How FAA is Funded Today | History of FAA Funding | Future Funding of FAA
 |
| August 1968 Cover of LIFE Magazine |
By the mid 1960s, jet aircraft were becoming more prevalent in the skies above the United States. Since much of the original air traffic control equipment from the 1920s and 1930s was still in use, congestion was quickly becoming a problem. By the summer of 1968, delays became so commonplace that Congress decided to get involved and aid the traveling public. As Congress investigated the congestion problem, it found that FAA’s existing funding mechanism was a large part of the problem. For this reason, they decided to set up a new “trust fund” to help pay for future development of the nation’s airports and airways. This fund is known as the Airport and Airway Trust Fund, and is still in use today.
At the time, airlines were the predominant users of the air traffic control system. Accordingly, Congress split the costs of the ATC system among the various airlines by instituting an eight percent tax on airline tickets. Other users of the ATC system (such as general aviation aircraft) were assessed a seven cent per gallon fuel tax. In 1970, this funding arrangement made sense for two reasons. First, since the airlines were by far the largest users of the ATC system, it made sense they pay in proportion to their use. Second, it made sense because airline ticket prices were regulated by Congress. Since airline tickets were subject to the eight percent ad valorem tax, Congress effectively controlled the amount of money going into the Trust Fund. By raising ticket prices, Congress could increase the Trust Fund's revenue.
When the airline industry was deregulated in 1978, Congress relinquished control of airline ticket prices, setting off an inflation-adjusted decline in the average ticket price that has continued to this day. As a result, Congress has been forced to increase the tax rates that all aviation system users pay in order to maintain the ATC system.
This has left the FAA with a funding system that fails to link the operational costs of the system to the revenue it collects from ATC system users. Since the Trust Fund’s balance relies primarily on ticket taxes, it can fluctuate wildly as ticket prices ebb and flow. Unfortunately, FAA’s cost to move a flight through the ATC system remains the same, regardless of the changing ticket price.