covenants in airline-airport operator contracts would be fully as enforceable. 2. The bill would impose no tax on the general aviation user, but would finance the development of reliever airports for the use of general aviation. The logic of this is not apparent. Within the limits of available resources, the system should be expanded to accommodate all classes of users as efficiently as possible in response to their needs. However, consistent with the principles set out above, all users should bear their fair share of the costs. 3. The ATA bill would continue the present Federal grant-in-aid program. Federal grants to airports constitute direct subsidies to air transportation. The users of air transportation come, predominantly from the most economically self-sufficient group in the Nation and do not require Federal subsidy. Given a rate of growth which is several times higher than the rate of growth of the economy as a whole, artificial stimulation of air transportation through subsidy is a selfdefeating policy. The Administration's program recognizes an exception to the general policy in the case of local service airports. 4. Finally, the ATA approach would dilute management responsibility. It creates a situation in which neither the airlines, the airport operators, nor the Government can have a full sense of the resonsibility that comes when one is "spending his own money." Certainly, an individual airline cannot be expected to be as cost conscious in requesting facilities to be paid for by a tax dollar collected from an "industry" passenger as it would be of a fare collected from a passenger on its route. In the latter case, both the revenue and the expense are run through the airline accounts and show up in the form of profits or losses. Other proposals for airport development, such as the one contained in S. 2379, would call for large Federal grant programs financed from direct taxes on air passengers or increased taxes on aviation fuel. S. 2379, in addition to the grant program, would authorize interest, subsidy payments on municipal securities issued to finance airport development. The administration is opposed to S. 2379 for essentially the same reasons cited in its opposition to the ATA proposal. The principal alternative considered in connection with the administration's airways proposal was whether to recommend adoption of trust fund financing. The decision against the trust fund approach was based on the fact that under no equitable tax structure did full financing of the total civil share of airways cost appear feasible. Several hundred million dollars would be required each year from general appropriations to sustain the fund. Under these conditions, the concept of a trust fund is illusory. It carries for the Government the principal disadvantage of trust fund financing-inflexibility in fiscal management due to the earmarking of funds and does not provide the principal benefit-full financing from special taxes on users. From the aviation industry's standpoint, the principal argument in favor of a trust fund is that is assures that aviation tax revenues will be spent for aviation purposes and not diverted to nonaviation uses by the Federal Government. If the revenue from either the present or the proposed special use taxes on aviation were anywhere near the Government's expenditures in behalf of aviation, the aviation industry could be justifiably concerned over the possibility of diversion. We re a very long way from that situation, however, for the industry s a whole. There is a further consideration, and in my judgment, a real danger, hich those of us who are interested in aviation and have a responsi ility for its growth and development should keep in mind. If funds are armarked by legislation for aviation, there will inevitably be a longin tendency on the part of many to try to hold Federal expenditures or aviation to the amount of revenues generated by the users and paid the so-called trust fund. This amount, I believe, would be substanally below the requirements for continued expansion of air transortation. The contribution from air carrier passengers and shippers under the roposed taxes would amount to 95 percent of the costs attributable the air carriers based on present cost allocation methods. We see danger in the next 5 years of their contribution exceeding 100 pernt of the expenditures attributable to them. We will, within the next years, reexamine the methods of cost allocation and the tax structure assure that inequity will not arise in the period beyond the 5-year ogram currently being proposed. Air transportation is facing a challenge of very rapid growth. In sponding, we must undertake a fundamental reexamination of where are, where we are going, and how we ought to get there. There is not the slightest resemblance between air transportation it existed in 1946, when the Federal Airport Act was enacted, and - transportation as it exists today. The conditions are literally deces apart. To attempt to respond now as we responded then, would to ignore 22 years of the most dynamic changes which have ever curred in the history of transportation. We have gone from a very pensive uniformly subsidized air carrier system providing an elite insportation service built around the DC-3, to a relatively inexpene, largely unsubsidized air carrier system providing an economical nsportation service built around a predominantly jet aircraft fleet. e transformation in general aviation has been equally dramatic. must cut our cloth to fit these facts. We have a privately owned, privately operated common carrier air nsportation system. Our policies should preserve and encourage e role of private enterprise in this system. To the fullest extent content with protecting the public interest, management decisions ould be made in this context. We have a locally owned, locally operated airport system. Our polis should preserve and encourage this healthy Federal-State-local ationship. There is every reason, particularly given the prosperity of aviation industry, why airports should prosper and be fully selfstaining enterprises under this system. We have a federally owned, federally operated airways system ich provides the safest and most efficient transportation in the -rld. Our policies must assure its adequacy to meet growing demands a sound financial basis. We have a Federal Government faced with great demands on its pacities to govern, and on its resources. We should carefully avoid her injecting, or leaving the Federal Government in areas of private local government enterprises except when there is no other way to otect national interests. The administration's airways and airports program will fully protect the national interest in a safe, efficient air transportation system and create a sound environment for future growth. That completes my testimony, Mr. Chairman. (The following was appended to the Secretary's prepared statement :) Hon. ALAN S. BOYD, Secretary of Transportation, THE WHITE HOUSE, Washington, September 20, 1967. DEAR MR. SECRETARY: It is apparent that the rapid growth of commercial and private flying is creating demands for substantial expansion and improvement in the Nation's air traffic control system. The Federal government is the manager of this system. System improvement will, therefore, require large additional outlays of Federal funds for investment and operations. Those who will benefit most from such expenditures, the aviation industry and the flying public, should pay their fair share of the costs of the system needed to handle the increase in air traffic while maintaining a high level of safety. I do not believe the general taxpayer should be asked to shoulder this burden. I am, therefore, asking you to develop a long-range comprehensive plan for the facilities, equipment and personnel required to meet these needs. This plan should be accompanied by a proposal for financing the improvements through a system of charges by which the users of the Nation's airways bear their fair share of its costs. Looking toward the immediate future, I am today submitting to the Congress a budgetary amendment designed to provide a more effective use of Federal Aviation Administration funds in the operation of the air traffic control system. I am also requesting you to direct the Administrator of the Federal Aviation Administration to conduct a review of current air traffic regulations, flight rules, and standards with a view toward making such changes as he considers necessary to maintain air safety. Should this review indicate that the maintenance of safety requires changes which involve some traffic delays, the Administrator should nevertheless make such changes. This Nation has an enviable record of air safety. I know that you and your associates can maintain this record. |