New air fees part of President Obama's 2010 budget proposal

By Michael Fabey

President Obama’s first budget proposal boosts funding to offset security costs throughout the transportation system and includes more money to improve the national airspace.

But the proposal also has raised an outcry because the administration plans to fund later security measures by raising airline passenger fees and starting new, direct user fees to replace current aviation taxes.

The administration earned some nods from travel pundits by proposing a five-year, $5 billion grant program for high-speed rail development and requesting about $800 million to help modernize the country’s air traffic control system.

The plan also includes an unknown amount of NASA money for research to "increase airspace capacity and mobility, enhance aviation safety and improve aircraft performance while reducing noise, emissions and fuel consumption," budget documents say.

The budget proposal, for the fiscal year that begins Oct. 1, slates an additional $55 million for the Transportation Department’s small-community air service programs to "fulfill current program requirements."

Finally, the spending plan identifies $64 million "to modernize the infrastructure used to vet travelers and workers. These funds will strengthen screening in order to reduce the risk of potential terrorism or other unlawful activities that threaten the nation’s transportation system."

Two changes in tax strategy that would directly affect airline passengers are an increase in the security fee assessed for passengers, now about $5 per roundtrip, and the repeal of some existing airline ticket taxes with "direct user charges," which would be imposed directly on airlines and other aircraft operators.

Critics pan user tax

House Transportation & Infrastructure Committee Chairman James Oberstar (D-Minn.) questioned the need to shift from excise taxes to user fees.

The spending plan provides scant additional details on what kind of increases or overall amounts the administration has in mind for either fee proposal. But the budget does note that the current security fee "only captures 36% of the cost of aviation security."

By increasing the security fee, the administration says it can raise enough money to "cover a majority of the estimated costs of passenger and baggage screening."

Kate Hanni, executive director of FlyersRights.org, said, "It’s going to be a tough pill to swallow for airline passengers to have to pay nearly three times more money to be treated as callously as they are by TSA."

The Air Transport Association said it would oppose any security fee increase, as it has done in previous administrations. The ATA said it is the government’s responsibility to fund and operate security procedures.

The Association of Corporate Travel Executives also opposed the security-fee increase.

"The Obama administration is attempting to fund the lion’s share of airport security through a user tax, primarily paid by corporations commissioning business travel or leisure travelers spending limited personal funds for a vacation," said ACTE Executive Director Susan Gurley.

"When terrorists or other criminals target an airliner or an airport, they are not attacking an industry nor a user group, but the nation," said Gurley. "The nation has an obligation to protect itself and this asset. Airport security should be paid for from the general tax fund."

If the government’s looking for a new funding font for security costs, Gurley suggested using the $400 million slated to build and $200 million to furnish the new U.S. Department of Homeland Security headquarters.

It’s a bit more complicated than that, said Vaughn Cordle of AirlineForecasts.

The way the Obama budget is structured — in concert with the administration’s economic stimulus package — the funding gap between the operational needs of the different departments, such as transportation and federal money sources, will widen and deepen as the next decade starts, Cordle said.

At the same time, he said, Obama will be looking for ways to reduce the deficit.

"The airline industry could look like a cash cow with higher taxes and fees," he said. At that point, he added, "Fares will have to go up and the industry will need to shrink even more."

His advice to fill in that financial gap: Downsize the air traffic control workforce, which would be one of the benefits of the system’s modernization.

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