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October 4, 1999

S. 82 - Air Transportation Improvement Act
(McCain (R) AZ and 9 cosponsors)

The Administration strongly supports the goals of S. 82 for renewal of the Federal Aviation Administration's vital safety and air traffic control (ATC) programs, but believes that fundamental, structural reform of our ATC system is necessary to handle the expanding airline traffic generated by our vibrant economy. Three principles are key to structural reform of ATC:
  • Management reform, through provision for a chief operating officer (COO) and other organizational changes, is necessary (but not sufficient) to allowing the ATC system to operate more like a business (i.e., customer-driven and performance-oriented);

  • Pricing reform - through replacement of the current excise tax on passengers with cost-based prices on commercial ATC customers - will provide the customer information necessary to drive management reform (yielding, among other things, better capital investment decisions and expansion of ATC services in response to market demand) and to create an incentive for more efficient production and use of ATC services; and

  • An appropriate mechanism will ensure that cost-based ATC receipts are used exclusively for ATC.

Unless floor action on S. 82 addresses these key principles (which are reflected in the Administration's own FAA reauthorization proposal) the Administration cannot support passage of the bill. A new proposal by Senators Gorton and Rockefeller, although it does not provide for pricing reform or an appropriate budget mechanism, could become the basis for a dialogue on achieving necessary management reform of the ATC system.

The Administration appreciates that the bill includes a number of its proposals and is generally consistent with the President's budget request. Nevertheless, the Administration will seek a number of amendments, as spelled out in an October 4 letter from the Department of Transportation.


S. 82 would increase outlays; therefore, it is subject to the pay-as-you-go (PAYGO) requirement of the Omnibus Budget Reconciliation Act of 1990. OMB's preliminary scoring estimate is that the bill would increase outlays by $4 million per year and a total of $21 million during FYs 2000-2004.

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