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FAA Funding Extension Leaves $200M in Controversial Rural Airport Subsidies Intact

Posted: 09/15/11 11:25 PM ET

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A short-term funding extension for the Federal Aviation Administration that Congress seemed poised to pass Thursday night leaves intact a small but costly program that has been criticized for decades by government auditors.

Created in 1978 as a part of the Airline Deregulation Act, the Essential Air Service subsidy was designed as a 10-year initiative to help rural airports likely to be left without routes as commercial aviation converted to a market-driven system. In most cases, the program limits assistance to isolated communities more than a 70-mile drive from the nearest major hub airport, which could be subsidized at a rate of less than $200 per passenger.

But EAS has persisted almost 25 years past its original congressionally mandated expiration date. It now serves 153 communities and costs some $200 million a year.

With growing political and economic pressure to reduce spending, some in Washington are focusing renewed attention on a subsidy program that, for example, has allowed constituents of Senate Majority Leader Harry Reid, D-Nev., to fly from Ely, Nev., to Denver for as little as $70 -- even though the cost of each ticket to taxpayers is reportedly $4,107 . A standoff over the program was at the root of a two-week FAA shutdown this summer and threatened earlier this week to shutter the agency again.

"The effectiveness of this program as anything other than enabling commercial airports to remain afloat is questionable, since the goal of the program was to help airports transition away from federal subsidies for air carrier service," said Sen. Tom Coburn, R-Okla., in his "Back in Black" deficit reduction plan , published in July. "Taxpayers should not be expected to subsidize air service indefinitely."

On Monday, Coburn had threatened to block new short-term FAA and highway funding extensions in the Senate; the House passed its version of the short-term extensions on Tuesday. Reid fired back at Coburn in a floor speech Wednesday, calling him a " dictator" for his "take this or leave it" approach to the FAA bill, the passage of which was needed to prevent tens of thousands of temporary layoffs. But Senate leaders announced a deal late Thursday, saying they had promised to remove a variety of spending Coburn objects to in longer-term transportation funding measures.

While EAS is a vital support program for Alaska communities with no other transportation options, there are also 109 airports in the lower 48 states that still benefit from the long-lived subsidy. These include Hagerstown, Md. , an hour and a half drive from both Washington and Baltimore with a reported per ticket subsidy of $191, and Jonesboro, Ark., where the Transportation Department estimates taxpayers are on the hook $840 for every ticket even though it's only 79 miles from Nashville.

The persistence of the subsidy "is a classic example of a small but vocal constituency trumping a large and unfocused majority - most folks don't know about the Essential Air Service," said Douglas Holtz-Eakin, president of the conservative American Action Forum and a former chief of the Congressional Budget Office. "Every administration knows this is a bad policy, but it's not worth all the political pain you have to go through to [cut it]. It's exactly the right size to live on like this."

But others contend that current political realities may have altered the dynamic. "By any standard, you can't justify the cost to benefit ratio here," said Norman J. Ornstein, an expert on congressional politics at the conservative American Enterprise Institute. Although this is not "a program in the billions," he said, "the pressure and the squeeze on almost every area of discretionary spending is such that even the smaller items are going to come under more scrutiny."

A troubled history

The Government Accountability Office first highlighted problems with EAS in 1983, five years after the program was launched. In a review of the 1984 budget , GAO noted that "the 88 small communities receiving subsidized air service are not making progress toward achieving self-sustaining air service, and carriers will abandon or substantially reduce service to most of the communities when the program ends." It recommended that Congress allow "greater flexibility to consider the merits of increasing or decreasing subsidies to selected communities in order to help develop an air service market or to discontinue subsidies to communities not supporting air service."

Although the program was designed to expire in 1988, it was extended for a decade and then made permanent in 1996 . In subsequent years, light passenger loads and a reduction in the number of airlines willing to participate led to higher costs for EAS, the GAO found in a 2000 review. "Between 1995 and 1999, the level of EAS funding for subsidized service increased substantially although the total number of communities that required subsidies decreased," auditors said. "Changes and consolidation in the airline industry have likely affected the cost of providing air service to smaller communities," they explained.

Subsidies rose 41 percent for service to communities outside of Alaska during the mid-90s while the number of EAS passengers fell by 4 percent, the GAO found. And by 1999, the percentage of seats filled on these subsidized flights had fallen to 15 percent on average. Commercial planes during that year averaged a 71 percent load factor.

President George W. Bush targeted the program for cuts in 2007, 2008, and 2009 , but each time was overruled by Congress. In the final budget he helped craft, Bush requested only the $50 million per year EAS is guaranteed by law. Congress pushed the program's budget up to nearly $137 million, House aides told iWatch News.

In President Barack Obama's first year in office, he requested a $55 million funding increase for EAS . Congress delivered that and more, pushing the program's budget up to $200 million in 2010, according to the Congressional Research Service .

In a July 2009 GAO report, auditors warned that "current conditions raise concerns about whether the program can continue to operate as it has." It

 

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