Federal Aviation Administration: Challenges Facing the Agency in 
Fiscal Year 2009 and Beyond (07-FEB-08, GAO-08-460T).		 
                                                                 
Fiscal year 2009 will be a critical year for the Federal Aviation
Administration (FAA), with the pending selection of a new	 
Administrator, the beginning of the 5-year term of the new Chief 
Operating Officer, and the continuing process of transforming the
nation's current air traffic control system to the Next 	 
Generation Air Transportation System (NextGen)--a complicated	 
effort to modernize the air traffic control system. In addition, 
FAA is currently operating under a temporary reauthorization.	 
Without legislative action, both the excise taxes that fund the  
Airport and Airway Trust Fund (Trust Fund) and FAA's authority to
spend from the Trust Fund will expire at the end of this month.  
This statement is based on recent reports and discussions with	 
selected senior FAA officials and representatives of aviation	 
industry and stakeholder groups. This statement provides GAO's	 
preliminary observations on some key aspects of the President's  
proposed budget for FAA for fiscal year 2009, and identifies some
of the current and future challenges facing FAA and the Congress.
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-460T					        
    ACCNO:   A80565						        
  TITLE:     Federal Aviation Administration: Challenges Facing the   
Agency in Fiscal Year 2009 and Beyond				 
     DATE:   02/07/2008 
  SUBJECT:   Air traffic control systems			 
	     Air traffic controllers				 
	     Airports						 
	     Aviation						 
	     Budget outlays					 
	     Cost analysis					 
	     Financial analysis 				 
	     Funds management					 
	     Future budget projections				 
	     Internal controls					 
	     Program evaluation 				 
	     Research and development				 
	     Skilled labor					 
	     Strategic planning 				 
	     Trust funds					 
	     Next Generation Air Transportation 		 
	     System						 
                                                                 

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GAO-08-460T

   

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United States Government Accountability Office: 
GAO: 

Testimony: 

Before the Subcommittee on Aviation, Committee on Transportation and 
Infrastructure, House of Representatives: 

For Release on Delivery: 
Expected at 10:00 a.m. EST: 
Thursday, February 7, 2008: 

Federal Aviation Administration: 

Challenges Facing the Agency in Fiscal Year 2009 and Beyond: 

Statement of Gerald L. Dillingham, Ph.D. Director, Physical 
Infrastructure Issues: 

GAO-08-460T: 

GAO Highlights: 

Highlights of GAO-08-460T, a testimony before the Subcommittee on 
Aviation, Committee on Transportation and Infrastructure, House of 
Representatives. 

Why GAO Did This Study: 

Fiscal year 2009 will be a critical year for the Federal Aviation 
Administration (FAA), with the pending selection of a new 
Administrator, the beginning of the 5-year term of the new Chief 
Operating Officer, and the continuing process of transforming the 
nationï¿½s current air traffic control system to the Next Generation Air 
Transportation System (NextGen)ï¿½a complicated effort to modernize the 
air traffic control system. In addition, FAA is currently operating 
under a temporary reauthorization. Without legislative action, both the 
excise taxes that fund the Airport and Airway Trust Fund (Trust Fund) 
and FAAï¿½s authority to spend from the Trust Fund will expire at the end 
of this month. 

This statement is based on recent reports and discussions with selected 
senior FAA officials and representatives of aviation industry and 
stakeholder groups. This statement provides GAOï¿½s preliminary 
observations on some key aspects of the Presidentï¿½s proposed budget for 
FAA for fiscal year 2009, and identifies some of the current and future 
challenges facing FAA and the Congress. 

What GAO Found: 

Although the Presidentï¿½s budget for FAA proposes major changes in the 
agencyï¿½s funding, the current funding mechanismsï¿½the Trust Fund and the 
General Fund of the U.S. Treasuryï¿½can potentially support FAA 
activities, including NextGen; however, timely reauthorization of the 
authorities to collect Trust Fund revenues and to spend from the Trust 
Fund is critical. The expiration of either or both of these authorities 
could have significant negative effects on FAAï¿½s ability to carry out 
its mission unless other revenue sources and spending authority are 
provided. FAA also has expressed concern that revenues from the current 
funding mechanisms depend heavily on factors, such as ticket prices, 
that are not connected to FAAï¿½s workload and costs. We believe that a 
better alignment of FAAï¿½s revenues and costs can address concerns about 
long-term revenue adequacy, equity, and efficiency as intended, but the 
ability of the proposed funding mechanisms to link revenues and costs 
depends critically on the soundness of FAAï¿½s cost allocation system in 
allocating costs to users. FAA faces a number of challenges in ensuring 
the continued safe and efficient operation of the current National 
Airspace System. According to the Department of Transportation (DOT), 
delays and cancellations during the summer of 2007 exceeded those in 
the summer of 2006. In the near term, DOT and FAA are exploring various 
initiatives to relieve the stress on the system. But FAA also must 
continue to address safety issues, particularly in the area of runway 
safety. FAA is currently deploying a new radar-based ground 
surveillance system and has encouraged airport improvements, such as 
changes to runway layout, markings, signage, and lighting. Nonetheless, 
we recently recommended that FAA prepare a new national runway safety 
plan and address air traffic controller overtime and fatigue issues 
that may affect runway safety. We also have made recommendations 
concerning FAAï¿½s collection and analysis of data, which are key to the 
agencyï¿½s implementation of a risk-based, system safety approach. 
Another challenge facing FAA will be its need to continue hiring and 
training thousands of air traffic controllers over the next decade to 
replace those who will retire and leave for other reasons, particularly 
given that controllers are retiring at a faster rate than FAA 
anticipated. 

FAA also faces a number of management challenges associated with the 
early implementation of NextGenï¿½an enormously complicated undertaking 
due to the technological complexities, numerous stakeholders, and broad 
scope of the effort. As FAA moves closer to undertaking a number of 
major NextGen system acquisitions, a critical component for keeping 
such acquisitions on track will be having the right skill set within 
the agency to successfully manage NextGen programs. Another challenge 
for FAA is developing a new plan for configuring facilities and 
airspace that will support NextGen. In addition, FAA continues to face 
challenges in meeting the research and development requirements of 
NextGen and in establishing credibility with stakeholders that the 
agency is fully committed to and capable of implementing NextGen. 

What GAO Recommends: 

In prior reports, GAO has made recommendations to address a number of 
the management challenges presented in this statement. FAA has begun to 
address GAOï¿½s recommendations, although many have not yet been fully 
implemented. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-460T]. For more information, contact 
Gerald L. Dillingham, Ph.D., at (202) 512-2834 or [email protected]. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to participate in this hearing today to 
discuss the President's fiscal year 2009 budget proposal for the 
Federal Aviation Administration (FAA), which resubmits the 
administration's 2007 proposal to reauthorize FAA and change its 
financing structure. Fiscal year 2009 will be a critical year for FAA, 
with the pending selection of a new Administrator, the beginning of the 
5-year term of the new Chief Operating Officer for the Air Traffic 
Organization (ATO), and the continuing process of transforming the 
nation's current air traffic control system to the Next Generation Air 
Transportation System (NextGen). My testimony today provides GAO's 
observations on some key aspects of FAA's proposed budget and 
identifies some of the current and future challenges facing FAA and 
Congress. 

My statement is based on work that we conducted between January 2008 
and February 2008, including our preliminary review of the President's 
proposed FAA budget for fiscal year 2009, reviews of other key FAA 
documents, discussions with selected senior FAA officials and 
representatives of aviation industry groups, updates of the results of 
prior GAO studies, and preliminary results of our ongoing work. All of 
our studies were conducted in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. A 
list of related GAO products is included at the end of this statement. 

Summary: 

Although the President's budget for FAA proposes major changes in the 
agency's funding, the current funding mechanisms--the Airport and 
Airway Trust Fund (Trust Fund) and the General Fund of the U.S. 
Treasury (General Fund)--can potentially provide sufficient resources 
to support FAA activities, including NextGen; however, timely 
reauthorization is critical. According to recent projections prepared 
by the Congressional Budget Office (CBO), revenues obtained from the 
existing funding mechanisms are projected to increase substantially and 
could support additional spending. However, without legislative action, 
both the excise taxes that fund the Trust Fund and FAA's authority to 
spend from the Trust Fund will expire at the end of this month. The 
expiration of either or both of these authorities could have 
significant negative effects on FAA's ability to carry out its mission 
unless other revenue sources and spending authority are provided. The 
President's budget also proposes changes to FAA's funding mechanisms 
that may be justified by factors other than the need for more revenues. 
For example, FAA has expressed concern that revenues from the current 
funding mechanisms depend heavily on factors, such as ticket prices, 
that are not connected to FAA's workload and costs to maintain, 
operate, and modernize the nation's air traffic control system. We 
believe that a better alignment of FAA's costs and revenues can address 
concerns, as suggested in the administration's reauthorization 
proposal, about long-term revenue adequacy, equity, and efficiency as 
intended. However, the ability of the proposed funding mechanisms to 
link costs and revenues depends critically on the soundness of FAA's 
cost allocation system in allocating costs to users. We found that the 
support for some of FAA's cost allocation methodology's underlying 
assumptions and methods is insufficient, leaving FAA unable to 
conclusively demonstrate the reasonableness of the resulting cost 
assignments. Another proposed change to FAA's budget would align the 
agency's budget accounts with its lines of business. We agree that such 
a restructuring is consistent with FAA's emphasis on aligning costs and 
revenues and could allow FAA to more specifically distinguish those 
funding options that better link costs and revenues; however, some FAA 
activities, such as safety, may not be clearly divisible into discrete 
categories. There could be some ambiguity in how safety activities are 
defined and in how their costs should be allocated between aviation 
users who benefit directly from a safe air traffic control system and 
the public that receives general safety benefits. The President's 
budget also proposes reductions in funding for the Airport Improvement 
Program (AIP) and changes in AIP allocations among airports. The 
proposed funding level of $2.75 billion would reduce AIP grants, 
especially for smaller airports. Moreover, according to FAA, the 
agency's authority to extend grants to airports lapsed at the end of 
calendar year 2007. FAA states that while the Consolidated 
Appropriations Act, 2008,[Footnote 1] extended the collection of 
airline ticket taxes to February 29, 2008, FAA cannot obligate funds 
for AIP after December 31, 2007. As a result, FAA has not made any 
grants this year. For airports, uncertainty over whether they will 
receive their AIP grant this year may delay or increase financing costs 
for projects intended to increase safety, ease congestion, or modernize 
their infrastructure or systems. 

FAA faces a number of challenges in ensuring the continued safe and 
efficient operation of the current National Airspace System (NAS). 
According to the Department of Transportation (DOT), delays and 
cancellations during the summer of 2007 exceeded those in the summer of 
2006. In the near term, DOT and FAA are exploring various initiatives 
to relieve stress on the system. For example, in an effort to reduce 
congestion and delays at New York area airports, DOT and FAA formed an 
Aviation Rulemaking Committee which, among other things, identified 77 
operational initiatives to identify strategies that could ease 
congestion and reduce delays in the New York region. FAA must also 
continue to address safety issues, particularly in the area of runway 
safety. FAA is currently deploying a new radar-based ground 
surveillance system and has encouraged airport improvements, such as 
changes to runway layout, markings, signage, and lighting. Nonetheless, 
we recently recommended that FAA prepare a new national runway safety 
plan and address air traffic controller overtime and fatigue issues 
that may affect runway safety. We have also made recommendations 
concerning FAA's collection and analysis of data, which are key to the 
agency's implementation of a risk-based, system safety approach. 
Another challenge facing FAA will be its need to continue hiring and 
training thousands of air traffic controllers over the next decade to 
replace those who will retire and leave for other reasons, particularly 
since controllers are retiring at a faster rate than FAA anticipated. 
Other immediate challenges FAA faces include maintaining existing 
infrastructure so that the current system continues to operate safely 
and reliably and keeping current system acquisitions on budget and on 
schedule. 

FAA faces a number of management challenges associated with the early 
implementation of NextGen--an enormously complicated undertaking due to 
the technological complexities, numerous stakeholders, and broad scope 
of the effort. As FAA moves closer to undertaking a number of major 
NextGen system acquisitions, a critical component for keeping such 
acquisitions on track will be having the right skill set within the 
agency to successfully manage NextGen programs. NextGen means an 
increasing number of acquisitions and increasing complexity within 
those acquisitions. FAA faces a significant challenge in hiring and 
retaining an adequate acquisition workforce to handle the transition, 
particularly in attracting managers who understand how to apply a 
systems approach to managing acquisitions. A second challenge for FAA 
is developing a new configuration of facilities and airspace that will 
support NextGen. Until a plan for facilities consolidation or 
realignment has been developed, the configurations needed for NextGen 
may not be implemented and potential savings that could help offset the 
cost of NextGen may not be realized. A third challenge that continues 
to face FAA is the need to meet the research and development 
requirements of NextGen. Although a 2006 assessment of NextGen research 
and development requirements led to increased budget requests for 
research and development funding for FAA, there continue to be 
challenges in meeting identified research and development needs. For 
example, if not adequately addressed, the environmental impacts of 
aviation, particularly the noise that affects local communities and the 
emissions that contribute to global warming, will constrain efforts to 
build or expand the runways and airports needed to handle the added 
capacity envisioned for NextGen. Finally, FAA faces a challenge in 
establishing credibility with stakeholders that the agency is fully 
committed to and capable of implementing NextGen. Stakeholders are 
particularly concerned about the lack of a clearly defined and 
transparent governance structure in the FAA organizations that share 
responsibility for implementing NextGen. Stakeholders have expressed a 
belief that one organization or person should be responsible, and thus 
accountable, for NextGen. 

The President's Budget Proposes a Number of Changes in Funding FAA 
Activities, FAA Accounts, and Airports: 

The President's budget proposes major changes in FAA's funding and 
budget accounts. According to FAA, these proposed changes[Footnote 2] 
are intended to provide more stable and reliable mechanisms to pay for 
NextGen. FAA also says that the proposed changes would improve the long-
term revenue adequacy, equity, and efficiency of its funding and over 
time better link revenues with the costs that users of the NAS impose 
on the system. If implemented, the changes would alter the basis for 
funding FAA, in part by recovering the costs of services provided by 
ATO in accordance with the cost assignments in a cost allocation study 
that FAA issued last year. These changes would redistribute the funding 
burden among user groups, increasing general aviation's proportion in 
accordance with the findings of FAA's cost allocation study. 

The Current FAA Funding Mechanisms Can Potentially Provide Sufficient 
Resources to Support FAA Activities, Including NextGen, but Timely 
Reauthorization Is Needed: 

FAA's current funding mechanisms--an appropriation from Trust Fund 
revenues, which come from various excise taxes, combined with a General 
Fund appropriation--have been used to fund the agency's activities for 
many years. Trust Fund revenues fell during the early years of this 
decade as the demand for air travel fell. However, as the number of 
passengers has grown, revenues have also grown, starting in fiscal year 
2004. FAA estimates that revenues will continue to increase if the 
current taxes remain in effect at their current rates. While retaining 
the basic structure for funding FAA, Congress has at times changed the 
mix of excise taxes and some of the tax rates. For example, when the 
taxes were reauthorized in 1997, Congress reduced the passenger ticket 
tax rate from 10 percent to 7.5 percent, but added the passenger 
segment tax.[Footnote 3] Congress has also appropriated varying amounts 
of General Fund revenues for FAA during the past 25 years, ranging from 
0 percent to 59 percent of FAA's budget and averaging around 20 percent 
since fiscal year 1997 (but less than 16 percent for fiscal year 2008). 

As FAA embarks on air traffic control (ATC) modernization through 
NextGen, FAA plans to spend roughly $5.4 billion over the next 5 years 
for NextGen, including both capital costs and development costs. But 
there is considerable uncertainty about how much NextGen will cost in 
the longer term. FAA estimates that the total federal cost for NextGen 
infrastructure through 2025 will range from $15 billion to $22 billion. 
Even if the cost should come in at the high end of the estimate, 
funding NextGen does not require that the current funding mechanisms be 
changed. According to recent CBO projections, revenues obtained from 
the existing funding mechanisms will increase substantially. Assuming 
that the General Fund provides about 16 percent of FAA's budget, CBO 
estimates that through 2018 the Trust Fund can support about $20 
billion in additional spending over the baseline spending levels CBO 
has calculated for FAA (the 2008 funding level, growing with inflation) 
provided that most of that spending occurs after 2010.[Footnote 4] How 
far this money will go to fund modernization is subject to a number of 
uncertainties--including the future cost of NextGen investments, the 
volume of air traffic, the future costs of operating the NAS, and the 
levels of future appropriations for the AIP, all of which may influence 
the funding that would be necessary to support FAA's 
activities.[Footnote 5] 

An additional uncertainty results from the status of FAA's 
reauthorization. Without legislative action, both the excise taxes that 
fund the Trust Fund and FAA's authority to spend from the Trust Fund 
will expire on February 29, 2008. The expiration of either or both of 
these authorities could have significant negative effects on FAA's 
ability to carry out its mission unless other revenue sources and 
spending authority are provided. FAA estimates that two previous lapses 
in taxing authority in 1996 and 1997 resulted in the Trust Fund not 
receiving about $5 billion in revenue. If both authorities expire and 
no additional revenue sources are provided for which FAA would have 
authority to spend, the only funds available to FAA would be General 
Fund revenues appropriated for fiscal year 2008 for FAA's Operations 
account that have not yet been spent. FAA estimates that it could 
maintain a scaled-down version of operations through early June using 
those funds. However, no expenditures could be made for other FAA 
programs because FAA's other accounts--AIP; Facilities and Equipment 
(F&E); and Research, Engineering and Development (RE&D)--can be funded 
only by Trust Fund revenues. As a result, not only would these programs 
have to be shut down, but also no funds would be available to pay the 
salaries of about 4,000 FAA staff who administer these programs, unless 
legislation is passed allowing them to be paid with General Fund 
revenues. Extending FAA's authority to spend from the Trust Fund would 
allow FAA to use the Trust Fund's uncommitted balance, and interest 
earned on that balance, for both operations and other programs. 
However, because the uncommitted balance is relatively low by 
historical standards--about $1.5 billion at the end of fiscal year 
2007, down from over $7 billion at the end of fiscal year 2001--even 
spending all of the uncommitted balance would have only a limited 
effect. FAA estimates that if it spends the uncommitted balance, it 
could maintain scaled-down operations and pay staff until August. In 
this situation, FAA has indicated it would give operations priority and 
seriously curtail other FAA programs. 

Funding Changes in the President's Budget Are Intended to Address 
Concerns about Long-term Revenue Adequacy and the Equity and Efficiency 
of the Current Funding Mechanisms: 

Although the current funding mechanisms can continue to support FAA 
activities, factors other than the need for more revenues may justify a 
major change in FAA's funding structure.[Footnote 6] FAA has expressed 
concern that revenues from the current funding structure depend heavily 
on factors, such as ticket prices, that are not connected to FAA's 
workload and costs to maintain, operate, and modernize the system. 
According to FAA, with the existing funding mechanisms, increases in 
the agency's workload may not over time be accompanied by revenue 
increases because users are not directly charged for the costs that 
they impose on FAA for their use of the NAS. Revenues collected from 
excise taxes are primarily dependent on the price of tickets and the 
number of passengers on planes, while workload is driven by flight 
control and safety activities. This disconnect raises three key 
concerns about the current funding structure--its long-term revenue 
adequacy, equity, and efficiency. Moreover, these three concerns are 
supported by long-term industry trends and FAA forecasts of long-term 
declines in inflation-adjusted air fares (despite recent increases in 
fares due to higher fuel prices), the growing use of smaller aircraft, 
and FAA's 2007 cost allocation study. Many of the changes proposed in 
the President's budget are intended to address these concerns by 
linking FAA's revenues more closely with its costs. 

We believe that a better alignment of FAA's costs and revenues can 
address long-term revenue adequacy, equity, and efficiency concerns as 
intended, but the ability of the proposed funding structure to link 
revenues and costs depends critically on the soundness of FAA's cost 
allocation system in allocating costs to users. We have reported that 
the design of FAA's methodology is generally consistent with the 
principles and methods set forth in federal cost accounting 
standards.[Footnote 7] However, as we also reported, the support for 
some of the methodology's underlying assumptions and methods is 
insufficient, leaving open the possibility that the study might assign 
costs to commercial, general aviation, and exempt users differently. 
Without better support, FAA is not able to conclusively demonstrate the 
reasonableness of the resulting cost assignments. We recommended 
several actions to FAA to provide additional support for the 
reasonableness of its methodology.[Footnote 8] 

Proposed Changes to Budget Accounts Would Have Advantages and 
Disadvantages while Proposed Approach to Determining General Fund 
Contribution Would Better Link that Amount to Public Benefits: 

The proposal to align FAA's budget accounts with FAA's lines of 
business would have advantages and disadvantages. Such a restructuring 
is consistent with FAA's emphasis on aligning costs and revenues and 
could allow FAA to more specifically distinguish those funding options 
that better link costs and revenues. For example, an ATO account 
dedicated to the operation, maintenance, and upgrade of the NAS could 
better enable the agency to charge for direct usage of the NAS. In 
addition, such an account structure could show the costs attributable 
to each line of business, thereby supporting the agency's internal 
financial management. However, some FAA activities may not be clearly 
divisible into discrete categories. For example, FAA proposes a new 
Safety and Operations account to include safety-related activities. 
However, there could be some ambiguity in how safety activities are 
defined and in how their costs should be allocated between aviation 
users who benefit directly from a safe ATC system and the public that 
receives general safety benefits. 

Linking the General Fund contribution to FAA's budget with the public 
benefits that FAA provides, as is proposed, would explicitly recognize 
that users of the system are not the only beneficiaries of the system. 
Such an approach allows for a "bottom up" calculation of the General 
Fund contribution that is based on the different public benefits that 
FAA provides, such as safety and use of the NAS by federal agencies. 
Under the current approach, the General Fund contribution is based on 
how much money is anticipated to be left from Trust Fund revenues to 
fund the Operations account after Trust Fund revenues for that 
particular year have been allocated to fund the AIP, F&E, and RE&D 
accounts. An approach that links a General Fund contribution to public 
benefits is consistent with the principle of public finance that public 
benefits should come from the General Fund and not from user 
contributions. This estimate of public benefits should not, however, be 
viewed as a precise determination. Some aviation activities, such as 
safety, benefit both users and nonusers. Others, such as a national 
airport system that includes small airports receiving federal grants, 
could be seen as a benefit not only to the users of those airports, but 
also to the broader community or the broader public. Such a change in 
the method of determining the General Fund contribution could result in 
an increase or decrease in that contribution, which would then have 
implications for how aviation activities are funded. 

Proposed Changes Would Reduce Grant Funding for Airport Development, 
but Would Allow Airports to Raise Charges: 

The President's budget proposal would reduce AIP funding and would 
change AIP allocations among airports. From 2001 through 2005, funding 
for the nation's 3,400 airports averaged about $13 billion from all 
sources (in 2006 dollars), including about $6.5 billion from bonds 
(issued by airport authorities and state or local governments), about 
$3.6 billion from AIP grants, and (for commercial airports) about $2.2 
billion from passenger facility charges (PFC).[Footnote 9] This level 
of funding is about $1 billion short of airports' planned development 
costs, which total at least $14 billion annually (in 2006 dollars) over 
the next 5 years. Of this $1 billion annual difference between historic 
funding and planned development costs, larger airports account for 
about $600 million annually, while smaller airports foresee a 
difference of about $400 million annually.[Footnote 10] The budget 
proposal would reduce AIP grant funding for fiscal year 2009 by $765 
million from current funding levels (about $3.5 billion in fiscal years 
2006, 2007, and 2008), to about $2.75 billion. In addition, the 
administration's reauthorization proposal for FAA would allow 
commercial airports to increase their PFC charge from a maximum of 
$4.50 to $6 if they gave up certain AIP grant funds. According to our 
calculations, a $6 PFC would have allowed larger airports to increase 
their PFC collections by about $1.1 billion in 2007, while they would 
forgo about $247 million in AIP funds under the proposal.[Footnote 11] 
Conversely, smaller airports, which collect less in PFCs and are more 
reliant on AIP for funding, could have increased their PFC collections 
by about $171 million in 2007, but would have to forgo about $436 
million in AIP funding under the proposal. 

In addition, according to FAA, the agency currently is unable to 
obligate any AIP funds because its authority to extend grants to 
airports lapsed at the end of calendar year 2007. FAA states that while 
the Consolidated Appropriations Act, 2008, extended the collection of 
airline ticket taxes to February 29, 2008, it did not address 
contracting authority for AIP funds. As a result, FAA has not made any 
grants this year. For airports, uncertainty over whether they will 
receive their AIP grant this year may delay or increase the financing 
costs for projects intended to increase safety, ease congestion, or 
modernize their infrastructure or systems. In addition, according to 
FAA, 28 airport sponsors expect to receive $324 million in letter of 
intent (LOI) disbursements in fiscal year 2008.[Footnote 12] Several 
airports have financed capital projects with bonds tied to their LOI 
disbursements and might need to obtain bridge loans to meet payment 
dates or could face heavy financial penalties for late payments if AIP 
grants are not made under the LOI. See appendix I for additional 
information about the effect of the President's proposed budget and 
reauthorization proposal on airports. 

FAA Faces Challenges in Ensuring the Continued Safe and Efficient 
Operation of the Current National Airspace System: 

FAA faces significant challenges in keeping the nation's current 
airspace system running as efficiently as possible given increasing 
demand for air travel. System congestion, and the resulting flight 
delays and cancellations, are serious problems that have worsened in 
recent years. Some of FAA's current safety challenges include 
addressing runway safety; improving aviation safety data to provide an 
early warning of hazards that can lead to accidents; and hiring, 
training, and retaining thousands of air traffic controllers. FAA also 
faces challenges in maintaining its current facilities and in managing 
the costs and schedules of current system acquisitions. 

FAA Faces Challenges in Addressing Increasing System Congestion, 
Delays, and Flight Cancellations: 

According to DOT, delays and cancellations during the summer of 2007 
exceeded those in the summer of 2006. Delays of more than 15 minutes in 
on-time arrivals increased at 51 of the 55 airports tracked by DOT. 
Flight cancellations also rose at the 55 major airports during the 
first 9 months of 2007, increasing 38 percent over the same period in 
2006. 

The causes of increased delays and cancellations in the U.S. aviation 
system are many, but the system is clearly under stress. For example, 
of the 30 percent of flights delayed in the summer of 2007, 
approximately 28 percent were attributed to national aviation system 
delays, 32 percent were attributed to late aircraft arrivals, and 26 
percent were attributed to air carrier delays. In the near term, DOT 
and FAA are exploring various initiatives to relieve stress on the 
system.[Footnote 13] For example, in an effort to reduce congestion and 
delays at New York area airports, DOT and FAA formed an Aviation 
Rulemaking Committee that, among other things, identified 77 
operational initiatives to identify strategies that could ease 
congestion and reduce delays. Some of these initiatives are underway 
and expected to be completed by the summer of 2008. Additionally, in an 
effort to reduce congestion in the New York region by the summer of 
2008, FAA has announced measures to cap hourly operations at John F. 
Kennedy International Airport in New York. In January 2008, FAA 
proposed to amend its policy on airport rates and charges to allow 
airports to vary what airport users are charged based on the time of 
day, the volume of traffic, and airports' future investment needs. 

While these initiatives may help to reduce some congestion before 
summer 2008, in the longer term, the aviation community agrees that 
major investment is required in the ATC system and in airport 
infrastructure to accommodate current and expected future demand for 
air travel. The key challenges in this area are managing a timely 
acquisition and implementation of NextGen and dealing effectively with 
the environmental concerns of communities that are adjacent to airports 
or under the flight paths of arriving and departing aircraft. These 
issues are discussed in greater detail later in this testimony. 

FAA Must Address Increasing Runway Incursions: 

Runway incursions can be considered a precursor to aviation accidents 
and their number and rate have been increasing recently. Incursions 
occur when aircraft enter the runway without authorization; in the most 
serious instances, collisions between aircraft are narrowly avoided. On 
August 16, 2007, for example, at Los Angeles International Airport--one 
of the nation's busiest airports--two commercial aircraft carrying a 
total of 296 people came within 37 feet of colliding during a runway 
incursion. While the number and rate of incursions declined after 
reaching a peak in fiscal year 2001 and remained relatively constant 
for the next 5 years, the overall incursion rate increased during 
fiscal year 2007 and was nearly as high as the fiscal year 2001 peak. 
(See fig. 1.) In addition, serious incursions continue to occur--about 
30 per year since fiscal year 2002--each involving the risk of a 
catastrophic runway collision occurring in the United States. Moreover, 
10 serious incursions occurred in the first quarter of fiscal year 
2008, significantly exceeding the 2 serious incursions that occurred 
during the same time period the previous year. This situation suggests 
that managing the occurrence of runway incursions and minimizing the 
risk of a catastrophic runway collision in the United States remains a 
significant safety challenge for FAA. 

Figure 1: Number and Rate of Runway Incursions from Fiscal Year 1998 
through Fiscal Year 2007: 

[See PDF for image] 

This figure is a vertical bar graph illustrating the Number and Rate of 
Runway Incursions from Fiscal Year 1998 through Fiscal Year 2007. The 
left vertical axis of the graph represents number of runway incursions 
from 0 to 500. The right vertical axis of the graph represents rate of 
runway incursions from 0 to 8. The horizontal axis of the graph 
represents fiscal years from 1998 through 2007. The following data is 
approximated from the graph: 

Fiscal year: 1998; 
Number of runway incursions: 300; 
Rate of runway incursions (per 1 million tower operations): 4.5. 

Fiscal year: 1999; 
Number of runway incursions: 325; 
Rate of runway incursions (per 1 million tower operations): 5. 

Fiscal year: 2000; 
Number of runway incursions: 400; 
Rate of runway incursions (per 1 million tower operations): 6. 

Fiscal year: 2001; 
Number of runway incursions: 400; 
Rate of runway incursions (per 1 million tower operations): 6.25; 

Fiscal year: 2002; 
Number of runway incursions: 330; 
Rate of runway incursions (per 1 million tower operations): 5.5. 

Fiscal year: 2003; 
Number of runway incursions: 310; 
Rate of runway incursions (per 1 million tower operations): 5.5. 

Fiscal year: 2004; 
Number of runway incursions: 310; 
Rate of runway incursions (per 1 million tower operations): 5.5. 

Fiscal year: 2005; 
Number of runway incursions: 310; 
Rate of runway incursions (per 1 million tower operations): 5.5. 

Fiscal year: 2006; 
Number of runway incursions: 310; 
Rate of runway incursions (per 1 million tower operations): 5.5. 

Fiscal year: 2007; 
Number of runway incursions: 350; 
Rate of runway incursions (per 1 million tower operations): 6. 

Source: FAA. 

[End of figure] 

To its credit, FAA has taken a range of actions to address runway 
safety and reduce the risk of collisions, including researching, 
testing, and deploying new technology such as the Airport Surface 
Detection Equipment, Model X (ASDE-X), which is a radar-based ground 
surveillance system. In addition, FAA has encouraged airport 
improvements, such as changes to runway layout, markings, signage, and 
lighting, and has provided training for pilots and air traffic 
controllers. Many of these actions were taken since the number and rate 
of incursions peaked in fiscal year 2001. However, as runway safety 
incidents declined, FAA's runway safety efforts waned, leading us to 
make several recommendations in November 2007.[Footnote 14] We 
recommended that FAA prepare a new national runway safety plan, improve 
its runway incident data collection and analysis capabilities, and 
address air traffic controller overtime and fatigue issues that may 
affect runway safety. 

FAA's Data Limitations Impede Safety Oversight: 

FAA's ability to identify and respond to trends and early warnings of 
safety problems and to manage risk is limited by incomplete and 
inaccurate data. Accurate, comprehensive data are particularly 
important for FAA as it moves away from an oversight approach that 
focuses on labor-intensive inspections to a system safety approach that 
is based on analyzing data to assess and prioritize risks. This change 
in oversight approach is a positive step; however, its effectiveness 
depends on having complete and accurate data and user-friendly 
databases. We have identified data limitations that affect FAA's 
ability to manage risk. For example, we identified problems with the 
completeness of FAA's safety inspection data; information on the 
performance of "designees," who include over 13,000 individuals and 
organizations that have been delegated to act on the agency's behalf; 
and data on air ambulance operations. We also identified problems with 
the completeness and usefulness of FAA's enforcement database. To 
address these issues, we have previously recommended that FAA improve 
the accuracy and completeness of its safety data and its analysis of 
those data.[Footnote 15] To its credit, FAA has made progress in this 
area, but more work remains. For example, our recent review of runway 
safety identified additional problems with the completeness of 
information on runway incursions. 

FAA considers the integration and sharing of high-quality, relevant, 
and timely aviation safety information critical to its system safety 
approach, particularly if the air transportation system grows 
significantly and increases in complexity, as anticipated. To improve 
its access to data, FAA is in the early stages of developing the 
Aviation Safety Information Analysis and Sharing (ASIAS)--a capability 
to integrate aviation safety data that is distributed across the 
aviation industry into information on the operational performance and 
safety of the aviation system. During fiscal year 2007, FAA established 
memorandums of understanding with seven commercial airlines to obtain 
access to certain safety data. According to FAA, ASIAS currently can 
access about 20 government and industry systems including de-identified 
reports provided by several airlines. An enterprise architecture, or 
blueprint for the initiative, is expected in September 2008. However, 
it will be important for FAA to address the quality issues that we have 
identified with its various databases as it moves forward with linking 
them through ASIAS. 

FAA Will Be Challenged to Continue Hiring and Training Thousands of Air 
Traffic Controllers: 

During the coming decade, FAA will be challenged to continue hiring and 
training thousands of air traffic controllers to replace those who will 
retire and leave for other reasons. FAA projects that about 72 percent 
of its controller workforce will become eligible for retirement by 2016 
and that between 2007 and 2016 it will lose a total of 13,527 
controllers through retirement and other reasons. To replace these 
controllers, FAA plans to hire about 15,900 new controllers from fiscal 
years 2007 through 2016.[Footnote 16] In fiscal year 2007, FAA hired 
1,815 controllers, bringing its total controller workforce to 14,874, 
or slightly more than its planned target of 14,807. FAA anticipates 
hiring 1,877 controllers in fiscal year 2008, which would bring the 
total number of air traffic controllers to 15,130. Figure 2 shows the 
estimated numbers of losses and planned hires for fiscal years 2008 
through 2016. 

Figure 2: FAA's Projected Air Traffic Controller Losses and Hiring, 
Fiscal Years 2008-2016: 

[See PDF for image] 

This figure is a vertical bar graph illustrating FAA's Projected Air 
Traffic Controller Losses and Hiring, Fiscal Years 2008-2016. The 
vertical axis of the graph represents annual losses/hires. The 
horizontal axis of the graph represents years from 2008 through 2016. 
Bar represent losses and new hires for each year. The following data is 
approximated from the graph: 

Year: 2008; 
Losses (with academy attrition): 1,250; 
New hires: 1,900. 

Year: 2009; 
Losses (with academy attrition): 1,275; 
New hires: 1,500. 

Year: 2010; 
Losses (with academy attrition): 1,300; 
New hires: 1,600. 

Year: 2011; 
Losses (with academy attrition): 1,350; 
New hires: 1,600. 

Year: 2012; 
Losses (with academy attrition): 1,400; 
New hires: 1,600. 

Year: 2013; 
Losses (with academy attrition): 1,400; 
New hires: 1,500. 

Year: 2014; 
Losses (with academy attrition): 1,350; 
New hires: 1,450. 

Year: 2015; 
Losses (with academy attrition): 1,300; 
New hires: 1,400. 

Year: 2016; 
Losses (with academy attrition): 1,250; 
New hires: 1,300. 

Source: FAA. 

[End of figure] 

Recent events may exacerbate the hiring situation. Data indicate that 
controllers are retiring at a faster rate than FAA anticipated. For 
fiscal year 2006, FAA estimated that 467 controllers would retire, but 
583 actually retired--about 25 percent more than planned. For fiscal 
year 2007, FAA anticipated 700 controller retirements, while 828 
controllers actually retired--an 18 percent increase over anticipated 
retirements. FAA incorporates each year's retirement numbers into its 
plans for future years, and has increased its hiring to compensate for 
greater than expected retirements. For example, in fiscal year 2008, 
FAA plans to hire 1,877 controllers, a significant increase over the 
planned 1,420 hires reflected previously in the Controller Workforce 
Plan, published in March 2007.[Footnote 17] FAA recognizes that some of 
these increases in retirements may be attributed to recent labor 
disputes and disagreements over the contract that went into effect in 
2006. In the fall of 2007, FAA began interviewing departing controllers 
to learn their reasons for leaving the workforce. 

In addition to the hiring situation, FAA will be challenged to retain 
sufficient numbers of experienced controllers to handle a growing 
volume of traffic while also addressing the on-the-job training needs 
of a large number of inexperienced controllers. According to FAA, about 
one quarter of the controller workforce, including Academy students, 
had less than 5 years of experience at the end of fiscal year 2007. 
Because it can take up to 3 to 5 years for a controller to become 
certified, within a few years, trainees could constitute a larger 
portion of the controller workforce. Our analysis of FAA's hiring and 
retirement projections indicates that by 2010, up to 40 percent of the 
controller workforce will have less than 5 years of experience. This 
high percentage of newly hired controllers will continue for a number 
of years, making it important for FAA to carefully balance the ratio of 
trainees to certified controllers at each air traffic control facility. 
Additionally, more controllers are failing their developmental 
training, increasing from about 6 percent to about 9 percent of total 
hires from 2006 to 2007. Another training challenge, as the transition 
to NextGen moves forward, will be to train controllers on the current 
system and on new air traffic management procedures envisioned for the 
future, such as precise navigation procedures that minimize pilot- 
controller communication. 

FAA Will Be Challenged to Maintain Current Facilities: 

FAA faces an immediate challenge in maintaining and repairing existing 
infrastructure so that the current system continues to operate safely 
and reliably. FAA is currently responsible for maintaining over 400 
terminal facilities. While FAA has not assessed the physical condition 
of all of these facilities, the agency rated the average condition of 
89 of them as "fair," with some rated "good" and others "very poor." 
Based on the assessment of these 89 facilities, FAA estimated that a 
one-time cost of repair to all of its terminal facilities would range 
between $250 million and $350 million. Two FAA employee unions, the 
National Air Traffic Controllers Association and the Professional 
Aviation Safety Specialists, contend that these facilities are 
deteriorating because of lack of maintenance and that working 
conditions are unsafe due to leaking roofs, deteriorating walls and 
ceilings, and obsolete air-conditioning systems. According to FAA 
officials, while some of these facilities can accommodate the new 
technologies and systems of NextGen, many of them are not consistent 
with the configurations that will be needed under NextGen. To the 
extent that NextGen technologies and systems have greater capabilities 
than the legacy systems now in use, fewer facilities will be needed to 
control airspace. As a result, the costs of repairing and maintaining 
the current number of facilities may be reduced. In the meantime, FAA 
will have to manage its given budgetary resources so that it can 
maintain legacy systems and legacy infrastructure while configuring the 
NAS to accommodate NextGen technologies and operations. The potential 
impact on the cost of NextGen in this circumstance is discussed later 
in this testimony. 

FAA Must Be Able to Successfully Control Costs and Schedules for 
Current ATC Systems Acquisitions: 

A cost-effective and timely transition to NextGen depends in large part 
on FAA's ability to keep the current portfolio of ATC systems 
acquisitions within budget and on schedule. In 1995, we designated 
FAA's ATC modernization program a high-risk initiative because of its 
cost, complexity, and systemic management and acquisition problems. We 
have reported that, during the last few years, FAA has made significant 
progress in acquiring ATC systems within budget and schedule goals. 
These achievements came in part through implementing businesslike 
operations and procedures for acquiring and managing ATC systems. For 
example, FAA has introduced earned value management for all new major 
acquisitions as a way to prevent, detect, report, and correct problems 
in acquiring major systems.[Footnote 18] 

In 2003, as part of its efforts to operate in a more businesslike 
fashion, FAA established annual acquisition performance goals that 
called for a high percentage of its major acquisition programs to be 
within 10 percent of budget and on schedule. For fiscal years 2004 
through 2006, FAA reported exceeding these annual goals. We recently 
examined how FAA was measuring its performance and reporting on its 
goals related to systems acquisitions. We found that because FAA 
measures progress related only to current program baselines and annual 
milestones, FAA's performance reporting could mask budget increases and 
schedule delays, possibly misleading stakeholders, including Congress, 
as to the agency's actual performance in acquiring ATC systems. In 
December 2007, we recommended that FAA identify or establish a vehicle 
for regularly reporting to Congress and the public on the agency's 
overall, long-term performance in acquiring ATC systems by providing 
original budget and schedule baselines for each rebaselined program and 
the reasons for the rebaselining. We also recommended that FAA report 
information on the potential effects that any budget increases or 
schedule slippages could have on the overall transition to 
NextGen.[Footnote 19] 

FAA Faces a Number of Management Challenges as It Begins to Implement 
NextGen: 

The transformation of the NAS is one of the federal government's most 
complex undertakings. Although NextGen is a collaborative effort, the 
bulk of the responsibility for successful implementation and transition 
belongs to FAA. The agency therefore faces a number of management 
challenges as it begins implementing NextGen systems and procedures. 
These challenges include hiring and retaining the right skill set 
within FAA, developing a facility plan for NextGen, meeting the 
research and development needs of NextGen, and establishing credibility 
with stakeholders regarding the agency's NextGen efforts. 

FAA Faces a Challenge in Hiring and Retaining Staff with the Right 
Skills to Manage the Implementation of NextGen: 

As FAA moves closer to undertaking a number of major NextGen system 
acquisitions, a critical component for keeping such acquisitions on 
track will be having the right skill set within the agency to 
successfully manage NextGen programs. In November 2006, we recommended 
that FAA examine its strengths and weaknesses with regard to the 
technical expertise and contract management expertise that will be 
required to define, implement, and integrate the numerous complex 
programs involved in the transition to NextGen.[Footnote 20] In 
response to our recommendation, FAA contracted with the National 
Academy of Public Administration (NAPA) to conduct a workforce needs 
analysis. In December 2007, NAPA reported its findings and observations 
to FAA from the first phase of its study,[Footnote 21] which focused on 
identifying the required workforce competencies and defining strategies 
for obtaining the necessary expertise. We consider this a necessary but 
not yet sufficient response to our recommendation. The challenge 
remains to compare FAA's existing and needed staff resources, determine 
what gaps exist, and fill those gaps with internal or external 
resources in a timely manner. 

More recently, FAA's Chief Acquisitions Officer, in discussing the 
challenges that the agency must manage in the transition to Next Gen, 
concurred with our assessment of FAA's hiring challenges. He stated 
that transitioning to NextGen means an increasing number of 
acquisitions and increasing complexity within those acquisitions, and 
that the agency faces a significant challenge in having an adequate 
acquisition workforce to handle the transition. The agency faces a 
particular challenge in attracting acquisitions managers who understand 
how to apply a systems approach to managing acquisitions.[Footnote 22] 

A number of FAA's acquisition staff have retired or left the agency to 
take positions in other organizations. In response, according to FAA, 
the agency has increased its recruiting efforts and is working to 
establish internships and university programs as means of developing 
qualified staff. Nonetheless, according to the Chief Acquisitions 
Officer, FAA was able to hire only enough acquisition staff in 2007 to 
replace those that had left. The challenge for FAA is to increase its 
hiring beyond one-for-one replacement to meet its growing human capital 
needs in this area, as well as to find ways to further streamline and 
automate its procurement process to increase staff productivity. 

FAA Will Be Challenged to Develop a Facility Plan That Takes Maximum 
Advantage of NextGen Technologies: 

To fully realize all of NextGen's capabilities, a new configuration of 
facilities and airspace will be required that is consistent with 
NextGen. A provision in the administration's reauthorization proposal 
directs the Secretary of Transportation to establish a working group on 
facilities consolidation to develop and report its recommendations to 
Congress before any facilities or services are realigned or 
consolidated. However, FAA has not yet developed or presented a 
comprehensive facilities consolidation plan. According to an FAA 
official, the agency plans to report on the cost implications of 
reconfiguring its facilities in 2009. Until a plan for facilities 
consolidation or realignment has been developed, the configurations 
needed for NextGen cannot be implemented and potential savings that 
could help offset the cost of NextGen will not be realized. Some FAA 
officials have said that planned facility maintenance and construction 
based on the current ATC system are significant cost drivers that 
could, without reconfiguration, increase the cost of NextGen. 

FAA Faces Challenges in Meeting the Research and Development Needs of 
NextGen: 

Applied research and development is critical for the transition to 
NextGen because it will help to reduce risk by better defining and 
demonstrating new capabilities, setting parameters for the 
certification of new systems, and informing decisions about the later 
transfer of systems to industry for deployment into the NAS. In my 
testimony before this Subcommittee last February, I noted that there 
was some uncertainty over which entities would fund and conduct the 
research and development needed to transition to NextGen. Although FAA 
and the Joint Planning and Development Office (JPDO) have taken steps 
to address these issues, some uncertainty still remains. In the past, a 
significant portion of aeronautics research and development, including 
intermediate technology development, was performed by NASA. FAA has 
determined that research gaps now exist as a result of both the 
administration's cuts to aeronautical research funding and the expanded 
requirements for NextGen. While NASA still plans to focus some of its 
research on NextGen needs, the agency is moving toward a focus on 
fundamental research and away from developmental work and demonstration 
projects. According to an FAA official, FAA and JPDO are currently 
developing a written agreement that will address NextGen's most 
pressing needs in fundamental research. 

In 2006, officials from FAA and JPDO initiated an assessment of NextGen 
research and development requirements. Although this initial assessment 
led to increased budget requests for FAA to help lessen the research 
and development gaps, there continue to be challenges in filling 
identified research and development needs. For example, if not 
adequately addressed, the environmental impacts of aviation, 
particularly the noise that affects local communities and the emissions 
that contribute to global warming, will constrain efforts to build or 
expand the runways and airports needed to handle the added capacity 
envisioned for NextGen.[Footnote 23] In an effort to move noise and 
emissions reduction technologies beyond NASA's research stage, the 
administration's proposal contains a provision that would create the 
Continuous Lower Energy, Emissions and Noise (CLEEN) program. The CLEEN 
initiative would create a program for the development, maturation, and 
certification of airframe technologies for aircraft over the next 10 
years to reduce aviation noise and emissions.[Footnote 24] According to 
FAA, the program is intended to accelerate near-term technology 
maturation and to provide an incentive for manufacturers to equip 
aircraft with noise reduction technologies. FAA's budget request for 
fiscal year 2009 includes provisions requesting an increase in research 
and development funding to support the integration and implementation 
of NextGen programs and the CLEEN initiative. 

In spite of these developments, it is still unclear how NextGen's 
developmental research needs will be addressed. Some observers believe 
that FAA has neither the research and development infrastructure nor 
the funding to address the developmental research needs for NextGen. 
According to a draft report by an advisory committee to FAA--the 
Research, Engineering and Development Advisory Committee--FAA would 
need at least $100 million annually in increased funding to perform 
this research and development work. Moreover, establishing the 
infrastructure within FAA could delay the implementation of NextGen by 
5 years. Unless NextGen's developmental research needs are met, 
technology transfers to industry for further development will also 
delay the implementation of NextGen, including capabilities aimed at 
increasing the safety, efficiency, and capacity of the system. 

FAA Faces a Challenge in Assuring Stakeholders That It Is Fully 
Committed to NextGen: 

Some industry stakeholders believe that FAA may not be fully committed 
to NextGen, in part because FAA has stopped some past modernization 
efforts. An example that is often cited is a partnership between FAA 
and a major airline to develop a datalink communications system that 
transmitted e-mail-like messages between controllers and pilots. The 
airline invested in this technology by equipping some of its aircraft, 
but, according to FAA, the agency and the airline subsequently agreed 
to cancel the program. 

In addition, some stakeholders have expressed a number of concerns 
about how NextGen is currently being implemented. First, some 
stakeholders are concerned about whether there is a clearly defined and 
transparent governance structure in the FAA organizations that share 
responsibility for implementing NextGen. These stakeholders have 
expressed a belief that one organization or person should be 
responsible and, thus, accountable for NextGen. Second, some 
stakeholders are concerned that NextGen efforts are not proceeding as 
quickly as needed. These stakeholders note that existing technologies 
could be implemented more quickly and more strategically than FAA's 
current plans allow. For example, the technologies for more precise 
navigation are available and in use by some airlines at some airports. 
However, because FAA has not developed all of the necessary 
implementation procedures for some critical city-pairs, some airlines 
cannot take full strategic advantage of these technologies. Third, some 
stakeholders have noted that some FAA implementation priorities will 
reduce costs immediately for FAA, but require airlines to make costly 
investments that will not begin to yield a return for them until 2020. 
Some stakeholders have suggested that returns on investment to industry 
can be accelerated if a regional implementation approach is used. To 
gain credibility and buy-in with stakeholders, FAA will have to address 
stakeholders' concerns about NextGen governance, implementing 
technologies more quickly, and structuring the required industry 
investments so as to yield returns on investment more quickly. 

Concluding Observations: 

FAA faces numerous challenges in 2009 and beyond to maintain the safety 
and efficiency of the current system and to successfully manage the 
implementation of NextGen--one of the federal government's most complex 
undertakings. Maintaining one of the safest systems in the world is 
complicated by the steadily increasing demands placed on the system 
while FAA's facilities and current technologies continue to age. As you 
consider the President's budget for fiscal year 2009, it is important 
to remember that a timely reauthorization is critical to ensuring the 
continuity of FAA's current programs and the agency's continuing 
progress toward NextGen. 

Mr. Chairman, this concludes my prepared statement. I would be pleased 
to respond to any questions from you or other Members of the 
Subcommittee. 

GAO Contact and Staff Acknowledgments: 

For further information on this statement, please contact Gerald L. 
Dillingham, Ph.D., at (202) 512-2834 or [email protected]. 
Individuals making key contributions to this report include Faye 
Morrison (Assistant Director), Paul Aussendorf, Jay Cherlow, Elizabeth 
Eisenstadt, Carol Henn, Bert Japikse, Edward Laughlin, Maureen Luna- 
Long, Maren McAvoy, Edmond Menoche, Richard Scott, Teresa Spisak, and 
Maria Wallace. 

[End of section] 

Appendix I: Additional Information on How Proposed Budget Changes Might 
Affect FAA's Ability to Fund Airports and Other Capital Projects: 

The President's budget and reauthorization proposal contain reductions 
in funding for the Airport Improvement Program (AIP), changes in AIP 
allocations among airports, and an increase in the cap on the Passenger 
Facility Charge (PFC) program for commercial airport development 
projects.[Footnote 25] Airports are an integral part of the nation's 
transportation system, and maintaining their safety and efficiency is 
an important Federal Aviation Administration (FAA) responsibility. To 
this end, FAA administers the AIP, which in fiscal year 2007 provided 
$3.5 billion in federal grants for development projects at the entire 
range of the nation's 3,400 airports--from small general aviation 
airports to the very largest that handle several million passengers per 
year. In addition, FAA administers the PFC program, which provided an 
estimated $2.7 billion during 2007. 

Last year, we reported that the funding level for airports is about $1 
billion less annually than planned development costs. Over the next 5 
years, planned airport development costs total at least $14 billion 
annually (in 2006 dollars).[Footnote 26] From 2001 through 2005, 
airports' historical funding averaged about $13 billion per year (also 
in 2006 dollars) from all sources. This amount covers all types of 
projects, including those not eligible for federal grants. The primary 
source of this funding was bonds, which averaged almost $6.5 billion 
per year, followed by federal grants, PFCs, and state and local grants 
(which averaged $3.6 billion, $2.2 billion, and $700 million per year, 
respectively). Of this $1 billion annual difference between historic 
funding and planned development costs, larger airports account for 
about $600 million annually, while smaller airports foresee a 
difference of about $400 million annually[Footnote 27] 

The President's budget and reauthorization proposal for AIP would 
decrease potential funding for all airports and shift more funding from 
airport entitlements to funds under FAA's discretion. The President's 
budget reduces AIP funding to $2.75 billion from its past level of $3.5 
billion in fiscal years 2006, 2007, and 2008. Table 1 compares AIP 
funding allocations at $2.75 billion to the current funding level of 
$3.5 billion. To make more discretionary grants available, the 
administration's reauthorization proposal would also remove the funding 
trigger in current law that doubles the amount of entitlement funds 
airports receive if the overall AIP funding level is above $3.2 
billion. According to FAA officials, their objective is to increase the 
amount of discretionary grants for airports so that higher-priority 
projects can be funded. 

Table 1: Estimated AIP Distribution under Alternative Funding Levels 
and Allocations (in millions): 

Primary airport entitlements[A]: 
$2,750 (proposed FY 2009) Administration's reauthorization proposal*: 
$629; 
$3,500 (actual FY 2006) Current funding allocations: $864. 

Other entitlements: 
$2,750 (proposed FY 2009) Administration's reauthorization proposal*: 
709; 
$3,500 (actual FY 2006) Current funding allocations: 816. 

Carryover entitlements[B]: 
$2,750 (proposed FY 2009) Administration's reauthorization proposal*: 
432; 
$3,500 (actual FY 2006) Current funding allocations: 432. 

Small airport fund: 
$2,750 (proposed FY 2009) Administration's reauthorization proposal*: 
0; 
$3,500 (actual FY 2006) Current funding allocations: 428. 

Discretionary and set aside grants[C]: 
$2,750 (proposed FY 2009) Administration's reauthorization proposal*: 
866; 
$3,500 (actual FY 2006) Current funding allocations: 845. 

Total AIP funds available for grants[D]: 
$2,750 (proposed FY 2009) Administration's reauthorization proposal*: 
$2,636; 
$3,500 (actual FY 2006) Current funding allocations: $3,386. 

Source: FAA. 

[*] Assumes that fiscal year 2009 funding is allocated according to the 
same reauthorization formulas as proposed in 2007. 

[A] Includes entitlements for nonprimary, cargo, and Alaskan airports. 

[B] Funds that some airports can claim to use in the fiscal year in 
which the amount was apportioned and 2 fiscal years immediately after 
that year. 

[C] Funds that are available for use on AIP-eligible projects at FAA's 
discretion. This includes funds set aside for such things as noise 
planning and programming, reliever airports and capacity, safety, 
security, and noise projects. It also includes discretionary grants 
that can be used for any AIP eligible project at any airport. 

[D] The funding available for grants after the 2006 rescission and 
deductions for airport research, other programs, and administrative 
costs. 

[End of table] 

For smaller airports, the effect of the administration's proposal is 
greater because they are more dependent on AIP than other funding 
sources. At a funding level of $2.75 billion, the proposal would reduce 
entitlements and other funding dedicated to small airports by $436 
million (see table 2). At a funding level of $3.5 billion in AIP 
funding, smaller airports would lose $75 million in entitlements and 
other dedicated funds under FAA's proposal, but discretionary funds 
would increase by $282 million, making it less certain how smaller 
airports would fare overall. 

Table 2: Effect of Proposed AIP Reauthorization Formula on Smaller 
Airports Assuming New Budget Level (dollars in millions): 

Funding categories: Entitlements; 
Current law at $3.5 billion: $1,680; 
Proposed law at $2.75 billion: $1,244; 
Difference from current: -436; 
Proposed law at $3.5 billion: $1,605; 
Difference from current: -75. 

Funding categories: Discretionary; 
Current law at $3.5 billion: 510; 
Proposed law at $2.75 billion: 519; 
Difference from current: +9; 
Proposed law at $3.5 billion: 792; 
Difference from current: +282. 

Source: GAO analysis of FAA data. 

[End of table] 

The administration's reauthorization proposal would also allow airports 
to increase their PFC to a maximum of $6 and allow airports to use 
their PFC collections for any airport projects while forgoing their 
entitlement funds. Based on calculations we did last year, a $6 PFC 
could have generated an additional $1.1 billion for larger airports in 
2007, exceeding the $247 million in entitlements that FAA estimates 
they would forgo under their reauthorization proposal (see table 
3).[Footnote 28] However, smaller airports (small and non-hub) would 
not benefit as much from this ability to increase PFCs because they 
collect less in PFCs and are more reliant on AIP for funding. A change 
to a $6 PFC could yield as much as an additional $171 million for 
smaller airports if they all imposed a $6 PFC. On a net basis, this 
relatively small increase in PFCs would not compensate smaller airports 
for the $436 million reduction in AIP funding at a $2.75 billion 
funding level. 

Table 3: Projected PFC Collections with a $6 PFC (dollars in millions): 

Airport size: Large hub; 
2007 PFC collections (estimated): $1,869; 
If all primary airports had a $6 PFC[A]: $2,696; 
Increase over 2007 collections: $827. 

Airport size: Medium hub; 
2007 PFC collections (estimated): $486; 
If all primary airports had a $6 PFC[A]: $782; 
Increase over 2007 collections: $295. 

Airport size: Subtotal; 
2007 PFC collections (estimated): $2,356; 
If all primary airports had a $6 PFC[A]: $3,479; 
Increase over 2007 collections: $1,123. 

Airport size: Small hub; 
2007 PFC collections (estimated): $184; 
If all primary airports had a $6 PFC[A]: $303; 
Increase over 2007 collections: $119. 

Airport size: Non hub; 
2007 PFC collections (estimated): $71; 
If all primary airports had a $6 PFC[A]: $123; 
Increase over 2007 collections: $52. 

Airport size: Subtotal; 
2007 PFC collections (estimated): $255; 
If all primary airports had a $6 PFC[A]: $426; 
Increase over 2007 collections: $171. 

Airport size: Total; 
2007 PFC collections (estimated): $2,611; 
If all primary airports had a $6 PFC[A]: $3,905; 
Increase over 2007 collections: $1,294. 

Source: GAO analysis of FAA data. 

[A] There are currently 382 primary airports eligible to apply for a 
PFC. 

[End of table] 

[End of section] 

Related GAO Products: 

Air Traffic Control: FAA Reports Progress in System Acquisitions, but 
Changes in Performance Measurement Could Improve Usefulness of 
Information. GAO-08-42. Washington, D.C.: December 18, 2007. 

Aviation Runway and Ramp Safety: Sustained Efforts to Address 
Leadership, Technology, and Other Challenges Needed to Reduce Accidents 
and Incidents. GAO-08-29. Washington, D.C.: November 20, 2007. 

Aviation and the Environment: Impact of Aviation Noise on Communities 
Presents Challenges for Airport Operations and Future Growth of the 
National Airspace System. GAO-08-216T. Washington, D.C.: October 24, 
2007. 

Assigning Air Traffic Control Costs to Users: Elements of FAA's 
Methodology Are Generally Consistent with Standards but Certain 
Assumptions and Methods Need Additional Support. GAO-08-76. Washington, 
D.C.: October 19, 2007. 

Aviation Finance: Observations on the Current FAA Funding Structure's 
Support for Aviation Activities, Issues Affecting Future Costs, and 
Proposed Funding Changes. GAO-07-1163T. Washington, D.C.: August 1, 
2007. 

Federal Aviation Administration: Viability of Current Funding Structure 
for Aviation Activities and Observations on Funding Provisions of 
Reauthorization Proposals. GAO-07-1104T. Washington, D.C.: July 12, 
2007. 

Airport Finance: Observations on Planned Airport Development Costs and 
Funding Levels and the Administration's Proposed Changes in the Airport 
Improvement Program. GAO-07-885. Washington, D.C.: June 29, 2007. 

Airport Finance: Preliminary Analysis Indicates Proposed Changes in the 
Airport Improvement Program May Not Resolve Funding Needs for Smaller 
Airports. GAO-07-617T. Washington, D.C.: March 28, 2007. 

Next Generation Air Transportation System: Progress and Challenges in 
Planning and Implementing the Transformation of the National Airspace 
System. GAO-07-649T. Washington, D.C.: March 22, 2007. 

Federal Aviation Administration: Key Issues in Ensuring the Efficient 
Development and Safe Operation of the Next Generation Air 
Transportation System. GAO-07-636T. Washington, D.C.: March 22, 2007. 

Federal Aviation Administration: Observations on Selected Changes to 
FAA's Funding and Budget Structure in the Administration's 
Reauthorization Proposal. GAO-07-625T. Washington, D.C.: March 21, 
2007. 

Performance and Accountability: Transportation Challenges Facing 
Congress and the Department of Transportation. GAO-07-545T. Washington, 
D.C.: March 6, 2007. 

Aviation Safety: Improved Data Collection Needed for Effective 
Oversight of Air Ambulance Industry. GAO-07-353. Washington, D.C.: 
February 21, 2007. 

Federal Aviation Administration: Challenges Facing the Agency in Fiscal 
Year 2008 and Beyond. GAO-07-490T. Washington, D.C.: February 14, 2007. 

Next Generation Air Transportation System: Progress and Challenges 
Associated with the Transformation of the National Airspace System. GAO-
07-25. Washington, D.C.: November 13, 2006. 

Aviation Finance: Observations on Potential FAA Funding Options. GAO- 
06-973. Washington, D.C.: September 29, 2006. 

Aviation Safety: FAA's Safety Efforts Generally Strong but Face 
Challenges. GAO-06-1091T. Washington, D.C.: September 20, 2006. 

Aviation Safety: System Safety Approach Needs Further Integration into 
FAA's Oversight of Airlines. GAO-05-726. Washington, D.C.: September 
28, 2005. 

Aviation Safety: FAA Needs to Strengthen the Management of Its 
Designees Programs. GAO-05-40. Washington, D.C.: October 8, 2004. 

Aviation Safety: Better Management Controls are Needed to Improve FAA's 
Safety Enforcement and Compliance Efforts. GAO-04-646. Washington, 
D.C.: July 6, 2004. 

Passenger Facility Charges: Program Implementation and the Potential 
Effects of Proposed Changes. GAO/RCED-99-138. Washington, D.C.: May 19, 
1999. 

[End of section] 

Footnotes: 

[1] Pub. L. 110-161. 

[2] These funding changes include (1) introducing user charges for 
commercial aircraft based on the cost of the air traffic control 
services they receive, (2) eliminating many current taxes, (3) 
substantially increasing the fuel taxes general aviation operators pay, 
(4) charging both commercial and general aviation a fuel tax to pay for 
airport capital improvements, the Essential Air Service program, and 
air traffic system research and development, (5) modifying FAA's budget 
accounts to align with FAA's activities or lines of business, and (6) 
linking the contribution to FAA's budget from the General Fund of the 
U.S. Treasury to the public benefits that FAA provides. These changes 
are proposed to begin in fiscal year 2010. 

[3] At that time, Congress also increased the international departure 
tax from $6 to $12 per person, applied this tax to international 
arrivals, and added the frequent flyer tax and the Hawaii/Alaska 
passenger taxes. 

[4] With a larger General Fund contribution toward FAA's budget, the 
Trust Fund would be able to support a higher level of additional 
spending beyond the baseline level. For example, in testimony last 
year, using a fiscal year 2007 baseline in which General Fund revenues 
provided about 19 percent of FAA's budget, CBO estimated that the Trust 
Fund would be able to support about $22 billion in additional spending 
over the fiscal year 2007 baseline level, provided most of the spending 
occurs after 2010. 

[5] If the desired level of spending exceeded what was likely to be 
available from the Trust Fund at current tax rates, Congress could make 
further changes within the current funding structure that would provide 
FAA with additional revenue. For example, Congress could raise the 
rates on one or more of the current excise taxes or could provide more 
General Fund revenues for FAA, although the nation's fiscal imbalance 
may make a larger contribution from this source difficult. 

[6] For a more complete discussion of options for funding FAA, see GAO, 
Aviation Finance: Observations on Potential FAA Funding Options, GAO-06-
973 (Washington, D.C.: Sept. 29, 2006). 

[7] GAO, Assigning Air Traffic Control Costs to Users: Elements of 
FAA's Methodology Are Generally Consistent with Standards but Certain 
Assumptions and Methods Need Additional Support, GAO-08-76 (Washington, 
D.C.: Oct. 19, 2007). 

[8] GAO-08-76. 

[9] Airports also received funding from state and local grants and 
other sources. 

[10] We follow conventions established in GAO's prior reports on 
airport finance in differentiating between larger airports (67 large- 
and medium-hub airports) and smaller airports (all other categories of 
commercial and general aviation airports). 

[11] GAO, Airport Finance: Observations on Planned Airport Development 
Costs and Funding Levels and the Administration's Proposed Changes in 
the Airport Improvement Program, GAO-07-885 (Washington, D.C.: June 29, 
2007). 

[12] The LOI program helps fund large-scale capacity projects at 
primary or reliever airports. LOIs state that FAA intends to obligate 
AIP discretionary and entitlement funds from future budgetary authority 
in an amount not greater than the federal government's share of 
allowable costs for that project. FAA issues an LOI to state that 
reimbursement will be made according to a given schedule as funds 
become available from Congress each year over the term of the LOI. 

[13] We are currently conducting a study examining FAA's efforts to 
reduce congestion through airspace redesign in the New York, New 
Jersey, and Philadelphia, Pennsylvania region. 

[14] GAO, Aviation Runway and Ramp Safety: Sustained Efforts to Address 
Leadership, Technology, and Other Challenges Needed to Reduce Accidents 
and Incidents, GAO-08-29 (Washington, D.C.: Nov. 20, 2007). 

[15] See GAO, Aviation Safety: Improved Data Collection Needed for 
Effective Oversight of Air Ambulance Industry, GAO-07-353 (Washington, 
D.C.: Feb. 21, 2007); Aviation Safety: System Safety Approach Needs 
Further Integration into FAA's Oversight of Airlines, GAO-05-726 
(Washington, D.C.: Sept. 28, 2005); Aviation Safety: FAA Needs to 
Strengthen the Management of Its Designees Programs, GAO-05-40 
(Washington, D.C.: Oct. 8, 2004); and Aviation Safety: Better 
Management Controls are Needed to Improve FAA's Safety Enforcement and 
Compliance Efforts, GAO-04-646 (Washington, D.C.: July 6, 2004). 

[16] Although air traffic is expected to increase significantly over 
the next decade, FAA expects that NextGen technologies and procedures 
will allow air traffic controllers to be more productive. Thus, FAA 
does not currently plan for any dramatic increases in overall 
controller staffing through 2016. 

[17] According to the President's budget for fiscal year 2009, FAA 
plans to further increase its hiring of controllers in fiscal year 
2009. 

[18] We are currently conducting an examination of FAA's implementation 
of earned value management. 

[19] GAO, Air Traffic Control: FAA Reports Progress in System 
Acquisitions, but Changes in Performance Measurement Could Improve 
Usefulness on Information, GAO-08-42 (Washington, D.C.: Dec. 18, 2007). 

[20] GAO, Next Generation Air Transportation System: Progress and 
Challenges Associated with the Transformation of the National Airspace 
System, GAO-07-25 (Washington, D.C.: Nov. 13, 2006). 

[21] Phase II of the project began in January 2008 and involves 
additional data gathering, competency validation, and in-depth 
benchmarking. NAPA plans to issue a final report on September 30, 2008. 

[22] Many of the NextGen systems will not be stand-alone systems, but 
rather interdependent systems that will require skills in managing 
systems integration. 

[23] GAO recently testified on aviation and the environment. See GAO, 
Aviation and the Environment: Impact of Aviation Noise on Communities 
Presents Challenges for Airport Operations and Future Growth of the 
National Airspace System, GAO-08-216T (Washington, D.C.: Oct. 24, 
2007). We will soon issue a report examining FAA's and NASA's research 
and development plans for aviation noise reduction. 

[24] A similar provision is in the Senate bill for FAA reauthorization. 
As of the date of this publication, the House and Senate are discussing 
the reauthorization bills. 

[25] PFCs are fees airports can charge passengers to fund FAA-approved 
projects. These are generally capped at $4.50 per passenger. 

[26] This estimate is a combination of FAA's estimate of $8.2 billion 
in AIP grant-eligible projects and $5.8 billion from the Airport 
Council International's estimate of projects not eligible for AIP. 
FAA's estimate is based on airport master plans that FAA planners have 
reviewed and entered into a database of all national system airports. 
The Airport Council International also estimates airports' planned 
development, based on a survey of the 100 largest airports and includes 
all projects regardless of grant eligibility. Conversely, airports 
received an average of about $13 billion a year for planned capital 
development. See GAO, Airport Finance: Observations on Planned Airport 
Development Costs and Funding Levels and the Administration's Proposed 
Changes in the Airport Improvement Program, GAO-07-885 (Washington, 
D.C.: June 29, 2007). 

[27] We follow conventions established in GAO's prior reports on 
airport finance in differentiating between the 67 larger airports 
(large-and medium-hub airports) and smaller airports (all other 
categories of commercial and general aviation airports). 

[28] This calculation assumes that the increased PFC would not affect 
passenger demand for air travel. GAO has previously calculated that a 
PFC increase could reduce passenger demand, which would reduce the PFC 
revenue collected at the higher rate. Our previous work suggests the 
revenue reduction due to demand effects would likely be small. See GAO, 
Passenger Facility Charges: Program Implementation and the Potential 
Effects of Proposed Changes, GAO/RCED-99-138 (Washington, D.C.: May 19, 
1999). 

[End of section] 

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