[Congressional Record Volume 143, Number 46 (Thursday, April 17, 1997)]
[Extensions of Remarks]
[Page E691]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        LINKED FINANCING--A NEW ALTERNATIVE FOR AVIATION FUNDING

                                 ______
                                 

                            HON. RON PACKARD

                             of california

                    in the house of representatives

                        Thursday, April 17, 1997

  Mr. PACKARD. Mr. Speaker, I rise today to introduce legislation which 
will establish a new funding mechanism for the Federal Aviation 
Administration called linked financing. This is an innovative and bold 
new mechanism for ensuring that the Federal Aviation Administration 
receives the funding it requires while preserving the advantages of the 
existing tax structure.
  I have worked closely with the Aircraft Owners and Pilots Association 
on this legislation, and I must credit my friend and former colleague, 
Jim Lightfoot of Iowa, with advancing this idea in the previous 
Congress.
  Linked financing is based on a simple premise: The services provided 
by the FAA are an essential Government function, for which users pay. 
So it ought to be possible to spend more on FAA programs--when and if 
users are willing to pay more. But as we know, this isn't necessarily 
the case under existing budget rules. The cap on overall discretionary 
spending constrains our ability to increase spending on certain 
transportation programs, even when the users are willing to increase 
their contribution.
  The administration has proposed replacing the current aviation taxes 
with direct user fees for FAA services to pilots and the airlines. 
However, user fees have many problems. They are costly to collect, they 
provide no incentive to manage costs, 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. It 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. The 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 upward by a corresponding amount the following year, according 
to a predetermined formula. A narrow 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. I am confident that almost all of 
the necessary growth in tax revenue would result from aviation industry 
growth, not tax rate increases. After all, most of the long-term growth 
in FAA operations spending is justified by increased aviation industry 
growth. But if circumstances make it necessary for this essential 
safety-related agency to receive more revenue through tax rate 
adjustment, the formula would provide for that.

  On the other hand, when FAA spending drops, tax rates would drop 
automatically the following year to reflect the decrease. This would 
ensure that users aren't paying for something they don't get. And 
aviation users would see a swift and direct benefit from coming to 
Congress with ways to reduce FAA spending as well as to increase it.
  Linked financing also addresses the constraints imposed by the 
discretionary spending cap. Under the current rules, additional 
aviation revenue doesn't automatically lead to additional aviation 
spending. Why? Because overall discretionary spending is capped, 
regardless of how much money the Government takes in for a particular 
function.
  The purpose of the spending caps is to help reduce the deficit by 
controlling 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.
  The key elements of linked financing are:
  First, an adjustable tax rate which is linked to the amount of 
spending on the air transportation system.
  Second, an annual reserve account outside the discretionary cap which 
is linked to the yearly increase in aviation tax revenue.
  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.
  Mr. Speaker, the Clinton administration's ongoing opposition to 
balancing the Federal budget has caused the surplus in the Aviation 
Trust Fund, once measured in billions of dollars, to dry up. For years 
I joined many Members of this House in asking that these surplus funds 
be spent on the intended purpose. The reauthorization of aviation taxes 
and highway spending programs gives the 105th Congress offers of a 
unique opportunity to change the way we fund these priority capital 
programs.
  In fact, Senators Bond and Chafee recently introduced legislation in 
the other body which establishes a direct link between the amount 
collected annually in gas tax revenues and spending for highway 
programs. And although I disagree with the administration's user fee 
concept, I was interested to read in the President's budget that a 
direct link is now needed between dedicated taxes and the level of 
funding for the agency operations that affect them.
  I believe linked financing holds considerable promise for addressing 
the future funding needs of our Nation's air transportation system, and 
could also be a solution for other transportation modes, and even other 
functions of government with dedicated sources of revenue.
  Mr. Speaker, linked financing is an idea which deserves serious 
consideration. I urge my colleagues to give it their attention.

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