Industry Relieved Budget Deal Averts Shutdown
December 19, 2013
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  • Senate passage of the budget deal on Dec. 18 comes as a relief to general aviation advocates worried that a prolonged impasse could have led to another costly government shutdown in January.

    Senate passage, by a 64-36 margin, sends the bill to the White House to be signed into law. The House passed the so-called Ryan-Murray budget framework earlier this month before recessing until January. The two-year budget agreement does not fix the nation’s deficit problems, but represents a modest agreement that would provide a framework with smaller cuts and tax increases over the next two years.

    “We know that difficult budget negotiations are a reality of our time, but another government shutdown would be an unwelcome development for the business aviation community,” says National Business Aviation Association Ed Bolen. He maintains the industry is disproportionately harmed by a shutdown.

    “The aviation industry is among the country’s most heavily regulated industries, so when government services are reduced or eliminated, our industry feels the impact more acutely than others do,” he told the House Transportation and Infrastructure Committee earlier this month, detailing the harm from the closure of FAA’s Registry during the 16-day October shutdown. “Imagine if no citizen of the United States could buy or sell a car, purchase or refinance a home, or if the sale of other critical goods came to a complete and grinding halt – that’s what basically happened in business aviation.”

    Bolen welcomed the budget framework brokered by Sen. Patty Murray (D-Wash.) and Rep. Paul Ryan (R-Wis.), saying, “This legislation should allow us to avoid another industry-damaging shutdown for the near term.”

    The Aerospace Industries Association called the October government shutdown “perhaps the greatest challenge to general aviation in 2013,” resulting in the furlough of more than one-third of FAA’s employees and halting deliveries of 150 aircraft worth $1.9 billion.

    The legislation is expected to significantly soften the effects of sequestration, curbing the extent of the cuts. But how that plays out with individual agencies has yet to be determined. It could help avoid another situation in which FAA must issue rolling employee furloughs or close a majority of the contract towers. But cuts are expected to remain a reality in the next few budget seasons, and FAA likely will continue to face tight budgets and difficult choices.

    AIA, whose members faced deep cuts both on the civil and defense side, welcomed the effort to blunt sequestration’s effects. “While a broader budget deal that would have eliminated sequestration altogether would have been ideal, we recognize the leadership and significant efforts of Senator (Patty) Murray and Congressman (Paul) Ryan that went into reaching this agreement that passed both chambers with overwhelming support,” the association says.

    The agreement did raise taxes on aviation – more than doubling the passenger security fee to $5.60. Airlines for America (A4A) had vigorously opposed the change. “It’s inappropriate for Congress to use airline passengers as an ATM when it needs more money,” A4A President and CEO Nicholas E. Calio had said in a statement.

    Absent from the agreement, however, was any change in business aviation depreciation schedules. The White House and key Democrats have dangled the “corporate jet tax loophole” as one of the key tax increases that needed to be made to help resolve the budget deficit. As recently as November, Murray was said to have a “list” of key tax increases, including an extension of the business aircraft depreciation schedule from five to seven years.

    The agreement also does not include any change in the aviation excise tax or new user fees. The $100 user fee, strongly supported by the White House, surfaced during initial budget negotiations more than two years ago.

    But that does not mean those proposals are dead. Noting the White House has offered up those proposals in its budget requests in recent years, “We fully expect the administration to come out and propose that again,” General Aviation Manufacturers Association President and CEO Pete Bunce says.

    And while the budget agreement buffers sequestration over the next two years, it does not end sequestration. Nor does it soften the cuts after 2016. This sets the stage for another budget showdown in two years.