year 2012.
    Let me ask you, in your testimony you indicate that the FAA 
has not taken into account--and I mentioned this in my opening 
statement--what could happen if in fact the new scheme is 
enacted into law with an increase in fuel tax, which could 
result in less revenue collected by the fuel tax than 
anticipated, and I wonder if you might elaborate on that.
    Mr. Dillingham. Yes, sir. We talked to FAA about this and 
FAA indicated that they did not take this into account because 
their rough calculation said that the fuel costs were less than 
5 percent of the cost of operating the aircraft. We pointed out 
that, you know, without actually doing that analysis, you 
really can't say to what extent less fuel will be purchased. If 
less fuel is purchased, then less revenues would come in, and 
that may mean the need to raise the taxes higher or find the 
funds from someplace else to pay for AIP.
    Mr. Costello. Let me ask you about the rationale. As I 
indicated in my opening statement and I think the FAA has made 
pretty clear that, in part, the reason that they want to go to 
this new system is to finance the new modernization program. 
Your office has done extensive review of FAA acquisitions and 
the experience that the FAA has had in the past, spending 
billions of dollars and having what I would call cost overruns 
or costs that were not anticipated by the FAA, schedule delays, 
overambitious plans, complex software development, and so on, 
and two years ago your office reported that 11 of the 16 major 
projects it reviewed experienced total cost growth of about 
$5.6 billion.
    So I guess my question to you, and I made clear where I am 
coming from and where I am going to, but I want to ask you in 
these experience cost growths of 11 of 16 programs of $5.6 
billion over what the FAA anticipated, historically speaking, 
has the FAA had problems with the ATC modernization efforts 
because Congress did not provide enough money or was not 
generous enough in providing funding, or what were the reasons 
why they had a $5.6 billion cost growth in the 11 of the 16 
programs?
    Mr. Dillingham. Mr. Chairman, there are many reasons why 
FAA has had cost overruns in the past. As you suggested, we 
have had the ATC modernization program on our high-risk list 
for about 15 years now. Among the reasons were also cited 
earlier in terms of overestimating or underestimating the 
complexity of the acquisition particularly with regard to 
software requirements creep, that is, once the program is set, 
someone or for some reason they will change what is required; 
lack of stakeholder input in some cases; lack of having the air 
traffic controllers as a part of the design and development. We 
also mentioned the fact that sometimes FAA's plans for money to 
acquire a system was not met by congressional appropriations 
and such, but that was a much smaller element than the other 
miscalculations.
    Mr. Costello. Mr. Scovel, since it was your report, I would 
ask you to comment as well.
    Mr. Scovel. Thank you, Mr. Chairman. We stand by our 
assessment from 2005. It is clear that the transition to 
NextGen was then and continues to be an extraordinarily high-
risk effort. As Dr. Dillingham has pointed out, it has been on 
the GAO's high-risk list for a number of years; it has been 
listed as a top management challenge by my office for our 
department for several years now as well.
    Your summary in your opening statement, Mr. Chairman, 
captures our concerns with development of NextGen: overly 
ambitious plans, complex software development, shifting 
requirements, and we would add to that poor contract 
management, and we would point to the STARS program as Exhibit 
A in that regard.
    Underlying all of this in terms of not only the interest of 
this Committee in terms of the financing proposal is the need, 
when assessing NextGen progress, of not only the cost to the 
agency, which will be very substantial in terms of many 
billions of dollars in order to implement NextGen, but also the 
need for industry to design and install the avionics that will 
be required in order to interface properly with NextGen 
programs. My understanding is that recent estimates of the cost 
to industry have also been in the range of $14 billion to 
perhaps as much as $20 billion as well over the development 
cycle of our NextGen programs.
    What I am getting at, sir, is the need to integrate not 
only the agency's plans, but also the industry's needs in order 
to fully be able to exploit the potential of NextGen.
    Mr. Costello. Thank you. As I indicated, I do have a number 
of other questions. I will come back, hopefully we will have a 
second opportunity. But let me say that that is exactly one of 
the reasons why I am concerned with this user fee system, where 
the agency would have the ability, regardless of what the cost 
growth is for future gen, that if they underestimated the cost, 
if there was mismanagement, all they would have to do is 
generate the revenue to match the cost with very little 
oversight or control by the Congress. That is one of many 
issues that concerns me with implementing this user fee system.
    The Chair at this time recognizes the Ranking Member, Mr. 
Petri, for any questions.
    Mr. Petri. Thank you very much, Mr. Chairman.
    Mr. Elwell, you may have detected a slight note of 
skepticism about some of the Administration's financing 
proposals. I wonder if you could just respond to what you have 
heard in the context of a question, which is how is the 
Administration's bill is a better way to fund NextGen than the 
current system?
    Mr. Elwell. I think the primary reason we believe it is a 
better way is because, under our proposal, the budget treatment 
allows us to examine exactly where our costs are and capital 
expenditures, and set fees to recover exactly what we plan to 
spend when we intend to spend it. The offsetting collection 
treatment that is written into the bill allows those funds that 
we collect through user fees not to compete with other 
discretionary needs outside of the Administration and all us 
and you the transparency to follow the money, if you will, from 
the point at which we allocate the cost, set the fee, recover 
the funds, and then spend it for what we are collecting it for.
    Typically, under the current system, with the financing of 
the FAA having absolutely no relation either to our current 
costs or proposed capital expenditures, we believe this is a 
far more transparent and direct link between costs and 
expenditures.
    Mr. Petri. Let me ask Dr. Dillingham. It is pretty clear 
that there have to be assumptions in order to allocate costs, 
and I just wonder if, doctor, you think the basis for the 
Administration's cost recovery system--based on your 
preliminary investigation, are the methods that the FAA used in 
the development of its cost allocation methodology reasonable? 
Do you have any comments on it?
    Mr. Dillingham. Mr. Petri, if you were to compare the 
methods and approaches that FAA used with either Federal 
standards for setting up cost allocation system or ICAO 
standards, we would conclude that they are in fact reasonable. 
What happens after that is within those broad parameters of 
generally accepted standards or ICAO standards, there is a lot 
of flexibility and, therefore, within those parameters FAA has 
made some policy decisions and some assumptions that have 
turned out to have some pretty powerful implications in terms 
of cost recovery. But, yes, the short answer is it was a 
reasonable process.
    Mr. Petri. Dr. Scovel, what is your view of the FAA's 
method for allocating costs among the different users?
    Mr. Scovel. Mr. Petri, I would concur with Dr. Dillingham 
that FAA's proposal, and specifically its cost allocation 
methodology, is indeed reasonable. As he pointed out, there 
have been certain policy decisions, what I referred to in my 
opening statement as tradeoffs made by FAA, specifically in its 
adoption of general aviation's contention that the NAS has been 
developed primarily to support the needs of the large air 
carriers. That resulted in an allocation decision by FAA that, 
frankly, works to the advantage of general aviation.
    You mentioned cost recovery, as well, in your statement to 
Dr. Dillingham. FAA has made certain decisions in its cost 
recovery methodology as well that appear to favor to some 
degree general aviation. Those are policy decisions, of course, 
by the FAA and reviewable by you on the Committee and the rest 
of Congress. I am not offering my recommendation in favor of 
them or any other policy alternative, but I am merely pointing 
them out for your consideration.
    Mr. Petri. Let me just turn to one other subject briefly. I 
think there is some proposal for some $5 billion borrowing 
authority. Could you discuss that? Is that a desirable thing? 
Should it be done sooner, the timing of it? Should Congress 
have greater oversight it? Could you just put that in context 
for us?
    Mr. Scovel. Yes, sir, I will try to do that. To be up 
front, I suppose I should say that we are skeptical currently 
as to the need for that $5 billion borrowing authority. As I 
understand the proposal, FAA suggests that it would need to 
borrow and would request authority to borrow up to $5 billion 
beginning in 2013, with all sums borrowed to be repaid by 2017. 
The primary basis for our skepticism at this point is the 
uncertain nature of the purpose for that borrowing.
    Given FAA's track record when it comes to acquisition 
management, we would like to see very strong controls placed 
over that. The need and the ability to execute with that money 
program development and implementation within the time frame 
stated is an important concern of ours. We think that the short 
time frame between 2013 and 2017, which strikes us as unusual 
because, clearly, I think what FAA intends to do is to use that 
money to fund the development and implementation, institution 
of programs that will have far-ranging effects, far more long-
lasting effects than 2017. So, in effect, they are borrowing 
money on the short-term, having to pay it back almost 
immediately without being able to see the long-range payoff and 
benefit. Those are our concerns.
    Mr. Costello. I thank the Ranking Member.
    The Chair recognizes the gentleman from New York, Mr. Hall, 
under the five minute rule.
    Mr. Hall. Thank you, Mr. Chairman and our Ranking Member, 
and thank you to our witnesses on the panel.
    Just an observation. As the passenger in 22B myself a 
number of times, I would believe that I am and many of the 
traveling public, who I talk to as I frequently fly with them, 
when they are sitting waiting on a late flight, either late 
departure or late arrival or waiting for a gate to open up, the 
common opinion out there is not that what we need to do is 
build some pie-in-the-sky ill-defined $4.6 billion satellite-
based system, but what we need is more gates, more runways, 
more air traffic controllers, and other similar things that 
cost less money and could be provided now. But that is just a 
comment.
    I wanted to follow up on the question about borrowing 
starting with Mr. Elwell. What does the FAA anticipate will 
happen during this 2013 to 2017 time frame that requires the 
borrowing authority?
    Mr. Elwell. The plan for the purchase and development of 
NextGen has within the second five-year period--with 2008 to 
2012 being the first five years_the second five-year period we 
anticipate cost spikes that under our proposal would require us 
to set user fees higher in one year than another. So having the 
ability to borrow for those expenditures gives some stability 
to the contracting of those expenditures and also leavens, if 
you will, the fees that we would charge going forward for the 
payment of those capital expenditures.
    Mr. Hall. Okay, so the decision was made by the 
Administration philosophically that rather than charge a 
realistic user fee or tax, if you will, or something that pays 
as you go, that there is more anticipated borrowing and debt. 
That is a preferable course for financing this program, am I 
correct in that?
    Mr. Elwell. I think I would characterize it more as giving 
us the ability, when the large spikes come, to make the users 
pay an even user fee over five years as opposed to something 
that varies widely from year to year.
    Mr. Hall. Okay. I will take that answer and ask Dr. 
Dillingham what your thoughts are on the proposal for $5 
billion of borrowing authority in that time frame.
    Mr. Dillingham. I think we have some of the same concerns 
that the Inspector General voiced in terms of the short payback 
and the borrowing authority, and not knowing exactly what it is 
going to be used for; and it is not a lot of borrowing 
authority at that. We also, though, I think, are sort of 
gratified that there has been a move from the earlier proposal 
of going to the capital markets, but now FAA is moving towards 
borrowing it from the Treasury, which is certainly cheaper. But 
even so, we have a concern about any kind of situation that 
sort of commits future resources given the way the overall 
fiscal state of the Government is.
    Mr. Hall. Right. Borrowing from a Treasury that is in 
record debt is a questionable proposition in my opinion.
    Here is another topic, the President's proposal to move 
from excise taxes to fees and financing his dramatic shift. The 
proposal for AIP just cracks the $3 billion market height and 
only provides $8.7 billion overall. How can this proposal fund 
capital improvements at small and mid-sized airports such as 
Stewart Airport or Westchester in my district, if it provides 
almost $2 billion less over the next three years than it did 
over the last three years? I am just curious how a funding 
proposal that actually produces less money is going to allow 
improvements at small and mid-sized airports.
    I guess first that would be to Mr. Elwell.
    Mr. Elwell. Of course, next week this Committee will have a 
full hearing on airports, so I don't want to try to get too far 
out of my area of responsibility, but what I will say, though, 
is that the proposals that we have in our bill that modify the 
current formulas we believe--and you will hear this next week 
in much fuller detail, but the formula changes puts the AIP 
money where it is most needed. The increase in the PFC 
proposal, the relaxation of some of the more unnecessary 
requirements that were placed on airports in capital spending, 
combined with the new proposal that would have no entitlement 
money going to those airports which have demonstrated self-
sufficiency frees up entitlement money for the airports that 
need it most.
    Mr. Hall. Thank you very much.
    Thank you, Mr. Chairman. I yield back.
    Mr. Costello. I thank you.
    The Chair, at this time, recognizes under the five minute 
rule Mr. Hayes.
    Mr. Hayes. Thank you, Mr. Chairman, and thanks to all the 
witnesses for being here today. As I have listened very 
carefully, I find myself in agreement with both Chairman 
Costello and Oberstar about what is going on, and I have just a 
couple observations before questions.
    Our focus needs to be on making the system better. It is 
working pretty darn well. We don't need to get our sledge 
hammer out, which is this very costly system, to drive a carpet 
tack. I mean, that has come across time and time again. It 
would seem the FAA is gulping the airline Kool-Aid, as opposed 
to my friend, Mr. Mica, we talk about sipping 3800 hours a 
year.
    Mr. Elwell, you and I have talked about this at grave 
length. Emphasis needs to be far greater on next generation 
aircraft, not next generation cost system, which we just can't 
seem to get our arms around. Again, it is a problem looking for 
a solution that does not yet exist. I mean, I think in personal 
terms of what could be done with STARS and SIDS and existing 
equipment that everybody has now to provide the kinds of 
increased capabilities that we will not necessarily get with 
this huge expensive system. So please focus on those ideas 
going forward as well.
    It is kind of like Earl Blumenauer. If you brought him in 
here and said, Mr. Blumenauer, your bi-caucus is not paying 
your fair share for highways. That is what is kind of being 
said here for general aviation. And it was talked about over 
and over again how many jobs, how much revenue, how much 
commerce. The general aviation industry provides a tremendous 
resource for this Country, and also exporting aircraft. We just 
can't afford to come in here and kill that whole process.
    Tort reform needs to be--some frivolous lawsuits and what 
that is doing to the industry. That is a good focus of 
attention. Getting the airline pilot age issue solved in 
equitable fashion.
    A quick question, Mr. Elwell. September 30th, if I 
understand correctly, the present tax system expires. It is 
going to be difficult to get something passed in that short 
amount of time. Wouldn't it be a good idea to go ahead and 
extend those as we continue this discussion?
    Mr. Elwell. Well, the history of extensions--many on this 
Committee remember vividly the highway bill. The history of 
extensions has proven that it wrecks havoc on especially 
capital programs at the airport level. It is very, very 
difficult to get starts on extensions that sometimes are just 
months at a time. Even a one-year extension could present 
difficulties with capital spending.
    Our bill, remember, sir, proposes that the user fee regime 
not be put into place until fiscal year 2009, and any 
contemplation of getting the bill passed this year, having that 
year grace period to have everything set and ready to go.
    Mr. Hayes. Well, again, my point is we have got a system 
that both of these other gentlemen have said is working, and if 
we go the other way we are going to decrease our revenue, so I 
think we can hear well enough to know that a six-month 
extension or we need to come up with a realistic extension to 
make a system that is working continue to function. In the 
meantime, 3 percent of the airports are causing the congestion, 
but we are focusing all our attention on there. There are a 
number of specific fixes--and you and I could go on for days 
about what they might be--that could be used immediately and 
really address those problems, again, without opening up this 
huge can of worms that has got us all concerned.
    I think the questions that have been asked or are in our 
material have pretty well gone over. It boils down to this: the 
system works, it has got plenty of revenue; you have got a new 
system we don't understand that is going to cut revenue. Let's 
get on down the road and fix the problems that we have got.
    Again, we thank you for coming, but I have been talking 
to--we are going to get all our pilots together; Mr. Salazar, I 
see, is here and Mr. Ehlers--the equipment manufacturers, 
talking to our pilots, and also talking to air traffic 
controllers, and begin to look at some things that we can do 
right now that won't cost money to speak of and solve some of 
the problems. But, again, thank you all for wrestling with 
this.
    And I thank the Chairman and the Chairman of the Full 
Committee and all our Members for being so conscientious and 
interested in this.
    Mr. Costello. The Chair recognizes the gentleman from 
Colorado, Mr. Salazar.
    Mr. Salazar. Thank you, Mr. Chairman.
    First of all, let me thank the witnesses for being here 
today and testifying.
    In September 2006 there was a hearing where CBO testified 
and I think Dr. Dillingham's testimony was almost identical to 
what was said. In general, basically, the CBO testified that 
the modernization of NGATS could be accomplished under the 
existing FAA financing structure.
    In Colorado today, for example, the Colorado Department of 
Transportation tells us that the sale of general aviation fuel 
is down 23 percent across the State. I am sure it is probably 
the same in other States as well. The airport managers tell us 
that this is tied directly to the price of fuel. Nine out of 10 
AOPA members have told us that if the tax on aviation gasoline 
is increased by even 50 cents a gallon, that they will reduce 
their purchase and they will curtail their flying.
    Your proposal, Mr. Elwell, actually basically stated that 
you will raise aviation taxes by 355 percent. Now, you tell us 
that you have not taken into account that formula and I have 
some severe concerns about what is going to happen to general 
aviation. Right now, I have concerns that your plan is 
basically not well thought out. So I would like your comments 
on that.
    I would also like Dr. Dillingham to make his 
recommendation, or I don't know if he can. Could you basically 
recommend or would you recommend that maybe FAA should wait and 
extend or wait for one year before we put such a risky proposal 
on the table?
    Mr. Elwell, would you start, please?
    Mr. Elwell. When we laid out the proposal and went through 
the cost allocation and came up with an assignment of cost to 
the different users, we found that there is 3 percent input 
into the Trust Fund from general aviation in total, and, yet, 
as Mr. Scovel has just said, the allocation showed that GA has 
16 percent of the burden on our system.
    When we looked at how to set the fees and how the recovery 
process would work, we set a system that would recover 11 
percent, which, of course, is less than the 16 percent of the 
burden that GA has. Of that 11 percent, 1 percent of the 
recovery from GA would come from I think the portion of GA you 
are talking about, 1 percent would come from the piston 
operator.
    And when we looked at the fuel tax rate that would be 
needed to get there, and then we looked at the overall 
operating cost of a GA airplane owner, we found that it raised 
their operating rate to less than 5 percent and did not 
consider that to be substantial enough to warrant looking into 
the effect that that would have since, within the past five 
years, the price of fuel for GA operators had doubled and 
overall--now, I am not familiar with the Colorado statistics, 
sir, that you cited, but overall we saw that that translated to 
about a 2 percent decrease in activity.
    So the answer to the question is we looked at it and, as a 
percentage of operating cost, didn't think that it was going to 
have as big an impact. And it not only went along with the cost 
allocation and the recovery of the system, we took almost two 
years to develop with very substantial interaction with the 
stakeholders, we just figured that it was and is the fairest 
way to do it.
    Mr. Salazar. Dr. Dillingham.
    Mr. Dillingham. Mr. Salazar, I think what we said in our 
testimony is that we have certain concerns both with regard to 
the cost allocation as well as the cost recovery that FAA has 
put forward. I think the Chairman spoke this morning about the 
fact that the proposal has only been out there for a relatively 
short time, and we think that it is sort of like the devil is 
in the details. And this Committee has asked us to look at 
those details and, though we don't make recommendations in this 
area, we say we need to put on the table that we do have some 
relatively serious concerns about the whole makeup of it. I 
mean, we talked about some of the assumptions that were 
involved in it. For example, one of the fundamental assumptions 
is this category of aircraft. They used two categories of 
aircraft when in fact they could have used many other 
categories of aircraft. And so, you know, I guess the bottom 
line for us is that we do have some serious concerns and we 
again just caution that we go forward with reauthorizing the 
excise taxes so we don't have that lapse again.
    Mr. Salazar. Thank you. I yield back.
    Mr. Costello. The Chair recognizes the gentleman from 
Tennessee, Mr. Duncan.
    Mr. Duncan. Well, thank you very much, Mr. Chairman. You 
know, this is my 19th year on this Subcommittee and I have sat 
through quite a few FAA reauthorizations in that time. You 
mentioned a few minutes ago Mr. Ehlers' statement--and 
certainly he is one of our most respected Members--when he said 
at the first hearing that this Administration was dead on--he 
used those words that we hear so often, dead on arrival, and 
maybe some parts of it are and maybe there are some parts that 
we could take a look at.
    But, you know, in all those reauthorizations we have worked 
out some pretty tough issues. Mr. Hayes mentioned the lawsuit a 
minute ago. Chairman Oberstar will remember when we worked out 
the general aviation liability reform and took an industry that 
was just about dead and brought it back to life. Some said we 
couldn't work that out.
    I think one thing that we haven't really taken into 
consideration too much--we talk about general aviation like it 
is all one thing, it is all the same, and it is not all the 
same. There are a lot of differences within general aviation. 
By the same token, there are a lot of differences--we talk 
about commercial aviation like it is all one entity, and it is 
not. There are a lot of differences between the different 
airlines and between cargo and passenger and several other 
things.
    Mr. Coble asked me, during my six years as Chairman, who 
was my ranking Member, and I told him Mr. Lipinski. And no 
chairman and ranking Member, I don't think, could have gotten 
along any better than Mr. Lipinski and I did, but I told him, I 
said, the main difference was I liked to hold hearings because 
I felt like I learned something at every hearing, and his was 
the Chicago way; I don't think he wanted us to hold any 
hearings, I think he wanted us to work out everything just 
between me and him and our office.
    [Laughter.]
    Mr. Duncan. But, you know, there comes a time for both. We 
can all learn a lot from these hearings, but I don't think you 
can really work out a lot of these tough issues in a group this 
big. What I am going to suggest is simple, and after we hold 
these hearings, you couldn't find two fairer people than 
Chairman Costello and Mr. Petri. We certainly can't find 
anybody who knows more about aviation in this Congress than 
Chairman Oberstar. I know, Mr. Mica, this is his top concern.
    I know Administrator Blakey said, when she testified a few 
days ago, that she had held meetings with all the different 
parties before they did the proposal, Mr. Elwell. Well, now 
that we have got the proposal out there, now is when we need to 
start having some of these meetings.
    Dr. Dillingham is not tied in, I don't think, to either 
side. He said he can't make recommendations, but he sure can 
give us some good information.
    But I think there is some common ground that we can reach 
to work out most of these things, and we are going to have to 
make some changes because we have got all this growth that 
people are talking about, all these passengers that are going 
to be hitting us.
    Mr. Hayes mentioned that 3 percent of the airports are 
causing most of the problem. We need to take a serious look at 
that.
    The witnesses all said what was reasonable, and there is 
nothing unreasonable about anything that has been proposed 
except you have got to take into consideration what is 
politically feasible at the same time, and sometimes there are 
a lot of differences.
    So I just thought I would make those comments, and I have 
some suggestions that I am willing to make to Chairman Costello 
and Mr. Petri at an appropriate time, when we get down to the 
nitty-gritty, which I think we will before too long.
    Thank you, Mr. Chairman.
    Mr. Costello. I thank the gentleman from Tennessee.
    At this time the Chair recognizes the gentleman from 
Washington State, Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Dr. Dillingham, you said the devil is in the details. I 
agree with you. And if that is the case, there is a lot of 
devil in this proposal. There are a lot of questions unanswered 
going through this, so I have got a few questions.
    I want to go back to borrowing authority a little bit. Mr. 
Elwell, you talked about the borrowing authority, the $5 
billion borrowing authority and the need for that because you 
anticipated cost spikes in the future. Can you provide any 
detail of the activities of the borrowing authority, specific 
details that the borrowing authority would finance and what 
specifically are the cost spikes that you are referring to that 
you anticipate from 2013 to 2017?
    Mr. Elwell. I don't have with specificity in the second 
five years.
    Mr. Larsen. If you don't, then how can you talk about 
anticipated cost spikes?
    Mr. Elwell. We have it, sir, I don't have the JPDO stats 
with me.
    Mr. Larsen. Okay.
    Mr. Elwell. I would be happy to provide you plenty of 
detail for the five years. And, of course, as the Administrator 
has testified, for the first five years we can enumerate the 
$4.6 billion that our proposal would raise and exactly what it 
is spent on, but, yes, we will certainly get that to you.
    Mr. Larsen. Can you talk to us about the borrowing 
authority and whether or not you are creating a separate 
account to manage that money, and to what extent either FAA 
will have oversight over the spending of that or Congress will 
have oversight over the spending of those specific dollars 
being borrowed?
    Mr. Elwell. Yes, sir. The oversight is the same as it is 
today. It would be subject to annual appropriations as it is 
today. This Committee's oversight in the reauthorization 
process and, of course, in the interim, whenever this Committee 
sees fit to hold hearings or to examine our accounts. In fact, 
I think the oversight of this Committee on the spending, both 
on the borrowing side and in the setting of the user fees, 
which would incorporate this service to the debt, I think the 
oversight is going to be enhanced because of the transparency 
of both how we are raising the money and exactly where we are 
spending it.
    The cost allocation study that we propose to do annually 
would have 600 separate lines of cost that are as transparent 
as can be, and one of those lines, if borrowing--and, again, 
remember the borrowing is permissive--if the borrowing were to 
take place, it would be borrowed against one of those lines, 
completely to be transparent and examined. The funds would have 
to be appropriated, but they would also have to be sort of 
first-in-line, if you will, and paid back by an adjustment to 
the user fees.
    But, in answer to your question, a separate account is not 
contemplated, it would be built into the fees.
    Mr. Larsen. You said the borrowing is permissive. It may be 
allowed under the authority if we end up allowing it, but my 
guess is if we allow it, it will get borrowed, honestly, 
probably to its fullest amount.
    Dr. Dillingham, do you want to provide any answer to any 
question I asked about the borrowing authority? Do you have 
other concerns about it, or thoughts?
    Mr. Dillingham. No, sir. I think we expressed all of our 
concerns about the shortness of the duration and what it is 
actually going to be spent for and whether the Federal 
Government can in fact stand that, you know, should we need it.
    Mr. Larsen. Okay.
    Mr. Scovel?
    Mr. Scovel. Right. I guess when Mr. Elwell said that the 
justification for the anticipated spike is uncertain at this 
time underlies our term--and I used the word skepticism in 
describing our need for borrowing for the period 2013 through 
2017. NGATS funding needs are fairly--and I emphasize fairly--
well defined between now and 2012. Beyond that point, my staff 
finds the funding requirements rather murky.
    Mr. Larsen. Well, you mentioned that for industry alone it 
might be from $14 billion to $20 billion, which might sound 
small, but it is a lot of zeroes behind that. It is $6 billion 
difference. It is $14 billion or it is 48 percent more than 
that. So it does seem murky. And then going through some of the 
other numbers in the NGATS proposal as well, I am a little 
confused about whether or not the total cost of the program is 
$15 billion to $22 billion or if it is $15 billion to $22 
billion plus the $14 billion to $20 billion that you outline. 
Have you got any thought on that?
    Mr. Scovel. My understanding is that the agency's needs 
will be in the range of $15 billion to $20 billion; industry's 
needs, as well, $14 billion to $20 billion, perhaps $15 billion 
to $22 billion. I have seen both ranges. So roughly comparable 
between the agency's needs for modernization and the industry's 
funding needs in order to accommodate.
    Mr. Larsen. Thank you. I have may have a second round of 
questions.
    Thank you, Mr. Chairman.
    Mr. Costello. I thank the gentleman.
    At this time the Chair recognizes the gentleman from North 
Carolina, Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman.
    Gentlemen, good to have you all with us. You have been 
bombarded with many questions, but I don't think this one has 
been put to you.
    Mr. Elwell, how have you taken the importance of general 
aviation into account in drafting your proposed bill?
    Mr. Elwell. I think the importance of general aviation is 
recognized throughout the bill, sir, and most of that 
consideration I think you will find in the policy decisions we 
make in recovery. Much has been said about the increase in the 
fuel tax that this bill proposes, and that is a necessary step 
to take if you are going to get fairness in the system, if you 
are going to get to a point where the users of the system pay 
for their use of the system.
    But as is done in many user fee systems throughout the 
world, we took--and this has been pointed out by my colleagues 
on the panel already several times, that when decisions could 
be made on a policy basis for the recovery of the funds--of 
course, I want to emphasize again that the allocation of cost 
is an accounting process, but the recovery of those costs 
through the setting of fees is where policy can interject, and 
it is in that area that I think we recognize the importance of 
GA.
    If you look at the bill, we propose that low-activity 
towers, about 286 of them throughout the Country, be funded by 
the General Fund. We also propose that flight service 
stations--flight service stations is service that we did an A-
76 on flight service stations some years ago to tremendous 
savings to the FAA, but those flight service stations are used 
predominantly by general aviation pilots. The cost of that 
service, flight service stations, we also put on the General 
Fund as good for general aviation population.
    Mr. Coble. Thank you, Mr. Elwell.
    This will apply to either of the three of you. How does the 
FAA user fee system affect regional service? Either of you 
three.
    Mr. Elwell. We don't believe that our proposal will 
adversely affect regional service at all.
    Mr. Scovel. Mr. Coble, we anticipate that there will be 
some effect, although small, in that while there won't be tower 
fees, for instance, for regional jets landing at the small 
airports that Mr. Elwell mentioned, when those small regional 
jets take off and land, for instance, at a larger hub airport, 
there may well be user fees incurred there. Of course, there 
will be increased gas taxes, some of which may be passed on to 
customers.
    Now, there may be some potential for offset, I should note 
in fairness, as well, because if reduced costs to the larger 
airlines are indeed passed on to passengers, some of those 
passengers, in transferring from a regional airline segment to 
a larger carrier leg of their trip., may find that those costs 
offset each other, but it is an if, and you can apply your own 
experience as to how often cost savings are passed on to 
customers.
    Mr. Coble. Thank you.
    Dr. Dillingham, do you want to weigh in on that?
    Mr. Dillingham. Mr. Coble, we had the same kind of 
findings, at least preliminarily, that the IG has just related 
to you.
    Mr. Coble. I thank you, gentlemen.
    Yield back, Mr. Chairman.
    Mr. Costello. I thank the gentleman.
    At this time the Chair recognizes the Chairman of the Full 
Committee, Chairman Oberstar.
    Mr. Oberstar. Thank you, Mr. Chairman.
    I greatly appreciate the contributions. Dr. Dillingham, you 
have always served the interest of aviation and the public 
interest exceedingly well with your measured and balanced, 
thoughtful observations and inquiries into aviation, and other 
issues that we deal with.
    Mr. Scovel, I welcome you to the Committee and to a long 
line of distinguished service by the Inspector General of DOT. 
We are grateful for your contribution.
    Mr. Elwell, we welcomed you for the hearing without a 
statement previously submitted to the Committee because you are 
really going to backing up what Ms. Blakey said last week. And 
one of the things that she said is that the Trust Fund balance 
cannot support a lapse in funding and that the Fund did lapse 
10 years ago because of a disagreement over reauthorization. 
That is not true. That was just a complete mixup, in fact, a 
failure in the reauthorization of a series of taxes that the 
new majority was engaging in, and in the process the airline 
ticket tax lapsed. It lapsed for a long time. And airline 
ticket prices didn't go down by 10 percent, they largely stayed 
the same. Don't rewrite history.
    Your governance proposal lists all those who will have 
input, including foreign carriers. Why foreign carriers?
    Mr. Elwell. The air transportation system advisory board is 
not proposed to have a foreign carrier.
    Mr. Oberstar. No, no. You have proposal and then a setting 
of fees listing all those who will have a contribution and have 
a voice in it, including foreign carriers. Why?
    Mr. Elwell. In the consultation process, Mr. Chairman, we 
do--not on the advisory board, but in the consultation process, 
we do list foreign carriers because they will be charged user 
fees.
    Mr. Oberstar. I am not aware the Russians consulted with 
our carriers when imposing fees on the Polar routes. The 
Chinese don't consult our carriers when imposing their fees. 
The Europeans don't include our carriers in setting their fees. 
This is a misguided proposition.
    You also include on the proposed board a representative of 
the Department of Defense. But then you, later on in the cost-
based user fee explanation provision, state the military would 
not pay these fees. So a non-payer is going to have a voice on 
the board. Why?
    Mr. Elwell. Well, there are a number of non-payers who have 
a voice on the board.
    Mr. Oberstar. But why the military?
    Mr. Elwell. The military uses our services; we use the 
military's services and----
    Mr. Oberstar. I know that. But you are going to exempt them 
fees but give them a voice on the board.
    Mr. Elwell. That is correct.
    Mr. Oberstar. And have you abandoned the weight component 
of the formula?
    Mr. Elwell. No, we have----
    Mr. Oberstar. You are sticking with that?
    Mr. Elwell. The Administrator----
    Mr. Oberstar. Why don't you use wide bodies instead of 
weight? That would be a little more credible. I don't want to 
help you with your proposal, but if you had said wide body 
aircraft instead of weight of aircraft, it would at least have 
a relationship to aviation considerations, such as wake 
turbulence and a distance needed en route, en trail between 
aircraft.
    Mr. Elwell. I am sorry, was that a question?
    Mr. Oberstar. No, it is a statement you can respond to.
    Mr. Elwell. I think there is not a fine line to draw 
between weight. I mean, to say that you would introduce weight 
in the terminal area for 300,000 pounds, but not for 290,000. 
So our formulas are progressive with regard to weight. And 
while we do believe that weight plays a factor in the terminal 
area with regard to cost, the primary decision with regard to 
weight was on the policy matters I talked about earlier, the 
policy decisions for ability to pay and fairness.
    Mr. Oberstar. Well, it is reasonable for airports to relate 
landing fees to weight because they do exert pressure on the 
runway and the taxiway and the parking apron, but they are not 
exerting a pressure on the air. The block is the same for a 747 
as a 787--which will be entering in service, we hope--a 777 or 
the A-380. Same block. Doesn't have anything to do with weight 
in the air, but does have a lot to do with wake turbulence. 
Your proposal would be somewhat more credible--somewhat more 
credible--if that were included.
    It was said well earlier, this proposition is not well 
thought through. There is a big rush to move from the splendid 
work that Russ Chew did in allocating costs in the system to 
then taking that cost allocation and applying it to cost 
recovery or to financing of the system.
    Now, tell me, how is this proposition for a fund going to 
work, the borrowing authority? How is it going to be 
capitalized? Are you going to appropriate $5 billion and then 
FAA is going to borrow against it, or how is this going to 
work?
    Mr. Elwell. Mr. Chairman, the language allows for borrowing 
up to $5 billion in the five-year period, the latter five years 
of the bill. Conceivably, that could be $5 billion in the first 
year or----
    Mr. Oberstar. Will FAA go to the Treasury to borrow it?
    Mr. Elwell. Yes, sir.
    Mr. Oberstar. To the money markets to borrow it?
    Mr. Elwell. Treasury, sir.
    Mr. Oberstar. To Treasury. And will that be borrowing at 
current market rates, Treasury notes?
    Mr. Elwell. It would be at the Treasury rates, sir. I am 
not----
    Mr. Oberstar. Treasury rates. So it would be repaid to the 
Treasury at roughly 6 percent or so, whatever that rates happen 
to be at the time?
    Mr. Elwell. Sounds reasonable.
    Mr. Oberstar. But not at the overnight rate that the Fed 
charges to banks.
    Mr. Elwell. I----
    Mr. Oberstar. You don't know.
    Mr. Elwell. I am not qualified to answer that, sir.
    Mr. Oberstar. A lot of stuff for us to work our way 
through.
    What is the borrowing authority for? Why do you need that?
    Mr. Elwell. Well, the implementation of NextGen is going to 
have some capital expenditures in the latter five years, things 
like the software systems that the controllers and the traffic 
flow managers use; the civil aviation requirements for 
position, timing and augmentation; GPS constellation 
enhancements----
    Mr. Oberstar. So you are going to borrow in the Treasury 
against these systems as they develop or as you are investing 
or as you are contracting with the private sector to build 
these systems for FAA, or what?
    Mr. Elwell. I think basically all the above, sir. It is to 
have stable funding on the front end of the contract----
    Mr. Oberstar. Is that going to be repaid, then, from the 
fees you propose to charge to aviation?
    Mr. Elwell. Yes, sir.
    Mr. Oberstar. Oh my goodness. That will take about three 
years to establish, given the way government systems work. By 
that time, we might just as well write the death knell for 
aviation. I just think this is a very dangerous scheme, 
dangerous to the future of aviation.
    I would point out, although FAA and some DOT and some 
Administration spokesmen say funding is not secure, Congress 
has rarely failed to appropriate the amount of funds requested, 
and I think we can well count on a sustainable funding. We may 
have to increase the dollar amount going in to the ticket tax, 
but I think these schemes that come up to us in this proposal 
are risky; they will unbalance our system. For example, you 
propose to generate revenues from the oceanic system. Is that 
limited to our 3 million square miles of transatlantic 
airspace?
    Mr. Elwell. It is limited to the airspace we control, yes, 
sir.
    Mr. Oberstar. And to the 18 million square miles we control 
in the Pacific airspace?
    Mr. Elwell. Yes, sir.
    Mr. Oberstar. And what about the Polar system that we are 
using? We cooperate with the Canadian Air Traffic Control 
System in managing Polar systems. So there won't be a fee for 
that?
    Mr. Elwell. If the Canadians are controlling it, no.
    Mr. Oberstar. No. Okay.
    Well, I am unpersuaded, unpersuaded at all. I have been 
through these schemes for 25 years and I think you are off on 
the wrong track.
    Thank you, Mr. Chairman.
    Mr. Costello. I thank the Chairman.
    The Chair at this time recognizes the gentleman from 
Florida, Mr. Buchanan.
    Mr. Buchanan. Thank you, Mr. Chairman, and I want to thank 
the Committee.
    Back to general aviation. I want to get your thoughts or if 
it has been considered. My son is a pilot, and I am looking at 
a lot of these people who fly piston planes, and I am concerned 
about general aviation. One of the things you don't talk about 
in here is what the cost of the fuel is for these various 
entities. I know that--and this is just an estimate, because I 
didn't check it, but probably commercial is paying $2.00 to 
$2.50 a gallon. I am guessing. Navgas and jet fuel for people 
that maybe--net jets maybe pays $3.50 a gallon, estimate. But 
the guy that is flying a piston plane or a small turbine jet is 
probably paying $4.50 for jet fuel and $5.00 for Navgas.
    So when you add 50 cents to that, the guy that is flying 
the small piston, you know, recreational flier, they are not 
millionaires, and you go from $5.00 to $5.50 a gallon, it is 
like in the car business when you are used to driving a large 
sports utility, it hits $3.00 a gallon. I think it can be a 
huge psychological factor, if nothing else, and that is one of 
my biggest concerns.
    You look at your fee increase, but you really don't talk 
about what everybody is paying for their fuel, and I think it 
is a big factor, because we are close to $5.00 or maybe over 
$5.00; you add 50 cents, $5.50, $6.00 a gallon, I think it 
becomes a big issue.
    I guess I wanted to ask all the witnesses your thoughts on 
that, if you gave it any consideration, because at the end of 
the day, like they have said numerous times, if we are going to 
drive a lot of people out of this industry, as well as the 
FBOs, some of them, then what have we really done in terms of 
increasing revenues? So I would like to--and I am kind of for 
sharing the burden, but I want to make sure, at the end of the 
day, there is enough gallons being bought that it makes sense, 
your 50 cents increase a gallon.
    Mr. Elwell?
    Mr. Elwell. Thank you, sir. Again, when you look at the 
current burden, the current taxes, 19.3 cents and 21.8 for 
avgas and jet fuel, respectively. That represents about 1.5 
percent of the total operating cost of those respective 
aircraft. The raising of the gas tax brings it up to still be 
under 5 percent. And as I said earlier, when the price of gas--
which, by the way, is the proxy, but it is somewhat unrelated 
to the tax; the tax is the way in which the user will pay for 
their cost burden on the system. But when the price of fuel 
went up post-9/11, in the past five years, by almost doubling, 
we did not see a significant diminution of general aviation 
activity that we could peg to that, to the rising fuel.
    So I think it is important to look at this rise in the fuel 
tax in relation to total operating cost. For instance, for a 
piston user, on average, I think it is about $2.00 to $4.00 per 
hour, and on the numbers that general aviation survey provides 
for the average recreational pilot, we are talking about 
anywhere from $400 to $500 additional a year to operate a 
piston aircraft, single-engine piston aircraft. So these are, 
in our estimation, not huge numbers, not debilitating numbers. 
And certainly when you look at how we propose to recover their 
burden on our system, 11 percent versus the 16 percent, I think 
we have made a lot of accommodation for GA everywhere we could.
    Mr. Buchanan. I talk to a lot of piston operators and a lot 
of them are concerned. I think by taking this up to $5.50, 
$6.00 a gallon, because I think that is where the reality is 
going to be, and if we add some other kind of increase, that is 
what I am hearing is the sentiment in Florida, and we have a 
lot of GA people there that are flying.
    Doctor, you want to comment on that, any thoughts?
    Mr. Dillingham. Yes, Mr. Buchanan. We mentioned earlier 
that, as far as we could determine, FAA had not taken into 
account this issue of price elasticity: at what point does it 
become too expensive for certain aviation participants to fly. 
We don't know if it will make a difference, but there are 
statistical techniques that could be applied to in fact see if 
it made a difference. And, in fact, because a decision was made 
to divide the aviation community into piston and turbine, and 
not further divide it, it sort of set the stage for all things 
that followed in terms of cost recovery.
    It is also the case that, as Mr. Elwell has said, certain 
policy decisions were made in terms of cost recovery, and as I 
am sure you are aware, around the world other policy decisions 
are made with regard to how to recover costs from GA operators, 
and in many cases it is a nominal fee. Of course, their GA is 
much smaller than ours, but it is still a policy decision that 
is made.
    Mr. Scovel. Mr. Buchanan, if I may.
    Mr. Buchanan. Yes.
    Mr. Scovel. Thank you. I don't have before me figures 
regarding the price per gallon for Avgas or jet fuel, for 
instance; however, I will say that our research shows that 
while the percentage increase in fuel taxes for general 
aviation amounts to, by our calculation, 334 percent--and that 
is an eye-popping number, to be sure--our research further 
shows that the cost typically to the small piston aircraft user 
amounts to about $8.00 and change per flight hour; a larger 
amount, to be sure, for the user of a larger business jet, but 
in terms of the small recreational user we are looking, by our 
calculations, at about $8.00 per flight hour increase.
    Mr. Buchanan. Yes. Some friends that I have got that used 
to fly twin King Airs are going down to single engine turbo 
props. They are looking at efficiency areas. They are still 
flying a bunch, but they are flying in planes that are more 
efficient per hour, operating cost.
    So I just would ask you to take that into account when you 
are looking at this, where navgas--because they said 410,000 is 
part of the organization. There must be a million. I don't know 
what the total number is, but there are a lot of folks out 
there, and I can tell you, the other business I am in is the 
car business, and there is some psychological barriers that 
affect certain areas, where they will take that big sports 
utility and get something else. They liked it, but not that 
much.
    Thank you.
    Mr. Costello. I thank the gentleman from Florida.
    The Chair recognizes at this time the gentleman from 
Michigan, Dr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. I think we sort of 
beat the gas tax to death, although I am sure we have a lot 
more work to do on it. Let me shift gears a bit.
    Perhaps it is my science background that makes me 
interested in this, but in the 13 years on this Subcommittee I 
have noticed a considerable number of cost overruns every time 
we have a new generation of equipment. So my questions are, 
first of all, for Mr. Dillingham, and we will go on from there.
    The first question is how certain are you that the cost 
figures are accurately calculated and based on reasonable 
assumptions about developing the NextGen system? Secondly, the 
assumption has been that a good deal of the research effort 
would come from NASA, whereas NASA is shifting money, appears 
to be shifting money away from their aeronautics part and into 
the space area and the research. Will NASA be able to, as part 
of JPDO, really contribute substantially to this? And, if so, 
does that have to be paid for out of the increased fees or is 
that going to come out of NASA's research budget?
    So most of those questions are relating to the progress of 
the whole JPDO and developing the NextGen system. So you are 
the independent observer here. I would appreciate your 
comments.
    Mr. Dillingham. Let me take on the last question first, 
with regard to the research and development efforts that were, 
early on, sort of slated for NASA. As you have just spoken 
about, their budget has been reduced significantly, and their 
focus has also been changed as well. It is an ongoing problem 
that has to be worked out from FAA's perspective in terms of 
how much is it going to cost to do the necessary research and 
development that needs to proceed some of the NextGen systems. 
This research is needed for regulation development, it is 
needed for demonstrations. All of these things need to be taken 
care of now, before the systems are acquired.
    FAA has asked for certain amounts of money in this year's 
budget to start to close where NASA used to be; however, it is 
not clear to us that that is enough money. Their own REDAC 
committee has said that, because FAA's RE&D budget and its 
capabilities have been reduced so much, that it might take 
several years before that could be built up and several 
hundreds of millions of dollars as well to build that up. So it 
is an issue that has not been resolved.
    Your first question was about whether the cost figures were 
correct. I think it is an estimate at this point in time. To 
give FAA credit, clearly, they are working in a unity fashion 
with industry and developers as well to come up with cost 
figures, but, again, it is just an estimate and estimates have 
been made before. FAA has in fact done better keeping on budget 
and on cost recently, but still, as I said earlier this 
morning, we maintain the ATC modernization on our high-risk 
list because it is in fact high-risk both for cost overruns and 
schedule breaches.
    Mr. Ehlers. Let me just ask Mr. Elwell and Mr. Scovel to 
comment as well.
    Mr. Elwell? Just on the last part, about your confidence 
level on the cost estimates for the research and development of 
the NextGen system.
    Mr. Elwell. We have a high confidence in the RE&D. Our 
concern, of course, is in being able to spend the money we need 
in the process, in the iterative process that Mr. Dillingham 
mentioned, which is a big part of our proposal, is the laying 
out of what is required to build NextGen and to be able to 
collect the fees necessary to spend the money where we need to 
spend it, which we at times have difficulty doing under the 
current system. But I think the estimates are realistic. As was 
pointed out, $14 billion to $22 billion through 2025 
represents--or $15 billion to $22 billion, I am sorry, on our 
side represents sort of the going forward with NextGen. There 
are a lot of variables that are hard to pin down in the latter 
years, but the JPDO and the organizational evolution 
partnership with industry is going to be very helpful in 
getting that narrowed as we go forward.
    Mr. Ehlers. Mr. Scovel, any final words?
    Mr. Scovel. Yes. Thank you, Mr. Ehlers. As I noted before, 
the price tag of $4.6 billion for NextGen for the period 2008 
through 2012 is the current price tag. To be sure, it needs 
refinement. Beyond 2012, as I mentioned before, we see a very 
uncertain future regarding the level of funding required for 
NextGen.
    With regard to NASA, NASA has already told us they intend 
to spend less. You have noted that they are turning their 
research more to space instead of aeronautics. We reported in 
our report in February concerning JPDO that NASA intends, as 
well, to turn its focus more to basic research and less to the 
applied science and information technology that may be of most 
benefit to NextGen efforts.
    If FAA intends to look to NASA exclusively for its 
research--and I know that is not the exclusive focus, but 
largely to NASA--then we think that is a wildcard, given NASA's 
stated funding intentions.
    No question, lots of development ahead. Refinement needs to 
be accomplished both by FAA and industry. Beyond 2012 it is an 
uncertain picture for us.
    Mr. Ehlers. Thank you very much.
    Mr. Costello. I thank the gentleman.
    Let me mention to both the witnesses and those in the 
audience that you will notice a number of empty chairs over 
here. The leadership has called a caucus, so most of our 
Members are in caucus, and I am certain that Mr. Larsen 
probably just returned from there, and others will shortly.
    Let me go to a second round.
    Have you had a chance, Ms. Fallin, to ask? Well, let me 
recognize you at this time to ask questions or any statement 
you would like to make.
    Ms. Fallin. Thank you, Mr. Chairman. I appreciate the time, 
and I appreciate all of you being so patient to sit here for so 
long and answer all of our questions. I know that all of you 
are very committed to what you do and believe in the different 
positions that you are taking.
    I do find it interesting that, from sitting up here, it 
appears that the FAA and the DOT seem to have a difference of 
opinion as to how this is going to work, and the FAA's proposed 
financing methods for the Next Generation and how FAA will meet 
its goals in raising enough revenue for the next system.
    I hear one person say, and I think it was you, Dr. 
Dillingham, that the new system would generate $600 million 
less--is that a true figure?--$600 million less under the new 
system than what we currently get today. That is correct?
    Mr. Dillingham. Yes, that is correct.
    Ms. Fallin. Okay. And, Mr. Elwell, I have great respect for 
the FAA and love the FAA, and I have respect for what you are 
trying to do to update technology and take care of all the 
increased passenger needs and flight delays, and all the 
different things that we need to deal with. I also believe that 
we should have a culture of continuous improvement in 
government in whatever we are doing. But I was curious about 
how many years have we had the current fee structure? How many 
years have we had that system in place, the one that you are 
proposing to leave?
    Mr. Elwell. Since 1970, I believe, when the Airport and 
Airway Trust Fund was developed.
    Ms. Fallin. Because I remember you saying that everyone 
should pay their fair share and that we should link revenue to 
costs. So I guess my curiosity was if we have had it that long, 
has it always been a problem, considering what your goals are, 
to link revenue to costs and for everybody to pay their fair 
share?
    Mr. Elwell. Well, it has been a growing problem, ma'am, 
since deregulation in 1979, because when--actually, when it was 
developed, the excise tax system was meant and designed by 
Congress to be a cost fee for services and it was--I am going 
to use the term ``alignable'' because we were a regulated 
industry. The FAA regulated the industry, could set the price 
of tickets, and could therefore drive the generation of 
revenue.
    Since deregulation, that has not been the case. In fact, we 
did bring a slide, and I don't know if it is cued up, but it 
would show you, as a function of departures over time, aircraft 
departures, through about 2006, the revenue generated, even 
though departures and, therefore, ostensibly revenue and the 
number of passengers flying seems to be steady, the revenue 
generation is really all over the place. And, unfortunately, 
the spikes--if it comes up--that you will see in the revenue, 
unfortunately, those spikes on either the high or low side 
rarely correspond with a same spike in the spending needs, and 
that is the problem, is that we have never been fully aligned 
on the spending side, and this proposal would do that.
    Ms. Fallin. Okay.
    Mr. Elwell. We didn't get the slide, I am sorry.
    Ms. Fallin. Thank you, Mr. Chairman. If I could continue on 
for just a moment.
    Dr. Dillingham stated that with the present fee structure 
and the growth in the FAA revenue, that he predicted it would 
generate around $19 billion in revenue?
    Mr. Dillingham. Yes, ma'am. We were quoting the 
Congressional Budget Office analysis.
    Ms. Fallin. And that with that type of growth and revenue, 
that the FAA would be able to pay for the NextGen system, is 
that true?
    Mr. Dillingham. That is correct.
    Ms. Fallin. But although it would not meet your goal of 
having more revenue-to-cost basis, but it would meet your goal 
of transforming the system to meet the passenger increase, the 
time delays, the increased traffic in certain airports, that 
you would be able to develop the system with current revenues 
in place as they are now.
    Mr. Elwell. As the Administrator said, it is conceivable, 
but on a much different schedule, we would anticipate, because 
of the difficulty in getting, under the current system, as the 
Trust Fund is filled, being able to spend the money you need on 
facilities and equipment when you need it. Our proposal, 
through the user fee proposal, forecasts a billion more 
dedicated F&E by 2012 than even the last year's budget, the 
2007 budget that goes through 2012 without the user fee 
proposal.
    So while it is possible, as the Administrator said, to get 
it done, we don't believe that it could be done near as 
efficiently or expeditiously as our proposal, which is designed 
to generate the funds we need to invest in the system when we 
need it.
    Ms. Fallin. Thank you, Mr. Chairman. I yield back my time.
    Mr. Costello. I thank the gentlelady from Oklahoma.
    We are going to a second round of questioning, and I am 
told any minute we will get called for a vote.
    Dr. Dillingham, I mentioned in my opening statement and I 
made a comment as well about the fact that the Administrator 
has said that they recently have 100 percent record on major 
capital projects on time and within budget. Frankly, I want to 
ask you, you have looked at this. Is that because certain 
modernization programs have been re-baselined, for instance, 
like STARS, in order to, frankly, hide some of the growth in 
cost? I would like your comments.
    Mr. Dillingham. Mr. Chairman, we are still looking at that 
issue for you and the Subcommittee. It is true that FAA has 
announced that for the last three years they have had their 
major systems acquisitions on time and on budget in terms of 
the 80 percent in terms of time and the 10 percent in terms of 
budget. It is also true that some of those systems have been 
re-baselined, and that re-baselining can lessen the 
transparency of knowing what the original baselines were.
    Our discussions so far with OMB indicate that under certain 
circumstances re-baselining is permissible and that information 
is communicated to OMB. Our question now is to what extent is 
that information communicated to the Congress and to the 
American public in terms of full disclosure, and we are still 
working on that and hope to have a report for you soon.
    Mr. Costello. That is a very diplomatic way to put it, 
lessen the transparency. And I realize that OMB, under certain 
circumstances, will say it is permissible, but it seems to me 
that it is a pretty difficult way for us to go back and assess 
the true costs.
    Mr. Scovel, I wonder if you might comment as well.
    Mr. Scovel. Yes, thank you, Mr. Chairman. We would concur 
in Dr. Dillingham's assessment of, as he and you put it, the 
lack of transparency, perhaps, in assessing the true cost and 
schedule requirements of some programs that have been re-
baselined. It is important to note that a re-baselined program 
is simply a snapshot in time of cost and schedule requirements. 
We would hope that any program, if you have re-baselined it 
recently enough, you could hit your cost and schedule goals.
    We would further note that some of the performance targets 
that have been identified for the programs that have been re-
baselined are simply, if you will, hardware delivery items, 
rather than performance capability based, and so they may not 
represent, in our view, a true picture of the progress a 
program may be making to full completion and readiness, as 
opposed to some intermediate steps that are less helpful to the 
Committee and to the public in assessing how FAA is executing a 
given program.
    Mr. Costello. Thank you.
    Dr. Dillingham, I guess it was a few years ago the 
Committee asked you to take a look at how some other countries 
were funding their air traffic control system, and, as I 
recall, your team did look at some other countries and came 
back, and I think that some of those countries the general 
aviation community there assessed a smaller fee than what the 
FAA is proposing here in the reauthorization. I wonder if you 
might tell us the findings, in other words, what some of the 
other countries are doing relative to general aviation versus 
what the FAA is proposing in their reauthorization.
    Mr. Dillingham. Yes, Mr. Chairman. We did undertake that 
study and looked at five countries around the world, including 
some European states, Canada and Australia, and basically what 
we found is that, with regard to GA--keeping in mind that the 
U.S. GA population is many, many times larger than anyplace 
else in the world, but accommodations were made for the general 
aviation community in that in some cases they were charged a 
nominal fee based on either the number of flights that they 
took in a given fiscal year or they were just charged a nominal 
fee, period, without regard to the number of flights. For 
example, in Canada, they charge about $70 a year as an annual 
fee. That has been recently increased and also added a 
congestion charge when they go into a busy airport; and in 
Australia they do it by the number of flights they do in a 
fiscal year.
    So, again, it is the issue of cost allocation versus cost 
recovery, and that policy decision about how to recover costs 
from GA differs from what we are proposing here.
    Mr. Costello. So the other countries that you looked at, 
they are not attempting to do cost recovery as the FAA is 
proposing here?
    Mr. Dillingham. That is correct, sir.
    Mr. Costello. Okay. Let me ask you what the implications 
are of basing the cost recovery only on cost allocation, as 
opposed to principles, for instance, of the ability to pay. 
What are the implications, if in fact this system is 
implemented, strictly based on cost recovery?
    Mr. Dillingham. I think one of the principal implications 
is something that has been mentioned many, many times this 
morning, that is, to what extent will this act as a damper on 
the general aviation industry in terms of the number of general 
aviation fliers, as well as the general aviation manufacturing 
industry. It is an unknown, but clearly a possibility exists.
    Mr. Costello. Mr. Scovel, in your testimony you talk about 
the challenge that the FAA faces in a billing system within 
available time frames, and I wonder if you would elaborate on 
that.
    Mr. Scovel. Yes, thank you, Mr. Chairman. If I could use a 
couple examples. The STARS program, which I know is well 
familiar to this Committee, involves a program that started off 
to provide for terminal modernization at 170 sites nationwide, 
for a cost of about $940 million. As the program developed, FAA 
found that it had funding and installation problems. It was 
forced to reassess the program. Ultimately, when the cost 
appeared to approach $2 billion, the program was cut to install 
that modernization equipment at 50 more sites. Ultimately, that 
in fact was reduced to 47, and the cost now is well in excess 
of $1 billion for a much smaller and less capable system.
    That doesn't also include the cost of Common ARTS, which 
was the controlling system then in place and which STARS was 
intended to replace. That system had to be updated and 
modernized at a number of other locations in order to provide 
those locations with the capability needed, when in fact those 
locations had been anticipated to receive STARS but ultimately 
were denied that capability.
    FTI is another example, sir, which my office has studied. 
This is the FAA's telecommunication initiative. It has been re-
baselined. Its cost and schedule time lines have been extended. 
Our current assessment shows that FTI is still on a problem 
track; it has FAA's full attention, however, but the schedule 
has been extended. The importance of FTI as a platform for 
NextGen accommodation can't be overstated. We are carefully 
watching FTI and we have a current assessment of FAA's remedial 
actions in progress.[The witness added the following subsequent 
to the hearing: As we note in our testimony, FAA's proposal 
provides 1 year for the new board to be appointed and reach 
agreement on a fee structure and fee levels, and for FAA to 
implement a billing system based on the fee structure. This is 
ambitious even if FAA employs a contractor. FAA has a study 
underway to examine how a billing system could be set-up, but 
we have not reviewed it. We think just getting the board up and 
running will be more time-consuming than FAA's proposal 
suggests.]
    Mr. Costello. I thank you.
    At this time, the Chair recognizes the gentleman from 
Washington State, Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman. Just a few questions 
here before I think we are getting called to vote, having to do 
with the fee collection process. I don't know if those 
questions have been asked yet, but I hope not.
    Mr. Elwell, the FAA's proposal will provide the FAA with 
the authority to terminate, reduce or withhold non-emergency 
services if a user fails to pay user fees. If you could 
distinguish and provide examples of what would be emergency 
services and what would be non-emergency services?
    Mr. Elwell. Sir, I don't think that I am really qualified 
to enumerate that. There is a hearing tomorrow, an ops and 
safety hearing that is, Nick Sabatini and his shop will be 
eminently qualified to answer that.
    Mr. Larsen. Okay. Can you answer the question, if a user 
believes there is an error and they are billed for a service 
they did not actually receive, what sort of appeal process does 
the FAA envision having?
    Mr. Elwell. The appeal process I believe is in the language 
of the bill. I do not have the tenets of that memorized. Again, 
I feel like I am not answering any of your questions. I 
apologize. I would be happy to get that for you.
    Mr. Larsen. I feel that way, too.
    [Laughter.]
    Mr. Elwell. I am sorry, sir. But there is built in language 
on the appeal process. And we anticipate that, especially in 
the early stages, to be part of the growing pains of a brand 
new system. But there is an appeal process built in.
    Mr. Larsen. We have asked Dr. Dillingham this question, I 
think, but I would like to ask you this question. Has the FAA 
analyzed the long-term effects of the user fee proposal on the 
growth of various aviation users, such as air taxis or business 
or general aviation? Have you looked at that and are you taking 
that into account, the results of those forecasts into account?
    Mr. Elwell. Again, as I said before, clearly the most 
dramatic change in payment is the GA community, because they 
were the most dramatic difference in what they are currently 
paying versus the costs they impose. While we didn't do a 
structured or detailed analysis of the effects that this would 
have going forward, we did feel an examination of what the tax 
means as a percent of operating costs that it was not as 
substantial as the recent doubling of the cost of gas over the 
past five years, which as I said before, did not demonstrate a 
significant reduction in activity.
    So I am not sure what you mean by long-term. But we don't 
have a study, per se.
    Mr. Larsen. I asked a question earlier of Mr. Scovel about 
the estimate of the cost of the program, an FAA cost versus an 
industry cost to implement Next Generation. I think the numbers 
I saw were $15 billion to $22 billion, again a very wide range. 
on the FAA's side, then a $14 billion to $20 billion range for 
industry costs for implementation. Are those the numbers you 
are operating under?
    Mr. Elwell. Yes, sir, those are the estimates. Which I 
would point out are actually very closely in line with the 
estimates the Europeans are giving for SESAR.
    Mr. Larsen. I personally don't have too much of a problem 
with the idea of Next Generation. The name is not all that 
descriptive, but the concepts behind it, satellite based and so 
on. But in other committees that I sit on, we have a problem 
with some other projects. It comes down to Robert Frost's poem, 
a line from his poem that a man's reach should exceed his 
grasp, or what's a heaven for. It seems in a lot of these 
programs, our reach never quite gets to the grasp. That has 
been the concern that we have seen in some other major spending 
programs in other committees that I sit on, major spending 
programs in this Committee and other Subcommittees we sit on. 
It drives me to extreme caution, as well, when I see the long-
term, the 25 years of build-out, 18 to 25 years of build-out 
and the cost of this program. Is the technology mature to do 
this? Will it be mature by the time we expect it to be 
implemented? The financing plan seems to be questionable as 
well. At least we have a lot of questions about the financing 
plan as well.
    I just don't want this to turn into, I don't want to turn a 
$25 billion venture into a $25 billion adventure.
    Mr. Costello. I thank the gentleman. I thank our witnesses 
on the first panel for their testimony today. We appreciate 
your testimony and your attempts to answer the questions that 
we have posed to you.
    We will ask the second panel to come forward so we can 
begin the testimony of the second panel. Again, thank you, 
gentlemen.
    While the second panel is coming forward, let me make some 
introductions of the witnesses on our second panel. Mr. Edward 
Faberman, who is the Executive Director of the Air Carrier 
Association of America; Mr. Phil Boyer, the President of the 
Aircraft Owners and Pilots Association; Mr. Jim May, President 
and CEO of the Air Transport Association of America; Mr. 
Stephen Alterman, President, Cargo Airline Association; Mr. 
Matthew Zuccaro, President of the Helicopter Association 
International; Mr. Ed Bolen, President and CEO of the National 
Business Aviation Association; and Mr. Roger Cohen, President 
of the Regional Airline Association.
    Obviously this is a large panel. As I mentioned, we have a 
caucus going on on the Democratic side. We are about to start 
some votes, I am told, in the next 15 to 30 minutes. So I would 
ask our witnesses to summarize their statements and to adhere 
to the five minute rule, if they would. I would recognize Mr. 
Faberman for his statement at this time.

   TESTIMONY OF EDWARD P. FABERMAN, EXECUTIVE DIRECTOR, AIR 
CARRIER ASSOCIATION OF AMERICA; PHIL BOYER, PRESIDENT, AIRCRAFT 
OWNERS And PILOTS ASSOCIATION; JAMES C. MAY, PRESIDENT AND CEO, 
  AIR TRANSPORT ASSOCIATION OF AMERICA; STEPHEN A. ALTERMAN, 
    PRESIDENT, CARGO AIRLINE ASSOCIATION; MATTHEW ZUCCARO, 
  PRESIDENT, HELICOPTER ASSOCIATION INTERNATIONAL; ED BOLEN, 
  PRESIDENT AND CEO, NATIONAL BUSINESS AVIATION ASSOCIATION; 
      ROGER COHEN, PRESIDENT, REGIONAL AIRLINE ASSOCIATION

    Mr. Faberman. Thank you and good afternoon.
    I am glad to be here today to talk about the future of the 
Nation's aviation system and propose funding mechanisms to 
support that system. I am the Executive Director of the Air 
Carriers Association, that continues to try to bring affordable 
air fares to American travelers around the Country.
    The Administration's financing proposal addresses a very 
important issue, but also raises a number of significant 
questions, including funding requirements should be fairly 
assessed to all operators in the system and to the general 
fund; congestion charges must not be allowed to further block 
access and competition; passenger facility charges should not 
automatically increase as those charges disproportionately 
impact lower fares; distribution of access at capacity-
constrained airports like LaGuardia should promote competition 
and must not further limit competition; and the Air 
Transportation Safety Advisory Board must include a 
representative of low-cost carriers.
    It is essential that we create a first-rate system that 
makes flying easier and safer. At the same time, we must 
continue the dream of deregulation. This Committee has played 
an active role in improving the Nation's aviation system and in 
opening the doors to competition and travel options for 
consumers.
    We support setting modernization as a priority. It is 
essential that the Nation's air traffic system be upgraded to 
meet growing demand and ensure the smooth operation of the 
system, while promoting maximum travel opportunities. We must 
also understand that we are not operating in an environment 
where costs are stable. Rather, costs, including fuel, security 
and facility expenses, continue to increase. Additionally, the 
cost for small airlines is higher at many airports because they 
do not have dedicated facilities and often struggle to get the 
facilities they need to operate.
    The Department has taken steps to open skies around the 
world. We want to see those skies now opened in this Country.
    Let me just comment on a few of the issues that have been 
raised this morning. We urge Congress to consider all possible 
cost-cutting measures and to take appropriate steps to enure 
that all stakeholders fairly participate in funding the system. 
The costs associated with these efforts cannot be borne by air 
carriers alone. Since the Nation's air traffic system is a 
national system that benefits travelers, communities, 
manufacturers, the entire travel and tourism industry and 
business expansion, general fund contributions must be at least 
maintained at existing levels.
    The proposal allows the FAA to increase fees on its own 
initiative with very little oversight. Therefore, we cannot 
endorse that approach. Congestion fees must apply to all 
operators who use the Nation's largest and most congested 
airports. The cost-based congestion charge in the proposal has 
no restrictions and seems limitless. Any congestion charge the 
FAA decides to issue should be imposed on those carriers 
actually causing the congestion. We don't believe it is 
appropriate to charge a small carrier or any operator with a 
small number of flights at a particular airport the same 
charges as those operating hundreds of flights.
    Low-cost carriers are already blocked from many airports 
and their operations are severely restricted in others. If 
congestion charges are imposed on carriers with only a few 
operations, it may close the door to access completely. As to 
general aviation costs, we are not proposing that they be 
significantly increased for less congested airports or that 
aircraft at small, uncongested airports should face any new 
charges.
    Rather, at congested or closed airports, general aviation 
aircraft should pay fees identical to those paid by carriers 
operating full-size aircraft. The same applies for fees for 
regional jets. For example, a regional jet flying between 
LaGuardia and National Airport should not pay 20 percent less 
of what a larger aircraft pays when that regional jet blocks 
others from operating at those airports.
    Currently, regional jets, VLJs and general aviation at 
congested airports contribute equally to congestion but pay a 
great deal less. PFCs cannot be analyzed in a vacuum because 
they are not the only fees or costs the airlines must absorb. 
Even though a small PFC increase might improve airport 
facilities, increasing PFCs as proposed by some parties would 
impact the ability to provide the low fares necessary to 
generate system growth. It could also have a real impact on 
travel, because many people will travel more frequently when 
lower fares are available.
    Congestion pricing, we believe we should consider it and 
look at it. However, there are too many questions out there as 
to whether it will promote, destroy or completely close 
opportunities for growth by all sectors of the industry. I also 
want to note that it is important that the Air Transportation 
System Advisory Board include representatives of all in the 
industry, including low-cost carriers.
    We applaud the Committee for holding these hearings and we 
are very anxious to work with the Committee and the 
Administration to craft a bill that will effectively serve the 
airline industry and consumers. Our dream is to create a high-
tech, safe and secure system that maximizes consumer choices 
and ensures that low fares are available to all. The concerns 
noted above, as well as those outlined by the Members of this 
Committee, and other parties, must be thoroughly discussed and 
significant revisions must be made before this proposal becomes 
a reality. This is only step one.
    Thank you.
    Mr. Costello. Thank you. The Chair recognizes Mr. Boyer.
    Mr. Boyer. Mr. Chairman, thank you.
    As you know, I am President of the Aircraft Owners and 
Pilots Association, probably the first user group to sit here 
at the table. We have talked a lot about the effect of this 
bill on the general aviation community.
    I represent 410,000 of those pilots. That is more than two-
third of the Nation's pilots and aircraft owners. And they use 
their planes, in the main, like you use a personal automobile, 
for business, personal travel. We are talking the average type 
plan, a single engine, piston airplane.
    The Chairman mentioned his number of years on this 
Committee. I have sat on this side of the table for about six 
years shy of the number of years you have, Chairman Oberstar. I 
have never seen such a distortion at a reauthorization hearing 
in all my years as this one here. We are manufacturing a 
crisis, a crisis about a Next Generation system, a crisis about 
funding. Where is the crisis? I would ask you to look at that 
very closely.
    But let me go on record. Status quo, to our organization, 
to our pilots, to our Members, is not an option. We don't want 
to just renew what we had exactly. But if we could get user 
fees off the table we could begin a dialogue on many of the 
things all of us here and the panel before me, and others you 
have heard from agree on. Next Generation system and all kinds 
of other things, including, perhaps, the kind of excise taxes 
that are paid. Because as you know, Mr. Chairman, we have 
addressed those before. We have raised them, we have changed 
the configuration, et cetera. All those things are possible.
    In business we always ask, what problem are we trying to 
solve? I would say there are various answers from whoever you 
ask that question of. The Administration, we haven't talked 
about it yet. But they want to cut back on the general taxpayer 
fund contribution to the system. The airlines, in spite of the 
huge Government bailout that they have been given in the last 
few years, wants to cut back on the taxes that their 
passengers, not the airlines themselves, but their passengers 
pay to ride the system. And the FAA, unfortunately, it wants to 
get out from under the Government, the Congressional control 
that has served that agency very well for many, many years.
    The Next Generation Air Transportation System, for heaven's 
sake, what a name to give to something. Obviously it is trying 
to sell you this crisis. Oh, we have got to do this now, we 
have got to do it to get things ready. But they have not 
determined the needs yet. They have no shopping list yet. It 
has not been priced out. Sitting next to me, my counterpart, is 
Mr. May. We agree on a lot more than you might think we might 
agree about on this proposal. But the one thing I think we 
agree on is we do need a Next Generation system. He and I co-
chair the industry institute that handles the JPDO decision-
making, the input.
    At this moment, neither one of us, I would maintain, could 
spell out the technologies that are going to be burdens to his 
operators and my operators, the price of those technologies, 
nor could we put a price on what the ground base and the FAA 
has to pay.
    My concern, and once again, getting user fees off the 
table, is get them out of here, and then we can get on with the 
dialogue. It is the camel's nose under the tent. Wherever you 
look in the world, remember, Jim would claim and the FAA would 
claim, well, these are primarily for the airlines. We say once 
they start at one segment of aviation, there is what I would 
call the trickle-down effect. Eventually, it gets all the way 
to the small operator flying VFR.
    In this proposal, there are a lot of catch phrases and 
carefully worded sentences: GA will pay primarily through the 
fuel tax. Primarily. There is congestion pricing in this bill, 
user fees for using the large air space considerations that we 
call Class B. A lot of certification charges, also.
    How would that affect users? Well, you asked questions of 
the last panel about the foreign models. I got an e-mail from 
an old friend from Australia just last week. When I was 
Chairman of the CAA, their civil aeronautics authority, I 
accepted the government's assurance that the user pays would 
put pressure on to reduce costs. The assurance was wrong. We 
now have user pays, general aviation is almost destroyed and 
there has been no real pressure on the bureaucracy to reduce 
costs.
    The commercialization of their equivalent of FAA and their 
equivalent of our air traffic organization has been a disaster 
for GA in Australia. I believe we will have the same happen in 
the United States if it goes ahead. And this was from somebody 
who tried to sell me on user fees 10 years ago. It is pretty 
plain and simple, when you look at the figures from their own 
government, a 28 percent decline in general aviation.
    Congressional oversight, we have talked about it, another 
catch phrase, offsetting collections. Look that up carefully. 
It is one appropriation that then goes outside of Congress' 
control. You have served us very, very well. I do not know that 
we will be as well served by an Air Transportation Advisory 
Board. Once again, Mr. May, to my left here, even agrees, as I 
have heard his recent statements after seeing the proposal, 
that it doesn't give the airlines enough input into how the 
money will be spent.
    The huge gas tax increase, my gosh, I can't tell you how 
painful that will be, and I don't have to, because the Members 
have probably been writing you and telling you exactly what 
they think. From 19.4 cents to 70.1 cents? We should have been 
having these hearings every year and slowly graduating that 
tax. I have never heard of an increase that huge at one 
particular time.
    Then you heard it from Dan Elwell, the Administrator, who 
says less than 5 percent of the cost of operating a plane, it 
is not a burden on pilots. Well, all you have to do is read 
some of those letters. Here is what one of our Members say. I 
am not going to belabor this tax increase, but let's look how 
it falls graphically, 3.4 four times for piston aircraft, 3.33 
times for jet aircraft.
    But what about the other side of the coin? The legacy 
airlines, a huge savings, and the low-cost airlines, a savings 
also. Here is the table, but you know, the numbers that we 
had--I am sorry we spent the money, we used a consultant. And 
he came up with almost the same numbers you heard from this 
first panel. We are a billion dollars off, but what is that 
among friends. And that is, plenty of money here for the 
operations. Let's not forget that general fund contribution. 
Let's remember that the Administration would like to lower it 
to 18 percent and then even lower.
    Here are the general fund contributions of various other 
things that benefit the general public. And as you can see, 
aviation right now is the lowest.
    You have heard it on airports, all I want to do is once 
again repeat, let's get user fees off the table and as Mr. 
Duncan said, we can then have the dialogue we have been having 
about how to get a meaningful reauthorization. Thank you.
    Mr. Costello. The Chair thanks the gentleman and recognizes 
Mr. May.
    Let me mention that there is a vote going on on the Floor, 
a series of votes. We will leave from here to go vote. My 
understanding is we will have about 45 minutes to an hour. We 
have four or five votes on the Floor with a motion to recommit.
    So I would announce that the Chair would put everyone on 
notice that we will be back here in one hour or after the last 
vote.
    Mr. Oberstar. Mr. Chairman, I can't help noticing Mr. 
Boyer's comment that he and Mr. May are close on--I will be 
worried if you get any closer.
    [Laughter.]
    Mr. Costello. The Chair recognizes Mr. May.
    Mr. May. Thank you, Mr. Chairman, and thank you, Chairman 
Oberstar, for your observation as well.
    I am pleased to be here today on behalf of more than half a 
million passenger and cargo airline employees, three-quarters 
of a billion passengers who fly every year and the millions who 
ship goods daily to all parts of the world. You have an 
extensive written statement, I will truncate my oral statement 
and just hit a quick summary.
    I think there is a need to modernize the air traffic 
control system and implement NextGen. As Phil has indicated, he 
and I agree on that point. At some point along the way, this 
Committee has to make a determination on the funding structure 
of that particular system. I would remind you that in 1970 when 
it was first established by Congress, it was done on the basis 
of user pays and cost-based financing. So I think we have to 
find a way to balance that cost recovery opportunity that goes 
on.
    Today's system is shortchanging our future, and I am 
referring to the air traffic control system. It uses 1950s 
architecture that is ground-based, finite, point to point 
routings, inefficiencies. I don't think it has the ability to 
be scaled for new growth. And new growth is exactly what we are 
going to have. In 1970, when that Trust Fund was created, there 
were about 2,500 commercial airliners in the system of all 
sizes. At the time, there were about 1,800 corporate aircraft 
using that system.
    Today, the numbers are 8,000 for our friends on the 
commercial side and 17,000 and growing, 18,000 corporate 
aircraft. I am referring now specifically to turbine, high-
performance aircraft. The FAA projects, and I think they are 
accurate, that we are going to go from three-quarters of a 
billion to a billion passengers a year enplaned by 2015. Today 
there are about 45,000 IFR operations managed by our air 
traffic controllers and the FAA every single day, 45,000. That 
is going to jump to 62,000 in the next 10 years.
    On top of that, we are going to have another 10,000 VLJs 
come into the system over that period of time. You will see a 
snapshot of some of the traffic taken from just a couple of 
days ago.
    The point I am trying to make is that there is huge demand 
growing, the system we have cannot be scaled to accommodate 
that demand. The consequence of all of that is going to be 
delay. We have had some very significant weather-related delays 
this winter. We are going to have more significant weather 
delays in convective weather in the summer. We have projections 
from a man I think most admire, Russ Chew, indicating that we 
are looking at some 62 percent over 2004 levels of delay coming 
over the next 10 years, if we don't do something to change this 
system.
    I don't disagree, actually, with Phil that we don't have a 
good game plan going forward as to what that system ought to 
look like. I do think that we are looking at somewhere in the 
range of $15 billion to $20 billion to put a new system 
together. I do think there is an imperative that we get that 
done and that we have an appropriate funding mechanism for 
making that happen. The consequences are particularly severe.
    Now, the good news is, we have these systems going in 
around the world. There are a lot of countries, unfortunately, 
that are ahead of the United States in establishing Next 
Generation systems: GPS, satellite-driven, using technologies 
like ADS-B where you transfer the intelligence of the system to 
the cockpit of the aircraft. But that takes me to the second 
part, which means, we have an avionics change coming, and I 
think those numbers are reasonably accurate that have been 
quoted this morning about the cost to airlines being somewhere 
between $18 billion and $20 billion for equipage.
    So I think that lost in the maelstrom of debate over the 
issue of user fees, i.e., cost recovery as opposed to cost 
allocation, is the fact that we have to find a way to pay for 
this system. I have advocated that it needs to be a four-part 
funding system. I think one part of it is some kind of a tax on 
the users of the system, whether it is an excise tax or whether 
it is a repeat of what we have today.
    But it has to be a balanced formula, because today airlines 
are paying 94 percent of all the dollars that are going into 
the Trust Fund. And you may choose to excoriate the idea of a 
user fee. But I certainly hope you won't choose to excoriate 
the reality that we are paying the vast majority of the dollars 
into that system today and from an equity basis that needs to 
be rebalanced. I think the best way to rebalance it, regardless 
of the recovery mechanisms, is to do it in accordance with the 
use or the demand that is being placed on that system. Only 
fairness.
    Mr. Costello. I thank the gentleman, and we will announce 
that the Subcommittee will recess until 1:45 or until after the 
last vote, which I am told should take most of the hour.
    [Recess.]
    Mr. Costello. The Subcommittee hearing will resume. We had 
obviously more votes than anyone anticipated, and it took 
longer than anyone anticipated.
    But I will say that Chairman, the former Chairman of the 
Subcommittee, Jimmy Duncan, just reminded me on my way over, I 
said, I have witnesses that have been waiting for a long time, 
and he said, well, tell them not to feel too bad, I had six or 
seven CEOs of airlines waiting one day and we had 24 votes in a 
row and we had to cancel and bring them back the next day. 
Fortunately we did not have to do that.
    Let me move on the next witness and recognize the President 
of the Cargo Airline Association, Stephen Alterman.
    Mr. Alterman. Thanks, Mr. Chairman. My name is Steve 
Alterman and I am President of the Cargo Airline Association.
    Although we are an integral part of the air transportation 
community, the cargo segment is unique. In order to serve our 
worldwide customers and to provide them with time definite 
services, a large percentage of our flights are during the 
night-time hours, thus enabling us to offer expedited delivery 
throughout the world. We are also one of the fastest-growing 
segments of the commercial aviation marketplace, with growth 
rates of 3.1 percent domestically and over 6 percent 
internationally expected over the next decade.
    In order to provide the service that our shippers in the 
world economy demand, we are dependent on a modern air traffic 
system. We simply cannot afford to continue to manage traffic 
with technology that was designed in the first instance to 
fight World War II. We must build a system using the technology 
and procedures necessary to address the shortfalls and capacity 
that will certainly occur. The modernization of our system must 
therefore be the major priority in the ongoing FAA 
reauthorization effort.
    And modernization of the system is critical for reasons 
other than simply addressing future capacity. Operational 
procedures using satellite-based technology will yield more 
efficient operations resulting in less noise and less fuel 
burn, thereby reducing aircraft engine emissions. The 
environmental benefits cannot be overlooked. Nor can the 
potential safety enhancements that will result with the 
provision of better and more timely information to both pilots 
and controllers.
    Finally, it is crucially important that these steps to 
modernize be taken now. We cannot simply wait any longer. 
Capacity will overwhelm us.
    With respect to the FAA financing proposal, it was issue 
don February 14th, 2007 and dealt primarily with the financing 
element of the system. Unfortunately from the cargo airline 
perspective, it actually created more questions than it 
provided answers. While the FAA has made significant strides in 
the past few months, especially in the area of the decision to 
use ADS-B technology, we still do not know the details of the 
Next Generation plan, and until the details of this plan are 
known, it is difficult to assess the funding required. Yet the 
FAA proposal focuses primarily on the funding element.
    Before moving to completely overhaul the system that has 
provided the basis for the FAA financing for decades, it is 
necessarily to more completely analyze the requirements of the 
system and how those requirements impact the resources 
necessary. In our opinion, the questions that must be asked and 
answered are: what is the precise nature and associated cost of 
the Next Generation system; what are the cost savings the FAA 
will realize from implementing the modernized system; will the 
current system provide the funding that is necessary; what are 
the costs and benefits to the user community; and should this 
system be purchased or perhaps leased to allow flexibility by 
the agency.
    Even if it is determined after this analysis that the 
current excise tax system must be completely overhauled, we 
cannot support the plan envisioned by the FAA proposal where 
the FAA is given virtually unfettered authority to set the 
level and structure of fees at will with little or no 
Congressional oversight and no provisions for judicial review. 
Such authority would clearly eliminate any incentive for the 
FAA to cut costs or restrain future cost increases since feels 
could always be raised to cover unnecessary agency spending.
    But even more importantly, it appears that the user fee 
system envisioned by the FAA proposal will require a 
complicated and costly bureaucracy simply to assess and collect 
the fees. In an era of limited resources, care should be taken 
to ensure that to the maximum extent possible the funds 
generated are actually spent to improve the system. The added 
cost of establishing and maintaining a bureaucracy juts to 
assess and collect the fees simply can't be justified.
    But whatever the eventual structure of the finance, we urge 
the following principles and considerations should be 
paramount. First, the U.S. aviation system is a national asset 
that benefits all citizens and drives the Nation's economy. The 
general fund contribution should reflect that fact. 
Historically it has been in excess of 20 percent and we urge 
that it not go down from there.
    Second, whatever funding mechanism is ultimately decided 
upon, Congress should ensure that industry funding obligations 
are fairly allocated. As a basic principle, no industry segment 
should be forced to subsidize any other industry segment. From 
our perspective in the all cargo industry, where under the 
current system, we pay a 6.25 percent airway bill tax plus a 
4.3 cent per gallon fuel tax, studies indicate that our 
industry segment pays somewhat more than 100 percent of our 
system use. This is before taking into account that we fly 
mostly at night.
    While we don't expect any relief for that portion of the 
system that exceeds 100 percent, neither should we be expected 
to pay more than our current share in order to make up for the 
shortfall in other industry segments. This result can be 
accomplished by simply retaining the current funding mechanism 
for the air transportation of cargo or by ensuring that any new 
system does not impact our industry adversely.
    Finally, I will wrap up, we strongly believe that Congress 
should support the funding necessary for continued research and 
development. It is today's research and development that 
provides tomorrow's products for the NextGen system. We can't 
overlook the R&D segment.
    Thank you very much. I will be happy to answer any 
questions.
    Mr. Costello. We thank you very much.
    Mr. Zuccaro?
    Mr. Zuccaro. Good morning, Mr. Chairman. Thank you for the 
opportunity to provide comments.
    Rather than repeat the facts and figures and information 
you have probably heard already, I would like to focus on the 
uniqueness of the helicopter industry and its environment. HAI 
is a not-for-profit professional trade association of over 
2,600 members, inclusive of 1,400 companies and organizations. 
Unlike many other trade associations, operations conducted by 
HAI members are not limited to one type of specific flying or 
one purpose. HAI members operate helicopters across a wide 
spectrum of uses, such as on-demand charter, commercial 
utility, corporate, law enforcement, emergency service, 
agriculture, as well as news gathering and private use. It is 
my sincere belief that the proposed FAA funding program, if 
enacted, will have an extremely detrimental economic impact on 
HAI members and will in fact constrain or eliminate some of 
these operations.
    The current FAA funding methodology can meet the future 
operational and developmental needs of the FAA inclusive of the 
NextGen initiative, which HAI actively supports and promotes. 
This is generally not in dispute.
    Almost all segments of the aviation community appear to be 
unanimous in their strong opposition to the Administration's 
funding proposal, the notable exception being the airlines. How 
can one support a proposed funding program that significantly 
reduces the cost to a high use entity such as the airlines and 
they place the highest demands on the system and then 
dramatically increase the cost to other segments of the 
industry, such as the helicopter community, whose utilization 
of the system is generally incidental with little or no impact.
    All of this being done with the stated need to fund NextGen 
as the stated purpose, whose very makeup, technology, benefits 
and costs are not even yet known. The icing on the cake is the 
fact that the actual revenue to the FAA under the proposed 
funding program will be reduced by $600 million in the first 
year alone.
    Consider this: currently some HAI members that are seeking 
initial FAA certification as commercial operators who are 
requesting similar FAA services are being advised that they can 
expect a wait of 18 months to 2 years for an initial 
appointment with an FAA representative. If this is the level of 
service under the current funding program, one can only imagine 
what it would be if the FAA reduces its annual income by $600 
million.
    It is important to note that the majority of HAI members 
are small businessmen and women who operate in excess of 5,100 
helicopters and fly more than 2.6 million hours per year. The 
vast majority of these operations are actually conducted at 
private heliports and facilities in remote locations without 
utilizing the services of FAA air traffic control or the need 
to operate to and from airports. In fact, the very nature and 
capability of a helicopter, in conjunction with the prime 
benefit of direct, point to point transportation, actually 
eliminates the operational need and desire to operate to and 
from airports. This has been further enhanced by such industry 
initiatives as privately funded point in space, off-airport 
instrument approaches.
    Historically, the helicopter industry has had to finance 
its own infrastructure with no Federal funding or support, 
inclusive of off-airport operation and maintenance bases, 
heliports, communications networks, and instrument approach 
procedures. This is due to the fact that the missions 
performed, operational altitudes, and locations of helicopter 
operations are normally outside the reach of the FAA ATC 
service area and the airport infrastructure. Some examples of 
this are the offshore operations in the Gulf of Mexico where 
over 650 helicopters support oil exploration and production, 
where helicopters have spent untold millions of dollars 
providing their own infrastructure, since they cannot talk to 
or be seen by the FAA air traffic control system. Similar 
situations can be found in hospital-based EMS helicopters that 
operate in remote rural areas where they accomplish their life-
savings missions, utility helicopters which provide services on 
behalf of the greater good, such as firefighting, aerial 
application, logging, power line installation and maintenance. 
Also corporate operators serving the off-airport needs of the 
business community.
    I hope you will agree that the helicopter community places 
the least demand on the air traffic control system and the 
airport system. In fact, the helicopter community is actually 
assisting the FAA in solving the problems of airport and air 
space congestion and the lack of capacity. We do that by 
removing from the system those passengers and those flights 
that would otherwise be flown in airplanes to airports and 
diverting them to off-airport, non-ATC environments. Utilizing 
advanced technology, helicopters have been able to provide off-
airport city center to city center transportation, thereby 
further creating new capacity at congested airports. When one 
considers this situation, maybe some thought should be given to 
the FAA compensating the helicopter community for services 
rendered.
    HAI and its members are supportive of the NextGen 
initiative, and when requested to support such initiatives, the 
helicopter community has already stepped up to the plate. Last 
year, HAI and its members formed a partnership with the FAA via 
an ADS-B memorandum of agreement, which facilitated the 
installation of ADS-B technology in conjunction with enhanced 
weather reporting and communications in the Gulf of Mexico.
    As part of their commitment to assist the FAA in the first 
phase of implementing ADS-B into the national airspace system, 
HAI members are providing in-kind service valued in excess of 
$100 million to the project. This includes no-cost helicopter 
transportation for the FAA staff and related project personnel 
to the platforms in the Gulf of Mexico where the equipment will 
be installed. These flights are currently taking place as I 
speak. No-cost space for the equipment on the platforms and our 
commitment to equip with the proper avionics.
    It is most interesting to note that although the helicopter 
industry is the only industry providing in-kind service and 
partnered with the FAA in this initiative, other airspace 
users, such as the airlines, will also reap the benefits of the 
new ADS-B system in the Gulf of Mexico once it is installed.
    With the above in mind, it would seem appropriate that the 
helicopter community should be the one segment of the aviation 
community that has the least economic impact on it. To do 
otherwise would be like charging a farm tractor that only 
leaves the farm once a month to travel on a public road a short 
distance to go to another farm the same highway tax as a long-
haul tractor trailer.
    The current funding system has been tested and proven. From 
a conceptual point, as a thought, the majority of the funds 
collected from helicopter operators should not be assigned to 
runway and airport development. Instead, these funds should be 
considered in the utilization of funding a nationwide system of 
heliprots for the helicopter industry.
    The current funding system, as I mentioned, is not yet 
broken. I think we should leave it in place. To replace it with 
something that has no logic, is widely opposed, will increase 
overall costs and has unknown results in terms of efficiency, 
fairness and productivity, would be counterproductive.
    I also would mention as a closing remark that helicopters 
should be considered as a separate aircraft category and not 
put in the same category as any airplane category that is 
currently being considered.
    With that, HAI and its members stand ready to work with 
you, the Committee, the FAA and the stakeholders to come up 
with an equitable funding system that will provide a safe, 
appropriate, efficient operating environment for all segments 
of the aviation community. Thank you for the opportunity to 
make these comments.
    Mr. Costello. Mr. Zuccaro, thank you very much.
    The Chair recognizes Mr. Ed Bolen, the President and CEO of 
the National Business Aviation Association.
    Mr. Bolen. Thank you, Mr. Chairman. It is an honor to be 
here representing the National Business Aviation Association 
today.
    As you know, and the others on this Committee know, 
business aviation is actually an FAA-defined term. Business 
aviation is the use of any general aviation aircraft, piston or 
turbine, for a business purpose. A number of piston operators, 
over 50 percent, according to AOPA, use their single-engine 
pistons for business purposes; twin-engine pistons and 
turboprops are used almost exclusively for that.
    So when you really look at the general aviation aircraft 
fleet being used for a business purpose, we have a slide, I 
don't know if we will be able to get that up or not. But it 
basically shows that the fleet is primarily 85 percent piston 
twins, turboprops and entry level turbofans. The kinds of 
companies that use these airplanes are as you would expect, 
small and mid-size companies primarily, again 85 percent of our 
membership. A typical member would be Richard Schein, a second 
generation owner of a recycling company in upstate New York 
that uses a twin engine Mitsubishi MU2 to go about expanding 
their work.
    Mr. Chairman, we all are here today to ostensibly talk 
about modernization. But for those of us who were here 10 years 
ago, there is a strong sense of deja vu. After all, it was the 
last time that we had a user fee debate that the Nation's 
biggest airlines proposed a user fee formula that would have 
shifted $600 million of their costs onto what they assumed was 
their competitor.
    But more importantly, it would have, as one senior 
executive CEO said at the time, given the airlines exclusive 
control over the ATC system. We want to make sure that does not 
happen today.
    The FAA has proposed what they call a Next Generation 
financing system. And the FAA has done a lot of talking about 
the need to modernize. Our concern as we look at the bill is 
that when it comes to Next Generation, FAA is talking the talk 
but they are not walking the walk. This bill that they have put 
forward, as you know, cuts FAA funding by $600 million. It caps 
the general fund contribution below today's levels and takes it 
down in the future. It diverts money that could be used for 
modernization, the towers, runway expansions, new technologies, 
and uses it to create a bureaucracy. It allows the FAA to go 
into debt, and it fails to provide a modernization time line 
and cost schedule.
    Now, Mr. Chairman, the general aviation community believes 
strongly in the need to modernize the system, because expanding 
capacity is necessary for our very survival. Every time there 
is congested airspace or congested airports, it is general 
aviation that gets squeezed out. You know this from Illinois, 
where we saw Chicago Midway, it was a great general aviation 
airport, then started attracting commercial service and we were 
pushed to secondary and tertiary airports. We have seen that 
repeated in Fort Lauderdale, San Jose, Manchester, New 
Hampshire. So expanding the capacity of the system is 
fundamental to our survival.
    Now, when we look at how to do that, we think it is pretty 
straightforward and there are no easy answers. If someone wants 
to lose weight, they basically have three choices: they can eat 
less, exercise more or do a combination of those two. When we 
look at additional funding for the Next Generation system, we 
think that the FAA can try to look for cuts in non-essential, 
non-safety programs. They can look for an increase in the 
general fund contribution. We can increase taxes on aviation 
users across the board. We can do some combination of those.
    But what the FAA has proposed is some radical scheme that 
moves us to user fees. I want to echo the comments of those who 
have preceded me in saying, let's get that idea off the table, 
so that collectively we as a community can work with you to 
make the hard choices necessary to put us on the path toward 
continued modernization of our air transportation system.
    Thank you, Mr. Chairman.
    Mr. Costello. We thank you, Mr. Bolen.
    Our last witness for this panel is Mr. Roger Cohen, the 
President of the Regional Airline Association.
    Mr. Cohen. Thank you, Mr. Chairman, Members. I am Roger 
Cohen.
    For the past three months, I have had the honor of being 
President of the Regional Airline Association. I would like to 
just limit my remarks to those things that you have not heard 
yet.
    Without much fanfare and under the radar screen, America 
has come to depend on regional airlines. Last year, we flew 158 
million passengers. That is almost one out of every four 
passengers in the United States. We are about 40 percent of the 
commercial fleet and nearly 50 percent of the total departures 
every day.
    Just yesterday, I saw the figures that post-9/11, our 
member airlines, in a very difficult environment, have added 
18,000 jobs, 18,000 full-time jobs. Our network partners have 
been forced to eliminate 87,000 jobs, about 23 percent of the 
total work force. Most importantly, our regional airlines serve 
some 650 communities across this Country. Here is the telling 
point: 442 of those, 70 percent, are served exclusively by 
regional airlines. In other words, if it were not for regional 
carriers, those 442 communities would have no scheduled airline 
service.
    Preserving this network of safe, convenient, and affordable 
regional airlines service is at the heart of RAA's views on the 
financing proposal. It is our number one priority. I wanted to 
clarify and answer to a question that was asked before, how 
this proposal would impact the regional airlines. I must tell 
you, we believe that the legislation before you would make air 
travel less convenient and less affordable for millions of 
Americans, particularly those who live in those 442 communities 
whose service is exclusively provided by regional airlines.
    Everything else you have heard today, we echo many of the 
comments you have heard about modernization and working 
collectively with the other stakeholders toward the Next 
Generation system. There obviously is no disagreement on that.
    But finally, at the end of a long day, but it is not an 
afterthought, I just want to share with you one last thing. I 
was a very young public relations representative working for 
TWA covering the hearings in Congress when Congress deregulated 
the airlines. Congress made a pledge to communities across this 
Country that they would not be abandoned, that because of their 
size, they would not lose all access to the national 
transportation network. The Essential Air Service program was 
created as part of that. Every Congress since then has 
maintained that pledge. We would hope and trust that you 
continue to recognize that pledge that was made to date, 140 of 
those communities across the Country.
    With that, thank you very much, Mr. Chairman.
    Mr. Costello. We thank you, Mr. Cohen.
    Mr. Boyer, you indicated in your testimony that nine out of 
ten of your members would reduce or curtail their flying if the 
fuel tax is raised to 70 cents. Can you tell us how you arrived 
that at figure, nine out of ten?
    Mr. Boyer. Actually about a year ago, once again, like you, 
we were waiting for a long time for this proposal. So it was 
supposed to be out last spring, and we decided when we started 
to hear of a dramatic fuel tax increase possibly being in it, 
we commissioned a study in conjunction with NBAA. We actually 
segmented the turbine and piston powered airplanes. We did a 
sliding scale that went from 25 cents, not knowing what it 
would be, all the way up to $1. Then we asked questions on, 
reduce your flying, curtail flying altogether. In the NBAA 
example, we said, disband your corporate fleet, et cetera.
    Our numbers came out actually 88 percent would reduce or 
curtail their flying. Now, I am picking the largest of the 
numbers. The curtail was down at about the 27, 28 percent 
category. So it was a survey done of very statistically valid 
size sample of our membership. Once again, in anticipation of a 
proposal that came out about a year later.
    Mr. Costello. I understand also that you are doing some 
type of an analysis right now to take a look at similar charges 
that are imposed on boats and motor vehicles. I would just 
request that once the analysis is done that you make it 
available to our Committee, if you would.
    Mr. Boyer. We very definitely will. It should be completed 
within about a week and a half or two weeks. It will address 
the certification fees that are in for getting a license, 
buying a plane and licensing it, and the charges that are in 
the bill that we didn't talk about today. But they are 
minuscule compared to what we are talking about at this panel.
    Mr. Costello. Thank you.
    Mr. May, you talked about a commitment and that you would 
like to see a robust general fund contribution. As I have said 
many times to I think everyone here testifying today, I just 
wonder what your definition, what percentage should that robust 
contribution from the general fund be?
    Mr. May. Mr. Chairman, I think it is probably north of 20 
percent. But I think the question that needs to be answered 
first is, how much money are we looking to raise? What is the 
formula for trying to raise that money? Are you going to have 
some sort of a contribution by people who use the system? Are 
you going to have bonding? If you are going to have bonding, it 
has to be obviously under a lot better circumstances than are 
proposed in the Administration's bill.
    I happen to think that innovative financing is a very 
worthwhile idea if done right, because there are some huge 
capital expenditures that are foreseen by the FAA. We are 
spending $2 billion a year, today, right now, on maintaining 
this antiquated system. How much savings are you going to 
generate out of that?
    Then when you get down to that fourth leg of the equation, 
how much do you then need for general fund? And what are the 
policy considerations that attach to that?
    Mr. Costello. The next question that I would ask is, from 
the FAA's proposal for the user fees, it makes me a little 
nervous and concerned that the FAA would have almost unilateral 
authority to raise fees. Given their track record, and it has 
been demonstrated, you heard from the earlier panel, both the 
IG and the GAO, I have concerns that if human nature is if you 
have a system where you can just spend whatever you decide to 
spend and then generate the revenue to match what you are 
spending, there is not an incentive for efficiency.
    I just wonder if you have concerns about the FAA's ability 
to, under their proposal, to be able to generate revenue as 
their expenses go up?
    Mr. May. Mr. Chairman, STARS, ERAM, WASS, FTI, $6 billion 
in overruns. We absolutely have those concerns. We have had the 
blank check conversation, if you will, with a number of people 
in the Administration and Members of Congress up here. We have 
looked, philosophically. We are paying 94 percent of the bill 
right now. I would like to readjust that down the road, and I 
would hope we would find some support for equity among users in 
the system.
    But at the end of the day, I am still going to be paying 
the lion's share of the bill. It is in my absolute best 
interest to assure that we are not giving anybody, FAA or 
anybody else, a blank check to do what they need to do. That is 
why I happen to think that governance is a critically important 
subject also.
    Mr. Costello. Last question about privatization. You have 
indicated in your testimony and other conversations that you do 
not necessarily support privatizing the air traffic control 
system. Is that an accurate statement?
    Mr. May. That is an accurate statement.
    Mr. Costello. Do you support some type of, if not 
privatization, a system similar to the Canadian system?
    Mr. May. No, sir, I do not. What I have tried to suggest to 
people is, look, this is a difficult subject to talk about. But 
we have this massive job in front of us. There are a whole lot 
of people that have a tendency to try and indicate how they 
would like that job to be done, even though they are not part 
of the process, necessarily.
    The FAA has about 5 percent discretionary opportunity with 
its AIP money. I think we both know what a major part of the 
reason for that is. Every time the FAA tries to shut down or 
consolidate operations, boom, a lot of our friends up here 
object to that. Seriously. Phil did a heroic job on flight 
service stations, trying to get them to go to a different 
status. It was not an easy task, even though it was the right 
thing to do.
    So I think there needs to be some level of independent 
thought and governance created, however that happens. I am not 
advocating corporatization, privatization. But I think there 
needs to be some level of independent authority that says, here 
is what we need to do and we need to make the right decisions 
and we need to think through. Because the FAA by itself has not 
done a really spectacular job.
    Mr. Costello. Thank you.
    Mr. Alterman, you indicate in your testimony that the FAA's 
proposal would require a complicated and costly bureaucracy. Do 
you want to just give a brief follow-up and explanation?
    Mr. Alterman. Yes, under the proposal, it looks to us, 
anyway, that it would be not really very simple to figure out 
who owes what and how to collect that money. An analogy I have 
made before is that we all get solicitation letters from 
charitable organizations asking for money. One of the first 
questions I ask is, does all the money I contribute go to the 
intended recipient, or am I going to be giving money to pay 
somebody's salary and have 20 percent or more in administration 
fees.
    It is the same thing here. There are not unlimited funds. 
Believe me, they are not unlimited funds. So the money we do 
raise should go to the modernization effort and not to fund 
another bureaucracy at the agency.
    Mr. Costello. And as it stands today, we still do not know 
what it would cost to administer the collection of these fees, 
how the system would operate and what the costs would be. When 
the Administrator was here, she indicated that it would be 
contracted out. But there were not costs associated with 
contracting out.
    I thank you.
    Mr. Zuccaro, you indicated that helicopters could help 
with, and currently help with the congestion at some of our 
airports. As you have seen and reviewed the FAA's proposal, 
would helicopters receive any kind of incentives for easing the 
problems with congestion at our airports?
    Mr. Zuccaro. Not that we noted in the proposal. Right now 
there are a number of elements. That is why I indicated what I 
said, if we are talking in terms of fairness and equitability, 
the money that is contributed by the helicopter operators 
through whatever system, some thoughts should seriously be 
given to develop that system that will allow that methodology 
of city center to city center to further develop.
    We would require FAA funding or governmental assistance in 
developing that heliport network. Also the network of 
instrument approaches that would be off-airport, that would not 
require us to take up a slot, even in IFR weather. We currently 
do that now. It is privately funded. The heliports are 
privately funded. The approaches are privately funded. We are 
doing everything we can to draw more traffic into off-airport 
locations. With new technologies, such as the civil tilt-rotor, 
with the potential to carry up to 70 passengers, city center to 
city center, that is a significant off-take from the airport 
infrastructure and the IFR infrastructure.
    But we really don't see any recognition of the helicopter 
industry in any of this. We are kind of lost in there. And we 
are placed in a category with piston airplanes. We do not 
operate, as I think I clearly indicated, like any airplane. Our 
needs are different, our requirements are different. But the 
good news is, our capabilities to help in the system off-
airport are much different than airplanes.
    So now, we are not being addressed at all. that is what is 
frustrating, quite frankly.
    Mr. Costello. Mr. Bolen, you have pointed out that there 
has never been an FAA modernization plan or program that has 
failed for the lack of support from the Congress or lack of 
funding from the Congress. You also point out that we may be 
going down a slippery slope here as far as reducing 
Congressional authority and oversight by implementing a user 
fee system. I happen to believe that both of those statements 
are correct. But I would ask you to elaborate.
    Mr. Bolen. I think they are fairly straightforward. When 
you look at the number of programs, and my friend, Jim May, 
just announced a few of them, the thing that Congress showed 
throughout all of those programs is a strong commitment to 
Congress to funding them unless and until the FAA determined 
they couldn't use those funds effectively.
    The FAA has tried to say that the reason they can't 
modernize is because Congress has not been providing stable and 
predictable funding. That simply is not true. Even if you look 
at their request this past year for the NextGen programs, and 
there are two Next Generation programs in the current budget, 
one is ADS-B and the other is the system-wide information 
management system. The Administration asked for a collective 
amount of $50 million for those. Congress provided $80 million.
    Congress is consistently supportive of capacity enhancement 
programs. They have not been the problem. They have provided 
strong, necessary oversight. They have made the FAA 
accountable, and that has made them better program managers. We 
don't want to see that go away.
    Mr. Costello. I thank you.
    At this time the Chair would recognize the Ranking Member, 
Mr. Petri.
    Mr. Petri. Thank you very much, Mr. Chairman. I just have 
one or two, maybe three or four questions, but not too many, I 
hope.
    Mr. Boyer, I apologize for having missed part of your 
testimony. But the full statement is in the record. You 
represent probably a majority of the pilots in the United 
States who are licensed. And so you have to take a pretty broad 
position. I don't know if you would be willing to address this 
question or not, but you heard my colleague, Mr. Duncan, 
talking about difference in charges for people who actually use 
the system as opposed to don't fundamentally use the system. We 
have a lot of people who are crop dusters or who are very much 
recreational pilots, going around but not really having their 
flights within the air traffic control system.
    Do you have any suggestions as to how we could 
differentiate between elements of the general aviation 
community, or do you think one size fits all so far as the fuel 
tax assessment actually makes sense?
    Mr. Boyer. Once again, I think if we can get the most 
onerous part of this bill out of the discussion, the user fee 
part, I think this is excellent discussion material. We have 
had long thoughts and actually suggested to the FAA in the two-
year period they were putting this together some various 
categories. I don't mean to sound as if I have created this 
answer for your question, but the market is changing. Now, once 
again, you have a district that sees the most recreational side 
of general aviation, once a year at the world's greatest air 
adventure in Oshkosh. But all flying is not like that. Even 
that event, which is primarily people who fly what I would call 
below the radar screen, do have to use a control tower at that 
event. It is boosted up.
    We are going to a system that more and more requires air 
traffic services, whether you just be a pleasure flyer. The 
security restrictions in aviation, the more control, the 
various classes of air space, the temporary flight 
restrictions, the use of a transponder and now subsequent 
devices that will be used in NextGen all require operating. So 
it will be very hard to operate in the future as we did 
yesterday, as Mr. Graves, who came in, does with his Piper Cub 
in the middle of Missouri. But it will be very difficult to do 
that as we move forward.
    So we are going to have take that into account. But it is 
something we would welcome the opportunity, already have put 
some ideas on the table to begin to figure out, okay, what 
segment uses more, uses less. It is still not going to be the 
science that the FAA would claim they already have down, and 
that our panel number one indicated may be right, may not be 
right. I think we are all going to have to work together on 
that.
    Mr. Petri. Mr. May, I think you pointed out that in the 
opinion of your organization, the existing system of paying 
could stand some improvement. Could you give examples of 
inequities and inefficiencies in the current system of funding 
the air traffic control system?
    Mr. May. Mr. Petri, I think the cost allocation exercise by 
the FAA does as good a job of that as anything. If you take a 
look at where the FAA is expending its resources and energy, we 
account and commercial airlines account for probably somewhere 
in the range of 68 to 70 percent of operations in the system. 
We are paying for 94 percent of all the dollars that are going 
into the Trust Fund. That is a direct allocation number.
    So what we have suggested is, if you want to focus in on 
that cost allocation, if you want to look at the other high 
performance users of the system, and as I explained to my 
friend, Mr. Boyer, back in April of 2005, I have no interest in 
going after the piston aviation GA crowd. But if you look at 
the high performance turbine operations, the net jets, the 
charters, the privately owned, the corporately owned aircraft 
that are in the same airspace that demand the same system, FAA 
tells us 98 percent of them fly IFR, then I think it is a 
matter of fairness and equity that if they are using 16 percent 
of the system, which they are, and they are paying for 6 
percent, that that number needs to be adjusted. I think this 
Congress and this Committee, along with the Ways and Means 
Committee, will have the task of doing that. I think it is a 
matter of equity.
    Mr. Petri. Thank you.
    Just one last question, if I could, of Mr. Bolen. Could you 
give us any sort of brief overview of what you feel can be 
accomplished in the next three to five years so far as 
improving the air traffic control system?
    Mr. Bolen. First of all, I think we ought to make sure we 
understand just how far we have come in the past couple of 
years. The foundation clearly of going forward according to the 
FAA, the Joint Planning and Development Office and everyone 
else associated with NextGen is the automatic dependent 
surveillance broadcast technology. That is a technology that 
the general aviation community pushed to have a pilot program 
in Alaska. The cargo carriers have done that in the Ohio 
Valley. We feel that that technology is clearly at the 
forefront of the modernization effort.
    We have some questions related to certification and 
implementation that need to be ironed out. But that is clearly 
something that we can do.
    Another example of the transformation that is already 
underway is reduced vertical separation minimum. Two years ago, 
we effectively doubled the amount of capacity in our en route 
air space because of significant investments that were made 
primarily by the general aviation community but also by the 
commercial airlines in altimetry that allowed us to go from 
2,000 foot spacing to 1,000 foot. When we continue to look 
forward, ADS-B is clearly at the foundation. The System-Wide 
Information Management program, or SWIM, is part of that. Then 
we need to be about Phase 2 of the ERAM program. Those 
technologies are really at the heart of the next system. And 
when you look at what we think the cost of that is, either the 
industry groups, the Joint Planning and Development Offices, 
all of industry, the cost of modernizing the system for NextGen 
is somewhere around $300 million to $1 billion per year.
    To put that in perspective, that is about 3 to 8 percent of 
the FAA's funding. It is an amount of money that we can all get 
our arms around and we should be able to find a way to make 
happen.
    Mr. Costello. I thank the Ranking Member.
    The Chair will recognize the gentleman from Illinois, Mr. 
Lipinski.
    Mr. Lipinski. Thank you, Mr. Chairman.
    As we start out on looking at the FAA reauthorization and 
specifically, the funding here, I only have one question. But 
this question, a very broad one. Just to get a sense from all 
of you, because I have heard a lot of and I have read in your 
testimony a lot of ideas about what is wrong with the 
Administration's proposal. Not that I am here defending the 
proposal. But I would like to hear, probably starting with Mr. 
May, what you would see as the general outlines of what you 
think would be the most fair and the best way to fund. Where 
should the funding come from, how exactly? Because there is a 
lot of, understandably, problems that all of you have in 
different parts of the Administration's proposal. But what do 
you think should be done?
    Mr. May. I will answer that as two questions. The biggest 
concern we have with the proposal staying strictly with the 
finance side of the proposal, is the subject that your 
colleague Chairman Costello brought up a minute ago. It has to 
do with cost and the lack of cost controls. It has the 
potential to become a wide open funding mechanism, blank check, 
whatever term you want to use. That is probably the single 
biggest concern I have with this.
    What I would like to see going forward is a funding system 
that allocates revenue into that system in some fashion that is 
tied to the use of that system. I understand that----
    Mr. Lipinski. How do you----
    Mr. May. I understand that the term user fee is nuclear in 
this Committee, that you will be fighting with one another to 
have the honor of playing taps at the funeral. But there has to 
be some mechanism where you can allocate costs, a cost 
allocated revenue system that can suggest that if I, 
representing the commercial airlines business, United Airlines, 
right on down the line, am using roughly 68 or 70 percent of 
the overall cost of the ATO, then I ought not to have to pay 
into the system more than what I use.
    Mr. Lipinski. Let me focus down my question then on use and 
how use is defined. Because that is another question that is 
certainly out there for all kinds of different suggestions on 
this one. Mr. Bolen, you had something?
    Mr. Bolen. I was just going to follow up on that. You are 
absolutely right. How you define use is fundamental to this 
debate on one's fair share. What the big commercial airlines 
have been promoting for a number of years here in the United 
States is something that they have been promoting 
internationally for decades. And that is that you look at all 
airplanes the same, whether they have 3 passengers, 30 
passengers or 300.
    That idea of looking at all airplanes the same has been 
rejected by every country around the world. It has been 
rejected by the International Civil Aviation organization. We 
keep hearing about the privatized places like Canada and 
Australia. Even Canada says, it should be noted that from a 
cost of service perspective, the majority of the infrastructure 
and operating costs of the system are driven by commercial air 
carriers operating large transport aircraft. You see, 
everywhere in the world, they see the fallacy that all 
airplanes are the same. They understand that the system costs 
are driven by commercial carriers and their large aircraft 
operating in a hub and spoke model. We understood this when we 
created it in 1970, that the system was built by and for the 
commercial airlines. And we have repeated understanding that 
every time the financing has been extended, including the last 
time in 1997, when changes were made to the formula, but they 
weren't made to the concept.
    Mr. Lipinski. If I can come back to, I want to let Mr. May 
conclude here, because this isn't meant to be any kind of 
statement on the definition of use that you use. I want to see 
if anyone else has any comments on that definition, then I will 
let Mr. May.
    Mr. Boyer. Well, I hate to let Mr. May have the last word, 
but I think the key, and your question is an excellent one 
about how do we define use. How and when do you use the system 
drives costs. Not a lot of airliners are taking off at midnight 
or at 11:00 p.m., and that is a place where even Mr. Alterman 
in his written testimony said, we primarily use the system 
during a period that not a lot of airlines use it.
    There are a lot of scheduling, and you have heard this, 
when you look at the airline schedules, all departures in the 
morning and late in the afternoon and sometimes during the 
middle of the day you can shoot a cannon off through those 
airports. What about the airlines that decide they are going to 
abandon a hub, that the FAA has put a huge infrastructure in 
the terminal radar environment, in the runway environment, 
Nashville is a good example, St. Louis is a good example. It is 
how and when you use the system, not just counting it.
    And the last one is, in the news this week was the landing 
of the 380 here in the United States, at a couple of our 
airports. The Airbus 380 cost the Los Angeles Airport, using in 
many cases Federal funds, $60 million to upgrade. At JFK, it is 
$150 million. So these are costs in the system that the FAA is 
not picking up when they call a blip is a blip or this was the 
cost of flying IFR. There is quite a difference between when 
you use the system, how you use the system and what you need 
from the system, like Category 3 approaches, which are not used 
by business aviation or general aviation, sophisticated 
approach lighting systems, et cetera. It is an excellent 
question.
    Mr. Lipinski. If the Chairman will allow us to hear from 
Mr. May.
    Mr. May. I think this is a discussion, Congressman, that 
can probably take most of the afternoon back and forth with a 
lot of different views. I would suggest to you that what the 
FAA has suggested as a measure is the distance flown in the 
system as a variable. Because what we are talking about is use 
of airspace, fundamentally, how much time do you spend in the 
system, how far do you travel in that system, and then some 
fixed component. I have a problem with the way the FAA did it 
in this particular piece of legislation, but a fixed component 
that relates to the number of operations or the use of 
terminals. I think you can adjust, as Mr. Boyer has indicated, 
by time of day, et cetera.
    What I am trying to get at fundamentally is that if the FAA 
has a cost allocation approach and the IG sat here this morning 
and said it was sound, GAO sat here this morning and said it 
was sound, if you got an accepted cost allocation study, then 
you ought to apportion the cost of the ATO in some fashion back 
to people who are using that system. You can call it whatever 
you choose. I don't want to lead to corporatization or 
privatization. But I think there is an equity issue involved 
that says, if we are paying for 94 percent of all the costs of 
the ATO and we are only using by Price Waterhouse generated 
measurements that have been reinforced by the IG and the GAO, 
if we are only using 68 percent, then we ought to find a way to 
rebalance that equation.
    Mr. Lipinski. Thank you. I know this discussion will 
continue.
    Mr. Costello. The Chair recognizes the gentleman from 
Kansas, Mr. Moran.
    Mr. Moran. Mr. Chairman, thank you very much.
    Mr. Cohen, as I walked in you were talking about regional 
airlines. Kansas of course is a State in which regional 
airlines are awfully important.
    I am interested in your just reminding me that, what 
components of FAA reauthorization should I and others who care 
about regional airlines and smaller airports be most concerned 
about? What issues do you want to raise? And is there something 
in the Administration's proposal that is particularly 
troublesome to the regional airlines?
    Mr. Cohen. Mr. Chairman, Mr. Moran, yes, there is quite a 
bit that is troubling in the Administration's proposal. And I 
would just point, a couple of weeks ago, the FAA gave everybody 
in this room an illustration of various scenarios under which 
the new system would change, how you would pay, what you would 
pay today as opposed to what you pay tomorrow. The one that 
struck me as the representative of the regional airlines is 
that a CRJ from Minneapolis-St. Paul to Minot, North Dakota 
would have to pay 36 percent more under the FAA's proposal. And 
the next example they gave was that a 747 from Tokyo to Los 
Angeles would pay 16 percent less.
    I think that that same kind of calculus can be used 
virtually around the Country at all of those communities, a 
number of them in the middle of the Country, in Kansas, as you 
know, a number of places. It is interesting that you mentioned 
Kansas, because I had the pleasure of working for both Mr. May 
at the Air Transport Association and Mr. Boyer at the Aircraft 
Owners and Pilots Association. When I would work for AOPA and I 
would go out to try and talk to a number of mayors and city 
councilmen and State legislators about the value of their 
general aviation airport, what they have told me repeatedly 
over the last few years was the kind of great service that they 
were getting to multiple hubs from their commercial airport 
because of the regional aircraft that are serving them now. For 
example, right now in Wichita, you can go to Chicago, you can 
go to St. Louis, you can go to Denver. And there are multiple 
choices, much better, more frequent service than there had been 
previously.
    So that is probably a long answer, but the question was 
asked earlier, and I don't know if you were in the room, by Mr. 
Coble, who asked the FAA how their proposal would impact 
regional aircraft. He said, I believe, I don't want to 
mischaracterize what he said, that it wouldn't harm them. And 
that is just patently not true.
    Mr. Moran. I know that this Subcommittee is going to have a 
hearing on essential air service, or at least the topic of 
essential air service is scheduled for April. I would invite 
you to visit with me and make certain that we are well informed 
of any issues that we need to pursue in regard to essential air 
service. Kansas is another State that is very much dependent 
upon that program.
    Mr. Bolen or Mr. May or both of you, during the last FAA 
reauthorization, GAO found that the major cost drivers of the 
air traffic control system was the hub and spoke system. I know 
Mr. Bolen just talked about that. Is that still true today? I 
guess I just heard you say that what we started with a long 
time ago was, I think Mr. Boyer was saying this, that what we 
started with a long time ago was the hub and spoke system. The 
system was designed based upon that plan. And my guess is that 
not a lot has changed in regard to hub and spoke. Is that true?
    Mr. Bolen. I think over the past 10 years, since this 
particular Committee did a deep dive into FAA funding and 
actually modified the taxes to reflect what was the current 
environment, what we have seen over that time is that 
commercial operations have grown faster than general aviation 
operations, including general aviation turbine operations. And 
that in addition to them growing, they have grown in hub 
operations specifically.
    That is why, and we have articulated a number of concerns 
with the FAA's cost allocation study. But it is hard for us to 
understand how it can be so radically different from what they 
did in 1997, since it was understood that hub operations drove 
costs then, there are more hub operations now, the relative 
activity between commercial and general aviation shows more 
growth on the commercial side.
    And yet because they have gotten away from what is known as 
the first, best approach to accost allocation and the second 
best approach to cost allocation, and come up with their own 
customized system, they have come up with a cost allocation 
that shows general aviation owing much more this time around 
than the last time. So that is really our concern, is it seems 
to be at odds with good economic principles and with what we 
know has happened in the market over the past 10 years.
    Mr. Moran. When you describe what has happened, and my time 
is expiring, but are the projections the same for general 
aviation and commercial, as we look into the future, the same 
kind of increasing use?
    Mr. Bolen. I think there is a variable out there that has 
been discussed that no one really seems to know. And that is 
the impact of very light jets on the market. There are some who 
have suggested that will facilitate a new business model known 
as the air taxi market. And if that is successful, that could 
eventually change some traffic patterns. We don't really know. 
Jack Pelton, who you know is the President, Chairman and CEO of 
Cessna, which since 1927 has built half of all general aviation 
airplanes in the world, believes that there are maybe 500 very 
light jets that will be delivered between now and four years 
from today. We heard earlier, someone used a 10,000 figure. 
Difficult to know what those numbers are.
    I think the important thing is that the number of general 
aviation airplanes has grown significantly since 1970, the mix 
of hours flown between commercial and general aviation has if 
anything become more dominated by commercial. The fundamental 
reason for that, and it was stated earlier in the hearing, is 
that a commercial airplane flies about 3,800 hours per year. A 
general aviation turbine airplane flies about 370 hours per 
year. In other words, for every commercial airplane, they are 
flying about 10 times as many hours as general aviation. We 
expect that to hold true with the very light jets as well.
    Mr. Moran. Thank you, Mr. Chairman.
    Mr. Costello. I thank you.
    Mr. Bolen, just a quick question. You heard me, I think 
earlier, ask Dr. Dillingham about looking at other countries. I 
would ask you, in your capacity of looking at other countries, 
do any countries that you know of assess fees according to 
those who use the system? In other words, we talked about many 
other countries that for general aviation they assess one fee 
that is much lower, so it is not based on just how often you 
use the system.
    Mr. Bolen. Almost universally around the world, rates and 
charges are based on aircraft weight and aircraft distance. In 
some companies, if an aircraft gets below a certain weight, 
they will go to a registration type fee. So there are two 
different ways that are universally done. What we have said is 
in the United States, we have a very good proxy for aircraft 
weight and distance flown. That is called the fuel tax. We are 
able to pay that without an administrative burden on either the 
Government or industry. It is an ultra-efficient way to do it 
and we think it should be continued.
    Mr. Costello. Thank you.
    The Chair recognizes the gentleman from Missouri, Mr. 
Graves.
    Mr. Graves. Thank you, Mr. Chairman, I appreciate it. I 
have been here and there all day long today and I apologize for 
missing a good part of the hearing today. As you are well 
aware, I am very interested in this subject.
    But I do have a couple of questions. One, the statement was 
made earlier today by Mr. Dillingham with GAO, he stated that 
cost overruns, when implemented in a new system by FAA in the 
past, the cost overruns were the cause of a number of reasons, 
including the lack of stakeholder input. My question is, how 
many of your organizations were included in that process as 
they were talking about this new air traffic control system and 
obviously, the stakeholders, as he put it, there are people who 
are going to be paying for it.
    Mr. Bolen. Well, Congressman, I would simply say, from an 
NBAA perspective, we have attended a number of briefings where 
the FAA has told us what they are going to do or how they are 
going to do it. We have always submitted comments and requested 
additional meetings to follow up with them. To date, those have 
not been, in most cases, answered. In the few cases where they 
have been answered, the requests have been denied.
    Mr. Alterman. One thing I can say for the FAA, as Mr. Bolen 
indicated earlier, the cornerstone of the Next Generation 
surveillance system will be a technology called ADS-B. We 
started working on ADS-B about 11 years ago when we started to 
look for an alternative to a radar-based collision avoidance 
system. I think we were before our time, because we never got 
that done, and we have a traditional TCAS in our aircraft.
    What we discovered was that the technology involved, ADS-B, 
had a whole host of other options to help the system. And we 
have been working cooperatively with the FAA Safe Flight 21 
office to help develop those, as has the general aviation 
community in Alaska, with the Project Capstone that they had up 
there. But I think the implementation of ADS-B technology 
reduced the accident rate by approximately 42 percent, or 
something around that number.
    So not with respect to whatever proposal they have now, but 
over the past decade, I have to say that the agency has worked 
cooperative with industry on specific projects that will help 
the NextGen system.
    Mr. Boyer. The one thing I can tell you, using Steve's ADS-
B analogy, which we have been involved in, as you know in 
Alaska for almost over a decade, I think the FAA lacks some 
organization right now. The Committee should be aware that ADS-
B is the one technology of NextGen that everybody seems to be 
talking about.
    But on a fast track, because they are set up in silos for 
program offices, they are fast tracking a rulemaking procedure 
that will begin in September, they hope to have it out in 
September, just to say, hey, we have this new technology out. 
And there are still a significant number of unanswered 
questions. We have been scrambling in our organization for 
three weeks, meeting with various vendors, with the FAA and 
with others.
    So the FAA is set up in a way in which it is not integrated 
over all paths. ADS-B could be a data link of the future, ADS-B 
has to be integrated with collision avoidance systems in the 
planes that fly in the Class Bravo airspace. These things are 
not being looked at.
    So this will probably cause a delay and an overrun unless 
we get stakeholders even more involved in asking these 
questions up front.
    Mr. Zuccaro. I can put a little different perspective on it 
from our standpoint, from the helicopter industry. We are 
involved heavily in the ADS-B initiative. As I pointed out 
previously, we had a situation in the Gulf of Mexico where for 
over 40 years, you had 650 helicopters operating on a daily 
basis, moving tens of thousands of people on and off platforms. 
You had no ability to talk to the FAA, nor could they see you. 
The operators had to create their own infrastructure.
    Last year, we were able to negotiate with the FAA as a 
partnership the installation of ADS-B into the Gulf of Mexico. 
That is a complete turnaround from the past history of the 
operating environment in the Gulf. The burden economically had 
been historically on the operators completely to build their 
own systems, because there was no national airspace system 
extended out over the Gulf in the altitudes that they operated 
in.
    We have stepped up to the plate in working with the FAA by 
contributing $100 million in in-kind services. We are committed 
to the technology. But the unique aspect of this is the 
advantage of ADS-B to the helicopter community is off-airport 
environment, outside that normal environment. It is an area 
such as this where we have nothing. We don't have 
communications or weather or air traffic control surveillance 
communications. It is to the EMS operator that is in a rural 
area that has no services, because he is below the radar 
screen, outside communications and not in an ATC environment. 
We have to create that system for him, and ADS-B provides us 
the best methodology to do that. So it is a safety enhancement 
and an operational efficiency enhancement.
    I will acknowledge freely that we sincerely appreciate the 
Administrator's help and leadership in taking ADS-B to that 
level within the helicopter community to recognize the safety 
initiative and the operational information that it provides us. 
But it is a flip-side coin. As was previously noted with the 
question, how do you get an equitable system? You take our 
segment of the industry. We do not operate in that environment. 
We are paying for a system that builds runways and airports. We 
don't runways and airports. We need heliports.
    How do we get that equitably put into place? We don't mind 
paying our fair share. But make sure it is fair and make sure 
we get the benefit of the funds that we put in that reflect our 
segment. We do operate at airports occasionally. And some of 
the funds we pay absolutely and rightfully belong in the 
support of those airports that we operate at. It is not an easy 
question.
    Mr. Alterman. One final point on what Mr. Boyer said. I 
think it points up a problem. One of the things that we 
mentioned in our testimony was, we don't seem to have the 
definition of the system yet. We have components of the system. 
And that is a real problem. We as an organization and as an all 
cargo industry, have supported the development of ADS-B. But 
before the commercial airlines start investing multi-billions 
of dollars in the avionics to support that, we have to know 
what the system looks like and the benefits to the industry 
defined. We know that we have to do phase one, which is putting 
in ground stations, and that will help GA more than the 
commercial airlines. We don't have any problem with that. But 
we have to do the research to understand and get the system so 
that the air to air applications, where the real benefits occur 
to the commercial airlines occur. We don't have that defined 
yet.
    So we are total supporters of ADS-B. We have worked on it 
for over a decade now. But how it fits into the system and the 
cost and benefits to everybody in that system have been poorly 
defined. That is what makes everything so difficult. We don't 
know what we are funding yet.
    Mr. Graves. That is actually the best point of all, and I 
see no reason why we need to put a funding system ahead of 
something we don't even know quite yet what it is going to be.
    Will the Chairman allow one more? And I have to ask this 
half in jest, and it is to Mr. May. In light of the subject 
matter, and talking about user fees and how we are going to 
fund the system, I think it was in the Wall Street Journal 
recently, the article about air carriers using highly 
sophisticated software to fly through Europe, so that they 
would miss user fees in certain countries. In fact, this one 
airline was cited as, they used it to avoid about $146 million 
worth of user fees in Europe.
    I am just curious as to how that blends in with all this 
talk of, if we are trying to avoid user fees in Europe, then 
why on earth are we trying to implement them in the United 
States?
    Mr. May. Mr. Graves, sometimes you have to be able to 
answer in half jest as well as ask the question.
    Mr. Graves. I understand.
    Mr. May. It brings a smile to my face.
    Mr. Costello. I thank the gentleman from Missouri.
    Let me in closing thank all of our witnesses here today. 
Certain it was a longer day than you anticipated or we 
anticipated your being here. But it has been very productive. I 
think there is one thing that we all can, I think, agree on, 
and that is that the FAA's proposal in particular for the user 
fee system presents a lot of questions, answers that they have 
not been able to put forth yet. It seems to me that if you are 
going to radically change the current system that you need to 
explain what your alternative is in detail, outline the cost, 
the administrative cost as well as every other associated cost. 
And you need to get out and sell the plan.
    As I mentioned earlier, we were told last summer, in June, 
that we would receive the FAA's proposal. Had we received it 
then, it would have given us time to analyze and to ask and try 
and spend some time on their proposal. Unfortunately, June 
slipped to September and then September to the end of the year. 
Then of course we received the proposal about 30 days ago.
    Realistically, I don't know how we are going to be able to 
write a reauthorization bill and I don't know how the FAA or 
anyone else would expect us to implement this user fee system 
as it has been presented. As the Administrator pointed out, we 
do have a time problem. We have a short window here for us here 
in the House to be able to mark a bill up, get it from the 
Subcommittee to the Full Committee to the Floor, let alone what 
our friends on the other side of the Capitol, the work that 
they have to do and then get it to conference and get it to the 
President.
    So I think it has been said, and I will repeat it again, 
Dr. Ehlers said that it was dead on arrival, Chairman Oberstar 
said that the user fee system today, that he would like to give 
it a proper burial. I think that it would be in our interest to 
consider everything that is on the table, but to be realistic 
and move on and address things that we can agree on and can 
address.
    So you have added to the debate today and we of course are 
holding a hearing tomorrow on the operations and safety issues. 
We will move on to hear from other stakeholders in upcoming 
hearings.
    We thank you for being here today. We thank you for your 
testimony and the Subcommittee stands adjourned.
    [Whereupon, at 4:00 p.m., the Subcommittee was adjourned.]


[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]




HEARING ON A REVIEW OF FEDERAL AVIATION ADMINISTRATION OPERATIONAL AND 
                            SAFETY PROGRAMS

                              ----------                              


                       Thursday, March 22, 2007,

                  House of Representatives,
    Committee on Transportation and Infrastructure,
                                  Subcommittee on Aviation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Jerry 
F. Costello [Chairman of the Subcommittee] presiding.
    Mr. Costello. The Subcommittee will come to order. The 
Chair would ask all Members, staff, and everyone in the room to 
turn off their electronic devices or put them on vibrate.
    Let me welcome our witnesses here, all of them. We have 
three panels today and we will hear from the first panel very 
shortly.
    The Subcommittee is meeting today to hear testimony on a 
review of the Federal Aviation Administration's operational and 
safety programs. Today is an opportunity for the Subcommittee 
to hear from various stakeholders and those involved in the 
system their views, comments, and recommendations for the 
reauthorization.
    Let me say that the Chair will impose the same procedures 
that we used yesterday at our hearing, since we have a number 
of witnesses. I believe we have 11 witnesses to hear from 
today. I hope we don't experience the number of roll call votes 
that we had on the floor yesterday.
    One is that the Chair will give an opening statement, will 
call on the Ranking Member to give his opening statement or 
comments, and then ask all of the Members to submit their 
opening statements for the record.
    Mr. Mica, I did not see you come in, but we certainly will 
recognize you.
    Let me begin by giving my opening statement.
    I welcome everyone here to the third Subcommittee hearing 
on the FAA's reauthorization. This hearing will provide a 
general review of issues associated with the FAA's operational 
and safety programs.
    This hearing represents an opportunity for our panelists to 
discuss issues that they believe this Committee should consider 
in the FAA reauthorization. The first panel will include 
testimony from the FAA's workforce, including the controllers, 
represented by the National Air Traffic Controllers 
Association; air traffic technicians and aviation inspectors, 
represented by the Professional Airways System Specialist; and 
other FAA professionals, represented by the American Federation 
of State, County and Municipal Employees.
    I have repeatedly stated that I am concerned about future 
staffing levels for the FAA's controller and safety inspector 
workforces. In particular, over the next 10 years, 
approximately 70 percent of the FAA's nearly 15,000 air traffic 
controllers will be eligible to retire. The FAA believes they 
could lose more than 10,300 air traffic controllers by 2015 and 
they will need to hire approximately 11,800 controllers over 
the next 10 years to have enough recruits in the pipeline to 
meet the positions lost.
    There is no question that the FAA's imposition of pay and 
work rules on the controllers' workforce has increased 
retirements. According to NATCA, veteran controllers are 
currently retiring at a rate of more than three per day since 
the end of the fiscal year 2006.
    It is clear that the current contract negotiation process 
does not promote good faith negotiations and gives an unfair 
advantage to the FAA. I am committed to fixing this grossly 
unfair process during the FAA reauthorization bill.
    In addition, it is not just NATCA that is affected by the 
FAA's interpretation of its authority to impose pay and rule 
works, it extends to the FAA's entire workforce. I look forward 
to hearing from PASS and AFSCME on the status of their 
respective contract negotiations with the FAA.
    I am also concerned about the potential attrition in the 
FAA safety inspector workforce. I am told that over one-third 
of the FAA safety inspectors will be eligible to retire by the 
year 2010, and I was informed this morning and given a chart 
that, in fact, since the end of the last fiscal year in 
September, that we have already lost 77 inspectors. It is an 
alarming rate of 12 or 13 per month. So I am concerned about 
the staffing levels for the safety inspector workforce.
    Last year, the National Research Council reported that the 
FAA lacks staffing standards for inspectors and recommended 
that the FAA undertake a holistic approach to determine its 
staffing needs. It is imperative that we make the investments 
in the FAA's workforce now so that they can meet the new 
challenges for maintaining the highest level of safety in this 
ever-changing aviation environment.
    Their carrier workforce is also well represented here by 
the Air Line Pilots Association, the Association of Flight 
Attendants, and the International Association of Machinists. 
With the airlines largely back on track after September the 
11th, it is time once again to turn our attention to the 
workplace and safety issues. I look forward to hearing about 
issues of concern to the pilots, flight attendants, and 
mechanics.
    On our third panel today, we will hear from a diverse 
group, including a return visit from Dr. Dillingham of the 
Government Accountability Office, who, of course, was here with 
us yesterday and has been with us many times, to discuss issues 
related to safety, accommodating new users in the airspace 
system, airport congestion, and air traffic staffing and 
training.
    With that, I want to welcome all of our witnesses here 
today, and I look forward to hearing their testimony.
    Before I recognize the Ranking Member and the Ranking 
Member of the Full Committee for statements and comments, I 
would ask unanimous consent to allow two weeks for all Members 
to revise and extend their remarks, and to permit the 
submission of additional statements and materials by Members 
and witnesses. Without objection, so ordered.
    At this time, the Chair would recognize the Ranking Member 
of the Full Committee, Mr. Mica, for his comment or statements.
    Mr. Mica. Thank you. I will try to be brief. I commend you 
and our Ranking Member, Mr. Petri, for conducting this series 
of hearings which I think are vitally important to 
reauthorization and some very critical questions on how we fund 
a system for the future.
    I think it is very important, too, that we have labor 
involved in some of these discussions so that we can move 
forward, and certainly labor I think is undoubtedly the largest 
percentage of our costs. Capital costs are just a fraction of 
what it does cost to run the system, so it is important that we 
include them in this process.
    I am also particularly pleased to be here today. Just a few 
minutes ago I got a call from Secretary Peters and also learned 
on the wire that the European Union Transport Commissioners 
have approved the Open Skies Agreement, which is probably one 
of the most historic events in international agreements that 
the United States has ever engaged in relating to aviation. And 
I think that is also important in regard to this hearing 
because we have to have a system that will handle this 
additional business at least on our side of the Atlantic, and 
then the incredible potential this holds for expanding 
employment and aviation industry, opening markets in 
communities that have never had international service, and the 
benefits to consumers, which are absolutely unprecedented. So 
we will see lower prices, see more jobs, dramatic expansion of 
air activity on the international side between both sides of 
the Atlantic. So a pretty exciting day.
    Yesterday, DOT announced the approval of Virgin America's 
request, which I think is also historic because I think they 
will inject a new level of competition that we have not seen 
before. So some exciting things, but we have to have the system 
available, ready to operate and meet the needs of the future 
traffic that we will see dramatically expanded by these events.
    With those quick comments, I am going to stay for a few 
questions. I have read some of the testimony, but I thank you 
again for this hearing and allowing me to participate.
    Mr. Costello. The Chair thanks Mr. Mica for his comments 
and the Chair recognizes the Ranking Member of the 
Subcommittee, Mr. Petri, for his opening statement or comments.
    Mr. Petri. Well, thank you very much, Mr. Chairman. I would 
like to join you in welcoming the three panels that we have 
here as witnesses today.
    Today's hearing is addressing FAA's operational and safety 
programs, and while the testimony will reflect a broad variety 
of issues that Congress will be considering during this 
reauthorization cycle, it is important to remember that we are 
conducting this hearing at a time when America's aviation 
system has been safer than at any other time in our Nation's 
history.
    This remarkable safety record is not an accident, it has 
been achieved through sound policy and through continuous 
oversight and, of course, we can't stop where we are, we must 
continue to strive for further improvements.
    So I look forward to learning more about the FAA's 
operations and its safety programs and yield back the balance 
of my time.
    Mr. Costello. I thank the Ranking Member for his comments
    Let me welcome our first panel of witnesses here today. As 
we said, we have 11 witnesses that are here to testify, and 
hopefully we will have all of you understand that we ask you to 
summarize your testimony. We have, I know, a number of 
questions and other Members who will be joining us.
    Our first panel, let me introduce and welcome: Mr. Pat 
Forrey, president of the National Air Traffic Controllers 
Association; Mr. Tom Brantley, the President of the 
Professional Airways Systems Specialists; Mr. Tom Waters, 
President of American Federation of State, County and Municipal 
Employees Local 3290.
    Gentlemen, the Subcommittee welcomes you here this morning 
and we would ask you to summarize your statements in five 
minutes or less, if possible, and we will have questions for 
you at that time.
    The Chair recognizes Mr. Forrey for his opening statement.

   TESTIMONY OF PAT FORREY, PRESIDENT, NATIONAL AIR TRAFFIC 
CONTROLLERS ASSOCIATION; TOM BRANTLEY, PRESIDENT, PROFESSIONAL 
    AIRWAYS SYSTEMS SPECIALISTS (AFL-CIO); AND TOM WATERS, 
 PRESIDENT, AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL 
                 EMPLOYEES (AFSCME) LOCAL 3290

    Mr. Forrey. Thank you, Chairman Costello, Ranking Member 
Mr. Petri, Mr. Mica. I would like to thank the Members of this 
Committee for inviting me to testify today to review 
operational issues and safety programs at the FAA.
    On behalf of the 19,000 aviation safety-related 
professionals that NATCA represents, I would like to praise 
both Chairman Costello and Chairman Oberstar for recognizing an 
urgent need to repair NATCA's current contract dispute with the 
FAA and for risking their political capital in an attempt to 
right the injustice that we unilaterally imposed upon aviation 
safety professionals in July of 2005, as well as America's air 
traffic controllers last September. You need to know that the 
men and women charged with keeping the skies safe for the 
flying public appreciate all that you do for them. Thank you 
very much, sir.
    What these men and women are asking Congress for is not 
complicated. The workforce at the FAA simply wants a fair 
collective bargaining process. We want a process that includes 
the role for the agency, a role for Congress, and a role for an 
experienced arbitrator when the two sides cannot come to an 
agreement. Simply stated, we are looking for fairness.
    I am here to tell you that for the men and women in control 
towers, TRACONs, and en route centers across the Country, there 
is considerable disillusionment, frustration, and distraction 
due to the effects that these unilaterally imposed work rules 
have had. The impacts of this situation are affecting the 
safety margins of the system. Yet, despite having their rights 
denied by the FAA, my membership continues to work as the 
safety professionals that they are and hopes that a 
congressional correction could be made that has already eluded 
us to this date.
    Currently, there are tens of thousands of FAA employees 
working without a contract, and even though the FAA continually 
makes reference to a contract, the truth is that air traffic 
controllers, engineers, test pilots, nurses, lawyers, and 
others represented by NATCA are working under imposed pay and 
work rules. This, sir, is not a contract.
    Mr. Chairman, I want to be clear that this is not just a 
collective bargaining rights issue. The impact of the current 
situation is greatly affecting the agency, its employees, and, 
by extension, the safety of the entire aviation system. These 
unfair work rules have resulted in the increased early 
retirement of veteran controllers, the same controllers who 
safely landed 5,000 aircraft in just over two hours on 
September 11th. This acceleration of retirements has aggravated 
the already existing controller staffing crisis.
    These oppressive work rules have also resulted in mandatory 
overtime to offset the understaffing, denial of sick leave and 
vacation time, an increase in stress and fatigue, and low 
morale among FAA employees. Today there are fewer controllers 
watching over more traffic, and the fatigue and stress is 
beginning to show.
    Simply stated, because of the imposed work rules and pay, 
the agency has a problem retaining veteran controllers and 
recruiting qualified candidates. They have now sunk to the 
level of advertising for candidates on MySpace.com and Craig's 
List.
    These problems have begun to negatively affect the safety 
margins in the system. Here are the facts. Because new hires 
now face a 30 percent pay cut, experienced military controllers 
are turning down FAA jobs in droves because it would mean a 
huge pay cut to them; retirements and even total attrition are 
exceeding the FAA's planning for a fourth year in a row; and, 
more importantly, the resulting fatigue among the remaining 
employees is now having a major safety concern for us. 
Controllers are forced to work longer hours on position without 
a break, 10-hour days, and mandatory six-day work weeks due to 
the effects of the imposed work rules and resulting short 
staffing.
    I strongly urge this Committee to carefully study this 
safety issue. I firmly believe that without a concerted effort 
to attract experienced or qualified controllers and to retain 
our current workforce, the air traffic control system will 
continue to lose controllers that will mean flight delays, 
runway incursions, and increased chance of aviation disasters.
    And don't let the FAA's propaganda bamboozle you. According 
to the FAA Regional Administrator, Doug Murphy, 50 percent of 
the trainees fail and it takes three years for the controllers 
to certify, so hiring one-for-one isn't going to adequately 
staff this system.
    Just two days ago the DOT Inspector General reported that 
approximately 2,563, or 11.1 percent, of the total midnight 
shifts they reviewed were staffed with only one controller 
before the Comair crash in Lexington last August. As the FAA 
has even now admitted, its own policy required two people in 
the Lexington facility, and only one was on duty at the time of 
the disaster. I firmly believe that was as a result of the 
agency's refusal to backfill retirements or to use overtime. 
The IG report should be a wake-up call to the agency to 
reevaluate its new staffing plan and increase its new staffing 
standards, not cut them down to grossly negligent budget-driven 
levels.
    As USA Today reported yesterday, the IG reported that the 
FAA spokesman said the agency has stopped understaffing the 
towers. We disagree with this assertion and we have mandatory 
overtime stories to prove it. Some staffing facts are 
indisputable. The FAA Administrator told this Committee last 
week that traffic is up, yet the number of controllers has 
fallen by over 1,000 in just three years, and it is going to 
get worse. The FAA's new staffing range calls for a reduction 
in controller staffing levels of between 9 percent and 26 
percent from previously agreed upon safe staffing needs. I 
believe this Committee should ask for the supporting 
documentation and justification for this change.
    In terms of modernization of the air traffic control 
system, I want to be clear on one point: no one would like to 
see more efficient air traffic control technology put in place 
than the controllers using the equipment. With the proper tools 
in place, air traffic controllers could handle an increase in 
capacity while making the entire system safer and more 
efficient. The agency continues to refuse to allow controllers 
to be part of a collaborative process for new technology to 
ensure its timely delivery and successful implementation. Air 
traffic controllers not only want the modernization system; 
they need it and they demand it.
    As far as the Administrator's FAA reauthorization proposal, 
NATCA believes it constitutes an ill-advised user fee financing 
system and other precursors to privatization that threaten to 
undermine an inherently governmental safety function.
    In closing, I would like to remind the Members of this 
Committee that, as a controller, my main concern is safety. I 
understand the safety implications of losing its most 
experienced controllers at a rate that is completely 
unacceptable: three per day. As a controller, I understand that 
new hires will need three years to certify and fail training at 
a rate of 50 percent in New York, according to FAA Regional 
Administrator Doug Murphy. As a controller, I understand the 
safety implications of an air traffic control system where 40 
percent of the controller workforce, by 2010, will have less 
than four years of experience.
    The safety of the system is severely compromised if the FAA 
cannot give its veteran controllers a reason to stay and help 
to rebuild the controller workforce of tomorrow before they 
take a well earned retirement. The FAA will not give them a 
reason to stay and help them keep the trainees.
    I would be happy to answer any questions you have, sir.
    Mr. Costello. The Chair thanks you, Mr. Forrey.
    Mr. Brantley, the Chair recognizes you for five minutes.
    Mr. Brantley. Thank you. Chairman Costello, Congressman 
Petri, and Members of the Subcommittee, thank you for inviting 
PASS to testify today. PASS represents approximately 11,000 FAA 
employees working throughout the United States and overseas, 
and we appreciate the opportunity to present our views on 
issues vital to aviation safety.
    Labor relations within the FAA are in a state of chaos due 
to the manner in which the FAA has approached contract 
negotiations with its unions. Under its interpretation of 
current law, if the FAA declares that the negotiations have 
reached impasse, the Administrator can send the matter to 
Congress. If Congress fails to act within 60 days, the FAA's 
terms are unilaterally implemented, a process that hijacks the 
collective bargaining rights of FAA employees. Contract 
negotiations for four of PASS's five bargaining units have been 
at impasse for over four years--four years--and there is no 
foreseeable end in sight.
    During negotiations over the contract for PASS's largest 
bargaining unit, Air Traffic Organization Technical Operations, 
the agency's behavior made it clear that it was not interested 
in good faith bargaining and was intent on declaring impasse as 
soon as possible, so PASS accepted the FAA's proposal in order 
to give the employees that PASS represents a voice in the 
process. They responded by overwhelmingly rejecting the 
contract proposal. Yet, rather than respecting the employees' 
rejection of its proposal and returning to the bargaining 
table, the FAA has instead chosen to pursue unilateral 
implementation of its terms through litigation. Is it any 
wonder that the 2006 FAA employee attitude survey showed that 
64 percent of FAA employees disagree or strongly disagree with 
the following statement: I trust FAA management?
    It is clear that a change is needed in order to ensure FAA 
employees their right to collective bargaining. PASS is asking 
Congress to take action to clarify that the Federal Service 
Impasses Panel has jurisdiction over all bargaining impasses 
arising at the FAA and that binding arbitration before a 
neutral third party is the method used for resolving disputes.
    Understaffing is also a major concern for PASS, especially 
in our technician and safety inspector bargaining units. 
Inadequate technician staffing has resulted in more unplanned 
outages, a dramatic increase in restoration times, and a move 
toward a fix-on-failure approach where preventive maintenance 
and certification of NAS systems and equipment are 
significantly reduced. The FAA does not have a staffing model 
in place to accurately determine the number of trained 
technicians needed to meet the agency's needs. PASS is 
requesting that Congress require a study of FAA technician 
training and the methods used by the FAA to estimate technician 
staffing needs.
    By 2010, as you pointed out, Mr. Chairman, almost 50 
percent of FAA inspectors will be eligible to retire. Yet, 
instead of addressing its staffing problems, the FAA has chosen 
to increase its reliance on its designee programs. The agency 
has responded to repeated criticisms of its use of these 
programs by assigning even more hands-on work to designees that 
was once performed by FAA inspectors. The latest example is a 
concept known as the organizational designation authorization 
program, which would allow a private organization to be in 
charge of overseeing the designee. In essence, the industry 
overseeing itself.
    In order to protect the safety of the aviation system, PASS 
is requesting that Congress direct the FAA to put expansion of 
designee programs on hold until the National Academy of 
Sciences staffing model is implemented and recommendations 
issued by the GAO, including the establishment of a program to 
evaluate the agency's designee programs can be thoroughly 
addressed.
    PASS is extremely concerned about several aspects of the 
FAA's reauthorization proposal, including outsourcing of key 
components of the NAS, the creation of a partisan commission to 
justify outsourcing targets and facility closures, and 
ambiguous user fees to fund the agency. The United States has 
the largest, safest, and most efficient aviation system in the 
world. To introduce concepts that would hinder or abandon the 
work performed by these professionals would be to risk the 
foundation that keeps this Country's aviation system safe. PASS 
remains committed to making sure that our Country maintains its 
standing as having the safest aviation system in the world, and 
turning that system over to private corporations will not 
accomplish that goal.
    Thank you, and I would be happy to answer any questions you 
may have.
    Mr. Costello. We thank you.
    The Chair recognizes for his opening statement or summary 
Mr. Waters.
    Mr. Waters. Thank you, Mr. Chairman. Good morning Members 
of the Aviation Subcommittee. I am Tom Waters, President of 
AFSCME Local 3290. AFSCME is a labor organization that 
represents 1.4 million workers, predominantly in the public 
sector. Approximately 2,000 of our members are employed in 
various professional positions at the FAA Headquarters here in 
Washington.
    For the past seven years, I have had the honor to serve and 
represent the attorneys and administrative staff within the 
FAA's Office of Chief Counsel. Today I am especially pleased to 
also represent, through my testimony, the AFSCME members within 
the other three FAA headquarter locals at the request of their 
presidents, my colleagues and friends, who are here today.
    Like the other unions, our story deals with the FAA's 
conduct in contract negotiations, but rather than repeat the 
often cited history of personnel reform and related statutes, I 
want to amplify the cost in human terms of the FAA's often 
sharp practices under reform. Working without a collective 
bargaining agreement for over six years, I have seen how 
quickly a workforce can be distracted and demoralized by the 
belief that its employer has dealt with it in an unjust and 
high-handed manner. After all, the issues at stake for the 
employee are no less than the employee's career, livelihood, 
and the ability to keep his or her family healthy, safe, and 
secure.
    Our own ongoing contract dispute with FAA has its origins 
in the agency's desire for a pay-for-performance salary system. 
In 1996, the FAA sought, and Congress granted, total authority 
to revise both the pay and personnel systems. Although we 
negotiated a contract under the new reform system, the FAA 
reneged and refused to implement, with the result that AFSCME 
members are now divided between two separate pay systems and 
serve under a hodgepodge of old and new work regulations 
negotiated, if at all, under a piecemeal process.
    I hasten to add that the employees in the Office of Chief 
Counsel--and I believe throughout headquarters--initially had 
little apprehension about the concept of pay-for-performance, 
called core compensation at the FAA. However, management's 
performance monitoring on the specific five-tiered system was 
one of failure. So, in one of its first changes under personnel 
reform, management implemented a pass-fail system. These habits 
and sequence of events became the source of much workforce 
mistrust and ultimately led the employees in the Office of 
Chief Counsel to unionizing. Other headquarters employees 
followed and formed three more AFSCME locals.
    From the summer of 2000 through February 2001, a 25-member 
negotiating team comprised of members of all AFSCME 
headquarters locals negotiated a 75-article contract with a 
management negotiating team comprised of management 
representatives from all affected lines of business. It was 
pursuant to a strict predetermined procedure for signifying 
closure for each article that the parties agreed upon each of 
the 75 articles. Productivity gains offset any pay raises.
    The four AFSCME locals overwhelmingly ratified the 
agreement on February 21st, 2001, by a vote of approximately 
1,000 to 30. However, the elation was short lived because 
Administrator Garvey submitted the agreement to the Office of 
Management and Budget for approval and then ultimately refused 
to sign and execute the contract, alleging that OMB 
disapproved. As you know, OMB approval of an agency collective 
bargaining agreement is not--is not--a requirement under 
Federal labor law, nor did the union ever acquiesce to OMB 
review or approval.
    Between Congress, the FLRA, and the United States Court of 
Appeals for the District of Columbia, the history of the 
protracted litigation resulting from the Administration's 
action, which the union lost, is a matter of substantial record 
and not repeated here. Worth recounting here, though, is that 
under the initial litigation, documents surfaced which refuted 
the agency's representation. One document showed that the FAA 
asked OMB to change draft language in a letter responsive to a 
congressional inquiry. OMB's review made it clear that the FAA 
management held the final decision on signing. The change 
requested by the FAA was to remove this language for wording 
that stressed that OMB did not concur. The agency's intent to 
revise the OMB letter is perhaps as telling as the substance of 
the revision itself. I have the document with me, if anyone is 
interested in reviewing it.
    Even if it preferred OMB approval, the FAA shot itself in 
the foot by refusing to execute the agreement. After 
ratification, the headquarters workforce was satisfied that it 
had replaced the sharp edges of a pending unilaterally imposed 
pay-for-performance system in favor of a well planned, 
bilaterally agreed upon pay-for-performance system. As I said, 
employees were enthusiastic to put behind them the fear and 
distraction of a new pay system and the concomitant arguments 
with and suspicions about management. Instead, today, some 
employees are in an FAA-imposed pay system while others remain 
in a near exact replica of the General Schedule system. There 
is such chaos that even the attorney managers in my office sued 
the agency for more money. We have often pointless performance 
reviews. We have no meaningful grievance procedure. Litigation 
remains the only recourse when third party resolution is 
desired. All working conditions must be resolved on a piecemeal 
basis through impact and implementation bargaining.
    AFSCME has tried every means available to resolve this long 
and protracted contract dispute. We requested assistance from 
Congress and twice had report language inserted in 
appropriations measures directing that the agency implement the 
contact. The FAA ignored the directives. Considering the fact 
that AFSCME has exhausted all means to resolve this matter and 
the FAA has used all means to thwart our efforts and those of 
other unions who are in similar unfortunate positions, it is 
time for Congress to consider a legislative approach to 
resolving FAA's failure to live up to the congressionally 
mandated task of legitimate personnel reform.
    We want not negotiate, but the fiscal year 1996 
appropriations language that granted FAA unfettered discretion 
in personnel reform must be repealed because the agency's 
version has led to poor morale and distrust. Employees must 
believe in the integrity of their employer and that they will 
receive a fair shake when it comes to bargaining with their 
employer. I urge the Subcommittee to act to eliminate the 
flawed and unfair bargaining process that currently exists at 
FAA in order to avoid any further misuse by the agency of its 
bargaining authority.
    In closing, I would like to invite each of you to the FAA 
to meet and speak with AFSCME members to fully understand the 
impact of the transactions and occurrences discussed here 
today. They are humble, dedicated, hard-working, and 
conscientious public servants who deserve better treatment than 
they receive from their management.
    I thank you and I would be pleased to answer any questions.
    Mr. Costello. We thank you and all of the witnesses that 
have testified so far this morning.
    Mr. Forrey, let me ask you, if I may. In your testimony you 
indicate that the FAA is not hiring controllers, but they are 
hiring trainees, and I wonder if you might explain the 
significance of your statement.
    Mr. Forrey. Well, I think the agency likes to portray the 
fact that they hire a controller for every one that retires, 
but the fact is it takes years to train a controller to be 
fully certified at any facility. The average is about three, 
according to the FAA's own Regional Administrator. And of those 
trainees we are finding a huge amount of individuals that are 
not making it and they are failing in training, and part of the 
reason being they are bringing them right out of these schools 
or they are bringing them off the street and they are sticking 
them in towers like Atlanta and O'Hare and New York TRACON and 
Dallas, and they don't stand a chance.
    The military controllers that used to come into the FAA are 
now being briefed by their own colonels and generals on the 
agency's payroll, jailhouse work rules, and pay system to stay 
in the military. So that avenue is kind of drying up for the 
agency and we are not getting those experienced controllers 
that might even help us in those busy facilities.
    So just a perfect example, at Atlanta tower there are 34 
certified controllers there; they have 7 trainees, they are 
expecting only 2 to make it; and the next year 12 of them are 
eligible to retire. There are 23 positions in that tower and 
next year, by this time in October, there might only be about 
25 controllers working that facility. How do you work the 
busiest air traffic control facility in the world with 12 
people or with 25 people? That is just ludicrous. They cannot 
train somebody in six minutes when they hire them and put them 
in the facility and be ready to go, it just doesn't work that 
way.
    Mr. Costello. Thank you.
    Mr. Brantley, let me ask you about the inspector staffing. 
You indicate in your testimony that because of the evolving 
industry, that the workload on the aviation safety inspectors 
have increased dramatically, and I want you to elaborate on 
that, explain that.
    Mr. Brantley. Well, Mr. Chairman, the nature of the 
business for the aviation industry has changed, so they are 
going to more regional jets as opposed to their current 
practice, which is more flights, more planes. But also things 
like the agency implementing its new ATOS system, while that is 
not fully implemented and it is not fully developed yet, that 
has created a whole different set of work practices for 
inspectors. Things like aging aircraft, which Congress directed 
the agency to begin looking into I guess about 10 or 12 years 
ago now, and it is just coming about, but that creates another 
workload. The explosion of outsourcing of maintenance by air 
carriers has created a workload because now, instead of just 
overseeing carrier itself, you know, it brings in the repair 
facilities that are now going to have to be overseen by the 
agency.
    So all of these things combined just create a lot more 
work, but the number of inspectors is not increasing.
    Mr. Costello. The number of inspectors, I have been 
expressing, as well as other Members of this Subcommittee, the 
number that are eligible to retire and may be leaving, is the 
figure that I have been giving this morning, that since the end 
of September that we have seen 77 safety inspectors leave since 
October the 1st?
    Mr. Brantley. Yes, sir, and that is a net loss.
    Mr. Costello. It is a net loss.
    Mr. Brantley. Yes, sir.
    Mr. Costello. I wonder if you might just quickly, without 
going into a lot of detail, give us an update on the status of 
negotiations with the FAA. Is it at a standstill or is there 
any indication at all?
    Mr. Brantley. Well, Mr. Chairman, as I mentioned earlier, 
for four out of the five bargaining units that we represent we 
have been at impasse, which is the stage where everything comes 
to a halt unless the agency decides to bring that to Congress. 
We have been at impasse for more than four years. Not a thing 
has happened in those four years by the agency to try to move 
these contracts to closure. The one contract that we had 
negotiations on in recent times, about a year ago--because we 
did not believe the agency was intent on reaching an agreement 
but, rather, their intent was to get to impasse so that they 
could impose their own terms--we actually accepted their 
proposal so we could put it to our Members for a vote. You 
know, our hope was, frankly, that seeing the results of that 
vote would wake the agency up, and 98 percent of our Members, 
in a record turnout, 98 percent voted no. So I think the 
message was there. Unfortunately, no one was willing to listen. 
So now we are involved in litigation. The agency is trying to 
implement the contract terms through litigation. We have a 
hearing next week, and I would be glad to keep you updated on 
how it is going, but essentially that is where we are.
    Mr. Costello. Thank you.
    The Chair, at this time, recognizes the Ranking Member of 
the Full Committee, Mr. Mica.
    Mr. Mica. Well, thank you, Mr. Costello.
    I guess last night was American Idol. I didn't miss it; 
instead, I--I did miss it. In fact, I never watch it. But I did 
stay up reading testimony. I did read all of Mr. Forrey's--and 
thank you, it was probably one of the most comprehensive 
submissions I have seen--and some of the others. I tried to 
catch up before today's hearing. Your pages aren't numbered, 
but the subject of the hearing, too, today is actually on, I 
guess, financing the system that we have got. Of course, a key 
component is personnel, since I asked and just found out that 
personnel costs will make up 80 percent of the budget cost in 
fiscal year 2008 and do now. But on this page here, Mr. Forrey, 
you say, third, a user fee based system is vulnerable to 
problems that disrupt aviation and commerce much as 9/11 and 
SARS did a few years ago. That is your statement, correct?
    Mr. Forrey. That is correct, sir.
    Mr. Mica. Well, I venture to say that if we look at the 
current system and we go back and look at 2001--we now have a 
7.5 percent ticket tax and aviation fuel tax that compose most 
of the revenue--that also is subject to the same type of 
disruption. And we actually have the documentation to prove the 
dramatic affect and loss, so I don't think that that is a very 
good criticism on what is being proposed by the Administration 
or the position. Which I support as a hybrid system.
    Let's see, then I think you also said in your testimony 
staffing-to-traffic, is that pretty much your position, trying 
to have staffing to the traffic?
    Mr. Forrey. I am claiming that the agency is staffing-to-
budget, and not staffing-to-traffic.
    Mr. Mica. It is not staffing. But you would prefer 
staffing-to-traffic. I have a chart of traffic and staffing.
    Can we put that up there? We can go back a little bit. They 
are 1999, 2000. Actually, according to staffing-to-traffic, if 
we use that model, FAA is still ahead of traffic, unless 
somebody could dispute these figures, but these are the 
figures. We have 14,618 controllers on board. That is in 
employment right now. Well, at the end of 2006. So we are still 
ahead of traffic.
    In fact, it was interesting. Mr. Kuhl was here just a few 
minutes ago, and I visited a number of airports in September 
and October. One was Elmira, which brought this to light. 
Elmira, New York had a dramatic drop-off in traffic. There are 
very few flights in there; you can almost count them on a few 
hands. They had 13 air traffic controllers in 2001 and they 
still have 13 air traffic controllers, with almost no traffic. 
Now, I could cite others here. Just a few: Albuquerque, 
Seattle, Columbus, Milwaukee, San Francisco. The list goes on.
    So part of the problem appears to be that the staffing has 
been left at some levels in some places, and, Mr. Forrey, you 
cited in some places we don't have enough air traffic 
controllers, is that correct?
    Mr. Forrey. That is correct.
    Mr. Mica. So part of the problem might be distribution. 
First of all, we have more numbers and then we have many 
airports--and I will submit a list for the record--that have 
more air traffic controllers than needed--all of these 
experienced pretty severe declines, and we saw that across the 
Country.
    Now, let's see, part of the problem, too, is applicants. Do 
we have a problem with applicants for these positions?
    Mr. Forrey. I believe you are going to run out of 
applicants. Right now the agency claims they have got about 
3,000 or 3,500 people in the pipeline, and the qualification 
level, to what extent we don't know.
    Mr. Mica. Actually, there are over 2,000 applicants that 
have been ranked and rated as eligible. So there may be 3,000, 
but 2,000 applicants. So we have got a little bit more evidence 
that we have applicants.
    Now, one of the other things is the 10 day--of course, the 
people that we have working, I think you stated that--oh, wait, 
wait, wait. You did state, too, they are going from the schools 
to the towers. And we could play back the tape, but that is 
what you said. I don't know that to be the case. Don't they all 
go through Oklahoma City?
    Mr. Forrey. As far as I understand they go to Oklahoma City 
for basic instruction.
    Mr. Mica. But isn't that a requirement, that you have to 
have those 10 weeks of training?
    Mr. Forrey. Yes, that is correct, but then they are putting 
them right into the towers, when they didn't do that before, 
sir.
    Mr. Mica. But there is no one going from the schools to the 
towers.
    Mr. Forrey. No, they spend 10 weeks at Oklahoma City.
    Mr. Mica. And the requirement is still just a college 
education, is that right, for those who enter. You can go 
directly as an applicant into Oklahoma or you could come from a 
school or from the military?
    Mr. Forrey. All candidates go through Oklahoma City, 
whether you come from a school or whether you come off the 
street. And now they are advertising for no qualifications.
    Mr. Mica. Well, I just want to make certain for the record 
that we have that correct.
    And then the issue about 10-hour work days. Now, it is my 
understanding that a full-time controller's basic work day is 
an 8-hour shift, which includes a 30-minute meal break. The 
average controller's time on board actually engaged in 
separating airplanes, according to--again, this I get from 
FAA--is 4 hours and 30 minutes per shift. That is the average 
time. Would that be about correct?
    Mr. Forrey. I have no idea.
    Mr. Mica. Okay. And the other thing, too, about this issue 
of the 10-hour days, anything over that amount of time that is 
set now would be voluntary. Is that correct?
    Mr. Forrey. I don't know. I don't know what you are talking 
about. Could you rephrase your question, because I am not sure 
what you are talking about?
    Mr. Mica. Well, again, under the terms of the previous 
contract----
    Mr. Forrey. Well, we are operating under imposed work rules 
now, sir.
    Mr. Mica. Okay, but under the----
    Mr. Forrey. The terms of the previous contract don't apply.
    Mr. Mica. But is anyone forced to do more than the 8 hours?
    Mr. Forrey. Yes, in many cases they are.
    Mr. Mica. But that is voluntary----
    Mr. Forrey. They are required to stay for 2 additional 
hours than the 8. Yes, it is happening a lot. Including 6 days 
when they don't want to.
    Mr. Mica. Okay. Was any of this a subject of the questions 
in arbitration or in discussions during the contract 
discussions?
    Mr. Forrey. Absolutely. It was one of the issues that was 
at impasse and was unilaterally imposed on the workforce.
    Mr. Mica. Well, again, I talked to some of the negotiators 
and they told me that it was not, that the union never brought 
that into the discussions.
    Mr. Forrey. Well, I am telling you that we did. So there 
you go.
    Mr. Mica. Again, I just talked to one of them. And the 
purpose of the hearing is really to clarify this.
    Mr. Forrey. I understand.
    Mr. Mica. Finally, the period of the past contract was 
1998, and then I think it went to about 2003 with an extension 
of two years, so over a total of that period of time the pay 
increase averaged a little over 10 percent per year, is that 
correct?
    Mr. Forrey. I disagree with that.
    Mr. Mica. On average? Well, they say through the time of 
the negotiation it was an 80 percent pay increase, because 
during the times----
    Mr. Forrey. Who is they?
    Mr. Mica. Well, at the end of the second year extension, 
which was 2005, I think it was July of 2005 until April, the 
terms of the old contract prevailed, so the increase in pay 
would be related to the old contract, is that correct?
    Mr. Forrey. From 2001 up through the imposition of this 
work rule and pay system our controllers have been earning the 
same or less than the rest of the Federal Government employees 
on their annual increases.
    Mr. Mica. Average pay would be--and I have heard three 
different figures. Average pay with salary and benefits I have 
heard 163, I saw a union document that said 173, and I am told 
171. From your standpoint today, before us, what is the average 
salary pay and benefits for a controller?
    Mr. Forrey. With the existing workforce? I believe it is 
probably about 116 with average pay and locality pay. That is 
right now. But under the agency's imposed work rules it will 
probably be somewhere around 84.
    Mr. Mica. That is quite different from what is publicly 
pronounced.
    Mr. Forrey. By whom?
    Mr. Mica. Well, again, last year Mr. Carr put forth a 
document that said $173,000----
    Mr. Forrey. That is with benefits.
    Mr. Mica.--pay, benefits----
    Mr. Forrey. Benefits we have no control over, sir. That is 
what all Federal Government employees get.
    Mr. Mica. But that is the cost to us, which is----
    Mr. Forrey. I understand. And I can tell you this, the 
cost----
    Mr. Mica.--the 80 percent----
    Mr. Forrey. And I lost, if we did nothing is flat for the 
next----
    Mr. Costello. The Chair can interrupt here.
    Mr. Mica. Well, thank you. Again, I was just trying to 
clarify some things for the record. Appreciate it. Yield back.
    Mr. Costello. Let me ask a question for clarification here, 
because I am a little bit confused. The Administrator always 
says that the average salary with benefits is $170,000, and you 
are saying here that that is not anywhere close with the 
current workforce, is that correct?
    Mr. Forrey. That is correct.
    Mr. Costello. Okay.
    The Chair, at this time, recognizes, under the five minute 
rule, Mr. Boswell.
    Mr. Boswell. Thank you, Mr. Chairman. I sense that this is 
a pretty important discussion we are having here today, and me 
and my colleague across the aisle there, we kind of use the 
system.
    Mr. Forrey, I think you answered us why we don't have the 
pool from the military. I was going to ask you to expand on 
that, but I think that is pretty clear. They are being 
encouraged, because of things going on, to stay where they are. 
I think that is pretty clear.
    I would just like for you to--I apologize, I came in a 
little bit late, but would you just do two or three things? 
Would you just tell us as concisely as you can what is the 
shortage today; how many controllers are needed by calendar 
quarter over the next year for us to be safe and have trained 
controllers; and what does it take, in your opinion, to 
interest an individual to apply and train to become a 
controller? And if you have a number in mind, if you could, 
from your perspective, what would it take cost-wise to fix the 
situation in your mind?
    Mr. Forrey. Mr. Boswell----
    Mr. Boswell. First, what is the shortage today?
    Mr. Forrey. The shortage today is about 1100 to 1200 
controllers that we had three years ago. We have less than 
that. And the traffic is now growing.
    Mr. Boswell. Eleven to 1200?
    Mr. Forrey. Yes. We had 15,383 in 2003; we now have 14,000, 
as the Administrator's fact book told us, 14,200, of which 
2,000 are trainees, they are not even certified controllers.
    Mr. Boswell. I think the whole listing public ought to be 
concerned about that figure. Go ahead.
    Mr. Forrey. What we need, probably, at least for a starter, 
is to get back to the levels we had, that we all agreed on 
several years ago, that we thought would fill the system. Those 
were developed by good empirical standards based on traffic 
activity, based on number of positions, number of sectors, the 
amount of volume of traffic through each of the radar 
positions. Those were all calculated and tabulated along with 
very scientific how much time it takes to work, how much leave 
people get, everything else, to decide by facility what kind of 
staffing was required.
    The agency just solved their whole problem by just coming 
out with some range thing on their staffing standard that 
basically says, lo and behold, look at that, all the people we 
have on board right now fit within our ranges, so we don't have 
a staffing problem anymore. They have not given us any kind of 
empirical data to support what they did, just rhetoric.
    So at least for a starter we would like to do that. We have 
asked the Administrator, I personally have asked the 
Administrator on a number of occasions and in writing, to get 
together with them and develop our staffing standards, that we 
be part of that. I think we have something to offer to that; we 
are the experts in the field. She has said that she would be 
willing to, but then, of course, at the same time they 
introduced this standard. So I am not sure if she is still 
willing or interested or not. But I think that is probably a 
good place to start, and involve the National Academy of 
Sciences in that process.
    As far as what it would take to interest controllers to 
come into this occupation, I think it would interest them that 
they don't hear stories about controllers that call in sick 
because they have a fever, are forced to come in because they 
are going to get fired if they don't, and end up vomiting on 
their radar position. At the same time, finding out that a 
supervisor with the same symptoms called in and said I can't 
make it, and they said, fine, don't come in, and replaced that 
person with overtime. That happened at Jacksonville Center. 
That is the kind of stuff going on in the field today.
    And until that changes, you are not going to see anyone 
really interested in taking this job. That is why they are 
passing it up. They are sending these kids to the Oklahoma City 
Academy at $18,000 a year, which is just over minimum wage, 
without any health benefits for three months, and then they are 
saying, you want the job? You go out there and do that. And, by 
the way, if you are successful there, we will put you in one of 
these facilities like New York TRACON or the Chicago TRACON or 
Dallas-Fort Worth TRACON, because we are going to get killed in 
those facilities with the staffing in about another 12 months, 
and the system is going to come to a screeching halt. And these 
kids don't stand a chance. It is like taking some kid out of 
high school baseball, pitcher star, and sticking them on the 
New York Yankees and saying, all right, buddy, it is the ninth 
inning, bases are loaded, two outs, and you are up. That is not 
the kind of situation we want.
    Mr. Boswell. Well, I appreciate that and I sense your 
frustration. Having visited a few control stations in busy 
areas, it is a tough job. It is a tough job, and I want to 
thank you for staying in there and fighting for what you 
believe in to, one, keep the professional life and, two, to 
make it safe not only for us that fly and use the system, but 
for those many, many thousands of passengers who are out there 
flying every day. So thank you.
    Mr. Forrey. Thank you, sir.
    Mr. Costello. I thank the gentleman.
    The Chair recognizes the Ranking Member of the 
Subcommittee, Mr. Petri.
    Mr. Petri. Thank you very much, Mr. Chairman. Before I 
yield a minute to my colleague, the Ranking Member of the Full 
Committee, I just wonder if I could ask kind of a general 
question of both Mr. Forrey and Mr. Brantley, and that is I am 
sure that you and your members are focusing, as we are, on the 
rollout of NextGen technology, and this has great promise, 
obviously, and it seems to be about time. The industry is 
looking forward to it and it is already happening. What is your 
attitude on--I mean, this will affect staffing levels and job 
descriptions and a lot of changes in the system, and even 
locations of personnel and so on. Do you have an attitude 
toward all this? You know, some people have likened it to the 
difference between switchboard operators and what we have now. 
In some ways the job will become much more responsible because 
a lot of the routine parts of the controlling, for example, I 
guess, will be handled by the technology. Could you comment on 
that?
    Mr. Forrey. Certainly. I would like to, sir. We are very 
interested in Next Generation Air Traffic Control System. I 
think it is about time it got done. I don't know that this 
funding mechanism has anything to do with it. The agency spent 
$35 billion. The Government has given the agency $35 billion on 
new technology stuff since the 1980s, and the only thing we got 
out of it so far is new radar displays in our centers and 
terminals and a few little safety items like ASDX. That is poor 
management, that has nothing to do with funding. So this whole 
shenanigan about user fees is going to fund Next Generation, I 
think what you need is someone who is going to manage the 
operation better. That might go a long way towards getting new 
equipment.
    Secondly, the agency doesn't want to include us for some 
reason. I don't know why, but they don't. So I have gotten 
myself involved with the JPDO, the RTCA, the IMC, and I am 
going to try and get the controller experience and the 
professional people that know the system involved in that 
avenue. We have been very well accepted and I am looking 
forward to it.
    But I am very interested in new equipment. We want it. We 
need it. But there has got to be more than just new equipment. 
The last time I looked, Buck Rogers was a TV show; it is not 
here, it is not today. I don't follow those conspiracy theories 
that, you know, they are going to take air traffic controllers 
and put them out of a job because of new technology. That is 
hogwash. We need equipment that is going to be able to provide 
the controller the tools to move more capacity in the system in 
a safer manner. We are all for that and we want to be part of 
that, but we are being shut out of that process right now.
    Mr. Brantley. Thank you. Congressman, I would echo, at 
least in part, what Mr. Forrey just said, and that is with 
regard to not being involved by the agency. You know, as late 
as three years ago we were involved in most of what was going 
on in the FAA as far as modernization. We had members that were 
part of these product teams to help evaluate it and develop the 
best possible product.
    Under this Administrator, the agency decided to no longer 
do that. Today we have no one involved in any modernization at 
the FAA. No one.
    Mr. Mica. Mr. Petri had yielded to me.
    Let me just extend what--well, first, he gave me the 
balance of his time.
    On the point of the trainees and somewhere between $17,000 
and $19,000, they are paid for that 10-week period, they don't 
get health benefits. Paying someone to go to school is 
unprecedented almost anywhere. With your predecessor, Mr. Carr, 
we had talked about actually shortening that course, certifying 
the 10 or 12 schools that we could have, and either have two-or 
four-year programs where they came out better qualified, as 
some of the NATCA personnel I have talked to who went to 
private schools versus those that went for the 10-week course, 
and then the taxpayer wouldn't have to pick up health care or 
that cost. Just like any other profession, they could go to 
school and pay it their own. And we have thousands of them 
coming through Embry-Riddle that are very qualified.
    The other point, both of you are interested in actually 
having a say in this. What I am going to propose today is that 
we give you a say in this, that we take 80 percent of the money 
and that we give it to you, all the money, the personnel 
operational money, and we create a not-for-profit ESOP, 
employee stock ownership plan, and we let you run it. You run 
it instead of FAA. We get rid of the FAA Administrator 
overhead. You may chuckle at this, but I am prepared to do 
that, to turn it over to you, to the unions and whoever else 
wants to participate; give you that 80 percent of the money and 
let you run it. We will give you that. And don't think it can't 
be done. When I was chairman of Civil Service, I ESOPed 1,000 
employees in Mr. English's district. They created a not-for-
profit. They have since made a profit, they are paying taxes, 
and they do a wonderful job. There is no reason why we can't do 
the same thing and turn it over to you. Are you ready to take 
it?
    Mr. Costello. Mr. Petri's time has expired.
    [Laughter.]
    Mr. Mica. Let them answer. That would be an interesting 
question.
    Mr. Forrey. I think the first thing I would do, Mr. Mica, 
is I would invite the agency to join me in that process.
    Mr. Costello. The Chair recognizes the gentlelady from 
Hawaii under the five minute rule.
    Ms. Hirono. I would like to ask all of the panelists I 
believe that the agency is moving toward privatizing various 
functions, including the running of whole towers. We have some 
of these occurring in my State, particularly, for example, at 
Kona Airport. I have a question to all of you as to what your 
concerns are regarding this move toward privatizing and public 
safety issues. Are there any inherent safety issues that we 
need to concern ourselves with this move toward privatization?
    Mr. Forrey. I will go ahead and start. Certainly, we have a 
very big concern about that. I mean, if you look at the FAA 
reauthorization proposal, they are talking about contracting 
out all the navigational needs at airports to the highest 
bidder, or the lowest bidder, I should say, and then selling 
those services to the users. They are talking about redefining 
VFR tower so they can contract them out more easily.
    We are very concerned about that because what happens when 
they contract it out is they reduce the employee personnel so 
they can make a profit, and that is what is happening in those 
contract towers out in the field right now. We don't have any 
problem with the controllers, we think they are very good 
controllers; the problem is there are just not enough of them 
and there is no oversight. The agency says there is, but there 
is not the oversight that they have for FAA facilities, I can 
guarantee you that.
    And if you look at the flight service stations that they 
just did, the A-76 process with last year, we have already got 
reports now where we are calling the flight service station to 
report pirate reports. We have icing and things that are very 
urgent need information to know for the pilots, and they are 
saying we don't do that anymore, we don't do that service 
anymore. So now they are cutting out services so they can make 
their profits.
    I think privatizing in an inherently governmental function 
like air traffic control services is disastrous.
    Mr. Brantley. Thank you. Yes, I agree, I think any time 
that the bottom line of whether it is making a buck or 
balancing the bottom line is the priority rather than safety, 
that just has so many inherent risks. I also think, quite 
frankly, if there was a way to make money at it, they would 
already be doing it. The reality is most airports are not 
capable of creating revenue, I believe, that would allow them 
to operate safely the way they do today. I think if they were 
privatized, they would have to scale back quite a bit, which 
means that a lot of communities that rely on the services of an 
airport would have to do without many things.
    So I don't think it is as easy as just turning it over. I 
think part of this is kind of the general public welfare. And I 
don't mean welfare as in the usual context here on the Hill, I 
mean as in the good of the people.
    Mr. Waters. Do you want me to respond to that question?
    Ms. Hirono. Sure.
    Mr. Waters. I was going to try to avoid it, since I have to 
admit that I was the staff attorney on the contract towers 
program and still I became president of the union in 2000. So, 
I don't know, that makes me kind of uncomfortable with Mr. 
Forrey. I wrote the memo on whether air traffic control at that 
level is inherently governmental.
    I think that the contract tower program, at the level that 
it is at, worked okay, if that is how we decided to go. We 
tried to write oversight in it, but I can tell you that, from a 
legal standpoint, oversight is the issue. I think that a lot of 
the--at that time--it was in 2000 that I was in--a lot of the 
controllers were former FAA controllers, so I had confidence in 
them because they were FAA controllers; they just went to 
contract towers. But I think that it ought to be held to the 
level that it is at, instead of expanded. You know, the 
contract towers program came out of the firing in 1980, so it 
was an emergency sort of staffing remedy at that time.
    So it has to maintain oversight, our oversight, FAA 
oversight. I think a lot of times, having practiced a lot of 
government contracts, both at the FAA and for the Marine Corps, 
that, you know, it is true that contractors issue is profit 
margin and they will cut where they can. I have been involved 
in a lot of litigation where the contractor did not give what 
the government asked for, what it paid for. A lot of 
litigation. So you have got to maintain the oversight.
    With Mr. Forrey, I should have pleaded the fifth, probably.
    [Laughter.]
    Ms. Hirono. One more question. Since the FAA is supposed to 
provide the oversight for these privatized entities, etc., and 
if they are not providing that, is it Congress that should be 
providing that oversight?
    Mr. Waters. Me?
    Ms. Hirono. Anybody.
    Mr. Forrey. Well, I think they need to tighten up what they 
do when they oversight these facilities. They go and they do 
on-the-spot checks maybe once a year, maybe more often, I don't 
know. But the fact of the matter is these facilities, they are 
not automated like you have in the major terminals and major en 
route facilities, so there is no way to electronically catch 
them when they have errors or they make mistakes, and it is in 
their best interest not to report those. So, you know, it is 
kind of like the chicken guarding the hen house. So who knows?
    Mr. Brantley. I personally would love to see Congress step 
up and provide some oversight, since it is not being done 
adequately.
    Mr. Costello. The Chair thanks the gentlelady and 
recognizes the gentleman from North Carolina, Mr. Hayes.
    Mr. Hayes. Thank you, Mr. Chairman.
    Gentlemen, thank you for being here. I get the feeling--I 
want to make sure I get this correct--there is some tension 
between you all and the FAA.
    [Laughter.]
    Mr. Hayes. Next Generation--Pat or anybody that would 
like--excuse me, Mr. Forrey--ADS-B, is that the answer to all 
the ills of air traffic control and congestion and everything 
else out there?
    Mr. Forrey. I think it is the future surveillance system. 
It is not the answer, it is just one leg of the three-legged 
stool.
    Mr. Hayes. What capabilities are available to us with the 
equipment that is in the cockpit, in the towers, in the TRACONs 
right now that do a lot of the things that are proposed for 
ADS-B? I know that is a big question.
    Mr. Forrey. I think there is the opportunity right now for 
the FAA to start utilizing ADS-B in the oceans of the world, 
where we don't have any radar coverage.
    Mr. Hayes. How about here at home?
    Mr. Forrey. Here at home, they are doing it in Alaska. I 
think they are doing a project down in the Ohio Valley with UPS 
or FedEx. I am not sure which. The Gulf of Mexico is another 
place where they are trying this new technologies. I think 
those are great opportunities and that is what they should be 
doing. I don't know that they are doing it enough.
    Mr. Hayes. Okay. And those are specific applications. A lot 
of flying goes on within the continental United States. Given 
the fact that a lot of general aviation aircraft fly outside of 
the 3 percent of congested airspace, what does that do to the 
cost, as far as you and the controllers are concerned, does 
that add a whole heck of a lot to what you are doing?
    Mr. Forrey. Well, I guess contrary to popular belief, a 
blip is not necessarily a blip. Certain operations have certain 
different impacts and costs. Most VFR pilots that are tooling 
around out there have absolutely no influence or no impact on 
the system.
    Mr. Hayes. How about IFR guys tooling around----
    Mr. Forrey. IFR guys? It depends, it depends. You know, the 
level of service, it just depends what flight strata you are 
in, what major airports you are around. Obviously, the more 
major the airport you are around or the higher the stratum of 
atmosphere, you are going to have a little bit more of an 
impact on the system.
    Mr. Hayes. Back to the 3 percent rule. I talked to your 
guys on the phone, on the radio, and in person, and they wanted 
me to get you all to talk about why you wanted to keep talking 
about the contract. But I think you have covered that, so I 
didn't want them to think I had forgotten.
    Last, but not least, you kind of age yourself. You and I 
are Buck Rogers. There is some new guy now, I don't know what 
his name is. I would love to see, Leonard and I and other 
pilots, Sam, we would put a working group together with all the 
players here, would certainly encourage--and I will see you 
next week in the office, we will see how we get this thing 
going.
    Mr. Chairman, thank you. I want to yield the rest of my 
time to Mr. Mica so he can finish up on his offer.
    Mr. Mica. Thank you. You had a couple of minutes here.
    Back to Mr. Forrey for a minute here. You separated the 
base pay, which you said was about 116, on average, is that 
correct? And the rest is benefits and----
    Mr. Forrey. Here is the deal. I want to go back to the 
table and negotiate fairly. I don't want to talk about what it 
was or what it is now. I want to talk about going back to the 
table, present the facts to an independent arbitrator who can 
delve through those facts. If the Administration is afraid to 
do that, the Administrator is afraid to do that, probably 
because her facts are not right.
    Mr. Mica. Again, what I am trying to do is get to sort of 
the money basis of this. You are trying to get a higher income 
for your folks, right?
    Mr. Forrey. I am trying to protect the system. I am trying 
to protect the occupation. I am trying to be able to go back to 
the table and negotiate fairly. I didn't have that opportunity, 
sir.
    Mr. Mica. Well, part of my question also deals with 
financing NATCA. I am told, and I don't know if this is 
correct, that 1.5 percent of the air traffic controllers' base 
salary goes to fund NATCA. Is that the way you all finance most 
of your operation?
    Mr. Forrey. Well, first of all----
    Mr. Mica. Is that the basis?
    Mr. Forrey. That is how we primarily finance it, yes.
    Mr. Mica. Have you lost money from this contract or are you 
on the terms of the old contract? This is an honest question. 
Someone told me that you are still on the terms of the 1.5 that 
applies to the old money versus that. Has NATCA had a net loss 
in money from the terms of the imposed work rules and what is 
going on now?
    Mr. Forrey. No, we haven't since we corrected the agency's 
deduction of our dues.
    Mr. Mica. So you still get the same amount.
    PASS, how do you get money to finance yourself? Do you get 
this 1.5 percent?
    Mr. Brantley. No, sir.
    Mr. Mica. So if you get more money, then you don't get more 
money.
    How about AFSCME?
    Mr. Waters. I am sorry, can you repeat your question?
    Mr. Mica. How do you get your revenue to operate, do you 
get 1.5 percent of the base salary?
    Mr. Waters. For our union?
    Mr. Mica. Yes.
    Mr. Waters. Yes, sir.
    Mr. Mica. You do.
    Mr. Waters. And if I could clarify, Mr. Mica.
    Mr. Mica. I am seeing no's in the back.
    Mr. Waters. I am sorry, it is .065. I am not sure I am 
clear on what you are asking, .065.
    Mr. Mica. You guys aren't negotiating very well.
    Mr. Waters. Well----
    Mr. Mica. Thank you. I yield back the balance of my time.
    Mr. Costello. I thank the gentleman. Let me just remind 
Members, if I may, that yesterday's hearing was on the FAA's 
financing proposal; today is on the operation and safety 
programs. And I realize that they are related, but I would hope 
that we are not all here to renegotiate contracts here in this 
room.
    Mr. Brantley. We would welcome the opportunity, Mr. 
Chairman.
    Mr. Costello. The Chair recognizes the gentleman from New 
York, Mr. Hall, under the five minute rule.
    Mr. Hall. Thank you, Mr. Chairman.
    I don't think that this is the proper place to grill our 
witnesses about how their bargaining units are organized or 
financed, although I can assume that when an administration 
takes a consistently anti-union stance across the board in 
every department of government, that it obviously doesn't help 
the membership or the funding of the unions.
    Unfortunately, as one of you stated this morning, this is 
one of those government functions that probably shouldn't be 
privatized and also shouldn't be subject to this adversarial 
relationship when the safety of the flying public is at stake. 
I am offended and upset at the way it seems that all three of 
you and your members are being treated.
    Having said that, I will say--this is a point of 
information for our Ranking Member, Mr. Mica--that there are 
schools who pay students to go to school. My daughter actually 
was paid as a graduate student by the University of Maryland. 
My nephew has several engineering offers to him for a master's 
and PhD candidate by very prestigious State schools where he 
will be paid, because he is such a desirable candidate, to go 
to acquire a master's and a PhD. So, just as a factual thing, 
that simply isn't true.
    I also would note that many of us up here, Members of this 
Committee, have junior or mid-level members of our staff who 
are in their twenties, probably, or maybe early thirties, and 
who don't have the responsibility of thousands of passengers in 
the air at any given time that we are responsible for who are 
getting salaries close to just below or just above that $32,000 
entry salary that I see in Mr. Forrey's written testimony.
    Some of the letters from our military controllers who wrote 
rejecting offers of employment, saying that they could not take 
a pay cut down to $32,000 a year. I just want you to understand 
that I have some very capable--I am not putting my staff down, 
but I have some very capable members of my staff in their 
twenties who, going by our congressional pay scale that comes 
from the Congressional Member Services Office recommendations, 
I don't think you can compare them to the skill and the 
importance of the job of a controller.
    That is the end of my speech and here is my question.
    First of all, can you compare the expected impact of 
NextGen to the impact of spending a fraction of that money to 
fully staff and adequately pay the controller workforce and the 
other workforce of the agency? And I will start with Mr. 
Forrey.
    Mr. Forrey. I don't think you can afford to not staff the 
system if you ever want to get to NextGen. NextGen is way down 
the road, it is concepts right now. I mean, ADS-B is just one 
piece of it, and it is only the air piece, it is not the ground 
piece. I mean, you can put all the airplanes you want in the 
air, but if you don't have more space on the ground, what are 
they going to do?
    Same with the controller. If you want to jam twice as many 
aircraft into a sector I am working 25 already, and you want to 
stick another 25 in there because of the increased capacity, 
reduced separation standards, whatever you want to do to get 
that capacity, what tools are you providing the controllers to 
make sure they can do that safely without causing disaster?
    So you need the staffing to keep the system going. You need 
the staffing to train the next generation of controller who is 
going to be using and developing that equipment. And I think 
that is what you need to do, you need to get that----
    Mr. Hall. Thank you. I am running out of time, so I will 
throw this out there to any or all of you. If you were given 
the ear of the FAA, what do you feel are the most important, 
the must-haves, the critical technological improvements that 
would allow the controller force to do its job, and what things 
do you think may be well intentioned but ultimately unnecessary 
or counterproductive out of this NextGen program?
    Mr. Forrey. Well, I think the most electronic thing we can 
get right now is called a human being. We need more of those. 
That is what we need right now. I think any kind of runway 
incursion devices, things of that nature, that would be great 
too, like ASDE-X. We need that deployed throughout the system; 
it is only in about 35 facilities right now and we need it in a 
lot more places. Controllers are getting fatigued and they are 
missing things, and equipment like that is just another backup, 
another thing for us to have a bigger safety net on the system.
    Mr. Costello. The Chair thanks the gentleman from New 
York----
    Mr. Hayes. Thank you, Mr. Chairman.
    Mr. Costello.--and recognizes the gentleman from Missouri, 
Mr. Graves, for five minutes.
    Mr. Graves. Thank you, Mr. Chairman. I have got some pretty 
quick questions, and I think you can probably answer them 
through just providing me with the data later, and I don't even 
think we even need to go into, with me, the stuff with the 
privatization complete agreement. I think we are in agreement 
with this whole funding level for Next Generation. I think we 
are.
    But when was the last time we did--and, Mr. Chairman, you 
may be able to answer this--the last time we did the staffing 
set up the way it is now, was it in 1998, was that the last 
time we did----
    Mr. Forrey. 1998, that is correct.
    Mr. Graves. Could you provide me the data on how the 
staffing was put together in 1998, how it was designed for that 
bill? Could you do that and just provide it to me, or the 
Committee, for that matter?
    Mr. Forrey. Certainly.
    Mr. Graves. And then the next thing is I need to know, you 
have talked about new technology and, obviously, we have got 
some things out there we don't even know what it is going to be 
yet, we don't know what is going to be asked for. You know, we 
don't even know what the system is. But what I want to know 
from you is what do you need. And be realistic, because, you 
know, we have to come up with a system that works, but what do 
you need as a controller to do your job.
    That is what I want to know. What do you need as a 
controller to do your job. If you would provide that to me. 
Whether it is one of these new systems which, again, we are not 
sure yet what that is going to be. I am talking about right now 
reality, what we can do the next thing with.
    And the last thing is--and you can start talking as soon as 
I get done, but I also want to know how you feel about--you 
were talking about staffing levels and having people who are 
qualified, but I had a young man in the Kansas City area that 
applied, highly qualified. In fact, this was an individual that 
was outstanding in obviously his college class where he 
graduated, but, yet he got caught up in this thing. They do the 
random--and the FAA is the one I know who has implemented 
this--it is the random choosing, you know, your name is drawn 
out of the hat and that is the first cut; it is not based on 
whether or not the kid is good enough or it is not based on 
whether or not he can qualify for it, it is this random cut, 
and I hate that. If I want somebody controlling an aircraft, I 
want somebody that knows what the heck they are doing, and I 
don't care who it is. I don't want a random system.
    I would like your comments on that. And, again, if we don't 
get through it all, please submit it to my office or submit it 
to the Committee, however you want to do it. But the 
technology, if you can do that real quick, I would be very 
interested and also the other.
    Mr. Forrey. The technology right now is we could use more 
stuff for the runways, we could use more stuff for the en route 
facilities and the TRACONs. Newer equipment like the STARS 
implementation was a new standard terminal displays. There is a 
thing out there called ACDs. They can be installed a lot 
cheaper and do the same thing with more functionality for our 
controllers. Those could be distributed throughout the system 
on all our terminals and TRACONs.
    We have facilities that are in disrepair. We have got 
facilities where people are getting sick from mold, 
infestation. It is destroying their lives and the agency does 
nothing about it. We need more staffing, obviously, so that 
people aren't getting fatigued, overstressed, overworked. Those 
are the kinds of things we need right now.
    As far as the--I can't remember your last question.
    Mr. Graves. I was talking about the random lottery.
    Mr. Forrey. Yes, how they select people. That is based on 
what the agency does. I mean, that is their entire human 
resources division that is doing that kind of stuff, and we 
have absolutely no say in it one way or the other.
    Mr. Graves. I want that to change. And it gets right to 
your comment on qualified----
    Mr. Forrey. In 1998, when we negotiated the last contract, 
we negotiated hiring people based on qualifications. The agency 
forced us out of that in 2003 and said, no, we want to pay them 
all the same, no matter what their qualifications are. I don't 
know why.
    Mr. Graves. I think we have got an abundance of applicants 
I don't like--and I think there are lots of people out there 
that will do--I do disagree with the United--I don't know if I 
disagree with you or do disagree with you, I am not quite sure 
yet. But I do think there is an abundance of applicants out 
there. I think there is an abundance of applicants that can do 
the job, but cutting them out of the system purely because they 
don't make the lottery I think is wrong.
    I have got one more. Please write it down and submit it to 
me. This goes along with the overall funding plan also, but 
what I need to know is if this contract is opened back up, when 
we are talking about funding levels, I want to know how much it 
is going to cost the taxpayers and the FAA immediately, and if 
it is made retroactive, how much it is going to cost them for 
the next 10 years. You can submit that to me also or just call 
me and let me know or submit it to the Committee. But I want 
the overall cost, because that is what we are talking about in 
this whole NextGen system.
    Mr. Forrey. I will give you something in writing, but I can 
just tell you right off the bat, if it just went back to where 
it was before it was imposed on it, it would be flat for the 
next 10 years, payroll.
    Mr. Graves. Because that is different than information I am 
getting, and that is the reason I want to get to the bottom of 
it, so please go through that with me.
    Mr. Forrey. We will do that.
    Mr. Graves. Thank you, Mr. Chairman.
    Mr. Costello. The Chair thanks the gentleman.
    The Chair recognizes the gentleman from Iowa, Mr. Braley, 
for five minutes.
    Mr. Braley. Thank you, Mr. Chairman.
    I want to thank all of the panel for coming today, but most 
importantly I want to thank the members you represent for the 
role they play every day in keeping our skies safe and allowing 
us to get to where we need to go to.
    Mr. Forrey, in your testimony you talked about the direct 
correlation between controller staffing and safety, and I 
wondered if you could elaborate a little bit on that as it 
relates to circumstances in the tower when you are dealing with 
staffing shortages.
    Mr. Forrey. I will try to, sir. When you have less bodies 
to work in the tower, you have fewer eyes watching the 
operation, you have more distractions on other duties you now 
have to do that you normally wouldn't be doing if there were 
other people there in the tower; you have less ears listening 
to the frequencies and what is being said and relayed back and 
forth between the pilots; and you are working longer time on 
position because you don't have people to relieve you. You are 
doing combined positions because you can't open up positions 
because you don't have enough staffing to do it.
    And this is a common occurrence happening every day in the 
system. We catch more and more near disasters on a common, 
regular day basis because we do, at some places, have 
appropriate staffing, but what is going to happen as that 
starts to reduce and whittle away, that safety net gets 
degraded and now the opportunity and chance for some near 
disasters can happen.
    I mean, just Atlanta, last month, we had a controller that 
inadvertently departed an aircraft head-on into six arrivals 
coming the opposite direction on that runway. Caught it two 
knots before they were going to hit rotation off the ground. It 
blew out the tires on the aircraft, but no one got off the 
ground and it ended up safely. That individual had worked 
overtime six-day work weeks four out of the last six weeks. 
That is a facility that is in severe crisis.
    Mr. Braley. Well, the last time you and I spoke we talked 
about a similar incident over my district, the 1st District of 
Iowa, out of your O'Hare unit as well, correct?
    Mr. Forrey. Correct.
    Mr. Braley. One of the other things that I noted in your 
written testimony is how the imposed work rules are causing 
strife between employees and management, decimating staffing 
levels by driving out veteran controllers at record pace, and 
destroying morale at the facilities, and you cite some 
additional examples. As someone who has studied human factors, 
can you talk about how these types of morale problems can have 
an impact on the ability of controllers to do their jobs in the 
tower on a day-to-day basis?
    Mr. Forrey. Well, first and foremost, I think our men and 
women in the field try to not let those distractions get in 
their way and they are still providing the safest operation in 
the world, and I commend them for that considering all that is 
going on and all the abuse that they are taking under these 
imposed work rules.
    I think some of the human factors you lose is they get worn 
out, they get tired, they get fatigued. They are working longer 
hours, they get angry. I mean, just at one of my facilities up 
in the Northeast last week, there was a confrontation between a 
supervisor and a controller in the hallway, where the 
controller accuses the supervisor of bashing him and throwing 
him up against the wall, and the supervisor accuses the 
controller of doing that. Well, the supervisor weighs 300 
pounds; the controller works about 150 soaking wet. I mean, it 
is causing a lot of distraction and animosity between workers 
and the people that supervise them, and that is not a good 
thing for anybody.
    So, sooner of later, you know, someone is going to get 
involved into some kind of a confrontation and they are going 
to miss something, and that is what we are concerned about. So 
if you can't have a happy workforce--and they are not happy, 
they are just leaving. We are losing about three a day through 
attrition.
    Mr. Braley. And that provides a good transition for you, 
Mr. Waters, because in your written testimony on the pay-for-
performance subject you talked about a factor that is very 
common in the workplace but nobody likes to talk about, that is 
the problem we encounter when there are workplace rules 
requiring regular performance evaluations that are never 
carried out and that employees never get the type of guidance 
and supervision that they are directed to and, therefore, 
disputes erupt between labor and management on whether or not 
an employee is living up to performance expectations.
    You have cited specific examples where an attorney who was 
part of your bargaining unit had to write her own performance 
evaluation after never receiving one over a three-year period. 
I would just like you to have the opportunity to comment on how 
that affects morale in the workplace and contributes to some of 
the other problems we have been talking about.
    Mr. Waters. Oh, it is a dramatic impact on morale because 
there is absolutely no trust. When you talk about pay-for-
performance--and I think, you know, attorneys in particular are 
willing--and I think I wrote in there that I told Administrator 
Garvey myself that we would be leading the charge for pay-for-
performance. In my office, in my division, where we do 
government contract litigation, we have cited the taxpayer 
billions of dollars. I mean, we have confidence in our 
abilities, but what we don't have is two or three performance 
appraisals for the last three years.
    The answer is to insist that the managers get graded on 
giving performance evaluations. I have been in the Marine Corps 
for 22 years. We don't have conversations in the Marine Corps 
did you get a performance evaluation this year? No, I haven't 
had one for three years. You don't have those because the 
officers are graded on their timeliness of giving those 
appraisals, and they have to be given. It is not even a 
possibility.
    So when I came to the FAA, I was shocked to see this. The 
other system that we had was so simple, especially on the merit 
system. You could look at the sheet and see that it required an 
initial counseling, and when that was; a mid-term counseling, 
and when that was; and then the final, and when that was. And 
as I cited, there were people who didn't get them for years. I 
have heard stories of people who didn't get them for 10 years. 
Sometimes I got them, sometimes I didn't. I never got the 
initial or the mid-term. So I guess you could say that, yes, 
sir, that definitely breeds mistrust because you can't have a 
pay-for-performance system if you are not measuring 
performance; it is impossible. And I know that adult 
professionals want feedback----
    Mr. Costello. The Chair thanks the gentleman from Iowa and 
recognizes the gentleman from Texas, Mr. Poe.
    Mr. Poe. Thank you, Mr. Chairman. A couple comments, then I 
have a question for Mr. Forrey.
    I am concerned, of course, about the aging of air traffic 
controllers. I have been to the facility at Intercontinental 
Airport, and every time I go up there it looks like an AARP 
convention, and that concerns me because eventually those guys 
are going to quit, you know, they are going to retire.
    I am also concerned about the training. I don't know how 
long it takes to train an air traffic controller, but I think 
however much time is needed, we should not cut back on training 
in the name of getting more air traffic controllers. It sounds 
to me similar to we need more doctors in the United States, so 
we will just cut med school in half and we will get more 
doctors quicker. Both of those have to do with public safety. 
So however long it takes to train one, that is how long they 
need to be trained.
    But my concern is consolidation of facilities with 
Intercontinental Airport in Houston and also the Beaumont 
facility that I represent about 97 miles away. Your testimony, 
Mr. Forrey, about the consolidation of FAA facilities, as you 
know, I questioned last week Administrator Blakey about the 
possible consolidation of the Beaumont and the Houston 
Intercontinental TRACON facilities and the loss of personnel, 
including air traffic controllers. She told me that 
consolidation would ensure that our controllers would have the 
best equipment, but both facilities use the STARS system, so I 
am a little confused about that, so I look forward to her 
answer. But, in your opinion, what is driving this 
consolidation of Houston and Beaumont, and what will it mean to 
those of us who use this airspace, including me? And do you 
have an example, in your opinion, of where consolidation made 
sense and was a good idea, and how it differs from what the 
Administration is proposing at Beaumont and its BRAC-like 
consolidation in their FAA reauthorization legislation?
    Mr. Forrey. I hope I can remember all that. I am very 
familiar with the Beaumont operation. They are essentially 
taking the airspace from the Beaumont tower and the surrounding 
area, putting that airspace over in the Houston 
Intercontinental facility, the TRACON, and they are not going 
to supply any staffing to support that airspace change, and 
they are going to downgrade that facility in Beaumont tower a 
couple levels, which is going to be about an 8 percent pay loss 
to those employees right off the bat, and essentially contract 
that facility out. At least that is what I believe they are 
going to do, because they are going to fall down to that kind 
of traffic.
    As far as the user of the system, you now no longer have 
people that are familiar with that airspace and the surrounding 
terrain and the surrounding weather. When something happens, 
they are going to be stuck over in a facility 100 miles away 
that has no clue what kind of airspace they are dealing with 
over there; now all they have is a tower.
    The agency is in the practice now of closing down these 
approach controls and these smaller facilities on the midnight 
shifts and moving them over hundreds of miles away, the 
airspace, to controllers in other facilities and centers, en 
route facilities that have no clue of what goes on in that 
airspace. They have no up-to-date weather information, they 
don't know what the terrain is like, and on many instances they 
don't even have standard operating procedures on how they are 
going to run the operation because the agency hasn't gotten 
around to it.
    So we are very concerned about consolidations. We are not 
opposed to consolidations. I mean, it does make sense in some 
instances, but not when the agency goes out and does a cost 
study basis analysis and takes a 7,000 square foot facility and 
says, hmm, let's make it a 14,000 square foot facility and see 
if it is just as easy and cheap to keep it here or to move it 
somewhere else. Well, they don't need 14,000 square feet, they 
need maybe 7,000 or 8,000 square feet. Give it an honest 
assessment. So those are the things we are looking at.
    Does it make sense to move those facilities to consolidate? 
In this particular instance, you are right, it doesn't; they 
are both using the modernized equipment. You are taking away a 
benefit to the users of the system that fly in and around that 
Beaumont area.
    The New York TRACON and New York Center we are working on 
putting together a consolidated facility. That made sense. You 
have got two huge facilities out on Long Island. Put them into 
one. It consolidated the airspace and it allows you to provide 
better transportation routes in and out of that whole New York 
complex area. Through the surrounding centers, it impacted 
flights out of Boston, out of Cleveland, out of Atlanta, and 
Florida. It was a great plan, but we got shut out of that 
process too.
    So there is a time and place when we can do that. There are 
314 FAA facilities out there. Is it reasonable to believe in 
the future that they can continue to fund and update equipment 
in all 314 facilities? Probably not. But let's make sure, when 
you do something like that, it is for the right reason, and 
right now we don't believe it is for the right reason, they are 
just doing it for cost.
    Mr. Poe. Thank you very much.
    What time I have left I yield to the Ranking Member, Mr. 
Mica.
    Mr. Mica. That is dangerous. I only have one quick 
question.
    The grievances that have been filed--you know, I consider 
air traffic controllers a profession and professionals, and you 
spoke to them as professionals, but I was told that since 
September 3rd, 2006, there have been filed over 248,276 
grievances. Now, all of that has to take time. This is one of 
the forms that has to be filled out with the documentation, 
which obviously is taking a lot of air traffic controllers away 
from their responsibilities. But this concerns me. This is a 
very serious amount of time.
    I really don't think air traffic controllers--now, I know 
they have some differences with you call ``work-imposed 
rules,'' but this is not my idea--put this up there--this is 
not my idea of professionalism. So we have got to stop this and 
we have got to stop this and start acting like professionals in 
this process. This is not acceptable.
    Mr. Costello. The Chair would observe that Mr. Poe's time 
has gone over by a minute.
    We are going to be called for three votes, but before we 
do, I would recognize the gentleman from Oregon, Mr. DeFazio.
    Mr. DeFazio. Thanks, Mr. Chairman. I have been enjoying the 
debate, but let's get back to some critical safety and 
operational issues here.
    I think a good case has been made that we need a just 
settlement and a contract, but I am going to go to something a 
little more specific, and the question goes to Mr. Brantley 
with PASS.
    I am very concerned to read in your testimony the FAA's 
move to a fix-on-failure approach, abandoning periodic 
maintenance and certification of NAS systems. Is this true?
    Mr. Brantley. Yes, sir, they are moving towards that 
approach and where, today, a lot of the maintenance is 
preventive in nature, the idea is to----
    Mr. DeFazio. But if we have a failure, it is a critical 
component, doesn't that mean we suddenly have airplanes that 
can't leave, airplanes that can't land, airplanes in holding 
patterns somewhere out there, and a lot of turmoil and 
potential for not only expensive delays, but also jeopardizing 
health and safety?
    Mr. Brantley. Yes, sir, absolutely. And, you know, part of 
the problem is the way the agency looks at things today is 
different than they used to, as well. One of the fundamentals 
built into the system is redundancy, and if your primary system 
were to fail, you would begin restoring that immediately, even 
though you are on a backup, so that you have a safety margin as 
well. And one of the things that we are seeing now is as long 
as there is a backup that you can go to, in many instances they 
don't even start getting someone to work on it until the next 
business day or the next time they have someone available.
    Mr. DeFazio. I think I read of an instance earlier this 
year, it might have been LA, I think, where both systems, both 
primary and secondary, went down.
    Mr. Brantley. Yes, sir. And there wasn't a person available 
that was actually--you know, the person that was assigned to 
cover the airport was also covering other airports in the area, 
so they weren't there at LAX when it happened.
    Mr. DeFazio. Could we call this sort of penny wise and 
pound foolish? I mean, has the industry itself complained to 
the FAA about this, said, really, this doesn't make a lot of 
sense to us here?
    Mr. Brantley. Yes, sir, I think one of the factors is that 
outages of equipment that are equipment-related are such a 
small percentage of the overall agency outages, it doesn't get 
the attention that at least I think it deserves. Because even 
though it is small, it is preventable to a large extent. So 
weather is something we are always going to struggle with, but 
that gets most of the agency's attention.
    And, yes, I think having the right number of trained people 
where they are needed is absolutely critical, and that is why 
we asked for a study on a staffing model and on training 
because, frankly, a debate right now about staffing is very 
hard to have because the agency can't even determine where they 
should have people.
    Mr. DeFazio. Is there a pending study?
    Mr. Brantley. There is not.
    Mr. DeFazio. Okay.
    Mr. Brantley. We are asking for some help.
    Mr. DeFazio. I think that is something the Committee might 
want to put into the FAA reauthorization that mandates such a 
study.
    I note a number of other areas that I think are really 
critical. You say we also have a dearth of qualified safety 
inspectors. Could this be true?
    Mr. Brantley. Yes, sir. And again, you know, the workload 
has increased and the number of inspectors has not. You know, 
it creates a situation where inspectors are spending less time 
doing inspections.
    Mr. DeFazio. So they are just checking paperwork that 
someone else created, like a designee or something----
    Mr. Brantley. Absolutely, sir.
    Mr. DeFazio. Or maybe a non-qualified maintenance facility.
    Mr. Brantley. Well, unfortunately, many of those they are 
not even allowed to inspect unless the sponsor, whoever is 
contracting with them, offers to take them in.
    Mr. DeFazio. Wait a minute. So we have someone doing 
critical aviation maintenance over here, they have been 
contracted with by a qualified facility or an airline over 
here, this is not a qualified facility. Our inspectors, as few 
as they are and as little capability as they have to get around 
and inspect these things, they can't go in there without----
    Mr. Brantley. Not an unannounced inspection. The sponsor 
has to take them in. And, you know, as bad as that is, even 
doing an inspection on a carrier or a certificated repair 
facility is becoming more and more rare because they are not 
allowed to, whether it is for reasons of budget, because they 
can't travel to go to the facility, or just because they don't 
want anyone going in there and disrupting the work the way they 
like to talk about it.
    Mr. DeFazio. You mean like overseeing the work?
    Mr. Brantley. Exactly.
    Mr. DeFazio. Checking the work?
    Mr. Brantley. Yes, sir.
    Mr. DeFazio. I find those things very alarming, Mr. 
Chairman, and hopefully we will have more opportunity to 
discuss those next week. But you need an adequate staffing 
level for your technicians, you need an adequate staffing level 
for the inspectors, and that is something I hope we can 
accomplish in the budget and then we will get into those other 
concerns next week.
    Thank you, Mr. Chairman.
    Mr. Brantley. Thank you, sir.
    Mr. Costello. I thank the gentleman from Oregon.
    The Chair, at this time, would announce we have a little 
over nine minutes. We have three votes on the floor. 
Immediately after the last vote we will come back and resume 
the hearing.
    At this time the Chair would recognize the distinguished 
Chairman of the Full Committee, Chairman oberstar.
    Mr. Oberstar. Thank you very much, Mr. Chairman, and thank 
you for your diligence in holding these hearings and thank all 
the other Members on both sides of the aisle for participating 
today. I regret I stopped in at the beginning, heard your 
presentation, then I had other children of transportation to 
deal with, like Water Resources Development and Technical 
Corrections Act, and a few other things that we are trying to 
wrap up here.
    We don't need to spend a lot of time discussing--at least I 
don't--discussing the concerns of the air traffic controllers. 
We had extensive hearings in 1981 and in 1980 about conditions 
in the facilities--whether towers, TRACONs, en route centers--
about the state of the art of aviation technology. We went 
through all of that. We knew what needed to be done, it was all 
laid out in the course of hearings in the Subcommittee of 
Investigations and Oversight. And when the government didn't 
participate in a cooperative and constructive manner with the 
air traffic controllers, they walked out.
    My father had card number one at the Steel Workers Union in 
1937, he was the first one to join. To establish the right of 
workers to bargain collectively and to withhold their services 
when the collective bargaining process broke down, that is a 
fundamental right. I was there at Farmington on August 4th. The 
strike occurred on August 3rd. And I stand with you today. We 
need to fix the collective bargaining process. Chairman 
Costello said that at the outset. We have got to fix it.
    This isn't about what kind of shirt you wear in a darkened 
TRACON facility or what type of slacks you wear. 
Professionalism is not in your clothes, it is in your head. 
Professionalism is in the command you give to the aircraft. 
Professionalism is being able to handle 27 aircraft in your 
sector at a crisis time.
    When a KC-135, for example, is in that airspace and it has 
a fire onboard and it is loaded with fuel, and you have got to 
get the other 26 aircraft out of that airspace, and you need 
every bit of professionalism, I don't give a damn whether you 
have got shorts on or a t-shirt on. I do care whether your 
commands are right; whether your separation is right; whether 
your management is sound. That is what this is about. The FAA 
needs to negotiate in good faith and we have to provide you 
with the tools to be able to do that, and we will find a way to 
do it.
    Thank you, Mr. Chairman.
    Mr. Costello. I thank the distinguished Chairman.
    Let me thank the first panel for their testimony and for 
answering our questions. You are dismissed. We thank you for 
your testimony.
    We will hear from the second panel as soon as the 
Subcommittee resumes after the last vote.
    [Recess.]
    Mr. Costello. If we could ask those who are on the second 
panel to please have their seats, we will go ahead and get 
started.
    The Chair would like to welcome the second panel and make 
brief introductions. First, Captain Terry McVenes, the 
Executive Air Safety Chairman for the Air Line Pilots 
Association; Patricia Friend, the International President for 
the Association of Flight Attendants; Robert Roach, the General 
Vice President of the International Association of Machinists. 
We thank you for being here today and the Chair recognizes 
Captain McVenes under the five minute rule.

   TESTIMONY OF CAPTAIN TERRY MCVENES, EXECUTIVE AIR SAFETY 
    CHAIRMAN, AIR LINE PILOTS ASSOCIATION; PATRICIA FRIEND, 
INTERNATIONAL PRESIDENT, ASSOCIATION OF FLIGHT ATTENDANTS-CWA; 
   ROBERT ROACH, JR., GENERAL VICE PRESIDENT, INTERNATIONAL 
                   ASSOCIATION OF MACHINISTS

    Mr. McVenes. Thank you, Mr. Chairman, and good afternoon. I 
want to thank you all for the opportunity to outline the Air 
Line Pilots Association's perspective on FAA safety and 
operational programs.
    ALPA is the world's largest pilot union. We represent more 
than 60,000 pilots in the United States and Canada. The 
Association was founded in 1931 and our motto since its 
beginning has been ``Schedule with Safety.'' Even today, in 
spite of the challenges and obstacles facing the airline 
industry, airline pilots remain focused on operating airliners 
safely and, as a result, the U.S. safety record is the envy of 
the rest of the world. From pilot fatigue to securing funding 
for modernizing the airspace system, the 110th Congress will 
need to play a pivotal role within the aviation community to 
maintain our unrivaled safety record.
    Today's air traffic system is under more pressure than ever 
to accommodate more airplanes in the same airspace, and we are 
all too familiar with the recent media reports of 10 hour 
ground delays some of our airlines have experienced. Those 
delays are unfortunate, but the broader issue is that these 
delays signal a weakness in the system that may eventually lead 
to an accident if it is not addressed.
    We must take these delays as a warning signal that the 
system needs help. We must proactively manage the safety risks 
that exist in our industry through safety management systems, 
or SMS, before an accident occurs. ALPA is a strong SMS 
advocate and Congress needs to monitor the FAA's progress on 
SMS implementation to ensure compliance with the ICAO standards 
deadline of January 1st of 2009.
    The Aviation Safety Action Program, or ASAP, is a critical 
element of SMS or in any aviation safety program. It allows 
front-line employees to report safety and operational issues 
first-hand, enabling the industry to work together to find 
solutions to difficult problems.
    As an industry, we have seen the value of ASAP go far 
beyond the cockpit to other employee groups in the airlines. 
Pilots and the airlines they fly for reap the safety and 
economic benefits of ASAP. In the air traffic arena, however, 
that same culture does not exist, and the front-line 
controllers' advice and input is often not welcome. They do not 
have a means to report safety or operational issues in the same 
cultural environment that many of the pilots at the other end 
of the radio do. And even though the FAA has encouraged and 
promoted ASAP for our Nation's airlines, they have not done so 
internally for the benefit of their own organization.
    In order to take that next step in aviation safety, all 
components of the system must be involved in ASAP, including 
air traffic control. Congress must urge the FAA to 
expeditiously make ASAP a reality for air traffic controllers. 
And just like the airlines, this requirement requires a 
commitment from the very top of the organization; in this case 
the FAA, and in this case specifically the FAA Administrator. 
The Administration can make this happen and it will have a 
tremendous impact on the safety and efficiency of our entire 
air transportation system.
    Allow me to switch now to transportation worker fatigue, 
which is a present and growing problem. FAA duty and roles for 
airline pilots are a dated patchwork of regulations developed 
over the past 60 years. ALPA recommends that Congress strongly 
encourage the FAA to modernize flight and duty regulations 
using rational, scientifically based working hour limits. Being 
on duty for 15 or 16 hours may make sense in a normal office 
environment, but it makes no sense for an airline pilot 
operating a complex machine in a complex environment, and it 
should make no sense to America's traveling public whose lives 
often depend on split-second decision-making.
    ALPA has long advocated one level of safety in the airline 
industry. Nevertheless, there are several discrepancies between 
cargo and passenger carrier regulations that must be addressed 
in order to bridge the safety gap between passenger and all-
cargo operations. Cargo airlines often operate in the same type 
of aircraft to the same airports at the same times as their 
passenger counterparts, and these aircraft need to be operated 
to the same safety and security standards, regardless of their 
payload. Flight deck door and firefighting requirements, to 
name just two of the issues, simply do not provide the same 
safety and security for cargo airlines as for passenger 
airlines, and legislation can fix that.
    To keep our National Airspace System functional, Congress 
must secure long-term funding for improvements now. 
Modernization efforts must include upgrading computer and 
satellite systems to improve operational safety and efficiency. 
More effective tools must be developed that will increase 
capacity and will also result in lower fuel usage, reduce taxi 
times, more efficient gate management, and more efficient 
departures.
    As a tragic overrun accident at Midway Airport in December 
of 2005 showed us, we also need to improve runway safety areas 
at all airports. The FAA's own numbers tell us that 45 percent 
of our Nation's airports must be improved to meet the 
standards. We also need to have more funding of industry 
research to develop accurate and reliable means to measure 
runway friction and to provide a reliable means to get accurate 
runway surface condition reports to the cockpit.
    Next week marks the thirtieth anniversary of the disastrous 
ground collision of two airliners in Tenerite. While much work 
has been done to prevent a similar occurrence from happening 
again, we are all too aware of several close calls in Chicago 
and Los Angeles just in the last nine months, any one of which 
could have had a similar disastrous result. The runway 
incursion problem has been thoroughly studied and mitigations 
have been devised that can lessen the risk of runway 
incursions. However, the Government and industry must be 
willing to devote the resources required to achieve long-term 
solutions to this problem.
    The final issue I want to mention is outsource maintenance 
oversight. One way that many of our carriers have cut costs 
since 9/11 is by reducing the amount of maintenance they 
perform internally themselves. When maintenance is outsourced, 
oversight becomes more complex and more difficult. Congress 
must ensure that the FAA retains the mandates and the resources 
to fill its oversight role in the new economic environment of 
outsource maintenance.
    For more than 75 years, ALPA has had a tremendous impact on 
improving aviation safety. Today ALPA continues to be the 
world's leading aviation safety advocate, protecting the safety 
interests of our passengers, fellow crew members, and cargo 
around the world. Congress must help us ensure that the airline 
industry's safety net is not eroded. Together we can advance 
the aviation safety in the years to come. As professional 
aviators who help keep this industry safe, together with the 
strong support of Congress, we are confident of success, 
success that is vital to the well-being of our Nation, our 
industry, and the traveling public. Thank you.
    Mr. Costello. Captain, thank you.
    Ms. Friend, your statement, if you can give us a summary in 
five minutes or less.
    Ms. Friend. Thank you, Chairman Costello, for giving AFA 
the opportunity to testify today. Flight attendants, as the 
first-responders in the aircraft cabin, have a unique 
perspective on a number of the safety programs of the FAA, and 
we are pleased to have a seat here today to discuss some of 
these issues.
    Unfortunately, I must tell you that the FAA has repeatedly 
failed to take action on several fronts that would improve the 
overall safety of the employees that work under its 
jurisdiction. My written testimony highlights a number of 
important issues, but in the five minutes allotted today I want 
to focus on just two of them: flight attendant fatigue and the 
lack of basic workplace safety and health protections for 
flight attendants.
    Fatigue is a very real and serious concern for the flight 
attendant workforce in this Country, just as it is for pilots. 
Some air carriers are routinely taking advantage of a reduced 
rest provision which allows a rest period to be reduced to 
eight hours. It is our understanding that the original intent 
of this provision was to accommodate day-of scheduling delays 
such as bad weather or air traffic control problems. This 
exception has become the rule and flight attendants are now so 
exhausted that they have informed us that they have, in some 
cases, forgotten to perform critical safety functions.
    Using the term ``rest period'' can be misleading because it 
involves much more than just sleep. The rest period can begin 
as soon as 15 minutes after an aircraft pulls into the gate and 
continue until one hour prior to the next scheduled departure. 
This rest period must also include waiting and travel time to 
the layover hotel; checking in; eating a meal, since many of 
our carriers have eliminated flight attendant crew meals; 
getting prepared for bed; then getting dressed for work the 
next morning; traveling back to the airport and preparing for 
the flight. Our members are reporting that the actual sleep 
time in an 8-hour rest is in many cases only between 4 and 5 
hours.
    To further highlight the FAA's turning of a blind eye to 
this practice, an FAA spokesperson, in response to a question 
from the media on this issue, stated the FAA rules on flight 
time and rest for both pilots and flight attendants are 
fundamentally sound; they serve aviation safety very well. We 
fundamentally disagree.
    Congress has recognized this problem and directed the FAA 
to conduct a study of flight attendant fatigue with a report 
that was due originally in June of 2005. After a year of 
stonewalling, the FAA finally released the report in June of 
2006. The report concluded that flight attendants are 
definitely experiencing fatigue, and it went on to recommend 
specific areas for further evaluation. AFA's request is that 
CAMI be directed to continue their initial research and that it 
receive adequate funding to do so.
    Like our longstanding battle to combat flight attendant 
fatigue, for well over 30 years AFA has been fighting for the 
most basic workplace safety and health protections for flight 
attendants. Those pleas continue to fall on deaf ears at the 
FAA. Flight attendants encounter numerous occupational injuries 
and illnesses while working aboard commercial flights. Their 
injuries are at rates several times greater than those for all 
private industry workers and even significantly greater than 
the rates experienced by construction workers.
    The reason that flight attendants continue to experience 
such high rates of injuries is that we are not covered under 
OSHA. The FAA has repeatedly refused to take any significant 
action to enforce standards protecting the occupational safety 
and health of flight attendants. The FAA claimed exclusive 
jurisdiction over our workforce in 1975. After decades of 
inaction by the FAA, AFA filed a petition for rulemaking in 
1990, asking the FAA to adopt selected OSHA safety regulations 
and apply them to airline crew members. Seven years later the 
FAA finally responded, declining the petition, stating that the 
issues do not address an immediate safety concern.
    After increased pressure from AFA, progress seemed to be 
forthcoming when the FAA and OSHA entered into a historic 
Memorandum of Understanding in August of 2000. The MOU 
established a joint FAA-OSHA team to identify whether OSHA 
requirements could be applied to the working conditions of 
employees on aircraft. The first report of the joint team 
identified five basic OSHA protections that could be 
implemented without compromising aircraft safety concerns. 
Unfortunately, the team did not meet again until January 2002, 
at which time they could not agree on a time line for 
implementation of the relevant OSHA regulatory standards.
    The DOT Inspector General has issued a report which 
concluded that unless FAA and OSHA resume working together, we 
have no confidence that industry standards will be issued in 
the near future to address occupational hazards. The report 
went on to recommend several concrete actions that the FAA and 
OSHA should take. It stated ``If these recommendations are not 
implemented, it will, in our opinion, be apparent that after 25 
years of limited progress, an alternative approach will be 
necessary.'' To date, the FAA and OSHA have taken no steps to 
implement the recommendations.
    In light of the continued stonewalling on the part of the 
FAA, we believe it is time for Congress to force the FAA to 
relinquish the exclusive jurisdiction over flight attendant 
workplace safety and health. Thirty years of inaction is far 
too long.
    Again, Mr. Chairman, thank you for giving me the 
opportunity to testify today.
    Mr. Costello. Thank you, Ms. Friend.
    Mr. Roach, you are recognized to summarize your statement, 
please.
    Mr. Roach. Thank you, Mr. Chairman, for the opportunity to 
appear before this Committee. I am here representing the 
National Association of Machinists and Aerospace Workers at the 
request of International president R. Thomas Buffenbarger. We 
represent over 100,000 airline employees within this industry, 
employees at every classification with the exception of pilots. 
Our statement is in the record and we will be very brief here 
because, as I stated, the statement is in the record and we 
don't want to take up too much time.
    Our first situation is the NMB, National Mediation Board 
and National Labor Relations Board jurisdiction. While Congress 
has been discussing and voted on H.R. 800, the Employee Free 
Choice Act, which gives the employees an opportunity to be 
recognized by a carrier, we have a large group of employees who 
were certified under the National Labor Relations Act under the 
existing procedures, signed up for an election, voted secret 
ballot, had been represented in some cases for 10, 20, and 30 
years, who overnight have lost union representation because of 
a change in the interpretation of the law by the National Labor 
Relations Board and the National Mediation Board.
    For example, in Minneapolis we had well over 200 members 
certified in the IAM since 1973. Overnight, in 2006, they lost 
union representation because they wanted improvements in their 
particular contract. This is creating an unsafe condition 
because, instead of having long-term loyal employees working on 
the airports, fueling planes and delivering certain items to 
the airports, we have a group of employees who are making 
minimum wage and change jobs very rapidly. We think that a 
change in the law is required to fix this problem.
    In addition, the lack of consistency by the National Labor 
Relations Board, National Labor Relations Act, and the Railway 
Labor Act in terms of express carriers. Under UPS, the 
employees, the truck drivers and the mechanics, the ground 
mechanics are covered under the National Labor Relations Act. 
At Federal Express, because the term ``express carriers'' was 
entered in the middle of the night into the law, Federal 
Express employees are all covered by the Railway Labor Act, 
which means to organize these employees, they must be organized 
throughout the entire Country, which is much different than 
what has happened at UPS. So there is a lack of consistency and 
there is not a level playing field between the carriers.
    We represent a large number of flight attendants as well, 
and we echo Sister Friend's concerns about flight attendant 
fatigue, as well as the fact that OSHA does not have control 
over the safety of flight attendants. We also have a concern 
about self-defense. Currently, today, self-defense training is 
voluntary and the TSA handles voluntary training. We do not 
believe that since 9/11 and the tragedy that 9/11 has caused, 
that self-defense training, which is designed to protect the 
individual flight attendant, as well as the flying public, 
should be voluntary. There should be mandatory training for all 
flight attendants, all active flight attendants.
    Foreign repair stations, there is insufficient oversight. 
There is not enough funding to get the proper inspections. A 
number of jobs have gone overseas, which every job that goes 
overseas is 16 other support jobs that we lose in this Country. 
We believe it is a matter of national security, as we export 
technology and jobs overseas, at some point in time some of 
this technology may come back to the United States to hurt us. 
It wasn't that long ago that President Saddam Hussein was an 
ally of the United States, until he became a terrorist, a 
member of the axis of evil.
    Foreign competition, we quickly want to echo the sentiments 
of my colleagues here, that we do not believe that any 
additional foreign intervention into ownership of airlines 
would be beneficial. Increased ownership must not be allowed. 
Congress rejected President Bush's Administration plan and that 
position should not change. The airports are a very safety 
sensitive place to work, it is a very dangerous place to work, 
and we believe that more oversight, not less oversight, is 
required.
    Since 9/11, we believe that because of subcontracting of 
work to small operations the safety of the airports and the 
employees and the flying public has been compromised. We stand 
ready to work with this Committee and the Members of Congress 
in providing any input that we can as a machinists union to 
improve the conditions.
    We are prepared to answer any questions. Thank you.
    Mr. Costello. Mr. Roach, we thank you.
    Captain McVenes, a couple of quick questions, please. One 
is in your testimony you indicate that there is a need to 
ensure that the aviation community does not become a culture of 
capacity, but a culture of safety, and I wonder if you might 
elaborate on that.
    Mr. McVenes. Currently, today, there is a lot of emphasis 
being placed on increasing capacity and that is a good thing, 
it is good for the traveling public, it is good for everyone to 
get capacity up. However, we cannot increase capacity just for 
the sake of increasing capacity unless we make sure that good 
safety safeguards are part of the solution to increasing 
capacity.
    Mr. Costello. I wonder if you might talk a little bit about 
the outsourcing of maintenance. In your testimony you indicate 
how there may be difficulty in the distance between maintenance 
being done and the people ultimately responsible for its 
correct completion, the more complicated the process might be 
by outsourcing to foreign countries and so on.
    Mr. McVenes. What we are finding, there is a very wide 
range of differences in the various repair stations out there 
that many of the airlines are using for this outsourcing. Some 
are done very well, some are not done so well. The results that 
we are getting back when the airplanes come back into service, 
a lot depends on the oversight that took place by the 
regulatory authorities at that repair station. So we have to 
ensure that that oversight continues. If there is not good--you 
know, everybody has got budgets that they are trying to work 
under, including the FAA, when it comes to oversight, but we 
have to make sure that they have got the funding there to have 
the right oversight, regardless of where the repair station is, 
to ensure that the work coming out of there is done correctly.
    Mr. Costello. Well, we share your concern, and if you were 
here for my opening statement, that is an issue that we are 
going to delve into further.
    Let me just say I really do not have questions at this time 
for Ms. Friend or Mr. Roach, but let me say that with the 
flight attendants, I think you have made a very compelling 
case, not just today, but in many instances, the 30 years of 
inaction. We hope that, as we move forward with the 
reauthorization and other legislation, we can address some of 
the issues that you in fact have been working so hard to 
address over the years.
    Mr. Roach, the issue with the National Mediation Board, I 
couldn't agree with you more, and at some point in time I hope 
that we can work with you to address that issue as well.
    At this time, the Chair recognizes the Ranking Member of 
the Subcommittee, Mr. Petri.
    Mr. Petri. Thank you very much, Mr. Chairman. Let me just 
say, first of all, as a member of the traveling public, I would 
like to thank all of your members for the generally high level 
of service that you provide. I mainly see the stewardesses or 
flight attendants, and they have a lot of challenges and do a 
great job almost all the time.
    I have a couple of questions, and this one you may not 
really want to answer, Captain, it has been a hot potato in the 
community for years. The international rules seem to be 
changing in the direction of allowing pilots who meet health 
safety standards to fly up to age 65 with a co-pilot who is 60 
or under. This has been debated, obviously, and I know you have 
Members on both sides of this. Do you have any guidance you can 
offer to us here in Congress on that issue?
    Mr. McVenes. Well, you are absolutely correct, it is a very 
divisive issue for all of us, and it is one that we really are 
putting a lot of effort into completely understand. As it 
stands right now, in light of the FAA's announcement for 
wanting to change the rule--and it is going to be placed into 
rulemaking--we feel that is the proper venue to deal with the 
age 60 question. Through that rulemaking process we can make 
sure that all the issues are addressed, safety and operational 
issues, to ensure they get addressed correctly, and whatever 
decisions are made, that they are done with all of those things 
in mind. But we really believe the rulemaking process is the 
way to go.
    Mr. Petri. Thank you.
    In your testimony, Ms. Friend, you strongly urge that we 
have legislation to encourage regulations setting bag weight 
limits in the cabin, I guess, on the planes. Is there a reason 
for that?
    Ms. Friend. This is the carry-on bag issue?
    Mr. Petri. Yes.
    Ms. Friend. Right. There are a number of reasons. First of 
all, the excess cabin baggage is a primary cause of a lot of 
injuries for our members attempting to get those bags properly 
stowed. We also believe if we limit the amount of baggage that 
is allowed into the cabin, that it also expedites the security 
process because the screeners have less bags that they have to 
examine through the x-ray machine, and we believe it increases 
the level of safety. I mean, there is just a limited amount of 
space in the cabin of that aircraft, and just traveling as a 
passenger, I can see how overstuffed those bins are, and I have 
no confidence at all that they would hold in any kind of an 
accident or incident, that that cabin would be littered with 
baggage and impede the safe evacuation of those passengers. So, 
yes, we strongly urge a reduction in the amount and size of 
baggage allowed in the cabin of the aircraft.
    Mr. Petri. Mr. Roach, could you expand on your testimony 
opposing foreign investment in U.S. airlines? I am interested 
not in control or management of airlines, but just investment 
in the American corporate--it is a global world; we are 
investing all over the world in a variety of ways. Why wouldn't 
it be a two-way street?
    Mr. Roach. Well, we are talking about control. The current 
investment level as it stands now, we are not trying to change 
that. But there is a lot of discussion about increasing 
investment from foreign carriers and in some cases some 
standards that don't appear to be control but is control. I go 
back to my days when I represented people at British Airways 
and British Airways invested $450 million in U.S. Airways, and 
there was some discussion with the Department of Transportation 
that they could not have control, and an executive of British 
Airways said to me in the hallway one day, he said, you know, 
you don't invest $450 million in anything and don't have 
control; we have control.
    So the more investment that we allow and the higher the 
percentage of this investment, they, at some point, have 
control over these airlines and it becomes anti-competitive in 
our view. And they have decimated the foreign flags in this 
Country. All the foreign flags that used to fly here, they have 
all disappeared or been reduced. So we think that foreign 
investment could be a very bad thing once control, once a 
foreign carrier or a foreign entity takes control of an 
American or domestic carrier.
    Ms. Friend. Mr. Chairman, may I add a comment to that?
    Mr. Costello. Please.
    Ms. Friend. I think, Congressman Petri, it is all in how 
you look at the U.S. air transportation system. I look at it as 
a public service, and in many cases as a part of our national 
defense when we provide the civil reserve air fleet and when we 
provide military airlift during times of war. It is not an auto 
plant or a bank or a telecommunications industry, it is part of 
our infrastructure, and I just don't think that control of it 
should be in foreign hands.
    Mr. Costello. Thank you.
    The Chair recognizes the gentleman from New York, Mr. Hall.
    Mr. Hall. Thank you, Mr. Chairman, and thank you to all of 
our panelists.
    I agree, Ms. Friend, with the statement you just made about 
critical infrastructure and services that relate to our 
national security--at certain times they definitely relate to 
our national security--needing to be in American hands.
    I wanted to go back to Captain McVenes' testimony that the 
fatigue cushion once provided by negotiated work rules has been 
completely eliminated. I was curious if you could elaborate on 
that.
    And then, Ms. Friend, if you would also speak to fatigue 
and to the CAMI study on fatigue and what recommendations were 
made.
    Mr. McVenes. If you take a look at the regulations that 
have been developed for flight duty and rest periods, they 
really date back 60 years, to a time when we were flying 
piston-powered airplanes and sometimes three pilot crews and 
very short haul operations. The way we have dealt with the 
changes in the industry in spite of those rules has always been 
through the collective bargaining agreements, where we were 
able to secure more realistic rest periods, more realistic duty 
times from those collective bargaining agreements.
    After 9/11, when the industry went through a very 
tremendous economic downturn, we lost a lot of those--there 
were a lot of changes that were made in those collective 
bargaining agreements as they applied to flight and duty time 
and rest periods. Consequently, we are at a point now where 
most of our airlines are operating strictly under the basic 
Federal regulations, the FARs, so we are seeing now that we are 
having a lot more issues purely from a safety perspective just 
on fatigue, and the reason has been because the contracts have 
changed.
    Ms. Friend. Captain McVenes is right. Those duty and rest 
times were intended to be a floor, and a floor that we never 
actually had to face and work under until all of the 
concessionary agreements made during bankruptcy. We now know 
that it is an inadequate floor.
    But on your question of the original CAMI fatigue study, in 
the initial study, CAMI reported that they only had time to 
really review existing literature and do some preliminary 
interviews or surveying of cabin crew members or flight 
attendants. What they recommended that they do is a more 
extensive study, actually follow selected crew members around 
and measure their reaction times at certain points in the duty 
time or following the reduced rest.
    So we have asked or we are asking that they be fully funded 
for what they need to complete that study so that we can only 
identify that flight attendants are fatigued--we know that--but 
we can identify where is the break point, what is the maximum 
amount of duty and minimum amount of rest that is required to 
maintain the vigilance and the reaction time that is necessary.
    Mr. Hall. Thank you. I also wanted to ask, Ms. Friend, 
about your testimony about poor air quality in the cabin or 
treatment of the aircraft with pesticides and the risks that 
you are aware of or that you suspect to passengers and crew.
    Ms. Friend. On the question of the pesticides, several 
countries require either active pesticide spraying or residual 
pesticide spraying. We have a number of our members and we are 
aware of some passengers who have suffered continuing health 
problems as a result of being exposed to this spray. Talk about 
Australia, where we do residual spraying, where the cabin seats 
and the crew bunks are literally saturated with a pesticide and 
then allowed to dry for maybe 8 hours, and then people actually 
are seated. And, you know, whether or not you have a particular 
sensitivity, you know, you in fact can be affected by this 
spray even though it is dry. What happens with our members is 
that they have repeated exposure and they do build up a 
sensitivity and suffer from rashes and even from some 
neurological damage.
    We have been working with the Department of Transportation 
on an alternative to chemicals, something that is called an air 
curtain, and actually has been tested and does work. We are 
actually going to be testing it soon in Puerto Rico. The 
government there has agreed to test, and if they are satisfied 
that it works, then they will eliminate the chemical spray and 
go to this air curtain. So the DOT has been very cooperative in 
working with this and are committed with us to try to persuade 
other countries to abandon the chemical and go with this non-
chemical approach.
    Mr. Hall. Thank you very much, and thanks for all the work 
that you do and your members do.
    Thank you, Mr. Chairman.
    Mr. Costello. I thank my friend from New York.
    The Chair recognizes now, under the five minutes rule, the 
gentleman from Illinois, Mr. Lipinski.
    Mr. Lipinski. Thank you, Mr. Chairman. I want to thank all 
of our witnesses for their testimony. I was actually back in my 
office listening to all your testimony. I appreciate the work 
that you do on behalf of those who are working and putting 
themselves in these situations. I know we were talking about 
flight attendants, the important safety role that they serve 
right now. I think that is especially true.
    One thing, quickly, I just want to ask in regard to, again, 
a safety question, but safety at airports. I want to ask 
Captain McVenes your testimony indicates that much more needs 
to be done to ensure the safety of runways and the airport 
environment. Right now, Midway Airport, there was an 
unfortunate situation where the plane ran off the runway. The 
runway safety areas are small there, but right now we are 
putting in the EMAS to restrict the planes that may go into the 
runway safety area. Are there any other recommendations that 
ALPA has in this regard in general?
    Mr. McVenes. Certainly, the effects of EMAS installations 
are something that can really help at those airports that are 
geographically challenged, shall we say, for runway lengths. We 
also have to take a look at the operating waves that we allow 
some of the airplanes to operate at when they go into some of 
these airports to ensure that they can safely be operated. In 
the other areas of runway safety, there are tests being done 
with runway status lights, for example, that can help in the 
runway incursion area. Tests were done in Dallas, also in San 
Diego, and I know there are some other airports around the 
Country, including O'Hare, I think, that have taken a look at 
this system as a means to help that runway incursion problem.
    These type of things, along with perimeter taxiways, could 
really go a long way to help runway safety. And then we can 
start taking a look at some very simple solutions, simple 
things like proper markings on the taxiways and runways; hold 
short lines, how they are signed and marked can help in that 
runway incursion area, too, to help us in this, the runway 
safety problem we have.
    Mr. Lipinski. Thank you.
    A quick question for Mr. Roach in terms of airport workers. 
There has been some talk about maintaining safety and making 
sure only people who should be in an airport are allowed in 
there. Do you have any concerns one way or the other on the 
rules or the access right now to the airport? Do you experience 
any problems?
    Mr. Roach. I think with a lot of the subcontracting of work 
that is going out, there are a lot of people coming on the 
airports that do not work for airlines, and that has been 
increasing over time. I recall some years ago at Continental 
Airlines, there were 100 employees who were working on the 
overnight cleaning who belonged to a company, not Continental 
Airlines, and it was found this company that had brought these 
people in had illegal documents and we didn't know who these 
people were or what they were doing.
    The access to employees coming on the airport, they all 
must go through a security check, but access for non-airline 
employees, driving trucks onto the airport, is very bad, and we 
have a concern for the people that we represent that people 
have access to the airports who have not been checked, who 
don't have criminal background checks, who have not been 
tested, and that these people are allowed to come on the 
airports. So we do have a concern about that particular group 
coming onto the airport.
    Mr. Lipinski. Thank you.
    Thank you. I yield back the balance of my time.
    Mr. Costello. I thank the gentleman and I thank all three 
of our witnesses. We appreciate your testimony here today and 
look forward to working with you as we proceed with the 
reauthorization. Thank you.
    At this time, the Chair will ask the third panel to come 
forward, and while you are coming forward I will make the 
introductions.
    Dr. Gerald Dillingham is back with us today. He was here 
yesterday and was very patient yesterday and has been patient 
today. He is, of course, the Director of Physical 
Infrastructure issues with the Government Accountability 
Office. Mr. Steve Baker, who is the President of the FAA 
Managers Association; Mr. Warren Kroeppel, who is the General 
Manager of LaGuardia Airport, the Port Authority of New York 
and New Jersey; Dr. Steve Sliwa, who is the CEO and President 
of The Insitu Group; and Mr. James Renninger, who is the 
Director of Aviation Center of Excellence, Florida Community 
College at Jacksonville.
    We would ask that you all take your seats, and we will 
proceed with Dr. Dillingham. You are recognized. Again, we 
appreciate not only you being here yesterday and today, but all 
of your good work. You are always very responsive to the 
Subcommittee, both in the past and currently, and we appreciate 
all that you and your folks do.

      TESTIMONY OF GERALD DILLINGHAM, DIRECTOR, PHYSICAL 
 INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; 
   STEVE BAKER, PRESIDENT, FAA MANAGERS ASSOCIATION; WARREN 
   KROEPPEL, GENERAL MANAGER OF LAGUARDIA AIRPORT, THE PORT 
  AUTHORITY OF NEW YORK AND NEW JERSEY; STEVE SLIWA, CEO AND 
    PRESIDENT, THE INSITU GROUP, INC.; JAMES B. RENNINGER, 
  DIRECTOR, AVIATION CENTER OF EXCELLENCE, FLORIDA COMMUNITY 
                    COLLEGE OF JACKSONVILLE

    Mr. Dillingham. Thank you, Mr. Chairman, Mr. Petri, Mr. 
Lipinski. This FAA reauthorization comes at a very critical 
time for the Nation's air transportation system and the FAA. 
The current system is under stress, as evident by last year's 
record delays and the increasing number and duration of air 
traffic control system outages. My testimony this afternoon 
addresses three specific questions: What progress is FAA making 
with the operation of the current ATC program that will be 
essential foundations for NextGen? Secondly, what are the key 
operational issues that need to be addressed to help ensure a 
successful transition to NextGen? And, third, what are the key 
safety areas that need to be addressed for the continued safe 
operation of the Nation's air transportation system?
    With regard to the current system, over the last few years, 
FAA has made significant progress in moving to more business-
like and cost-effective operations of the air traffic control 
system. There are, however, some significant challenges that 
need to be addressed during this authorization period. One of 
those challenges is for FAA to institutionalize the progress 
that it has made in managing the operations of the current ATC 
system. This challenge is made even more difficult because the 
new FAA Administrator and a permanent leader of FAA's air 
traffic organization will also need to be selected.
    Mr. Chairman, because the next few years are very critical 
for implementing NextGen, FAA may want to identify a candidate 
for chief operating officer at the ATO who is able to serve the 
full five-year term.
    There are other significant challenges that need to be 
addressed. For example, FAA must address the problem of the 
increasing number and duration of ATC system outages. 
Maintaining existing systems as it begins to acquire NextGen 
systems is critical, since these existing systems will be the 
core of the Nation's ATC system for years to come.
    Finally, continuing FAA initiatives, such as facility 
consolidations and closings, should be based on a risk 
assessment and with full involvement of the Congress and FAA's 
internal stakeholders, including the controllers and the 
technicians.
    Now I would like to identify some of the key operational 
issues and challenges associated with the transition to 
NextGen. One challenge is FAA's ability to maintain critical 
acquisitions on schedule and on budget. This will be essential 
to meeting the goal of transitioning to NextGen by 2025 and 
minimizing any cost increases and schedule delays.
    Another challenge is the coordination that will be 
necessary between the ATO, which is charged with the operation 
and maintenance of the current air traffic system, and the 
JPDO, which is sometimes referred to as being responsible for 
the visionary component of the system.
    The operational evolution partnership is FAA's plan for 
providing continuity between the current system and the vision 
to come. The challenge is the extent to which the plan is 
actually implemented.
    Now I want to turn to our last issue and identify the areas 
that need to be addressed during reauthorization for continued 
safe operation of the air transportation system. First, ground 
safety is an area of concern and will continue to be because 
air traffic is forecast to grow substantially during the coming 
decade. FAA needs to keep on schedule to deploy technologies 
that help prevent runway incursions, a safety issue that 
remains on NTSB's most wanted safety list.
    Second, FAA needs to work with Congress to establish the 
appropriate regulatory approach for some system users. For 
example, Congress may want to revisit FAA's dual role of both 
regulating the safety and promoting the commercial space 
industry. In light of the recent spike in air ambulance 
accidents, FAA may want to revisit the regulation under which 
air ambulances currently operate.
    A third safety area that needs attention is improving the 
accuracy and completeness of safety data and FAA's analysis of 
that data. Accurate, complete information would provide FAA 
with the basis for a data-driven risk management safety 
approach. Such an approach could give the agency an early 
warning of hazards and national trends, thus potentially 
averting accidents.
    A fourth safety challenge is FAA's ability to manage its 
human resources, specifically, the hiring, training, and 
deployment of its safety inspectors, engineers, technicians, 
and air traffic controllers.
    And, lastly, the FAA and the unions must find ways to work 
together to minimize conflict and maximize cooperation for 
operating the current system as well as transforming to 
NextGen.
    In the final analysis, each of these challenges that I have 
identified has the potential to significantly affect the safety 
and efficiency of the Nation's air transportation system and 
should receive serious consideration in this reauthorization.
    Thank you, Mr. Chairman.
    Mr. Costello. Thank you, Dr. Dillingham.
    The Chair now recognizes Mr. Baker for his statement, if 
you could summarize in five minutes or less.
    Mr. Baker. Thank you, Chairman Costello and Ranking Member 
Petri. I appreciate the opportunity to come before the Aviation 
Subcommittee and provide you with a perspective of the managers 
throughout the FAA system on safety and operational programs.
    The FAA Managers Association is made up of non-bargaining 
unit employees within the FAA from each of its lines of 
business. We promote excellence in public service and are the 
advocates of managing the skies in a safe and efficient manner 
for the flying public and the aviation industry, and adhere and 
implement the guidance of Congress.
    While we, as an association, represent all managers within 
the FAA, today I will primarily be focused on delivering the 
perspective of the air traffic managers within the system. I 
would like to focus my comments on basically three areas: 
first, thank you to this Committee for your leadership and 
including Section 226 in the last FAA reauthorization; second, 
I will discuss the need for increasing the air traffic front-
line managers; and, third, I will share our perspective of how 
the current system is working.
    Section 226 expanded accelerated retirement to some second 
level managers within the air traffic control field. We 
basically have an accelerated system whereby, with 20 years and 
age 50, we can retire. With 25 years we can retire at any age. 
It was, in the past, limited to simply air traffic controllers 
and front-line managers. This Committee, under the leadership 
of then Chairman Mica and now Chairman Oberstar, along with Mr. 
Costello and Mr. Petri, got language inserted that expanded 
that retirement benefit and eliminated a huge disincentive for 
our controllers to move up within the ranks, and it is not 
often that we get to thank you guys for what you do for us. We 
really appreciate it. It was legislation that worked. It was 
bipartisan. It did exactly what it was supposed to. Thank you 
for that.
    My second point speaks to the pressing need for appropriate 
levels of oversight at the front-line level. It is important to 
emphasize where air traffic managers come from. We are not 
plucked out of the sky; we are not hired off the streets. We 
are actually air traffic controllers that have moved up within 
the organization. It is impossible to be a front-line manager, 
an air traffic manager in the FAA without having that 
background and experience.
    The actual floor set by Congress is currently 1,846 front-
line managers. Unfortunately, that is a level that the FAA has 
been unable to attain thus far. In 1995, we had 772 operational 
errors, and operational errors, of course, are when aircraft 
get below the standards, too close. By 2005, that operational 
error rate had risen to 1,506. That is a 95 percent increase in 
operational errors. In 1995, runway incursions were 249. By 
2005, they were at 336. That is a 35 percent increase.
    The only difference between today and 1995 in the way we 
staff our facilities is actually in the front-line manager 
ranks. We have tried for several years, and Congress has helped 
in setting a floor, and we hope that Congress will continue to 
help us reach those levels of necessary front-line managers. We 
continue to try to work with the FAA to increase those levels 
of management. We are hampered by budgetary constraints and 
currently undergoing a huge restructuring, which you heard much 
about this morning, and I am sure you will continue to hear 
much about in the years to come.
    The FAA is hiring a brand new workforce. We are turning 
over an entire group of air traffic controllers in a very short 
amount of time. These are all reasons why we need the proper 
amount of front-line managers in there to oversee the changes 
that have to do with NextGen, that have to do with hiring a new 
workforce, that have to do with bringing on new systems. It all 
requires the proper amount of oversight, and I was pleased to 
hear all of the unions this morning express the need for proper 
oversight.
    We want to make sure that the Committee understands that 
our association, while independent from the FAA, is not at a 
battle with any of the unions over their contracts. We do, 
however, have grave concern that we are changing a process that 
has already been put in place. To reverse a process now would 
have very bad effects on the entire agency in terms of morale, 
in terms of cost. I have no problem with setting a set of rules 
up for future negotiations, but to go backwards in time now 
would have dire effects.
    These impasse procedures were developed in 1995, when the 
FAA was removed from Title V and a process was put in place to 
make sure that Congress maintained control of the budget. To 
send a contract to mandatory arbitration by a disinterested 
third party, Congress would lose control of that budget, and 
that concerns us.
    Mr. Costello. Mr. Baker, we thank you for your testimony.
    At this time, the Chair recognizes Mr. Kroeppel.
    Mr. Kroeppel. Chairman Costello, Congressman Petri, 
Congressman Hall, and the other distinguished Members of the 
Subcommittee, good afternoon. I am Warren Kroeppel, the General 
Manager of LaGuardia Airport for the Port Authority of New York 
and New Jersey. On behalf of the Port Authority, I would like 
to thank you for organizing this hearing and giving me the 
opportunity to testify today and to share with you our thoughts 
regarding the management of the Nation's largest airport system 
and some of our current challenges. My comments will be brief 
and I request that my entire statement be entered into the 
record.
    The Port Authority of New York and New Jersey operates four 
airports that are critical to the Nation's trade, travel, 
commerce, and tourism. It is a rapidly growing gateway. John F. 
Kennedy International, Newark Liberty International, LaGuardia, 
and Teterboro Airports are used by 104 million passengers with 
over 2.6 million tons of cargo and 1.2 million aircraft 
movements in 2006. LaGuardia is by far the smallest of New York 
area's three commercial airports, consisting of only 680 acres 
in area. It has two intersecting 7,000 foot runways and four 
passenger terminals with 73 gates.
    The FAA's propose of NextGen legislation seeks to address a 
fundamental and undeniable problem: the scarcity of airfield 
resources at LaGuardia. It has been clear since the high 
density rule was established in the late 1960s that certain 
airports have insufficient runways and taxiways to handle 
unconstrained demand without experiencing significant 
congestion and the attendant delay and passenger inconvenience.
    At LaGuardia, the problem is exacerbated by the fact that 
no amount of labor, capital or entrepreneurship, can expand the 
constraint on that capacity, which is actually airport land. 
The highly constrained facilities at LaGuardia are not capable 
of absorbing the demand for access to the airport without the 
use of tools to manage the inevitable delay and strain on the 
airport infrastructure that would ensue if access were left 
unchecked. Managing congestion is just one of the key goals for 
LaGuardia in the post-high density rule era.
    Congress also had established the goal of creating 
opportunities for new entrants and ensuring service to small 
communities. In addition, the FAA and Port Authority were 
concerned about the efficient use of airspace or throughput. To 
address congestion management, the FAA correctly focuses on the 
need to continue to place limits on flight activity consistent 
with the supply of capacity. The Port Authority agrees that 
this is an FAA responsibility; however, the Port Authority 
believes that the current limit on operations at LaGuardia may 
not be low enough and that now is the time to further examine 
this limit to determine whether reduced hourly operations rate 
or other measures will prevent delays from accumulating to 
excessive levels.
    While we agree with the goal of providing new entrants and 
limited incumbents access to LaGuardia, we have great concern 
about the FAA's approach. The NPRM proposed that starting in 
2010, and every year thereafter, 10 percent of all existing 
operating authorities would be reallocated. The NPRM, much like 
the language in the NextGen bill, are silent on the mechanics 
of how this would actually work.
    A turnover of this nature would create excessive roiling 
for the entire airport community. Airlines that have spent 
years building their schedules so that it could provide hourly 
service in high demand business markets would be faced with 
potentially losing key pieces of their operation. Even if the 
airlines were successful in restoring some elements of their 
lost 10 percent by repurchasing through whatever mechanism is 
instituted, there is no certainty they would be able to restore 
their schedules.
    As for carriers who may successfully acquire new operating 
rights through their forced annual reallocation of the 10 
percent of LaGuardia's capacity, there is no certainty that 
they will find contiguous gate space which would permit them to 
take advantage of the new opportunity in a commercially viable 
manner. Both the NPRM and the NextGen bill are filled with 
uncertainty that is quite troubling to airlines, the airport, 
and the customers we serve.
    The Port Authority strongly agrees that in the case of 
LaGuardia, where it has been established that aeronautical 
capacity is finite and cannot be expanded, the over-abundance 
of service to large markets with small aircraft effectively 
precludes other services. Both the FAA and Port Authority 
differentiate between small planes to large places, which often 
poorly serve the traveling public, and small planes to small 
places, which is the only way small communities can afford 
access.
    Although the Port Authority supports the many principles, 
doctrines, and tenets that the FAA has articulated, in the Port 
Authority's view, the proposed rule and legislation needless 
interfere with the airport operator's proprietary rights to 
manage LaGuardia. More importantly, it appears that the 
proposal would have undesirable impacts on the airport, the 
airlines, and ultimately the traveling public due to the 
fundamental mismatch between the proposed airfield policy and 
the management of the land site infrastructure.
    The FAA's proposal is too prescriptive and improperly 
assigns to the Federal Government the responsibility of 
managing access to the all-important airport gate facilities, 
rather than acknowledging the responsibility for doing so rests 
with the airport operator as the manager of the facility.
    The Port Authority has determined that an alternate 
approach is preferable, realizable, and responsive to the 
aforementioned goals. The FAA needs only to set the operational 
hourly limit and to establish the criteria for service to small 
communities. The Port Authority will then exercise its right to 
manage utilization of access to LaGuardia's terminal and gate 
facilities, which avoids many of the potential pitfalls in the 
NPRM proposal and the NextGen legislation.
    The Port Authority proposes using its proprietary rights to 
effectuate gate utilization measures, in consultation with air 
carriers, to achieve the objectives that Congress and the FAA 
have articulated. The Port Authority has legitimate interest as 
the proprietor of the airport to seek to optimize the efficient 
use of limited airport capacity and facilities to promote 
competition at LaGuardia.
    The FAA acknowledges there is a tremendous uncertainty 
embedded in the LaGuardia NPRM, uncertainty as to what Congress 
will authorize and uncertainty as to how market clearing 
charges will work in its first application in the United States 
aviation context. Rather than face this tremendous uncertainty 
with the resultant high disruptive effects on airlines, 
airports, and the customers, the Port Authority believes that 
it would be preferable to use gate leasing policy, which is a 
time-tested and common industry practice. The FAA should set 
the hourly capacity at LaGuardia, provide for small community 
access, and empower the Port Authority to proceed with its gate 
leasing policy. We urge Congress to enable the Port Authority 
to proceed with a simpler, more simple solution to LaGuardia's 
congestion issue: incentive-based gate leasing policy.
    If the Administration's provision for congestion airports 
are incorporated into legislation, we then urge Congress to 
engage gate leasing policy as a potential market-based 
mechanism.
    Mr. Costello. We thank you for your testimony, and the 
Chair, at this time, would recognize Dr. Sliwa.
    Mr. Sliwa. Thank you, Chairman Costello. Mr. Petri and 
Members of the Subcommittee, good afternoon. It is my pleasure 
to be here today in support of your review of FAA operational 
and safety programs in our Nation's air traffic system. Thank 
you for this opportunity. There are some significant partnering 
opportunities which, if taken, can foster and advance 
commercial applications of unmanned aircraft system activity 
without compromising the safety and established operating 
procedures of the National Airspace System.
    I am the CEO of Insitu, a small, fast growing company that 
develops and produces UAV systems. We received recognition in 
1998 as the first company to fly an unmanned aircraft across 
the Atlantic Ocean. It weighed 40 pounds, took 27 hours, and 
burned a gallon and a half of gas. More recently we are known 
as the developers of the ScanEagle system, which we jointly 
deploy with Boeing. It is flown over 36,000 hours in Iraq and 
from ships on the U.S. Navy, making it the fourth most used UAV 
in U.S. history, and is still on a commercial off-the-shelf, 
COTS, system.
    There are well over 400 small companies in the U.S. that 
are involved in unmanned aircraft system development and 
component manufacturing at various levels of sophistication. 
The situation is similar to the 1930s and 1940s, when many 
airplane companies built the legacy of aviation we all enjoy 
today. Many predict that the 21st century will be the century 
of autonomous aircraft.
    However, the commercial unmanned aircraft market is 
outpacing the incremental processes which create procedural or 
regulatory guidance. Current market analyses assess that the 
unmanned aircraft system products and services market will grow 
to be $15 billion in annual revenue within the next 8 years. We 
need your help to capture this market and, with its capture, 
help assure U.S. leadership in aviation.
    Although the operations to date have been in support of the 
military operations, civilian applications are beginning to 
become viable as these systems mature. In fact, we at Insitu 
have commissioned for several civilian applications in the 
coming year valued in the millions of dollars. We see many 
opportunities in the future, ranging from minerals assessment, 
search and rescue, resource management, and to homeland 
security.
    But these civilian applications, and even supporting the 
research, training, and production flight testing needs for 
military applications, require access to the U.S. airspace 
system. In fact, I would say that the foremost challenge in 
achieving growth in this dynamic market is a safe, sustained 
access to airspace.
    The FAA Unmanned Aircraft Program Office is developing 
guidance and regulations for the certification and integration 
of unmanned aircraft in the NAS and is supported by an FAA-
commissioned industry working group through RTCA which just 
completed a compilation of recommended best practices and 
guidance material, and trade associations such as the 
Association of Unmanned Vehicle Systems, known as AUVSI. We in 
the industry applaud this first step and we are proactively 
collaborating with this Program Office and with other FAA 
offices and with industry working groups and trade 
associations.
    However, we can't achieve progress rapidly on the current 
path. The United States unmanned aircraft industry is sometimes 
cast an envious glance at the regulatory practices of our 
allies and trading partners like Australia and Canada, which 
encourage unmanned aircraft experimentation with flexible risk 
assessment, continuous data collection, and continuous 
improvement. As a case in point, the FAA has stopped issuing 
certificates of authorization for other than government 
agencies to experiment with UAVs in the national aerospace 
system. This past February, the FAA published policy guidance 
in the Federal Register related to unmanned aviation systems 
and is viewed by many in our industry as an attempt to create 
regulations by policy inference.
    We believe that defining industry performance parameters 
without first encouraging the industry to demonstrate its level 
of performance is comparable to the classic catch-22 paradox. 
We applaud the efforts the FAA is making, but it is resource-
constrained when it considers the challenges before it. 
Unmanned aircraft range in range from a few ounces to many tons 
in gross weight. Some have applications they want to test in 
very remote locations and others want to interoperate with 
commercial aircraft on instrument flight plans.
    Unfortunately, trying to apply rules and regulations to 
such a diverse field of unmanned aircraft, with a few pages of 
guidance, is problematic, and trying to quickly apply the 
current rules developed for the manned aircraft infrastructure 
to this class of aircraft is not likely to be fruitful for 
broad and rapidly evolving industry. For example, the FAA is 
currently using the manned experimental aircraft rules for 
unmanned aircraft industry, which has significant flaws as the 
industry develops.
    I have five suggestions helpful to the industry, to the 
FAA, and to our Nation: one, provide sufficient personnel and 
financial resources for FAA unmanned aircraft system policy 
exploration, development, and application; two, encourage the 
FAA to experiment, collaborate with industry, and collect data; 
three, reintroduce the use of civil certificates of 
authorization for commercial companies with appropriate FAA 
safety case reviews and monitoring; four, encourage the FAA to 
address huge variations in unmanned aircraft types and risk 
factors; and, five, discourage the current regressive practice 
of regulating via policy promulgation.
    In conclusion, safe access to the airspace requires both a 
mix of technology, policy, and regulation, and also judicious 
and reasonable experimentation. We encourage Congress to 
increase the FAA unmanned aircraft systems program application 
funding to equip the FAA with the tools and incentive to 
encourage military and civilian experimentation, and we 
encourage Congress to support FAA sound policy based upon 
knowledge of distinct unmanned aircraft system classes, current 
technology, and industry needs.
    Mr. Costello. Dr. Sliwa, thank you.
    Mr. Renninger, you are recognized under the five minute 
rule. Thank you.
    Mr. Renninger. Well, thank you, Chairman Costello and 
Members of this Subcommittee. I am pleased to be here today to 
discuss air traffic controller training, the FAA college 
initiative, and suggestions for increasing the number of 
qualified air traffic controllers.
    As you are probably aware, there is a looming crisis in the 
Nation's control towers, as controllers hired in the wake of 
the 1981 strike reach retirement age. Not only do these 
controllers need to be replaced, but there is also a growing 
need to provide additional air traffic control services for the 
new transportation systems brought on by things such as very 
light jets.
    Government experts predict that by 2025 there will be three 
times the number of planes in the skies as there are today. 
Numerous GAO studies have been warning for years about the need 
to better prepare for controller attrition, and FAA's own 
projections indicate that approximately 72 percent of the 
current air traffic controller workforce will be eligible to 
retire in the next 10 years. Clearly, there is a need to 
attract and train new air traffic controllers and use all 
available resources to provide the technical training they 
require.
    Currently, there are three sources from which the FAA gets 
air traffic controllers: number one is former DoD and FAA 
controllers; number two is students from the CTI schools; and 
number three is applicants responding to FAA vacancy 
announcements.
    The percentage of controllers supplied by the CTI programs 
varies, but was 33 percent of the total as of November 2005 and 
25 percent at the end of fiscal year 2006. Now, these figures 
do not reflect the true value of CTI graduates who had required 
less time to be certified after the mandatory on-the-job 
training for all controllers. Only controllers who have 
transferred from another FAA facility require less time to 
certify at their new positions. It is clear that the training 
and education that controllers receive at the colleges and CTI 
schools prepares them to join the air traffic controller 
workforce with minimal cost from the FAA.
    Now, CTI was started in 1989, when Congress established the 
Mid-America Aviation Resource Consortium (MARC) to provide ATC 
training in Minnesota. Hampton University followed shortly 
thereafter, and was awarded FAA funds for ATC training in 1990. 
Interest in this program led to the FAA adding three more 
schools in 1991: Community College in Beaver County, UND, and 
University of Alaska. Nine more schools were admitted to the 
CTI program in 1997. There have been no new schools added since 
1997 and there is no process with the FAA to become a CTI 
school, although there is a strong interest in joining this 
group by well qualified schools.
    Graduates of CTI schools earn either an associate's or 
bachelor's degree in aviation administration or management that 
incorporates basic training courses for air traffic 
controllers. Air traffic controllers need this associate's 
degree just to be a controller, and they need a bachelor's 
degree if they want to move on into management. The cost of 
earning a degree varies widely among the CTI schools, from a 
low of about $4,000 for an associate's degree from a public 
school to a high of almost $100,000 for a bachelor's degree 
from a private university. The cost is borne by the student, 
who comes to the FAA ready for on-the-job training that is 
necessary to be certified.
    Once in Oklahoma, they undergo further training before 
going to their final FAA facility, where they will have on-the-
job training that is specific to each position. Only after 
successfully completing this training are the developmental 
controllers certified and able to begin working as air traffic 
controllers.
    Being designated a CTI school is very important for a 
college or university that wants to offer ATC training. Only 
graduates from a CTI school can have their names added to the 
hiring database maintained by the FAA. It is from this database 
that individuals are chosen for further training and 
employment. The FAA currently has no process to admit any new 
schools to the CTI program. Well qualified schools that offer 
other FAA certified training have indicated an interest in 
becoming CTI schools and have been rebuffed. The FAA needs to 
open the CTI school process that are able to meet the FAA 
standards for air traffic control training. If the FAA can 
certify training for pilots and aircraft mechanics, there 
should be no reason why they cannot certify air traffic 
controller training programs and degrees at colleges and 
universities.
    The benefits of becoming a CTI school are these: they 
increase the pool of pre-screened candidates and also the pool 
of qualified applicants at little or no cost to the FAA; they 
also have applicants in the region where the demand exists the 
most. The advantage of the flexibility of community colleges 
and universities, who are the experts in workforce education 
and training, is that we can do this at a fraction of the cost 
of what private schools charge.
    Mr. Chairman, this concludes my remarks, and I hope I have 
convinced you of the need to open up the FAA's college training 
initiative program. I can tell you that Florida Community 
College at Jacksonville is currently providing FAA-certified 
training in aircraft mechanics, as well as pilot training, and 
we see no reason why we couldn't do training in air traffic 
control as well. I think we can do this for the betterment of 
the air traffic controllers who are going to man our aircraft 
control towers, terminal radar facilities, and our traffic 
control centers of the future.
    Thank you very much.
    Mr. Costello. We thank you for your testimony and we thank 
the entire panel. I know it is difficult to summarize your 
remarks in five minutes, but you all did pretty well.
    Let me ask a few questions.
    Dr. Dillingham, the FAA recently released an updated 
version of their controller workforce plan, and I just wondered 
what GAO's impression is of this current version of the 
controller workforce plan.
    Mr. Dillingham. Mr. Chairman, we think that the FAA has 
done a credible job in recognizing that they have had more 
retirements than they had initially projected and, therefore, 
have made an attempt to bring more people into the pool. We do 
have a concern about the fact that there are fewer past DoD 
controllers and the fact that even some of the CTI graduates 
are finding other jobs.
    So what that means, of course, is that you are going to 
have a core of people that are going to need more training, you 
are going to have less experienced controllers in place for a 
while. I think the number is something like 40 percent of the 
controllers within the next five years will be there less than 
four years, and it usually takes three to five years to be a 
full performance controller.
    So they have made some steps. You know, it still is a work 
in progress, as far as we can tell.
    Mr. Costello. And there is still reason for concern. I 
mean, we are not here to beat up on the FAA, we are here to 
delve into issues and arrive at conclusions and try and provide 
solutions.
    You heard testimony earlier today concerning the issue of 
the controllers, and I think it is a fact that there are fewer 
DoD controllers going to work for the FAA and, as you 
mentioned, the CTI grads are finding other jobs as they 
graduate. What is the primary reason for that. That hasn't 
taken place in the past.
    Mr. Dillingham. Well, I think it was mentioned earlier that 
our research has shown that when the candidates take a look at 
what the starting salary is now, as opposed to what it was 
prior to, when they understand what the work rules are, and 
another thing that was mentioned today that we also found to be 
the case is that DoD is offering incentives to keep their 
people in. So those are the major contributing factors that we 
have been able to discern.
    Mr. Costello. In your opinion, what does the FAA need to do 
to ensure that there are enough air traffic controllers in the 
future to handle the traffic?
    Mr. Dillingham. I think what they have started to do is a 
step in the right direction, that is, to look at staffing by 
facilities and also to get a surge of candidates to take into 
account that they are going to be losing more than they did in 
the past. I don't know if you want to call it PR, but the 
notion that there is such discord between labor and management 
probably is something that has to be addressed; otherwise, you 
are not going to have people wanting to go into that situation, 
so somehow that has to be ameliorated.
    Mr. Costello. And you mentioned, I think, in your testimony 
that if in fact--and we all, both the Ranking Member, Mr. 
Petri, and the Ranking Member of the full committee, Mr. Mica, 
Chairman Oberstar, and myself, we have all encouraged the FAA 
and the unions to try and come together and work out their 
differences and to reach an agreement. You mentioned in your 
testimony that if in fact relations between the FAA and their 
unions improve, it could have a positive effect on safety. I 
wonder if you might elaborate on that.
    Mr. Dillingham. Yes, Mr. Chairman. I think it is a pretty 
well understood and accepted principle, and I think somebody 
mentioned it earlier today, the idea about a happy workforce, 
and I think it is a little bit more than a happy workforce. I 
think, you know, if people can concentrate on their jobs, 
particularly a job such as an air traffic controller job, you 
have got to have a focus on that, you can't be concerned about 
other things. So that is one of the things.
    We also, at the Government Accountability Office, are 
trying to think about how we can do a study to actually look at 
labor management relations at FAA because it is clearly a 
unique situation in government. We recognize that we don't 
think either the majority or the minority will ask us to do any 
work like that, so we are going to try to work with the 
Comptroller General to get permission to do that kind of work.
    Mr. Costello. Very good. I thank you.
    The Chair recognizes the Ranking Member, Mr. Petri.
    Mr. Petri. Thank you very much. I have several questions, 
first for Mr. Kroeppel.
    I get the impression--I mean, LaGuardia is under a lot of 
pressure. You are at capacity and you have a very huge market 
to serve, and your customers, both the traveling public and the 
airlines, spend a lot of years developing their shuttles and 
all of that sort of thing. Will you be developing some specific 
proposal or something that we can put our teeth into as we 
analyze the FAA's proposal, to kind of have a managed capacity 
situation? They are trying to develop a national plan and you 
obviously have a lot of stakeholders and a huge problem and 
could be affected by it a lot; and there are control issues and 
uncertainty issues, and people have invested a lot in 
developing various programs. Could you expand on that or could 
we work with you on this?
    Mr. Kroeppel. Yes. That is actually the gist of the issue, 
Congressman. As we had mentioned, the real issue here that we 
have, we agree with most of the FAA proposals, except for the 
one as far as just how to do it. The real key to this is we 
have to match the airspace capacity to the available ground 
resources. We actually did look at different market-based 
scenarios. We found that it didn't work.
    So while we agree with the FAA that they should set the 
limit of airspace and also assign small community access, the 
way to really do this to make it work at an airport would be to 
give us the tool to use our own gate leasing and management 
system, and the best example I can give you is this: What 
really concerns us is in the proposal there is a proposal with 
10 percent reallocation per year, and a good example of that 
would be, for example, if a Delta on the east side of the 
airport, in a terminal on the east side of the airport would 
lose 10 percent of its capacity, if, for example, an American 
Airlines on the west side of the airport, through some 
mechanism, would gain those, it really wouldn't work for them 
because they wouldn't have contiguous gates and economically it 
would not work for them.
    So we feel the only way we can actually match the land site 
resources to the air site capacity made by the FAA would be by 
giving the airport proprietary right of having this gate 
management system, which would allocate those scarce resources 
properly.
    Mr. Petri. Is there a money issue in this too? If you 
auction off obviously a scarce resource, one way to allocate it 
is by charging more or having people bid. Is there an issue as 
to who gets the money from some sort of a queue management 
system like that?
    Mr. Dillingham. Well, that is one of the issues, but, 
really, we felt that if it does go to some type of auction-
based solution or some type of peak period charge use, it 
really wouldn't solve that issue. Where it breaks down for the 
airlines and the customers is how does that 10 percent, how do 
these resources on the ground, how do you match that, how does 
it become realized and how does the operation run smoothly.
    So the real key of that is the control would be us having 
control of the gates and basically managing the resources and 
making that available to new competitive services and allowing 
new entrants to come in. With the way the system is now, 
airlines can have gates and not utilize them to the proper 
capacity. So this solves a lot of issues.
    Mr. Petri. Well, this is a complicated issue that requires, 
I suspect, much more extensive analysis and discussion than we 
can do in this particular forum, but thank you for raising it 
and for your testimony.
    I just wonder if I could talk with Mr. Baker for a minute. 
I don't know if we should be alarmed or how we should deal with 
the situation of the quarter of a million grievances in the 
FAA. Is this a sign of bad management, or is this a tactic, or 
what is going on here?
    Mr. Baker. Well, if you look at the makeup of the 
grievances, Mr. Petri, you will find that many of them are 
grievances because my manager told me I couldn't wear shorts to 
work. So many of them are frivolous. We actually have a huge 
concern about what so many of those types of grievances in the 
system, that we look over grievances. They all matter, but 
there are real grievances out there and we don't want to miss 
those. Those grievances have overwhelmed the system.
    I believe they are under control now, off the facility 
level, which was my concern. The union has every right to 
grieve anything within the statute, and they did so. Now we 
have gotten it off the facility level and it is up at the 
higher levels, where it always should have been anyway. We did 
as good a job as I think we possibly could have, taking the 
distraction of the contract, imposed work rules, whatever you 
want to call what we have, out of the workforce so that our 
actual facilities can focus on safety, which is what we are 
there for, and I think we are doing that.
    Mr. Petri. Thank you.
    Mr. Costello. I thank the Ranking Member.
    In fact, the LaGuardia question, I was going to delve into 
that a little bit, but I think Mr. Petri covered it. I think it 
is an issue that is not going to be resolved today, but we are 
going to have to work with you and others on it.
    I have no further questions, and if the Ranking Member does 
not, I want to thank you, all of you and all of our witnesses 
today. I think it has been a very productive and comprehensive 
hearing. So we thank you. We look forward to working with you 
as we move forward with the reauthorization.
    With that, the Committee stands adjourned.
    [Whereupon, at 1:39 p.m., the Subcommittee was adjourned.]



[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]



 HEARING ON THE FEDERAL AVIATION ADMINISTRATION'S AIRPORT IMPROVEMENT 
                                PROGRAM

                              ----------                              


                       Wednesday, March 28, 2007

                   House of Representatives
    Committee on Transportation and Infrastructure,
                                  Subcommittee on Aviation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Jerry 
F. Costello [Chairman of the Subcommittee] presiding.
    Mr. Costello. The Subcommittee will come to order. The 
Chair will ask that all Members, staff, and everyone in the 
room turn off electronic devices or put them on vibrate.
    The Subcommittee is meeting today to hear testimony on a 
review of the FAA's Airport Improvement Program. As we all can 
see, we have three panels of witnesses, I think a total of 15 
witnesses to hear from today, so I would ask Members to take 
that into consideration and consider placing their opening 
statements in the record so that we can get to our witnesses.
    I will give an opening statement and then recognize the 
Ranking Member, Mr. Petri, for his opening statement or 
remarks, and then hopefully go directly to the witnesses.
    I want to welcome everyone to the fourth of our hearings on 
the FAA reauthorization. This hearing focuses on the FAA's 
Airport Improvement Program.
    The FAA estimates that during the next five years there 
will be $41.2 billion of AIP-eligible infrastructure 
development, an average of about $8.2 billion a year. The 
Airport Council International-North America believes that total 
airport capital development costs, including the cost of non-
AIP-eligible projects, to be about $17.5 billion per year from 
2007 through 2011.
    While the FAA acknowledges that airport capital needs are 
up, the FAA's new three-year proposal provides approximately 
$1.5 billion less for the AIP program than what the FAA 
requested for the first three years of its last reauthorization 
proposal, the Centennial of Flight Aviation Authorization Act. 
I want to repeat that. While the FAA acknowledges that capital 
needs are up, the FAA's new three-year proposal provides $1.5 
billion less for the AIP program than they requested for the 
first three years in the last reauthorization.
    I believe that we will need a more robust program than what 
the FAA has suggested. I am concerned about the impact of these 
cuts on smaller airports. AIP grants are generally a larger 
source of capital funding for smaller airports. The GAO will 
testify today that 64 percent of the capital funding for 
smaller airports comes from the AIP program.
    The FAA is proposing a number of interesting changes to the 
AIP program that the FAA believes would help target more active 
smaller airports. However, even with the FAA's programmatic 
changes, there would be less total funding for programs 
traditionally and specifically associated with small airports 
when compared with the current structure and funding levels.
    Further, under the FAA's proposal, there may be some 
winners and losers when it comes to small airports. For 
example, while the busier smaller airports would receive larger 
non-primary entitlement grants than they now receive, the FAA 
estimates that several airports that are eligible to receive 
non-primary entitlement grants would no longer be eligible. I 
look forward to hearing from our witness today from the FAA as 
to why the FAA believes these airports should no longer be 
deserving of AIP eligibility.
    The FAA believes that cuts to the AIP program would be 
offset by raising the current $4.50 cap on the PFCs, raising it 
to $6.00. The PFC cap has not been raised since 2000, and many 
in the airport community believe that inflation and 
construction cost increases have eroded the PFC's value.
    The FAA believes that an increase in the PFC cap to $6.00 
would generate an additional $1.5 billion for airport capital 
development. I believe the PFC has been an important tool in 
improving and expanding our airports, and I agree that we 
should increase the cap of $4.50. There is no question that 
there has been a loss of purchasing power, and we must increase 
the cap to adjust for inflation.
    In addition, the FAA proposes to greatly expand the PFC 
eligibility for airport capital projects. More specifically, 
the FAA's proposal would expand the PFC eligibility to 
encompass any airport capital project that is eligible to be 
funded with airport revenue, provided that the project is not 
anti-competitive. I have concerns with expanding the 
eligibility beyond its current scope.
    Some have argued that the PFC is essentially local money 
and, therefore, there should be more local control over how 
PFCs can be spent. Since a significant portion of PFC revenue 
comes from interstate passengers, I believe that PFC revenue 
should be used to promote national policies and goals, such as 
increased capacity, safety, and competition, within an 
integrated system.
    With that, I again welcome our witnesses here to testify 
before the Committee. Before I recognize the Ranking Member, 
Mr. Petri, for his opening statement, I would ask unanimous 
consent to allow two weeks for all Members to revise and extend 
their remarks and to permit the submission of additional 
statements and materials by Members and witnesses. Without 
objection, so ordered.
    At this time I would call on and recognize the Ranking 
Member, Mr. Petri, for his opening statement or any remarks.
    Mr. Petri. Thank you very much, Mr. Chairman. I would like 
to thank our many witnesses this morning for coming and sharing 
their viewpoints on the important topic before us this morning, 
airport improvement funding and airport noise issues.
    The FAA proposal regarding funding of airport 
infrastructure raises several important issues which I look 
forward to hearing about today. A major portion of the proposal 
worthy of discussion is the proposed increase of the passenger 
facility charge and the impact of inflation and construction 
costs on the purchasing power of that charge over time. The 
expanded PFC project eligibility and streamlining of project 
approval processes are also obviously of interest to this 
Subcommittee.
    To many of the small airports in my district and around the 
Country, the airport improvement program is a significant 
source of funding for capital projects. For the past few years, 
Congress has authorized between $3.5 billion and $3.7 billion 
for that program, which has helped our small hub and non-hub 
airports grow and therefore provide more capacity within the 
national airspace system.
    That level of investment has also greatly benefitted our 
reliever in general aviation airports. Therefore, I would like 
to hear about the Administration's explanation as to how the 
lower AIP levels fit into their overall airport infrastructure 
financing proposal.
    I am also interested in the impact of the AIP formula 
changes on airports of all sizes.
    Part of that proposal is the new tiered non-primary 
entitlement program. I think it is an interesting idea, 
responsive to need, and look forward to hearing more about the 
specifics of that particular proposal.
    The link that currently exists between airports turning 
back AIP money to the FAA and the receipts of PFC money by 
those airports is an interesting topic. It is particularly true 
given the way it links small airport financial interests to 
those of large airports. The agency's proposal seems to de-link 
the financial interests, which raises questions as to what the 
impact on airports, both large and small, will be. Is it a 
necessary link?
    Also, the Administration's proposal sunsets a number of 9/
11-related provisions or programs from Vision 100. The agency 
states that it does this because, by and large, airports have 
recovered from 9/11. I look forward to hearing about this 
aspect of the proposal and of the state of airports in our 
Country.
    Once again, I would like to thank this panel and the other 
panels that we will be hearing from for coming today and look 
forward to your testimony, and yield back the balance of my 
time.
    Mr. Costello. I thank the Ranking Member.
    The Chair would now introduce our first panel of witnesses. 
First, Mr. D. Kirk Shaffer, Associate Administrator for 
Airports at the Federal Aviation Administration; Dr. Gerald 
Dillingham, Director of Physical Infrastructure Issues with the 
U.S. Government Accountability Office, who has been in this 
room as many times as I have been in the last two weeks, but we 
welcome you back as always; Mr. Charles Barclay, President of 
the American Association of Airport Executives; and Mr. Greg 
Principato, President of the Airports Council International-
North America.
    The Chair would recognize Mr. Shaffer under the five minute 
rule.
    I mentioned earlier to Members and to witnesses we have 
three panels. We are attempting to hear from all of the 
stakeholders and everyone who, of course, has an interest in 
the reauthorization bills. We are trying to be as inclusive as 
possible, and that is why we have 15 witnesses today. So I 
would ask you to take that into consideration and try and, with 
the exception of the GAO, who has, I think, a slide 
presentation that will go a little bit longer than five 
minutes, I would ask you to summarize your statements in five 
minutes, if that is possible. And if you go a little bit over 
that, I will remind you and let you know.
    So, at this time, the Chair recognizes Mr. Shaffer under 
the five minute rule.

   TESTIMONY OF D. KIRK SHAFFER, ASSOCIATE ADMINISTRATOR FOR 
     AIRPORTS, FEDERAL AVIATION ADMINISTRATION; DR. GERALD 
  DILLINGHAM, DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, U.S. 
 GOVERNMENT ACCOUNTABILITY OFFICE; CHARLES BARCLAY, PRESIDENT, 
     AMERICAN ASSOCIATION OF AIRPORT EXECUTIVES; AND GREG 
  PRINCIPATO, PRESIDENT, AIRPORTS COUNCIL INTERNATIONAL-NORTH 
                            AMERICA

    Mr. Shaffer. Good morning, Chairman Costello and 
Representative Petri, Members of the Subcommittee. This is my 
first appearance before the Subcommittee since joining the FAA, 
and I look forward to working very closely with the 
Subcommittee in the months ahead as you consider the 
Administration's airport financing reform proposal.
    While my written testimony provides many details of our 
proposal, I would like to take my time this morning to 
highlight some of the changes that we propose for the Airport 
Improvement Program affecting small airports and also address 
our proposals for PFC reform. I know that our proposal has 
generated a number of questions and concerns with our 
stakeholders and with the Members of this Subcommittee, and I 
look forward to addressing those issues with you today.
    Before I get into specifics, let me give you a little 
background of how we developed this proposal and the data that 
supports it.
    During the past two years, we reached out to all of our 
stakeholders, to the airports, the consultant community, to the 
airlines and others, to find out the state of the industry. We 
also contacted the financial community because, as you know, 
AIP pays for only 25 airport to 35 percent of airport capital 
development needs nationally. We reviewed engineering and 
planning data, and we reviewed airport financial data as well.
    Our review showed that capital needs are up. Our latest 
published report on airport needs, known as the NPIAS, is up 
about 4 percent over the prior NPIAS. Even that figure is low 
since it did not account for the jump in construction costs and 
fuel surges in the summer of 2006.
    Airports have recovered financially from the financial 
shocks of 9/11. Passenger and traffic operations are up at many 
locations, approaching pre-9/11 levels. Across all sizes of 
airports, net operating results--that is revenue minus 
expenses--are up. Large airports have returned to 
profitability. In contrast, while small airports have recovered 
financially, many operated at a deficit before 9/11 and 
continue to do so. In other words, small airports continue to 
depend on Federal AIP dollars to meet their capital needs.
    The municipal bond market and rating agencies told us that 
airports remain much better financial risks than their airline 
tenants. For this reason, airports that have developed strong 
revenue streams independent of the airlines are especially 
favored. PFCs are viewed as just such a revenue stream because 
they depend on the underlying demographics of the markets that 
the airports serve, not on the health of the individual air 
carriers. However, PFCs would be even more effective financial 
tools if airports had more flexibility in the kind of capital 
projects they could finance with PFCs.
    Finally, current developments in air transportation, the 
transition to the NextGen air traffic control system, the 
introduction of very light jets, the growth of fractional 
ownership and point-to-point air traffic services, and 
continuing congestion at large airports mean that secondary and 
reliever airports, as well as other high activity general 
aviation airports, will face increasing investment needs.
    Based on these findings, our proposal is designed to do the 
following: assure a stable source of AIP funding for small 
commercial and GA airports; assure sufficient AIP funds 
available for the FAA to distribute and for the States to meet 
critical safety capacity and security priorities; convert the 
non-primary entitlement into a strategic investment tool that 
will help secondary and reliever airports, as well as other 
high activity GA airports, meet the new demands that will be 
put on them; and enhance PFCs as a local airport financing tool 
through an increased maximum PFC, broaden PFC eligibility and 
administrative streamlining.
    With regard to the non-primary entitlements and State 
apportionments, there is no doubt that the non-primary program 
enacted as part of Vision 100 helped a number of smaller GA 
airports upgrade and maintain their facilities, do 
comprehensive master planning, and construct revenue-producing 
facilities that help them become more self-sufficient.
    We fully support continuation of the NPE program, but with 
modifications that make sense for the entire spectrum of 
airports. Beginning in the summer of 2005, we looked at each 
and every GA airport in the system. We looked at the smallest 
and the largest. We looked at the types of aircraft that use 
these airports and what kind of infrastructure airports need to 
serve them safely and efficiently. We looked at it from an 
engineering perspective and a planning perspective. The data 
confirmed what common sense tells you: not all GA airports are 
created equal. Airports with more activity or with higher 
performance aircraft require more elaborate airfield 
infrastructure.
    When we then look at the GA community of airports, we see 
two major themes: different roles and different needs. In that 
context, we are proposing a four-tiered system of non-primary 
entitlements. The busiest, largest non-primary airports would 
be granted $400,000 per year. This category includes commercial 
service and reliever airports. The smallest GA airports, those 
with less than 10 based aircraft, would not receive an annual 
entitlement. But let me be absolutely clear. We are not saying 
that these airports have no capital needs or that AIP should 
not support those needs. These airports will continue to 
qualify for State apportionments and discretionary funds. Also, 
we propose to preserve the 95 percent Federal share for these 
airports. All we are saying is that these airports' capital 
requirements are intermittent, they do not require annual 
infusions of cash to sustain their infrastructure.
    We are proposing that about 750 airports would end up in 
this lowest tier under our proposal. We have heard people say 
that these 750 airports are going to lose money. That figure is 
simply, plainly wrong. We went into our grants database to look 
at what has been happening at these airports, and we had to 
focus on the airports that are not located in block grant 
States. We can't track the grants in the block grant States. 
But in the 42 States that do not have block grants, nearly half 
the airports in the lowest tier either did not receive a non-
primary entitlement or did not spend the non-primary 
entitlement money they got by taking a grant in the last four 
years. So the number of airports that will actually lose 
guaranteed annual money is a far more modest figure, around 300 
locations.
    Let me please address one other aspect of our AIP proposals 
affect small airports. We have heard people characterize our 
proposal on the Federal share for small airports as FAA cutting 
the Federal sharing from 95 percent down to 90 percent. That 
assertion also is plain wrong. Vision 100 sets the expiration 
date for the 95 percent Federal share as September the 30th. 
All the FAA is proposing is that we let that entitlement expire 
as Congress intended it to.
    Let me briefly address the PFC program, Mr. Chairman. PFCs 
do remain fundamentally a local revenue, and after 17 years a 
very good track record has been amassed in the imposition and 
the application of PFCs. We are proposing, as you have noted in 
your opening comments, three principle changes to the PFC 
program: we want to raise the cap to $6.00 in recognition of 
the increased construction costs and the impacts of inflation 
over time since the last adjustment; we want to broaden the 
eligibility so that airports can use this revenue for more 
projects and produce even more revenue; and, finally, we want 
to administratively streamline the PFC process by essentially 
eliminating all the bureaucratic paperwork, with the exception 
of an annual report that looks a year back and a year forward.
    That having been said, Mr. Chairman, I know that these are 
some substantial changes that we are proposing. Change is never 
easy, particularly change of the magnitude that we are 
suggesting. The undeniable fact is that we face a billion 
passengers coming through the system by 2015, and we have got 
to begin to prepare now to meet that challenge.
    This concludes my prepared statement. I would be happy to 
take your questions.
    Mr. Costello. We thank you.
    The Chair now recognizes Dr. Dillingham.
    Mr. Dillingham. Thank you, Mr. Chairman, and thank you for 
your consideration, Mr. Petri, Mr. Duncan, Mr. DeFazio, and 
Members of the Subcommittee.
    You asked GAO to examine four issues related to the 
reauthorization of the AIP program. The first issue focused on 
the nature and scope of airport capital needs. To address this 
issue, we compared estimates of capital development needs that 
were prepared by FAA and Airports Council International 
organization. Our analysis showed that ACI's estimate of 
developmental costs is considerably higher than FAA's.
    This graphic shows that for 2007 through 2011 FAA has 
estimated that annual development costs, in 2006 dollars, that 
is, will be a little bit over $8 billion. For the same period, 
ACI estimated that development costs would be slightly more 
than $15.5 billion. This is a difference of about $7.5 billion 
annually. The primary reason for the difference between the 
estimates is that FAA's estimate only includes projects that 
are eligible for AIP grants, while AIC includes both eligible 
and ineligible projects.
    When we compared only AIP eligible projects in both 
estimates, ACI's estimate still exceeded FAA's by about $1.5 
billion annually. The difference between the two estimates was 
accounted for because of differences in the definition, 
measurement, and timing of the projects.
    The second issue we addressed was how much money have 
airports received for capital development and where is that 
money coming from. This graphic shows that between 2001 and 
2005 airports received an average of about $13 billion a year 
for capital development from a variety of sources. Overall, the 
primary source of airport funding was municipal bond proceeds, 
which is shown here in green. Bonds accounted for about half 
the total funds, followed by AIP at 28 percent, shown in 
yellow, and PFC, which is shown in orange and which accounted 
for about 17 percent of the total. State and local funds 
accounted for the remaining 5 percent.
    As you can see, smaller airports depend much more on AIP 
grants than larger airports. This graph shows that larger 
airports obtained only 14 percent of their funds from AIP 
grants, compared to 64 percent for smaller airports.
    A third issue that we examined was the extent to which 
current funding levels would be sufficient to meet capital 
development needs between 2007 and 2011. The bar on the left 
side shows that FAA has received about $13 billion for capital 
development in each of the last five years. The bar on the 
right shows that if airports continue to receive a similar 
amount of money over the next five years, it would cover all 
the projects in FAA's capital development plan.
    To get a more complete picture of the potential demand on 
capital, we combined FAA's planned development cost and the 
cost of ACI's ineligibility projects. As you can see, the bar 
on the right shows that the combined development costs for the 
next five years exceeds historical funding levels by about $1 
billion annually.
    A more detailed analysis of this issue shows that the 
differences between past funding levels and future development 
costs is different for larger and smaller airports. For the 67 
larger airports, the shortfall would be about $600 million 
annually, and for all other airports, including general 
aviation airports, the shortfall would be about $400 million 
annually.
    The last issue we examined was the potential effect of the 
Administration's reauthorization proposal for airports. We 
concluded that the Administration's proposal to increase the 
PFC ceiling from $4.00 to $6.00 will enhance funding for larger 
airports despite an overall reduction in AIP funding. However, 
the impact on smaller airports is more uncertain because these 
airports depend much more on AIP. The proposal would also 
reduce AIP by $750 million, or more than 20 percent of its 
current level. The proposal would also increase the amount that 
airports can collect from PFCs, potentially by as much as $1.1 
billion annually. For smaller airports, which have far less 
capacity to collect PFCs, increasing the PFC ceiling may not 
compensate for the overall reduction in AIP funds.
    As a separate issue, our analysis raises questions as to 
whether the new fuel taxes that have been proposed to fund AIP 
will be as much as anticipated and whether additional sources 
of revenue may have to be found. This would certainly be the 
case if Congress appropriated more than $2.75 billion for AIP.
    In conclusion, Mr. Chairman, we expect that the demand for 
air travel will continue to increase and airports will need to 
make capital improvements to meet the capacity challenges in 
today's system, as well as those of the NextGen. AIP will 
continue to play an important role in meeting those challenges 
and some elements of the Administration's proposal are to be 
commended, such as simplifying the funding formula and giving 
FAA more discretion to fund high priority projects. However, 
other parts of the proposal raise concerns about its impact on 
smaller airports.
    Thank you, Mr. Chairman.
    Mr. Costello. Thank you, Dr. Dillingham.
    The Chair recognizes now Mr. Barclay.
    Mr. Barclay. Thank you, Mr. Chairman and Members of the 
Committee. It is always a privilege to testify before the T&I 
Committee.
    I would just like to make several points in addition to our 
written testimony. The first is that airport executives are 
very concerned about their ability to meet the demand that is 
coming at this system with adequate airport capacity. We have 
the particular challenge, as you know, that it takes 7 to 10 
years, sometimes more, for any major capital development at 
airports, so we need to be starting right now for things we 
want in this system and operating in the middle of the next 
decade.
    But regardless of any challenges we face, we know we are 
going to add one-third the number of passengers that we 
currently have to the system in the future, almost half, as a 
matter of fact. It is the equivalent of adding the population 
of the United States to the airport system that we currently 
have. Any of you that travel at busy times in the system know 
we don't have the capacity at the present time to meet that 
kind of coming demand. And it is not just the issue of 
constraining an airport system. As this Committee also well 
knows that not meeting demand for air travel has broad 
ramifications for the economy in general. So we are here asking 
for the Committee's help for our Members to be able to meet 
those demands that are coming at the system.
    Second point is that the existing elements of financing for 
capital development of airports have been absolutely ravaged by 
construction inflation. This is not your 2.7 percent CPI 
increase that the public understands. The latest figures are 
that in the last three years, in the 30 major markets, 
construction inflation has been just under 25 percent. It has 
been a huge increase in our projects and, as a result, we are 
recommending to the Committee much higher funding levels than 
are in the Administration's plan, specifically, $3.8 billion 
with annual increases for AIP and a $7.50 cap on the passenger 
facility charge with indexing for future inflation, rather than 
today's $4.50 or the $6.00 recommended by the Administration. 
We do appreciate their recognizing the need for an increase.
    In all candor, Mr. Chairman, I know people on the Committee 
have said, well, gee, a $3.00 jump is kind of a long reach that 
the airports are recommending. Let me, with all respect, remind 
the Committee that in 1999, eight years ago, the Committee 
voted for a $6.00 PFC overwhelming. The House of 
Representatives voted for a $6.00 PFC at that time, and it was 
only in negotiations with the Senate that it was cut back to 
$4.50. If you went back and took that $6.00 PFC and added 
inflation to it, you would be well over $8.00. The very first 
PFC was a $3.00 PFC that went up from zero to $3.00. This 
Committee recommended $3.00 to $6.00. So we think that both the 
history of this program makes a $3.00 increase reasonable by 
what has been past practice and, more importantly, the needs 
make it a reasonable increase.
    The Administration proposal on AIP is one that we have 
great respect for the professionals in Kirk's office. They have 
done their best, were given too low a level by OMB for AIP, in 
our opinion. We start from current law, frankly, as the test as 
to whether a change in AIP would be good or bad. This Committee 
has, for 37 years, been balancing out the needs of different 
categories of airports in the system and where money needs to 
flow, and that is a high hurdle to overcome for any new ideas 
in the system. We are certainly open to those, but we find a 
lot of merit in making sure that we continue the benefits of 
the current system and the balances that you have made in law 
in the past, but that we make sure we increase for all 
categories of airports the capital needs, because they have all 
been met with these challenges of construction inflation.
    We would also recommend that the Committee continue to keep 
in mind, as it always has in the past, that the Trust Fund was 
developed to do capital development first, operations second. 
To some extent, I think the Administration is trying to switch 
that priority.
    A final brief comment. We would like to work with the 
Committee on small community air service provisions. We think 
they need to be strengthened over what is in the 
Administration's program.
    I would be glad to answer any questions, Mr. Chairman.
    Mr. Costello. The Chair thanks the gentleman and recognizes 
Mr. Principato.
    Mr. Principato. Chairman Costello, Congressman Petri, 
Chairman Oberstar, Members of the Subcommittee, thank you for 
this invitation to testify.
    As President of Airports Council International-North 
America, I am testifying on behalf of the local, regional, and 
State authorities that own and operate commercial service 
airports. Our members enplane more than 95 percent of the 
passenger and cargo traffic in this Country, domestic passenger 
and cargo traffic, and nearly all of the international 
passenger and cargo traffic. Nearly 400 aviation-related 
businesses are also members of ACI-North America.
    Passenger growth has returned and the stakes are high. As 
airports prepare their capital development strategies to meet 
these needs, they employ a variety of tools, including bond 
financing, PFCs, AIP, and airport-generated revenue. For a 
variety of reasons--ranging from the impact of construction 
cost inflation, to an outdated PFC cap, to unfavorable tax 
treatment for airport bonds, to the annual fight over proposals 
to cut AIP--it increasingly difficult for airports to meet 
increasing needs. Simply put, if Congress does not act to 
address these issues in reauthorization, airports will be left 
without the tools and financial resources needed to play their 
role in developing and maintaining a strong national air 
transportation system.
    To put this into context, as the Chairman said before, ACI-
North America's latest capital needs survey estimates over 
$17.5 billion in capital needs each year over the next five 
years. Given that the current Federal annual appropriation to 
meet those needs is $3.5 billion, the reliance of the airport 
industry on locally generated funds, including PFCs and revenue 
bond financing that is often backed by PFCs, is obvious.
    The industry needs the full array of tools to finance the 
capital development necessary to support a growing, competitive 
air transportation system. For this reason, the airport 
community is advocating policy changes to permit greater 
airport access to capital, combined with the continuing and 
strong Federal investment in airport development.
    Based on construction cost inflation alone, we believe the 
PFC ceiling should be raised to $7.50, an index to return 
purchasing power. This change would simply allow airports to 
account for construction cost inflation and nothing more. It 
would keep the PFC whole, in other words. We also support the 
FAA's proposal to streamline the program. PFCs have been in 
place for 17 years and are well recognized as a success.
    Airports have utilized their PFC authority diligently and 
in a balanced way to promote important national aviation 
priorities such as additional capacity, the promotion of 
competition and choice, noise mitigation, and safety and 
security enhancements. It is also important to note that more 
than 95 percent of PFC-backed projects have been implemented 
without airline opposition, and because PFCs are an efficient 
and effective way to finance projects, they often have the 
effect of reducing overall airline costs while providing needed 
capacity.
    I know there has been a great deal of discussion about how 
PFCs are used. Airports pursue a balance in their efforts to 
increase capacity. No airport would forego investing in 
potential air side capacity simply to build excess non-air side 
facilities. In Atlanta, 55 percent of the newly opened runway 
was built with PFCs, providing huge capacity benefits not just 
to that airport, but to the Nation as a whole. The new runway 
in St. Louis will be 59 percent built with PFC funds. Those are 
clearly capacity-enhancing projects.
    Yesterday, I spoke with the director of the Sacramento 
California Airport. He told me he has far more air side 
capacity than he is currently using, and he would like to bring 
more service in, but that his terminal couldn't handle it. He 
needs to do a terminal project, which in this case I would 
argue is a capacity project.
    I also spoke with the director of the Asheville North 
Carolina Airport. He does not have any big air side projects 
right now, but needs to do work on his terminal in order to 
provide price and service competition for his community. He 
can't do it without the combination of PFCs and AIP.
    With regard to AIP, we believe that the funding needs to be 
increased and the program strengthened. Applying the same 
construction cost inflation analysis to the AIP program, the 
authorized levels should rise to $3.8 billion, $4.0 billion, 
and $4.1 billion in the next three years. PFCs were meant to 
supplement, not supplant, AIP, and both need to be strong.
    It should also be mentioned that we believe air traffic 
control modernization will have enormous capacity and 
environmental benefit, and we fully support efforts to achieve 
that goal.
    Mr. Chairman, the members of ACI-North America and I thank 
you for this opportunity to testify, and we are at your 
disposal to work with you to promote the success and the 
expansion of the Nation's air transportation system. Thank you 
very much.
    Mr. Costello. The Chair thanks the gentleman and recognizes 
the distinguished Chairman of the Full Committee, Chairman 
Oberstar.
    Mr. Oberstar. Thank you very much, Mr. Chairman. This is 
perhaps, of all the hearings we are holding, the most important 
on the future of aviation in the reauthorization. We have 
received--I spent a great deal of time last night and this 
morning reading through the testimony--some of the best 
documentation I have seen in many years, and I think that is 
because the stakes have been raised by the Administration's--I 
will be kind--proposal. I won't put an adjective on it.
    Dr. Dillingham, as always, you provide us with very 
thorough, thoughtful, detailed, well supported documentation. 
Let me ask should AIP funding for terminal purposes be 
expanded? And for which purposes and what types of limits 
should be put on it? We have gone along for years saying AIP 
has all these limitations; one of them is terminals, one of 
them is activities that generate revenues. When I was in the 
position of Mr. Costello, chairing Aviation years ago, we sort 
of went along, just made assumptions and lived with those 
assumptions. Maybe we ought to reconsider. What do you think?
    Mr. Dillingham. Chairman Oberstar, I think that the 
rationale for the funding decisions that were made some time 
ago still are valid; however, I think we also should b e open 
to looking at new opportunities in terms of making changes.
    Mr. Oberstar. And that means?
    [Laughter.]
    Mr. Oberstar. You don't want to just continue doing studies 
for us, you want to make some policy recommendations. This is 
your opportunity.
    Mr. Dillingham. Well, Mr. Oberstar, you know that the GAO 
is sort of prohibited from making policy recommendations. That 
is why I had to answer the way that I did.
    Mr. Oberstar. Well, that is why, over the years, we have 
hired some of your people to come on the staff. They have the 
substantive knowledge and then they come with all those hidden 
agendas that they had for years that they were repressed.
    Mr. Dillingham. Yes, sir.
    [Laughter.]
    Mr. Dillingham. That is very true, sir.
    Mr. Oberstar. Well, I am not suggesting that we make a 
change, but I am saying we need to rethink a great deal of what 
we have ben doing in aviation. Mr. Barclay, who has a long 
history of--goodness, gracious, he goes back to the Wright 
Brothers in aviation----
    Mr. Barclay. Don't keep going, Mr. Oberstar.
    [Laughter.]
    Mr. Oberstar. Your documentation is just filled with 
specifics, but you get to the PFC and funding that--wait, I had 
this marked here. A $7.00 PFC the Administration proposes for 
up to 10 medium or large hub airports if they agree to operate 
and maintain terminal area navigation equipment such as ILS and 
approach lighting systems and so on. Where did that wacky idea 
come from? This is a big cost shift. They have stuffed their 
hand into the pockets of the airport and say, all right, you 
pay for the things that we have been paying for, you increase 
the cost on passengers, and then we are going to say we got a 
budget cut. That is what that smells to me like.
    Mr. Barclay. I agree, Mr. Chairman. The notion--first of 
all, let me step back and say experimenting with ideas in 
general with pilot programs is something this Committee has 
done effectively over the years to find that balance you found 
over 37 years for an airport program, but one of the concerns 
that has always been there is if you start shifting nav aids 
into AIP, some future OMB is going to have a great incentive to 
start funding as much F&E as it can out of the AIP program, and 
you don't wind up having enough money then for construction 
costs at airports.
    So we would agree with being very cautious about those 
ideas.
    Mr. Oberstar. Doesn't this amount to double-charging of air 
travelers? They are paying out of the ticket tax for--of 
course, the FAA has this scheme of changing the whole financing 
structure, but if you keep it as it is and you shift it to PFC 
costs for a function that is an F&E account, you are already 
paying for the F&E, now we are going to pay again for the F&E 
account for airport lighting.
    Mr. Barclay. In fairness to the Administration, there have 
been some airports in the past that have wanted to use AIP when 
they couldn't get on the list for an ILS.
    Mr. Oberstar. Oh, yes, I know. Time and again they have 
bought other equipment because they couldn't get it through the 
F&E account and they were trying to use AIP funds.
    Mr. Barclay. But normally the airports turn the operations 
of those facilities over to the FAA to then operate out of its 
account. So we share the concern that is being expressed.
    Mr. Oberstar. There are lots of these little treasure 
troves that are hidden deep inside that FAA budget proposal. 
You have, on the same page a little earlier, airports typically 
unable to refinance their debt take advantage of lower interest 
rates for 10 years. How did that come about? You were probably 
there when the original tax was done. You were probably over in 
the Senate staff when that was written.
    Mr. Barclay. Tell me again what I am talking about here?
    Mr. Oberstar. On page 12 of your testimony you make what 
seems to me a very reasonable proposal or request, to allow 
airports to refinance debt, take advantage of lower interest 
rates and have more revenues available.
    Mr. Barclay. That is a Finance and Ways and Means----
    Mr. Oberstar. Why was the 10 years put in the first place?
    Mr. Barclay. I don't know, Mr. Chairman.
    Mr. Oberstar. Why don't you find out and come back to us?
    Mr. Barclay. We will get back to the Committee with that.
    Mr. Oberstar. It may have just been 10 years because some 
staffer at OMB said 10 years or some staffer on the House or 
Senate Ways and Means Committee said 10 years. But if there is 
a rationale behind it, we ought to understand that so that we 
can make an appeal to the Ways and Means Committee on your 
behalf. I think this is a sensible idea.
    Mr. Barclay. If I can add, Mr. Chairman, we are 
fundamentally asking for airport bonds to be treated the same 
way that highway bonds are treated.
    Mr. Oberstar. Yes.
    Mr. Barclay. We want identical treatment; nothing more, 
nothing less.
    Mr. Oberstar. Why not? Why was this difference made?
    In PFC-funded projects there is a creeping move, and it is 
sort of growing by increments, of airlines wanting to have a 
veto over PFC projects. What do you think?
    Mr. Barclay. Bad idea. The airports have moved strongly 
since deregulation to get rid of mutual air--not mutual aid, 
but majority and interest clause agreements and things that 
give airlines the right to veto projects that competitors will 
want to come in and use. So we should keep independence for 
airports for those projects.
    Mr. Oberstar. That was one of the six points I wrote down 
in my discussion from that chair with Secretary Skinner in 
1990. I said they were not going to have veto. They should have 
a strong consultative role. FAA, DOT have an oversight role. 
Maybe we strengthen that role so some questionable projects 
could be filtered out or modified. And also the requirement for 
a competition plan by airports so that we ensure that, as we 
increase capacity, we also increase opportunities for 
competition.
    Mr. Barclay. Well, in the history of the PFC program, there 
have only been two turned down, and only one of those was 
objected to formally by the airlines. So the rhetoric that this 
is a highly contentious program is really not met by the record 
that most of these projects are worked at. Airports should 
consult. The airline opinions are important, but they shouldn't 
have a veto over the programs.
    Mr. Oberstar. I have just a couple more points, Mr. 
Chairman
    Mr. Principato, 17 percent, for a very long time, of the 
PFC was going into capacity, the rest was going into other 
terminal needs and on-airport ground needs. If there is to be 
an increase in the PFC, would you agree to a requirement also 
that a higher percentage of the PFC go into capacity projects 
and runway, taxiway, parking apron improvements?
    Mr. Principato. Well, as I said in my testimony, we believe 
that certainly when you allocate the amount of PFC that has 
gone into interest, the number is much higher than 17 percent. 
I think we spoke the other day. It is really more like 30.
    Mr. Oberstar. In the last two or three years it has gone 
into 40 plus percent.
    Mr. Principato. Right. And airports always seek a balance, 
as well. I used the Sacramento Airport example earlier, where 
they have the air side capacity they need, but they can't bring 
in the service they would like because their terminal can't 
handle it. So they need to use PFCs to do a terminal project to 
make the most of their air side capacity.
    Mr. Oberstar. One of the reasons that I wrote that language 
into the PFC, because the airlines don't give a hoot how you 
get there or what you do when you get to the airport, they just 
say this is the time we are going to take off, and you are here 
or we leave without you. They don't care how you get there.
    Mr. Principato. And then you would have someplace to let 
the passengers out and pick them up.
    Mr. Oberstar. So airports worry about that. You are the 
advocates for the public.
    Mr. Principato. Right. And the airlines need to have 
someplace to let the passengers off and pick them up and so 
forth.
    I also think that those statistics may understate a little 
bit the capacity benefit. I used the Atlanta example before, 
which had capacity benefits throughout the entire Country, and 
55 percent of their new runway was built with PFCs. So I think 
we are seeing, as you said yourself just a minute ago, a trend 
for more and more PFC financing for important projects like 
that.
    Mr. Oberstar. By my estimate--it is my own horseback 
estimate of keeping track of canceled projects after September 
11--airports diverted $3.4 billion, roughly $3.5 billion to 
security needs at airports. I have advocated that airports 
should be compensated for these through the AIP program or the 
Defense account or out of general revenues. Have you folks in 
the ACI done some discussions about those diversions of funds 
to security needs?
    Mr. Principato. We certainly agree with you that this is a 
national defense, national security priority and that it ought 
to be handled that way, but whether through Defense or Homeland 
Security or whatever, we generally agree with you on that.
    Mr. Oberstar. Mr. Shaffer, does FAA have an opinion on 
expanding use of AIP funds or PFC funds for terminal 
requirements?
    Mr. Shaffer. The FAA is comfortable with the limitations 
that presently exist, Mr. Chairman, but, of course, as I have 
spoken about earlier this morning, we do believe that the 
eligibility for PFCs as a form of local revenue should be 
expanded.
    Mr. Oberstar. Thank you. Appreciate it.
    Thank you, Mr. Chairman.
    Mr. Costello. Thank you.
    The Chair recognizes the ranking Member of the 
Subcommittee, Mr. Petri.
    Mr. Petri. Thank you very much, Mr. Chairman.
    I wonder, Mr. Barclay, you referred briefly in your oral 
testimony to the small airport program, ideas that you might 
have for strengthening that program. Could you expand on that a 
bit?
    Mr. Barclay. Well, it is fundamentally expanding, adding 
funding to the programs that the Committee has already 
established. We think there is a lot of merit in the current 
small airport fund, compared to the recommendation of the 
Administration to create a new discretionary account, because 
it ties together the interest of large and small airports and 
the PFCs. Entitlements are given back; that money goes to 
smaller airports. Expanding that program as we expand the PFCs 
seems to us to be a good idea.
    Smaller airports, as you noted in your opening statement, 
small airports are heavily reliant on a robust AIP program. If 
they are going to have capital development that is needed for 
the future, they get the majority of their funds from that kind 
of program, and we really need to have--airports shouldn't be 
looked at as individual facilities; airports are a network. 
Every passenger that takes off from a small airport, virtually 
everyone is bound for a large airport somewhere in the system. 
Many of the people that get on airplanes at large airports are 
bound for small airports. So we need to look at a network 
approach to the financing, which means PFCs for large airports, 
increases in those, and AIP increases for smaller airports. So 
we very much want to work with the Committee to expand the 
current programs and make sure small airport needs are met.
    Mr. Petri. This next question kind of follows up on that 
both for you and for Mr. Dillingham, and that is if you could 
talk a little bit about the Administration's proposal to expand 
the discretionary AIP program. When we look at it, we think, 
well, the appropriators will earmark it all, so what impact 
would this really have on the air industry if it is supposed to 
be a network and kind of balanced improvement, and is there 
some way to achieve that objective? Could you kind of discuss 
the merits of expanding that discretionary program?
    Mr. Dillingham. Mr. Petri, as I understand it, the 
Administration's proposal does not change the national priority 
system in terms of what discretionary monies would be spent 
for, that they would still be spent for safety and security and 
environment and capacity. I think that the larger airports 
receive a higher score for those same projects, and also that 
the larger airports would tend to have more of those projects. 
It is not clear to me that the smaller airports will benefit 
from that kind of change.
    Mr. Barclay. Overall, in the Administration's program, they 
would cut the total funding for airports by that $765 million 
and $430 million of that would come out of the accounts that 
are aimed at smaller airports. So it is both an issue of 
allocation and are the programs the right ones to be shifting. 
I assume the Ranking Member is talking about the non-primary 
entitlements, where the tiering of non-primary airports has 
merit to look at that. But taking away the guaranteed 
entitlements from the smallest airports in the system is again 
something we would question unless it is replaced by a 
guaranteed discretionary pool or some other new idea that would 
get over the accounting problems that we think the 
Administration is legitimately trying to figure out, how can we 
not allocate lots of money to smaller airports that aren't 
going to draw on it. That has got merit, but so does 
guaranteeing these smaller airports that the money will be 
there when they need it.
    Mr. Petri. Thank you. We would like to work with you 
further in this area in particular. Thank you.
    Mr. Costello. Thank you, Mr. Petri.
    The Chair recognizes the gentleman from Colorado, Mr. 
Salazar.
    Mr. Salazar. Thank you, Mr. Chairman.
    Mr. Dillingham, I was noticing the comparison here that you 
have compared to FAA and the comparison that talks about the 
planned development costs. Could you expand on that a little 
bit? And maybe Mr. Shaffer could also talk about that a little 
bit.
    But, also, how do you define small airports? What is your 
definition of small airports?
    Mr. Dillingham. The analysis that we tried to present that 
show the difference between what ACI was estimating as planned 
capital development and what the FAA has in its national 
integrated plan for airports, the NPIAS, basically, FAA 
produces a document of airport needs that sort of is a bottoms-
up approach from which they get the needs from the airport, and 
they move towards a national system of airports being concerned 
primarily with making sure that safety, security, capacity, 
standards, those things are met based on the forecast of 
traffic for the Nation's system. So that is what generates the 
amount from FAA. And it is all for projects that are eligible 
for funding by Federal grants, the AIP.
    Whereas, ACI includes projects that are not eligible for 
funding by Federal grants, AIP, and oftentimes they are money-
generating projects, as such, or projects that they would be 
able to fund with private sector money. So that is the 
difference that we were making, and that accounts for the 
difference in the planned development costs between the two.
    Small airports, we are talking about small hubs and non-hub 
airports is what we define as small airports in our 
presentation.
    Mr. Salazar. Mr. Shaffer?
    Mr. Shaffer. Mr. Salazar, further in regard to what Dr. 
Dillingham was just saying, the precise definition that you are 
requesting is for a small hub, that is an airport that enplanes 
from one-quarter of one percent down to five one-hundreds of a 
percent of the total national enplanements on an annual basis. 
A non-hub is one that enplanes less than five one-hundreds 
percent of the national total, but more than 10,000 per year. 
And then you drop below that even to the non-primary commercial 
service airports. Those are, as I say, non-primary airports; 
they have between 2,500 and 10,000 enplanements per year.
    Mr. Salazar. Thank you.
    Mr. Dillingham, in your estimate or your analysis, I think 
Mr. Barclay referred to the inflationary costs or construction 
inflation of 25 percent. I think that is the figure that he 
used. Did you take into account that inflationary cost?
    Mr. Dillingham. No, we did not. That clearly would raise 
the cost, and I am not sure that the FAA took that into account 
in their development of their numbers as well.
    Mr. Salazar. So, Mr. Barclay, would you say that the 
Administration's proposal is the correct way to follow, or 
should we try another angle?
    Mr. Barclay. No, sir, the Administration's proposal doesn't 
have enough money in its to build the capacity we need to meet 
the demand that is coming at the system, so that is why we say 
we sort of start from the wisdom of current law that has been 
worked out over many years, and we need to move up from there.
    Mr. Salazar. Thank you, Mr. Chairman. I yield back.
    Mr. Costello. The Chair at this time recognizes the 
gentleman from Tennessee, Mr. Duncan.
    Mr. Duncan. Thank you, Mr. Chairman.
    Mr. Shaffer, at one point we were losing general aviation 
airports at a rate of one per week. Is that trend continuing? 
And how important do you consider the more active general 
aviation airports to the entire national aviation system?
    Mr. Shaffer. Congressman Duncan, I don't have the exact 
figures on the tip of my tongue. There are a couple of airports 
out west that I am aware of that the local community is 
presently debating keeping open or not, and some of the 
advocacy groups in the Country are working very diligently to 
keep those open.
    Honestly, in regard to the second part of your question, 
general aviation airports, that is where my heart is. That is 
where I grew up, on an airport with grass runways. So that is 
part of my focus. But, of course, I have to put that cinnamon 
aside and do exactly what I think you are suggesting, and that 
is look at the system as a whole and evaluate each airport in 
that system as a part of that integrated whole.
    Indeed, general aviation airports, particularly with the 
advent of very light jets, more point-to-point air taxis, more 
fractional ownership of aircraft will become more and more 
important to the national system, and that is one of the 
primary motivations of the Administration's proposal to free up 
more money so that we can focus that money on the small 
airports and the general aviation airports, to help them 
prepare for the advent of more traffic and congestion.
    Mr. Duncan. All right. Thank you.
    Dr. Dillingham, you mentioned in your report that the FAA 
wants to expand the privatization program for airports, and, of 
course, they have done that in other countries to a much 
greater extent than we have here. You know, there has been very 
little activity so far in the five airport pilot program that 
we authorized. Do you think it can be expanded quite a bit by 
removing this airline veto and the other proposals that they 
are making?
    Mr. Dillingham. Mr. Duncan, just as you said, the pilot has 
been around for a number of years and there hasn't been very 
much interest in it. As we go around the Country, we don't hear 
a clamor for airport privatization.
    Mr. Duncan. Okay.
    Mr. Barclay and Mr. Principato, let me ask you this. The 
FAA estimates that we are going to have 300 million more 
passengers in the next seven or eight years. How far behind are 
we and are we reaching a crisis point at some of these 
airports? Also, in your studies, have you taken into 
consideration the tremendous growth areas? And what I am 
talking about, for instance, the Knoxville metropolitan area, 
for instance, is growing by leaps and bounds. There are places 
in the northeast and other parts of the Country that are losing 
population or just barely staying the same. How much have you 
taken that into consideration, that the needs might be growing 
faster in certain areas than others?
    Mr. Principato. Well, you mention Knoxville. Bill Marston, 
who runs the Knoxville Airport, is on our board and keeps our 
attention focused on that, and does a great job, by the way. 
Certainly, we are looking at that. The service patterns are 
changing. As I stated before, airports look at their own 
circumstances and are working very, very hard to meet the 
expanding and changing needs in their communities and trying to 
expand the reach, but this 300 million new people is an 
inescapable fact. I have yet to find anybody who doesn't think 
that is going to happen. That seems to be the one number 
everybody agrees on.
    Mr. Duncan. Have we been able to speed up some of these 
projects? I remember years ago they said it took, for the big 
main runway at the Atlanta Airport, it took 14 years from 
conception to completion. That is part of what I am getting at 
when I say how far behind are we. If we are going to take a 
long time for some of these projects----
    Mr. Principato. We have made a lot of progress in the last 
10 years, but we are still behind. And if we don't update the 
tools at our disposal, the PFCs, keep AIP strong and growing, 
then we are just going to fall further and further behind.
    Mr. Duncan. What effect would it have, Mr. Barclay, if the 
Senate did to you again what they did before? You know, the 
Senate messes up a lot of things.
    [Laughter.]
    Mr. Duncan. I agree with you, Congressman, that they did 
this last time. You know, you are making the point that one of 
the beauties of the PFC is that it is a ceiling, it is not a 
requirement, and it has got restrictions on it. And airports, 
their local government, they don't have a profit incentive, 
they don't have the incentive to go build things that aren't 
needed. But where you do have the needs, if you provide the 
room that airports can utilize, an increased PFC, they can go 
build things where they need them.
    We are not at a crisis now. Post-9/11, as you know, that 
gave us some extra time. We were going to reach a billion 
passengers by 2011, before 9/11 occurred. But we then also 
turned around and started spending a lot of money on security, 
and we are still spending a lot of time on security at the same 
time we are trying to add capacity. So when you balance all 
those issues out, our members tell us we are not in a crisis 
now, but we will be if we get that population the United States 
added to the system and we haven't started building this year 
and next year.
    Mr. Duncan. I will just end with this. In some ways we are 
going overboard on this security and shortchanging the 
expansion of capacity efforts.
    Thank you, Mr. Chairman.
    Mr. Costello. Thank you.
    The Chair, at this time, recognizes the gentleman from 
Oregon, Mr. DeFazio.
    Mr. DeFazio. I thank the gentleman.
    Mr. Shaffer, are you familiar with the history of PFCs?
    Mr. Shaffer. Very much so.
    Mr. DeFazio. Are you? Okay. So you are familiar with the 
period during which PFCs did not exist and the reasons why they 
didn't exist?
    Mr. Shaffer. Yes, sir, I am.
    Mr. DeFazio. Okay. And that had to do with?
    Mr. Shaffer. Revenue diversion, sir.
    Mr. DeFazio. Okay, that is good. You don't think that, 
potentially, your rather broad expansion of the license for 
PFCs could lead to what many people might consider revenue 
diversion?
    I have one other question. Do you know the breakdown on PFC 
revenues between what is collected at origin versus what is 
collected en route?
    Mr. Shaffer. I don't.
    Mr. DeFazio. Okay.
    Mr. Shaffer. I would be glad to get that for you if it 
would be of assistance to you.
    Mr. DeFazio. It would be very useful, because my point is 
that I really think it is hard to make the case that an en 
route fee is a local revenue. You know, I fly from Eugene to 
Denver, I pay a PFC in Denver. I have never even been outside 
the new terminal on the grounds, never. And I think there are a 
heck of a lot of other people in that situation at Chicago or 
anywhere else. I have been outside in Chicago twice in 20 
years, I think.
    So I think making the case for a local revenue is hard, and 
I am concerned, as the original Democratic author of PFCs, that 
we may be headed back down that route where we are making it 
more controversial than it needs to be. My position would be, 
yes, you may be able to make a case--you certainly, I think, 
can make a case for terminal construction in some airports, but 
I am worried about the latitude you are proposing and would 
urge you to rethink that, with your knowledge of the history.
    Mr. Shaffer. I believe I understand your concern, 
Congressman, and I will see if I can't get that en route PFC 
data for you.
    Mr. DeFazio. That would be very helpful.
    Dr. Dillingham, I know we have plowed this ground many 
times, but as I understand the Administration's fee proposal, 
it presents us with a deficit, basically, in terms of our 
capital needs for our airports as we move toward a billion or 
more passengers in the not-too-distant future, is that correct?
    Mr. Dillingham. Yes, sir.
    Mr. DeFazio. Now, if we kept the current fee structure and 
that many people really flew and airline ticket prices stayed 
about where they are, all things considered, would that create 
enough revenue to fill that deficit?
    Mr. Dillingham. Yes, sir. Based on our analysis and based 
on our understanding of the CBO analysis, it would provide 
enough revenues.
    Mr. DeFazio. I mean, that is assuming other things are 
pretty much held the same.
    Mr. Dillingham. Yes, sir.
    Mr. DeFazio. But we could fill that deficit.
    Mr. Dillingham. Yes, sir.
    Mr. DeFazio. Okay. And, again, not asking you to pass a 
policy judgment or talk about the inequities that some of us 
feel are created by the Administration proposal, particularly 
the burden on GA, the Administration proposal would produce 
revenues that would not be adequate to meet that capital 
deficit, is that correct?
    Mr. Dillingham. I am sorry, would you say that again, Mr. 
DeFazio?
    Mr. DeFazio. Well, I mean, their proposal, unless you were 
to further increase the gas tax or something else, would not 
produce revenues sufficient to meet that deficit.
    Mr. Dillingham. We have some concerns about that based on 
the way, as we understand, FAA computed their numbers, not 
taking into account the potential lessening of purchasing of 
gas tax and the elasticity issue.
    Mr. DeFazio. Okay.
    Mr. Barclay, I would just like you to sort of give us where 
do you see--we talked a little bit, when I saw you yesterday, 
about the need to streamline PFCs. I don't want to create an 
unnecessary and redundant paperwork process, but just be real 
candid here. Is what the Administration is proposing just 
getting rid of unnecessary paperwork or is it really creating 
the potential that we won't be adequately monitoring how PFCs 
are going to be spent?
    Mr. Barclay. I honestly think you can streamline and go to 
a certification and auditing kind of procedure, because you 
have got experience in the system that, as I say, there has 
only been two PFCs turned down in the history of the program. 
So that gives you a track record to go on. And you know you 
have got the local checks and balances on these projects and on 
the levying of fees that are at least locally looked on as a 
local fee once they elect to put it on.
    So the Administration recommendations, putting aside 
eligibility for the moment, but just streamlining, is one that 
is well worthwhile. We have done some experimenting with that 
at the smaller airports, and it seems to have worked pretty 
well.
    Mr. DeFazio. Okay, thank you. My time has expired.
    Thank you, Mr. Chairman.
    Mr. Costello. Thank you.
    The Chair recognizes the gentleman from Missouri, Mr. 
Graves.
    Mr. Graves. Thank you, Mr. Chairman.
    I am just trying to clarify where we are in this whole 
proposal, in the FAA's proposal in terms of AIP. It is a 
network, as Mr. Shaffer pointed out, and wheels don't work 
without spokes, and our aviation network doesn't work without 
general aviation facilities, that is all there is to it. But it 
is not just about GA airports; there are a lot of jobs out 
there, there are a lot of small businesses out there that 
completely depend on those airports to function.
    What I am trying to figure out, the FAA's proposal is going 
to cut the AIP program considerably. In fact, in Missouri, 
which is obviously the State I am looking at, we are talking 
about $2.1 million to the State for the Airport Improvement 
Program. Is that correct, is that the direction we are going to 
go? I hear talk about discretionary funding. This is just 
vitally important to many of our States and to GA. The program 
is designed to get GA pilots off the bigger airports. I mean, 
obviously, it works in conjunction with the bigger airports, 
and, just like you said, it is a network, and it is a network 
that is important. We don't want those delays at the larger 
reports; get GA off of those airports and get them onto the 
smaller airports.
    But where are we in this process? Is the program being cut 
considerably? Are those funds going to be discretionary? I want 
to keep that guaranty there. Somebody answer the question. I am 
trying to figure out where we are at.
    Mr. Shaffer. I couldn't agree with you more, Congressman, 
in terms of the critical nature of general aviation airports, 
not only on a local level, but as a part of the national system 
of airports. What we are proposing the AIP level plus the 
modifications that we are proposing to AIP and the passenger 
facility charge program includes things like this: a standalone 
State apportionment fund, and now with a minimum of $300 
million per year in that fund; raising the discretionary 
account from $148 million, I believe it is, which is a number 
that is almost 20 years old, up to $520 million, preserving the 
95 percent Federal share for that smallest tier of the nine and 
fewer based aircraft, preserving the 95 percent Federal share.
    In making a lot of common sense changes, as you know, as a 
general aviator, one of the things that enables those airports 
to generate the most revenue is fuel sales. The other one is 
hangar rental. Well, right now, if one of those airports wants 
to spend AIP funds to add a credit card reader to their 
existing fuel farm, they can't do it, and that just makes no 
sense at all. Same result with regard to putting new skin on a 
bunch of T hangars. It is not eligible; you have to knock them 
down and start from scratch, and that just makes no sense. So 
we want to remove, frankly, silly restrictions that disable the 
smaller airports from being more sufficient.
    Mr. Graves. Well, at my airports, my GA pilots are 
extremely frustrated. They are being told that their taxes are 
going to go up 300 percent and they are going to lose money to 
fix their airports at the same time, and it is extremely 
frustrating to them.
    But this program is absolutely vital, and I hope that the 
Members of the Committee are paying close attention to this 
because those small airports out there depend on it. I would 
love to see some changes in it, some changes that make sense. 
We need to keep that money there and we need to make sure that 
it is always going to be there. We don't want to cut it.
    Mr. Dillingham, I don't know if you had anything or not.
    Mr. Dillingham. No, sir.
    Mr. Graves. Thanks, Mr. Chairman.
    Mr. Costello. I thank the gentleman.
    The Chair recognizes now the gentleman from Wisconsin, Mr. 
Kagen.
    Mr. Kagen. Thank you, Mr. Chairman.
    And thank you to all of you for your presentations, they 
have been very enlightening. As a new Member on this Committee, 
there is a great deal to learn. For many years I have been a 
great fan of the GAO. They have tremendous work and my reading 
of their product is that they have very little bias to add. So 
without getting Dr. Dillingham to be political, I will just ask 
you yes or no questions, and you can plead the fifth, if you 
would like.
    [Laughter.]
    Mr. Dillingham. Thank you, sir.
    Mr. Kagen. Isn't it true that the proposal by the 
Administration is really attempting to do more with less?
    Mr. Dillingham. Yes.
    Mr. Kagen. So I got that right.
    Mr. Dillingham. Do you believe that the funding level 
proposed by the Administration for AIP is adequate to meet the 
current needs and future needs of our airport system?
    Mr. Dillingham. According to FAA's estimates, it is.
    Mr. Kagen. And according to your own analysis and years of 
experience?
    Mr. Dillingham. I think there is some value to looking at 
what the airports propose in terms of what they think they 
need. I mean, I think there is a balance in there. I think one 
of the things that needs to be considered is that the FAA 
proposal is a very complicated, integrated proposal where one 
element of it sort of is dependent on another element and you 
sort of have to take it as a whole to make some sense of it. 
And if you start pulling it apart, you start to see things 
where there is not enough money here or this shouldn't be done 
this way. So I think they intended it to be taken as a whole 
rather than the parts of it.
    That is a little bit more than yes or no. Sorry.
    Mr. Kagen. So much for yes or no questions. Thank you.
    [Laughter.]
    Mr. Kagen. Mr. Barclay, the current level of funding 
proposed would have a significant effect on small airports like 
where I am from in Northeast Wisconsin, Green Bay and Appleton. 
Can you comment, please, upon what you would recommend the 
level of funding be for AIP and others?
    Mr. Barclay. Well, the current appropriated level is just 
over $3.5 billion. The current authorized level is $3.7 
billion. We are recommending really a modest increase from the 
authorized level, start it at $3.8 billion and then take it up 
over the years of the authorization. Frankly, that is trying to 
be cognizant of the difficult budget decisions the Committee 
and the Congress have to make. And we have the advantage of 
having this leverage that the PFC can be used primarily by the 
larger airports. We can then shift more of the AIP to smaller 
airports, and you can get a balance that way. You don't have to 
entirely rely on the Federal budget for everything in the 
airport system.
    So we would like to see at least that $3.8 billion level 
met for the first year of the program.
    Mr. Kagen. Mr. Principato, you mentioned in your opening 
statement that you would like to see a more creative and more 
functional contribution from bonding.
    Mr. Principato. Yes.
    Mr. Kagen. What specifically do you have in mind?
    Mr. Principato. That tax treatment of bonds?
    Mr. Kagen. Correct.
    Mr. Principato. On the tax treatment of bonds, about 60 
percent of airport bonds--as Dr. Dillingham's slide showed 
before, over half of airport finance comes from bond, and about 
30 percent of that, by the way, is backed by PFCs. So the PFCs 
have a utility well beyond just the dollar that you bring in. 
But about 6 percent of airport bonds are treated as private 
activity bonds, so subject to AMT; they can't advance refund 
them, so that adds to the cost of putting airport capital 
projects into place.
    Our modest proposal would be simply that any project that 
is eligible for AIP or PFC be counted as a public purpose 
project and be treated by the tax code that way. I know that is 
not this Committee's jurisdiction, but that would be our modest 
proposal. And if you like that idea, we would like to work with 
you on seeing if we can follow up on that.
    Mr. Kagen. We do have friends in other committees.
    Thank you very much, Mr. Chairman. I yield back my time.
    Mr. Costello. The Chair recognizes at this time the 
gentlelady from Oklahoma, Ms. Fallin.
    Ms. Fallin. Thank you, Mr. Chair.
    Mr. Dillingham, when I was viewing your charts that you 
were showing earlier, you talked about your difference in 
estimates on the FAA's and the ACI's average annual plan 
development costs that are coming up, and you showed a 
difference of $5.8 billion and what you anticipate the needs 
would be compared to the FAA's estimates, and then you 
segmented that out to ineligible and eligible AIP costs. Can 
you explain what an eligible cost would be and why the FAA does 
not include that in their estimates of needs for the future?
    Mr. Dillingham. An eligible cost is defined by statute. The 
statute says what is eligible for PFC. So that is what we mean 
when we say eligible AIP. Ineligible AIP are projects that are 
not included in the statute, and in large measure these are 
oftentimes that are income-generating projects such as a 
parking garage or some other income-generating project on the 
airport grounds.
    I don't want to speak too much for FAA in terms of why they 
don't include them, but I think their estimate is based on what 
the statute allows them to include. Therefore, they wouldn't 
have something that couldn't be paid for by Federal grants as a 
part of their estimate.
    Ms. Fallin. Well, I guess that was my question, Mr. 
Chairman, if I could follow up. Your estimate costs are a lot 
higher than the FAA's, so if they are ineligible, why would we 
include that as something that is part of the costs?
    Mr. Dillingham. Well, actually, it is the airport 
organization's estimates of what their cost would be, and, 
again, not wanting to speak too much for the airport, since 
they are sitting close by, I think the airports see the needs 
differently than FAA in terms of they may see that some 
projects that--like it was explained earlier this morning, like 
if FAA concentrates on the air side--runways and taxiways and 
things like that--it is also important from the airport's 
perspective that passengers have someplace to pick up their 
bags, someplace to get on the airplane and that kind of thing. 
So they have a different perspective on sort of what they think 
is needed to enhance the system.
    I think the airport people can probably speak better to 
that than I can.
    Mr. Principato. That is our organization's estimate, and we 
look at the entirety, the terminal, the gates, and everything 
else, because they are all really capacity projects when you 
think about it. You can have a lot of runways and the all work 
really well, but if you only have a couple of gates, you have 
no place to put the people. So that is one thing, we look at 
the whole picture.
    The other is airports pursue a variety of strategies to 
raise capital for projects and so forth, particularly smaller 
airports are looking at the parking garage issue and so forth. 
So we really look at the entirety of what is going on at the 
airport.
    If I could say one other thing just about the difference in 
our number and the GAO number--I was talking to Dr. 
Dillingham's staff beforehand and we are going to work with 
them--our number is--we put an inflation adjustment into our 
number. Not construction cost inflation, a smaller inflation 
number, to get to our $17.5 billion over the next five years, 
and theirs are in constant 2006 dollars, so they are in 
deflated dollars. Also, we need to work with them, but we think 
they may understate the cost of repaying bonds that are out 
there. Again, about 60 percent of airport projects are financed 
with bonds, and it may understate that, but we need to sit down 
with their staff and work that out
    Ms. Fallin. Well, I have got a few minutes left, so I am 
going to ask you a question, Mr. Shaffer.
    In light of them saying that there are some things that 
they believe should be eligible, have you had a discussion with 
the airports about changes that might be made to allow things 
that they need that would enhance service at the airports?
    Mr. Shaffer. We have, and that discussion is ongoing. More 
fundamentally, we have also been and continue in discussions 
not only with the airports, but with Dr. Dillingham's staff in 
terms of getting down to a common understanding of which 
projects, for what period of time, and under what eligibility 
is included in these needs estimates.
    Ms. Fallin. Thank you so much.
    I yield back my time.
    Mr. Costello. The Chair thanks the gentlelady.
    At this time, the Chair recognizes the gentleman from 
Washington State, Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman. I will just take a few 
minutes to ask some questions. Mr. Costello will be back in a 
few moments.
    The first question is for Mr. Shaffer and has to do with 
comments on page 11 of your testimony. Mr. Oberstar asked some 
questions about one of the pilot projects you propose. The 
other pilot project you propose is use of AIP dollars 
specifically to install ADS-B equipment. Relating back to the 
hearing we had last week, I think the testimony last week was 
on the Next Generation ATC program. There were estimates 
anywhere from $12 billion to $15 billion from FAA, $10 billion 
to $14 billion from private airports. I may have those numbers 
wrong, but the magnitude is still the same. So you are looking 
at $22 billion to $29 billion over the next several years from 
user fees, from increased gas tax, and from some bonding 
authority in the second ten years, paid by potential 
surcharges.
    So the question I would have is with that amount of money 
going potentially into the Next Generation ATC system, which 
would include ADS-B, why do you think it makes sense to use AIP 
dollars for ADS-B when, again, previous testimony to the 
Committee shows there is going to be a lot of money, 
potentially, flowing into Next Generation ATC?
    Mr. Shaffer. Congressman, that pilot program is directed 
toward those areas of the Country where either the ADS-B 
installations would not be included in the NextGen rollout or 
where, for example, either a community or an airport wants to 
install ADS-B in advance of the Administration's F&E schedule 
and budget. So it is really a supplement to the NextGen system 
as we have proposed it.
    Mr. Larsen. In addition to that, in your pilot project, 
does it not include the control over that particular portion of 
ADS-B system by the installer, or would this be part of the FAA 
system run by the FAA, staffed by the FAA?
    Mr. Shaffer. It would be part of the system, Congressman.
    Mr. Larsen. Would it be run by the FAA and staffed by the 
FAA?
    Mr. Shaffer. Yes, that is my understanding.
    Mr. Larsen. That is your understanding. How much do you 
anticipate would come out of the AIP to finance this pilot 
project, have you done an estimate on that?
    Mr. Shaffer. I don't have it on the tip of my tongue, 
Congressman, and I apologize for that; I will get it for you. I 
will also add that there is interest already in the system for 
doing things of this nature. For example, the State of Colorado 
has already begun installing ADS-B there because their terrain 
is such that there is really no amount of radar that can cover 
and provide the sort of air traffic control that a lot of 
general aviators, for example, need and desire.
    That tells us that there is a lot of interest in that.
    Mr. Larsen. [Presiding.] Are they doing that out of AIP 
dollars?
    Mr. Shaffer. No, they are doing that on their own 
presently.
    Mr. Larsen. Doing it on their own.
    Dr. Dillingham, in your analysis of the FAA versus AIP 
funding structure, did you take into account, did you make any 
estimate on the amount of AIP dollars that would be used in 
this pilot project to finance an earlier roll-out or 
supplemental roll-out of ADS-B?
    Mr. Dillingham. No, we did not, Congressman Larsen.
    Mr. Larsen. So those numbers are not included in your 
analysis?
    Mr. Dillingham. Not specifically. No, sir.
    Mr. Larsen. Not specifically. So if they were, that would 
mean, in my mind, I guess it would mean there would be fewer 
AIP dollars on your bottom line analysis.
    Mr. Dillingham. Yes, sir.
    Mr. Larsen. Mr. Barclay or Mr. Principato, have you looked 
at that particular pilot project and the impact that spending 
AIP dollars and the availability of AIP dollars for ADS-B roll-
out and what that means for AIP dollar availability?
    Mr. Barclay. That goes back to my earlier answer. We are 
hesitant to endorse giving AIP dollars going to nav aids, 
rather than F&E dollars going to nav aid. So some 
experimentation with the issue, let me step back and say we are 
big fans of ADS-B and the next gen system. We agree that is the 
right pattern to go with. It is a fundamental part of that 
system. There are a number of things about this pilot program 
we question. The money is not going to the airports and it is 
coming out of AIP, rather than F&E. So we would be happy to 
work with the committee to redesign that.
    Mr. Larsen. Okay.
    Mr. Principato. Actually, we have many of the same 
concerns, certainly with the last point Mr. Barclay made about 
some of the money not going to the airport. On the ILS 
question, I just wanted to put one more issue on the table. If 
we do move in the direction of a pilot program, a lot of 
airports have concern about the liability issue, if they are 
going to take that on. If the Congress in its wisdom puts it in 
place, we need to look at the liability issue moving forward.
    Mr. Larsen. I noted that in one of your testimonies, the 
liability if you were to take responsibility.
    That takes my time. Where is the list here? The Chair 
recognizes Mr. Hayes of North Carolina.
    Mr. Hayes. Thank you, Mr. Chairman.
    A question for Mr. Barclay and Mr. Shaffer together, and 
thank you all for being here today.
    How does the FAA count aircraft? If you were at a towered 
airport, obviously the arrivals and departures are counted, but 
many airports do not have towers and operate very safely, and 
have lots of traffic. In terms of AIP money, can you help me 
with that?
    Mr. Shaffer. Congressman Hayes, that is a great question. 
We put a lot of effort into figuring out the best way to count 
it. As you point out, if you have a tower, then obviously you 
have the log books and the radar tracks and you know exactly 
what is going on.
    We also analyzed whether fuel sales might be a way of 
figuring out the number of based aircraft at a particular 
airport. For a variety of reasons, we concluded that was not 
likely to yield an accurate result, so we settled on the idea 
of getting the end numbers off of the aircraft at each 
particular airport.
    Honestly speaking, the results in collecting that data up 
to this point have been spotty across the Country. Some areas 
we have gotten pretty high percentages of response, and others 
pretty low. As I sit here, I am open-minded, and if you have a 
better way to figure out that number of based aircraft, I would 
love to talk to you about it.
    Mr. Hayes. Of course, based aircraft is important, but the 
folks that are coming and going to do business at that airport 
is equally important. I am thinking in my District, Salisbury 
is a non-towered airport. A tremendous of commerce goes in and 
out of there, not based traffic. Concord has the data. As you 
say, tracking information is available. The aircraft are, I am 
not a computer guy. Can you punch a button and say who went to 
Salisbury that day, Mr. Dillingham?
    Having this conversation, Congressman Graves reminded me of 
a Phil Boyer quote, ``Give me a mile of highway and you can go 
a mile. Give me a mile of runway and you can go anywhere in the 
world.'' And that is crucial as we face the future.
    Do you want to comment on that, Mr. Barclay? Do you have 
some idea from an airport standpoint of how we might painlessly 
and properly count aircraft in and out?
    Mr. Barclay. Well, I think it is currently done by 
estimates. We will get back to you. I have forgotten the 
details of exactly how they estimate those numbers, but your 
broader point is exactly right. To use a larger airport 
example, the Atlanta Airport recently did a cost/benefit 
analysis of their impact on the local economy. It was $18 
billion a year at one airport. We are talking about investing 
for all 550 airports in the country that get air carrier 
service, 3,500 airports that are eligible, a lot less money 
than that for the entire country.
    Hong Kong spent $25 billion to build one airport for their 
country. It shows the importance to the economy in general of 
making these investments and what a wise investment it is for 
the, frankly, modest amount of money that we are investing in 
large and small airports, because the small ones are just as 
important to their communities as the large ones are to theirs.
    Mr. Hayes. Okay, if you will help us track that going 
forward.
    Mr. Dillingham was talking about all these additional 
passengers for airlines and general aviation. In the next 
generation equation from your perspective, has the revenue 
stream from these additional passengers, which we basically 
agree are going to occur, has that been taken into account as 
to what the present system is going to generate in terms of 
revenue dollars?
    Mr. Dillingham. I think when you look at the overall FAA 
proposal in terms of its move to user fees or the necessity to 
move to user fees for adequate revenues, it has not been taken 
into account, although the proposal does address some of the 
other issues that are of concern to the aviation community.
    Mr. Hayes. Thank you.
    So Mr. Shaffer, again welcome. The necessity for the next 
generation, I don't think we have come to that determination 
yet in terms of dollars, but you all make sure as this cost 
accounting system, which I am trying to match with something, 
doesn't quite measure up. Let's make sure we know how many 
dollars are coming in. If we take something that doesn't appear 
to be broken, then don't try to fix it until we need it. If you 
could kind of keep us up to speed on that.
    Mr. Chairman, with time left, I yield back. Thank you all 
again.
    Mr. Larsen. Thank you.
    Mr. Hall of New York?
    Mr. Hall. Thank you, Mr. Chairman.
    Thank you all, our illustrious panel.
    First, I wanted to ask Mr. Barclay what the most common 
landside projects are that PFC's fund?
    Mr. Barclay. It is primarily gates. Again, if you have your 
airside build-out, and you want to maximize the utilization of 
that, PFCs were designed to be able to fund gates and 
particularly gates that would allow more competition into the 
airport.
    Mr. Hall. Thank you. In your testimony, you indicated the 
changing of the Federal share for airfield paving and 
rehabilitation projects for runways and taxiways at large and 
medium airports, and from 75 percent to 50 percent would be 
hardship. Could you elaborate on that, please?
    Mr. Barclay. Well, if the purpose in general is to provide 
more funds for construction at airports, reducing the amount of 
money in the Federal share doesn't seem to make sense to us. 
That was, we think, driven primarily by the much lower number 
in the Administration's program. They are trying to make the 
dollars go farther so they reduced the Federal share of those 
programs.
    If you pull an extra 25 percent away like that, you are 
just going to have to find it somewhere else in the airport 
financing system. So we think it makes sense to leave the 
percentages where they are.
    Mr. Hall. Okay.
    Mr. Shaffer, three quick related questions here. The FAA's 
proposal would eliminate the Military Airport Program 
discretionary AIP setaside. Could you explain the reasoning for 
that?
    Mr. Shaffer. Yes, sir. The Military Airport Program is 
presently 4 percent of the discretionary fund. It is about $35 
million a year. But the number of airports coming into that 
program has dwindled to almost, well, it is single digits on an 
annual basis. Most of the airports that are presently in the 
program are second time entrants, and the new entrants are just 
ones and twos. So we want to leave the criteria in place, but 
the level of traffic there, or participation if you will, 
simply does not any longer justify the setaside, and it causes 
the setaside mainly to be an accounting exercise. But we are 
not removing the criteria. When an airport comes up that wants 
to go through that program, that will be available to them and 
we will have the money to fund it.
    Mr. Hall. The setaside will be available?
    Mr. Shaffer. Not the setaside, but the program, the 
criteria to fund the types of projects like hangars and 
passenger terminals and things that a military airport 
ordinarily does not have, but are needed to convert to a 
civilian airport.
    Mr. Hall. Okay. The proposal would sunset the 95 percent 
Federal AIP contribution to small airport projects and return 
it to 90 percent. What is the logic there?
    Mr. Shaffer. That is a great question, Congressman. It is 
simply this. When Congress established that 95 percent 
participation level by the Federal Government, it was in 
response to the impacts of 9/11. We are now six years down the 
pike almost from 9/11. As I testified earlier this morning, 
those impacts financially, traffic-wise, passenger counts, are 
largely now gone and airports have recovered. So we are simply 
suggesting that Congress let the sunset, which you put in the 
provision in the first place, go ahead and occur.
    Mr. Hall. Okay. The last question would be, well, there are 
two parts to this. Why has the FAA proposed to eliminate the 
reliever airport setaside? And also, the new tiered approach to 
non-primary entitlements which handle funding to the bigger 
small airports, I was curious if you could let me know either 
now or later in detail specifically how that would affect 
airports like Stewart International Airport which is in my 
District.
    Mr. Shaffer. Sir, the reliever setaside is presently two-
thirds of 1 percent of the discretionary account on an annual 
basis. That translates into about $5 million a year. In 
actuality, we spend something in excess of $22 million every 
year on reliever airports. So this is a classic example of a 
true accounting exercise. The setaside really has been overcome 
by our actual commitment to assisting those airports. So we 
think that the setaside is no longer necessary.
    I don't know where Stewart falls out. I am very familiar 
with that airport, having flown in there many times when it was 
still an Air Force base, but I will have to get the response to 
you on that. I don't know which tier you would fall in.
    Mr. Hall. Thank you. I appreciate it.
    I yield back. Thank you.
    Mr. Costello. [Presiding.] I thank the gentleman.
    The Chair at this time recognizes the gentlelady from 
Florida, Ms. Brown.
    Ms. Brown. Thank you, Mr. Chairman.
    Mr. Shaffer, I want to follow up with your discussion about 
the FAA proposes to eliminate the Military Airport Program. You 
all brought this program elimination up the last time, and it 
was my amendment that reinstated it. You indicated that it was 
for hangars and other things. What the communities use that for 
is for those runway expansions, and most communities cannot 
afford to keep it up. But after 9/11, the military continued to 
use those runways in those communities, even though BRAC had 
done away with the major portion of what they were for.
    So I don't understand. Do you not talk to the military?
    Mr. Shaffer. Actually, Congresswoman, we consult with them 
directly and often. Let me clarify what I said earlier just so 
everybody understands. We are not eliminating the program. The 
criteria for entrants and participation in the Military Airport 
Program will remain on the books for airports that want to go 
through that program. All we are suggesting is that the number 
of airports that now would be eligible is so small that FE
    Ms. Brown. What is it? About six? Is it about six a year, I 
think.
    Mr. Shaffer. That sounds about right, ma'am.
    Ms. Brown. Well, that is what it was before.
    Mr. Shaffer. Well, I understand what you are saying. We are 
simply saying that we have the money to put those airports 
through the system, but that number continues to decline. Six 
may not be exactly right currently, but it is a single digit 
number. So the setaside as a financial matter really doesn't 
have----
    Ms. Brown. Maybe we can talk and work on some additional 
language so that I can be assured that it will be available for 
those communities that want to continue these programs, in 
conjunction with the military.
    Mr. Shaffer. I would be happy to do that.
    Ms. Brown. Okay. My next question, the FAA proposes 
changing the Federal share of airfield payment and 
rehabilitation projects for runways and taxiways at large and 
medium hub airports from 75 percent to 50 percent. How are the 
airports going to finance these significant increases 
particularly given the additional security issues that the 
airports have had to step up to the plate with?
    Mr. Shaffer. The obligation to maintain the airfield that 
is paid for in part by the Federal Government has always 
resided with the airport owners and operators, Congresswoman. 
Our proposal to adjust the level of participation on 
rehabilitation going forward is in part a recognition of that 
preexisting obligation on the part of the airport owner and 
operator, but likewise, a recognition on our part that that is 
still an asset in the national system of airports, so the 
Federal Government should continue to have an investment in 
that.
    I recognize exactly what you are saying with regard to the 
security burdens that have been placed on the airports. For 
example, in our proposal in-line EDS systems would be an 
exception, if you will, compared to prior practice, where even 
if an EDS system was being built for a sole user, just one 
airline, that would still be eligible for Federal participation 
because as you point out there are big dollars involved, and of 
course it is a critical priority. It is safety, security, which 
one of them is first?
    Ms. Brown. It is there together.
    Mr. Shaffer. They are together.
    Ms. Brown. They are twin babies. Would anybody else like to 
respond to that?
    Mr. Principato. I think the point about security is a good 
one for two reasons. As we talked about before, airports have 
been called upon to do more in the security area, and this is 
obviously a national and homeland security issue. And also, as 
we talked about the cost of building capital projects at 
airports and so forth, even construction costs, inflation 
understates it because there is a whole security component to 
that project you have to provide for that security. So I am 
glad you brought that up. We really start from the proposition, 
as has been said before by both Mr. Barclay and myself, that 
capital needs are going up. Everybody recognizes that, and so 
we start from the proposition that we should be increasing 
resources rather than decreasing them.
    Ms. Brown. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Costello. I thank the gentlelady.
    The Chairman at this time recognizes the gentleman from 
Florida, Mr. Buchanan.
    Mr. Buchanan. Thank you, Mr. Chairman.
    Mr. Shaffer, what impact would the Administration's 
proposed increase in the AIP discretionary $520 million have on 
the various airport communities? Where is that money going to 
be primarily spent? Or where would it be used?
    Mr. Shaffer. Sir, it will be spent on safety, security, 
capacity, those high priority projects that the smaller 
airports will be confronted with, given the advent of the 
various different types of transportation that I have already 
enumerated. We need to get out in front of that, if you will, 
and that has a benefit for the rest of the system as well 
because if we can put the very light jets, the air taxis and 
transportation modes like that at the smaller airports, that 
helps relieve congestion on the large and medium hubs.
    Mr. Buchanan. Okay.
    Mr. Dillingham, and I know you have said it a couple of 
times in your presentation here, how do you define small and 
large airports?
    Mr. Dillingham. We consider medium and large hubs as larger 
airports. And the smaller airports were the small hubs and 
below. I think Mr. Shaffer has the exact number of 
enplanements, the technical definition of them, if you would.
    Mr. Buchanan. In our community, I am looking at Sarasota, 
and I have Tampa, which I know is a large airport, and Atlanta 
is a big airport. But is Sarasota considered a small airport in 
your definition? Or would you know that?
    Mr. Shaffer. Yes. It is a small hub, I believe, sir.
    Mr. Buchanan. Okay. And just in the way of history, I am 
new to the committee, too. The PFCs, there has been a lot of 
discussion about increasing that. But why do we look at that 
just strictly as an option for large airports, or the top seven 
or eight airports? And why isn't that an option for little 
smaller airports if they felt that they needed that capability 
or something?
    Mr. Barclay. Congressman, if I could answer that. One of 
the important values of PFCs is you don't have to just spend 
them as you collect them. You can use them to back bonds. So 
even at an airport the size of Sarasota, if they have projects 
that are bondable, they get leverage off the PFC revenues that 
they collect, and they can use them together with other 
revenues to back bonds.
    Mr. Principato. If I can just add to that, that really 
makes them the most effective, efficient, flexible financing 
mechanism for these kind of projects. Not all airports have 
gone to $4.50. I think 25 percent of medium and large hubs are 
still at $3.00. They don't have a PFC; 35 percent of small hubs 
have not gone to $4.50, but 65 percent have gone there. If we 
do convince you to raise the PFC ceiling up to $7.50, as has 
been said before, not all airports will go to $7.50. Airports 
in communities can have flexibility within that to really set 
their own rate and plan their own capital projects. It works 
for airports of all sizes.
    Mr. Buchanan. But you talked about the growth in terms of 
passengers in the next decade or so, and everybody believes 
that it could be very much a reality. Do you think $7.50 makes 
sense? I know you touched on that as well, that that is 
something that we should consider?
    Mr. Principato. I think the $7.50, the argument we have 
made is that $7.50, if you apply construction costs and 
inflation to the $4.50 PFC, that would be almost $7.50 in 2008, 
the first year of this authorization. So we didn't pick the 
number really out of the air. We analyzed it and came up with 
that number.
    If I might offer one small idea, there has been some fear 
that all airports may go to $7.50 and some folks, the airlines 
and others, multiply it out and say it will be $2 billion or $3 
billion, whatever. If you put a set of rungs in there, maybe in 
25 percent increments, airports in communities would have the 
flexibility to maybe do a $5.50 or $5.75, whatever works for 
that community. It is a very flexible tool that really gets you 
much more than a dollar's worth of value.
    Mr. Buchanan. Once last comment for just any of the panel 
members. I look in our community. Tampa is our largest airport 
by far, but we have three or four other airports around it that 
have a lot more capacity, but yet we are looking to do a 
massive expansion in the one airport. Why is that? Why do we 
have airports that are under-utilized in the surrounding area? 
In our area, and I am sure it is in different areas of the 
country, but yet we keep plowing the money into the major 
airport that is there. Is it just because that is where people 
want to go, or the marketing? What drives that? Because we have 
other airports that could probably do five, ten times the 
business they are doing, but yet we keep expanding. I am all 
for Tampa Airport getting bigger, but I just want to understand 
the rationale.
    Mr. Barclay. You have seen very strong growth at the 
airports surrounding Tampa, in addition to Tampa's growth. At 
airports, part of the challenge is you want to meet the 
marketplace demand, so people obviously want to keep going to 
Tampa. Our job is to build out the capacity there to meet that 
demand, but also make sure it is available. Because we have a 
seven to ten year time horizon, we want Sarasota to have the 
capacity to pick up more AirTran service, more other kinds of 
new services when Tampa is not the right market for them.
    We need to build out as much capacity in this Country as we 
can. A lot of us who have been around Washington for a while 
remember when Dulles was described as a white elephant. More 
capacity then was needed, and today it is one of the most 
valuable resources on the whole East Coast.
    Mr. Buchanan. I wasn't just thinking of Sarasota. I was 
thinking of St. Pete-Clearwater. Those other airports have a 
lot more capability.
    I thank you. My time is up. I yield back.
    Mr. Costello. I thank the gentleman.
    The Chair has just a few questions, and then we will move 
on to the second panel.
    Mr. Barclay, let me ask you. You heard me mention in my 
opening statement my concern about the Administration's 
proposal to replace the small airport fund with a small airport 
setaside program. I wonder if you would comment. Are you 
supportive of the Administration's proposal?
    Mr. Barclay. We are not, Mr. Chairman. First of all, it is 
much less money in the Administration's proposal. And second, 
on the philosophy, we think there is an advantage to continuing 
to tie together the interests of large and small airports in 
the PFC Program. The entitlements that are given up there go to 
the small airport fund. That has been a reason why all airports 
in a network system see an advantage to the two different kinds 
of funding. So our inclination is to continue to support the 
small airport fund and continue to build that.
    The Administration plan would mandatorily take the large 
and medium hub airports out of the entitlement program. We see 
an advantage to continuing to let them elect whether they get 
out of that or stay in AIP or increase the PFC.
    Mr. Costello. So you clearly are opposed to the 
Administration's proposal.
    Mr. Barclay. We agree with the Chairman.
    Mr. Costello. Dr. Dillingham, let me ask you again 
concerning small airports and the Administration's proposal. 
How would small airports compete for discretionary funds under 
the Administration's proposal?
    Mr. Dillingham. Small airports would compete in the same 
way that large airports compete, basically on the criteria by 
which discretionary funds are allocated in terms of safety and 
capacity and environment and security. However, large airports, 
their scores are higher for those same projects. Large airports 
tend to have more of those projects. The bottom line is, small 
airports will be disadvantaged.
    Mr. Costello. So there is no question there would be 
winners and losers?
    Mr. Dillingham. Absolutely.
    Mr. Costello. Very good.
    Last question, Mr. Barclay. As you know, the 
Administration's proposal calls for increasing the fuel tax 
both on commercial and general aviation. At least part of the 
revenue would fund the AIP Program, research and development, 
and the EAS Program. I wonder if you would comment, does it 
really matter where the source of the revenue comes from to the 
AIP Fund? If so, why?
    Mr. Barclay. It does, Mr. Chairman. We would not agree 
philosophically with the notion that AIP should be funded out 
of one very narrow set of taxes mostly on one part of the 
industry, general aviation. We think that all of the users of 
the system get a benefit out of airport capacity and what we 
fund in AIP, and we should continue that kind of broader base 
of funding.
    Mr. Costello. I thank you.
    The Chair thanks all of the witnesses on the first panel 
for being here today.
    I would recognize Mr. Petri for any comment that he might 
have.
    Mr. Petri. Our colleague, Mr. Coble is hurrying over 
because he had a question. There he is. Mr. Coble had a 
question. You go ahead and ask it. I don't know what it is.
    Mr. Costello. We are holding the whole show up for you.
    Mr. Petri. Go to a microphone. Here it is.
    Mr. Coble. First of all, Mr. Chairman, I apologize to you 
and the Ranking Member and all in the room. We had a Judiciary 
markup and I couldn't get away. I am not even sure whether my 
question has been asked or not, but let me go into this.
    Mr. Shaffer, if I may?
    Mr. Shaffer. Yes, sir.
    Mr. Coble. A number of general aviation airports in my 
District are dependent upon the dollars from the AIP, the 
Airport Improvement Program, to meet market demands and make 
necessary upgrades. Would you elaborate for me, if you would, 
how the proposed tiered system would be more effective than the 
current entitlement-based system? And what, if any, reaction 
have you received from the airports that may be adversely 
affected by these changes?
    Mr. Shaffer. Sir, the tiered system that we have proposed 
is a recognition of the fact that not all general aviation 
airports are created equal. There is a broad range of 
operational levels, some have very simple airfields, others 
very complex airfields. They have different levels of need on 
an annual basis and on a long-term basis.
    So our tiered proposal is our best effort to allocate the 
funds where they are most needed to meet oncoming safety, 
capacity, and security projects amongst these airports.
    With regard to the reaction that we have received, it will 
come as no surprise to anyone that those that are in the lower 
tier, the nine or fewer based aircraft, are not very happy 
about that because no one likes to lose something that they 
already have. But as I pointed out in my earlier testimony, for 
the last, and this is just one example, over the last four 
years, there are 114 of these airports across the Country that 
have qualified for a non-primary entitlement, but have not 
taken a grant for four years.
    We can only conclude from that that they simply did not 
have a need for the money during those years. That is not to 
say that they won't eventually have a need, because they 
certainly will. It is just that they don't need it year after 
year after year.
    What we are proposing positions us to meet their 
intermittent demands, for example, every 10 or 15 years, 
whatever it works out to be, if they need to overlay a runway 
or expand a ramp or whatever the project happens to be, we will 
be in a position financially to pay for that project from the 
Federal side just like we always have.
    Mr. Coble. I would like to talk to you in more detail about 
this.
    Dr. Dillingham, good to have you back up here.
    Mr. Chairman and the distinguished gentlemen from Illinois 
and Wisconsin, we are all subjective. That is to say, I am 
hoping that my airports will be beneficiaries of good things to 
come. I think I speak for all of us up here. We are that 
parochial and we are that selfish about our places back home.
    I had good folks in my office last week. Two were from my 
counties. A third was not. And I said to the third one, I am 
going to treat these other two better than we will treat you. 
He said, well, all 100 counties are important to me. I said, 
six counties are important to me. We are guilty of that.
    Mr. Chairman, thank you, and Mr. Petri. I apologize again 
for my belated arrival.
    Mr. Costello. I thank the gentleman.
    The Chair would recognize another Member who came in after 
a markup. This will be the final round of questions for this 
panel.
    The gentleman from Illinois, Mr. Lipinski, is recognized.
    Mr. Lipinski. Thank you, Mr. Chairman.
    Just helping take care of those things in the Science 
Committee, the Chair there, and was not able to do, chairing 
this panel here this morning.
    I just wanted to really go down a general road here, 
looking at PFCs. I certainly think PFCs are an important piece 
of the funding for necessary capital improvements at airports. 
But now we are looking at expanding PFCs, increasing the amount 
that can be charged for PFCs. So I just wanted to take a step 
back, first of all, and ask you what types of capital 
improvements are being funded right now, and then take a step 
forward, are there improvements that are not being done right 
now at the airports that you believe that the PFCs need to be 
expanded in order to cover these types of improvements, or 
further capital improvements?
    I just want to throw that question out there because I 
think we really need to look at, when we are talking about 
increasing PFCs, what are they being used for and what more do 
you think they should be used for with this increase.
    Whoever wants to start out.
    Mr. Principato. Well, I think the part of your question 
about the expansion of the eligibility. What we are really 
looking for is for the $4.50 PFC to be made whole against 
construction cost inflation because after all, we are not 
buying a loaf of bread with it. We are buying construction with 
it. Construction costs have soared. There is a table in my 
testimony that talks about that.
    Certainly, major runway and airfield projects are being 
funded by PFCs. The Atlanta runway, 55 percent of that runway 
was by PFCs. It increased their arrival rate from 88 flights an 
hour to 117 just in the last year since that runway was opened, 
just huge capacity benefits. I told the Chairman the story 
yesterday. My wife flew to Bloomington, Illinois just south of 
where you are from, through Atlanta, and everything was just 
right on time and worked really well. So Bloomington was 
benefitting from that project. The St. Louis runway, 59 percent 
was PFC.
    Again, a lot of PFC dollars are going into terminal 
projects as well because once the plane lands, you need to 
place to bring the people and take them of. In Charleston, West 
Virginia, they put PFCs into an expansion of the runway safety 
area. It is a smaller airport, but they also added four gates 
and a hold room so they could handle the additional flights 
that that smaller community is being able to generate.
    So it has really been a wonderful tool for airports of all 
sizes.
    Mr. Barclay. When we talk about the passengers increasing 
by 50 percent or adding 300 million passengers to the system by 
2015, 90 percent of those passengers are at the large and 
medium hub airports. The top 80 airports have 90 percent of 
those passengers. They are the most reliant on passenger 
facility charge increases to meet that growing demand.
    So you have two issues involved. One is should you expand 
eligibility for PFCs. We have a split opinion among our members 
as to whether or not you should expand eligibility. We have 
unanimity among the members that we have to increase that level 
if we are going to meet the demand coming for new facilities at 
airports.
    Mr. Dillingham. Mr. Lipinski, I take it from a slightly 
different angle. We don't have any disagreement with the fact 
that construction costs have increased and that there should be 
some consideration of raising the cap on PFC. However, we would 
caution that when you look at changing what is eligible for 
PFC, when you look at indexing PFCs, we would just caution that 
there should be due consideration for congressional oversight 
and accountability when we look at those aspects of it.
    Mr. Principato. On the expansion of the eligibility, as Mr. 
Barclay mentioned, there are some different views, but 
particularly the smaller airports, and both our memberships are 
very interested in seeing if we can work something out here to 
expand eligibility. They have less ability to go to the capital 
markets, and some projects that are not now eligible are really 
an important way to raise revenue for their capital program. So 
some of the smaller airports are interested in the eligibility 
expansion issue. I think as we go through this, perhaps we 
could work together on seeing if there is a way to help them.
    Mr. Lipinski. Dr. Dillingham, could you just briefly expand 
on your thoughts on increased congressional oversight?
    Mr. Dillingham. Well, for example, if you index PFCs, it 
could mean that that airports and/or FAA does not have to come 
back to Congress on an annual basis or reauthorization basis 
for raising the PFC. Also, if the eligibility for PFCs is 
expanded, it is quite possible that PFCs will be spent for 
things that could be financed from the private sector market.
    Again, Congress's role is to sort of set the criteria by 
which PFC-eligible projects are identified.
    Mr. Lipinski. Thank you.
    Thank you, Mr. Chairman.
    Mr. Costello. I thank the gentleman from Illinois.
    Again, we would like to thank each of our panelists on the 
first panel for your thoughtful testimony. We look forward to 
your continued input as we go forward with the reauthorization. 
So thank you very much.
    At this time, the Chair would invite the second panel to 
come forward please. As they are coming forward, I would like 
to introduce them and yield to some of my colleagues to make an 
introduction as well.
    The first panelist on the second panel will be Mr. James E. 
Bennett, President and CEO of the Metropolitan Washington 
Airports Authority; the Honorable Nuria Fernandez, the 
Commissioner of Aviation in the City of Chicago; Ms. Elaine 
Roberts, President and CEO of the Columbus Regional Airport 
Authority; Mr. John Clark, the Executive Director at the 
Jacksonville Aviation Authority.
    I would yield at this time to my friend from Florida, Mr. 
Buchanan, to introduce a witness from his area.
    Mr. Buchanan. Thank you, Mr. Chairman.
    I want to take a moment to introduce Rick Piccolo. Rick is 
the President and CEO of the Sarasota-Bradenton Airport, which 
sits right in the middle of our two counties, two of the bigger 
counties I represent.
    Rick is also the Chairman of the Airport Council 
International-North America. We are proud of that, Rick. Rick 
and I have had an opportunity to work together for probably six 
to eight years for economic development. We talk a lot about 
airport issues because I have also been in the aviation 
business.
    So I want to thank the Chairman of the Council. We are 
proud of that, for taking his time to come to the committee 
today. I look forward to hearing about your testimony.
    Thank you, Mr. Chairman.
    Mr. Costello. I thank the gentlemen from Florida.
    Next, I would introduce Ms. Karen Ramsdell, who is the 
Airport Director, Santa Barbara Municipal Airport; Mr. Doug 
Kimmel, who is the Airport Manager from the Williamson County 
Regional Airport in the southern part of my congressional 
District. Mr. Kimmel, we are pleased to have you here to offer 
your testimony. Mr. Kimmel is a graduate of the Southern 
Illinois University. The President of that university is a 
former colleague of ours, and was on the Transportation 
Committee and on this Subcommittee. So we welcome you here 
today and we look forward to your testimony.
    The Chair would now yield to my friend from Oregon to 
introduce a witness from Oregon.
    Mr. DeFazio. Thank you, Mr. Chairman.
    I want to thank the next witness for making the long trip. 
He even had one more leg than I have, and it is as far away 
from Washington as you can get, which is often a blessing.
    So Mr. Gary LeTellier, who is the Executive Director for 
the Coos County Airport District at Southwest Oregon Regional 
Airport. We have renamed it, so I had to read that. I am not 
quite up on the name yet. He comes to Oregon with extraordinary 
experience in major airports. He has a professional education 
in aviation from Embry-Riddle and a master's from the 
University of Washington. He flew with United Airlines. He was 
a military aviator. I don't think you could have a broader 
experience. And Gary might not agree with this, but I am going 
to say that in a way, you look at his past experience and you 
wonder how did he end up in Coos Bay? And I would say it has to 
do with the water. It is on the Pacific Ocean. It is a 
beautiful, beautiful community. I think Gary chose to move 
there when he could have had what would be considered by many, 
not those of us from Oregon, but others, much more prestigious 
positions in major urban areas around the country, but he has 
chosen to honor us with his work. I really appreciate you being 
here today.
    I do have to say, Mr. Chairman, I have a markup in Homeland 
Security and also a hearing in Resources. I am going to have to 
absent myself at this time, but I leave it in your able hands.
    Mr. Costello. We trust that our friend from Oregon will 
protect the interests of this committee.
    Mr. DeFazio. There are a few aviation issues that we will 
be discussing in the markup.
    Mr. Costello. We thank you.
    The Chair now recognizes Ms. Brown from Florida to 
introduce a witness from Florida.
    Ms. Brown. Thank you. I want to thank you again for holding 
this hearing.
    I want to take a moment to introduce Mr. John Clark, one of 
today's distinguished panelists, who is from my home town of 
Jacksonville, Florida. He is a life-long aviation professional 
and is currently the Executive Director and CEO of the 
Jacksonville Aviation Authority, which includes Jacksonville 
International, two general aviation airports, and a former 
military airport that is being transitioned to civilian use. In 
2006, the airport handled over 6 million passengers and 140 
million pounds of air cargo. John is a past board member of the 
American Association of Airport Executives and is currently the 
Secretary Treasurer of the Airport Council International Board. 
Prior to his time in Jacksonville, he was Detroit Airport 
Director and held management positions in Sacramento.
    John will testify about the tremendous population growth in 
our area and the anticipated need for nearly $500 million in 
capital programs over the next 10 years. This can only be done 
by reauthorizing and enhancing the Airport Improvement Program 
and providing all our airports with the funding they need to 
continue to serve the flying public in a safe and efficient 
manner.
    With this, I want to welcome John Clark and the other 
distinguished panelists to today's hearing. I am looking 
forward to hearing your ideas on strengthening the Airport 
Improvement Program.
    Thank you.
    Mr. Costello. The Chair now recognizes the gentleman from 
Colorado, Mr. Salazar, to introduce a witness who will be 
actually on the third panel.
    Mr. Salazar?
    Mr. Salazar. Thank you, Mr. Costello, and thank you for 
indulging me.
    It is my honor today to introduce someone who is from 
Colorado and has been with the Colorado Department of 
Transportation for over 15 years. He worked under both the 
Democratic and Republican Administrations in Colorado. It is my 
honor today to introduce Travis Vallin who has been the 
Director of the Colorado Division of Aeronautics for 10 years 
in the State of Colorado. He is now the current Chairman of the 
National Association of State Aviation Officials. Although he 
is on the third panel, and I apologize Mr. Chairman because I 
have to run off to another committee hearing, Travis, welcome.
    Mr. Costello. I thank the gentleman from Colorado.
    Let me announce to everyone that we expect to have four 
votes on the floor of the House right at 12:30. What we intend 
to do is when we get down to about five minutes, we will 
recess, go to the floor, vote and we will come back 
immediately, which should be about approximately 30 minutes 
from the time that we recess. So I will just put you on notice 
that we will be coming right back.
    The Chair recognizes, and again as you can see, we have 
eight witnesses on this panel. We have your written statements. 
I can tell you that I sat up late last night and early this 
morning reading some of the testimony. So we would ask you to 
summarize your written statement in five minutes or less.
    The Chair recognizes at this time Mr. Bennett.

TESTIMONY OF JAMES E. BENNETT, PRESIDENT AND CEO, METROPOLITAN 
     WASHINGTON AIRPORTS AUTHORITY; THE HONORABLE NURIA I. 
 FERNANDEZ, COMMISSIONER OF AVIATION, CITY OF CHICAGO; ELAINE 
 ROBERTS, A.A.E., PRESIDENT AND CEO, COLUMBUS REGIONAL AIRPORT 
    AUTHORITY; JOHN CLARK, EXECUTIVE DIRECTOR, JACKSONVILLE 
 AVIATION AUTHORITY; FREDERICK J. PICCOLO, PRESIDENT AND CHIEF 
 EXECUTIVE OFFICER, SARASOTA MANATEE AIRPORT AUTHORITY; KAREN 
 RAMSDELL, AIRPORT DIRECTOR, SANTA BARBARA MUNICIPAL AIRPORT; 
  DOUGLAS KIMMEL, AIRPORT MANAGER, WILLIAMSON COUNTY REGIONAL 
 AIRPORT; GARY W. LETELLIER, AIRPORT MANAGER, SOUTHWEST OREGON 
                        REGIONAL AIRPORT

    Mr. Bennett. Chairman Costello, Ranking Member Petri and 
Members of the Aviation Subcommittee, on behalf of the 
Metropolitan Washington Airports Authority I want to thank you 
for inviting me to testify today.
    I am President and Chief Executive Officer of the Airports 
Authority, the operators of Ronald Reagan Washington National 
Airport and Washington Dulles International Airport. In 
addition, I wear a hat today as Chair of the Airport 
Legislative Alliance Policy Roundtable. The ALA is comprised of 
119 airports large and small located throughout the United 
States.
    I had the privilege of attending FAA's annual forecasting 
conference here in Washington, D.C. just the other day. Among 
the distinguished speakers was FAA Administrator Marion Blakey. 
In the course of her remarks, she reminded the 600 assembled 
guests that Washington Dulles International was going to be one 
of the fastest growing commercial airports in the United States 
between 2006 and 2020, with a projected growth in aircraft 
operations of 68 percent, and a 112 percent growth rate in 
passenger enplanements.
    The Airports Authority utilizes quite effectively the two 
financing mechanisms that are part of the FAA reauthorization 
legislation before the Subcommittee, namely the AIP and PFC 
programs. Together, these financing tools are important 
components of our ability to expand and maintain the 
infrastructure to keep pace with the significant growth that 
Administrator Blakey referred to in her remarks.
    In that regard, any legislation or proposal that would 
affect either of these programs is of great interest not just 
to the Airports Authority, but to airports nationwide. The 
Airports Authority has a $7 billion capital construction 
program planned through 2016. The program is funded with $4.7 
billion in bonds, $1.7 billion in PFCs, and $600 million in AIP 
grants.
    In the execution of the current program, we are spending 
roughly $2 million per day on construction and related services 
at Dulles Airport. We agree with the Administration's 
recommendation to increase the AIP discretionary fund to $520 
million to meet the need of letters of intent.
    LOIs are important financing tools for airports. As a 
matter of fact, in 2006, the Airports Authority received a $200 
million letter of intent from the FAA to fund the construction 
of our much-needed fourth runway at Dulles, which we plan to 
open in October of 2008. This LOI represents approximately 56 
percent of a total project cost of $357 million. By having this 
LOI available, we are able to construct this much-needed 
capacity enhancement to the airport in a cost-effective manner.
    Of equal importance to the Airports Authority is the issue 
of passenger facility charges and the proposal to increase 
them. Since PFCs were authorized by Congress in 1990, they have 
become the second largest source of financing infrastructure at 
the Airports Authority, following only behind bonds. PFCs have 
not kept pace with the rate of construction inflation. Most 
airports have committed their PFC authority well into the 
future. For example, at Dulles our PFC authority is used 
through the year 2017. PFCs originally authorized airports to 
collect a maximum of $3 per enplanement. This increased to 
$4.50 in 2001. However, because of the inflation and the 
increased cost of construction, PFCs do not have the buying 
power that Congress authorized. Today, they should be 
increased.
    I support the Administration's proposal to increase the PFC 
to a level of $7.50 in lieu of $6.00 per enplanement, which has 
been proposed by the FAA. At the $7.50 rate, the construction 
buying power of the PFC will return to about the same rate as 
when it was authorized at the $4.50 level in 2001. To further 
prevent the erosion of the buying power of the PFC, we believe 
that it should be indexed to construction inflation.
    I also would like to, in the interest of time, speak very 
briefly about bonds sold through the capital markets. We 
believe that bonds sold through the capital markets should be 
classified as public bonds, and not subject to the alternative 
minimum tax. Because most airport bonds are considered private 
activity, they are subject to the AMT and the penalty of the 
AMT is between 20 and 30 basis points on each of our bond 
sales, which amounts to about, we have over $4 billion in debt. 
That AMT penalty adds nearly $10 million annually to our 
airline rates and charges at the two airports.
    Chairman Costello, Ranking Member Petri, thank you again 
for inviting me here to testify.
    Mr. Costello. We thank you, Mr. Bennett.
    Commissioner Fernandez?
    Ms. Fernandez. Good afternoon, Chairman Costello, Ranking 
Member Petri, and the honorable and distinguished Members of 
this committee. On behalf of the City of Chicago, its 3 million 
residents, our two airports, I want to thank you for the 
opportunity to present our views on this very important 
reauthorization proposal.
    As a large airport hub, we are facing some very significant 
challenges as it relates to upgrading, and we are not alone. 
All the other large airport hubs are in the same place that we 
are. What we foresee is that in the coming years, it will take 
billions of dollars to maintain vital infrastructure and 
billions more to increase capacity. If you add the FAA's need 
to modernize the air traffic control system, you will see that 
a very robust and dependable funding for the air transportation 
network is an urgent national priority.
    Airport financing is the key element to meeting the needs 
of growing demand for air travel. The FAA has projected, as has 
been mentioned here, that air traffic will reach 1 billion 
enplanements per year, 300 million additional enplanements by 
2015. Moreover, FAA's forecast for O'Hare International is 
expected to increase in traffic from 37 million enplanements 
that we experienced in 2006, to 53 million in 2020. Similarly, 
Midway International Airport anticipates increase from 8.9 
million to 16.3 million. That is a significant increase.
    Without adequate financing for capacity-increasing 
projects, it will be very difficult for our airports to safely 
and securely accommodate the substantial growth in air traffic. 
So therefore, the ability of airports to find a reliable source 
for their capital is going to continue to be critical for the 
future of aviation.
    I want to thank this committee for its support of the 
O'Hare modernization program, which is a prime example of how 
crucial the different funding sources are now and they are 
being used to finance capacity enhancements at airports. Over 
35 percent of the funding for phase one of the OMP is comprised 
of AIP grants and PFC funding. As we work towards the phase two 
of this very important program, AIP and PFC will play a 
significant role in funding the completion of the modernization 
of our airports.
    First, I would like to discuss the importance of the PFC 
provision in the reauthorization proposal. We believe that the 
FAA's decision to increase the cap to $6.00 is a step in the 
right direction, but it does not go far enough. We recommend 
that Congress set the PFC cap at $7.50 and index it to 
inflation, because the effects of the inflation have diminished 
the power of current PFC levels to adequately finance airport 
construction projects.
    Additionally, we note that the increasing PFC cap is merely 
that, a ceiling. It does not require airports to adopt the 
$7.50 PFC, but rather it gives airports the flexibility to 
select the level that best addresses their needs. Market 
principles, we believe, and agreements with airlines will 
determine the level of PFC that their passengers are willing to 
absorb.
    We appreciate the fact that FAA was receptive to the 
airport's concerns at the existing PFC application process, 
which was overly bureaucratic and burdensome. Their proposal 
for new measures will help streamline the PFC process and get 
us the dollars quicker.
    Second, a balanced capital investment strategy for airports 
requires a strong AIP program. AIP is important to airports of 
all sizes, and we are encouraged that there was an increase 
included in the AIP discretionary account, and that all 
existing AIP letter of intent commitments will continue to be 
honored.
    For large airports, a robust AIP discretionary program is 
critical. These funds are being used by airports for very 
important safety, security, expansion programs for capacity, 
and more important, to address some of the environmental needs 
of our airports, as we continue to strike the right balance 
between the airport and its compatibility with the surrounding 
community.
    I would like to just once again thank the committee for 
this opportunity to come before you and express our gratitude 
for all the important work that you have done, as we continue 
as a large hub, and all airports in this Nation, to look for 
funding sources and the flexibility that we need to continue to 
be implementing safety and security to the aviation industry.
    Thank you.
    Mr. Costello. We thank you for your testimony, Commissioner 
Fernandez. I would note that the Administrator and I both came 
to Chicago not too long ago and had a briefing on the O'Hare 
modernization, as well as the proposal to privatize Midway 
Airport, which of course I have expressed some concerns about. 
But let me say that both the Administrator and I were impressed 
with how well the project is going as far as the expansion of 
O'Hare.
    The Chair recognizes Ms. Roberts at this time.
    Ms. Roberts. Thank you, Chairman Costello, Ranking Member 
Petri, and Members of the House Transportation and 
Infrastructure Subcommittee on Aviation. Thank you for inviting 
me to participate in this hearing on the Administration's 
proposal to reauthorize the Federal Aviation Administration's 
Aviation Improvement Program.
    As the CEO for the Columbus Regional Airport Authority, I 
am also wearing a second hat today. I am the Chairperson of the 
American Association of Airport Executives this year.
    Just briefly, we operate three airports, all different 
sizes, with unique roles. Port Columbus is our passenger, 
commercial airport, a medium hub. Rickenbacker is a cargo 
airport, also jointly used with the military. And Bolton Field 
is a general aviation airport. The latter two are relievers to 
Port Columbus.
    You have heard the forecast for continuing growth in our 
industry. We have seen similar growth in Columbus over the last 
few years. Not only have we rebounded from the impacts of 9/11, 
but even more significantly, we suffered a 25 percent reduction 
in all of our scheduled departures just in mid 2003 by America 
West, when they closed their small hub in Columbus. We have 
fully rebounded now from that cutback as well, and have had 
record passenger growth in four of the last five months.
    Traffic for the first two months of this year is also up 
over 10 percent, and projected to continue to climb, largely 
due to new air service being brought to our market. Southwest 
has also continued to grow and became our largest airline last 
year and grew 18 percent in terms of passenger growth.
    Our cargo traffic has also been up significantly at 
Rickenbacker. We saw a 20 percent increase in cargo tonnage in 
December, and ended the year with over 250 million pounds of 
cargo, as well as over 37 percent more landed weight. Our 
general aviation airport has over 110 based aircraft and has 
also seen steady growth in terms of operations.
    All of this just means that we have an increased demand for 
continued infrastructure development at our airports. We have a 
$1.2 billion capital program for the next 12 years in Columbus 
for our airports. Due to rising construction costs and the rate 
of inflation, we also are not convinced that the current 
resources we have are adequate to cover this program. We ask 
your help in helping secure more resources to accommodate that 
increasing demand as costs are also rising.
    I also appreciate the fact that the Administration has 
proposed to increase PFCs to $6.00, but would urge you to 
consider increasing it further to the $7.50 rate that you have 
heard a lot about this morning. Also, by increasing AIP funding 
to at least $3.8 billion for fiscal year 2008, we think those 
two primary funding sources will help airports of all sizes. 
Although we are a medium hub airport in terms of Port Columbus, 
and we are not totally reliant on the AIP funding, we are still 
looking to receive over $110 million of AIP funds for a 
proposed new runway that is currently in the EIS process. We 
are looking to have about one-fourth of that runway project 
covered by PFCs and the remainder we would have to go out and 
issue new debt and pass on the cost to the airlines.
    AIP funds are also critical for us at Rickenbacker in 
particular. It is in the Military Airport Program and has 
significant capital needs, including $15 million to 
rehabilitate one of our 12,000 foot runways. The airport is not 
self-sufficient yet, due largely to the large investment 
required in infrastructure.
    One-fourth of our entire capital program for the next 10 
years is projected to be paid for with PFCs. So a $7.50 PFC is 
really important to our long-range requirements. It would 
generate about $10 million per year right now at our current 
level of enplanements, which is around 3.4 million enplanements 
per year.
    We have used PFCs, like many airports, largely for airside 
capacity projects, extending runways, airfield improvements, as 
well as about 10 years ago, adding some gates to our terminal 
for needed capacity.
    In summary, although over half of our capital program will 
be paid for with airport-generated funds like parking revenues 
and concession fees and issuing new airport revenue bonds, AIP 
funding and PFCs are essential for us to be able to operate all 
three of our airports and keep up with the growing demand for 
infrastructure.
    I thank you again for the opportunity to be here today. I 
hope you will continue to provide airports of all sizes in this 
Country with the tools that we need to be able to keep up with 
the increasing demand and to help offset the rising cost of 
construction.
    Thank you very much.
    Mr. Costello. We thank you, Ms. Roberts.
    The Chair now recognizes Mr. Clark.
    Mr. Clark. Thank you, Mr. Chairman and Congressman Petri 
and Members of the committee.
    I represent Jacksonville Aviation Authority. It is a system 
that has four airports, the primary airport being Jacksonville 
International Airport, which we saw 6 million passengers in 
2006.
    Since you have the written testimony, I would just like to 
take the opportunity to emphasize three points in my written 
testimony. That is in support of the increase of the passenger 
facility charge from $4.50 to $7.50. This has become very 
important to the Jacksonville Aviation Authority as we are 
faced, like other airports, with many capital demands. But the 
PFC allows a greater level of flexibility in being able to 
respond more timely than any other mechanism that we have at 
this point. So we highly encourage an increase of the PFC to 
$7.50 and more flexibility with that funding mechanism.
    Also, we would like to speak to the military assistance 
program. Having been in a community that was part of the BRAC 
process and bringing on an airport into our system that 
actually adds considerable capacity, the military assistance 
program has provided a level of funding which otherwise we 
would not have been able to move forward on the development of 
Cecil Field.
    To this day, Cecil Field is now in consideration for a 
commercial space port. It provides activity and capacity for 
air cargo, as well as maintenance and repair and overhaul. So 
we would like to extend and encourage this committee to 
consider the continuation of the military assistance program.
    Additionally, we rely on AIP funding and would encourage 
that the committee would consider levels that are at least of 
current authorization levels. To decrease it would only hurt 
our system and our ability to meet the capital needs of the 
airport system.
    Our final point, in trying to recognize the continuous 
demands on the need and infrastructure at the airports, we, 
too, are looking at the possibilities of privatization, and 
therefore would encourage in the Administration's proposal 
increasing the number of privatization opportunities. As we try 
to address in an innovative way the way we will provide funding 
and grow the system in Jacksonville, we have begun to look at 
the alternatives. One of those alternatives is airport 
privatization.
    Having spent several years now looking at the models, both 
in Europe and Australia and in Canada, we believe that there is 
opportunity here in the United States to consider airport 
privatization as the community continues to grow. Jacksonville 
happens to be one of the fastest growing communities in the 
Southeast, and therefore we are trying to determine what are 
the best ways that we can continue to fund our capital programs 
and meet the growing needs of our region.
    Mr. Chairman and Members of the Committee, I will end my 
remarks there.
    Thank you.
    Mr. Costello. Mr. Clark, thank you. I am pleased to hear 
that the Military Airport Program has worked for you. It was my 
first year in Congress and first year on this committee and 
Subcommittee that Congressman Henry Nowak and I offered the 
amendment that created the Military Airport Program. So we are 
pleased that it has worked for you.
    The Chair now recognizes Mr. Piccolo.
    Mr. Piccolo. Chairman Costello, Ranking Member Petri and 
Members of the committee, thank you for the opportunity to 
appear and speak to the issue of AIP.
    I would also like to thank Mr. Buchanan for your kind 
introduction.
    I appear today wearing two hats, first as Chairman of 
Airports Council International-North America. Our member 
airports enplane over 95 percent of the domestic and virtually 
all the international airline passengers and cargo traffic in 
North America. I also wear my hat as President and Chief 
Executive Officer of the Sarasota Bradenton International 
Airport, a small hub facility on the west coast of Florida.
    This year is critical for aviation in the United States. 
The expiration of the Federal Aviation Administration's 
programs, taxes and fees provides an historic opportunity to 
make needed changes that enhance and strengthen our national 
air transportation system for decades to come.
    Main Street and downtown were the centers of commerce and 
economic growth prior to the construction of our Interstate 
Highway System. When the Federal highway system linked our 
Country from coast to coast, economic expansion ensued that 
created a large middle class with increased educational and 
economic opportunity for millions of Americans.
    Airline deregulation and the creation of the computer have 
made the term ``global economy'' a part of our lexicon. The key 
component of our Country's ability to compete successfully in 
this global economy has been a robust and expanding aviation 
platform, not just from the major hubs like Atlanta, Chicago, 
New York and Los Angeles, but from smaller facilities that have 
made global markets accessible and cost-effective, places like 
Louisville, Kentucky; Greenville-Spartanburg; and Flint, 
Michigan, which are located near major automobile manufacturing 
facilities; or Rochester, Minnesota, home of the world's 
renowned Mayo Clinic; or wonderful tourism destinations like 
Palm Springs, California or Sarasota, Florida. These facilities 
provide critical access for our citizens and visitors.
    The FAA has taken some innovative first steps in their 
proposal and they are to be applauded for their effort. With 
that said, there are some areas of concern for smaller 
airports. The AIP funding source must be stable and 
predictable. We are concerned that dedicating just 
international arrival and departure taxes, along with some 
portion of gasoline taxes and general fund contributions, will 
lead to a very unstable funding source for AIP.
    Small and non-hub airports are much more dependent on this 
program for their capital funding needs. It would seem fair and 
prudent that whatever tax and fee program is devised should be 
used to fund all facets of the aviation system, rather than 
reserving specific parts of each program. This cross-financing 
of the system ensures that during difficult times, all sections 
must sacrifice equally.
    The Passenger Facility Charge ceiling should be raised to 
$7.50 and the application process must be streamlined and 
eligibility rules aligned with airport needs. The PFC program 
is a way for local communities to make direct decisions on how 
to build infrastructure and compete in the global marketplace. 
This increase in the flexibility for its use as the local 
governing body deems appropriate is a critical element in the 
future of our Nation's airports.
    The Small Community Air Service Development Program should 
be preserved, not eliminated, as proposed by the 
Administration. Sarasota Bradenton International Airport is a 
shining example of the success of the program. Before receiving 
that grant, the airport had lost 50 percent of its passenger 
traffic and was bleeding 1.6 million passengers annually to 
Tampa International. In 2005, SRQ received a grant of $1.5 
million that was used to attract a low-cost carrier, AirTran 
Airways, which started with three daily flights to two cities. 
In 2006, AirTran carried almost 400,000 passengers and provided 
nine daily departures to five nonstop destinations during peak 
season, and five daily departures to three nonstop destinations 
off season.
    SRQ has been one of the fastest growing airports in the 
Nation since that time, and the economic health of the airport 
and the community has been helped many times over by this 
investment. Not only did this result in increased ridership, 
but the introduction of low-cost service injected competitive 
pricing into the community.
    We all know that airlines have been pushing their prices 
higher in an effort to become profitable. At SRQ, the average 
fare increase from 2004 to 2006 is 15.5 percent. However, in 
markets where AirTran was introduced, fares have risen less 
than 1 percent over those two years. This has resulted in a 
saving of $17 million for our local consumers. In addition, the 
additional 400,000 passengers have additional economic impact 
on the community.
    Finally, small airports are feeders to larger facilities. 
They help feed the hubs and provide efficiency. If small 
airports fail or cannot remain competitive, those passengers 
must drive to larger facilities. In 2000, the Airport 
commissioned an environmental study that measured the effects 
of that bleed of 1.6 million passengers annually. It resulted 
in the following environmental impacts.
    There were 224 million miles of additional road travel; 
11.2 million additional gallons of fuel were consumed; and the 
added carbon dioxide in the air was 1.28 billion grams. There 
were 203 million additional grams of nitrous oxide, and 2.24 
million additional grams of particle matter. As you can see, 
these figures cover only one small airport. The support of the 
Nation's small and non-hub airports is not only good economic 
policy, but it is good environmental policy.
    On behalf of all our members, and small airports in 
particular, I want to thank you for the opportunity to comment 
and look forward to working with you to strengthen our national 
aviation system.
    Thank you, Mr. Chairman.
    Mr. Costello. Thank you, Mr. Piccolo.
    Ms. Ramsdell?
    Ms. Ramsdell. Chairman Costello, Ranking Member Petri, and 
Members of the House Transportation Infrastructure Subcommittee 
on Aviation, I thank you for inviting me to participate in this 
hearing today.
    Santa Barbara Municipal Airport is a small hub airport on 
the coast of California. Last year, the airport had over 
400,000 enplanements and ranked in the top quarter of non-
primary and primary commercial service airports in terms of 
enplanements.
    The FAA terminal area forecast projects a 45 percent 
increase in Santa Barbara enplanements by the year 2020. In 
2002, Santa Barbara completed its master plan after many years 
of environmental hurdles. The plan proposed some priority 
projects for our airfield. Two of the projects addressed runway 
incursions, and a project to extend the safety areas at each 
end of our main runway to meet current FAA standards.
    The plan proposed also a 67,000 square foot airline 
terminal project to meet current and future demand. Our ACIP 
for 2008 to 2012 totals $61 million. That is in contrast to the 
$71 million in entitlement and discretionary money that the 
airport received over the last 20 years.
    The airfield safety projects totaled $35 million. They will 
be completed this year, with our $15 million fiscal year 2007 
AIP request. Funding for these projects included four years of 
the airport's entitlement plus discretionary funding. PFCs 
provided the local AIP match.
    The terminal project will be funded with AIP grants and 
debt financing, and I might add, our first debt in the 
airport's history, and using PFCs to back debt service. Due to 
increasing construction costs, our project square footage and 
other features of the project have been cut and cut and cut. It 
has been 30 years since the last expansion of the terminal, and 
passenger use has grown over 100 percent.
    AIP grants and PFCs are the financial resources that Santa 
Barbara depends on for the critical capital development 
projects. I urge you to increase the PFC cap from $4.50 to 
$7.50. With PFC revenues at Santa Barbara growing at about 3 
percent per year, but construction costs in Santa Barbara 
growing at about 6 percent per year, you can see that our 
purchasing power has eroded every single year that we go 
forward.
    At Santa Barbara, the additional PFC revenues above what we 
need for debt service would be used to fund other eligible 
features of our terminal project that have been cut, and also 
fund the AIP match for airfield safety and infrastructure 
projects.
    I urge you to increase the AIP funding levels, even one 
year with a 35 percent cut as currently proposed can impact a 
small airport's ability to construct a project, and will impact 
our terminal project. If levels are increased, Santa Barbara 
could fund eligible portions of the terminal project for which 
there are not sufficient AIP dollars under current levels, and 
additional AIP funds would also be used to complete airfield 
safety and infrastructure projects that we have had to plan for 
at least five years away due to lack of available funding.
    I urge you to maintain the 95 percent Federal AIP share for 
smaller airports. For many small airports which have large 
projects such as our airfield safety projects, coming up with a 
5 percent match is difficult, let alone a 10 percent match. For 
that project, we got a substantial amount of discretionary 
funding, but it doesn't help if you can't come up with the 
local share.
    Santa Barbara's air passenger traffic has fully recovered 
from September 11, yet the security impacts to our terminal 
taking up more space has increased as our passenger demand has 
also increased. AIR-21's enactment increased AIP funding 
levels, increased PFC cap, and then the increase in the Federal 
AIP share after 9/11, combined to make it possible for Santa 
Barbara to construct over $35 million in airfield safety 
projects over the course of four years.
    Today, increasing the AIP funding levels, increasing the 
PFC cap, and maintaining the Federal AIP match, combined will 
make it possible now for Santa Barbara to construct its air 
terminal project to meet passenger growth, and have funding for 
future capital priorities.
    Chairman Costello, Ranking Member Petri, and Members of the 
Aviation Subcommittee, I want to thank you for inviting me to 
appear before you today and to represent the small airports 
perspective. I urge you to continue to assist airports of all 
sizes to keep pace with the increasing passenger demand and 
skyrocketing construction costs by raising the PFC cap and 
increasing AIP funding.
    These actions will have an impact on Santa Barbara Airport 
by improving safety and increasing air terminal capacity to 
meet growing passenger demand.
    Thank you.
    Mr. Costello. We thank you for your testimony.
    Let me announce that we have four votes on the floor. We 
have six minutes to get over to the Capitol to vote. We are 
going to recess at this time. I would expect that we will come 
back immediately after the last vote, which I would guess will 
be somewhere in about 20 to 25 minutes. So we will recess until 
then.
    [Recess.]
    Mr. Costello. The Subcommittee will come to order.
    Mr. Kimmel?
    Mr. Kimmel. Thank you, Mr. Chairman, Representative Petri 
and Members of the Aviation Subcommittee, I am honored to be 
here today to discuss the AIP program and its significance to 
Williamson County Regional Airport, a non-hub primary 
commercial service airport located in Southern Illinois.
    Though the services and benefits our airport provides to 
the surrounding region are significant, so too is the reality 
of the financial challenges we face. In any given year, airport 
revenue struggles to cover the cost of operating and 
maintaining the facility. So as we have heard here earlier 
today, capital improvement projects at smaller airports, 
particularly such as ours, can only be accomplished with 
funding through AIP.
    In recent years, we have relied on AIP to extend our 
primary runway, acquire land, remove obstructions, rehabilitate 
and expand aircraft parking areas and taxiways, and acquire 
aircraft rescue and firefighting equipment. Over the next five 
years alone, we have identified project needs requiring over 
$6.6 million in AIP funding.
    Mr. Chairman, I ask that the Aviation Subcommittee account 
for the capital development needs of our Nation's airports by 
supporting AIP funding levels in the amount of $3.84 billion 
and $4.2 billion for fiscal years 2008, 2009 and 2010 
respectively, while setting forth a minimum level of 25 percent 
as the general fund contribution throughout this period.
    Also important for smaller airports, as has been discussed 
this morning, will be retaining the Federal matching fund 
amount of 95 percent. A $500,000 airport improvement project, 
as an example, that has a local matching share that increases 
from $25,000 to $50,000 is truly significant to smaller 
organizations, and in many cases could prevent smaller airports 
from moving forward in a timely manner with planned and 
necessary improvements.
    Regarding the small airport setaside fund, there certainly 
has been discussion this morning indications that this will 
result in reduced funding for smaller airports. So I would 
certainly ask that we exercise caution with considering any 
formula change that has that potential across the board. Though 
we are not a general aviation airport, I would offer that any 
future formula based upon a tiered level of funding for 
airports, the only way that that could have any viability would 
be if that lowest tier still is afforded entitlement funding 
under AIP.
    I would like to voice support of an increase in the PFC cap 
up to $7.50. Though paling in comparison to the amount of money 
that this generates at larger airports, this increased funding 
capability is significant, too, for smaller airports that also 
must be creative in financing airport improvements.
    Now, alongside AIP, two other programs that are of 
particular concern to smaller airports during this 
reauthorization proposal and period are the Essential Air 
Service Program and the Federal Contract Tower Program. 
Connecting small communities to the national air transportation 
system is both fundamental for local economic vitality and is 
in the national interest. This was stated by the GAO in its 
reference to the Essential Air Service Program. Unfortunately, 
once again the current proposal would result in over 70 
communities being dropped from the program, including 
Williamson County Regional Airport. This discontinuation of air 
service that would result for communities across the Country 
would be an unprecedented tragedy in Federal aviation policy.
    The Contract Tower Program is a vital safety and economic 
asset to smaller airports as well. At our airport, the mix of 
student pilot training from nearby Southern Illinois 
University's program, and our own air carrier operations, makes 
the ability to maintain these air traffic control services 
essential to safe operations. In the short term, our airport 
will likely depend upon the cost sharing provisions of this 
program in order to maintain these services. So I would like to 
make particular mention of the need to authorize $8.5 million 
for the cost-sharing program in fiscal year 2008.
    Finally, Mr. Chairman, I would like to voice my opposition 
to the proposed increases in general aviation fuel taxes and 
user fees. General aviation is a very broad term and it 
consists of numerous small operators and private aircraft 
owners far less capable of absorbing an increase in costs. If 
such a proposal were to be implemented, then that effect would 
be fewer operators providing fewer operations at smaller 
airports across the Country, and fewer services to the public.
    Thank you, Mr. Chairman.
    Mr. Costello. We thank you, Mr. Kimmel.
    The Chair recognizes Mr. LeTellier for five minutes.
    Mr. LeTellier. Chairman Costello, Ranking Member Petri, and 
Members of the Subcommittee, thank you again for my invitation 
to be here today. I am testifying on behalf of the Coos County 
Airport District, who is the owner and operator of the 
Southwest Oregon Regional Airport, a non-hub commercial service 
airport on the coast of Oregon.
    As a small hub commercial service airport, our planning and 
capital needs for development and renewal and replacement of 
aging infrastructure are met almost exclusively from the AIP 
and passenger facility charge programs. I would like to just 
hit a couple of highlights of my written testimony to you now.
    The first is the increase in AIP funding. The 
Administration's request for $2.75 billion of AIP in the next 
fiscal year is about $1 billion less than what the Congress has 
authorized for this current year. The proposal would reduce the 
total entitlements for non-hub airports from $307 million to 
$269 million, a $38 million reduction year over year.
    It also appears as if the Administration's proposal to 
replace the small airport fund with a small airport 
discretionary fund could also cost small airports.
    We, like our colleagues, urge you to increase AIP funding 
so the program can at least keep pace with increasing 
construction costs, and ask you specifically that you protect 
small communities like ours from penalties being imposed 
through the formula changes for the distribution of the AIP 
funding.
    We also are concerned over the Administration's proposed 
reduction of the Federal share for AIP projects. AIP funding 
actually accounted for 94 percent of all capital expenditures 
for non-hub airports in fiscal year 2003. This proposal would 
decrease the eligible share for a qualified AIP project at 
smaller non-hub airports to 90 percent. In our case, PFCs are 
used for the actual match, and our ability to collect is very 
small. So a 5 percent increase in matching fund requirements 
for us would prevent us from moving forward with many of our 
planned construction projects.
    We would also like to see the PFC cap increased. You have 
heard that at $3.00 PFC in 1990 is worth only $1.73 today; and 
a $4.50 PFC is worth $2.86 over 2000. The American Association 
of Airport Executives' analysis projects that a $4.50 PFC in 
the year 2000, adjusted for inflation and increases for 
construction costs, would need to be $7.20 this year. The 
Administration's proposal to raise the cap on PFCs to $6.00 is 
not enough to overcome the effects of inflation and increasing 
construction costs. We therefore join our other colleagues in 
asking you to raise the PFC to $7.50.
    We believe that it is important to ensure that there is a 
stable source of funding to pay for the airport improvement 
program and we are concerned about the Administration's 
proposal to increase general aviation fuel taxes.
    Fourth, I wanted to talk just a moment about continuing the 
Small Community Air Service Development Program. Small and 
rural communities with non-hub airports like ours have 
struggled since deregulation. There is a very deliberate trend 
toward fewer flights by incumbent airlines to these 
communities, even though overall passenger levels are 
continuing to increase across the Country. Congress and the 
Administration should work together to ensure that these small 
and rural communities can continue to have access to our 
national aviation system. It is disappointing that the 
Administration's proposal does not include funding for this 
vital program. We urge you to reauthorize this program up to 
$50 million for the Small Community Air Service Development 
Program.
    Mr. Chairman, that concludes my remarks. I would just like 
to say that you have heard remarkable unanimity here today from 
the industry about the Administration's proposed legislation.
    Thank you very much.
    Mr. Costello. Thank you very much.
    We thank each of our witnesses on this panel. A few brief 
questions, if I can.
    Mr. Bennett, I am pleased that you touched on the bonds, so 
you have covered that question for me. But in your written 
testimony you indicate that you would suggest that when the FAA 
is denying a grant to the PFC authority to a project that you 
would like them to give 30 days notice. Can you explain the 
reason for that?
    Mr. Bennett. Yes, sir, Mr. Chairman. Thank you for that 
question. The effort there is to make sure that there is no 
retroactive reversal under this scenario, a retroactive 
reversal of a PFC that might otherwise have moved forward 
without the opportunity to discuss that with the FAA. The 
concept is not in the manner in which PFCs are currently 
approved.
    It would be in a more streamlined manner and it would be 
very difficult for airports following that streamlined approach 
to have the FAA have the ability to just at some point down 
that process just cut them off. We would like some kid of 30 
day notice period so that we could say, wait a minute, let's 
talk about this; just don't completely cut this PFC off today. 
Give us an opportunity to review and comment and try to change 
your mind before you disapprove that.
    Mr. Costello. Thank you.
    Commissioner Fernandez, speaking of streamlining the PFC 
process, you indicate in your testimony that the process is 
overly bureaucratic and burdensome. I wonder if you might 
explain some of the problems that you have personally 
experienced with the bureaucratic process.
    Ms. Fernandez. Thank you very much, Mr. Chairman, for that 
very important question. As you know, we have been moving 
forward with our air modernization program, and one of the 
challenges we face is that a significant portion of that 
capital program is reliant on PFCs. We have had the good 
fortune to work very closely with the regional office of the 
Federal Aviation Administration as it relates to ensuring that 
the various elements contained within the application meet 
their satisfaction.
    But we are also on a time table where the cost of the 
project is going to continue to increase if decisions are not 
made in a timely fashion. So as we go back and forth with the 
Federal Aviation Administration to resolve the issues contained 
in the application, we would urge them to expedite that 
application so that we can in the near future submit future 
applications to be able to continue, keep our project within 
the time line that have established, and avoid any increases in 
construction costs and labor by deferring the construction bids 
waiting for these funds to be available.
    Mr. Costello. Mr. Clark, you indicated that the PFC funding 
is too restrictive. I wonder, are there any projects in 
Jacksonville at the Aviation Authority that have not been 
completed because of the restrictions? In other words, if the 
restrictions were removed, what projects would you endeavor to 
undertake?
    Mr. Clark. Thank you, Mr. Chairman. The recent example of 
the restrictiveness of the PFC is, we needed to buy some 
additional land for a proposed future runway. And although land 
is eligible, the criteria is that you have to be at at least 65 
percent of capacity of your existing runway.
    The problem that we ran into is immediately adjacent to the 
airport there is a development that is occurring that will 
bring some 15,000 homes right on the fringe of the airport. Our 
position was we needed to buy the land to protect that next 
parallel runway system. Trying to work through the process with 
the FAA, we were going to have to buy the land whether we got 
PFC funding or not. We just needed to do that to protect the 
future interest of the airport.
    So in that manner, sometimes even though there is 
flexibility with PFC, it can be very difficult to accomplish 
what the airport needs in a more timely manner. It was looking 
at the fact that this development was about to occur and is 
occurring and we would not have had the ability to protect the 
interests of the airport on a long-term basis.
    Mr. Costello. Thank you.
    Mr. Piccolo, you indicate that you believe, I think you say 
a proper and equitable level of support should come from the 
Federal Treasury, from the general fund.
    Mr. Piccolo. Yes.
    Mr. Costello. I wonder, what do you consider proper and 
equitable, the percentage, for instance?
    Mr. Piccolo. The historical average has been, in prior 
years, the 25 percent range. So we think that somewhere in that 
area is a good percentage. There is a great deal of benefit for 
the entire Country, both from a defense standpoint and from an 
economic standpoint. Having a quarter of those revenues coming 
from the general fund seemed to be something that for a long 
time the Congress traditionally did, as it was before.
    Mr. Costello. Just as a side note, I am in total agreement 
with you. For those who I think have a tendency, some of our 
friends at the FAA, to shift costs and to reduce the 
contribution from the general fund, I think we ought to be 
trending in the opposite direction. Those who never use the 
system benefit, the Country benefits as a whole. As a result, 
there ought to be a robust contribution from the general fund.
    Mr. Kimmel, you describe in your testimony $6.6 million in 
AIP funding for your airport in anticipated needs over the next 
five years. I wonder, what type of projects, quickly, are you 
planning, and what would be the result if the AIP funds were 
not available?
    Mr. Kimmel. First and foremost, one is actually required by 
FAA, due to our certification as a commercial service airport, 
a runway safety area issue of having to relocate the end of our 
north-south runway to accommodate the higher standards. 
Obstruction and removal, more land acquisition, pavement 
projects, runway overlay, ramp expansion.
    And this doesn't even taken into account what I foresee us 
coming up with in the next five years, particularly at our 
airport, which is the need for a new airline terminal. You have 
been to our airport on many occasions, and unfortunately we are 
in a facility that we have talked about capacity constraints. 
They are not always airside. And in our case, in particular, 
even a smaller regional airport, we have a 1972 facility that 
was designed with utter disregard for the functions of what we 
need it to accommodate. We have grown out of that facility 
right now and so, we are this year putting some AIP money into 
a planning study for a new terminal, new terminal development, 
looking at options on expanding on to the existing but most 
likely replacing the existing.
    So the $6.6 million figure that I used earlier doesn't even 
take into account the probable need for a new airline terminal.
    Mr. Costello. I thank you.
    The Chair recognizes at this time the Ranking Member of the 
Subcommittee, Mr. Petri.
    Mr. Petri. I have a kind of general question for any or all 
of the panel members to comment on, and that is, really your 
attitude and the role of airports, your attitude toward and the 
role, if any, of airports in the NextGen effort or the FAA's 
effort and plan to roll out more modern and satellite and 
transponder-based air traffic control as opposed to the old 
radar-based system. Do you have any comments or concerns about 
that as it affects airports?
    Mr. Bennett. Just speaking from our perspective, our 
concern is we need it soon. And we need to make sure that there 
is a method to fund it and get it in place. Because every 
estimation of our system suggests that demand is going to far 
exceed the capacity of the existing system. We need NextGen and 
we are very hopeful that it moves forward with dispatch.
    Ms. Fernandez. I would echo that sentiment. One of the 
concerns that I have as a large hub is the fact that the 
forecast for the increase in operations is just eight years 
away. If we are talking about 300 million more operations in 
the air space and we are still using technology that dates back 
20 years, that is a pretty frightening scenario. So clearly, 
the sooner this new technology can be rolled out, the better. 
As we are looking to more technology to supplement the manpower 
that is overseeing that technology, I think it is necessary 
that the Next Generation be implemented expeditiously.
    Mr. Clark. I would echo my concerns and just say that when 
you look at the fact that you can get in your car and go on GPS 
and know exactly where you are and where you are moving to, it 
would seem that it is something that we would also have with 
aviation, which is much more technologically-involved.
    Mr. Kimmel. I would offer that the technology is needed. 
But the existing funding mechanisms, based upon the Aviation 
Trust Fund, need to be utilized to fund it. The proposal with 
user fees and increases in taxes would kill smaller airports. I 
have 50 based aircraft that I can guarantee you would stop 
flying if they had to pay any more than what they already do. 
And we don't have a control tower, and we have less revenue and 
have to come back and ask for me from the Federal Government.
    Mr. Costello. I thank the gentleman.
    The Chair recognizes at this time Mr. Moran.
    Mr. Moran. Mr. Chairman, thank you very much. I am pleased 
to join you here today and just generally like to get caught 
up. I missed the testimony, although I have had the opportunity 
to at least read the summaries of your testimony today. The AIP 
program is a very important one across the Country but clearly 
in States like Kansas, where we are so rural and the sources of 
revenue so limited. I appreciate the comments earlier that I 
heard about the importance of contract tower program, the 
essential air service program. Those are ones that matter 
significantly to communities I represent.
    But I wanted to give you the opportunity, I am dismayed, 
can't imagine that anyone could reach the conclusion that 
Federal funding of AIP can be anything but increased. The 
suggestion that it would be reduced just absolutely makes no 
sense to me. And I wanted to give you the opportunity to put on 
the record the kinds of consequences you would see if the idea 
of AIP funding was reduced as proposed by the Administration, 
and give you the chance to point out any of the increased 
costs, the cost structure that you are facing in projects that 
you are contemplating at your airports.
    Ms. Roberts. I would be happy to start. We have three 
airports, all of different sizes, a commercial passenger 
airport, a cargo airport and a general aviation. All three 
depend pretty heavily on AIP funding. We have a big project at 
Port Columbus, our medium hub commercial airport for about a 
$150 million replacement runway that we are in the middle of an 
EIS and in conversations with the FAA. We are optimistic that 
we would get about 50 percent of that from AIP and multi-year 
letter of intent.
    The Rickenbacker, our cargo airport, has been heavily 
dependent on AIP and partially through the military assistance 
program. We have large needs there, having inherited a facility 
that was formerly exclusively military use, two long runways, a 
lot of pavement. And we are using every dime we can get from 
the AIP program as well as using local dollars.
    So all three of our airports would be sorely hurt if we 
were not able to get AIP. It covers about 10 percent of our 
projected $1 billion capital program for our three airports in 
Columbus.
    Mr. Moran. Any comments about increasing costs? My 
impression would be that you are facing a cost structure, 
increasing construction costs.
    Ms. Roberts. Absolutely. We have seen construction costs 
rising in the project right now that we are jointly funding 
with the State department of transportation. We have seen the 
cost rise from a $40 million estimate to about $55 million. 
Because of Federal highway limitations, our State DOT is 
telling us we are going to have to fund the shortfall, which is 
almost $15 million. Not that that is an AIP project, but those 
are costs that then come out of other funding sources, or we 
issue new debt which ends up raising the costs to the airlines 
ultimately and makes it harder for medium and smaller airports 
to attract good air service for their communities.
    Mr. Moran. Thank you.
    Mr. Piccolo. Congressman, also on the construction cost 
index issue, not only has it gone up about 25 percent and 
eroded the effectiveness of AIP, but also for some places in 
Florida we have seen construction cost rises of about 50 
percent. It really pushes a lot of projects right off the 
table. So a cut in AIP on top of the inflationary pressures 
that are in the construction cost index would have a very 
significant impact I think on airports across the Country, 
particularly in areas where that construction cost index is 
growing even faster. We have seen that go up some due to the 
hurricane issues that we have had the last couple of years in 
the southeast. There is so much work to do that there is such a 
demand for materials that it affects the public projects as 
well as the private projects.
    Ms. Fernandez. Just to quickly punctuate on the 
significance of the AIP program, we at O'Hare, for instance, we 
look at the AIP as one component of our funding sources. We put 
together a five year capital improvement program, and that 
include sa portion of AIP that we feel will be necessary. FPCS 
have always been a supplement to the AIP. We can't have a 
diminish in one and not an increase in the other. They really 
need to go hand in hand. That is how we have built not only our 
five year CIP, but we also, as part of our O'Hare modernization 
program, which is a $2.8 billion program, 12 percent of that 
program is intended to be financed through the AIP. So it is 
very important to us not only that it remains robust, but that 
it remains a dependable, sustainable funding source.
    Mr. Bennett. I would echo those concerns from the large 
airport. With large programs such as we have here in 
Washington, approaching about $7 billion, you have to have all 
sources of funding brought to bear in order to execute that 
project, so that you can keep your facility in a competitive 
manner with respect to the fees that you have to charge for the 
use of your facilities. And AIP is important even at a large 
airport in Washington. At Washington Dulles we are in the 
process as we speak of constructing a fourth runway that is 
being funded with, 56 percent of the resources for that project 
are coming from the AIP program through a multi-year letter of 
intent of about $200 million. So it is very important to those 
kind of capacity projects.
    Mr. Ramsdell. Congressman, at Santa Barbara Airport, a 
small hub, any cut in AIP, combined with the increased 
construction costs, will cause us to cut back or need to cut 
back more on our terminal project, which is already pretty much 
cut to the bone. More AIP would also help reduce the debt that 
we will need to incur which in turn will help reduce costs to 
the airlines it services.
    Mr. Kimmel. Just briefly, Congressman, I had touched on the 
importance of maintaining in AIP the 95 percent Federal share. 
Though Vision 100 had put that in place on a temporary basis, I 
would contend that that higher share should have been in place 
long before. Smaller airports, whether it is as a result of 
September 11th or other factors, have and continue to struggle 
in recent years. Costs of construction, as you have been 
hearing, and other significant factors.
    In our portion of Illinois, our electric rates have gone up 
40 percent in the last few months. I have a bill on my desk, 
our airline terminal went from $1,500 to $3,800. Our matching 
local fund, based upon our $1 million entitlement right now at 
95 percent, of course, is $50,000. Going up to $100,000, we 
would be looking for areas to cut in order to do, plan any 
necessary AIP projects.
    Mr. LeTellier. Congressman, I would just like to echo my 
colleagues' comments. At the Southwest Oregon Regional Airport, 
our only access to capital funds are AIP and PFCs. So our 
revenue streams are not sufficient to access commercial debt 
markets. So without a PFC and AIP program, our capital program 
would come to as screeching halt. Needless to say, if you 
decrease it from our current allocations, it certainly is not 
going to help us any.
    Mr. Costello. I thank the gentleman from Kansas, and I 
thank all of our witnesses for being here today and we thank 
you for your testimony. I am sure that we will be speaking with 
and working with you as we go through the reauthorization 
process. Thank you very much.
    We would now invite the third and final panel to come 
forward. I will do introductions as you are moving forward. Mr. 
Travis Vallin has been introduced by our colleague form 
Colorado, Mr. Salazar, but he is the Director of the Division 
of Aeronautics for the Colorado Department of Transportation. 
The Honorable James Healy, County Board Member from DuPage 
County, Illinois; and Mr. Robert Bogan, who is the Deputy 
Director of the Morristown Municipal Airport.
    So we would ask the three of you to come forward, if you 
would, and take your seat.
    Mr. Petri. Mr. Chairman, I wonder if I could ask unanimous 
consent to introduce a statement by our colleague, Rodney 
Frelinghuysen, who is very interested in and wanted to express 
his support for the Morristown Municipal Airport.
    Mr. Costello. Without objection, it will be a part of the 
record.
    The Chair recognizes Mr. Vallin at this time.
    Mr. Vallin. Good afternoon, Chairman Costello, Mr. Petri 
and Members of the Subcommittee. On behalf of the National 
Association of State Aviation Officials, NASAO, I thank you for 
this opportunity to share with you our thoughts.
    My name is Travis Vallin, and I am the Aeronautics Director 
with the Colorado Department of Transportation. But today I 
speak to you on behalf of the men and women in State aviation 
agencies in all 50 States, Guam and Puerto Rico. We are a 
little bit unique from the testimony that you have heard today 
in that we represent aviation in all our collective States.
    Airports, pilots, general aviation, commercial and airlines 
all fall underneath the category of customers. As I have said 
many times to Congressman Salazar, I am the State Aeronautics 
Director, and we represent what is in the public's best 
interest. I am proud to say that NASAO's testimony today is 
based on that same simple principle: what is in the public's 
best interest.
    I will provide to you my testimony in three general 
categories. First, what we like; second, what we have concerns 
over; and third, things that we just can't support.
    First of all, what we like. The States fully support and 
encourage the modernization of the air traffic control system. 
NASAO members have been part of this transformation for years, 
whether it be the Wide Area Multilateration System funded by 
the State of Colorado or all the Atlantic Coast States putting 
in State-sponsored ADS-B ground stations. What we think is 
right about this proposal is that FAA agrees with us and the 
Administration is supporting ADS-B funding from the airport 
improvement program.
    We also like the idea of the proposed hard floor for the 
$300 million for the State apportionment funding, as this is 
one of the most valuable investment categories to State 
aviation agencies in meeting the demands of the general 
aviation airports. NASAO also believes that Congress is going 
in the right direction with the PFC. Like our partners at ACI 
and AAAE, we agree that PFCs must be raised to $7.50 to meet 
the needs.
    Next, some of the issues that we area little concerned 
about. There has been a lot of testimony today about the non-
primary entitlement program. As you know, the proposed system 
would put airports into four different categories, resulting in 
net losses to many States. At this point, NASAO cannot support 
the four-tiered proposed system, but the good news is, we are 
actively working with the FAA headquarters airports office to 
find a workable solution that is a win-win for all of us.
    Now the issues that we just can't support and think are not 
in the public's best interest. First of all, the proposed AIP 
level of $2.75 billion. That level simply will not meet the 
needs of the aviation community, both large and small, and it 
will not allow us to continue to be successful. NASAO 
recommends authorizing AIP at $3.8 billion in 2008.
    The essential air service program, which as many of you 
know is a lifeline to small and rural communities. The 
Administration's proposal would eliminate more than 60 
communities and slash the budget to $50 million. NASAO 
recommends and supports that Congress continue the EAS program 
and fund it at a minimum of $127 million. NASAO does not 
believe that the current funding structure, which has created 
the largest, safest and most efficient air transportation 
system in the world, is broken. The change to a radically 
different user fee system that would actually collect less user 
fees than what we enjoy today is most certainly not in the 
public's best interest. NASAO is adamantly opposed to any new 
user fees for general aviation.
    We also strongly believe that increasing fuel taxes on GA 
by about 250 percent would not be in the public's best 
interest.
    NASAO respectfully suggests that you have an excellent 
template at your disposal. That is Vision 100. And that the 
general fund contribution be no less than 30 percent.
    Lastly, NASAO is opposed to the Administration's attempt to 
impose a new board of directors on the FAA. We feel they 
already have one, and that is you, the U.S. Congress.
    That concludes my statement, Mr. Chairman. Thank you again 
for allowing NASAO to participate in this hearing and this 
legislative process.
    Mr. Costello. We thank you, and the Chair recognizes Mr. 
Healy at this time.
    Mr. Healy. Thank you, Mr. Chairman, Members of the 
Subcommittee. My name is James Healy, I am a county board 
member from DuPage County, Illinois.
    Unlike all the other panel members today, I, like you, am 
an elected official, elected by the voters of my district. 
Today I speaking in behalf of the other county officials across 
America and NACo, the National Association of Counties, which 
represents the 3,100 urban, suburb and rural counties.
    Counties own about one-third of the Nation's commercial and 
general aviation airports. This includes some of the largest 
airports in the United States, including the hubs in Miami, Las 
Vegas, Cincinnati, Milwaukee, Fort Lauderdale and Orange 
County, California. Counties also own or appoint the governing 
boards of the airport authorities at small airports, such as 
the Williamson County Regional Airport, the Outagamie Regional 
County Airport in Wisconsin, and the facility owned by my 
county, the DuPage County Airport, the third or fourth largest 
airport in Illinois, and a reliever for O'Hare Field.
    Earlier this month, NACo adopted its policy on the Aviation 
Reauthorization bill. Much of our policy relates to the AIP 
program. Over the next five years, the existing airport 
infrastructure, both airside and landside, will be strained by 
increased usage and counties across America are trying to meet 
that need. Accordingly, NACo recommends the AIP program be 
funded at an average level of no less than $4 billion annually 
during the next reauthorization period. Further, NACo supports 
guaranteed funding of the AIP program through the existing 
point of order provisions or an even stronger guarantee.
    One way to help ensure higher funding into the future is to 
index the revenue sources of the Aviation Trust Fund, such as 
the ticket tax and fuel taxes and adjust them annually. NACo 
believes the current revenue structure in place since 1970 and 
the revenue sources funding the AIP program have worked and 
should be continued.
    NACo fully supports allowing airports to increase the 
passenger facility charge to no less than $6. NACo believes the 
FAA-proposed funding of the trust fund is likely to lead to a 
substantially smaller AIP program. The proposed 70 cents per 
gallon tax on aviation fuel would be devastating to smaller 
airports and ultimately lead to less revenue for needed 
improvements. NACo proposes that the proposed user fees based 
on air traffic control usage on general aviation. NACo believes 
the proposal would be counter-productive, adversely affecting 
safety and ultimately increasing gridlock on the Nation's hubs 
and undermine the investment counties have made in airport 
facilities.
    Airports must have the flexibility to use the AIP and PFC 
funds to invest in landside and off-airport capital projects 
that are closely related to the operation and success of an 
airport. That includes roads, interchanges and public transit 
that are an integral component to the growth and sustainability 
of these airports. The priorities set by the local government 
bodies must be recognized.
    While passengers need to be assured of the dependability of 
their flights, they also need to feel they can get to the 
airports easily and on time. This is especially true given the 
extra time passengers need at airports for security measures. 
It is important to begin moving away from the silo approach to 
mobility and begin to think of a comprehensive system of moving 
our citizens. Intermodalism is not just a buzz word we now use 
in the lexicon of transportation. It is what county officials 
are striving for.
    Restrictions of what can be funded with AIP dollars is a 
major concern to county officials. At DuPage County Airport, 
our application was denied for funding of an emergency response 
vehicle to meet the needs of the larger corporate aircraft, 
which are equal to the size of commercial airliners. In another 
example, Outagamie County, Wisconsin, has invested in and 
operates a regional airport in Appleton, Wisconsin, serving a 
region of 500,000 people. However, the county is unable to use 
AIP funds for a new road into the airport and other related 
expenses as part of a $7.2 million parking and access project 
for that airport.
    Allowing airports to use AIP funds for these types of 
related purposes makes sense to NACo. Counties are asking you 
to remove the shackles from how we use AIP and PFC funds. Our 
constituents have entrusted us to use these tax dollars wisely. 
We simply ask that you give us that same trust.
    Based on feedback from some of our members regarding the 
eight-State AIP block grant program, it is NACo's believe this 
program imposes an unnecessary administrative layer between the 
airports and the FAA. The program should be eliminated and 
permit those airports to work directly with the FAA. The 
smaller GA airports in these States can continue to get 
technical assistance from their State agencies, the same as 
they do the other 42 States, which are not part of this 
program.
    Thank you for this opportunity to address the Committee. I 
would be happy to answer any questions.
    Mr. Costello. Thank you, Mr. Healy.
    The Chair now recognizes Mr. Bogan.
    Mr. Bogan. Chairman Costello, Ranking Member Petri and 
Members of the Subcommittee, thank you for giving me an 
opportunity to testify at this hearing.
    I am Robert Bogan, Deputy Director of Morristown Municipal 
Airport in Morristown, New Jersey. I am here representing a 
group called Sound Initiative, a coalition for quieter skies. 
Sound Initiative was formed by airports and counts as its 
members airports, local governments and homeowner and citizen 
groups that are concerned about aircraft noise. Our goal is to 
encourage you to complete the job this Committee started in 
1990 by phasing out all noisy Stage 1 and Stage 2 aircraft.
    As you know, the FAA divides aircraft into three categories 
by the amount of noise they make. Stage 1 aircraft are the 
loudest, Stage 2 are also noisy, and Stage 3 aircraft are the 
quietest.
    By 1985, most Stage 1 aircraft had been phased out as a 
result of earlier regulatory action taken by the FAA. In 1990, 
at the initiative of Mr. Oberstar and this Subcommittee, 
legislation was enacted to begin the phase-out of most Stage 2 
aircraft. That legislation was included in the 1990 FAA 
reauthorization bill, known as the Airport Noise and Capacity 
Act, or ANCA. The phase-out of Stage 2 aircraft called for in 
ANCA was completed by the year 2000.
    However, both the FAA regulatory action and the 1990 
Congressional action applied only to aircraft weighing more 
than 75,000 pounds. Noisy Stage 1 and 2 aircraft that weighed 
less than that were not affected, and many continue to fly to 
this day.
    According to the FAA, as of last summer, there were about 
1,330 Stage 1 and Stage 2 aircraft registered in the United 
States. These Stage 1 and Stage 2 aircraft comprise about 13.5 
percent of jet aircraft weighing less than 75,000 pounds. 
Although these aircraft represent a relatively small percentage 
of the total U.S. fleet, the FAA noted in a letter to the 
former Chairman of this Committee that while not an issue when 
measured at the system level, there are a few airports where, 
especially when adjusted for their limited number of 
operations, this segment of aircraft appears to contribute in a 
significant fashion to noise exposure contours.
    So today, although those aircraft are small in number 
relative to all aircraft, many airports across the United 
States report that they account for a majority of noise 
complaints. In fact, at some airports, 50 to 80 percent of the 
noise complaints received are related to Stage 1 or Stage 2 
aircraft. Sound Initiative was formed to address this problem.
    Sound Initiative was organized by a group of airport 
operators who are on the front line of the aircraft noise 
debate on a daily basis. Across the Country, airport managers 
must respond to the concerns of neighbors, government 
officials, the news media and others who want to know what they 
are doing about aircraft noise. Some airports have installed 
sophisticated monitoring systems that identify aircraft and the 
noise they make when departing. Others have long relied on 
programs that try to be responsive to neighbors' noise concerns 
by mediating their complaints with operators based at their 
facilities.
    But real action can only come from trying to reduce noise 
at its source. The power of local airports to do this is 
severely limited. That is why we call on Congress to complete 
the job it started in 1990 and phase out all noisy aircraft, 
regardless of how much they weigh. What happens at an airport 
like Morristown, when these Stage 1 and Stage 2 aircraft go 
away, it means quieter skies for people living and working 
nearby.
    Morristown is among the busiest airports catering to 
corporate and smaller business aircraft in the New York City 
metropolitan area, logging an average of 210,000 departures and 
arrivals each year. Operations include those of based corporate 
tenants, transient business use, flight training and 
recreational traffic. Although only one Stage 2 aircraft is 
based at Morristown, more than half the noise complaints from 
neighbors are the result of other Stage 2 aircraft landing and 
taking off there.
    In a recent study, we reviewed the sound contour and the 
noise footprint of all airplanes and jets departing 
Morristown's runway 23. The study also looked at what would 
happen to those contours if only Stage 3 aircraft departed from 
the runway. The results show a significant reduction in the 
noise impact to our neighbors. As you can see in the chart, the 
noise footprint is radically reduced, it takes that footprint 
out of the town of Madison, which it pretty well encompassed, 
and it relieves about 3,000 people from the daily noise impact.
    On the other hand, we have the example of Naples Airport in 
Florida. That airport tried to work through the FAA's existing 
Part 161 process to phase out noisy aircraft. It spent hundreds 
of thousands of dollars on consultant studies to tell it what 
it already knew about the need to reduce aircraft noise. When 
the airport instituted restrictions based on the Part 161 
study, the airport lost funding from the Federal Airport 
Improvement Grant Program.
    In the end, Naples successfully defended the lawsuits 
against it and did succeed in banning noisy aircraft at its 
airport. But it cost more than $3 million, money that could 
have been spent on safety or security projects.
    I can assure you that other airports do not have the funds 
to take on the system the way Naples did. Rather than attempt 
to develop an airport-by-airport solution which has yet to be 
achieved even once by the Part 161 process, we believe a 
lasting, long-term nationwide solution to the aircraft noise 
problem can only come from Congress.
    Sound Initiative does have a proposal we would like this 
Committee to consider to address this noise problem. Under our 
proposal, a copy of which is attached to the end of the written 
testimony, all Stage 1 and Stage 2 aircraft would have to cease 
operations in the 48 contiguous States three years after 
enactment. Almost all of these aircraft are close to 20 years 
old, most are much older than that.
    So three years seems like a reasonable balance between the 
needs of aircraft owners to change over to quieter aircraft and 
the needs of airport neighbors for noise relief. It comes more 
than 17 years after Congress set precedent for this type of 
action and 7 years after the last Stage 2 weighing more than 
75,000 pounds operated or was modified to meet Stage 3 
standards.
    Our proposed legislation goes a step further, however, by 
recognizing that some airports, due to their location or other 
factors, may not have as much need for noise relief. In those 
cases, we propose to let airports notify the FAA that they are 
wiling to continue to allow Stage 1 and Stage 2 aircraft to 
operate there.
    Mr. Chairman, Congress provided noise relief to our 
Nation's larger airports several years ago. It is now time to 
provide added relief to those airports and to extend the same 
relief to the people who live near smaller reliever and 
satellite airports. On behalf of Sound Initiative, I urge you 
to include our proposed legislative language or something 
similar to it in the Subcommittee FAA reauthorization 
legislation.
    Thank you very much.
    Mr. Costello. I thank you.
    Let me follow up with a question. You mentioned the Naples 
Airport under the Part 161 process. Why did they lose their 
funding?
    Mr. Bogan. At some point, there was clearly some confusion 
about whether the actions that were taken by the airport were 
legal. I believe that the FAA merely took the position that it 
was not, that the Naples action was not consistent with FAA 
policy, so they withheld grant funding.
    Mr. Costello. Do you have any idea how long the process, 
going through the court system, how long it took and the 
approximate cost to litigate?
    Mr. Bogan. We were up here last week and this week, and I 
did run into a group from Boca Raton who was very familiar with 
that. They said it was up around $5 million and it took quite a 
while. I think multiple years were involved.
    Mr. Costello. Thank you.
    Mr. Healy, in your testimony you talk about how you 
support, or NACo supports eliminating the eight-State AIP block 
grant program. I wonder if you would tell us why you support 
the elimination.
    Mr. Healy. That came about at our last conference here in 
Washington. As you know, we have county commissioners from 
across the Nation come together. Several of them came in from 
Michigan and from North Carolina, saying they were having a 
problem with it. I phoned home to my State, talked to my 
airport director, he said the same thing.
    The reason is, we believe it is an unnecessary level of 
extra government. There is definitely a need for State agencies 
to assist smaller GA airports that don't have the resources or 
expertise to apply and utilize State Federal grant funds. 
However, for airports that do have these resources, dealing 
with State agencies under a Federal block grant program is an 
unnecessary and ineffective system. It is a bureaucracy that is 
adding to the cost of us doing business in our airports. It 
does not even eliminate the need for us to go to the FAA in the 
process of getting approvals for projects. It just adds to 
another layer of government, and we believe that it should be 
eliminated so that we can deal directly with the FAA. As the 
other 42 States do with their airports, the smaller airports 
that need this type of assistance would continue to go to the 
State agency.
    Mr. Costello. Very good, thank you.
    The Chair now recognizes the Ranking Member of the 
Subcommittee, Mr. Petri.
    Mr. Petri. Thank you for your testimony.
    Just one or two fairly quick things. It is my impression, 
Mr. Bogan, living part of the time within the flight path going 
to an airport, that there has actually been considerable 
improvement in the last few years as silenter planes have been 
phased in. Is that your experience, too?
    Mr. Bogan. Absolutely. I believe corporate America has 
stepped up, recognizing that they want to be good neighbors, 
too. My tenants have all upgraded their aircraft over the last 
10 years, and they are all flying Stage 3 aircraft, save for 
one who is nostalgic for the old days, I guess. But yes, there 
has been quite an improvement, and that is part of the problem. 
The community has now been educated to expect quieter aircraft. 
When one of these Stage 2s show up, they can tell the 
difference.
    Mr. Petri. I guess that is right.
    Mr. Healy, why is it easier for the, we usually hear the 
opposite, why is it easier for local airport authorities to 
deal with the FAA, the Federal Government, than with these 
State aviation agencies?
    Mr. Healy. We already have to deal with the FAA. So to us, 
it is just another process we have to go through. We first go 
to the State agency, then we are at the same time either 
simultaneously or afterward dealing with the FAA on the same 
type of projects.
    Mr. Petri. So it is not necessarily easier, it is just 
duplicative?
    Mr. Healy. It is duplicative, and actually, it sometimes is 
a hindrance. Because if you are turned down at the first stage, 
you don't know if you can go to the second stage dealing with 
the FAA.
    Again, we realize that some of the smaller counties and 
some of those smaller airports may need that type of assistance 
from their State agencies. We are not saying not to. We are 
saying that the other 42 States in the Nation are able to 
handle that by working with their local agencies and local 
airports. But for the eight States that have it, we believe 
that it is cumbersome.
    Mr. Petri. Thank you.
    Mr. Vallin, your testimony was somewhat critical, I should 
say, but strongly critical in some aspects of the 
Administration's proposal but supportive in others. I wondered 
if you could talk a little bit about the new four-tiered non-
primary entitlement program, which is a significant proposal 
people are looking at very carefully. Are there any changes or 
what changes would you make in that proposed program?
    Mr. Vallin. Right now, we do have open communications with 
the FAA on that. We are running a lot of different scenarios.
    The problem that we face is when you take that tiered 
system today and you implement what the dollars will look like, 
I will give you an example, the State of Montana will lose 
about $700,000 from what they realized under a straight 
$150,000 entitlement. The State of Colorado goes up $1.2 
million.
    So because it creates such an inequity when it comes to 
winners and losers, it is very difficult for NASAO to take a 
positive position on putting fewer dollars in some of our 
smallest airports. A couple of scenarios that we are looking at 
is maybe adjusting the funding levels a little bit. But we 
understand it is a very complex issue. It is kind of like a 
Rubik's cube, we make an adjustment, we run the analysis and 
then we see where the winners and losers are. So we are 
actively involved in that process and hopeful we can find a 
win-win in that negotiation.
    Mr. Petri. Thank you. Thank you all very much.
    Mr. Costello. The Chair thanks the gentleman.
    Let me thank our witnesses on this panel for being here 
today. We appreciate your time. You just happened to end up on 
the third panel, so you had to sit here quite a while. We 
appreciate your patience, your testimony and look forward to 
working with you and to considering your suggestions and your 
testimony as we go through the reauthorization process.
    We thank you, and this concludes this hearing. Until our 
next hearing tomorrow morning, the Subcommittee is adjourned.
    [Whereupon, at 2:30 p.m., the Subcommittee was adjourned.]


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