Conservatives Look to PFC Reform to Create Tailwind for Airport Free-market Reform

Posted: May 18, 2015 12:01 AM

There is a move on Capitol Hill to fix the way we maintain America's airports by bringing free-market reforms to the massive transportation bill the Republican leadership is dead-set on passing this summer.

Capitol Hill conservatives may not be able to stop the transportation spending bill, but some right-thinking members of Congress are working to leverage the Passenger Facility Charge as a way to move Uncle Sam further out of the airport business.

It is not privatization, which is still a non-starter given that President Barack Obama still checks the mailbox at 1600 Pennsylvania Avenue. But, the plan relies on one of the intellectual tenets of privatization: the benefit principle.

The benefit principle says that users of a specific good or service should the ones paying the freight. It is why you pay a fee at a National Park Service campground or at the public golf course. It is the opposite of the government paying the full boat, which ends up turning the goods and services into a Soviet-style perks for the politically-connected and wealthy—which is what air travel used to be.

The Washington-based Tax Foundation, released a May 11 study, “Improving Airport Funding to Meet the Needs of Passengers,” detailing how reforming the PFC reform syncs-up with benefit principle, authored by Alan Cole, an economist at the conservative foundation.

“Public policy on airport spending should be more in line with the benefit principle. According to the benefit principle, the people who use a public service should generally be the ones to contribute to that service,” he wrote. “This approach allows projects to be approved or canceled on their own merits, by the people who best understand the costs and benefits.”

The PFC started at $3 per ticket in 1990, roughly five years after the final dismantling of the Civil Aeronautics Board, with the intent of making airports more self-sufficient.

It was not an accident that Congress funded the program with a charge. Monies collected through the PCF, which was raised and capped at $4.50 in 2000, are neither a tax nor a fee. They do not go to the U.S. Treasury and they are not managed by the federal government. All PFC revenues go directly to the airport where they are collected.

The problem is that with 96 percent of the nation's 750 million passenger-trips per year are clustered in 135 airports, the general aviation airports and small regional airports across the country cannot self-generate PFC revenues to pay for, for that matter cover a bond offering, capital projects, such as runways, terminals and baggage facilities.

While the federal government, through the Federal Aviation Administration, doles out $3 billion per year for airport capital projects, only $500 million goes to the general aviation and small regional airports. This is the familiar problem with centralized decision-making in Washington. The well-heeled airports are the ones getting the federal support, not the airports in need of help.

Cole recommends that the PFC needs to be raised to $8.50 to make up for the last 15 years, but he is also calling for Congress to empower the local airports by giving them the ability raise and lower the Passenger Facility Charge as appropriate to respond to market forces.

There are travelers, who pay up for the convenience of the local general aviation or regional airport—let them.

“An uncapped PFC would be the most free-market solution to this infrastructure problem, but at the very least, Congress must recognize that the current $4.50 cap is arbitrary and not connected to reality in any meaningful way,” Cole said. “Airport operators – in concert with local, regional, or state authorities – are best equipped to determine the appropriate PFC levels for their needs.”

What? Local control? Market forces and a dynamic pricing? Sounds good enough for Obama to veto, but if conservatives are successful amending the transportation bill, a bill to big to veto, the PFC reform will become law and making things better right away.