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The Congress is considering bills to reauthorize the Federal Aviation Administration (FAA) and its program of grants to airports, known as the Airport Improvement Program (AIP). In March 1999, the Congress passed legislation extending the program through May 1999. The Congressional Budget Office (CBO) prepared this paper, which examines alternative sources of funding for small airports and options for modifying the AIP, at the request of the House Committee on the Budget. In accordance with CBO's mandate to provide objective and impartial analysis, the paper makes no recommendations.

Elizabeth Pinkston of CBO's Natural Resources and Commerce Division wrote the paper under the direction of Jan Paul Acton and Elliot Schwartz, formerly of CBO. Marvin Phaup, of CBO's Special Studies Division, and James Blum, formerly of CBO, provided extensive advice on the financial concepts presented in Chapter II. David Moore, Peter Fontaine, Victoria Heid Hall, and Paul Van de Water, all of CBO, reviewed a draft of the paper, and Eric Guille provided technical advice on the statistical programs used to analyze the data.

Many members of the staff of the FAA provided data and explanations of FAA's policies and procedures. The author is particularly grateful to Jim Borsari, Eric Gabler, Wayne Heibeck, Larry Kiernan, and Catherine Lang.

The author would also like to thank Paul Aussendorf and his colleagues at the General Accounting Office and John Fischer and Robert Kirk of the Congressional Research Service for their valuable advice.

Liz Williams edited the manuscript, and Rae Wiseman prepared it for publication. Laurie Brown prepared the electronic versions for CBO's World Wide Web site.

Questions about the paper may be directed to Elizabeth Pinkston.
 

Dan L. Crippen
Director
April 1999
 
 

SUMMARY

I - INTRODUCTION

• Determining the Appropriate Role of Government in Subsidizing Airports
• The Federal Role in Supporting Small Airports
• The Structure of the Airport Improvement Program
• The Amount and Distribution of AIP Funding
• Sources of Funds for AIP Grants

II - THE FINANCIAL CONDITION OF AIRPORTS FOR THE 1996-1997 PERIOD

• Data Used for This Analysis
• The Financial Condition of Airports
• Sources of Funds for Investment
• The Role of Grants and Other Sources of Funds in Meeting Capital Needs

III - APPROACHES TO INCREASING FUNDS INVESTMENT FOR SMALLER AIRPORTS

• Increasing Passenger Facility Charges
• Borrowing More Funds for Investment
• Encouraging Private Equity Participation
• Modifying the Federal Grant Program
• Obtaining Assistance from State and Local Governments

APPENDIX - The Data Set and Its Strengths and Weaknesses
 

TABLES
1.	Airport Improvement Program Grants by Type of Airport, 1982-1997
2.	Airport Improvement Program Grants by Funding Category 1982-1997
3.	Airport Improvement Program Grants by Type of Airport, 1997
4.	Revenues from Aviation Taxes, 1998
5.	Operating Surpluses and Ratios by Size of Airport, 1996-1997
6.	Sources of Operating Revenue and Categories of Operating Expenses by Size of Airport, 1996-1997
7.	Sources of Funds for Investment by Size of Airport, 1996-1997
8.	Contributions of Funding Sources in Meeting Capital Needs
9.	Bond Issues by Type of Bond and Airport, 1982-1996
FIGURE
1.	Funding for the Airport Improvement Program
BOXES
1.	Airport Size and
2.	Evolution of the State Block-Grant Program for Airports

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