GAO-12-342SP: Homeland security/Law enforcement: 48. Passenger Aviation Security Fees

Homeland security/Law enforcement > 48. Passenger Aviation Security Fees

Options for adjusting the passenger aviation security fee could further offset billions of dollars in civil aviation security costs.

Why This Area Is Important

 

According to the President’s 2011 National Counterterrorism Strategy, aviation security and screening is an essential tool in the country’s ability to detect, disrupt, and defeat plots to attack the homeland.[1] Civil aviation security includes, among other things, screening passengers and their carry-on and checked baggage for explosives, weapons, and other prohibited items. To help offset the costs associated with providing this security, the Aviation and Transportation Security Act authorized the Transportation Security Administration (TSA) to impose two security-related fees: a passenger security fee and an air carrier security fee (Aviation Security Infrastructure Fee).[2]

TSA imposed the passenger security fee—a uniform fee on passengers of U.S. and foreign air carriers originating at airports in the United States—in February 2002 at $2.50 per enplanement, capped at $5.00 per one-way trip, which are the maximum amounts allowed under the Aviation and Transportation Security Act. In addition, in February 2002, TSA imposed the air carrier security fee—a fee imposed on air carriers to further offset the costs of civil aviation security and capped at the amount paid by air carriers for screening passengers and property in calendar year 2000.[3]

The fees collected offset amounts appropriated to TSA for aviation security. In his fiscal year 2012 budget request, the President requested that Congress increase the passenger security fee but did not request an increase in the air carrier fee. In light of the administration’s focus on the passenger security fee and the possibility that the basis for calculating the cost to air carriers for screening passengers and property in 2000 could remain in dispute, for the purposes of this summary, GAO will focus on options for offsetting aviation security costs related to the passenger fee.[4]

In the 10 years since TSA imposed the passenger security fee, TSA has developed additional measures to help mitigate potential risks to the nation’s civil aviation security system, such as enhanced passenger screening technologies, among other programs, which have contributed to increases in the costs of aviation security to the federal government.



[1]National Strategy for Counterterrorism (Washington, D.C.: June 28, 2011).

[2]See Pub. L. No. 107-71, § 118(a) (2001) (codified as amended at 49 U.S.C. § 44940).In general, the fees collected offset the account that finances the activities and services for which the fee is imposed. Specifically, the fees collected offset amounts appropriated to TSA’s “aviation security” account. See, e.g., Department of Homeland Security Appropriations Act, 2010, Pub. L. No. 111-83 (2009). See also 49 U.S.C. § 44940(f)(1).

[3]See 49 U.S.C. § 44940(a)(2) (authorizing the collection of the air carrier fees if passenger security fee collections were insufficient to pay for the costs of providing civil aviation security services). TSA collected approximately $280 million in air carrier fees in fiscal year 2010 and expects to have collected an estimated $420 million in fiscal year 2011 and each fiscal year thereafter.

[4]See, e.g., Southwest Airlines, Co. v. Transp. Sec. Admin., 650 F.3d 752 (D.C. Cir. 2011) (denying airlines’ petition for review of TSA’s determination to use $420 million as the basis for its calculation of the cost to air carriers for screening passengers and property in calendar year 2000). As of this most recent ruling by the Court of Appeals, it remains unclear if air carriers will continue to dispute the amount of the fee imposed by TSA.

What GAO Found

Several options exist for revising passenger security fees to help further offset civil aviation security costs. From fiscal years 2002 through 2011, TSA collected about $18 billion in passenger and air carrier security fees, compared to the approximately $63 billion appropriated for aviation security activities over the same time frame; thus, security fees offset about 29 percent of amounts appropriated for aviation security-related activities during this time frame. The figure below shows the difference between the funds appropriated for aviation security and the aviation security fees collected since fiscal year 2002.

Difference between TSA’s Annual Appropriations and Aviation Security Fees Collected, from Fiscal Years 2002 through 2011

Difference between TSA’s Annual Appropriations and Aviation Security Fees Collected, from Fiscal Years 2002 through 2011

 

Notes: For the purposes of GAO’s analysis, TSA identified the total amounts appropriated to TSA for aviation security-related programs and activities, including Federal Air Marshals, threat assessments, and some support costs. Due to statutory and other limitations, TSA did not collect a full year’s worth of fees in fiscal years 2002 through 2004. In addition, beginning in fiscal year 2005, and each fiscal year thereafter, the first $250 million in passenger security fees collected have been designated to the Aviation Security Capital Fund, except for fiscal year 2008, when an additional $250 million in fee collections were designated to the Checkpoint Screening Security Fund. See 49 U.S.C. §§ 44923(h), 44940(i). The figure above excludes amounts designated for the Aviation Security Capital Fund or the Checkpoint Screening Security Fund from “passenger security fees collected” and does not include these amounts in “amounts appropriated to TSA.” Percentages may not add to 100 due to rounding.

 

 

The importance of closely aligning fees to the cost of the service provided has been widely documented. As GAO previously reported in May 2008 about user fee design, agencies should review their fees on a regular basis to ensure that they, Congress, and stakeholders have complete information on the costs of federal programs, and that fees are appropriately aligned to program costs and activities, among other things.[1] Further, GAO’s report stated that user fees can be designed to reduce the burden on taxpayers to finance the portions of activities that provide benefits to identifiable users above and beyond what is normally provided to the public. The International Civil Aviation Organization also issued guidance regarding cost recovery for airport charges.[2] This guidance provides information to consider when setting fees, including fees related to aviation security, and determining the extent to which fees should offset security costs. According to International Civil Aviation Organization officials, costs should be a key consideration in setting fees and governments or airports, with input from relevant stakeholders, may consider increasing security fees when costs increase. For example, following the September 11, 2001, terrorist attacks, the government of Canada imposed an Air Travelers Security Charge of $12.00 per one-way trip to cover the costs of aviation security services.[3] This fee was reviewed and reduced each year from 2003 through 2006 to reflect increases in passenger enplanements, revenue, and tax reductions, while it was increased in 2010 to $7.48 to reflect increased expenditures for deploying upgraded checked baggage screening systems, among other things.[4]

In recent years, several options have been considered for increasing the passenger aviation security fee. However, the fee has not been increased since it was imposed in February 2002. The table below provides a description of the proposed options presented from various sources for increasing the passenger security fee.

Options to Increase the Passenger Aviation Security Fee

Source

Description of option

Potential for addressing the difference between amounts appropriated and fees collected

President’s Deficit Reduction Plan (September 2011)

The administration proposed increasing the passenger fee to $7.50 per one-way trip by 2017 through incremental $0.50 increases.

The plan estimates that this option would collect an additional $8.8 billion over 5 years and $24.9 billion over 10 years. According to the plan, over 10 years, $15 billion of these collections would be directed for debt reduction and the remaining collections would be used to offset TSA appropriations.

Congressional Budget Office (CBO) (March 2011), President’s Debt Commission (November 2010), and House Budget Committee (April 2011)

In late 2010 and 2011, CBO and the President’s Debt Commission advanced similar options in which the passenger fee would be increased to a flat rate of $5.00 per one-way trip. The House Budget Committee also included this option in its concurrent resolution on the budget for fiscal year 2012.

CBO estimates that this option would increase annual fee collections by about $2 billion, on average, or about $10 billion over 5 years. TSA officials stated that TSA is supportive of the CBO and President’s Debt Commission option because it would enable them to more closely meet their goal of offsetting 80 percent of the federal government’s aviation security costs through fee collections.

TSA Fiscal Year 2012 Budget Request (February 2011)

In its fiscal year 2012 budget request, TSA proposed incrementally increasing the passenger security fee to $5.50 per enplanement by 2014, with an $11 per one-way trip maximum.

The fiscal year 2012 budget request for TSA includes an option to increase the current $2.50 fee by $1.50, offsetting appropriations by $590 million in 2012. In addition, the option assumes $0.50 and $1.00 increases in 2013 and 2014, respectively. When fully implemented in 2014, TSA anticipates that this option will increase annual passenger fee collections by $2.3 billion.

TSA’s goal for security fee collections (February 2009)

TSA officials stated that their goal is ultimately to offset 80 percent of amounts appropriated to TSA for aviation security-related programs and activities through fee collections. To achieve this goal, TSA would need to increase the passenger security fee to about $7.00 per enplanement, capped at $14 per one-way trip, according to GAO’s analysis.

Increasing the fee to offset 80 percent of the amounts appropriated to TSA for aviation security-related programs and activities would represent an average annual increase of about $4 billion in passenger fee collections, depending on appropriations.

Source: GAO analysis of TSA, CBO, OMB, and President’s Debt Commission data.

Note: Estimates for future years are based on available enplanement data and are subject to change.

 

In addition to the options noted above, the passenger security fee could also be adjusted for inflation. OMB Circular A-25 provides that biennial reviews assure that existing charges are adjusted to reflect unanticipated changes in costs or market values. GAO also reported on issues to consider when setting user fees such as whether fee collections are projected to change with inflation. According to GAO’s analysis, an inflation adjustment to the existing passenger security fee would result in an increase of approximately $0.50,[5] increasing the fee from $2.50 to about $3.00 per enplanement, capped at $6 per one-way trip. Adjusting the fee for inflation would represent an average annual increase of about $410 million in passenger fee collections.

Industry association officials representing key aviation stakeholders—including airport executives, airlines, and passengers—from four of the five associations GAO interviewed have expressed general opposition to a passenger security fee increase for various reasons, such as the argument that aviation security is a federal responsibility and therefore associated costs should be borne by the government. One association noted that the burden of subsidizing these costs should not fall solely on passengers. Officials with three of the five aviation industry associations GAO interviewed also stated that the demand for air travel could be impacted if aviation security fees were increased. However, TSA officials stated that TSA does not expect its fiscal year 2012 proposal to increase the passenger security fee to $5.50 per enplanement (capped at $11.00 per one-way trip) to have a significant impact on travelers’ demand to fly since the proposal suggests modest, incremental increases to the fee.

In addition, GAO’s review of the economic literature and related analysis suggests that the demand for air travel is somewhat elastic to price changes,[6] though TSA’s proposed fee increase to $5.50 per enplanement by 2014 constitutes a small proportion of the average price of a one-way trip,[7] which is about $210 as of calendar year 2010, according to the U.S. Department of Transportation.[8] Moreover, the responsiveness of travelers to changes in air travel prices depends on several factors such as distance traveled, nature of the trip (nonbusiness versus business), and the availability of alternative travel modes (for example, rail, road, etc.). GAO’s analysis of TSA’s fiscal year 2012 budget proposal to incrementally increase the passenger security fee to $5.50 per enplanement by 2014 shows that when demand effects are taken into account, total enplanements from fiscal years 2012 through 2014 could be reduced by 1 percent or about 26 million passengers over this 3-year period.[9] This would reduce expected fee collections by about $120 million, or 3 percent of the $4.4 billion in additional fees collected over this period.[10]



[1]In addition, pursuant to the Chief Financial Officers Act of 1990, agencies must review fees and other charges for services and things of value biennially, and based on these reviews make recommendations, as appropriate, on revising the fees to reflect costs incurred. See 31 U.S.C. 902(a)(8). Similarly, OMB Circular A-25 provides that each agency will review user charges biennially. These reviews include (1) assuring that existing charges are adjusted to reflect unanticipated changes in costs or market values, and (2) reviewing of all other agency programs to determine whether fees should be assessed for government services or the user of government goods or services. In accordance with OMB guidance, TSA reviews the passenger security fee, which is a user fee, biennially, but TSA does not have authority to adjust the fee beyond the maximum amount established in statute, if warranted.

[2]International Civil Aviation Organization, Policies on Charges for Airports and Air Navigation Services (Doc 9082), Eighth Edition, 2009. The International Civil Aviation Organization is a specialized agency of the United Nations that sets standards and regulations related to aviation safety, security, and aviation environmental protection, among other things.

[3]The Canadian Air Transport Security Authority, created after September 11, 2001, is a governmental entity responsible for providing core civil aviation security functions, such as screening passengers and baggage at Canadian airports. The Air Travelers Security Charge is imposed on flights departing from any of the 89 airports regulated by the Canadian Air Transport Security Authority. GAO did not compare the costs of civil aviation security in Canada to those in the United States.

[4]The amount of Air Travelers Security Charges imposed on travelers varies depending on flight segment, such as domestic (one-way), domestic (round-trip), transborder (to the United States), and other international flights. The fee is charged to passengers who use airports in which the Security Authority performs security-related services. Dollar amounts shown above are in Canadian dollars. When converted to U.S. dollars, the Air Travelers Security Charge would have been $7.56 in 2002 and $7.36 in 2010.

[5]GAO’s inflation adjustment factor is derived from the Consumer Price Index (for urban consumers) compiled by the Bureau of Labor Statistics using 2002 as the base year. GAO divided the annual Consumer Price Index for 2010 by that of 2002 to get the adjustment factor for 2010.

[6]See D.W. Gillen, W.G. Morrison, and C. Stewart, Air Travel Demand Elasticities: Concepts, Issues, and Management, Department of Finance, Government of Canada (January 2003).

[7]Note that this is the fare for a whole trip; since a trip may entail more than one enplanement, the fee increase as a percentage of enplanement fare would be slightly higher but still very small.

[8]The average ticket price reflects a weighted average price of domestic and international flights.

[9]In this context, demand elasticity refers to the degree to which the demand for air travel changes with price. Our analysis assumes a demand elasticity of -1.122. This is the median of 254 estimates from 21 studies analyzed in a 2003 study conducted by the Department of Finance, Government of Canada. See D.W. Gillen, W.G. Morrison, and C. Stewart. In addition, a 2007 study claims that this demand is less elastic (less responsive to price changes especially when those price changes apply to all national routes). The 2007 study estimates this national level elasticity to be -0.8. In this case, the reduction in total enplanements could be even lower. See Intervistas Consulting Group, Estimating Air Travel Demand Elasticities, Final Report (December 2007).

[10]Note that the reduction in enplanements by 26 million could also result in some lost revenues from excise and segment taxes levied on air travel. GAO estimated this to be about $295 million.

Actions Needed

 

Increasing the passenger security fee could help further offset billions of dollars in the federal budget for aviation security programs and activities in outlying fiscal years. Therefore, Congress, working with the Administrator of TSA, may wish to consider

  • increasing the passenger security fee according to one of the options identified in this summary. Options to increase the fee include the President’s Deficit Reduction Plan option ($7.50 per one-way trip by 2017); the CBO, President’s Debt Commission, and House Budget Committee option ($5.00 per one-way trip); TSA’s Fiscal Year 2012 Budget Request option ($5.50 per enplanement by 2014); TSA’s goal to ultimately offset 80 percent of federal aviation security costs through fee collections (according to GAO analysis, this option would increase the fee to about $7.00 per enplanement); as well as adjusting the fee for inflation (according to GAO analysis, this option would increase the fee to about $3.00 per enplanement). These options could increase fee collections from about $2 billion to $10 billion over 5 years.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from products listed in the related GAO products section and additional work GAO conducted. To address the issues discussed here, GAO analyzed (1) available documentation and guidance on TSA’s aviation security fees and programs, (2) TSA’s historical revenue data for aviation security fees from fiscal years 2002 through 2011, and (3) TSA estimates of applicable enplanement data for fiscal years 2012 through 2014. GAO compared this data with other supporting documents, when available, to determine data consistency and reasonableness. On the basis of these efforts, GAO concluded that the data are sufficiently reliable for the purposes of this summary. GAO also analyzed various options to raise the passenger security fee, including the Obama administration’s February 2009 budget request for fiscal year 2010, CBO’s August 2009 option, and the President’s Debt Commission report.

To develop the option to adjust the fee for inflation, GAO analyzed OMB Circular A-25 and GAO’s May 2008 report, which includes issues to consider when setting user fees such as whether fee collections are projected to change with inflation. GAO also reviewed OMB Circular A-25 and relevant provisions of the Chief Financial Officers Act related to the setting and periodic review of user fees. GAO further interviewed officials with the International Civil Aviation Organization and analyzed policy guidance regarding international policies and best practices for the development and periodic review of aviation-related fees. To provide information on comparable fee structures and approaches in which fees are periodically adjusted, GAO analyzed documentation and analysis regarding Canada’s Air Travelers Security Charge, including documentation of fee adjustments and associated demand elasticity analysis. GAO also discussed the current aviation security fee structure and options for modifying these fees with TSA officials; officials from five industry associations representing passengers, airports, and international groups; and officials from three organizations with subject matter expertise in aviation issues. GAO selected these associations because they represent key stakeholders—passengers, airports, and airlines—that could be affected by a fee increase.

Agency Comments & GAO Contact

 

GAO provided a draft of this report section to DHS for review and comment. DHS provided technical comments, which were incorporated as appropriate.

 

For additional information about this area, contact Steve Lord at (202) 512-4379 or lords@gao.gov.

 

Related Products

Federal User Fees: A Design Guide
http://www.gao.gov/products/GAO-08-386SP

GAO-08-386SP: Published: May 29, 2008. Publicly Released: May 29, 2008.