Of these, 3,304 are designated as part of the national airport system and are therefore eligible for federal assistance. Our estimates ranged from $1.4 billion per year to fund safety, security, noise mitigation, and reconstruction projects; $2.8 billion if other high-priority projects, primarily capacity-related projects, are added; $6.1 billion for all AIP-eligible projects; and $10.1 billion per year to fund all types of projects, including those not eligible for AIP funding. Although a difference may exist between funding and planned spending in total, there is a much closer match between funding from AIP and planned spending on FAA’s highest-priority projects (reconstruction and mandates). Current funding at the 3,233 small, nonhub, other commercial service, and general aviation airports is a little over half of the estimated cost of their total planned development, producing a difference of more than $1.4 billion (see fig. Effect of Proposals to Increase Airport Funding Varies

Evaluating the various proposals to provide additional funding for airport development involves the consideration of the trade-offs among the various funding types as well as the potential effect each proposal would have on airports. Initiatives to increase funding for airport development include increasing AIP funding, raising the ceiling on PFCs, and other initiatives, such as FAA’s pilot programs for innovative financing and privatization. 7). Increasing the PFC ceiling would not substantially benefit smaller commercial airports. Conclusions

The total funding for airport development peaked in 1992 in real terms and declined to about $7 billion in 1996. Recommendation

To help smaller airports fund some of the cost of their capital development, but to avoid undermining the level of federal support for larger airports, we recommend that the Secretary of Transportation seek authority from the Congress to use Airport Improvement Program grants to capitalize state revolving funds in those circumstances where states have a demonstrated capability and desire to manage a revolving fund. Sources of Airports’ Capital Funding

Funding for airport development comes from five primary sources: federal Airport Improvement Program (AIP) grants, passenger facility charges (PFC), airport and special facility bonds, state grants, and airport revenue. Federal Grants

AIP grants are made available from the Airport and Airway Trust Fund.The Federal Aviation Administration (FAA) allocates most AIP grants on the basis of (1) a legislated apportionment formula, tied to the number of passengers an airport enplanes, and (2) set-aside categories earmarked for specific types of airports and projects. The figure also shows that the amount of new finance for airport development increased from less than $1.5 billion in 1982 to more than $3.7 billion in 1996. Current Funding and Planned Development

	Funding source 1996

Planned development  1997 through 2001  (annualized)

	Funding source 1996

Planned development  1997 through 2001  (annualized)

	Funding source 1996

Planned development  1997 through 2001  (annualized)

	Funding source 1996

Planned development  1997 through 2001  (annualized)

	Funding source 1996

Planned development  1997 through 2001  (annualized)

	Funding source 1996

Planned development  1997 through 2001 (annualized)
Data on general aviation airports’ revenue are unavailable. To determine whether current funding is sufficient to meet planned development for the 5-year period from 1997 through 2001 for each airport category and overall, we compared total funding to planned future development as determined in our prior report on airport development.
Why GAO Did This Study

Pursuant to a congressional request, GAO assessed airports' capacity to finance their future development, focusing on: (1) how much airports of various sizes are spending on capital development and where the money is coming from; (2) whether current funding levels will be sufficient to meet capital development planned for the 5-year period from 1997 through 2001; and (3) the potential effect of various proposals to increase airport funding, if a difference exists between current funding and planned development.

What GAO Found

GAO noted that: (1) in 1996, the 3,304 airports that make up the national airport system obtained about $7 billion for capital development; (2) more than 90 percent of this funding came from three sources: airport and special facility bonds ($4.1 billion), funding made available from the Airport and Airway Trust Fund ($1.4 billion), and passenger facility charges paid on each airline ticket ($1.1 billion); (3) capital funding more than doubled from 1982 through 1992 and has since declined; (4) airports' 1996 capital funding of about $7 billion is less that the $10 billion per year that airports anticipate will be needed to fund the development planned for 1997 through 2001; (5) while this difference is not an absolute predictor of future funding shortfalls--both funding and planned development may change in the future--it does provide a useful indication of where funding differences may be the greatest; (6) the difference between past funding and planned development is especially acute for smaller commercial and general aviation airports, whose 1996 funding was a little over half of the estimated costs of their planned development; (7) the picture is somewhat brighter if the categories of planned development are narrowed to just those the Federal Aviation Administration (FAA) gives highest priority--that is, safety, security, and noise-mitigation projects and the maintenance of existing airfields; (8) with the exception of the small commercial airports, federal grants in 1996 matched or exceeded the planned development for such projects; (9) several proposals to increase funding for airports have emerged in recent years; (10) these include increasing the size of the federal grant program, raising the ceiling on passenger facility charges, and leveraging existing funding sources; (11) each proposal varies in its magnitude and in its effect on airports and their users; (12) increasing the size of the federal grant program would mostly help smaller airports, while raising passenger facility charges would mostly help larger airports; (13) GAO believes that the FAA's current pilot programs to use grants in more innovative ways and to privatize airports are likely to yield only marginal benefits; (14) however, another means to expand airport investment would be to use federal airport grants to capitalize state revolving funds; and (15) while not a currently permitted use for federal airport grants according to FAA officials, state revolving funds have proved successful in other infrastructure sectors.