Segment 1 Of 2     Next Hearing Segment(2)

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[PLEASE NOTE: The following transcript is a portion of the official hearing record of the Committee on Transportation and Infrastructure. Additional material pertinent to this transcript may be found on the web site of the Committee at []. Complete hearing records are available for review at the Committee offices and also may be purchased at the U.S. Government Printing Office.]







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FEBRUARY 5 AND 13, 1997

Printed for the use of the

Committee on Transportation and Infrastructure


BUD SHUSTER, Pennsylvania, Chairman

THOMAS E. PETRI, Wisconsin
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HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
JAY KIM, California
STEPHEN HORN, California
BOB FRANKS, New Jersey
JOHN L. MICA, Florida
SUE W. KELLY, New York
RAY LaHOOD, Illinois
FRANK RIGGS, California
CHARLES F. BASS, New Hampshire
JACK METCALF, Washington
ROY BLUNT, Missouri
JOSEPH R. PITTS, Pennsylvania
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JOHN R. THUNE, South Dakota
CHARLES W. ''CHIP'' PICKERING, Jr., Mississippi
JON D. FOX, Pennsylvania
J.C. WATTS, Jr., Oklahoma

NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
ROBERT E. WISE, Jr., West Virginia
BOB CLEMENT, Tennessee
ROBERT E. (BUD) CRAMER, Jr., Alabama
ELEANOR HOLMES NORTON, District of Columbia
PAT DANNER, Missouri
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JAMES E. CLYBURN, South Carolina
BOB FILNER, California
FRANK MASCARA, Pennsylvania
GENE TAYLOR, Mississippi
BILL PASCRELL, Jr., New Jersey
JAY W. JOHNSON, Wisconsin
JAMES P. McGOVERN, Massachusetts

Subcommittee on Aviation

JOHN J. DUNCAN, Jr., Tennessee, Chairman

ROY BLUNT, Missouri Vice Chairman
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RAY LaHOOD, Illinois
CHARLES F. BASS, New Hampshire
JACK METCALF, Washington
JOSEPH R. PITTS, Pennsylvania
CHARLES W. ''CHIP'' PICKERING, Jr., Mississippi
JON D. FOX, Pennsylvania
J.C. WATTS, Jr., Oklahoma
BUD SHUSTER, Pennsylvania
(Ex Officio)

NICK J. RAHALL II, West Virginia
ROBERT E. (BUD) CRAMER, Jr., Alabama
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PAT DANNER, Missouri
JAMES E. CLYBURN, South Carolina
(Ex Officio)



Proceeding of:

February 5, 1997

February 13, 1997


FEBRUARY 5, 1997

Anderson, John H., Jr., Director, Transportation Issues, Resources, Community and Economic Development Division, U.S. General Accounting Office, accompanied by Timothy F. Hannegan, Assistant Director, and Charles R. Chambers, Jr., Senior Evaluator
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  Bolen, Edward M., President, General Aviation Manufacturers Association

  Boyer, Phil, President, AOPA Legislative Action

  Coyne, James K., President, National Air transportation Association

  Olcott, John W., President, National Business Aircraft Association, Inc.

  Poole, Robert W., Jr., President, Reason Foundation


  Costello, Hon. Jerry F., of Illinois

  Menendez, Hon. Robert, of New Jersey


  Anderson, John H., Jr.

  Bolen, Edward M.

  Boyer, Phil

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  Coyne, James K.

  Olcott, John W.

  Poole, Robert W., Jr.


Olcott, John W., President, National Business Aircraft Association, Inc.:

Business Aircraft Purchase Expectations Survey, chart

Reported Impact of User Fees on Aircraft Utilization, chart

Percent Reduction in Flight Activity After Pay-As-You-Go, chart

FEBRUARY 13, 1997

  Crandall, Robert L., Chairman and CEO, American Airlines

  Harrison, Kay, Member, Board of Directors, City of Fort Smith, AR

  Kelleher, Herbert D., Chairman, President and CEO, Southwest Airlines, Inc

  Plavin, David Z., President, Airports Council International-North America, accompanied by Charles Barclay, President, American Association of Airport Executives
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  Shyman, Judie, President, National Business Travel Association, accompanied by Norman R. Sherlock, Executive Director, NBTA

  Wolf, Daniel A., President, Cape Air/Nantucket Airlines



  Costello, Hon. Jerry F., of Illinois

  Cramer, Hon. Bud, of Alabama

  Metcalf, Hon. Jack, of Washington


  Crandall, Robert L

  Harrison, Kay

  Kelleher, Herbert D

  Plavin. David Z
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  Shyman, Judie

  Wolf, Daniel A


Kelleher, Herbert D., Chairman, President and CEO, Southwest Airlines, Inc.:

State by State Passenger Loss Due to $24 Roundtrip Federal Head Tax or User Fee, chart

Memorandum from Lawrence B. Gibbs, Miller & Chevalier, June 18, 1996

Comparison of Proposed User Charges System vs. 10 Percent Tax Collected (Based on CY 1995 Data) for Domestic Operations of the Major, National, Regional, and Commuter Airlines, chart

Big Seven Proposed User Tax System to Fund the FAA (It's Really and Excise Tax All Along)

Articles from the Wall Street Journal and the St. Louis Post-Dispatch


  Joint Committee on Taxation, report, Background Information on Federal Air Transportation Excise Taxes and the Airport and Airway Trust Fund

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  Levine, Michael E., Executive Vice President-Marketing and International, Northwest Airlines, Inc., statement

  U.S. General Accounting Office Estimate of Tax Revenues, chart

  U.S. General Accounting Office Comparison of Various User Fee Proposals

  Kolstad, James L., Vice President, Public and Government Relations, American Automobile Association, letter, February 19, 1997

  Boyer, Phil, President, AOPA Legislative Action, letter, January 23, 1997

  Reding, Robert W., President and CEO, Reno Air, letter, January 31, 1997

  Handel, Mark, e-mail to, January 21, 1997

  Alterman, Stephen A., President, Air Freight Association, letter to Timothy Hannegan, Assistant Director, Aviation-Competition Issues, U.S. General Accounting Office, February 19, 1997



U.S. House of Representatives,
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Subcommittee on Aviation,
Committee on Transportation and Infrastructure,

Washington, DC.

  The subcommittee met, pursuant to notice, at 10:30 a.m. in room 2167, Rayburn House Office Building, Hon. John J. Duncan, Jr. (chairman of the subcommittee) presiding.

  Mr. DUNCAN. I want to welcome everyone to our hearing today. I'm sure we'll have other members come in as they have a chance to do so. But we'll go ahead and call this hearing to order now.
  Today we begin the first of 2 days of hearings, or at least 2 days of hearings, on the issue of aviation user fees. In the last Congress, as many of you know, this subcommittee had a very active agenda. In fact, we were told that we had more hearings than possibly any other subcommittee in the entire Congress. I don't know if this next 2 years will be as active as the last 2 years, but certainly this is a very important issue that we start off this Congress with. And this should be a very important and a very interesting hearing that we have today, and then also next week.
  Our bipartisan efforts in the last Congress culminated in the passage of the Federal Aviation Reauthorization Act of 1996, a comprehensive piece of legislation dealing with airport improvements, safety, security, FAA reform and a host of other issues. I look forward to similar legislative activities in this Congress, and hopefully we will have equally successful results.
  Today we begin with a bit of unfinished business from last year. Last September, as the Congressional session was drawing to a close, we promised to hold a hearing to evaluate the user fee proposal of the seven large airlines. However, there was not sufficient time at the end of the session to accommodate that hearing.
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  As it turns out, holding the hearing today could not be more timely or appropriate. As a result of the expiration of the ticket taxes last December, the balance in the Aviation Trust Fund is dropping at the rate of about $450 million per month. Along with expiration of the taxes, the authority to transfer these funds from the general fund to the Aviation Trust Fund also expired.
  As a result, the FAA tells us that the uncommitted balance in the trust fund could drop to zero by the end of March. At a time when safety and security are on everyone's mind, it seems irresponsible to allow the Trust Fund revenue to lapse in this way. I'm hopeful, as are many people, that the Ways and Means Committee will move quickly to rectify this situation, and I am sure that they will.
  In this hearing, we are talking about a more long term perspective. The question here is, what is the best way to raise revenue for the Trust Fund, and whether the ticket tax should be scrapped or replaced by some sort of user fee system. I think everyone agrees that those who use the aviation system should pay for the infrastructure that they use. They should pay their fair share, but the dispute arises, however, over the proper or the fairest way to do that.
  The seven largest airlines have developed their own fee system that is based on the number of seats, number of passengers, and distance of the flight. At this point, I and I think most other members have an open mind on this issue. I think the big airlines are to be commended for not merely talking about user fees, but actually putting a proposal on the table.
  However, if support is to be built for any fee proposal, it is absolutely essential that such a proposal be seen as fair to all the parties concerned. Today we will hear from the GAO, which has done extensive work on this subject. The subcommittee appreciates the thoroughness of GAO on this, and on many other issues that we deal with in this committee.
  We will also be hearing from Robert Poole, of the Reason Foundation, who always has innovative approaches to aviation problems. And we appreciate his being here today. His previous testimony before this subcommittee has proved invaluable, as we have addressed the various issues, particularly including our initiative on airport privatization, which we actually enacted into law, at least on a trial basis.
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  Finally, we will hear from various general aviation interests who have strong views on these issues and have also provided outstanding testimony to the subcommittee on several occasions. It's a pleasure to have all of you here today.
  Next Thursday, we will have a second day of hearings on this issue. At that time, we will hear from Herb Kelleher of Southwest Airlines and Robert Crandall of American Airlines, and several others. So I think we have an informative couple of days ahead of us. And I will now recognize the ranking member, Mr. Lipinski, for any statement that he wishes to make.
  Mr. LIPINSKI. Thank you very much, Mr. Chairman.
  Let me first congratulate you on being elected Chairman of the House Aviation Subcommittee for the 105th Congress. As I mentioned to you before the hearing started this morning, I was looking forward to having that position. But unfortunately, on the weight of the chairmanship, we had an election that didn't work out.
  But if I can't be the Chairman of this committee, I am delighted to have you as the Chairman of the committee. You led this subcommittee well in the 104th Congress by conducting our business in an open and bipartisan fashion. A lot of good legislation was passed last year under your leadership, and I look forward to continuing our excellent, and I do mean excellent, working relationship.
  Today we will hear testimony on proposals to replace the aviation excise tax with user fees. Much of our discussion will be focused on a proposal developed by the seven largest airlines that would redistribute approximately $600 million of the Airline Aviation Trust Fund tax burden among the members of the industry. The formula, developed by the seven large carriers, results in less being paid by the seven and more being paid by virtually all other carriers.
  I must say at the outset that I have problems with this proposal. While I do not necessarily disagree with the notion that some carriers may pay disproportionately too much or too little under the current system, and that the system of financial support for the Trust Fund may need to be rationalized, this proposal appears to be designed to accomplish something other than that.
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  This proposal would shift a greater burden to the smaller, non-hubbing carriers, and lessen the burden of those carriers that do have hub-based operations. While there may be valid policy reasons for doing this, we must take into account how such a policy would affect airline competition and fares.
  Closer to home, the carrier that would be hardest hit by this proposal, Southwest Airlines, is one of the largest employers in my district, with its large operation at Midway Airport, which happens to be located about eight blocks from my home, Mr. Chairman.
  Legislation last year created a National Civil Aviation Commission that will develop a concrete proposal to finance the Federal aviation programs. That will be presented to Congress later this year.
  I do want to say that the proposal before us today, and next week, has moved the debate in the discussion along in this area. And I compliment the seven airlines for that.
  Finally, only in the past week have we learned that the Trust Fund will hit zero far earlier than previously anticipated, possibly as early as next month. It is incumbent on the Congress to correct this situation as soon as possible and reinstate the aviation excise tax, until Congress decides whether or not to change the funding system.
  As I understand it, the FAA has already stopped the new airport grants and is starting the process of deciding which air traffic control modernization projects to suspend. I would urge every member of this committee to contact the Ways and Means Committee to urge speedy action to fix the Trust Fund problem, and reinstate the aviation taxes as soon as possible.
  Again, Mr. Chairman, I thank you very much for your cooperation in the past. I look forward to working with you in the future, and I yield back the balance of my time.

  Mr. DUNCAN. Well, thank you very much, Mr. Lipinski. And I very much appreciate your kind words. I have, as you know, the greatest respect for you.
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  I remember Mrs. Danner, late in the last Congress, said that she had told another member that she didn't think there was any subcommittee in the entire Congress where the Chairman and the ranking member worked together as well as we did. And I don't know if that's true or not, but I hope it is true. And I certainly have the greatest respect for you, and I appreciate the way that you have conducted your side of the aisle and led your party in this subcommittee.
  Thank you very much.
  At this time, I might mention to those who have come in, the members who have come in, I don't know how many of you have had a chance to read the background or briefing material that was submitted by the subcommittee staff, but that is a very good summary of this issue. And it's worth looking at. Particularly interesting, I think, is the summary of where the ticket tax goes now, that 86 percent of the revenues that go into the Aviation Trust Fund come from the ticket tax, and another 14 percent come from the cargo tax and the international departure tax and the fuel taxes and so forth.
  But probably the shortest summary of this issue is on page three of that briefing paper, and it says that in 1995, when the House and Senate were developing the legislation to reform the FAA, several airlines and the FAA proposed to replace the 10 percent ticket tax with a user fee. Although this idea was discussed for over a year, no specific proposal was offered until the spring of 1996, when seven of the major airlines developed a user fee plan. The seven airlines call themselves the Group of Seven, and include American Airlines, Continental Airlines, Delta, Northwest, TransWorld, United, and U.S. Air. And it has on that page a summary of their proposal.
  I think that that's a pretty good summary. And then also it tells about the position of the smaller, low-cost airlines, and why they think this is not a fair proposal. So that's worth a look.
  But at this time, we'll go to other members for any other statements that they have. Mr. Metcalf, I believe you were here next. If you have an opening statement at this time, we'll be glad to hear it.
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  Mr. METCALF. Not at this time, Mr. Chairman.
  Mr. DUNCAN. All right.
  Ms. Johnson?
  Ms. JOHNSON. No, thank you, Mr. Chairman.
  Mr. DUNCAN. Okay.
  Mr. Pease?
  Mr. PEASE. No statement, Mr. Chairman.
  Mr. DUNCAN. All right.
  Mr. Hutchinson?
  Mr. HUTCHINSON. Mr. Chairman, I want to thank you for letting us participate in this. But in the interest of time, I'll waive any opening statement.
  Mr. DUNCAN. All right. Thank you very much.
  Mr. Menendez?
  Mr. MENENDEZ. Mr. Chairman, I just want to commend you and the ranking member for moving so quickly on such a vital issue. I have a statement which I will ask be considered in the record in its entirety.
  Mr. DUNCAN. We will certainly place your statement in the record.
  [Mr. Menendez' prepared statement follows:]

  [Insert here.]

  Mr. DUNCAN. On my list, we've got Mr. Bass listed next. Mr. Bass?
  Mr. BASS. No statement, Mr. Chairman.
  Mr. DUNCAN. Mr. Thune?
  Mr. THUNE. No statement, Mr. Chairman.
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  Mr. DUNCAN. All right. Well, we're moving, I believe that's the fewest statements we've ever had at one of our hearings. Maybe that's a good sign for the new year.
  We will call forward at this time panel number one, if they'll have their seats there at the table.
  Panel number one is primarily Mr. John H. Anderson, Jr., who is Director for Transportation Issues, for the General Accounting Office. He is accompanied by Mr. Timothy F. Hannegan, who is Assistant Director for the Resources, Community and Economic Development Division of the GAO, and Mr. Charles R. Chambers, Jr., who is the Senior Evaluator for that division in the GAO. And also, Mr. Robert Poole, Jr., of the Reason Foundation.
  Mr. Anderson, I believe we'll go ahead and start with your testimony, please.

  Mr. ANDERSON. Thank you, Mr. Chairman, and members of the subcommittee.
  I really appreciate the opportunity to be here today to talk about FAA financing issues. As you mentioned, with me are Tim Hannegan and Charles Chambers, who have done a lot of the hard work that's behind this testimony this morning.
  I'll summarize my statement and I ask that my entire statement be entered in the record.
  On December 31st, 1996, the Government's authority to collect the taxes that finance the Airport and Airway Trust Fund lapsed. Historically, the Fund has provided about three-quarters of FAA's budget. On December 9th, 1996, we reported to you, Mr. Chairman, as well as Mr. Oberstar, Mr. Lipinski, and other members of the House and Senate, on the status of the Fund, and on a proposal by a coalition of the Nation's largest airlines to replace the 10 percent tax on domestic airline tickets with user fees. The coalition airlines developed their proposal because they believe that the ticket tax unfairly subsidizes their low fare competitors.
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  We also testified on this issue yesterday before the Senate Finance Committee. As recently as December, Treasury and FAA estimated that with the lapse of the authority to collect aviation excise taxes, the Trust Fund would fall about $1 billion short of funding its share of FAA's 1997 budget. Now, Treasury has acknowledged that it miscalculated, and the shortfall will be about $2 billion.
  This means that in order to ensure that it can pay its work force through the end of the year, FAA will have to stop making new capital commitments as early as March. To prevent this from happening, the Congress would have to act sooner than originally thought to meet FAA's 1997 funding needs.
  Moving now to the coalition's proposal, we believe that the commercial users of the Nation's air space and airports should, to the extent possible, pay their fair share of the costs. The ticket tax is not based on factors that relate to the user's share of the system's cost, and may not fairly allocate cost among users. Nevertheless, comparing the relative share of airlines' payments under the ticket tax to some common measures of system usage does not provide conclusive evidence that the ticket tax is unfair.
  As the chart to my left shows you, the coalition airlines accounted for almost 80 percent of the 1995 ticket tax payments. Their percentage of system use was lower than this for some common indicators, such as domestic departures, passenger enplanements, and miles flown. However, the coalition airlines accounted for 81 percent of the fuel consumed by commercial airlines in 1985, another indicator of system usage.
  Airlines that compete with the coalition airlines, such as Southwest and America West, accounted for about 17 percent of the payments made under the ticket tax in 1995. But their system use indicators were higher than this for departures and enplanements. On the other hand, their share of miles flown and fuel consumed was the same as their share of ticket tax payments.
  Reaching definitive conclusions based on these comparisons is further complicated when the impact on commuter airlines is considered. The major commuters are owned by or affiliated with one of the coalition airlines.
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  Currently, FAA does not have sufficient cost information to show whether the ticket tax or any other system usage indicators would be good proxies for fairly allocating FAA's costs among its commercial users. Hopefully, when the work of the National Commission on FAA Financing is done, and the Administration and the Congress have a chance to assess it, a clearer picture of FAA's costs and the options for financing FAA will emerge.
  However, the Congress will have to act before then to meet FAA's fiscal year 1997 funding needs.
  While the coalition airlines' proposal is one alternative that could be implemented, we believe it could have serious competitive ramifications. Under the coalition's proposal, instead of a ticket tax, airlines would pay for domestic operations under a formula that is based on three factors. By using two factors in particular, originating passengers and non-stop passenger miles, the formula favors the larger airlines which operate hub and spoke systems, at the expense of the low fare and smaller airlines, which tend to operate point to point systems.
  For example, consider two possible routings between St. Louis and Orlando. As shown in the chart that's now before you, the hubbing airline would first take the passenger to a hub, such as Chicago O'Hare, to connect to another flight to Orlando. The point to point carrier would take the St. Louis passenger non-stop to Orlando.
  The airline that lands at O'Hare to transfer the passenger to another flight to Orlando has twice as many takeoffs and landings as the airline that flies non-stop. However, under the proposal, by charging $4.50 per originating passenger, the hubbing airline would pay the same amount as the non-stop airline, even though in this particular example, the hubbing airline imposes a greater cost on the air traffic control system.
  In addition, by charging one half cent per non-stop passenger mile, or the straight line distance between the points of origin and destination, the coalition's formula does not charge the hubbing airlines for the circuitous routings that are common to their hub and spoke operations.
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  Because the coalition airlines operate hub and spoke systems and low fare and small airlines tend to operate point to point systems, the coalition's proposal would shift the fees for using the system away from the coalition airlines and onto their competitors. For example, based on FAA's traffic data for 1995, if the ticket tax were replaced by this proposal, the cost to the coalition airlines would have decreased by nearly $550 million, while the cost to the low fare and other small airlines would have increased by nearly $500 million. This could have substantial competitive impacts.
  The coalition has raised legitimate questions about the fairness of the ticket tax. However, determining how best to finance FAA is a complex problem that requires careful study and good cost data. FAA's costs vary depending on the amount, type and timing of various airline operations. Hubbing operations at congested airports increase the peak service demands on the system and increase FAA's costs.
  However, this cost has not yet been quantified, and neither the 10 percent ticket tax nor the large airlines' proposal accounts for these costs. Hopefully, the cost study currently being performed for FAA will shed some light in this area.
  A financing system that doesn't take such factors into consideration could result in costs not being fairly allocated among system users.
  Taxing one or more of the indicators of system use, such as departures or passenger enplanements could be used instead of the ticket tax to finance FAA. However, the potential competitive impact of using these indicators as a basis for allocating costs varies greatly depending which indicator is used.
  The impact of the financing options also varies among airlines within the coalition, competing and commuter groupings. For example, under a system that taxes both fuel use and passenger enplanements, the amount paid by four coalition airlines would decrease, but would increase for the other three coalition members.
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  The various financing options for FAA also present tradeoffs concerning their ease of administration, impact on the airport and airway systems' efficiency, and ability to produce an equitable system in which users pay their fair share. For example, a formula that combines several of the common system usage indicators might provide the best proxies to ensure that users pay their fair share of system costs. However, such a formula may also be complex and difficult to administer.
  Similarly, taxing airlines for their use of the most congested airports may result in a more efficient use of the Nation's airspace. However, because the coalition airlines are the primary users of these airports, this approach may not produce the most equitable result from their point of view.
  The advantages and disadvantages in the potential competitive impacts of a new financing system for FAA will need to be carefully studied over the next year by the National Commission and the Secretary of Transportation. The financing alternative that is finally selected should be relatively easy to administer and help ensure that in the long term, FAA has a secure funding source, the Nation's airports and airways are used as efficiently as possible, commercial users of the system pay their fair share, and a strong, competitive airline industry continues to exist.
  Ultimately, this is going to be a policy call for the Congress to decide how best to balance these goals.
  This concludes my statement. We'd be glad to answer any questions.

  Mr. DUNCAN. Thank you very much, Mr. Anderson.
  Mr. Poole, you may begin your testimony, please.

  Mr. POOLE. Thank you very much, Mr. Chairman.
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  I'm Robert Poole, President of Reason Foundation. As a former aerospace engineer, I have been researching air traffic control issues since 1977. My testimony today is based in part on this study that Reason Foundation released last spring, putting forth an alternative user fee system.
  Why should we consider switching to user fees? Southwest makes the argument, ''If it ain't broke, don't fix it.'' But I think it's clear the aviation tax system is broken and does need fixing. Congress has twice let the excise taxes lapse, the Trust Fund will hit zero shortly. Increased budget balancing pressures are going to continue for the foreseeable future and will restrict appropriations for FAA and air traffic control.
  As Chip Barclay of AAAE has put it, air traffic control resources are tied to the demand to reduce the Federal budget deficit, when what we need is a funding source tied to the demand for ATC services. It's just out of synch. That's really the case for user fees. Air space users today are being shortchanged when the monies they pay have to go through the Federal budget process.
  If you compare it with the telephone system, for example, that's a system paid for directly by user fees. When demand increases, revenues increase so that major capital investments can get made in a timely fashion, funded by the capital markets. Air space users deserve to have a system as good as that.   ATC fees are not just a matter of theory. At least 16 countries have restructured air traffic control over the last decade and shifted to user fees, including Australia, Britain, Canada, Germany, New Zealand, and Switzerland. Commercialization in those countries has created strong incentives for more cost-effective systems, leading to a 30 percent decrease in the fee levels in the last 10 years in New Zealand, and a 5 to 10 percent decrease in fee levels in Germany in just the last 2 years.
  In every single one of these countries the user fee structure consists of a terminal-area charge based on the weight of the aircraft, and an en-route charge based on weight and distance. This is the ICAO manual called ''Manual on Route Air Navigation Facility Economics.'' On page 26, ICAO says that ''only distance flown and aircraft weight are recommended as parameters suitable for use in a charging system for air traffic control.'' And this is the advice every single country has followed that's done this.
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  Now, because shifting from taxes to user fees is a major step, it should be done very, very carefully. I believe the system should be developed by the aviation community itself, reflecting a consensus approach that all the segments of that community can live with.
  Now, Canada has just been through a user-led process to develop that kind of a consensus. They commercialized their system last November 1 with a 2-year transition period underway now from excise taxes to ICAO-type user fees.
  I agree completely with GAO's criticism of the Big Seven proposal. It unfortunately has destroyed what had been a decade of unity within the airline industry, favoring the commercialization of air traffic control supported by some kind of user funding. Herb Kelleher himself was a prominent member of the Airline Commission in 1993 that recommended that kind of an approach. Unfortunately, we've got some patching up to do within the community.
  The Big Seven airlines have one important point in their favor. The ticket tax unfairly does charge two identical airline flights, as GAO has pointed out, for receiving exactly the same services, based on what fare they charge. That just doesn't make sense. But their proposal, which charges much less to hub and spoke operators who impose more cost on the system, also is not fair. And it does nothing to address other inequities in the current tax system.
  But by contrast, a system based on ICAO principles of weight and distance, would address all of these issues. In the ICAO-type system that we proposed last spring, the average en-route charge was 25 cents a mile, the average landing charge was $27. And then any specific aircraft's actual charge would be up or down from those, depending on its actual weight.
  Depending on how you adjust the parameters, we found there's all sorts of wiggle room to adjust the outcome in terms of who pays what to come up with a system that doesn't make drastic changes for who bears what cost today. That's probably the only way you're going to reach consensus on this.
  Now, under this kind of a weight and distance proposal, two 737s flying from point A to point B, using the same services, would pay exactly the same amount, which is an increase in fairness from today. Under this proposal, a flight that goes from A to B directly without going through a hub would pay less than a flight that goes through a hub. That, as GAO points out, is also an increase in fairness.
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  Also under this proposal, a business jet that's used as an air charter would pay the same as a business jet that's used by a corporate executive. And that would also be an increase in fairness, compared to today when the privately owned business jet is only paying a small fuel tax instead of the true cost of using the system.
  And what about the rest of general aviation, apart from business jets? Seventy-eight percent of the GA fleet is single engine piston planes, and only 17 percent of their operations used towered airports. So about 65 percent of all GA wouldn't be charged any fees, even if they would apply to those who use the system, simply because they don't use the system that much.
  And if all the excise taxes were repealed, including the GA fuel tax, the large majority of GA would be financially better off under that kind of a user fee system than they are today.
  Abolishing the GA fuel tax would also make it easier to put in charges for business jets, because it would offset some of the cost increase. Our calculation is that the net increase to a typical business jet user, if the fuel tax were gone, and a weight and distance charge were put in for business jets, would be about 1.5 percent increase in the total cost to own and operate a business jet.
  Now, that's not going to break a Fortune 500 company or really anybody else who can afford a business jet. And it's far less than the impact of the $225 per flight fee for business jets that the Administration proposed last fall, which would cost the users about four times as much as a true weight and distance system.
  Now, in Canada, all the major stakeholders, the owners and pilots, the business aircraft association, the airlines, controllers and the pilots got together, concluded that their tax-based system was broken and needed fixing, and agreed to a user fee system that they would design. Their approach became ''user pay means user say''--users must have a say in how the charges are put together and how the system is run.
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  I think we have a window of opportunity now to create that kind of a consensus with the suspension of the ticket tax, the Coopers & Lybrand study that's underway, the Gore Commission, the Civil Aviation Review Commission. We can take out a clean sheet of paper and design a better funding system, one that ties ATC resources directly to the demand for ATC services, under user control.
  We don't have that consensus yet, but if this subcommittee and other Government bodies invite the aviation community to get together and develop such a system and offer them the prospect of significant user control in how it's operated, I think that kind of consensus can be built.
  That concludes my summary and I'd be glad to answer any questions.

  Mr. DUNCAN. Thank you very much.
  Since we opened this hearing and had statements by myself and Mr. Lipinski, and we offered other members a chance to give statements, since then we've been joined by Ms. Granger. Certainly you're welcome here today. Do you have any statements you wish to make about this?
  Ms. GRANGER. No, thank you, Mr. Chairman.
  Mr. DUNCAN. And we've got Mr. Ehlers here. Would you like to make any statement at this time?
  Mr. EHLERS. No, thank you, Mr. Chairman.
  Mr. DUNCAN. All right. Thank you very much.
  Mr. Poole, you make a fascinating proposal. And you said in your testimony that under your proposal that 65 percent of general aviation represented by single engine piston users would save money under the proposal.
  Mr. POOLE. That's correct.
  Mr. DUNCAN. Have you done a study or an estimate of how much they would save or how much their costs would go down?
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  Mr. POOLE. I don't have the number right now. But it's basically the amount of fuel tax paid by the single engine piston portion of the GA community. Those numbers, I think, are obtainable. I don't have a single annual dollar total.
  But that would certainly be a benefit to this large majority of people who fly in their own planes.
  Mr. DUNCAN. You said that to go from a user, from a tax system to a user fee system is a big step, and it is.
  Mr. POOLE. Yes.
  Mr. DUNCAN. And it's difficult to come up with a user fee proposal that everybody feels is fair. But that's the purpose of this hearing, and starting to look into this to come up with that.
  You've said that you don't think the Big Seven proposal that's on the table and out there now is really fair. Have you analyzed how the Group of Seven would be affected by your proposal? How much difference there is between what you've proposed and what they've proposed?
  Mr. POOLE. On a spot basis, we calculated the impact on particular commercial aircraft, 747 flight, and what we considered to be a typical profile, 737s, 757s, that sort of thing. And what we found was that depending on how much of the total system cost you derive from terminal charges versus how much from en route charges, you can make it come out almost any way you want in terms of incidence.
  And the point that we selected showed relatively modest impacts, you know, 10 percent increase or decrease for a typical 737 or 747. The point was not to try to peg it exactly, but to show that there's a lot of flexibility in a weight and distance based system, that if the users could get together and play with the numbers for a while, I think they could come up with a system that wouldn't produce drastic changes in who pays how much, compared to today, but would be something that everybody could live with.
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  Mr. DUNCAN. To have a true user fee system, you have to first, you need to be able to determine the cost of the service that's provided.
  Mr. POOLE. Right.
  Mr. DUNCAN. Do you think there are some difficulties or problems that we're going to face in trying to determine that, and what would you say about that?
  Mr. POOLE. There definitely are, and I don't envy Coopers & Lybrand in their task that they've been assigned in doing this. The problem with any system like this is that there are a lot of what economists call joint costs that serve multiple purposes in the system, in that you cannot, there's no objective way to fully assign joint costs to this user or that user. Some of them are going to be there regardless.
  And so there's always an element of arbitrariness in saying, you can figure out how many total dollars are spent, and you can figure out where they're spent. But in terms of assigning them precisely to each portion to individual users, it's really not possible without some degree of arbitrariness.
  Also, given that the need, in order to make a big transition like this, you have to reach some kind of consensus that everybody can work with. I think the quest for perfect cost allocation is just not realistic. I think you've got to come up with something that's more reflective of underlying costs than the present system, which is clearly significantly unfair. But that's also realistic, it's easy to administer, as GAO pointed out, you have to have something that uses easily collectible data, and certainly weight is used in calculating every landing fee in the country. So that's already being collected and reported.
  Distance flown is incorporated in every flight plan. So the FAA already collects that data routinely for every flight. So using a weight and distance based system is completely easy and low cost to calculate and work with. It has a lot of advantages.
  Mr. DUNCAN. It's sometimes said here that any time you talk about changing, making any major change, whether it's the fees that Medicare pays or anything else that we talk about that there are winners and losers.
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  Mr. POOLE. Inevitable.
  Mr. DUNCAN. Under your proposal, do you think that there are winners and losers?
  Mr. POOLE. Yes, I think there are, there will be winners and losers. Clearly, business jets, under our approach, would pay somewhat more. They would probably be--
  Mr. DUNCAN. But you said 1.5 percent.
  Mr. POOLE. One point five percent of their total annual cost of owning and operating a jet was our estimate of what it would amount to. And I think that's a defensible increase, given that they are clearly probably the furthest out of line for paying, today, anything close to what their cost is of using the system.
  Other than that, I think it's reallocation among airlines. The real winner would be the small general aviation, that under our proposal, with no excise taxes, would no longer have to pay a fuel tax. And when they don't use the system, they wouldn't pay any fees at all.
  There would be some reallocation among airlines. And I suspect that the final result would have the low fare airlines paying somewhat more, based on the kind of overall figures GAO has come up with, that the lower fare airlines are probably today paying somewhat less than their total share. But the impact would be nowhere near as great as proposed by the Big Seven.
  Mr. DUNCAN. My time's about to run out, but let me ask you this. They say now that, now, with the system that we have, most of the costs are paid by the users.
  Mr. POOLE. Right.
  Mr. DUNCAN. But some of the costs are paid from general funds,and people have always gone on the theory that even people who don't fly, who have never set foot on an airplane, that they benefit from our aviation system, from a good system, because it helps our economy and it helps many other, in many other ways.
  Do you think that's fair or reasonable, or do you think--I guess your position is it should go entirely to a user, entirely user-financed system and then the costs would, and the benefits would be spread out by the users?
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  Mr. POOLE. Yes, and no. I think the air traffic control system, the infrastructure for the system, should be paid for entirely by user fees.
  However, I think the other function, particularly the safety regulatory function of FAA, should be paid for from general revenues, on the grounds that OSHA safety regulation is paid for, FDA regulation, safety regulations agencies, consumer products, all the safety, those are inherently governmental functions. They are and ought to be paid for out of general revenues. And that is a benefit to the entire country, to everybody.
  Mr. DUNCAN. One last quick question, Mr. Anderson, the FAA says that they will have, that they currently have about a $12 billion shortfall in their funding needs. Have you looked at that? Do you think that their claims about the $12 billion shortfall are accurate?
  Mr. ANDERSON. We looked at that, I think it's been about a year ago, when FAA was first saying that they thought they had a $12 billion shortfall overall. I think what we concluded was that, you know, being sort of the accountants that we are sometimes, we nit-picked that a little bit and said, well, it might not be $12 billion, it might be $9 billion or something like that. But we clearly concluded that there was a potential shortfall there, looking at their needs relative to what the funding might be over the long term.
  Mr. DUNCAN. All right. We'll get more questions later.
  Mr. Lipinski?
  Mr. LIPINSKI. Thank you, Mr. Chairman
  Mr. Anderson, in your testimony, I may have misheard you, but I thought I heard you say in your testimony that three of the Big Seven underneath their proposal would pay more? Did you say that?
  Mr. ANDERSON. No, under, if you took and used as variations some of the other indicators of system usage, enplanements, and that sort of thing. And if you did combinations of those, you're going to get changes in the winners and losers.
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  Under the coalition's proposal, clearly all of them would pay, all the coalition members would pay less.
  Mr. LIPINSKI. And that runs from TWA paying $27 million less up to Delta paying $140 million less?
  Mr. ANDERSON. Yes, if you're taking that from our report, yes, sir.
  Mr. LIPINSKI. I'm taking that from your report, so I'm hoping you're going to agree upon that.
  Mr. ANDERSON. Yes.
  Mr. LIPINSKI. And Southwest would pay $205 million more, correct?
  Mr. ANDERSON. Correct.
  Mr. LIPINSKI. And America West would pay only $25 million more, I say only $25 million more, but in comparison to $205 million, it's a lot more.
  This chart that you have up here where you are saying that the people who use the hub and spoke wind up benefitting, correct?
  Mr. ANDERSON. Under the coalition's proposal, in terms of, they wouldn't be paying for those hubbing costs, that's correct.
  Mr. LIPINSKI. But in reality, isn't the situation, the coalition will fly normally longer routes, whereas, say, Southwest Airlines, if Southwest Airlines is going to fly to Baltimore, more than likely, they're going to take off from St. Louis and land in Cincinnati or land in Cleveland, then they land one more time and then they finally get to Baltimore, right?
  Mr. ANDERSON. That's true.
  Mr. LIPINSKI. So if you were to put up a chart such as that, do you know what the difference would be in what they're paying for the system and what the coalition is paying for the system?
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  Mr. ANDERSON. No, we don't know. What we do know, though, is that there are certain airports that are key hubbing airports where any increase in activity there in terms of traffic is going to cause some increase in terms of the peak demand costs that are put on FAA.
  I think that as we indicated in our report and my testimony, this is a very complex issue. I think the National Commission has its hands full to by August come up with looking at this thoroughly. Because the things that you mention are valid things. When you look at the total system and you look at individual circumstances.
  But we were just trying to present the big picture in terms of the impact on the hubbing operation.
  Mr. LIPINSKI. You mentioned that the coalition proposal would have a negative impact on some of the other carriers. You didn't go into any detail, though, on what that negative impact would be. In fact, I'm not even sure if you said negative impact. I think you may have just said an impact on those other carriers.
  Mr. ANDERSON. Right.
  Mr. LIPINSKI. Do you have any thoughts at the present time on whether that would be a positive or negative impact, and what kind of specific impact it would be?
  Mr. ANDERSON. I think based on the reaction that Mr. Kelleher had at yesterday's hearing, and we would agree with this, it could have a very potential negative impact. To the extent that any changes in the taxing system or fee system was passed on directly to the consumers in the form of the prices that they pay for the tickets, this could cause people to change their decisions to fly or not.
  Especially on low cost airlines, the passengers there are very price sensitive. And it could have an impact, and that's what we were getting at, a negative impact.
  Mr. HANNEGAN. One thing, Mr. Lipinski, I'd like to add.
  Mr. LIPINSKI. Yes, sir, Mr. Hannegan.
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  Mr. HANNEGAN. The smaller airlines at this point are having difficulty, the Kiwis of the world, not Southwest, per se, but some of the smaller ones, even though the major airlines are reporting record profits. And so one of the concerns we have is, that the type of cost shift may put some of these airlines out of business, some of the ones that are having more difficulty right now. So that could, if you drive some of them out of the market impact competition negatively as well.
  Mr. LIPINSKI. You mentioned Mr. Kelleher testifying yesterday. Was Mr. Kelleher enthusiastically prepared to support the coalition, pay an additional $225 million or something?
  Mr. ANDERSON. No, sir, he was not. I think it will be a pretty good hearing next week.
  Mr. LIPINSKI. I think it will bring together my best friend in the aviation industry, the chairman of the board of American Airlines, Bob Crandall, and the man who probably has a business operation who does more for my district in Illinois than any other entity. So it will be an enormously interesting hearing for me also.
  Mr. LIPINSKI. Unfortunately, two of the gentlemen live very close together down there in Texas, so perhaps they can fly up here on a United Airlines flight and work out all their problems before they arrive.
  Now, Mr. Chairman, I'm going to conclude at this particular time. This is a subject that we're going to be into for a long time, so I'll have many other opportunities to go over this ground with these folks here and other people. Thank you very much.
  Mr. DUNCAN. Well, thank you, Mr. Lipinski. And that is correct, we're going to start with these hearings, and then we'll get the Commission report later on, and we'll probably be dealing with this for quite some time.
  But we've been joined by Dr. Cooksey. Dr. Cooksey, do you have any statements you would like to make at this time?
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  Mr. COOKSEY. I think not. Unfortunately, I was at another meeting.
  I am a pilot, I am interested in aviation. I try to keep my flight instrument rating current. But I will not comment today.
  Mr. DUNCAN. Okay. We'll go next for questions to Mr. Hutchinson.
  Mr. HUTCHINSON. I will yield to Mr. Thune to my right.
  Mr. DUNCAN. That's fine.
  Mr. THUNE. Thank you, Mr. Chairman.
  I would also want to commend you for taking this issue and analyzing it like we are at this point. I do believe that it's something that has potentially some serious implications for my part of the country and I would like to pose a question to Mr. Anderson, with respect to the study. Whether or not you contemplated the impact on really small town airports.
  And I'll give you a case in point. I live in Pierre, South Dakota. We are served by feeder airlines, affiliated with Mesaba Airlines, which is affiliated with Northwest and United Express, of course, affiliated with United. And I know and hear you reference the fact that commuter carriers will, under this coalition proposal, probably pay less. But I'm wondering if your study contemplated any impacts, adverse impacts, that might occur with respect to those smaller airports, smaller carriers, and if that, if they are included in the definition of commuter in this study.
  Mr. ANDERSON. I think that generally what we believe is that any sort of a change and a shift in the amount of cost of the magnitude that we're talking about here could result in some major changes in routes that airlines decide to fly. And it could ultimately impact the rural routes more so than some of the others.
  Mr. THUNE. Is it conceivable that if the parent airline, say in this case, Northwest, actually pays less under this proposal, that they might pass some of those savings on to their feeder airlines and in some cases actually drive fares down? We have a situation which I think was alluded to earlier, and that is that it's a very price sensitive thing. And if prices go up very much, people will drive to Sioux Falls or to Rapid City to get service.
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  And we're very concerned. Pierre is our state capital, and we want to retain air service there.
  Mr. ANDERSON. Sure. Clearly, that's something that could happen. You could see a shift, and you could see some folks in some of those locations that could benefit, possibly, in terms of those lower fares, to the extent that the carriers pass those on in the form of lower prices.
  On the other hand, you'd have folks in other parts of the country that would have the opposite effect occur, and could see their costs go up.
  Mr. THUNE. It does seem to create winners and losers, and like most of the people on this panel, I'm sure that you want to ensure that your area is not one of the losers under this scenario.
  But I guess I would have some concerns, until we are able to flesh this out a little bit more in terms of detail, like I say, with respect to the individual situations and cases.
  Thank you.
  Mr. DUNCAN. Mr. Poole, what do you think about that? Right now, if you fly out of some of the hub airports, you can fly across the country, just about, cheaper than you can fly from say, let's just pull out an example, Knoxville, Tennessee to Washington, D.C.
  Mr. POOLE. Right.
  Mr. POOLE. Yes, sir.
  Mr. DUNCAN. In fact, a whole lot cheaper. Do you think that a user fee system would result in fairer pricing for airline tickets?
  Mr. POOLE. I have a problem with the Big Seven approach, it is talking a lot about impact on passengers, per se, and claiming that passengers today are paying unfairly because they're paying through the ticket tax rather than through a charge to the airline.
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  But it seems to me that, if you shift to a charge that is fundamentally based on the airline for the unit of service delivered, namely, the safe passage of the plane through the sky, then you're not talking about something that directly impacts the passenger. Obviously it becomes a cost that's part of the airline's cost structure.
  But no more so than fuel is a part of the airline's cost structure or wages or anything else. And I think that it's not at all clear from an economic standpoint that the airlines will directly pass through dollar for dollar the change in cost that comes from a change in what they're, in effect, paying for air traffic control. I mean, today they do, in effect, directly pass it on because it's added on to the ticket price and it's visible there.
  But if it becomes part of their cost structure, like the cost of jet fuel, it's not clear, I mean, they obviously would like to pass it through, but prices are determined by supply and demand, not necessarily by each addition or subtraction from the underlying cost structure. So I don't think you can say that the impacts will be as direct as some of these analyses like to make out.
  Mr. DUNCAN. What do you all think happens if we don't do anything? The experts all predict that air passenger traffic is going to shoot way up. That's going to, of course, create problems for the system. The FAA says that it already has this $12 billion, maybe $9 billion or $10 billion, we're not sure exactly what, but a huge shortfall. Are the problems that we see now going to grow worse or greater if we don't make some changes?
  Mr. POOLE. Yes, and I think that's actually the most important reason to shift to a user fee system, is precisely to address that problem, the need for major, major modernization and technical modification of the FAA's air traffic control system. We today have a situation in which the FAA points out, and the budget balancing pressures mean, that you cannot project an increase in stream of resources for investment in the air traffic control infrastructure today. You just cannot realistically in good conscience do that. And yet we need an increase in stream of resources to invest in that system, and we need it badly now.
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  Creating a solid user fee approach that's bondable means that investment can be funded by the capital markets, which is what Canada's doing. They had a $3 billion initial financing of NavCanada last November. It was easy to finance. The capital markets fell all over themselves to provide that, because there's a bondable revenue stream, and they're now replacing the short term bank financing with a series of revenue bond issues. The first one in December for $750 million was three times oversubscribed.
  Modernization of this sort is readily fundable from the private capital markets, if you create a predictable revenue stream that doesn't lapse because Congress doesn't get around to reauthorizing it. You have to have something that's independent of these pressures of the budget cycle. It's got to be something that's tied directly to the use of the system, but that can be predicted with confidence it's going to be there for 10 or 20 years, so that you can do long term financing. That's really the most important reason to do this change.
  Mr. DUNCAN. Mr. Chambers, any comments you want to make?
  Mr. CHAMBERS. No, thank you, Mr. Chairman.
  Mr. DUNCAN. Mr. Anderson, anything else?
  Mr. ANDERSON. I just want to add to what Mr. Poole said. I tend to agree overall with what he says in terms of the needs of the system. Clearly, clearly, this past summer demonstrated for everybody, with ValuJet, TWA Flight 800, the concerns that are on the public's minds out there about the safety and security of our aviation system. And clearly, FAA's got tremendous challenges that it needs financial resources to address.
  And the fact that potentially their fiscal year 1997 budget could be short by the tune of $2 billion if something is not done just heightens the concern. We have to modernize the air traffic control system. It's far, far beyond having that done. We need that, it's past due.
  So clearly there are needs. We just have to come up with a system that will hopefully do it in a fair, equitable manner.
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  Mr. DUNCAN. All right. Does anybody else have any questions? Mr. Lipinski?
  Mr. LIPINSKI. Thank you, Mr. Chairman.
  The coalition stated in their proposal that back in 1970, when the fuel tax was implemented, that it was implemented in the way it was because we were in a regulated environment in the aviation industry. And they maintained that it was fair at that time because it was regulated. Now that we've deregulated, it's no longer fair.
  I'd like a comment from anybody on the panel that would like to comment in regards to what they believe, did they believe that was true at the time, or what's your feelings about it?
  Mr. ANDERSON. Yes, I'll comment on that, Mr. Lipinski. Clearly it was a regulated environment, back when the fuel tax was put in place back in 1970. And clearly, when you go to a deregulated environment that results in a big fluctuation and change in fares, yes, it does create the system that on the surface appears unfair.
  What confuses us, I think, and doesn't lead us to conclude quite as strongly that the current system is unfair is there's a number of things that we don't know the answer to yet. We don't know the answer, for example, in terms of what the costs are for the peak demands that are put on a hubbing carrier. We don't know, there are certain advantages some of the major airlines are given in the form of slots at slot controlled airports. And there's a value that could probably be put on that, but we don't know what that is, to offset the potential unfairness of the ticket tax.
  It's just a very complicated thing, that when you take all these things into consideration, the picture is not quite as clear as you might want to first think.
  Mr. DUNCAN. Anyone else?
  Mr. HANNEGAN. Yes, I'd just like to add, I think that the coalition has raised some legitimate questions about the fairness of this system, because the system, the ticket tax, is not tied to costs at all. It's tied to the fare you pay.
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  So the questions are legitimate, but there are some key answers we don't have yet.
  Mr. LIPINSKI. I think we all agree that they have legitimate concerns, and that they are paying more than they should be paying for the system is my opinion. I seriously question, as I mentioned earlier, though, that they should pay as little as they want to pay, and some other people have to pay as much as they've got to pay.
  Would it make any sense if we went into a fuel tax as part of, or all of, how we wind up funding this? Would that be beneficial in regards to motivating air carriers to move more quickly to more efficient aircraft?
  Mr. ANDERSON. Yes. You've touched on one that's sort of a pet of mine. The staff kid me about this all the time. The primary source of revenue for the Highway Trust Fund is the tax on gasoline. And one of the things that we showed up on the bar chart we had up here earlier was what would be the potential shift in cost if you went to a fuel tax sort of a system.
  We did an analysis that showed that if you charged 42 cents a gallon for aviation fuel and you wanted to generate about the same amount of revenue, about $5 billion that the ticket tax generated in 1995, the actual distribution of the costs among the coalition airlines versus the competing airlines versus the commuters would be about the same as the ticket tax. So the cost would end up being about the same.
  Now, I'm sure that there are downsides to letting the primary source of revenue be a fuel tax. Probably that would be a good question to ask the airline folks here next week. But it clearly is something to be looked at, I believe.
  Mr. LIPINSKI. Anyone else have a comment?
  Mr. POOLE. I would just agree. I think that it probably is something of a proxy for weight and distance, because the heavier aircraft obviously would burn more fuel and so forth, the longer, the more distance they fly, the more fuel they burn.
  I think there is a question, though, that I want to call your attention to, that having it be a tax rather than a fee, if tax means that it goes through the Federal budget process, you're still going to have a problem making that a bondable revenue stream, because of the political uncertainty as to what its level is going to be 5 years from now when you have 20 or 25 year bonds outstanding. That's going to play havoc with the people who would supply capital.
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  So if your objective is partly, not just to increase fairness and provide a better funding source, but to provide a bondable revenue stream, which is what I believe your objective should be, then you need to look carefully about whether it's a tax or whether it's a fee and where it goes once it's collected.
  Mr. LIPINSKI. Unfortunately my language sometimes is not too precise, such that I was calling it a fuel tax. It's a ticket tax. But I have a brilliant staff, and they managed to correct me before I made that mistake too often.
  So as I say, my language is not always precise. Hopefully, my mind knows what I want to do, though. Now that I just said that, I had another question and I can't remember what it was.
  Mr. LIPINSKI. Well, as I said earlier, Mr. Chairman, this issue is going to be around for a long time. I'll have another opportunity.
  Thank you.
  Mr. DUNCAN. Okay, thank you very much.
  Mr. Menendez, do you have any questions?
  Mr. DUNCAN. Mr. Thune, do you have any other questions?
  Mr. THUNE. Not at this time, Mr. Chairman.
  Mr. DUNCAN. All right. Well, that concludes this panel. Gentlemen, thank you very much for being with us, and for your most helpful presentation.
  Our next panel is Mr. Phil Boyer, who is President of the AOPA Legislative Action; Mr. Edward F. Bolen, who is President of the General Aviation Manufacturers Association; Mr. John W. Olcott, who is President of the National Business Aircraft Association; and Mr. James K. Coyne, President of the National Air Transportation Association.
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  Gentlemen, thank you very much for being with us. And I suppose what we'll do, we'll just move down the table in this direction.
  Mr. MENENDEZ. Mr. Chairman?
  Mr. DUNCAN. Yes, Mr. Menendez.
  Mr. MENENDEZ. May I be heard on a point of order?
  Mr. DUNCAN. Yes, sir, Mr. Menendez.
  Mr. MENENDEZ. Mr. Chairman, I am wondering, having reviewed the testimony of the panel that presently will be before us, whether or not the House rule on, known as truth in testimony, is being observed today. That rule, as I understand it, I'm not necessarily supportive of it, but the fact of the matter is, if it is to be applied, I expect it to be applied uniformly as a member of this committee and as a member of the House.
  It says that any witness appearing in a non-governmental capacity who submits a written statement, and I've seen that this panel all has written statements, shall include with that statement to the maximum extent practicable, a curriculum vitae, a disclosure of amount and source by agency and program of any Federal grant they receive or sub-grant thereof, or contract or subcontract thereof, received during the current fiscal year, or either of the two previous fiscal years by the witnesses, or by an entity represented by the witness, and that's also in the meeting notice for this hearing.
  So having seen none of this information attached to the testimony that is about to be presented, the question is, are we observing this rule, or has the Chairman sought to relax the rule? And if that is the case, what is the procedure, since we're beginning the process, what will be, are you establishing a precedent, what is the procedure? Because I personally like people to come and testify and get their expertise and glean from their expertise and through questioning the truth that we need to derive.
  But I would hate to see certain groups be asked for such information and other groups not be asked for such information.
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  Mr. DUNCAN. Well, Mr. Menendez, we will, this Chairman is attempting to set no precedent. We are going to, or my wish is that we handle these hearings in the way we handled them in the last Congress. And the rule that you're talking about, there are a lot of rules of the House that could come into play, I suppose, on every hearing that we don't really get into. And we'll enforce that rule to the extent that you wish us to.
  What I would prefer to do at this hearing is, if you want, we will insist that they attach that type of information in the future. But so that we can go forward with this hearing today, if it would be acceptable to you, I would like to just let you ask the witnesses about that.
  Mr. MENENDEZ. Mr. Chairman, I thank you for your answer. If I may continue on my point of order.
  Mr. DUNCAN. Yes, sir.
  Mr. MENENDEZ. I don't like this rule. I think it's a terrible rule. I think it is designed by some to prevent or to intimidate certain groups from coming to testify before the Congress. That is my personal view of it.
  So I do not seek the enforcement of the rule and I don't want to stop this panel from testifying. I want to hear what they have to say.
  However, I also want to, for the Chairman's and the ranking member's sake, have them understand from my point of view that I also will not be supportive of selective enforcement of the rule. So that in fact, certain entities and groups that would come before the committee would be asked for such information and others would not. That I think would be patently unfair. And I know the Chairman, with his judicial experience, I think might agree with me.
  So all I'm concerned about, and the reason I raise the issue now, and I don't want to delay the hearings any further, is to say, I do not seek enforcement of the rule, but I also will not support selective enforcement of the rule.
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  Mr. DUNCAN. Well, I think that's a fair and reasonable position for you to take. I can assure that this Chairman will try as hard as possible not to have any selective enforcement of that rule. And we'll proceed as much as possible in the manner that we always have.
  Mr. MENENDEZ. I withdraw my point of order, Mr. Chairman.
  Mr. DUNCAN. Thank you very much.
  Mr. Lipinski?
  Mr. LIPINSKI. Mr. Chairman, I would simply like to say that I agree with what Mr. Menendez has to say. But knowing you, I am sure that you will work this situation out that everyone will be happy. Because if anyone has the wisdom of Solomon in regards to these matters, you definitely do.
  Mr. DUNCAN. Not really, Mr. Lipinski, but thank you very much.
  All right, let's go ahead with the witnesses. Gentlemen, thank you very much for being with us. Mr. Bolen, you may begin your testimony.

  Mr. BOLEN. Thank you, Mr. Chairman. I appreciate the opportunity to testify today.
  My name is Ed Bolen, and I am the President of the General Aviation Manufacturers Association. GAMA represents 53 manufacturers of general aviation aircraft, engines, component parts and avionics. Our manufacturers have operations throughout the United States and in every community that you can think of.
  GAMA is proud to be a part of the Alliance for Safe and Efficient Air Transportation, a group of 2,400 entities that have come together to address the issue of FAA funding. To our knowledge, it's the largest group of aviation interests ever assembled on a policy issue.
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  The Alliance, and GAMA in particular, is very interested in having a system that is adequately funded. And we in the general aviation community very much want to contribute to that.
  Consequently, we would urge this committee to work with everyone on Capitol Hill to reinstate the aviation excise taxes as quickly as possible for as long as possible. As you know, everyone who is currently a member of the aviation community has found their place in the marketplace. Reinstating the taxes as they have been in existence for 25 years is not going to cause disruption. It's not going to displace people. People are going to be able to continue to thrive in this marketplace, which has given the United States the safest, the largest and the most sophisticated and diverse air transportation system in the world.
  From a general aviation perspective, we pay toward funding the FAA through a fuel tax. And we think that this is a particularly good method for us to contribute to the trust fund. The fuel tax does a very good job of approximating one's use of the system. It is also a very easy way for us to pay, and an easy way for the Government to collect. From the taxpayer's perspective, there are no returns to file, there's no record keeping, there isn't a lot of paperwork. It's simple and it's easy to understand.
  From the Government's perspective, it's easier to collect from a handful of fuel companies rather than several hundred thousand pilots.
  Also, unlike some user fees which we have seen in other foreign countries, a fuel tax does not discourage safe practices. In areas where a fee is charged for every service that is provided, you certainly find people reluctant to accept those services. In the United States, we encourage people to file flight plans and to get weather briefings and talk to control towers. I'm concerned that if we begin to tax those particular safe practices, we're going to have less of them, and the impact is going to be on safety.
  Because GAMA is primarily a representative of manufacturers, I think it's also important that we talk about some of the other user fees that we have seen in other countries, including certification fees. First of all, I would like to make the point that certification is something that is done by the Government to protect the public's interest in safety. It is not done for the benefit of the manufacturers. And in that respect, I believe that certification is appropriately something that should be paid for from the general fund contribution.
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  I also think that in the interest of safety, it is important that the regulators and the regulated have a free flow of communication. I'm concerned that in placing fees for certification, we'll create a toll booth between the regulated and the regulators. And that will restrict the free flow of safety information.
  We have seen that where certification fees are in place in foreign countries, the authorities send more people than necessary and take more time than necessary to provide services, because they are reimbursed on a per person and an hourly rate. And I think we want to avoid that situation in the United States and work toward just achieving the primary goal of safety.
  The final point that I want to address today is a proposal that was made by the Administration last summer to levy a $225 per flight fee on all business aircraft. I think that is particularly troubling. Primarily because it would amount to a huge tax increase on the flights. Also, this tax would not be related to any service. Short flights are taxed at the same amount as long ones. It would not take into account the charges based on the system.
  For these reasons, I think the per flight fee is a particularly bad proposal. I don't know whether or not it will be part of the budget that's submitted to Capitol Hill tomorrow. But if it is, it is very discouraging for us.
  One final point about that that I'd like to make, is that it also violates the principle that revenues that are raised from the aviation community should be spent on aviation.
  Thank you, Mr. Chairman, for the opportunity to testify.

  Mr. DUNCAN. Thank you very much, Mr. Bolen.
  Mr. Boyer, we're not only going in table order, it's alphabetical order, I notice, also. You're next. Thank you very much for being here.

  Mr. BOYER. Thank you, Mr. Chairman.
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  I guess I feel in this room perhaps the way you felt last night in the chamber as the President was giving his State of the Union address. And those of us who were outside of that chamber or outside of this room today were watching on television when another event was going on at the same time. And so we dealt with split screens and crawls across the bottom.
  If I could for just a moment, let me split the screen, and what's going on, I read you from, whether it be the Wall Street Journal or whatever in Washington, on this very issue of financing. Yesterday, Treasury Secretary Robert Rubin urged Congress to immediately renew the 10 percent airline ticket tax to bolster the Trust Fund for air safety improvement. The Treasury's Acting Assistant Secretary said, we believe it would be appropriate to propose a specific system of new fees or taxes, but not without the benefit of the Commission's recommendations, which you talked about.
  And even someone we didn't always agree with on the other side of the Hill last year, Senator John McCain came out yesterday and said that they must extend the ticket tax. So while we're in this room talking about financing and future financing mechanisms, even as early as this afternoon, Ways and Means, we understand, will be marking up a way to extend our present system.
  Congressman Menendez, I am Phil Boyer, I represent 340,000 members of AOPA Legislative Action. That's about 55 percent of all the active pilots in this country, and we represent the general aviation interests of pilots and owners in the United States. As you know, there are about 620,000 general aviation pilots.
  And we do believe that this committee has gone a long way in the 104th Congress with FAA reform. We believe it's right to bring this subject up now. But as Congressman Lipinski said, I think we'll be talking about it for a while, because it's complex. Basically, you have helped us last year and the year before, in looking at FAA reform and how to do it. In other words, how to get it done.
  But all of a sudden, before we've even let those issues sink in, those commissions be established, we're all of a sudden jumping to how to pay for it, instantly. We don't have, for instance, yet in place, the very good management advisory council that you, Mr. Chairman, were very instrumental in crafting, and that the former FAA Administrator David Hinson said could be a breakthrough for his ability to work within the system. No members yet appointed.
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  The National Civil Aviation Review Committee, which was part of the Act that all of you supported, that has been talked about in the previous panel here, no members approved yet. And yet, the study by Coopers & Lybrand, the almost $1 million study, is due to be completed at the end of this month and turned over to this committee. So we have a lot of work to do there.
  There's an FAA cost allocation study that's done on a regular basis about every decade. It's critical to answer some of the questions that were asked of the previous panel: what does it cost for various components of the system. That study is being completed, it's being very closely held by the FAA. I would ask this committee to perhaps ask for that study, so that you can get a better handle on what are the individual components paying and how have they looked at this situation.
  The efforts that went forth on personnel and acquisition reform that you put in place, we haven't been able to measure all those yet. So what impact will they have on the $9 billion or $12 billion shortfall? So why are we jumping to how to pay for it, other than, let's get the system that's worked for 27 years back in place.
  And I hope we will remind Congressman Lipinski that, as he asked the question about deregulation, this system has been in place for two decades of deregulation. Deregulation just didn't happen and all of a sudden now the ticket tax is no longer effective. For almost 20 years, we've had deregulation and the ticket tax, and the excise taxes on aviation have worked.
  The other thing we haven't talked about is safety. And for my constituency, safety is critical. When you begin charging for uses of various components of the system, you begin to affect safety. And all these wonderful examples that were presented from foreign countries on the earlier panel by Mr. Poole, look at their safety record for general aviation flights.
  For instance, we keep referring to Canada. Canada's new system isn't even up and running yet. They were here in force during the Rohr Commission hearings to better understand what we were all talking about here. So let's not compare ourselves there. There's no other country that has imposed user fees that currently anywhere comes close to the size of our air traffic system in this country.
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  And while Mr. Poole says most of my constituency doesn't use towered airports, I would claim that air traffic fees also encompass whether briefings, flight instrument system, Congressman Cooksey said just a minute ago that he was trying to keep his instrument rating current. Well, when he flies in the instrument system, there would be user fees under any of these systems.
  We pay presently, and we don't want to lose the ability to have our say. So even under a system which general aviation's costs might go to nothing for those who didn't use any of those services I just mentioned, we prefer to pay. We prefer to keep you as the governing body of the national air transportation system, not a group of airlines, the Big Seven, for instance, making policy and determining what happens.
  Passengers are probably the most un-represented at this entire hearing today. We're going to talk to the airlines next week. We're talking to those who do pay a fee for using fuel today, but we're not talking to the people who actually buy these airline tickets, and hopefully very soon again, will find a ticket tax on it.
  How do they feel? Have they been raising any noise level about being able to take advantage of a different airport than O'Hare, a different set of city pairs, buying tickets in advance, getting the opportunity perhaps to do personal or business travel at a lower rate, and hence pay a lower fee?
  And we didn't also talk about the various classes of airline service. Remember, when you do pay a ticket tax on an airline and you ride first class, you're getting a higher level of service and you're paying a higher level of tax for that service, somewhat ignored by this.
  Users have a tremendous investment in the future. I'm saying, we've still got to say, how do we do it. For instance, the NAS plan, that's now in its second iteration, was established in 1981 at a cost of $11 billion to complete modernization of our system. It was supposed to be done in a decade. It's now almost at $40 billion, and there's no end in sight.
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  Let's fix how we do it. Let's let some of these new reforms that you were instrumental in putting forth take hold before we do a knee-jerk reaction to try to figure out how to pay for it.
  There are alternatives. The parent committee here last year came up with the Truth in Budgeting Act, figuring out how to take the aviation and other trust funds off budget. We've come up with the linked financing plan, an alternative we put forth that says, maintain a tax structure, but allow it to grow with the growth of the aviation system.
  Basically, I think caution is the word. And certainly, watching what's going on on that split screen right now, and making sure that we all work to rapidly improving our present system while we work on a new one is of the utmost importance.
  Thank you.

  Mr. DUNCAN. All right, thank you very much, Mr. Boyer.
  Mr. Coyne?

  Mr. COYNE. Thank you very much, Mr. Duncan. And Congressman Lipinski, it's a great pleasure for me to be here again.
  I represent the National Air Transportation Association, which is nearly 2,000 businesses located at airports across the country that the infrastructure of aviation, both general aviation and commercial aviation. Our members have had a great interest in this financing debate over the last year or two, and we're grateful for this opportunity to testify.
  We have concluded that oftentimes there are hidden agendas in any debate involving money. And I'm sure that's no secret to people here in Congress.
  Of course, part of the genesis of this debate began because there were some quarters of the FAA and the Administration that felt that the only solution, given the budget constraints on further taxes, was to get out from the semantics of taxes and create something that wouldn't be subject to caps or other controls on tax increases so that the FAA's budget could increase.
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  All of a sudden, a solution appeared user fees. ''Suppose we call them user fees, they're not taxes, we'll fool everybody, we'll get the money we need from the public, but we won't have to subject ourselves to limits imposed by Congress or other people who are trying to limit the growth of the bureaucracy.''
  I think Congress and the public has come to realize that calling a tax a user fee is disingenuous, in fact it's really almost immoral. What we're talking about today is getting away from these false semantics, false labels, and simply focusing on the question of, how much money does the FAA need and how that money should be raised, recognizing that whatever money is raised, it's fundamentally a tax.
  We believe that we should call a tax a tax. I think as someone several years ago said, if it looks like a duck and walks like a duck, it's a duck. And that's what we're talking about here.
  Our members have been hopeful that as these taxes are debated and authorized by this committee that the committee not be driven by hysteria or somebody else's hidden agenda. You've heard from the GAO that most of the arguments being made for the Big Seven's tax proposals are nothing more than an attempt to seek an economic competitive advantage that some airlines want over others. And frankly, it's almost amusing how transparent those proposals have been.
  Nevertheless, you and the committee have the very serious job of coming up with a long term solution for financing the FAA through a structure of taxes. What should that tax structure be over the years ahead? And should that be your first question?
  In my mind, your first question should be. ''What are the costs that the FAA really needs to finance? Before we rush to open up some huge piggy bank that really doesn't exist, let's seriously ask the question.'' ''Does the FAA really need $12 billion more money over the next 7 or 8 years?''
  Virtually all of our members at NATA would say no! There are huge opportunities for cost saving right now in the FAA. If you think about it, the FAA is principally in the business of computers and telecommunications. It's the largest telecommunications network in the world and the largest computer system in the world, outside of the internet, working together to link together to all the various parts of the FAA and to provide instant communications to pilots and others.
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  But what area of our economy has seen more cost saving in the last decade or two than those two areas, telecommunications and computers? It seems to us that the FAA ought to be able to come forward and show you dramatic new ways over the next decade that their costs will be held in line or in fact in many areas, decreased, and that their productivity, their labor productivity can improve dramatically, taking advantage of all this new technology that we have today.
  But leaving aside for a moment the question of cost reduction, which I think is something this committee should be very conscious of as it goes forward in this debate, let's move to the question of another sort of ignored question here? What should be the portion of the tax imposed on our industry and the users, and the portion of the tax borne by the general revenue fund?
  The Chairman raised this question during the previous panel, and I don't think he got a complete answer from anybody. I'm sure everybody in this panel would wholeheartedly support the concept that the general revenue fund certainly deserves to pay a significant share of the cost of the FAA, and not just their safety regulation costs, but the entire structure of the FAA, which provides a public service for virtually every citizen in this country.
  The general fund, over the past several years, has paid approximately 30 percent of the cost of the FAA. I, for one, think that's a fair share. Whether it should be 30 or 28 or 27, that's a debatable point. Those who stand up and say that the general taxpayer should bear no cost, no share of the FAA's cost, are ignoring all the huge benefits that our national air transportation system and the FAA provide for every citizen.
  Finally, the question of tax. Some people seem to think that there is one tax and only one tax that will somehow be the silver bullet to solve the funding questions, but, in fact, for the past two or three decades, we have had two very different taxes financing the cost of the FAA. We've had the ticket tax on the one hand, and the fuel tax on the other hand, and we've had these two taxes for a good reason. They provide different ways to accomplish the funding goals of our government, of the FAA, by dealing with different variables.
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  The ticket tax deals with a per capita structure recognizing the value that each person who uses our system gets from the system. It's interesting to note how disingenuous the airlines are when they say that since deregulation the taxes are unfair, so lets throw the whole system out the window. In fact, when the system was originally created, the airlines surely understood that there were always first class passengers and cabin class passengers paying two very different rates. These passengers paid different fares for the same flight, but it was okay then, now they complain, that, Southwest or ValuJet has a lower rate and it's not fair.
  A fundmental concept of taxation justifies these different structures, different people getting different benefits, different levels of service, and most especially, different perceived value. They should and do have a different capacity to pay on a per capita basis. Just like we all pay different real estate taxes to support our schools, even though we might have the same use per person of our school system, these different per capita taxes or ticket taxes have a fundamental logic which I think every member of Congress can appreciate.
  But on the other hand, we also have had the fuel tax, which has an equally valid basis as a tax structure for aviation. As Mr. Poole admitted earlier, the fuel tax is a perfect proxy for weight and distance. In fact, it's even better than just weight and distance, because planes that fly high over long distances, have a much lower fuel consumption per mile than short haul planes. Planes that are taking off and landing frequently have a greater rate of fuel consumption that compares fairly to their greater use of the system.
  Our view is that the fuel tax is a perfectly valid component of the structure, the tax structure funding the FAA. I think, you'll see political benefits as well. With two revenue streams, you have the potential for dividing and allocating these two different revenue streams, perhaps one more toward ATC, the other more toward the general safety functions of the FAA.
  So what am I trying to suggest to you here as we move forward? The first encouragement is not to rush to create the perfect combination of these taxes, but to give the National Civil Commission and the other authorized groups time to analyze this question, working with the GAO, who of course I think had some very interesting comments about the fuel tax earlier today, in coming up with the right mix of fuel tax and ticket tax for a long term solution to this problem.
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  I'm not saying that it's necessarily going to be the exact same cents per gallon that we've had recently or the same percentage per ticket. The ticket tax could come down, for example, the fuel tax could be increased on portions of the commercial airline system, and, at the same fare, we could reduce the fuel tax for small piston planes, who really don't contribute much in the way of tax revenue and impose costs to provide the tax collection mechanism for them.
  In summary, we have a unique opportunity to move forward, coming up with a tax proposal that Congress could impose after evaluating the recommendations of the National Commission, and settle this long dispute, so that we could start to build, if I can use this term, bridge for the FAA to move to the next century.
  Thank you.

  Mr. DUNCAN. Thank you very much, Mr. Coyne.
  Let me just make one comment in regard to your comments and Mr. Boyer's. This hearing and the one next week came about at the request primarily of the Speaker of the House and it arose out of a meeting that was held between the Speaker, Chairman Archer, Chairman Shuster and myself and several others, with the CEOs of many of the major airlines.
  And the agreement at that time, that came late in the Congress, and the agreement at that time was that we would start hearings early in this Congress to look into this. As you know, if we stick just with the ticket tax, that comes under the jurisdiction of the Ways and Means Committee. And we assume that the Ways and Means Committee is going to reinstate the ticket tax basically as it has been at least temporarily.
  But if we come up with a new user fee system, or a new system for financing, then that comes primarily under this committee. But it's not something that anybody's going to rush into. We're going to hold these hearings just as a way of starting to look into this, and all the issues involved and all the ramifications. Because we know it is, as it was mentioned in the first panel, this is a very complex problem. And maybe at the end of all that, it's like those 3 days of hearings we held 2 years ago on the Administration's ATC proposal. We decided not to do anything, because the support was not there.
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  But what we're looking at is to see where the support is, do we stay basically where we are, or do we come up with a new system. But we're not going to jump in and do something before the Commission makes its report, and all these other groups and people and agencies involved look into it that need to look into it.
  Mr. COYNE. Well, you are absolutely right, Mr. Chairman. My comments on that regard were really directed at the remarks that we read in late of last year by some of the representatives of the major airlines that they felt that they could use the crisis of the funding or the absence of the tax this Spring as a lever to get their seven coalition tax policy accepted. I'm pleased to see that you and the other members of the committee understand that this is something much too important to allow some short term crisis to drive you.
  Mr. DUNCAN. Well, you know, at the end of all this, we may well make some changes. But I don't think Mr. Lipinski or I or Chairman Shuster or Mr. Oberstar or any of us tend to rush into this without looking at it very thoroughly and very closely. This is just the start.
  All right, Mr. Olcott.

  Mr. OLCOTT. Mr. Chairman, Mr. Lipinski, thank you very much for this opportunity.
  My name is Jack Olcott. I represent the National Business Aircraft Association. Our members are companies, 4,500 companies, that are the world's most active users of general aviation for business transportation. They also purchased last year over $11 billion in airline tickets. They need transportation of all forms.
  We've heard on many occasions, including this morning, certain characterizations of business aviation. I'd like to correct those characterizations. The typical member of NBAA is not a member of the Fortune 500. They typically operate one turbine powered business aircraft, that carries about six people. The cabin is large enough for a business conversation but not much else.
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  They do, however, provide transportation to 10 times the number of airports with any form of commercial airline service, scheduled airline service, and 100 times the number of locations with convenient service. They allow a company to maximize the productivity of their two most important assets, people and time. Our member companies are indeed very productive. They generate revenues in excess of $3 trillion annually, and they employ more than 16 million people.
  Business aviation truly provides access to economic opportunity, and it produces results. We strongly recommend that the aviation excise taxes be reinstated as soon as possible for as long as possible. The excise tax system is fair, it is efficient, and it generates a predictable revenue stream.
  Let me address each one of those elements. First of all, the collection system is very easy and very efficient. It doesn't involve a bureaucracy such as we find in Europe. It is certainly fair. It encourages the producer of services to be efficient, so that producer can offer lower airline fares. It rewards the sharp buyer, the buyer who shops around and gets the lower fare ticket, even though they're riding a ''Big Seven'' airliner.
  And finally, the acceptance of this form of taxation is very high. The collection mechanism compliance is very high. And the people who are paying nearly 90 percent of all the money that goes into this system, the airline passenger, isn't complaining one bit. Our Nation's traditional system of funding the FAA by a combination of excise taxes and general fund contribution has provided a steady, reliable and abundant revenue stream, and it should be continued.
  The longer Congress delays in reinstating the excise tax, the more we compromise the very good reforms developed in the 104th Congress, and complicate the task before the National Civil Aviation Review Commission. NBAA cautions this group concerning a system of user fees, particularly one that totally relies on the direct user to fund our aviation transportation infrastructure. Economists have said that a transportation infrastructure funded solely by the direct user will be under-capitalized and under-utilized. Such under-capitalization and under-utilization will hurt our Nation. And that's not in the best interests of anybody.
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  Furthermore, citizens who never fly on an airliner, who never go in a general aviation aircraft, benefit from the ebb and flow of commerce that air transportation provides. Granting the FAA the right to tax in no way encourages the FAA to be more efficient. In fact, it funds their inefficiency. And finally, user fees can certainly discourage operators from using the safety services of the FAA.
  In conclusion, NBAA urges Congress to move beyond the narrow issue of user fees versus excise taxes and focus on the unique opportunity that exists right now to create the world's best transportation infrastructure, the proper air transportation infrastructure for the 21st century.
  Air transportation is truly the enabling technology that will allow the United States to fulfill its economic and social objectives in the 21st century. We should move forward and focus on the bigger issue of how do we empower the FAA with the organizational structure and the management resources to fulfill the Nation's need for a truly efficient, modern air transportation infrastructure.
  Thank you very much.

  Mr. DUNCAN. Well, thank you very much, Mr. Olcott.
  And thank all of you for some very informative testimony. Mr. Boyer, I thought it was fascinating that you said that even though under a proposal such as Mr. Poole made, he listed general aviation, basically, as the big winner in his proposal. And he said 65 percent would pay almost no costs or much lower costs. But you say even if they don't pay any costs, you don't support a user fee type system. Is that correct?
  Mr. BOYER. I believe in the adage that he also said, and that most of the foreign countries that have adopted user fees, and that is, user pays, user says. If we weren't paying anything and you were holding this hearing, if we weren't taxpayers in this system, would we even be at the table. It is, we believe, incumbent upon us to support the parts of the system we use, the marginal parts of the other systems we use. And we feel the efficient passive fuel tax is the way to do it.
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  But I know our members, no one likes taxes. But at the same time, they are the most efficient way, we feel, to pay our fair share of the air transportation system we use.
  Mr. DUNCAN. All right. Mr. Lipinski, I'm going to go first to you for questions.
  Mr. LIPINSKI. Thank you, Mr. Chairman.
  I really don't have any questions of this panel. I simply want to say that I think your presentation has been enormously articulate. I particularly agree with you, Mr. Coyne, there is no difference between a user's fee and a tax.
  It seems to me, though, that there was a great President who brought that into the lexicon by the name of Ronald Reagan, who substituted user fee for taxes. I'm sure you're familiar with him.
  Mr. COYNE. I think they were called ''Revenue Enhancements'' at one point, too.
  Mr. LIPINSKI. Yes, they were. That is very true.
  Well, as I say, he was an enormously articulate individual also.
  I do believe, though, that the FAA needs additional funding in the future. I think the system is growing, I think that they operate right now under restrictions that I don't think that we should subject the flying public to. So I think that they need more revenue in the future.
  I don't think that we should jump into any new system of taxation. But I do believe that we have to change the existing system. I do not believe it is fair to certain elements, particularly in commercial aviation. I don't agree with the coalition's plan, but I think there is enough brain power on this committee and information that we can get from individuals in the aviation community that we could come up with a new plan that will be advantageous to the American flying public.
  In regards to your particular concerns, as I mentioned earlier, you have all articulated extremely well. I know that the Chairman and I and all the members of this committee will certainly take those into consideration. And it is my opinion that your position in the end product will probably be little changed from what it is at the present time.
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  Because in all candor, what you contribute to the system, I know, is significant to each and every one of you. But in the big picture, it's relatively speaking, a few drops in the very big bucket.
  So I don't think you should be too concerned about it.
  I thank you once again for your testimony, and I turn the microphone back to the Chairman.
  Mr. DUNCAN. Well, thank you very much, Mr. Lipinski.
  I had some other things that I thought I might go into, but we have a vote going on on the Floor. And rather than hold you gentlemen up any further from your busy schedules.
  Mr. Oberstar, Mr. Lipinski said you didn't want to say anything. I wasn't trying to overlook you, but if you have something you want to say.
  Mr. OBERSTAR. Mr. Chairman, I don't have anything to say, and I won't take very long to say it.
  Mr. OBERSTAR. I was delayed by a meeting of the Kennedy Center Board of Trustees, representing the Chairman and myself. It delayed my arrival here, and I want to thank our panel and the GAO witnesses for being here. This airline's userfee idea is a bad idea. We ought to give it a decent burial and find something else to replace it.
  Mr. DUNCAN. Thank you very much, Mr. Oberstar.
  And thank you, gentlemen, for being here with us. We have concluded this hearing much, much faster than I thought we would have.
  Thank you very much.
  [Mr. Costello's prepared statement follows:]

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  [Whereupon, at 12:10 p.m., the subcommittee was adjourned, to reconvene at the call of the Chair.]

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