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Trump’s TSA bombshell

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Included in the fiscal year 2018 budget blueprint released March 16 by US President Donald Trump is a proposed radical change in how aviation security is funded. Under the Trump administration’s plan, the overwhelming majority of the funding burden for security at US airports would be shifted from the federal government to airline passengers and state and local governments. One bottom line reality of this plan: it will make it more expensive to fly.

In one sense, the Trump budget blueprint brings clarity to TSA’s mission, something both the Bush and Obama administrations had trouble defining during the agency’s first 15-plus years of existence. TSA would become an agency that essentially has two functions: operating airport passenger screening checkpoints and enforcing federal standards for security throughout the transportation system. The latter would appear to be a relatively low-cost responsibility. The former, more expensive responsibility—operating passenger screening checkpoints—would be 75% funded by flight ticket passenger security fees. Other airport security functions, such as perimeter patrols, would be funded by state and local governments.

Here are the stark numbers: The airline passenger security fee, implemented after 9/11, is currently $5.60 per one-way trip for all flights departing from a US airport; the fee cannot exceed $11.20 for a roundtrip ticket. TSA has said aviation security expenses totaled just over $6 billion in fiscal year 2016, $2.2 billion of which was covered by offsetting aviation security collections. That means the fees covered roughly 37% of TSA’s aviation security expenses, or less than half of what the Trump administration wants them to cover.

Even if every dollar of flight ticket passenger security fees (totaling $3.7 billion in fiscal year 2016) were allocated to airport security screening—which is not currently the case—there would still be a substantial shortfall (more than 13 percentage points) to get to funding 75% of aviation security expenditures.

The Trump proposal said it would save $80 million by cutting other areas of TSA, including grants to state and local governments, still leaving about $800 million—at a minimum—that would have to be added to the collective total of the passenger fees collected by airlines. And if the fees are pegged to covering 75% of aviation security costs, presumably it means they could rise at any time if necessary to reach the target.

In this budget proposal, Trump is saying aviation security is the responsibility of airlines and state and local governments, with TSA’s appropriated budget chipping in to help a bit and TSA continuing to run the passenger checkpoints—at least for now. That’s a radical departure from Bush and Obama, who both saw aviation security as an essential government function post-9/11. The passenger security fee, which already was more than doubled in 2013, was meant to help offset the cost, not be the primary funding source for aviation security by any means.

The Trump proposal puts US airlines in a bind. In the same budget blueprint, Trump gave the industry a long sought after dream fulfilled: removing ATC from FAA by creating an independent NAV Canada-like entity to manage and operate ATC in the US. The security fee proposal, on the other hand, is a nightmare for the industry: a huge increase in a passenger fee airlines already thought was high. It also saddles airlines with a major funding burden going forward: they essentially become responsible for three-fourths of TSA’s main expense.

But do airlines want to go to war with the Trump administration over the security fee? Would the mercurial Trump punish any resistance by airlines to the security fee proposal by backing off of the ATC reform proposal? Is the Trump administration basically asking airlines to accept a much higher security fee as the price for getting ATC reform?

In its initial response to Trump’s budget blueprint, Airlines for America (A4A), the lobbying organization for US airlines (minus Delta Air Lines), praised Trump for “visionary leadership” in taking the “bold step” of proposing to separate ATC from FAA. It did not offer an immediate response on the security fee proposal, which if made as a standalone proposal by a previous administration would have surely brought loud and immediate protest from airlines.

One caveat to all this is that Trump, who fancies himself as a master negotiator, may see the security fee proposal as an opening negotiating bid. The problem, however, is that the president is seeking such expansive non-defense spending reductions across the federal government—and also wants to pour money into immigration enforcement, including building the famous wall along the US-Mexico border—that there isn’t much room for negotiation. TSA is simply not a priority on any level for Trump, and he wants to shed the burden of funding it. Unfortunately for airlines, he wants to move the burden to them.

UPDATE: After this blog post was published, an A4A spokesperson emailed me the following statement:

“Airlines for America stands in firm opposition to tax increases that further burden consumers and risk deterring air travel. US aviation and our customers are already subject to 17 federal aviation taxes and ‘fees’, in addition to standard corporate taxes. In fiscal year 2016 alone, special US taxes on airlines and their customers totaled approximately $23.1 billion—more than $63 million per day. Tax increases are not the answer.

“In addition, we have also seen an all too common trend of diversion of these revenues away from their stated purpose and toward other purposes, such as deficit reduction or other sectors of government. The [2013] Bipartisan Budget Act raised the security fee and diverted that increased revenue to offset deficit spending. This means that the traveling public will pay $13 billion in security fees over the next 10 years that won’t actually be spent on TSA. Instead of saddling passengers with more taxes, Congress should return the $1.32 billion in diverted TSA passenger security fee revenue—money passengers have already paid in security fees—back where it belongs: paying for aviation security.” 

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