GAO Forecast of Future FAA Aviation Trust Fund may be Good News or a Basis for Debate

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A MAJOR question facing the FAA Reauthorization Act is whether the Trust Fund is sufficient to support the FAA’s budget in the out years. Recently the FAA forecasted a major deficit, $5 Billion by 2020. The below GAO Report may differ from the agency’s numbers, propounded by the Assistant Administrator for Policy, International Affairs and Environment, Mr. Richard Swayze .

The GAO was mandated by Congress, §808 of the FAA Modernization and Reform Act of 2012, to study the impact of increases in aviation fuel prices on the Airport and Airway Trust Fund (trust fund) and on the aviation industry in general…” It would appear that the purpose of this very specific language and the even more exacting economic parameters is to examine the funding stream for the Trust Fund.

With a “worst case” forecast of a 200% increase in the fuel rates for commercial airlines (the major source of the Trust Funds’ cash), the GAO came to the tentative conclusion that the flow of all of tax revenues would likely cover the FAA’s budgetary needs. The focus of the study was the following analytical syllogism:

· whether the increase in the airlines’ fuel costs

· would then increase fares and

· thus passenger demand would decrease,

· causing the airlines to reduce their schedules and

· then reducing the collection of the fuel taxes.

The GAO found, after running multiple economic models and forecasts, that the end result would be enough tax revenues to pay for the FAA budget. However, the auditors added the following caveats to their future estimates:

There are limitations and caveats for all economic models. No model can take into account every possible event or policy change that may occur in the future. In particular, economic models tend to be better at forecasting the near future than later years. As a result, the longer the forecast, the less confidence there is in the results.”

That paragraph indicates that there is some uncertainty in the GAO’s numbers.

However, the magnitude of the difference between Mr. Swayze’s $5,000,000,000 deficit and the GAO’s nominal $0 numbers provide a basis for some serious discussions about numbers before Congress considers whether and how to define the funding source for the FAA’s future budget. T&I Chairman Shuster recently, at the NBAA convention, suggested that some reform of the current FAA’s funding, structure, and way of regulating should be made in the Reauthorization legislation.

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