In a surprise move welcomed by industry leaders, the White House reversed course in its Fiscal Year 2016 budget, dropping the proposed $100 ATC user fee that had been the mainstay over the past several budgets. But at the same time, the Obama Administration continues to push its proposal to change business aircraft depreciation schedules.

“After years of fighting to protect pilots from arbitrary fees and charges, we’re pleased to see that the White House has finally taken our message to heart and acknowledged that user fees on general aviation are a non-starter,” said Mark Baker, president of the Aircraft Owners and Pilots Association. “This is a big victory for the future of general aviation but we’ll continue to keep a close watch to make sure this bad idea doesn’t re-emerge as it has in the past.”

“Clearly, this is progress on a key issue,” added Ed Bolen, president and CEO of the National Business Aviation Association. “The challenge is that…the President still appears to be singling out general aviation.”

The budget, released February 2, zeroes out the aviation user-fee budget line for new ATC charges not only for the FY2016 estimate but also for future years. In addition, this year’s budget would seek a larger general fund contribution, to $1.368 billion in FY2016 from the estimated $1.146 billion in FY2015. The White House previously had called for ramping up user fees while the general fund contribution slowly disappeared.

User Fees a Non-starter

The administration, rebuffed on Capitol Hill every time it proposed user fees, had sought a $100 per-flight charge, saying it was necessary to achieve a better balance of contributions from users. General Aviation Caucus members have written several letters to the White House in the past, urging that the user-fee proposal be shelved. Last year, the White House proposed the user-fee charge in its budget documents but didn’t actually ask Congress to make the change. Instead, administration officials said the proposal was only part of its overall budget picture. A user-fee proposal likely would have been dead on arrival again this year.

General Aviation Manufacturers Association president and CEO Pete Bunce noted that removal of the user-fee proposal from the White House budget eliminates the fight from the reauthorization debate this year–at least from the administration’s standpoint. Other Washington leaders, however, have been exploring privatization concepts and other air traffic management structures that would rely on user fees. Unlike those concepts though, the White House’s proposal would have syphoned off the user-fee revenue to pay for other parts of the federal budget, noted Paul Feldman, vice president of government affairs for GAMA. “The $100 fees was a flawed proposal that had no relationship to [air traffic control needs],” Feldman said.

Depreciation Changes on the Table

While the user-fee proposal is absent, at least in this year’s proposal, the White House continues to pursue lengthening the depreciation schedule for business aircraft. The proposal, offered as a means to close what it characterizes as a tax “loophole,” has long been used as a political chip in federal budget deficit talks. The proposal would seek to match business aircraft depreciation schedules to those of airliners, extending the timeline to seven years from five. The White House estimates such a proposal would raise $108 million in FY2016, more than $2 billion over the next five years and $3.5 billion over the next decade.

“That proposal has become a political talking point,” Feldman said, but he questions the savings estimates. “At the end of the day, companies depreciate the full amount whether over five years or seven years.”

“The President has repeatedly misstated the facts about this business aircraft tax policy,” Bolen said, questioning why the budget would single out an industry without careful analysis of the proposal’s impact. “We will not let the President’s decision to target business aviation–whether in this budget proposal or any other venue–go unchallenged,” he said.

“We will continue to vigorously oppose revising the tax treatment for the purchase of business aircraft,” added Tom Hendricks, president and CEO of the National Air Transportation Association. “It adversely impacts aviation businesses that are known for creating highly skilled, good paying jobs at a time when we must continue to build economic momentum.”

As for specifics in the FAA’s budget, the White House would increase the operations account by $174 million and scale up facilities and equipment (F&E) funding by $255 million but cut airports funding by $450 million. The White House is proposing a $15.8 billion budget overall for the FAA, including $9.915 billion for operations; $2.855 billion for F&E; $166 million for research, engineering and development; and $2.9 billion for the Airport Improvement Program.

Hendricks praised the proposed funding, saying it “recognizes the important mission of the FAA by proposing significant increases for FAA operations, system modernization and research.” The budget includes $956 million for NextGen projects and requests $21.3 million to hire more aviation safety inspectors and engineers, both for surveillance and certification efforts. The funding is a “good start” to helping with the FAA’s resources, Feldman said.

The $1.3 billion total budget for the FAA’s Aviation Safety Oversight office also includes funding for “oversight and training for designee supervision and the integration of manned and unmanned aircraft into the National Airspace System,” budget documents say. Another measure closely followed by general aviation interests would include $6 million for the continued research into a leaded aviation gasoline replacement. “We are pleased by the funding for alternative fuels. The program is going well,” Feldman said.

Among the more controversial measures in the White House budget is a call to slash airport funding but enable airport operators to increase the Passenger Facility Charge (PFCs) to $8 from $4.50. The budget would eliminate guaranteed funding for hub airports and focus grants on smaller commercial and general aviation airports that do not have as much access to other revenue sources.

While strongly supported by airport groups, the proposal for increased PFCs has drawn an equal measure of opposition from airline groups. This could become an obstacle for a reauthorization bill, Bunce said.

The White House release of the budget is only the first step in a long appropriations process, industry officials agreed. “It will be a heavy lift for the aviation industry,” said Hendricks. “Among other things, the President’s overall discretionary budget proposal, including the FAA, is well above the caps required by law and these increases will face a skeptical Congress.”

Also, the depreciation tax measure would likely be addressed separately, if it is addressed at all.