[Congressional Record Volume 142, Number 136 (Friday, September 27, 1996)]
[Extensions of Remarks]
[Pages E1740-E1741]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        ``LINKED FINANCING''--A NEW CONCEPT IN AVIATION FUNDING

                                 ______
                                 

                           HON. JIM LIGHTFOOT

                                of iowa

                    in the house of representatives

                      Thursday, September 26, 1996

  Mr. LIGHTFOOT. Mr. Speaker, I rise today for the purpose of 
introducing legislation to establish an innovative new funding 
mechanism for the Federal Aviation Administration. We've named this new 
funding mechanism Linked Financing and I'm introducing the legislation 
at this obviously late date to ensure interested committees such as the 
Budget, Ways and Means and Transportation Committees, as well as 
organizations such as the National Civilian Aviation Review Commission, 
will have an opportunity to study and consider this interesting concept 
before work begins again next year on the controversial issue of FAA 
financing reform.
  This concept known as Linked Financing is something I've worked on 
with my friends at the Aircraft Owners and Pilots Association (AOPA). 
AOPA has devoted substantial time and effort to refining the idea, and 
I believe it holds considerable promise for addressing the future 
funding needs of our Nation's air transportation system. It's based on 
a simple premise. That is, the services provided by the FAA are an 
essential Government function largely financed by the users of the 
system. As we know, under existing budget rules the cap on 
discretionary spending and the trade-offs it requires, sometimes 
constrain our ability to fully fund programs which are largely funded 
by the users.
  This situation cries out for a fresh approach. Next year, Congress 
will begin to debate a number of issues closely tied to the future of 
aviation funding. The House, in an overwhelming vote to take the 
transportation trust funds off budget, has sent the clear signal that 
it wants transportation trust fund monies fully spent for the intended 
purpose. An internal fight among airlines for market share has crept 
into Congress and will likely cause a reexamination of the current 
airline ticket tax structure. Finally, the Clinton administration, in 
an attempt to use more discretionary spending to fund its liberal 
social agenda, has created what I believe is an artificial FAA funding 
crisis in order to justify a new aviation tax structure.
  All of these issues contain potential pitfalls. Taking the 
transportation trust funds out of the unified budget process could send 
a mixed signal as we seek to balance the Federal budget over the next 7 
years. It remains to be seen whether readjusting the airline ticket tax 
structure will increase either safety or savings to the traveling 
public. The administration has not been able to adequately demonstrate 
its alleged aviation funding shortfall. And its proposed solution, new 
aviation taxes, has a number of additional problems. They are costly to 
collect, they can disrupt the financial planning of the airlines, they 
have safety implications, and--most important--FAA would have little 
direct accountability to Congress for how the agency spends the money.
  Linked Financing is a better alternative. This plan would provide FAA 
the funding the administration says it needs, but, unlike imposing the 
administration's proposed new aviation taxes, would not circumvent the 
current budget process.

[[Page E1741]]

  Linked Financing would retain the excise taxes which airway system 
users now pay on airline tickets, fuel, and cargo. These taxes would 
continue to feed the Airport and Airway Trust Fund. This Trust Fund is 
for aviation spending only, and it finances most of the FAA's budget.
  Under Linked Financing, what aviation users pay in taxes for a given 
year would depend on what Congress allowed the FAA to spend the year 
before. When the FAA's spending goes up, the taxes collected would be 
adjusted upwards by a corresponding amount the following year, 
according to a predetermined formula. An upper limit on the tax rates 
would keep the rates at a reasonable level. The objective is for tax 
revenues to match spending from year to year. We think most of the 
necessary growth in tax revenue would result from aviation industry 
growth, not tax rate increases. But the formula would provide for an 
adjustment in the tax rates, if necessary.
  When FAA spending drops, tax rates would drop automatically the 
following year to reflect the decrease. This would ensure that system 
users will not pay for non-existent services.
  Linked Financing also addresses the constraints imposed by the 
discretionary spending cap. Under the current rules, additional revenue 
doesn't automatically lead to additional spending. Why? Because 
spending is capped, regardless of how much money the government takes 
in.
  The purpose of the spending cap is to control the deficit by cutting 
Government spending instead of raising taxes. However, under Linked 
Financing, aviation users would pay for the increased spending for 
FAA--not other taxpayers.
  Therefore, the Linked Financing plan establishes an annual Trust Fund 
reserve account which would be available to the appropriations 
committees to supplement the resources otherwise available to them 
within the discretionary cap. This Annual Reserve Account would be 
outside the discretionary cap, so the discretionary cap would not limit 
the ability of Congress to spend the funds deposited in the Reserve 
Account. The amount deposited in the Annual Reserve Account each year 
would be equal to the annual increase in Aviation Trust Fund revenue, 
if any.
  Linked Financing assures that the taxes that aviation users pay are 
promptly spent for aviation purposes. And it does this without major 
changes to the current budget process or the ability of Congress to 
oversee FAA's spending.
  As an innovative mechanism for using dedicated taxes--taxes collected 
for a specific purpose--Linked Financing could offer a solution for 
other user financed Government programs, as well.
  This is an interesting idea, Mr. Speaker, which deserves serious 
consideration. The challenges facing aviation are not going to go away 
and I urge my colleagues to give this proposal their attention as we 
begin to debate these issues in the final days of this Congress as well 
as the 105th Congress.

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