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CBO - Congressional Budget Office

09/25/2017 | News release | Distributed by Public on 09/25/2017 09:36

H.R. 2997, 21st Century Aviation Innovation, Reform, and Reauthorization Act

H.R. 2997 would establish a federally chartered, not-for-profit corporation (known as the American Air Navigation Services (AANS) Corporation) to assume responsibility for operating the U.S. air traffic control (ATC) system, a function currently performed by the Federal Aviation Administration (FAA). The proposed corporation would be governed by a 13-member board of directors composed of individuals representing certain aviation stakeholder groups. To finance the costs of providing air traffic services, the bill would authorize the corporation to charge fees to users of such services and to issue debt.

The Secretary of Transportation would manage and oversee the transition of operational control over air traffic services to the proposed corporation, which would occur on October 1, 2020. Until that time, the bill would authorize appropriations for the FAA to continue to operate, maintain, and modernize the air traffic control system and carry out the agency's other traditional responsibilities related to civil aviation. After the proposed transition of all air traffic control-related personnel and programs to the AANS Corporation, the bill would authorize additional appropriations for FAA and the Department of Transportation (DOT) to continue to meet traditional aviation-related responsibilities, such as performing certain regulatory and safety-related activities, making grants to airports to support capital projects, and subsidizing air service to certain rural communities.

H.R. 2997 would make other significant changes to account for the proposed transition of ATC-related functions to the proposed corporation. Starting in 2021, when the AANS Corporation would begin to levy fees on users of ATC services, title VIII of the bill would reduce the rates of certain aviation-related excise taxes that those entities currently pay to support federal appropriations to the FAA. Also in 2021, the bill would require the Office of Management and Budget (OMB) to reduce statutory limits on overall amounts of discretionary funding to account for the portion of ATC-related spending that would be shifted from the FAA to the corporation.

Although the proposed corporation would be independent and autonomous, in CBO's view it would effectively act as an agent of the federal government in carrying out a regulatory function. Hence, in keeping with guidance specified by the 1967 President's Commission on Budget Concepts, the proposed corporation's cash flows should be recorded in the federal budget. More specifically, fees charged by the proposed corporation should be recorded as federal revenues, and its expenditures should be classified as federal direct spending.

On that basis, CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting H.R. 2997 would:

  • Increase net direct spending by $90.7 billion over the 2018-2027 period;
  • Reduce net revenues by $7.8 billion over the 2018-2027 period;
  • Increase net deficits stemming from revenues and direct spending by $98.5 billion over the 2018-2027 period; and
  • Result in discretionary outlays totaling $70.9 billion over the 2018-2027 period, subject to the appropriation of authorized amounts.

The estimated changes in direct spending and revenues under H.R. 2997 reflect CBO's assessment of the budgetary effects of enacting H.R. 2997 as a stand-alone measure. Ultimately, however, the net budgetary impact of activities related to air traffic control under H.R. 2997 would depend on the details of additional legislation that lies beyond the scope of this cost estimate-namely, future appropriations acts. Broadly speaking, while CBO estimates that the proposed corporation would spend more than the FAA otherwise would under current law for capital investments to modernize infrastructure and equipment related to the ATC system, CBO expects that the underlying costs to operate and maintain that system would not change significantly under H.R. 2997. As a result, CBO expects that shifting responsibility for those costs to the proposed corporation (thus effectively reclassifying such spending from discretionary to mandatory) would not materially change the overall magnitude of federal spending if future appropriations are reduced in accordance with H.R. 2997. Indeed, to account for that shift, H.R. 2997 would authorize a marked reduction in future appropriations for the FAA as well as a reduction to overall limits on discretionary spending in 2021 (the last year for which such limits are in place) that comport with the envisioned transfer of operational control over the ATC system to the AANS Corporation. However, whether subsequent reductions in future discretionary funding occur would depend on appropriations enacted by future Congresses.

Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues.

CBO estimates that enacting H.R. 2997 would increase net direct spending and on-budget deficits by more than $5 billion in one or more of the four consecutive 10-year periods beginning in 2028.

CBO has determined that the nontax provisions of H.R. 2997 would impose intergovernmental and private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) on operators of air ambulances. The bill also would preempt state authority over air traffic control services and would limit the ability of state and local governments to spend revenues generated from new or increased taxes at airports that are not broadly based and that target items such as car rentals. Based on information from the FAA, public airport operators, and state aviation agencies, CBO estimates that the cost of the mandates on public entities would fall below the annual threshold established in UMRA for intergovernmental mandates ($78 million in 2017, adjusted annually for inflation). The bill would impose additional mandates on private entities including users of air traffic services, air carriers, manufacturers of aircraft, and ticket agents. CBO estimates that the aggregate cost of mandates on private entities would well exceed the annual threshold established in UMRA for private-sector mandates ($156 million in 2017, adjusted annually for inflation).