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DEPARTMENT OF TRANSPORTATION
Since 2001, the Administration:
• Worked with the Congress to enact a reauthorization of the Department of Transportation’s
highway, public transportation, and highway safety programs that gives States more flexibility
and targets priority areas, such as safety and mobility;
• Helped stabilize the airline industry following the September 11, 2001, terrorist attacks;
• Reached key highway safety goals, including improving the national safety belt usage rate to
a record high and reducing the highway fatality rate;
• Completed the largest competitive sourcing effort undertaken by a Federal agency, which will
save taxpayers more than $2 billion by consolidating Federal Aviation Administration facilities
and modernizing its technologies;
• Launched the Next Generation Air Transportation System initiative to transform the Nation’s
vital air transportation system; and
• Worked with pipeline users and the Congress to enact new legislation to improve pipeline
safety by preventing damage to pipelines and providing help to States who share oversight
of pipelines.
The President’s 2008 Budget:
• Proposes Federal Aviation Administration reauthorization legislation that would improve the
management of the air traffic control system by reforming the system’s financing structure;
and
• Proposes a new highway congestion initiative that will enable select cities to test innovative
approaches for managing traffic and facilitate improvements to major interstate corridors.

107

108

DEPARTMENT OF TRANSPORTATION

FOCUSING ON THE NATION’S PRIORITIES
Building a More Efficient Air Traffic Control System to Meet the Air Travel
Demands of the Future
Under the Federal Aviation Administration’s (FAA’s) current tax structure, which expires at the
end of 2007, there is no relationship between the taxes paid by users and the air traffic control
services provided by FAA. For example, two identical commercial jets fly between Miami and Boston
at the same time of day. One is full of passengers, while the other is nearly empty, yet both impose
the same workload on FAA. Since the current tax structure is primarily based on the price of a ticket,
FAA collects much more in taxes from the full plane than from the nearly empty plane. Under its
reauthorization proposal, FAA aims to create a direct relationship between revenue collected and
services received, providing FAA with a stable revenue stream and creating incentives to make the
system more efficient and responsive to user needs.
The 2008 Budget includes a reauthorization proposal that transforms FAA’s excise tax financing
system into a cost-based user fee system. Under this system, aviation users would pay for the actual
level of service that FAA provides in managing the use of the national airspace. User fees would
enable users to gauge the actual costs of their requirements on the system. By providing clearer
price signals, a new direct payment structure will also enable FAA to better target investment and
management decisions that provide the greatest system performance benefits. This new model
encourages FAA to control costs, increase accountability, and improve its ability to operate like a
business.
Under the proposal, FAA’s financing for air traffic operations will primarily be based on user fees
instead of excise taxes. FAA would have the authority to collect the user fees that directly offset
the cost of its operations; expenditure of the available fees would be affirmed in the appropriations
process. User fees would be collected from commercial aviation operators. General aviation users
would continue to pay a fuel tax. Both user fees and fuel tax rates would be calibrated based on
the costs that the users impose on the system. FAA would also be able to charge all users a fee
for operating in the Nation’s most congested airspace. FAA’s budget would maintain a general fund
component to cover activities that benefit the public good, like safety oversight functions and public
use of the airspace. FAA’s airport grants program would continue to be funded from fuel taxes paid
by all users ($2.75 billion for 2008).
The Budget assumes FAA will implement its new financing system starting in 2009 while other
elements of the reauthorization will be effective in 2008. To illustrate the effect of the proposal, the
Budget Appendix volume also includes material that displays how this would be implemented.
The President’s Budget also includes $175 million to support key FAA investments in the Next
Generation Air Transportation System (NGATS). Launched in 2003, NGATS is a multi-agency effort
that will transform the Nation’s air traffic management system to accommodate projected demand
and continue to improve air transportation safety and security. The Budget continues FAA investments in satellite navigation and other projects to improve the automation of air traffic management.
The reauthorization proposal will help FAA continue to invest in NGATS, and includes proposals to
establish pilot programs to encourage airports to take responsibility for maintaining and modernizing equipment to support the transformation of the air traffic control system. The reauthorization
proposal includes other programmatic changes and reforms to improve the system. For example, the
grants program will empower airports with strong local revenue sources to attract private capital
and improve airport performance.

THE BUDGET FOR FISCAL YEAR 2008

109

Exploring New Ways to Reduce Highway Congestion
Highway traffic congestion is a pervasive problem that affects every American either directly or
indirectly. In 2003, drivers in the 85 most congested urban areas in the United States experienced 3.7
billion hours of travel delay and burned 2.3 billion gallons of wasted fuel for a total cost of $63 billion.
In the Nation’s 10 most congested areas, each rush hour traveler “pays” an annual virtual “congestion
tax” of between $850 and $1,600 in lost time and fuel, spending the equivalent of almost eight work
days each year stuck in traffic. In addition to these costs, deterioration in the transportation system
makes delivery of goods and services less reliable, has environmental impacts, distorts real estate
markets, and robs people of time with their families.
In support of a Department-wide effort
Worsening Highway Congestion
to tackle congestion in all modes, the 2008
Annual hours of delay per traveler
Budget redirects funds to a new $175 million
100
highway congestion initiative. The program
1982
2003
is funded with balances from unneeded
80
Congressional earmarks for highway projects.
The Department would make these funds
60
available to local governments to demonstrate
innovative ideas for curbing congestion. A
40
select number of large-scale pilot projects
would be chosen based on their willingness
20
to implement a comprehensive congestion
reduction strategy.
That strategy would
0
Washington
LA\
San
Miami
New
Houston
Average
include a broad demonstration of some form of
Long Beach Francisco
York
Atlanta
Dallas
Chicago
Detroit
Boston
Phoenix Philadelphia
congestion pricing, commuter transit services,
commitments from employers to expand work
Source: Texas Transportation Institute.
schedule flexibility, and faster deployment of
real-time traffic information. The goals of the initiative are to test new ways to mitigate congestion,
evaluate the benefits and costs of these approaches, and determine if they can be applied in other
parts of the country. Part of this initiative also includes $25 million for the Corridors of the Future
program to enable the Secretary to target a small number of projects that show they can help expand
capacity and improve operations along heavily congested interstate travel and trade corridors.

Focusing Amtrak’s Spending Priorities
The Administration believes that scarce taxpayer dollars must be spent wisely, including the funds
provided to Amtrak. Led by its Board of Directors, Amtrak made some progress in 2006 to strengthen
its finances by increasing revenues and controlling costs. While Amtrak’s recent performance is
encouraging, it continues to under perform overall. Amtrak’s system-wide on-time performance
again dropped in 2006 to 68 percent, and it required $490 million in operating subsidies, mostly for
its money-losing long distance trains. When last measured for 2002, the net Federal subsidy per
thousand passenger miles traveled was $199.90 for rail, $5.87 for commercial aviation, and -$.95 for
highway users according to the Bureau of Transportation Statistics. While Amtrak carried 24 million
passengers in 2006, domestic air carriers that year flew 656 million passengers.
Historically, Amtrak has been hampered by a lack of accountability, poor design, and mismanagement. The latest critical review of Amtrak comes from the Government Accountability Office,
which concluded, among several findings, that Amtrak’s long-distance trains “show limited public
benefits for dollars expended,” and that “these routes account for 15 percent of riders but 80 percent of financial losses.” To turn the enterprise around, the Administration has urged basic reforms

110

DEPARTMENT OF TRANSPORTATION

that would empower local communities and ultimately customers to determine the most efficient
way to run trains. The Administration expects the Board’s newly-installed management to make
significant changes required to enable the company to succeed without Federal operating subsidies.
The Department plans to administer Amtrak’s subsidy with this goal in mind.
The 2008 Budget proposes a subsidy that would require that Amtrak make hard choices
about its services and commit to running the railroad more like a business. The request is part
of a multi-year program to reduce and then eliminate Amtrak’s reliance on Federal operating
assistance as required by the Amtrak Reform and Accountability Act of 1997 (49 USC 24101). For
2008, the Budget recommends $900 million for intercity passenger rail, but only $800 million for
Amtrak directly. This amount includes $300 million for operating costs, compared to the $490
million Amtrak received in 2006, beginning the phasing out of operating subsidies. The Budget
continues to fund Amtrak’s infrastructure needs with a capital request of $500 million, which is
equal to the 2006 enacted level. This level should underwrite Amtrak’s ongoing efforts to rehabilitate
the Northeast Corridor between Washington, D.C. and Boston, which is by far its most heavily
used and important route. In addition, the President’s Budget requests $100 million for capital
matching grants to States for intercity passenger rail projects. This new program would give local
communities resources to direct investment in facilities that reflect their top rail transportation
priorities. The Administration believes the Federal Government should help States fund capital
projects where there is strong demand for rail service, and help foster managed competition among
rail operators to encourage innovation and cost control.

Department of Transportation
(In millions of dollars)
2006
Actual
Spending
Discretionary Budgetary Resources:
Federal Aviation Administration .......................................................................
FAA operations, capital, and research programs (non-add) ...........
Federal Highway Administration......................................................................
Federal-Aid Highway Obligation Limitation (non-add) .......................
Federal-Aid Highway rescission of contract authority (non-add) ...
Federal Motor Carrier Safety Administration ..............................................
National Highway Traffic Safety Administration:
Existing law ........................................................................................................
Legislative proposal ........................................................................................
Federal Railroad Administration ......................................................................
Intercity Passenger Rail (non-add) ...........................................................
Maritime Administration......................................................................................
Federal Transit Administration .........................................................................
Federal Transit Administration Obligation Limitation (non-add) .....
St. Lawrence Seaway Development Corporation .....................................
Pipeline and Hazardous Materials Safety Administration ......................
Research and Innovative Technology Administration..............................

Estimate
2007

2008

14,271
10,756
34,206
34,183
4,229
490

14,798
11,283
31,477
35,551
4,261
455

14,077
11,327
37,176
39,585
2,000
528

806
—
1,502
1,293
298
9,853
8,263
16
115
6

799
—
1,324
1,114
212
8,529
6,910
16
112
6

711
122
1,071
900
295
9,423
7,873
17
119
12

THE BUDGET FOR FISCAL YEAR 2008

111

Department of Transportation—Continued
(In millions of dollars)
2006
Actual
All other programs (including offsetting collections) ................................
Total, Discretionary budgetary resources 1 ....................................................

Estimate
2007

2008

267
61,830

203
57,931

128
63,679

3,501

—

—

Total, Discretionary outlays ...................................................................................

59,236

62,713

65,811

Mandatory Outlays:
Federal Aviation Administration .......................................................................
Federal Highway Administration......................................................................

181
1,080

158
1,300

1
1,339

Federal Railroad Administration ......................................................................
Maritime Administration......................................................................................

4
274

2
198

5
145

Pipeline and Hazardous Materials Safety Administration ......................
All other programs (including offsetting collections) ................................
Total, Mandatory outlays ........................................................................................

12
275
906

15
291
1,062

16
275
1,221

Total, Outlays ..............................................................................................................

60,142

63,775

67,032

Credit activity
Direct Loan Disbursements:
Transportation Infrastructure Finance and Innovation Program ..........
Railroad Rehabilitation and Improvement Program .................................
Total, Direct loan disbursements .........................................................................

54
79
133

330
363
693

1,393
600
1,993

Guaranteed Loan Disbursements:
Transportation Infrastructure Finance and Innovation Program ..........
Maritime Guaranteed Loans (Title XI)...........................................................
Minority Business Resource Center ..............................................................
Total, Guaranteed loan disbursements .............................................................

—
140
5
145

200
100
19
319

200
—
18
218

Memorandum: Budget authority from enacted supplementals

1

Includes both discretionary budget authority, obligation limitations, and rescissions.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102