Claims and Responses: Chairman Bill Shuster's 21st Century Aviation, Innovation, Reform, and Reauthorization (AIRR) Act (H.R. 2997)

Blog Articles · Sep 13, 2017 · Regulation

At some point, the House could vote on the 21st Century Aviation Innovation, Reform, and Reauthorization (AIRR) Act (H.R. 2997), introduced by Chairman Bill Shuster (R-Pa.). The bill would turn the Air Traffic Control (ATC) system into a standalone government-sanctioned, non-profit corporation and reauthorize the Federal Aviation Administration (FAA) for fiscal years 2018-2023. While not perfect, the 21st Century AIRR Act represents a substantial improvement over American's current aviation system that has fallen well behind our foreign counterparts due to excessive government regulation and a broken aviation finance system.

Below are some commonly made claims and straightforward conservative responses:


Claim: The Congressional Budget Office score shows H.R. 2997 will add $100 billion to the deficit.

Response: The CBO's cost estimate is incomplete and inaccurate, and it is expected to issue an updated score within the next couple of weeks. A proper assessment of the bill's fiscal impacts (assuming the American Air Navigation Services (AANS) Corporation's revenues stay on-budget, a decision with which the OMB disagrees) would yield a deficit increase of $1.5 billion to $5 billion over the next 10 years. This increase is only due to the corporation's new ability to borrow, which shifts capital spending into the 10 year budget window but does not meaningfully change long-term capital outlays.

Claim: ATC corporatization is a bad deal for taxpayers because it gives away the nation's ATC infrastructure for free.

Response: The nation's ATC system has been paid for almost exclusively by excise taxes on users of the aviation system (primarily commercial passengers). Because the new the non-profit corporation would be funded exclusively by aviation user fees, requiring the non-profit to pay for the system upfront would simply result in double-charging aviation users for a system that they have already paid for. This would amount to a huge, unnecessary financial burden on fliers that would likely increase federal spending elsewhere in the government as Congress scrambles to spend the revenues generated by the "sale."

Claim: Moving Air Traffic Control out of the government will lead to federal bailouts in the future.

Response: The argument that a future Congress may make the decision to bail out a non-governmental entity is essentially an argument against private enterprise. While Congress has repeatedly made misguided decisions to bail out various private industries (many of which were never government-owned), the unavoidable reality is that lawmakers are not legally allowed to bind a future Congress. Indeed, the question is whether conservatives would prefer to create a business with the off-chance of it receiving future taxpayer assistance (which they would be right to oppose), or continue with one that is permanently shackled to the taxpayer.
If bailouts are a true concern, maintaining government responsibility for an infrastructure asset does not reduce the likelihood of a general fund bailout whatsoever. The most instructive example is the federal Highway Trust Fund, which was designed as a user-funded mechanism for highway construction and maintenance. Since 2008, Congress has bailed out the Trust Fund with more than $140 billion in general revenue, in blatant violation of the 1974 Budget Act (which requires the fund to be at least 90 percent self-sufficient). Other examples of federal bailouts of supposedly dedicated funding streams -- even those that violate the law and Congressional rules -- abound.
In the case of air traffic control, the example of the UK's privatized ATC system, UK NATS, is misguidedly pointed to as proof that a bailout is inevitable. While UK NATS did require a bailout in the early 2000s, this was the result of an unprecedented decrease in aviation activity following 9/11 (which also prompted the U.S. government to bail out its private domestic air carriers). Since then, corporatized ATC providers have taken the necessary precaution of establishing reserve funds to weather recessions and other drops in aviation demand. The AANS corporation will be authorized to do the same, and given the ample amount of current aviation revenues, will likely be able to amass such a contingency fund with ease.

Claim: The bill is a giveaway to labor unions and will allow current Air Traffic Organization (ATO) employees to retain their federal benefits.

Response: This iteration of ATC reform is a substantial improvement over last year's version in regards to labor provisions. H.R. 2997 explicitly lays out harsh penalties -- termination of employment and union decertification -- in the case employees participate in a strike, work stoppage or slowdown (Sec. 91109). Furthermore, the bill requires speedy resolution of labor disputes (Sec. 91107) and prohibits supervisors from joining a union (Sec. 91104).
While the Heritage Foundation generally favors aggressive labor reforms -- including Right-to-Work designation and a stronger shift to the provision of private compensation and pensions -- the modest labor reforms included in the bill are improvements over last year. When those reforms are combined with the fundamental changes to the nation's ATC system, it would be a significant improvement. In order to retain the current generation of Air Traffic Controllers (a large portion of whom could retire, yielding potentially crippling effects on the nation's aviation system), the bill allows ATO employees the option of keeping the benefits promised by their current employer, the federal government. If members have an issue with current federal personnel compensation practices, they should address those issues through the normal legislative avenues.
In regards to future federal liabilities, the bill would reduce the federal government's payroll, pension and benefit liabilities by moving the subsequent generations of air traffic controllers out of the government and onto private payrolls. These ATC workers would have otherwise been federal employees, and thus the shift constitutes a large transfer of long-term retirement and benefit responsibility away from taxpayers and onto the private sector. Indeed, in the near term, we can expect the institutional change to prompt some employees to retire earlier than they otherwise would have, which will reduce long-term benefit payments to these workers.

Claim: The bill removes federal oversight of ATC spending.

Response: The negative effects of the politically motivated budget cycle and bureaucratic, risk averse procurement process are prime reasons to move ATC out of the government into the private sector. Despite multiple attempts to reform the procurement process in the 1990s, the FAA still lags behind its foreign counterparts in developing and adopting technology upgrades. Recent reports from the DOT Inspector General confirm that the FAA has trouble accurately projecting the costs and benefits of its modernization programs and note that the FAA's attempts to improve its procurement and acquisition processes have "not achieved the expected cost and productivity outcomes." Continuing the current political and bureaucratic micromanagement of air traffic control-even through implementing further reforms-will only perpetuate the FAA's flawed procedures. Sufficient oversight will be applied to the corporation's ATC spending primarily through its own governing board (two seats of which will be held by federal appointees), as well as the Secretary of Transportation and continued regulation by the FAA.

General Aviation

Claim: Corporatizing ATC will limit service and increase costs for rural users.

Response: H.R. 2997 not only exempts General Aviation users from charges (see below), but also prohibits the corporation from engaging in economic discrimination, requiring it to serve all users regardless of their location or fee-exempt status (Sec. 90701). (However, the case can be made that instituting user-fees for General Aviation aircraft would increase the economic incentive for the Corporation to provide such areas service, thus further strengthening the guarantee of service. However, the General Aviation lobby has steadfastly resisted the implementation of any user fees whatsoever.)
Furthermore, the bill instructs the Secretary of Transportation to ensure that proposed changes do not negatively affect access to rural airports (Sec. 90702). In fact, there is reason to expect corporatization to benefit rural users by reducing the cost of ATC services through expanding the contracting of tower services (currently suspended by the FAA) and implementing digital remote towers (a cost-reducing practice employed in other countries, but not by the FAA).

Claim: Corporatizing ATC puts the major airlines in control.

Response: The AANS Corporation will be governed by a 13 member board of user-stakeholders. The composition of the board is detailed below:
As the legislation clearly outlines, the major airlines will control only one of the 13 board seats, while regional air carriers (who service smaller and rural airports) will hold one other seat. This hardly amounts to a controlling share of the board. Even if the airlines managed to align a majority coalition of board members on an issue, such as raising fees, the new fee structure is still subject to public review and approval by the Secretary of Transportation, who must consider whether the fees "adversely impact the ability of the user to use or access any part of the national airspace system" (Sec. 90313(d)(1)(B)), providing another (arguably excessive) level of oversight. Furthermore, any fees deemed discriminatory are subject to challenge in court.

Claim: The bill will result in future fees for General Aviation.

Response: Because the current tax regime results in considerable subsidies for General Aviation ATC usage and airport infrastructure, the Heritage Foundation has proposed free-market changes to reduce the subsidies that flow from everyday travelers to those that own their own private aircraft. However, to appease General Aviation interests, H.R. 2997 specifically exempts General Aviation aircraft from ATC user-charges in Section 90313(d)(7), thus implementing a prohibitive price control, maintaining extant subsidies, and rejecting common international practice. Because this exemption is subject to the periodic review by Congress through the authorization process, members voice concerns that a future Congress may remove this statutory protection. Because legislation cannot bind a future Congress, the only solution would be to amend the Constitution to exempt a business from charging General Aviation aircraft for the services it provides -- an exceptionally poor idea on procedural, constitutional and policy grounds.
Even if a future Congress were to remove the statutory exemption, any change to the corporation's fee structure would still have to go through the normal approval process, which requires approval by the corporation's board (on which General Aviation elects two representatives) as well as the Secretary of Transportation, ensuring checks on the prospect of a fee increase. As the experience in Canada has shown, user charges for single propeller aircraft amount to just $70 per year, while business jets are charged on a distance-weight basis, the international norm (with the exception of the U.S.). Concern that such fees have a slight chance of being implemented in the future does not justify the opposition to much needed changes to the nation's ATC system.

Claim: Rural and General Aviation airports will lose their federal funding.

Response: While localizing the responsibility for airport funding is a free-market policy supported by the Heritage Foundation, H.R. 2997 increases rural airport funding in the Airport Improvement Program and Essential Air Service program without major programmatic changes.

Claim: Corporatizing ATC has devastated General Aviation pilots in Canada.

Response: This is a falsehood perpetuated by the GA lobby in the U.S. Bernard Gervais, the president of the Canadian Owners and Pilots Association (the Canadian counterpart to AOPA, which opposes the legislation), has written that GA is thriving in Canada, that his 15,000 pilot-members "are largely satisfied with the service we receive from Nav Canada," and requested that AOPA "stop using Canada as your example." In reference to the false claim that Canada's GA user-charges (common in every country except the US) have negatively affected GA, he responded: "Things are working out pretty good. Would anyone go back to a government-run system? No."

National Security

Claim: The bill will give away the national airspace to a private company, limiting interoperability with military controllers and jeopardizing national security in times of war.

Response: H.R. 2997 retains federal ownership of the national airspace; it simply restores the authority to conduct civilian air traffic control operations to a private, non-profit enterprise. In the event of an existential security threat, the president can transfer authority over air traffic operations to the Department of Defense (Sec. 225 and Sec. 90906). The FAA's regulatory/safety arm will continue to set air traffic control procedures and training standards for both military and civilian air traffic controllers. The military's 8,000 air traffic controllers will continue to train and operate alongside civilian air traffic controllers. The only difference will be that civilian controllers will not be FAA employees; they will be employees of a non-profit corporation.
Cooperation between civilian and military ATC operators has not been a major issue for any U.S. allies that have removed their civilian ATC operator from the government, including Canada, the U.K., Australia, and New Zealand. Indeed, the joint U.S.-Canada North American Aerospace Defense Command (NORAD) is fully integrated with Canada's private provider of air traffic control. While structural changes inevitably stir up objections from individual bureaucrats who are accustomed to the status quo, these considerations have resulted in the support of Secretary of Defense Mattis for ATC corporatization.

Claim: Corporatizing ATC could hand over U.S. airspace to foreign powers or terrorists.

Response: Again, H.R. 2997 maintains federal ownership of the national airspace. All board members of the AANS Corporation will be required to be U.S. citizens, and the bill establishes a process to ensure that current government screening of employees for suitability, security and medical concerns remains in place. U.S. citizenship will remain a requirement for positions that require a security clearance. Furthermore, it is likely language regarding the primacy of security screening could be made more explicit through a member-driven process.
It is worth noting that the FAA currently employs many foreign-born workers through its contract tower program and the DOD employs some 35,000 non-citizens. There is absolutely no reason to expect ATC corporatization to increase security threats to the national airspace.