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Aviation Finance: Observations on the Effects of Budget Uncertainty on FAA

GAO-16-198R Published: Nov 19, 2015. Publicly Released: Dec 08, 2015.
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What GAO Found

According to the Federal Aviation Administration (FAA), its ability to perform its mission has been affected by budget uncertainty resulting from the 2013 government shutdown, sequestration, 2011 authorization lapse, continuing resolutions, and multiple short-term reauthorizations. Based on our review of FAA documentation, GAO was able to quantify some, but not all of these effects. For example, during the week of April 21-27, 2013, while furloughs were in effect, sequester-related air traffic controller furloughs delayed 7,099 flights, mostly in heavily congested air-traffic areas. Moreover, FAA implemented a hiring freeze at its air traffic controller training academy in response to sequestration and at the time of this review had fewer controllers than expected.

Although current segments of FAA's Next Generation Air Transportation System (NextGen) programs are generally on schedule, past budget uncertainty has delayed final investment decisions for certain NextGen program segments. For instance, FAA delayed Segment 1, Phase 2 of En Route Full Services of Data Communications, a program designed to modernize controller-to-flight crew communication, until late 2016 as a result of the 2013 government shutdown. In addition, sequestration delayed NextGen improvements, originally scheduled for 2013, to optimize the use of airspace at two of five metroplexes, major population centers that include several major commercial and general aviation airports in close proximity. According to FAA officials, while the additional incremental costs associated with budget uncertainty are difficult to determine, past budget uncertainty has delayed the benefits of NextGen, creating a lack of confidence among industry partners.

FAA addresses budget uncertainty using a variety of mechanisms. For example, according to FAA officials, although the agency does not formally prepare contingency plans for all budget scenarios, it conducts informal budget modeling for various funding scenarios and discusses options with the Office of Management and Budget before making decisions on how to respond to budget uncertainty. In addition, FAA has broken NextGen acquisition programs into smaller segments to make them more manageable and more affordable in the short term. FAA can also use its limited budget flexibilities to address uncertainty. FAA can reprogram up to $5 million or 10 percent (whichever is less) within its four main budget accounts without congressional consultation or above this threshold with congressional consultation, except for between line items in the Operations account. FAA's fiscal year 2016 budget request included a proposal to provide the agency with broader authority that would allow it to transfer up to 10 percent of funds between any of its four main budget accounts to meet its funding priorities, although this authority could lessen congressional control and oversight of FAA's use of funds.

Finally, alternative funding options that have been proposed for FAA or a restructured Air Traffic Organization (ATO) present advantages and disadvantages. For example, in prior work GAO concluded that direct user charges would encourage more efficient use of the air traffic control system, but are tied to the demand for air travel; thus, revenues could fall during an economic downturn. Aviation stakeholders, policy think tanks, and GAO identified another option that involves authorizing FAA or a restructured ATO to issue bonds to fund infrastructure-related projects. This option could provide more stable revenues, as well as spread costs over a project's lifetime; however, bonding could lessen congressional control and oversight of FAA's use of funds.

Why GAO Did This Study

Since 2007, the FAA has operated and overseen the nation's aviation system amid ongoing budget uncertainty, an issue that has affected other federal agencies as well. This uncertainty is due to a protracted reauthorization process and timing issues associated with the budgeting and appropriating process. Aviation stakeholders are concerned that budget uncertainty makes it difficult for FAA simultaneously to operate and modernize the aviation system. Moreover, some stakeholders cite budget uncertainty as a justification for the restructuring of FAA's Air Traffic Organization.

GAO was asked to examine the effects of past budget uncertainty on FAA. Among other issues, this report addresses: (1) what is known about how past budget uncertainty has affected FAA's operations; (2) how past budget uncertainty has affected NextGen implementation; (3) how FAA has addressed budget uncertainty; and (4) potential alternative funding options for FAA. GAO reviewed FAA's budget requests and enacted amounts for fiscal years 2007-2015 and obtained written documentation from FAA. GAO corroborated this documentation by analyzing additional relevant data provided by FAA. To assess the reliability of FAA's data, GAO reviewed existing information about the data and the systems that produced them, and determined that the data were sufficiently reliable for the purposes of this report. GAO also reviewed relevant GAO reports on the effects of the 2013 government shutdown, sequestration, and continuing resolutions, and conducted a literature review to identify alternative funding options for FAA, and their advantages and disadvantages.

For more information, contact Gerald Dillingham at 202-512-2834 or

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Agency missionsAir traffic control systemsAir traffic controllersBudget administrationBudget allowancesBudget authorityBudgetingCommercial aviationDocumentationFunds management