STATEMENT OF RAMESH K. PUNWANI, CHIEF FINANCIAL OFFICER,
FEDERAL AVIATION ADMINISTRATION, BEFORE THE COMMITTEE ON TRANSPORTATION AND
INFRASTRUCTURE, SUBCOMMITTEE ON AVIATION ON THE FAAÕS FY 2009 BUDGET, FEBRUARY
7, 2008.
Good morning, Chairman Costello, Congressman Petri and Members of the Subcommittee.
As this is my first appearance before the Subcommittee, I would like to take this opportunity to introduce myself. After working in the private sector in the aviation and travel fields for several decades, I joined the Federal Aviation Administration (FAA) four years ago as the agencyÕs Chief Financial Officer (CFO). My job is to manage the agencyÕs budget, accounting, cost control and reduction efforts, as well as our financial programs and policies. On behalf of our Acting Administrator, Bobby Sturgell, and the other members of our senior management team, I would like to emphasize our commitment to you, and ultimately to the American public, to deliver a safe, efficient, and accessible aviation system. We have pushed hard to manage more effectively, rein in costs, and better respond to our customers. The FY 2009 budget request moves FAA further along that road, toward a more streamlined and efficient organization that the taxpayers deserve.
With me today is my colleague, Gene Juba, Senior Vice President for Finance, from our Air Traffic Organization (ATO). Gene is also from the aviation industry and is here to assist me in addressing some of your programmatic questions.
Today I would like to first briefly address a pressing budget issue for the current fiscal year and then provide an overview of our FY 2009 budget request and how it meets FAAÕs strategic goals.
FY 2008 Agency
Funding
As you are aware, the recently
enacted Continuing Appropriations Act extended the authority to make
expenditures from the Airport and Airway Trust Fund (AATF) only until February
29, 2008. Of
the $14.9 billion appropriated for FAA this fiscal year, approximately $12.6
billion (or 84%) of our FY 2008 budget is funded from the AATF, while the
remaining $2.3 billion (or 16%) is supported from the General Fund. All of FAAÕs Airport Improvement
Program (AIP), Facilities and Equipment (F&E), and Research, Engineering
and Development (R,E&D) accounts are funded by law solely from the Trust
Fund. Without an extension
of the Trust Fund expenditure authorities, FAA will be unable to obligate funds
after February 29th from the Trust Fund, including the uncommitted
balance. This will have immediate consequences. Most notably, our airports, facilities
and equipment and research personnel (approximately 4,000 employees) will be
sent home because they can only be paid from the Trust Fund. FAA will not be able to provide funding
on our major contracts, including ADS-B, STARS, ERAM and WAAS*, which are the foundational programs for both our existing
air traffic control system and the Next Generation Air Transportation System (NextGen).
Essential
functions will be maintained as long as possible but certain safety and capacity
enhancing projects and programs will be deferred and our remaining personnel,
who are funded by the General Fund portion of the Operations account, would also
be sent home after funding provided by the General Fund has been fully
obligated—most likely in early June.
Secondly, the Consolidated
Appropriations Act only provided a temporary extension until February 29th
of the authority to collect of most of the aviation related excise taxes that
provide approximately 95% of the Trust FundÕs revenue. The uncommitted balance in the Trust
Fund (approximately $1.5 billion, as of the end of FY 2007), which could only
be tapped if Trust Fund expenditure authority is extended, is insufficient to
sustain FAA operations beyond a few months and a lapse in the collection of
excise taxes could very quickly begin to impact FAAÕs operations, forcing a
shut down of our remaining 43,000 employees funded through the Operations
appropriations account.
Third, as you know, contract
authority for AIP expired on September 30, 2007, however Congress, in a series
of continuing resolutions, provided temporary and limited AIP contract
authority through December 31, 2007. Without contract authority, we are not able to make any new
AIP grants. We do have authority to honor payment requests for existing
grants provided in prior years, and we will continue to pay those to the extent
possible. However, as a
result of the lack of new contract authority, we cannot distribute funds to 62
airport sponsors that have requested approximately $265 million in FY 2008 to
upgrade their runway safety areas, or make almost $250 million in discretionary
letter of intent (LOI) payments. Based
on a quick survey, we have learned that eleven
airports with pending LOIs are facing immediate impacts, some as soon as
February and March, with several taking out short-term loans to bridge
financial requirements, and others at risk for incurring heavy financial
penalties on financing. Unfortunately, with the gap in AIP contract authority for FY
2008, we are near the point of losing a portion of this construction season and
airport sponsors will have to defer critical safety and capacity projects.
Mr. Chairman, it is in the best
interest of aviation safety and efficiency that these current year fiscal
concerns be addressed and we are hopeful that Congress will resolve this before
the end of the month. We remain
ready to work with you and other Members to enact a full-fledged
reauthorization proposal that is consistent with the goals of the
Administration.
FY 2009 Budget
Turning now to the next fiscal
year, our FY 2009 Budget request of $14.643 billion provides funding to support
all critical priorities of the FAA.
As always, safety is FAAÕs primary concern and our budget request,
sixty-seven percent of which is dedicated to our safety mission, reflects that
commitment. (See attached chart showing our budget request in terms of
agency goals). This request
includes $688 million for key research and technologies to enable the
transition to NextGen, as well as funding to meet our hiring goals for our air
traffic controller and safety inspection workforces--areas we know that this
Committee is most interested in. I
want to point out to the Committee that over the past five years, we have
improved our financial management performance in ways that enable us to better
use the funding Congress provides for execution of our vital safety and
infrastructure programs. Financial
management accomplishments include improving the discipline with which programs
and contracts are first approved, improving the tracking and monitoring of
approved programs, and reducing our overhead costs so that more of the taxpayer
dollars are spent on a safe, efficient and accessible aviation system.
The 2009 budget request assumes
congressional passage of the PresidentÕs reauthorization proposal for FAA
programs and revenue streams starting in 2010. We firmly believe that comprehensive reform is
necessary. The FY 2009 budget once
again provides the framework for the AdministrationÕs Next Generation Air
Transportation System Financing Reform Act (H.R.
1356), a proposal that will make flying more convenient for millions of
travelers. As air traffic is
expected to nearly triple by 2025, our aviation system requires a more reliable
and dynamic source of revenue to fund the modern technology required to manage
this expanded capacity. Our
proposal replaces the decades-old system of collecting ticket taxes with a
stable, cost-based funding program.
Based on a combination of user-fees, taxes and general funds, it creates
a stronger correlation between what users pay to what it costs the FAA to
provide them with air traffic control and other services. The incentives our plan puts in place
will make the system more efficient and more responsive to the needs of the
aviation community. FAA will
continue to work with this Committee and others in Congress as well as our
aviation stakeholders toward a successful reauthorization that is consistent
with our key principles for a comprehensive cost-based funding structure that
ensures that costs and revenues are better aligned, that all stakeholders are
treated fairly and that our aviation system is ready for the congestion and
environmental challenges of the future.
We continue to believe that these principles will provide us with the clearest
path toward implementation of NextGen and with it, the avoidance of mounting congestion
delays.
For FY 2009, we have proposed a
new account structure that aligns FAAÕs budget accounts with its lines of
business. We believe an account structure
based upon agency functions makes sense both in terms of how we operate now as
well as under our proposed new financing reforms. For ease of understanding this approach, we have attached a
ÒcrosswalkÓ chart showing a comparison of our request with the current account
structure.
Safety and Operations
The FY 2009 request is $2.052
billion for Safety and Operations, including $1.2 billion for Aviation Safety,
$14 million for Commercial Space Transportation, and $851 million for Staff Offices.
Most of the funds requested
support the agencyÕs activities to maintain and increase aviation safety and
efficiency. Our Aviation Safety
(AVS) organization accounts for $1.187 billion of the request, to meet its
mission of promoting aviation safety in the interest of the American public by
regulating and overseeing the civil aviation industry. AVS consists of eight distinct
organizational elements employing approximately 7,000 personnel. These employees are responsible for the
oversight of the ATO, certification, production approval and continued
airworthiness of aircraft, as well as certification of pilots, mechanics and
other safety related positions. The
agency recognizes that this Subcommittee is particularly interested in our
efforts regarding aviation safety inspector staffing. Funding for AVS in FY 2009 maintains recent staffing gains
to our aviation safety workforce, providing for 4,110 safety inspectors and
requests an additional 30 safety staff positions for Air Traffic
oversight. In anticipation of
future staff retirements, FAA is aggressively hiring and training safety
personnel to enhance oversight, surveillance and certification activities.
I should also note that the $14
million Commercial Space Transportation request includes $270 thousand for 4
additional safety personnel needed to assess the human space flight aspects of
the safety evaluations of commercial space license and permit applications. In addition, $851 million is requested for
FAA staff offices, including the CFO and finance, human resources, information
systems, international policy, civil rights, and legal offices.
Air Traffic Organization
The FY 2009 Budget Request for the FAAÕs Air Traffic Organization (ATO) is $9.670 billion, of which approximately $7 billion is for ATO operating expenses. We recognize that this Subcommittee is also very interested in our efforts regarding controller staffing. As with the safety inspector workforce, the FAA is aggressively hiring and training controllers to ensure the right number of controllers are in place at the right time to address the now well-documented retirement ÒbubbleÓ. As you know, the FAA began anticipating todayÕs air traffic controller retirement wave several years ago, issuing a comprehensive plan that we update annually.
In anticipation that more than 60 percent of the
controller workforce will become eligible to retire over the next 10 years, the
FAA plans to hire more than 16,000 controllers over that period. In fiscal year 2007, the FAA hired
1,815 controllers and ended the year with 14,874 controllers on board –
67 more controllers than our workforce plan target of 14,807. This year, we have robust hiring goals
with a year-end target of more than 15,000 controllers on board. Our FY 2009 budget includes funding to
hire a net increase of 306 new controllers, a level consistent with the targets
being developed for our updated staffing plan to be published next month. The agency is also offering a variety
of incentives to recruit and retain controllers, including recruitment and
relocation bonuses and repayment of student loans.
The ATO continues to see cost
savings from Flight Service Station (FSS) contract, which was initiated two
years ago. We anticipate savings
of over $1.7 billion over the ten years of the contract. Our network of automated flight service
stations, which provide weather guidance and other assistance to the pilots of
small airplanes, was reduced from 58 to 18 in the fourth quarter of FY
2007. The current set of flight
service stations comprises 15 previously existing facilities and 3 new ones
built by Lockheed Martin. The
contract not only saves money, it also commits the vendor to modernize and
improve the flight services we provide to general aviation pilots. These savings result directly in a reduction
of the budget request.
NextGen and Capital
Needs
Our FY 2009 budget request will provide
$688 million--a nearly $500 million increase from 2008--in support for the
comprehensive transformation of our air traffic control system known as NextGen
that is already underway. This
Committee has held numerous hearings on our transformation and modernization
efforts and is well acquainted with the ongoing management efforts to
coordinate this tremendous undertaking.
As you know, in the past year, key NextGen defining documents have
matured. Last summer, the Joint
Planning and Development Office (JPDO) released public versions of the
Enterprise Architecture and Concept of Operations. In July, the initial baseline of the NextGen Integrated Work
Plan was completed. The work plan
lays out the progression from the present to the future, with activities and
responsible agencies identified.
As envisioned, the work plan would guide the formulation of future
budgets within partner agencies.
The FY 2009 NextGen budget
represents strong collaboration between JPDO and the new OEP—formerly the
Operational Evolution Plan, and now the Operational Evolution Partnership-- to
define and estimate the budgetary requirements for FY 2009. That collaboration will provide
oversight and track progress to ensure that NextGen objectives are achieved. This NextGen investment portfolio
includes programs and activities deemed Òtransformational,Ó i.e., those that
will truly move toward the next generation system. The FY 2009 portfolio consists of $631 million in ATO
Capital Programs, $57 million in Research, Engineering & Development, and
$704 thousand in Safety & Operations, for a total of $688 million. This funding level includes $19.5
million to directly support the JPDO: $5 million from ATO Capital and $14.5 million from
R,E&D. This represents a
significant investment in NextGen programs and reflects the AdministrationÕs
commitment to comprehensively address capacity constraints in the aviation
system.
Grants in Aid for
Airports (AIP)
The FAAÕs reforms for the AIP program contained in our reauthorization proposal are designed to strategically target federal dollars to the airports where they will have the most impact. While large and medium hub airports have a greater ability to finance their own capital requirements with revenue from passenger facility charges and their own rates and charges, small primary and general aviation airports rely more heavily on AIP funding to help meet their capital needs and complete critical projects. We have proposed changes to the Federal funding program which will stabilize and enhance these funding sources for airports. With our proposed programmatic changes, including the increase in the passenger facility charges, the $2.75 billion proposed in our budget will be sufficient to finance airportsÕ capital needs and meet national system safety and capacity objectives. Our request also includes $15 million for the Airport Cooperative Research program and $19 million for airport technology research.
Research, Engineering, and Development (R,E&D)
The FY 2009 request for R,E&D
is $171 million. The request
includes $91 million for continued research on aviation safety issues. The remaining research funding is to
address congestion and environmental issues, including $42 million for new
NextGen Projects such as Self Separation, Weather in the Cockpit, Air-Ground
Integration, and the Continuous Low Energy, Emissions, and Noise (CLEEN)
Technologies program. $14.5
million is provided for the Joint Planning and Development Office to continue
defining and facilitating the transition to NextGen. An additional $5 million in support for JPDO is contained in
the ATO capital request, related specifically to the work on demonstration
projects.
Increased Safety
Due to the
combined efforts of government and the aviation community, we are fortunate to
be living in the safest period in aviation history and the FAA is committed to
making it safer still. In the past
10 years, the commercial fatal accident rate has dropped 57%, to a rolling
three-year average of 0.022 fatal accidents per 100,000 departures as of the
end of FY 2007. In the past three
years, the United States averaged approximately two fatal accidents per year
and 28 deaths per year; while any loss of life is tragic, this statistic is
remarkable, given that there are roughly 12 million commercial aircraft flights
per year. General aviation
accidents are down. Air traffic
control errors are occurring at a rate lower than in the previous two
years.
Approximately 67% of our budget request, or $9.855
billion, supports the FAAÕs safety mission. Our safety goals for FY 2009 are to reduce U.S. commercial
airline fatalities per 100 million people (including crew) on board to fewer
than 8.31 (an improvement of over 6% from our FY 2008 goal) and to reduce the
rate of general aviation fatal accidents.
To achieve these goals, FAAÕs FY 2009 budget request includes $9.9 billion to operate and maintain the air traffic
control system, inspect aircraft, certify new equipment, ensure the safety of
flight procedures, oversee the safety of commercial space transportation, and
develop a replacement air traffic data and telecommunications system.
The request includes an increase of $11.3 million to
hire and train sufficient air traffic controllers to achieve our hiring targets
noted earlier in my statement. It
also includes $800,000 for 30 new positions to support continued development of
the Air Traffic Oversight office, which was formed in FY 2004 to improve the delivery
of air traffic services, and maintains the staffing gains to our aviation
safety workforce during FY 2007-2008.
Total aviation safety staffing will reach 7,069 by the end of FY 2009.
The FAA will continue working to reduce the
precursors of aircraft accidents, runway incursions and operational
errors. This Subcommittee will be
examining our efforts in this latter area at a hearing scheduled for next week
so we will be brief here. Suffice
it to say that the FAA will continue to concentrate on outreach, awareness,
technology, and improved procedures and infrastructure.
International Leadership
Our FY 2009 request includes $63.1 million to
expand the FAAÕs international leadership role and to help improve safety. FAA will expand training and technical
assistance programs that help civil aviation authorities meet international
standards, as well as promoting seamless global operations. The FAA will continue to promote
increased external funding for training and technical assistance programs that
help civil aviation authorities around the world meet international safety
standards. FAA will also continue
to work with its international partners and the International Civil Aviation
Authority (ICAO) to harmonize global technological standards, and to expand the
use of global satellite navigation systems.
Environmental Stewardship
Our FY 2009 budget request includes $276.8 million,
of which $227 million is requested from the AIP program, to ensure that the
number of people in the United States who are exposed to significant aircraft
noise levels—a Day/Night Average Sound Level of 65 decibels or
more—continues to decline.
FAA will continue to address the environmental impacts of airport
projects, primarily aircraft noise.
FAA will also provide expertise and funding to assist in abating the
impacts of aircraft noise in neighborhoods surrounding airports by purchasing
land, relocating persons and businesses, soundproofing residential homes or
buildings used for educational and medical purposes, purchasing noise barriers
and monitors, and researching new noise prediction and abatement models and new
technologies. We estimate that
20,000 people will see a reduction in aircraft noise from these efforts. The FY 2009 request includes $10 million
in new RE&D funding for the Continuous Low Emissions, Energy and Noise
Technologies program to accelerate the introduction of quieter and cleaner
technology in commercial fleets, and to initiate a NextGen Environmental
Management System.
Security
As you know, responsibility for the security of the aviation system now
rests with the Department of Homeland Security. Therefore most of the $218.6 million requested in our budget
for next year focuses on enhancing the security of the FAAÕs own personnel,
facilities, and communications. FAA
ensures the operability of the national airspace through the facilities,
equipment and personnel of the air traffic control system, which is essential
to the rapid recovery of transportation services in the event of a national
crisis. Additionally, the budget
request includes funding to continue upgrading and accrediting facilities,
procure and implement additional security systems, and upgrade our command and
control communications equipment.
Performance and Accountability
Finally, as Chief Financial Officer
of the FAA, I would like to highlight some of the ways we are better executing
and managing the budget resources that Congress provides. At FAA, Òacting more like a businessÓ
isnÕt just a slogan. We are actively
engaging in a comprehensive pay-for-performance program, consolidating
operations, improving internal financial management, and increasing benefits to
our customers. Our beacon will
always be our mission – to provide the safest, most efficient aerospace
system in the world. Our bottom
line is results for our stakeholders, including the taxpayer and traveling
public.
As I noted at the outset of my
testimony, the transformation over the past five years has been steady and
sure, as we have embraced the vision of the PresidentÕs Management Agenda (PMA)
and its aggressive strategy to improve management throughout the federal
government. The evolution of the
PMA complements the strategic vision of our Flight Plan. It
contains a number of management performance measures, including a cost control
performance measure requiring each organization to contribute cost efficiencies
that save money or avoid costs for the agency. Through the Flight Plan and PMA, we have made dramatic gains in human capital, competitive
sourcing and consolidations, financial performance, and, ultimately,
accountability to the bottom line of our customers.
We are continuing to make every
effort to control our operating costs.
Personnel reform for the agency, granted in 1998, is starting to bear
fruit, with conversion from the traditional GS-Schedule pay system to pay for
performance. Accountability for
results is systemic throughout our organization, with 90 percent of our
employees on the pay-for-performance system, including our executives. Flight Plan performance targets must be achieved before annual
pay raises are calculated.
Executives and managers have a good deal of discretion in rewarding
high-performing employees, and incentives are present to ensure quality work
and innovation are rewarded.
Executives are also eligible for short-term incentive increases when
specific performance thresholds are met or exceeded. This conversion is allowing the agency to flatten pay bands
and tie performance incentives to pay increases.
We know that labor costs drive a
significant share of our budget, and we have been working to slow the rate of
growth in labor costs, as evidenced by the FAAÕs recent contract with our
controller workforce, and such steps as back-filling positions with new employees
at lower pay grades when possible.
We are also increasing workforce productivity through cutting multiple
levels of management and better management and oversight of our workerÕs
compensation caseload.
I
have already mentioned our ATOÕs success with competitively sourcing its flight
service station function. They
have also successfully consolidated administrative and staff support functions
from nine service areas to three, allowing for better service while saving an
estimated $360 to $460 million over the next 10 years. FAA has also taken steps to consolidate
and improve our real property management and information technology (IT)
investments.
In a concerted effort to control costs and make smarter
capital investment choices, several years ago the FAA created a capital
investment team to review financial and performance data. The team provides an early warning for
potential problems as well as help to develop corrective actions. So far, these business case reviews
have identified $460 million in lifecycle savings by restructuring/terminating
10 programs, 6 of them major. To
date, over 165 projects were reviewed in various stages of acquisition, capital
formulation, and business case development.
Finally, the Strategic Sourcing for the Acquisition of
Various Equipment and Supplies (SAVES) initiative is an ambitious effort begun
in FY 2006 to implement best practices from the private sector in the
procurement of administrative supplies, equipment, and IT hardware. It is expected to achieve $9 million in
savings annually.
Conclusion
Mr. Chairman, with CongressÕ help we can avoid disruptions
to our programs this fiscal year with an extension beyond March 1st
of critical authorities and taxes that support our programs. Time is of the essence. We also stand ready to work with this
Committee and others in Congress to enact an aviation authorization bill this
year that will provide the necessary cost-based financing and programmatic
reforms that will enable us to move to the NextGen transportation system. Our FY 2009 request provides strong
support for our staff hiring goals, safety and capital programs and NextGen
activities. Given the vital role aviation plays in the NationÕs economy
and the need to prepare for the future, our funding request for FY 2009 is
designed to support AmericaÕs growing demand for aviation-related services.
That concludes my
testimony. My colleague and I
would be happy to answer any questions you and Members of the Subcommittee may
have.
