Alaska is facing a budget crisis due to the low price of crude oil, which will impact all Alaskans, most likely in multiple ways. Focusing on the impact to the 247 state operated airports, the Alaska Aviation Advisory Board (AAB) worked with the Alaska Department of Transportation & Public Facilities (DOT) to look at ways to provide additional revenue to support the airports, while having minimal impact on aviation system users. This discussion started back in February this year, when DOT initially announced a proposal to establish landing fees at Deadhorse, a move that many feared would spread to other airports across the state system. In a meeting with Governor Walker, the AAB expressed concerns about landing fees, and asked to work with DOT to look at other options before any changes were made. The Governor indicated he would welcome the board’s input, which kicked off a series of meetings with DOT.
At the spring and summer AAB meetings, DOT presented both the costs to operate the Rural Alaska Airport System, and three alternative methods to increase revenues. DOT also discussed several possible measures to reduce operating costs. These ranged from handing some airports over to local communities to operate, to streamlining the aviation functions of the department into a single division. Establishing a true division of aviation within DOT is something that a number of aviation organizations, including AOPA and the Alaska Airmen’s Association, have advocated for a number of years. While we believe that streamlining the management of DOT airports will help manage costs in the long run, this doesn’t address the immediate need to keep the airports operating.
What does it cost to operate state airports? Funding for airports comes in two distinct flavors: capital funding, which is used to build and improve airports, primarily comes from the federal government; and operating funding, which covers staffing, supplies and other costs associated with operations and maintenance, which is typically supplied by the airport owner.
Capital Funding: The State of Alaska, like other states, receives grant money directly from the FAA through the Airport Improvement Program (AIP), to build and expand airports. Alaska has received over $200 million/year for the past several years from this program. The FAA’s contribution is typically about 90% of the grant, with a requirement for the state to match the federal funding. The state’s contribution comes from the airport owner, called the sponsor, in FAA terms. This AIP funding mechanism allows for the construction and improvements of airports nationwide, but comes with strings attached. One of the strings is that the sponsor (airport owner) agrees to pay for operation of the facilities, and to keep them in good working order.
Operational Funding: Funding the operation and maintenance of airports is the challenge. The FAA expects airport sponsors (owners) to pay for operations, and airports typically charge fees to help cover some of those costs. Airport lease fees, tie down fees, and other revenue streams help offset operational costs. In Alaska, even though we rely on aviation for basic transportation, our low population base often doesn’t provide the volume of fees that would be needed for our airports to truly be self-sustaining. Here are the figures for the state-operated airports (not including Anchorage and Fairbanks International, which are operated as a separate enterprise fund). The cost to operate the Rural Alaska Aviation System in FY 2014 was $33.8 million dollars. Revenues received by the state included $5.3 million from airport leasing, tie down permits, etc. and $4.6 million in aviation motor fuels taxes, for a total revenue of $9.9 million. These revenues go into the General Fund. Each year the Legislature appropriates money from the General Fund to DOT, which includes the resources to operate the rural airports.
Revenue Options DOT presented three options to increase revenues: Implement landing fees, initially at the regional hub (Part 139) airports; implement a state-wide airport user fee, and; increase motor fuel taxes. The AAB looked at these from the standpoint of how much they would cost to implement, the projected amount of revenue generated, what they would cost the users, and how equitable they seemed both to different segments of the aviation community and to the public, which in many cases relies on aviation for the delivery of goods and services, in addition to their own transportation. After considerable deliberation, the AAB recommended that the state increase the aviation motor fuel tax from the current levels (4.7 cents/gal for avgas and 3.2 cents/gal for jet fuel), to 10 cents/gal for both fuel types. Based on projections provided by the state, this would raise about $9 million additional revenue per year. Combined with the current revenue streams, it would provide approximately $19 million of the $34 million needed to operate the rural airports.
A significant motivation for this recommendation is that a change in motor fuel tax doesn’t create any additional cost to state government to collect. Both landing fees and airport user fees require additional administrative efforts to collect, as well as burden the user with tracking and payment. It was also felt that the motor fuel tax was more equitable because cost is proportional to use. Adam White, Government Affairs Manager for the Alaska Airmen’s Association, provided the following information to show the impact to some typical GA users:
At a recent meeting in Fairbanks, Governor Walker acknowledged the AAB recommendation. It will take legislative action, however, to make a change to the motor fuel tax. While no one wants to see an increase in operating cost, the motor fuel tax increase option appears to be the best choice to address this issue. We will certainly be discussing it more in the months ahead, and we are interested in hearing your thoughts on funding to keep our airports open, maintained and safe for all aviation operations.
This article is reprinted from the January-March, 2016 issue of the Alaska Airmen’s Association Transponder.