Eliminate Grants to Large and Medium-Sized Hub Airports

Under the Airport Improvement Program (AIP), the Federal Aviation Administration (FAA) provides grants to airports to expand runways, improve safety and security, and make other capital investments. In 2010, about 30 percent of that money went to airports that are classified, on the basis of the number of passenger boardings, as large and medium-sized. Those airports-- currently, there are 65, although the number fluctuates from year to year--account for nearly 90 percent of passenger boardings.

This option would eliminate the AIP's grants to large and medium-sized airports but would continue to provide grants to smaller airports in amounts that match funding in 2010. That year, smaller airports received $2.4 billion, more than two-thirds of the $3.5 billion available under the program. Retaining only that portion of the program would reduce federal outlays by about $4 billion through 2016 and by almost $10 billion over the 2012-2021 period.

The AIP, like some other transportation programs, is treated in an unusual way in the budget. The program's budget authority is provided in authorization acts as contract authority, a mandatory form of budget authority. But because the spending of contract authority is subject to obligation limitations contained in appropriation acts, the resulting outlays are categorized as discretionary.

The main rationale for this option is that federal grants simply substitute for funds that larger airports could raise from private sources. Because those airports serve many passengers, they generally have been able to finance investments through bond issues as well as passenger facility charges and other fees. Smaller airports may have more difficulty raising funds for capital improvements, although some have been successful in tapping the same sources of funding as their larger counterparts. By eliminating grants to larger airports, this option would focus federal spending on airports that appear to have the fewest alternative sources of funding.

One argument against ending federal grants to large and medium-sized airports is that those airports currently lack the flexibility to substitute private sources of funding for reduced federal grants because of provisions of federal law that limit the amount that airports can charge passengers to finance capital projects.

Another argument against ending such grants is that they allow the FAA to retain greater control over how those airports spend their funds by imposing conditions for aid.