BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2015 - 2016 Regular
Bill No: SB 747 Hearing Date: 4/21/2015
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|Author: |McGuire |
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|Version: |4/14/2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Erin Riches |
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SUBJECT: Airports: financial assistance
DIGEST: This bill provides for an annual appropriation of
aviation fuel tax revenues from the General Fund to the
Aeronautics Account in order to comply with federal law.
ANALYSIS:
Existing law establishes the Aeronautics Account within the
State Transportation Fund. This account is funded by revenues
from fuel excise taxes of 18 cents per gallon on general
aviation fuel and 2 cents per gallon on jet fuel. These rates
were set in 1994 and 1969, respectively.
The Airport Improvement Program (AIP), administered by the
Federal Aviation Administration (FAA), provides grants to public
agencies for the planning and development of public-use
airports. In general, the federal grant covers 75% of eligible
costs for large and medium primary hub airports, and 90% to 95%
of eligible costs for small primary, reliever, and general
aviation airports. Eligible projects include capital
improvements related to safety, capacity, security, and
environment. Operational and maintenance costs are generally
not eligible for AIP assistance. To supplement AIP, Caltrans
administers a State AIP Matching Grant Program. This program,
which provides a state matching grant equal to 5% of the federal
grant, is funded from the Aeronautics Account.
In November 2014, the FAA issued a directive (Docket No.
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FAA-2013-0988) to confirm its longstanding policy, based on
federal law, that aviation fuel taxes be used for airport
purposes and state aviation programs. The directive provides
states one year to submit an action plan to the FAA. The action
plan will detail the process of amending any non-compliant state
laws and local ordinances as necessary for compliance, as well
as detailing the process to develop reporting requirements and
tracking systems for aviation fuel tax revenues. The plan must
be implemented within three years of the FAA directive, which
took effect December 8, 2014. Failure to comply with the FAA
mandate could result in ineligibility for AIP grants and
possible civil penalties.
This bill:
Transfers from the General Fund to the Aeronautics Account
revenues derived from aviation fuel taxes. Requires Caltrans'
Division of Aeronautics to annually allocate these funds to
eligible recipients, for airports and aviation-related purposes,
as follows:
1.12% to the state's 215 general aviation airports (e.g.,
Sacramento Executive Airport)
2.40% to be divided among the state's 33 commercial service
airports as follows:
21% for the 20 non-hub commercial airports (e.g.,
Crescent City, Sonoma County, and Oxnard)
34% for the three large hub commercial airports (Los
Angeles, San Diego, and San Francisco);
14% for the 6 medium hub commercial airports (e.g.,
Sacramento, Oakland, and San Jose international airports)
31% for the four small hub commercial airports
(Fresno, Long Beach, Palm Springs, and Santa Barbara)
1.27% for grants for non-hub airports with less than 300,000
enplanements annually to attract, establish, and expand
airline service through incentives, marketing, passenger
studies, route analysis, and acquisition of consultants
2.1% for aviation education grants, including but not limited to
scholarships for flight training and aviation-related degrees
from accredited universities, with priority given to
under-represented students, women, veterans, and low-income
SB 747 (McGuire) Page 3 of ?
persons
3.5% for administrative costs
4.15% for other state aviation programs and aviation related
purposes pursuant to this bill
COMMENTS:
1.Purpose. The author states that California has been out of
compliance with federal law on aviation tax revenues for
decades. The state has transferred a total of nearly $15
million in aviation fuel tax revenues from the Aeronautics
Account to the General Fund over three different fiscal years
(2002-03, 2003-04, and 2010-11). Due to lack of funds,
Caltrans was unable to administer any grants for general
aviation airports in fiscal years 2011-12 and 2012-13, and
could only partially fund the State Matching AIP Grant
Program. In the last year alone, four commercial airports in
California have announced that they have lost or will soon
lose all commercial service activity: Modesto Airport, Chico
Municipal Airport, Inyo-Kern Airport, and McClellan-Palomar
Airport. This bill will help the state comply with the FAA
mandate by directing revenue from aviation fuel sales taxes to
the state's underfunded aviation program and thereby provide
relief to the state's aviation industry.
2.How much money? The state Board of Equalization has initially
estimated the annual taxable fuel sales amount for fiscal year
2013-14 at approximately $30 million. The annual
appropriation authorized in this bill would vary somewhat from
year to year, due to the impact of oil price volatility on jet
fuel prices. Regardless, this bill would result in
significantly increased revenues for the Aeronautics Account,
which currently has a balance of about $9 million. However,
questions have arisen about exactly which revenues should be
directed to the Aeronautics Account under the FAA directive;
for example, some sales tax revenues are constitutionally
protected. These issues will need to be worked out as this
bill moves forward.
3.Rationale for distribution. The author worked with the
California Airports Council, sponsor of this bill, to
determine the allocations. These percentages are based on
passenger volumes and funding needs for operations and
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maintenance.
4.Federal law on aviation tax revenues. AIP was established by
the federal Airport and Airway Improvement Act of 1982. This
act requires an airport sponsor accepting an AIP grant to
provide assurance that any revenues received by the airport
will be used for the capital and operating expenses of the
airport, the local airport system, or other local air
transportation-related facilities owned or operated by the
sponsor. This requirement aims to prevent a "hidden tax" on
air transportation and to ensure that federal airport grants
are used to supplement funding for airport projects, rather
than substituting for funds diverted to other programs.
Congress amended the act in 1987 to allow revenues from a
state fuel tax to also be used for state aviation programs.
In 1996, Congress enacted legislation extending the revenue
use requirements to all airports that have been the subject of
federal assistance, regardless of whether the airport is
currently subject to an FAA grant agreement.
5.Why now? In response to requests from various U.S. senators
and state legislatures, the FAA issued five opinions between
1990 and 2010 to affirm its revenue use policy. The FAA
Reauthorization Act of 1994 directed the FAA to establish
policies and procedures to assure the prompt and effective
enforcement of illegal diversion of airport revenue. In 2013,
the FAA began soliciting comments to initiate a process to
formally clarify the policy. The majority of comments
supported the general purpose of the revenue use policy and
underlying statutes: namely, to direct aviation revenues to
aviation purposes. Comments focused on issues such as
ensuring that airport operators are not held responsible for
taxes imposed by other entities, the definition of aviation
taxes, and the length of the compliance period. These issues
are addressed in the directive issued in November 2014.
6.Is California in compliance? As noted earlier, the state has
made several transfers from the Aeronautics Account to the
General Fund, with no statutory requirement for repayment.
The 2014-15 budget agreement transferred $4 million from the
Local Airport Loan Account, a revolving loan fund, to the
Aeronautics Account, bringing the Aeronautics Account balance
up to $9 million. The General Fund loans, however, have not
been repaid. According to Caltrans, all funds in the
Aeronautics Account are expended in accordance with current
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state and FAA requirements.
7.Amendments. The author will accept amendments to correct the
implementation date in the legislative intent language to
December 8, 2017, and to add Senator Fuller as a coauthor.
Related Legislation:
SB 616 (Wright, 2014) - would have allowed Caltrans to provide
state matching funds through AIP to projects that commence prior
to receiving those funds. (Caltrans regulations require that in
order to be eligible for a state AIP grant, a sponsor cannot yet
have broken ground on the project.) SB 616 was passed
unanimously by this committee, but was eventually pulled back
from the Governor's desk late in the legislative session due to
ongoing negotiations.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes
Local: No
POSITIONS: (Communicated to the committee before noon on
Wednesday,
April 15, 2015.)
SUPPORT:
California Airports Council (sponsor)
Aircraft Owners and Pilots Association
American Association of Airport Executives, Southwest Chapter
Association of California Airports
California Pilots Association
Marin County Board of Supervisors
OPPOSITION:
None received.
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