"Don't be fooled by high-minded rhetoric"

Saturday, December 9, 2000

Don't be fooled by high-minded rhetoric
By JERRY HEASTER - Columnist
The Kansas City (MO) Star


Buried deep in reports of the proposals to improve air-travel service was a
comment by President Clinton about an aspect of the problem the flying
public and the airline industry need a better understanding of.

As part of his plan, the president wants Congress to change the source of
the system's financing from passenger taxes to user fees. The relative
merits of this approach aside, the funding source isn't the problem.

The problem here is that his recommendation ignores an important reality:
The nature of the financing mechanism doesn't mean much unless the money
collected to improve airports and airways is spent on airports and airways.

As things stand now, the president's crusade is a lot of sound and fury
signifying nothing. This will remain the case unless Washington changes the
way it handles tax revenues collected for specific purposes. Meantime,
nobody should be fooled by high-minded rhetoric unless real reforms are
offered to make sure the money gets where it's supposed to go.

Much of the breakdown of America's air-traffic system has occurred because
the federal government isn't spending anywhere near the amount of money it
collects in the name of maintaining and improving the system. The problem
involves one of the lesser known abuses of the trust funds Washington is so
fond of using as slush funds.

While many Americans are increasingly aware of how excess Social Security
tax revenues have been largely responsible for recent budget surpluses, few
know how smaller trust funds also add to the surplus.

Just as with Social Security, any revenue collected to finance airport and
airway needs that isn't spent for its designated purpose is expended on
general budget outlays. The Airport and Airway Trust Fund gets an IOU in the
form of a nonmarketable Treasury security. The same thing happens when
Congress spends less for highway work than is raised by federal gas taxes.

At the end of fiscal 2000, the airport-airway fund had just over $13
billion. This is money that could have gone to improving the air-travel
system if Congress had used it for its intended purpose. To give you an idea
of how much is being diverted from what air travelers are paying to finance
the system, the airport-airway trust fund balance has more than doubled in
three years.

Before any of the current airport-airway trust fund balance can be used to
finance anything, Congress must approve money to redeem the fund's
nonmarketable IOUs, which were substituted for the real money already spent
on unrelated budget outlays. If, however, Congress were to redeem those IOUs
in the airport-airway trust fund, this would reduce the size of the budget
surplus Washington likes to brag so much about.

To be sure, there's a lot wrong with the air-travel system that can't be
remedied simply by throwing money at it. However, in terms of upgrading the
technology that provides a smoother flow of air traffic, if more money
misappropriated from passenger taxes had been spent to improve the system,
there would be a lot fewer problems for government and the industry to deal
with today.

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