	Background

		Sources of Trust Fund Revenues

The Trust Fund provides the primary source of funding for FAA and  receives revenues principally from a variety of excise taxes paid by users  of the national airspace system. Revenues deposited in the Trust Fund are subject to congressional  appropriations. Uses of Airport and Airway Trust Fund Revenues

The Trust Fund is the primary source of funding for FAA’s capital  programs and also provides funds for FAA’s Operations account. The  capital accounts include (1) the Facilities and Equipment (F&E) account,  which funds technological improvements to the air traffic control system,  including the modernization of the air traffic control system, called the  Next Generation Air Transportation System (NextGen); (2) the Research,  Engineering, and Development (RE&D) account, which funds research on  issues related to aviation safety, mobility, and NextGen technologies; and  (3) the Airport Improvement Program (AIP), which provides grants for  airport planning and development. In addition, the Trust Fund has  provided all or some portion of the funding for FAA’s Operations account,  which funds the operation of the air traffic control system and safety  inspections, among other activities. Finally, the Trust Fund is used to pay  for the Essential Air Service (EAS) program. In fiscal year 2010, FAA’s  expenditures totaled about $15.5 billion, with Trust Fund revenues  covering about $10.2 billion, or 66 percent, of those expenditures. As  figure 2 shows, while total FAA expenditures grew about 60 percent from  fiscal year 2000 through fiscal year 2010, the Trust Fund’s revenue  contribution only increased 12 percent, while the contribution of general  revenues from the U.S. Treasury has increased to cover a larger share of  FAA’s operations expenditures. The Financial Condition of the Trust Fund Has Deteriorated over the Last Decade

Since the Trust Fund’s creation in 1970, revenues have in the aggregate  generally exceeded spending commitments from FAA’s appropriations,  resulting in a surplus. This surplus is referred to as the Trust Fund’s  uncommitted balance—the balance in the Trust Fund that remains after  funds have been appropriated from the Trust Fund and contract authority  has been authorized. As of the end of fiscal year 2010, the Trust Fund’s  uncommitted balance was about $770 million (see fig. As figure 3 shows, the Trust Fund’s uncommitted balance has declined  since reaching $7.35 billion in fiscal year 2001. This decline is largely a  result of how Congress determines the amount of appropriations that  should be made from the Trust Fund. Starting with the Wendell H. Ford  Aviation Investment and Reform Act of the 21st Century (AIR-21) in 2000  and continuing with Vision 100, Congress has based FAA’s fiscal year  appropriation from the Trust Fund on the forecasted level of Trust Fund  revenues, including interest on Trust Fund balances, as set forth in the  President’s baseline budget projection for the coming fiscal year. Each  year’s forecast, and accordingly FAA’s appropriation, is based on  information available in the first quarter of the preceding fiscal year. For  example, the revenue forecast for fiscal year 2011 is prepared in the first  quarter of fiscal year 2010. These revenue forecasts can be uncertain  because it is difficult to anticipate, a year in advance, events that may  significantly affect the demand for air travel or fuel usage, the fares that  passengers pay, and other variables that affect Trust Fund revenues. Later this month, in the President’s budget, the administration will  release its newest estimate of the Trust Fund’s fiscal year 2011 year-end  uncommitted balance. These improvements are intended to  improve the efficiency and capacity of the air transportation system while  maintaining its safety so that it can accommodate anticipated future  growth. Options for Ensuring a Sustainable Trust Fund

Given the uncertainty inherent in forecasting revenues and the decline in  the uncommitted balance of the Trust Fund, we have suggested that  Congress should work with FAA to develop alternative ways to reduce the  risk of overcommitting budgetary resources from the Trust Fund.
Why GAO Did This Study

This testimony discusses the status of the Airport and Airway Trust Fund (Trust Fund). Established in 1970, the Trust Fund helps finance the Federal Aviation Administration's (FAA) investments in the airport and airway system, such as construction and safety improvements at airports and technological upgrades to the air traffic control system, as well as FAA operations, such as providing air traffic control and conducting safety inspections. FAA, the Trust Fund, and the excise taxes that support the Trust Fund (which are discussed later in this statement) must all be periodically reauthorized. The most recent reauthorization expired at the end of fiscal year 2007. Proposed reauthorization legislation was considered but not enacted in the 110th and 111th Congresses, although several short-term measures were passed to extend the authorization of aviation programs, funding, and Trust Fund revenue collections. The latest of these extensions--the Airport and Airway Extension Act of 2010, Part IV--was enacted on December 22, 2010, extending FAA programs, expenditure authority, and aviation trust fund revenue collections through March 31, 2011. The financial health of the Trust Fund is important to ensure sustainable funding for a safe and efficient aviation system without increasing demands on general revenues. This testimony provides an update on the status of the Airport and Airway Trust Fund, including the current financial condition of the Trust Fund, anticipated Trust Fund expenditures for planning and implementing improvements in the nation's air traffic management system that are expected to enhance the safety and capacity of the air transport system, and options for ensuring a sustainable Trust Fund. This statement draws on our body of work on these issues, supplemented with updated information on the Trust Fund from FAA and the Congressional Budget Office. All dollars reported in this statement are nominal, unless otherwise noted.

What GAO Found

The Trust Fund is the primary source of funding for FAA's capital programs and also provides funds for FAA's Operations account. The capital accounts include (1) the Facilities and Equipment (F&E) account, which funds technological improvements to the air traffic control system, including the modernization of the air traffic control system, called the Next Generation Air Transportation System (NextGen); (2) the Research, Engineering, and Development (RE&D) account, which funds research on issues related to aviation safety, mobility, and NextGen technologies; and (3) the Airport Improvement Program (AIP), which provides grants for airport planning and development. In addition, the Trust Fund has provided all or some portion of the funding for FAA's Operations account, which funds the operation of the air traffic control system and safety inspections, among other activities. Finally, the Trust Fund is used to pay for the Essential Air Service (EAS) program. In fiscal year 2010, FAA's expenditures totaled about $15.5 billion, with Trust Fund revenues covering about $10.2 billion, or 66 percent, of those expenditures. While total FAA expenditures grew about 60 percent from fiscal year 2000 through fiscal year 2010, the Trust Fund's revenue contribution only increased 12 percent, while the contribution of general revenues from the U.S. Treasury has increased to cover a larger share of FAA's operations expenditures. Since the Trust Fund's creation in 1970, revenues have in the aggregate generally exceeded spending commitments from FAA's appropriations, resulting in a surplus. This surplus is referred to as the Trust Fund's uncommitted balance--the balance in the Trust Fund that remains after funds have been appropriated from the Trust Fund and contract authority has been authorized. As of the end of fiscal year 2010, the Trust Fund's uncommitted balance was about $770 million. the Trust Fund's uncommitted balance has declined since reaching $7.35 billion in fiscal year 2001. This decline is largely a result of how Congress determines the amount of appropriations that should be made from the Trust Fund. Starting with the Wendell H. Ford Aviation Investment and Reform Act of the 21st Century (AIR-21) in 2000 and continuing with Vision 100,10 Congress has based FAA's fiscal year appropriation from the Trust Fund on the forecasted level of Trust Fund revenues, including interest on Trust Fund balances, as set forth in the President's baseline budget projection for the coming fiscal year. Each year's forecast, and accordingly FAA's appropriation, is based on information available in the first quarter of the preceding fiscal year. For example, the revenue forecast for fiscal year 2011 is prepared in the first quarter of fiscal year 2010. These revenue forecasts can be uncertain because it is difficult to anticipate, a year in advance, events that may significantly affect the demand for air travel or fuel usage, the fares that passengers pay, and other variables that affect Trust Fund revenues.