[Congressional Record Volume 143, Number 13 (Wednesday, February 5, 1997)]
[Senate]
[Pages S1036-S1037]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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                     AIRPORT AND AIRWAY TRUST FUND

 Mr. GORTON. Mr. President, last Thursday, I joined my 
colleague from Arizona, the new Chairman of the Senate Commerce 
Committee--Senator McCain, the ranking member of the full committee, 
Senator Hollings, and the ranking member of the Aviation Subcommittee, 
Senator Ford, in sponsoring the Airport and Airway Trust Fund Taxes 
Short Term Reinstatement Act. This legislation will extend the existing 
system of aviation excise taxes through September 29, 1997, and give 
the Internal Revenue Service authority to transfer previously collected 
aviation excise taxes into the airport and airway trust fund.
  The airport and airway trust fund is funded by a 10-percent passenger 
ticket tax; a 6.25-percent cargo waybill tax; a $6 per person 
international departure tax; and certain general aviation fuel taxes. 
In 1997, this fund is expected to provide 62 percent of the Federal 
Aviation Administration's [FAA] fiscal year 1997 budget. More 
specifically, the trust fund is expected to provide $5.3 billion of the 
FAA's $8.6 billion total fiscal year 1997 budget. Of this $5.3 billion, 
$3.6 billion will provide 100 percent of the resources necessary to 
fund the FAA's capital programs, while $1.7 billion will provide 34 
percent of the fiscal year 1997 budget for FAA operations. But this 
fund, so critical to the operation and improvements of our aviation 
system, is no longer being funded.
  When the authority to collect the aviation excise taxes lapsed on 
December 31, 1996, officials from both the General Accounting Office 
[GAO] and the FAA predicted that the $4.35 billion in uncommitted 
balances in the fund at that time would be available to fund the FAA's 
capital programs through June 30, 1997. By July 1, 1997, however, they 
predicted that the trust fund would become insolvent. Accordingly, if 
Congress did not reinstate the taxes, it was predicted that the Office 
of Management and Budget [OMB] would have to reduce the FAA's capital 
accounts, which are totally funded out of the trust fund --including 
both the facilities and equipment [F&E] account and Airport Improvement 
Program, to account for the $1 billion shortfall between the trust 
fund's fiscal year 1997 expected contribution of $5.3 billion and the 
actual contribution of $4.35 billion.
  According to the FAA, this reduction in the facilities and equipment 
account could force the FAA to issue stop work orders on all major F&E 
contracts, which include upgrades of the current air traffic control 
system throughout the country. The Airport Improvement Program would 
suffer an even greater impact. Under the original projections, if the 
aviation taxes were not reinstated, funding for the Airport Improvement 
Program would have to be reduced by as much as $300 million in fiscal 
year 1997. Existing funding agreements under the AIP would be 
maintained, but no new, discretionary funding would be provided for 
high-priority safety and security projects, capacity projects, and 
important noise mitigation programs.
  Quite simply, this is unacceptable. If delays in the implementation 
of safety and security initiatives, as well as construction of capacity 
enhancement projects, are caused by lack of funds, then we in Congress 
will be responsible for weakening the safest aviation system in the 
world.
  From a Washington State perspective, fiscal year 1997 funding for 
noise mitigation is particularly important. Seattle-Tacoma 
International Airport has been a national leader in noise mitigation 
programs and was the first to implement a local housing insulation 
program to reduce the impact on houses near the airport. The current 
program, which is partially funded through the AIP's discretionary 
noise mitigation grants, is scheduled to run through the year 2003.
  Under these original projections, it was clear that reinstating the 
taxes as quickly as possible was the appropriate action for Congress to 
take to ensure that the U.S. aviation system continues to be the best 
system in the world.
  Last Wednesday afternoon, however, this situation became more dire 
when the Treasury Department announced that because of an accounting 
error, the airport and airway trust fund could be insolvent as early as 
March or April.
  Let me explain the events, as I understand them, which led to 
accounting Error made at by the Treasury Department. Each airline 
deposits the ticket taxes it collects to the IRS every 2 weeks. Under 
the look-back provisions of the IRS safe harbor rule, however, an 
airline can base the amount of that payment on the amount of excise 
taxes it collected in a 2-week period from the second preceding quarter 
before the current quarter. In other words, in making a 2-week tax 
payment in the third quarter of the year, an airline can deposit the 
amount it collected in a 2-week period during the first quarter of that 
year. If the taxes it deposits are less than what the airline actually 
took in during the third quarter, the airline can make up that 
underpayment when it files its quarterly return. The quarterly return 
date is approximately 2 months after the close of the quarter.
  The 10 percent ticket tax was in place during the fourth quarter of 
1996. The airlines' semimonthly tax payments for that quarter, however, 
were based on the second quarter of 1996, during which time no excise 
taxes were collected. The airlines, in essence, did not remit any 
excise taxes during the fourth quarter of 1996, even though they were 
collecting these taxes from passengers at that time. The airlines will 
have to make up for these tax underpayments by the time they file their 
fourth quarter returns, which are due on February 28, 1997. These 
taxes, however, will not be deposited into the aviation trust fund, 
since the general-fund-to-trust-fund transfer authority expired along 
with the aviation excise taxes on December 31, 1996.
  It appears that the Treasury Department did not account for the 
complex

[[Page S1037]]

accounting procedures, and assumed that the trust fund would be 
credited with $1.5 billion more than it can be unless Congress 
reinstates the authority for the IRS to transfer the fourth quarter 
excise taxes to the trust fund. The FAA now expects to run out of money 
for its capital programs, and possibly its operations, much sooner than 
originally anticipated.
  Mr. President, with Wednesday's Treasury Department announcement that 
the trust fund could be insolvent by March, I believe it is clear that 
the Senate's first and overriding priority must be to immediately 
reinstate the excise tax and transfer authority. While our system 
continues to be the safest aviation system in the world, Congress owes 
it to the American people to consider this legislation as quickly as 
possible to ensure aviation safety, security, and capital investment 
are not jeopardized in any manner.

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