This is true for both the 71 largest airports, as well as for the nation’s 3,233 smaller commercial and general aviation airports. Funding Sources Vary Depending on Airports’ Size

In 1996, tax-exempt bonds, the Airport Improvement Program (AIP), and passenger facility charges (PFC) together provided about $6.6 billion of the total $7 billion in funding for large and small airports. Table 1 lists these sources of funding and their amounts in 1996. As shown in figure 1, smaller airports relied on AIP grants for half of their funding, followed by tax-exempt airport and special facility bonds,and state grants. AIP grants accounted for only 10 percent of larger airports’ funding. Funding Levels Fall Short of Small Airports’ Plans for Development

Small airports’ planned capital development during 1997 through 2001 may cost nearly $3 billion per year, or $1.4 billion per year more than these airports raised in 1996. Figure 2 compares small airports’ total funding for capital development in 1996 with their annual planned spending for development. But even if the entire bond financing available to smaller airports were spent on AIP-eligible projects, these airports would have, at a minimum, about $945 million a year in AIP-eligible projects that are not funded. For large airports, the difference between 1996 funding and planned development is about $1.5 billion. However, because large airports obtained $5.5 billion in funding in 1996 versus $1.5 billion for small airports, large airports’ potential shortfall represents 21 percent of their planned development costs as compared to small airports’ potential shortfall of 48 percent. Effect on Smaller Airports of Proposals to Increase and Better Use Airport Funding Varies

Proposals to increase airport funding or make better use of existing funding vary in the extent to which they would help smaller airports and close the gap between their funding and the costs of planned development. For example, increasing AIP funding would help smaller airports more than larger airports because current funding formulas would channel an increasing proportion of AIP funds to them. Most of these airports already return the maximum amount that must be turned back for redistribution to smaller airports in exchange for the opportunity to levy PFCs. 2). FAA’s Efforts to Make Better Use of Existing AIP Grants Have Had Mixed Results

In recent years, the Congress has directed FAA to undertake steps to find ways to extend existing AIP funds, especially for small airports that rely more extensively on AIP funds than do large airports. Others efforts, such as pilot projects to test innovative financing and privatization, have received less interest from airports and are still being tested. Both FAA and the participating states believe that they are benefiting from the program.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed airport funding issues as they apply to smaller airports, focusing on: 1) how much funding has been made available to airports, particularly smaller airports, for their capital development and what are the sources of these funds; (2) comparing airports' plans for future development with current funding levels; and (3) what effect will various proposals to increase or make better use of existing funding have on smaller airports' ability to fulfill their capital development plans.

What GAO Found

GAO noted that: (1) in 1998, GAO reported that the 3,304 airports that make up the federally supported national airport system obtained about $7 billion from federal and private sources for capital development; (2) the nation's 3,233 smaller airports accounted for 22 percent of this total, or about $1.5 billion; (3) as a group, smaller airports depend heavily on federal grants, receiving half of their funding from the federally-funded Airport Improvement Program (AIP) and the rest from airport bonds, state grants, and passenger facility charges; (4) by contrast, the 71 largest airports in the national airport system obtained $5.5 billion in funding, mostly from tax-exempt bonds and relied on AIP for only 10 percent of their funding; (5) small airports planned to spend nearly $3 billion per year for capital development during 1997 through 2001, or $1.4 billion per year more than they were able to fund in 1996; (6) smaller airports' planned development consists of projects eligible for AIP grants, like runways, and projects not eligible for grants, like terminal retail space; (7) at least $945 million and as much as $1.4 billion of smaller airports' planned development that are eligible for grants may not be funded on an annual basis; (8) the difference between funding and planned development is much greater for smaller commercial and general aviation airports than it is for large airports; (9) several initiatives to increase or make better use of existing funding have emerged in recent years, including increasing the amount of AIP funding and raising the maximum amount airports can levy in passenger facility charges; (10) under current formulas, increasing the amount of AIP funding would help smaller airports more than larger airports, while raising passenger facility charges would mainly help larger airports; and (11) other initiatives for making better use of federal grant monies, such as AIP block grants to states, have primarily been directed toward smaller airports, but none appears to offer a major breakthrough in reducing the shortfall between funding and the levels airports plan to spend on development.