DRAFT LEGISLATION AND SECTION BY SECTION SUMMARY

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SEC. 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.-- This Act may be cited as the `Aviation System Improvement Act'.

(b) TABLE OF CONTENTS.--

Section 1. Short title; table of contents
Section 2. Amendments to title 49, United States Code
Section 3. Applicability
Section 4. Definitions
Section 5. Effective date
Section 6. Findings
Section 7. Purposes

Section A. Establishment of the Performance Based Organization for the Air Traffic System
Section B. Air Traffic Performance Fund
Section C. Fees to support FAA programs through June 2000
Section D. Ticketing and advertising
Section E. Fees to support FAA programs beginning in July 2000
Section F. Modification of current funding system for FAA
Section G. Extension of Airport and Airway Trust Fund expenditures
Section H. Transfers to the Air Traffic Performance Fund
Section I. Termination of transfers to trust fund
Section J. Transfers from the Airport and Airway Trust Fund
Section K. Budget treatment
Section L. Discretionary spending limits
Section M. Outlay limits on FAA expenditures
Section N. Consolidation of facilities
Section O. Multiyear appropriations
Section P. Management Advisory Council

SEC. 2. AMENDMENTS TO TITLE 49, UNITED STATES CODE.

Except as otherwise specifically provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision of law, the reference shall be considered to be made to a section or other provision of title 49, United States Code.

SEC. 3. APPLICABILITY.

Except as otherwise specifically provided, this Act and the amendments made by this Act apply only to fiscal years beginning after September 30, 1998.

SEC. 4. DEFINITIONS.

In this Act, the following definitions apply:

(1) ADMINISTRATION.-- The term `Administration' means the Federal Aviation Administration.

(2) ADMINISTRATOR.-- The term `Administrator' means the Administrator of the Federal Aviation Administration.

(3) SECRETARY.-- The term `Secretary' means the Secretary of Transportation.

SEC. 5. EFFECTIVE DATE.

Unless otherwise specified in this Act, the provisions of this Act and the amendments made by this Act shall take effect on the date that is 30 days after the date of the enactment of this Act.

SEC. 6. FINDINGS

Congress finds the following:

(1) Traffic data and trends indicate that adding a few minutes of delay to each airline flight in the United States will bring the aviation system to gridlock with dramatic negative impacts on the economy. The airline industry's complicated schedules are based on precise and efficient air traffic control technology and management. Rapidly growing demand combined with a reduction in capacity, as the result of outdated equipment, will bring our nation's aviation system to gridlock soon after the turn of the century. Gridlock could also have safety implications as pressures to meet flight schedules grow just at a time when capacity is increasingly constrained.

(2) The present system of federal budget regulation is inappropriate for a system controlling commercial operations that need to be driven by demand for services. Budget rules that govern the federal aviation system must be revised. The money problem that faces the Federal Aviation Administration (FAA) is an inability to access the revenues collected for its use.

(3) Authority and accountability are too diffused to run a 24 hour-a-day, high technology, rapidly changing operating system for a major commercial industry. Everyone responsible for the current air traffic control (ATC) system -- the Federal Aviation Administration, the Department of Transportation, the aviation industry, the Administration, and the Congress -- want to make the system work. But there are too many people in charge. The problems are systemic and require basic changes in command and control.

(4) While the vast majority of FAA employees remain dedicated and professional, the FAA itself impedes needed modernization by not focusing enough on determining and meeting its external users' needs for high quality and modern services at reasonable costs. Modern business tools such as a cost accounting system that tie specific costs to services and measurement tools to assess how well services are provided are not yet available. Incentives are needed to change the FAA culture to be more externally focused on users and services and more businesslike and responsive.

(5) The funding system forces trade-offs which substitute operational costs for capital investments. The system is in a downward spiral where increasing operational and maintenance costs, driven by outdated equipment, are "freezing out" new investments under current federal budget cap assumptions. Future system capacity will be reduced in real terms from today's capacity.

(6) Airport-related congestion will increase in the future without a strong federal commitment of resources. Airport capital investments must go hand-in-hand with ATC investment to maintain system capacity.

(7) Airport Improvement Program (AIP) funding serves as the linchpin of airport financial planning and, therefore, must be funded adequately on a reliable basis. AIP contributions to airport capital requirements should be funded at $2 billion annually over the next five years assuming growth adjustments through this period. Further, AIP should be provided requisite budget treatment to ensure a stable and predictable federal funding source for airport capital development. More AIP funding will result in more system capacity being developed.

(8) Smaller airports should receive funding at a higher level, so that their capital development needs can be met and thereby allowing them to continue serving as a critical element of the air transportation system. The Airport Improvement Program is essential for capital development at smaller airports as they have less capability to draw in a meaningful way from other sources of capital funds.

(9) In order to meet the needs for airport infrastructure investment, in the future, the current $3 ceiling on passenger facility charges (PFCs) will need to be raised. As an alternative, AIP levels would need to be funded at a level substantially above a $2 billion annual level. If the limit on PFCs is increased, there should be a process established that places a strong emphasis on negotiation between local airports and tenant airlines when a higher-than-$3 PFC is being proposed. When there is written agreement between an airport and its tenant airlines for the airport to levy a PFC higher than $3, there should be no statutory PFC dollar limit, and the FAA's approval process should be ministerial.

(10) Historically, the United States has been the leader in air traffic management and technology. However, other countries are moving ahead of the United States in making improvements to their aviation infrastructure. Falling behind other countries in making critical capital investments will certainly affect the international competitive position of the United States.

SEC. 7. PURPOSES

The purposes of this Act are--

(1) to ensure that the United States continues to have a safe, secure, and efficient air transportation system;

(2) to ensure that there is an adequate and stable funding system specifically dedicated to support the programs of the Administration;

(3) to reform and authorize the programs of the Administration that ensure a safe and healthy national air transportation system;

(4) to permit the Administration to establish a program to improve air traffic system performance and to establish appropriate levels of cost accountability for air traffic services provided by the Administration;

(5) to make the Administration a more efficient and effective organization, able to meet the needs of a dynamic, growing industry, and to ensure the safety of the traveling public;

(6) to provide a financial structure for the Administration so that it will be able to safely support the future growth in the national aviation and airport system;

(7) to establish a process for the creation of an improved financing and funding system for the Administration, including performance- and incentive-based fees for certain services, and to establish a program to improve air traffic system performance and to establish appropriate levels of cost accountability for air traffic services provided by the Administration;

(8) to ensure that any funding derived from aviation system users will be dedicated solely for the use of the Administration;

(9) to establish a process for the implementation of a user charge system based on an accurate and comprehensive accounting of the costs of the services provided;

(10) to develop an aviation funding system to provide for the long-term efficient and cost-effective support of the Administration and the national aviation system; and

(11) to achieve a more efficient and effective Administration for the benefit of all users of the national aviation transportation system, including the aviation transportation industry.

SEC. A. ESTABLISHMENT OF THE PERFORMANCE BASED ORGANIZATION FOR THE AIR TRAFFIC SYSTEM.

(a) Subtitle VII is amended by inserting after chapter 445 the following:

CHAPTER 446--PERFORMANCE BASED ORGANIZATION FOR THE AIR TRAFFIC SYSTEM

SUBCHAPTER I--GENERAL PROVISIONS
44601. Definitions.

SUBCHAPTER II--ORGANIZATION AND ADMINISTRATIVE
44611. Establishment.
44612. Governing Board.
44613. Officers.
44614. Performance management
44615. Authority to incur indebtedness

SUBCHAPTER I--GENERAL PROVISIONS

Sec. 44601. Definitions

In this chapter, the following definitions apply:

(1) `Airport and Airway Trust Fund' means the Airport and Airway Trust Fund established under section 9502 of the Internal Revenue Code of 1986 (26 U.S.C. 9502).

(2) `Board' means the Governing Board established by section 44612.

(3) `Chief Operating Officer' or 'COO' means the Chief Operating Officer established by section 44613(a).

SUBCHAPTER II--STRUCTURE OF ORGANIZATION

Sec. 44611. Establishment

(a) In General.-- There is established an entity within the Federal Aviation Administration to be known as the Performance Based Organization for the Air Traffic System (hereinafter referred to as the "PBO-ATS").

(b) General Authority and Responsibilities of the PBO-ATS.-- Except as otherwise specifically provided in this part of subtitle VII of this title after enactment of this chapter, the PBO-ATS shall--

(1) exercise the authority of the Federal Aviation Administration over day-to-day operational supervision and control over the movement of aircraft;

(2) develop and implement airspace orders, procedures, and other directives with respect to the use of navigable airspace. This authority includes the ability to issue routine airspace actions and airspace assignments and designations in accordance with rules prescribed for the PBO-ATS by the Administrator of the Administration. Notwithstanding the PBO-ATS's safety functions and responsibilities with regard to any orders or directives it may prescribe, the authority and responsibility for prescribing safety standards and the policies encompassing the safety structure of the National Airspace System remain with the Administrator. The PBO-ATS shall faithfully and efficiently adhere to and abide by all safety and security standards and regulations prescribed by the Administrator.

(3) develop and implement air traffic orders, procedures, and other directives governing the flight of aircraft, for the navigation, protection, and identification of aircraft, for the protection of persons and property on the ground, and for the efficient utilization of the navigable airspace, including procedures as to safe altitudes of flight and the prevention of collision between aircraft and land or water vehicles, and between aircraft and airborne objects;

(4) be authorized to--

(A) acquire, establish, improve, dispose of, and eliminate air navigation facilities or equipment wherever necessary;

(B) operate and maintain such air-navigation facilities; and

(C) provide necessary facilities and personnel for the management and protection of air traffic. The PBO-ATS shall update and arrange for publication of clearly defined routes for navigation through airspace where the PBO-ATS determines that publication of such routes would promote safety in air navigation;

(5) to encourage and allow maximum use of the navigable airspace by civil aircraft consistent with national security, and subject to appropriate military authority exercised pursuant to section 40106 of this title, recommend for issuance by the Administrator, in consultation with the Secretary of Defense, regulations that establish areas in the airspace the Administrator decides are necessary in the interest of national defense, and to restrict or prohibit flight of civil aircraft that the PBO-ATS cannot identify, locate, and control with available facilities in those areas;

(6) recommend to the Administrator long-range plans and policy for the orderly development and use of the navigable airspace and airport infrastructure that will best meet the needs of, and serve the interests of, civil aeronautics and the national defense, except for needs of the armed forces that are peculiar to warfare and primarily of military concern. In making recommendations, the PBO-ATS shall emphasize--

(A) providing the highest degree of safety and efficiency in air commerce;

(B) meeting the forecasted needs of civil aeronautics; and

(7) to implement the authority in this section, undertake reasonable actions, including action to--

(A) develop, alter, test, and evaluate systems, procedures, facilities, and devices, and define their performance characteristics, to meet the needs for safe and efficient navigation and air traffic control of civil and military aviation, except for needs of the armed forces that are peculiar to warfare and primarily of military concern; and

(B) select systems, procedures, facilities, and devices that will best serve those needs and promote maximum coordination of air traffic control, air defense, and range surveillance systems except for needs of the armed forces that are peculiar to warfare and primarily of military concern;

(8) establish procedures to notify the public when major changes in service are contemplated;

(9) in any case where negotiations with other countries over airspace control and air navigation may be necessary or desirable, act through the Administrator; and

(10) exercise the authority of the Administrator under sections 347 and 348 of Public Law 104-50 (109 Stat. 436; November 15, 1995) (as amended), under subtitle B of Title II of the Federal Aviation Reauthorization Act of 1996, and under section 106(l) of this title.

Sec. 44612. Governing Board

(a) IN GENERAL.-- There is established a Governing Board ("Board") in which the powers and authority of the PBO-ATS are vested.

(b) FUNCTIONS.--

(1) IN GENERAL.-- The Board shall be responsible for the major actions and policy functions of the PBO-ATS, including the following:

(A) The appointment and removal of the Chief Operating Officer and the approval of other senior officers of the PBO-ATS under section 44615. The Board may retain outside experts or consultants as part of any effort to identify potential candidates for the position of Chief Operating Officer.

(B) Authorization for issuance of indebtedness.

(D) Approval or modification of user fees and other charges to the public imposed under section 45313 of this title.

(E) Approval of annual plan for PBO-ATS expenditures.

(F) Such other significant actions as the Board considers appropriate and are consistent with the Aviation System Performance Improvement Act.

(2) NONDELEGABLE FUNCTIONS.-- The Board may not delegate the functions described in subparagraphs (A) through (E) of paragraph (1).

(3) NOT SUBJECT TO ENTITIES CREATED BY EXECUTIVE ORDER.-- The PBO-ATS shall not submit decisions for the approval of, and shall not be bound by the decisions or recommendations of, any committee, board, or other organization established by Executive order.

(c) MEMBERSHIP.-- The Board shall be composed of the Administrator of the Federal Aviation Administration and 6 other voting Members to be appointed by the President, by and with the advice and consent of the Senate. The initial members of the Board shall be appointed as soon as practicable after the date of the enactment of the Aviation System Performance Improvement Act.

(d) QUALIFICATIONS.--

(1) IN GENERAL.-- Members appointed to the Board under subsection (c) of this section shall have a fiduciary responsibility to represent the public interest, shall be citizens of the United States, shall have knowledge of sound corporate business practices, and at least three of whom should be selected from individuals who have knowledge of or a background in aviation. Members of the Board may not--

(A) have a pecuniary interest in, or own stock in or bonds of, an aviation or aeronautical enterprise;

(B) engage in another business, vocation, or employment of an aviation or aeronautical nature;

(C) be a member of any organization a substantial part of whose activities are for the purpose of influencing aviation-related legislation;

(D) be an employee of the Administration or PBO-ATS (except for the Administrator); and

(E) serve more than two consecutive five-year terms, as defined in subsection (e) of this section.

(2) DEFINITION.-- In this subsection, `influencing legislation' has the meaning such term has under section 4911(d) of the Internal Revenue Code of 1986 (26 U.S.C. 4911(d)).

(e) TERMS.--

(1) IN GENERAL.-- Subject to paragraphs (2) and (3) of this subsection, each Member of the Board appointed under subsection (c) of this subsection shall be appointed for a term of 5 years.

(2) TERMS OF APPOINTEES.--Members other than the Administrator shall be appointed to the Board for a term of 5 years except that, of the Members first appointed, two shall be appointed by the President for 1-year terms, two shall be appointed by the President for 3-year terms, and two shall be appointed by the President for 5-year terms. Administrators shall serve terms coincident with their service in their positions.

(3) VACANCIES.-- Any Member appointed under subsection (c) of this section to fill a vacancy occurring before the expiration of the term for which the Member's predecessor was appointed shall be appointed only for the remainder of that term. A Member may serve after the expiration of that Member's term until a successor has taken office.

(f) REMOVAL.-- Members of the Board appointed under subsection (c) of this section may be removed by the President for inefficiency, neglect of duty, or malfeasance in office.

(g) CHAIRPERSON.-- The Chairperson of the Board shall be the Administrator.

(h) QUORUM AND MAJORITY APPROVAL.-- Four members of the Board shall constitute a quorum for carrying out the duties and powers of the Board. Decisions of the Board require approval by a majority vote of all Members of the Board. In the case of a crisis or emergency, the Administrator may take an action or make a decision on behalf of the Board, but such action or decision may only stand if ratified by a majority of the Board Members within 15 days.

(i) PAY AND EXPENSES.-- Each Member not employed by the United States Government is entitled to compensation as set by the President, which may be comparable to corporate boards when performing Board duties and powers. Each Member is entitled to reimbursement for necessary travel, reasonable secretarial support, and subsistence expenses incurred in attending Board meetings.

(j) BYLAWS.-- The Board may adopt and amend bylaws governing the operation of the PBO-ATS. The bylaws shall be consistent with this chapter.

(k) PUBLIC HEARINGS.-- At least twice each year, the Board shall hold a public hearing to take public and aviation industry input on issues relevant to responsibilities and activities of the PBO-ATS.

(l) MEETINGS.-- The Board shall meet at least six times each year, or at the call of the Chairperson.

Sec. 44613. Officers

(a) CHIEF OPERATING OFFICER.--

(1) APPOINTMENT.-- The Board shall appoint a Chief Operating Officer for an initial period of three to five years. The appointment shall be made on the basis of demonstrated ability in management and without regard to political affiliation or activity. The COO also should have knowledge of or experience in aviation. The Board may reappoint the COO to subsequent terms so long as performance, as set forth in the annual performance agreement (as defined in paragraph (4) of this subsection), is satisfactory or better. However, until the Board appointed pursuant to section 44613 makes an appointment, an individual with the qualifications specified by this subsection may be appointed, by the Administrator, within 30 days of the enactment of the Aviation System Performance Improvement Act, to serve as an interim COO. The COO is subject to the policy guidance of the Board and reports to the Board. The Board may revoke, rescind, or modify actions of the COO.

(2) DUTIES.-- The Chief Operating Officer shall manage the day-to-day operation of the PBO-ATS, including (except as provided in section 44612(b) of this title) the hiring, firing, and assignment of employees, acquisition of facilities and equipment, preparation of the annual budget submission, and such other functions as the Board considers appropriate.

(3) REMOVAL.-- The Chief Operating Officer shall serve at the pleasure of the Board, except that the Board shall make every effort to ensure stability and continuity in the leadership of the PBO-ATS.

(4) PERFORMANCE AGREEMENT.-- The Board and the COO shall enter into an annual performance agreement which shall set forth measurable organizational and individual goals for the COO in key operational areas. The agreement shall be subject to review and renegotiation on an annual basis.

(5) COMPENSATION.-- The COO is authorized to be paid an annual rate of basic pay not to exceed that of the Administrator. In addition, the COO may receive a bonus in an amount up to, but not in excess of, 50 percent of such annual rate of basic pay, based upon the Board's evaluation of the COO's performance in relation to the performance goal set forth in the performance agreement described in paragraph (4). Payment of the bonus may be made to the COO only to the extent that such payment does not cause the COO's total aggregate compensation in a calender year to equal or exceed the amount of the President's salary under section 102 of title 3, United States Code.

(6) ANNUAL REPORT.-- The COO shall prepare and submit to the Board an annual management report containing such information as the Board shall prescribe.

(7) COORDINATION.-- The COO shall coordinate with, but not be subject to, the headquarters and regional administrative structure of the Federal Aviation Administration.

(b) OTHER OFFICERS.-- Subject to the approval of the Board, the Chief Operating Officer shall appoint other senior officers who shall each have such duties as the Chief Operating Officer may prescribe. Within the limits of sections 347 and 348 of Public Law 104-50 (109 Stat. 436; November 15, 1995) (as amended), and subtitle B of Title II of the Federal Aviation Reauthorization Act of 1996, and subject to the approval of the Board, the COO has exclusive authority, which may be delegated, to fix the pay of the officers and other employees of the PBO-ATS, except that the Board shall fix the pay of the COO. No such officer or employee may have a base rate exceeding the Administrator's base rate of pay. However, the Administrator shall fix the pay, at a rate not to exceed level III of the Executive Schedule, of the COO until the Board is appointed.

(c) COUNSEL.-- Subject to the approval of the Board, the Chief Operating Officer may appoint a counsel who shall be the chief legal officer for all legal matters arising from the activities of the PBO-ATS, or the COO may retain outside legal counsel, or both.

(d) CHIEF FINANCIAL OFFICER.-- Subject to the approval of the Board, the Chief Operating Officer shall appoint an officer who shall be the chief financial officer for all financial matters arising from the activities of the PBO-ATS.

(e) OTHER SERVICES.-- Subject to the approval of the Board, the COO may contract for personnel management, financial accounting, or budgeting activities of the PBO-ATS.

Sec. 44614. Performance management

(a) The PBO-ATS shall establish a performance management system which--

(1) maintains individual accountability by--

(A) establishing one or more retention standards for each employee related to the work of the employee and expressed in terms of individual performance, and communicating such retention standards to employees;

(B) making periodic determinations of whether each employee meets or does not meet the employee's established retention standards; and

(i) in accordance with applicable provisions of law and regulation, denying any increases in basic pay, promotions, and credit for performance; and

(ii) taking one or more of the following actions:

(I) reassignment; or

(II) other appropriate action, including termination, to resolve the performance problem; and

(2) strengthens its effectiveness by--

(A) establishing goals or objectives for individual, group, or organizational performance (or any combination thereof), consistent with the annual performance agreement described in section 44613(b) and the PBO-ATS performance planning procedures, including those established under the Government Performance and Results Act of 1993, and communicating such goals or objectives to employees;

(B) using such goals and objectives to make performance distinctions among employees or groups of employees; and

(C) using performance assessments as a basis for granting employee awards, adjusting an employee's rate of basic pay, and other appropriate personnel actions, in accordance with applicable provisions of law and regulation. For purposes of this subparagraph, "performance assessment" means a determination of whether or not retention standards established under paragraph (1)(A) are met, and any additional performance determination made on the basis of performance goals and objectives established under subparagraph (A) of the paragraph.

(b) The PBO-ATS shall establish an awards program designed to provide incentives for and recognition of organizational, group, and individual achievements by providing for granting awards to employees who, as individuals or members of a group, contribute to meeting the performance goals and objectives established under the section by means of a superior individual or group accomplishment, a documented productivity gain, or sustained superior performance.

Sec. 44615. Authority to incur indebtedness

(a) General authority.-- Beginning July 1, 2000, and subject to the authority of the Secretary of Transportation pursuant to subsection (d) of this section to disapprove the issuance of indebtedness by the PBO-ATS, the PBO-ATS may issue such notes or other obligations as the PBO-ATS determines necessary to carry out the purposes of section 44611(b)(4)(A) of this title, either to the Secretary of the Treasury pursuant to subsection (b) of this section or to private entities pursuant to subsection (c) of this section. The aggregate amount of any such obligations outstanding at any one time shall not exceed $15,000,000,000.

(b) Treasury borrowing.-- The PBO-ATS may issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions, as may be prescribed by the Secretary of the Treasury. Such notes shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obligations of the United States of comparable maturities. The Secretary of the Treasury shall purchase any notes or other obligations issued hereunder, and for that purpose such Secretary is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under that Act are extended to include any purchase of such notes or obligations acquired by him or her under this subsection. The Secretary of the Treasury may at any time sell any notes or other obligations acquired by him or her under this subsection.

(1) After consulting with the Secretary of the Treasury and the Secretary of Transportation, the PBO-ATS is authorized to issue notes and other obligations to private entities consistent with this subsection.

(2) The PBO-ATS may pledge air traffic system assets under its control and pledge and use its user charge collections and receipts for the payment of the principal or interest on its obligations, for the purchase or redemption thereof, and for other purposes incidental thereto, including creation of reserve, sinking, and other funds which may be similarly pledged and used, to such extent and in such manner as the Board deems necessary or desirable. The PBO-ATS is authorized to enter into binding covenants with the holders of such obligations, and with the trustee, if any, under any agreement entered into in accordance with the issuance thereof with respect to the establishment of reserve, sinking, and other funds, application and use of user charge collections and receipts of the PBO-ATS, stipulations concerning the subsequent issuance of obligations or the execution of leases or lease/purchases relating to properties under its control, and such other matters as the Board deems necessary or desirable to enhance the marketability of such obligations. However, the PBO-ATS may not enter into covenants that have the effect of conflicting with any requirement of this Act, as determined by the Secretary in approving the issuance of indebtedness pursuant to subsection (d) of this section.

(3) Obligations issued by the PBO-ATS under this subsection shall be subject to such terms and conditions as the Board determines.

(4) Obligations issued by the PBO-ATS under this subsection shall--

(A) be negotiable or nonnegotiable and bearer or registered instruments, as specified therein and in any indenture or covenant relating thereto;

(B) contain a recital that they are issued under this section, and such recital shall be conclusive evidence of the regularity of the issuance of sale of such obligations and of their validity; and

(C) be treated as an obligation or security of the United States for purposes of the counterfeiting and forgery provisions of title 18, United States Code.

(d) Review of borrowing.-- The issuance of indebtedness by the PBO-ATS may be disapproved by the Secretary of Transportation if the Secretary determines that the total revenues of the PBO-ATS are insufficient to satisfy obligations incurred by the PBO-ATS, including those that are held by the United States. Within 30 days of the receipt of a proposal for the issuance of indebtedness, the Secretary shall notify the Board of any disapproval, with justification for a disapproval.'.

(b) Section 106 of title 49, United States Code, is amended by inserting at the end the following new subsection:

(r) Relationship of Administrator and PBO-ATS.--

(1) The Administrator shall delegate such powers, authorities, and responsibilities of the Administration to the PBO-ATS as the Administrator deems are necessary to fulfill the requirements of the Aviation System Performance Improvement Act.'.

(2) To the extent necessary, the Administrator shall, through the PBO-ATS entity, execute and otherwise carry out the decisions of the Board (as established in section 44613) to carry out the functions and responsibilities of the PBO-ATS.

(3) By no later than February 1, 1999, the PBO-ATS and the Administrator must enter into a Memorandum of Understanding concerning the exercise of the PBO-ATS' air traffic system related authorities and responsibilities to ensure clear lines of authority and responsibility for the safe and efficient movement of air traffic.

(4) By no later than February 1, 1999, the PBO-ATS and the Administrator must enter into a Memorandum of Understanding concerning the allocation of the Administration's administrative expenses to the PBO-ATS and providing for reimbursement to Administration of such expenses.'.

SEC. B. AIR TRAFFIC PERFORMANCE FUND.

Section 45303(c) is amended by--

(1) inserting "under this chapter (except for section 45302)" after "Administration" where it first appears; and

(2) striking paragraph (1) and inserting a new paragraph (1) as follows:

"(1) shall be credited as offsetting collections to a separate account in the Treasury, to be known as the Air Traffic Performance Fund, and made available for the activities of the PBO-ATS established under section 44611 of this title and for airport planning and development and noise compatibility and programs;".

SEC. C. FEES TO SUPPORT FAA PROGRAMS THROUGH JUNE 2000.

(a) IN GENERAL.-- Chapter 453 is amended by adding at the end the following:

Sec. 45305. Aviation User Charges Through FY 2000.

(a) In General.--There is hereby imposed on the amount paid for leviable transportation of any person a fee equal to 7.5 percent of the amount so paid.

(b) Domestic Segments of Leviable Transportation.--

(1) In general.-- There is hereby imposed on the amount paid for each domestic segment of leviable transportation by air a fee in the amount determined in accordance with the following table for the period in which the segment begins:

In the case of segments beginning:	The fee is:
After January 31, 1999, and before October 1, 1999	$2.00
After September 30, 1999, and before July 1, 2000	$2.25

(2) Domestic segment.--For purposes of this section, the term `domestic segment' means any segment consisting of 1 takeoff and 1 landing and which is leviable transportation described in section 45306(a)(1).

(3) Changes in segments by reason of rerouting.-- If--

(A) transportation is purchased between 2 locations on specified flights, and

(B) there is a change in the route taken between such 2 locations which changes the number of domestic segments, but there is no change in the amount charged for such transportation, the fee imposed by paragraph (1) shall be determined without regard to such change in route.

(1) In general.--There is hereby imposed a fee of $12.00 on any amount paid (whether within or without the United States) for any transportation of any person by air, if such transportation begins or ends in the United States.

(2) Exception for transportation entirely leviable under subsection (a).-- This subsection shall not apply to any transportation all of which is leviable under subsection (a) (determined without regard to sections 45310 and 45311).

(3) Special rule for Alaska and Hawaii.-- In any case in which the fee imposed by paragraph (1) applies to a domestic segment beginning or ending in Alaska or Hawaii, such fee shall apply only to departures and shall be at the rate of $6.

(d) By whom paid.-- Except as provided in section 45307(a), the fees imposed by this section shall be paid by the person making the payment subject to the fee.

(e) Special Rules.--

(1) Segments to and from rural airports.--

(A) Exception from segment fee.--The fee imposed by subsection (b)(1) shall not apply to any domestic segment beginning or ending at an airport which is a rural airport for the calendar year in which such segment begins or ends (as the case may be).

(B) Rural airport.-- For purposes of this paragraph, the term `rural airport' means, with respect to any calendar year, any airport if--

(i) there were fewer than 100,000 commercial passengers departing by air during the second preceding calendar year from such airport, and

(ii) such airport--

(I) is not located within 75 miles of another airport which is not described in clause (i), or

(II) is receiving essential air service subsidies as of the date of the enactment of this paragraph.

(i) In general.-- Paragraph (5) shall not apply to any domestic segment beginning or ending at an airport which is a rural airport for the calendar year in which such segment begins or ends (as the case may be).

(ii) Transportation involving multiple segments.-- In the case of transportation involving more than 1 domestic segment at least 1 of which does not begin or end at a rural airport, the 7.5 percent rate applicable by reason of clause (i) shall be applied by taking into account only an amount which bears the same ratio to the amount paid for such transportation as the number of specified miles in domestic segments which begin or end at a rural airport bears to the total number of specified miles in such transportation.

(2) Amounts paid outside the United States.-- In the case of amounts paid outside the United States for leviable transportation, the fees imposed by subsections (a) and (b) shall apply only if such transportation begins and ends in the United States.

(3) Amounts paid for right to award free or reduced rate air transportation.--

(A) In general.--Any amount paid (and the value of any other benefit provided) to an air carrier (or any related person) for the right to provide mileage awards for (or other reductions in the cost of) any transportation of persons by air shall be treated for purposes of subsection (a) as an amount paid for leviable transportation, and such amount shall be leviable under subsection (a) without regard to any other provision of this subchapter.

(B) Controlled group.--For purposes of subparagraph (A), a corporation and all wholly owned subsidiaries of such corporation shall be treated as 1 corporation.

(C) Regulations.--The Secretary of the Treasury shall prescribe rules which reallocate items of income, deduction, credit, exclusion, or other allowance to the extent necessary to prevent the avoidance of the fee imposed by reason of this paragraph. The Administrator may prescribe rules which exclude from the fee imposed by subsection (a) amounts attributable to mileage awards which are used other than for transportation of persons by air.

(4) Inflation adjustment of dollar rates of fee.--

(A) In general.--In the case of leviable events in a calendar year after the last nonindexed year, each dollar amount contained in subsection (c) shall be increased by an amount equal to--

(i) such dollar amount, multiplied by

(ii) the cost-of-living adjustment determined under section 1(f)(3) of title 26, United States Code, for such calendar year by substituting the year before the last nonindexed year for `calendar year 1992' in subparagraph (B) thereof.

If any increase determined under the preceding sentence is not a multiple of 10 cents, such increase shall be rounded to the nearest multiple of 10 cents.

(B) Last nonindexed year.--For purposes of subparagraph (A), the last nonindexed year is 1998 in the case of the dollar amounts contained in subsection (c) of this section.

(5) Rates of ticket fee for transportation beginning before October 1, 1999.-- Subsection (a) shall be applied by substituting for `7.5 percent', `8 percent' in the case of transportation beginning after January 31, 1998, and before October 1, 1999.

(f) Exemption for certain helicopter uses.-- No fee shall be imposed under subsection (a) or (b) on air transportation by helicopter for the purpose of --

(1) transporting individuals, equipment, or supplies in--

(A) the exploration for, or the development or removal of, hard minerals, or

(B) the exploration for oil, or gas, or

(2) the planting, cultivation, cutting, or transportation of, or caring for, trees (including logging operations),

but only if the helicopter does not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to sections 44509 or 44913(b) or subchapter I of chapter 471 of this title, during such use. In the case of helicopter transportation described in paragraph (1), this subsection shall be applied by treating each flight segment as a distinct flight.

(g) Exemption for certain emergency medical transportation.-- No fee shall be imposed under this section or section 45308 on any air transportation for the purpose of providing emergency medical services --

(1) by helicopter, or

(2) by a fixed-wing aircraft equipped for and exclusively dedicated to acute care medical services.

(h) Application of fees.-- The fees imposed by this section shall apply to --

(1) transportation beginning during the period --

(A) beginning on February 1, 1999, and

(B) ending on June 30, 2000, and

(2) amounts paid during such period for transportation beginning after such period.

(i) Collection system.-- No later than January 31, 1999, the PBO-ATS shall have in place a system for the collection of fees established under this section.

Sec. 45306. Definition of leviable transportation.

(a) Leviable transportation; in general.-- For purposes of this section and sections 45305 and 45307 of this title, except as provided in subsection (b), the term ''leviable transportation'' means --

(1) transportation by air which begins in the United States or in the 225-mile zone and ends in the United States or in the 225-mile zone; and

(2) in the case of transportation by air other than transportation described in paragraph (1), that portion of such transportation which is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if such portion is not a part of uninterrupted international air transportation (within the meaning of subsection (c)(3)).

(b) Exclusion of certain travel.-- For purposes of this part, the term ''leviable transportation'' does not include that portion of any transportation by air which meets all 4 of the following requirements:

(1) such portion is outside the United States;

(2) neither such portion nor any segment thereof is directly or indirectly --

(A) between (i) a point where the route of the transportation leaves or enters the continental United States, or (ii) a port or station in the 225-mile zone, and

(B) a port or station in the 225-mile zone;

(3) such portion--

(A) begins at either (i) the point where the route of the transportation leaves the United States, or (ii) a port or station in the 225-mile zone, and

(B) ends at either (i) the point where the route of the transportation enters the United States, or (ii) a port or station in the 225-mile zone; and

(4) a direct line from the point (or the port or station) specified in paragraph (3)(A), to the point (or the port or station) specified in paragraph (3)(B), passes through or over a point which is not within 225 miles of the United States.

(1) Continental United States.-- The term ''continental United States'' means the District of Columbia and the States other than Alaska and Hawaii.

(2) 225-mile zone.- The term ''225-mile zone'' means that portion of Canada and Mexico which is not more than 225 miles from the nearest point in the continental United States.

(3) Uninterrupted international air transportation.-- The term ''uninterrupted international air transportation'' means any transportation by air which is not transportation described in subsection (a)(1) and in which--

(A) the scheduled interval between (i) the beginning or end of the portion of such transportation which is directly or indirectly from one port or station in the United States to another port or station in the United States and (ii) the end or beginning of the other portion of such transportation is not more than 12 hours, and

(B) the scheduled interval between the beginning or end and the end or beginning of any two segments of the portion of such transportation referred to in subparagraph (A)(i) is not more than 12 hours.

For purposes of this paragraph, in the case of personnel of the United States Army, Air Force, Navy, Marine Corps, and Coast Guard traveling in uniform at their own expense when on official leave, furlough, or pass, the scheduled interval described in subparagraph (A) shall be deemed to be not more than 12 hours if a ticket for the subsequent portion of such transportation is purchased within 12 hours after the end of the earlier portion of such transportation and the purchaser accepts and utilizes the first accommodations actually available to him for such subsequent portion.

(d) Transportation.-- For purposes of this part, the term ''transportation'' includes layover or waiting time and movement of the aircraft in deadhead service.

(e) Authority to waive 225-mile zone provisions.--

(1) In general.-- If the Administrator determines that Canada or Mexico has entered into a qualified agreement --

(A) the Administrator shall publish a notice of such determination in the Federal Register, and

(B) effective with respect to transportation beginning after the date specified in such notice, to the extent provided in the agreement, the term ''225-mile zone'' shall not include part or all of the country with respect to which such determination is made.

(2) Termination of waiver.-- If a determination was made under paragraph (1) with respect to any country and the Administrator subsequently determines that the agreement is no longer in effect or that the agreement is no longer a qualified agreement--

(A) the Administrator shall publish a notice of such determination in the Federal Register, and

(B) subparagraph (B) of paragraph (1) shall cease to apply with respect to transportation beginning after the date specified in such notice.

(3) Qualified agreement.-- For purposes of this subsection, the term ''qualified agreement'' means an agreement between the United States and Canada or Mexico (as the case may be)--

(A) setting forth that portion of such country which is not to be treated as within the 225-mile zone, and

(B) providing that the tax or fee imposed by such country on transportation described in subparagraph (A) will be at a level which the Administrator determines to be appropriate.

(4) Requirement that agreement be submitted to Congress.-- No notice may be published under paragraph (1)(A) with respect to any qualified agreement before the date 90 days after the date on which a copy of such agreement was furnished to the Committee on Transportation and Infrastructure of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate.

Section 45307. Special rules

(a) Payments made outside the United States for prepaid orders.-- If the payment upon which a fee is imposed by section 45305 is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation pursuant to such order shall collect the amount of the fee.

(b) Fee deducted upon refunds.-- Every person who refunds any amount with respect to a ticket or order which was purchased without payment of the fee imposed by section 45305 shall deduct from the amount refundable, to the extent available, any fee due under such section as a result of the use of a portion of the transportation purchased in connection with such ticket or order, and shall report to the Administrator the amount of any such fee remaining uncollected.

(c) Payment of fee.-- Where any fee imposed by section 45305 is not paid at the time payment for transportation is made, then, under regulations prescribed by the Administrator, to the extent that such fee is not collected under any other provision of this subchapter, such fee shall be paid by the carrier providing the initial segment of such transportation which begins or ends in the United States.

(d) Application of fee.-- The fee imposed by section 45305 shall apply to any amount paid within the United States for transportation of any person by air unless the fee-payer establishes, pursuant to regulations prescribed by the Administrator at the time of payment for the transportation, that the transportation is not transportation in respect of which fee is imposed by section 45305.

(e) Round trips.-- In applying this subchapter to a round trip, such round trip shall be considered to consist of transportation from the point of departure to the destination, and of separate transportation thereafter.

(f) Transportation outside the northern portion of the Western Hemisphere.-- In applying this chapter to transportation any part of which is outside the northern portion of the Western Hemisphere, if the route of such transportation leaves and reenters the northern portion of the Western Hemisphere, such transportation shall be considered to consist of transportation to a point outside such northern portion, and of separate transportation thereafter. For purposes of this subsection, the term ''northern portion of the Western Hemisphere'' means the area lying west of the 30th meridian west of Greenwich, east of the international dateline, and north of the Equator, but not including any country of South America.

Sec. 45308. Imposition of property transportation fee

(a) In general.-- There is hereby imposed upon the amount paid within or without the United States for the leviable transportation (as defined in section 45309) of property a fee equal to 6.25 percent of the amount so paid for such transportation. The fee imposed by this subsection shall apply only to amounts paid to a person engaged in the business of transporting property by air for hire.

(b) By whom paid.

(1) In general.-- Except as provided by paragraph (2), the fee imposed by subsection (a) shall be paid by the person making the payment subject to fee.

(2) Payments made outside the United States.-- If a payment subject to fee under subsection (a) is made outside the United States and the person making such payment does not pay such fee, such fee--

(A) shall be paid by the person to whom the property is delivered in the United States by the person furnishing the last segment of the leviable transportation in respect of which such fee is imposed, and

(B) shall be collected by the person furnishing the last segment of such leviable transportation.

(c) Determination of amounts paid in certain cases.-- For purposes of this section, in any case in which a person engaged in the business of transporting property by air for hire and one or more other persons not so engaged jointly provide services which include leviable transportation of property, and the person so engaged receives, for the furnishing of such leviable transportation, a portion of the receipts from the joint providing of such services, the amount paid for the leviable transportation shall be treated as being the sum of (1) the portion of the receipts so received, and (2) any expenses incurred by any of the persons not so engaged which are properly attributable to such leviable transportation and which are taken into account in determining the portion of the receipts so received.

(d) Termination.-- The fee imposed by subsection (a) shall apply with respect to transportation beginning after February 1, 1999, and before July 1, 2000.

(e) Collection system.-- No later than January 31, 1999, the PBO-ATS shall have in place a system for the collection of fees established under this section.

Sec. 45309. Definition of leviable transportation, etc.

(a) In general.-- For purposes of this section and section 45308, except as provided in subsection (b), the term ''leviable transportation'' means transportation by air which begins and ends in the United States.

(b) Exceptions.-- For purposes of this part, the term ''leviable transportation'' does not include -

(1) that portion of any transportation which meets the requirements of paragraphs (1), (2), (3), and (4) of section 45306(b), or

(2) under regulations prescribed by the Administrator, transportation of property in the course of exportation (including shipment to a possession of the United States) by continuous movement, and in due course so exported.

(c) Excess baggage of passengers.-- For purposes of this part, the term ''property'' does not include excess baggage accompanying a passenger traveling on an aircraft operated on an established line.

(d) Transportation.-- For purposes of this part, the term ''transportation'' includes layover or waiting time and movement of the aircraft in deadhead service.

Sec. 45310. Small aircraft on nonestablished lines

The fees imposed by sections 45305 and 45308 shall not apply to transportation by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less, except when such aircraft is operated on an established line. For purposes of the preceding sentence, the term ''maximum certificated takeoff weight'' means the maximum such weight contained in the type certificate or airworthiness certificate.

Sec. 45311. Transportation by air for other members of affiliated group

(a) General rule.-- Under regulations prescribed by the Administrator, if --

(1) one member of an affiliated group is the owner or lessee of an aircraft, and

(2) such aircraft is not available for hire by persons who are not members of such group, no fee shall be imposed under section 45305 or 45308 upon any payment received by one member of the affiliated group from another member of such group for services furnished to such other member in connection with the use of such aircraft.

(b) Affiliated group.-- For purposes of subsection (a), the term ''affiliated group'' has the meaning assigned to such term by section 1504(a) of title 26, United States Code, except that all corporations shall be treated as includible corporations (without any exclusion under section 1504(b) of title 26, United States Code).

Sec. 45312. Cases Where Persons Receiving Payment Must Collect Fee

Except as otherwise provided in section 45307(a), every person receiving any payment for facilities or services on which a fee is imposed upon the payor thereof under this chapter shall collect the amount of the fee from the person making such payment.'.

SEC. D. TICKETING AND ADVERTISING PENALTY

Chapter 463 is amended by adding at the end the following:

Sec. 46317. Penalty for offenses relating to certain airline tickets and advertising.

(a) Tickets.-- In the case of transportation by air all of which is leviable transportation (as defined in section 45306 of this title), the ticket for such transportation shall show the total of --

(1) the amount paid for such transportation, and

(2) the fees imposed by subsections (a) and (b) of section 45305 of this title.

(b) Advertising.-- In the case of transportation by air all of which is leviable transportation (as defined in section 45306) or would be leviable transportation if section 45306 did not include subsection (b) thereof, any advertising made by or on behalf of any person furnishing such transportation (or offering to arrange such transportation) which states the cost of such transportation shall --

(1) state such cost as the total of

(A) the amount to be paid for such transportation, and

(B) the fees imposed by sections 45305(a), (b), and (c), and

(2) if any such advertising states separately the amount to be paid for such transportation or the amount of such fees, shall state such total at least as prominently as the more prominently stated of the amount to be paid for such transportation or the amount of such fees and shall describe such fees substantially as: ''user fees to pay for airport construction and airway safety and operations.''

(c) Penalty.-- Any person who violates any provision of subsection (a) or (b) is, for each violation, guilty of a misdemeanor, and upon conviction thereof shall be fined not more than $100.'.

SEC. E. FEES TO SUPPORT FAA PROGRAMS BEGINNING JULY 2001

Chapter 453 of title 49, United States Code, is further amended by inserting at the end the following:

Sec. 45313. User fees to Support PBO-ATS and AIP

(a) In general.-- Not later than July 1, 1999, the Administrator shall develop an initial proposed fee schedule to pay all the costs of providing the programs and activities (including capital investment) of the PBO-ATS, as established under sections 44611 of this title, and to fully support airport-related programs authorized under section 48402 . In developing the proposal, the Administrator may utilize the services of experts and consultants, and may contract on a sole source basis, notwithstanding any other provision of law to the contrary, to develop air traffic system user fees based on cost accounting data. The Administrator shall cause a copy of the proposed fee system to be published in the Federal Register as a Notice of Proposed Rulemaking. The Administrator must issue a final rule under this section, after public comment and hearing, and consultation with the MAC established under section 106(p) of this title, by March 1, 2000, and such fee schedule shall take effect no later than July 1, 2000. The PBO-ATS Board, established under section 44612 of this title, must approve any proposed fee schedule or system under this section prior to issuance of a final rule. On March 1, 2000, the Administrator shall transmit copies of the proposed final rule to the Committee on Commerce, Science, and Transportation of the Senate, and the Committee on Transportation and Infrastructure of the House of Representatives for review. Section 106(f)(3)(B) of this title is not applicable to any rulemaking undertaken under this subsection.

(b) Requirements.-- To the maximum extent feasible, a fee system developed under this section, must--

(1) be based upon the costs of providing services to users based upon the best available data derived from the cost accounting system; and

(2) differentiate between the provision of services related to the landing and takeoff of aircraft and the provision of services related to handling aircraft in flight.

(c) Considerations.-- To the maximum extent feasible, in developing a fee system under this section, the Administrator shall consider--

(1) the impact on air fares (including low-fare, high-frequency service), service, and competition;

(2) the existing contributions provided by individual air carriers toward funding of the Administration and the air traffic system;

(3) the promotion of fair and competitive practices;

(4) the unique circumstances associated with interisland air carrier service in Hawaii and rural air service in Alaska;

(5) the impact on service to small communities;

(6) the impact on services provided by regional air carriers;

(7) the use of congestion and peak-period pricing;

(8) the costs of providing services at different size terminals, to different size aircraft, and at different times of day; and

(9) the ease of administration of such fees.

(d) Limitations.--

(1) Certain users.-- Fees may be imposed under this section on any user of air traffic control services not subject to taxes under section 4261 of title 26, so long as any such fees are not inconsistent with international agreements.

(2) General aviation aircraft.-- No fee may be imposed under this section on aircraft that are not used in the business of providing transportation of persons or property for compensation or hire by air.

(3) On-demand and air taxi operators.-- No fee may be imposed under this section on aircraft that are used exclusively for on-demand and air taxi operations under 14 CFR 135 (as of September 30, 1998).

(e) Consultation with Management Advisory Council.-- In developing proposals under subsection (a) of this section, the Administrator shall consult with the Management Advisory Council established under section 106(p) and, to the maximum extent possible, seek to develop a consensus.

(f) Termination.-- Fees imposed under this section (except under subsection (g)) shall terminate 3 years after going into effect or until replaced by a replacement fee system established under subsection (g), but any amounts collected shall remain available until expended.

(g) Additional system proposals.-- After the initial fee system has been imposed under this section, the PBO-ATS Board may propose a replacement fee system. The Administrator shall cause a copy of the proposed replacement fee system to be printed in the Federal Register in the form of a Notice of Proposed Rulemaking. Any final rule setting forth a replacement fee system must be developed in consultation with the Management Advisory Council established under section 106(p) of this title and approved by the PBO-ATS Board after public comment and hearing. The proposed replacement fee system shall take effect upon the termination of the fee system it replaces. Section 106(f)(3)(B) of this title is not applicable to any rulemaking undertaken under this subsection.

(h) Policy for imposition of fees, charges and practices.-- The fees, charges and related practices established pursuant to this section shall conform to the following policies:

(1) Fees, charges and practices shall not unreasonably restrain competition by, for example, being unfair, unreasonable, unjustly discriminatory among current or potential users of the air traffic system, or unreasonably disadvantaging new entrants.

(2) Fees and charges shall be consistent with all obligations of the United States Government under international agreements.

(3) Fees and charges shall be maintained at a level sufficient to assure the satisfaction of all obligations incurred by the PBO-ATS (or the Administration, as the case may be), including those that are held by the United States.

(4) Fees and charges need not be based solely on costs if the PBO-ATS determines that public interest or safety would be better served by not doing so.

Sec. 45314. Non-applicability of certain laws

The provisions of the Independent Offices Appropriation Act, as amended (31 U.S.C. 9701), are not applicable to the imposition of any fees under this chapter.'.

SEC. F. MODIFICATION OF CURRENT FUNDING SYSTEM FOR FAA.

(a) PASSENGER TICKET TAX.-- Clause (ii) of section 4261(h)(1)(A) of title 26, United States Code, is amended by striking "September 30, 2007" and inserting "January 31, 1999".

(b) CARGO WAYBILL TAX.-- Clause (ii) of section 4271(d)(1)(A) of title 26, United States Code, is amended by striking "September 30, 2007" and inserting "January 31, 1999".

(c) ON-DEMAND AND AIR TAXI OPERATORS.-- Section 6427(l)(2)(B) of title 26, United States Code, is amended by inserting "(except for such fuel use after June 30, 2000, by on-demand, air taxis or charters operating under 14 CFR 135)" after "section 4041(c)(1)".

SEC. G. EXTENSION OF AIRPORT AND AIRWAY TRUST FUND EXPENDITURES.

(a) EXTENSION OF EXPENDITURE AUTHORITY.-- Paragraph (1) of section 9502(d) of the Internal Revenue Code of 1986 is amended by striking `October 1, 1996' and inserting `October 1, 2002'.

(b) EXTENSION OF TRUST FUND PURPOSES.-- Subparagraph (A) of section 9502(d)(1) of such Code is amended by inserting before the semicolon at the end `or the Aviation System Improvement Act'.

SEC. H. TRANSFERS TO THE AIR TRAFFIC PERFORMANCE FUND

Part C of Subtitle VII is amended by adding the following new chapter at the end:

CHAPTER 483 -- TRANSFERS TO THE AIR TRAFFIC PERFORMANCE FUND

48301. Transfers to the Air Traffic Performance Fund.

48302. Transfer of amounts.

48303. Management of funds.

Sec. 48301. Transfers to the Air Traffic Performance Fund

There are hereby appropriated to the Air Traffic Performance Fund (as established under section 45303(c)(1)) amounts equivalent to--

(1) the taxes received in the Treasury under--

(A) subsections (c) and (e) of section 4041 of title 26, United States Code (relating to aviation fuels),

(B) sections 4261 and 4271 of title 26, United States Code (relating to transportation by air),

(D) section 4091 of title 26, United States Code (relating to aviation fuel) , and

(2) the amounts determined by the Secretary of the Treasury to be equivalent to the amounts of civil penalties collected under section 47107(n) of title 49, United States Code.

There shall not be taken into account under paragraph (1) so much of the taxes imposed by sections 4081 and 4091 of title 26, United States Code, as are determined at the rates specified in sections 4081(a)(2)(B) or 4091(b)(2) of title 26, United States Code.'.

Sec. 48302. Transfer of amounts

The amounts appropriated by any section of this chapter to the Air Traffic Performance Fund established by section 45303(c)(1) shall be transferred at least monthly from the general fund of the Treasury to such Air Traffic Performance Fund on the basis of estimates made by the Secretary of the Treasury of the amounts referred to in such section. Proper adjustments shall be made in the amounts subsequently transferred to the extent prior estimates were in excess of or less than the amounts required to be transferred.

Sec. 48303. Management of funds

(a) Report.-- The Administrator shall be responsible for managing the Air Traffic Performance Fund established by section 45303(c)(1), and, after consultation with the PBO-ATS Board, to report to the Congress each year

(1) on the financial condition and the results of the operations of such Trust Fund during the preceding fiscal year and

(2) on its expected condition and operations during the next 5 fiscal years. Such report shall be printed as a House document of the session of the Congress to which the report is made.

(b) Investment.--

(1) In general.-- The Administrator shall invest such portion of the Air Traffic Performance Fund established by section 45303(c)(1) as is not, in his or her judgment, required to meet current withdrawals. Such investments may be made only in interest-bearing obligations of the United States. For such purpose, such obligations may be acquired --

(A) on original issue at the issue price, or

(B) by purchase of outstanding obligations at the market price.

(2) Sale of obligations.-- Any obligation acquired by the Air Traffic Performance Fund established by section 45303(c)(1) may be sold by the Administrator at the market price.

(3) Interest on certain proceeds.-- The interest on, and the proceeds from the sale or redemption of, any obligations held in the Air Traffic Performance Fund established by section 45303(c)(1) shall be credited to and form a part of such Trust Fund.'.

Sec. I. TERMINATION OF TRANSFERS TO TRUST FUND

Section 9502 of title 26, United States Code, is amended by striking subsection (b) and redesignating subsections (c), (d), and (e) as (b), (c), and (d), respectively.

SEC. J. TRANSFERS FROM THE AIRPORT AND AIRWAY TRUST FUND

Section 9502(d) of the Trust Fund Code of 1981 (Expenditures from Airport and Airway Trust Fund) is amended by the addition of new paragraph (6) as follows:

(6) Transfers from the Airport and Airway Trust Fund related to certain air traffic transition costs.-- The Secretary of the Treasury shall pay from the Airport and Airway Trust Fund to the Air Traffic Performance Fund amounts equivalent to the unexpended balance of appropriations available on October 1, 1998, for airport planning and development and noise compatibility and programs, for operation and maintenance of air traffic control, air navigation, communications, or supporting services, and for development or construction of air traffic control, air navigation, or communications facilities (and related research, engineering and development) for the air traffic and airway system by the Federal Aviation Administration. Such amounts shall be transferred on October 1, 1998 and on the basis of estimates by the Secretary of Treasury. Such balances received by the Air Traffic Performance Fund will be used only for the purposes for which they were appropriated, when held in the Airport and Airway Trust Fund.'.

SEC. K. BUDGET TREATMENT

(a) Any transfer under section 9502(d) of the Trust Fund code of 1981, as amended by Section J of this Act, shall be exempt from the requirements of section 251 of the Balanced Budget and Emergency Deficit Control Act of 1985.

(b) Notwithstanding any other provision of law, so long as the receipts and disbursements of the Air Traffic Performance Fund established under section 45303(c)(1) do not result in an increase in the deficit, as determined by the Congressional Budget Office for the period ending with fiscal year 2002, such receipts and disbursements shall not be taken into account for purposes of any budget enforcement procedures under the Balanced Budget and Emergency Deficit Control Act of 1985 except for purposes of section 605(b) of the Congressional Budget Act of 1974. (c) Section 255(g)(1)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985 is amended by inserting after "Appropriations for the District of Columbia (to the extent they are appropriations of locally raised funds);" the following:

"Air Traffic Performance Fund;".

(d) Notwithstanding any other provision of law, the receipts and disbursements of the PBO-ATS that are directly related to indebtedness incurred under section 44615 (as established by this Act), except for repayment of such debt, shall not be counted as new budget authority, outlays, receipts, or deficit or surplus for purposes of--

(1) the budget of the United States Government as submitted by the President;

(2) the congressional budget; or

(3) the Balanced Budget and Emergency Deficit Control Act of 1985.

SEC. L. DISCRETIONARY SPENDING LIMITS.

Upon enactment of this Act, the discretionary spending limits set forth in section 601(a)(2) of the Congressional Budget Act of 1974 (2 U.S.C. 665(a)(2)) (as adjusted in conformance with section 251 of the Balanced Budget and Emergency Deficit Control Act of 1985) for fiscal years 1999 through 2002 are reduced by the following amounts:

(a) For fiscal year 1999, for the discretionary category: $9,172,000,000 in new budget authority and $8,234,000,000 in outlays.

(b) For fiscal year 2000; for the discretionary category: $9,623,000,000 in new budget authority and $9,047,000,000 in outlays.

(c) For fiscal year 2001, for the discretionary category: $9,978,000,000 in new budget authority and $9,665,000,000 in outlays.

(d) For fiscal year 2002; for the discretionary category: $10,161,000,000 in new budget authority and $10,107,000,000 in outlays.

SEC. M. OUTLAY LIMITS ON FAA EXPENDITURES

Part C of Subtitle VII is amended by adding the following new chapter at the end:

CHAPTER 484 -- AVIATION PROGRAM AUTHORIZATIONS

48401. Air Traffic Services.
48402. Airport planning and development and noise compatibility planning and programs. 48403. Unavailability of funds.
48404. Aviation Safety.
48405. Aviation Security.
48406. Administrative and other expenses.
48407. Office of Commercial Space Transportation.
48408. Military and public use of the air traffic system.

Sec. 48401. Air Traffic Services; research, engineering and development

(a) General Authorization of Expenditures.-- Not more than a total of the following amounts may be outlayed by the Administrator (acting on behalf of the PBO-ATS established under section 44611 of this title) out of monies made available under section 45303 to operate, acquire, establish, and improve air navigation facilities and equipment under Chapter 445 (except for sections 44504, 44507, and 44512) of this title:

(1) $6,718,000,000 for fiscal year 1999;

(2) $7,390,000,000 for fiscal year 2000;

(3) $7,932,000,000 for fiscal year 2001; and

(4) $8,334,000,000 for fiscal year 2002.

(b) Availability of Amounts.-- Amounts authorized under this section remain available until expended.

Sec. 48402. Airport planning and development and noise compatibility planning and programs

The total amounts which shall be provided after September 30, 1998, by the Administrator, out of monies made available under section 45303, to make grants for airport planning and airport development under section 47104 of this title, airport noise compatibility planning under section 47505(a)(2) of this title, and carrying out noise compatibility programs under section 47504(c) of this title shall be $2,000,000,000 for fiscal year 1999, $4,000,000,000 for fiscal years ending before October 1, 2000, $6,000,000,000 for fiscal years ending before October 1, 2001, and $8,000,000,000 for fiscal years ending before October 1, 2002.

Sec. 48403. Unavailability of funds

Notwithstanding any other provision of law, none of the monies or funds made available to the Administrator under section 45303(c)(1) may be outlayed by the Administrator on the cost of administration or to carry out duties or obligations under Chapters 441, 447, 449, or 701 of this title.

Sec. 48404. Aviation Safety

(a) Authorization of Appropriations.-- Not more than a total of the following amounts may be appropriated to the Administrator under Chapters 441 and 447, and sections 44504, 44507, and 44512, of this title:

(1) $700,000,000 for fiscal year 1999;

(2) $750,000,000 for fiscal year 2000;

(3) $800,000,000 for fiscal year 2001; and

(4) $850,000,000 for fiscal year 2002.

(b) Availability of Amounts.-- Amounts authorized under this section remain available until expended.

Sec. 48405. Aviation Security

(a) Authorization of Appropriations.-- Not more than a total of the following amounts may be appropriated to the Administrator under Chapters 449 of this title:

(1) $200,000,000 for fiscal year 1999;

(2) $200,000,000 for fiscal year 2000;

(3) $250,000,000 for fiscal year 2001; and

(4) $250,000,000 for fiscal year 2002.

(b) Availability of Amounts.-- Amounts authorized under this section remain available until expended.

Sec. 48406. Administrative and other expenses

(a) Authorization of Appropriations.-- Not more than a total of the following amounts may be appropriated to the Administrator for administrative expenses, including GSA rent and Staff Offices, under this title (and not otherwise funded under this chapter or reimbursed by the PBO-ATS pursuant to section 106(r)(4)) :

(1) $200,000,000 for fiscal year 1999;

(2) $200,000,000 for fiscal year 2000;

(3) $200,000,000 for fiscal year 2001; and

(4) $200,000,000 for fiscal year 2002.

(b) Availability of Amounts.-- Amounts authorized under this section remain available until expended.

Sec. 48407. Office of Commercial Space Transportation

(a) Authorization of Appropriations.-- Not more than a total of the following amounts may be appropriated to the Administrator under Chapters 701 of this title:

(1) $7,000,000 for fiscal year 1999;

(2) $8,000,000 for fiscal year 2000;

(3) $8,500,000 for fiscal year 2001; and

(4) $9,000,000 for fiscal year 2002.

(b) Availability of Amounts.-- Amounts authorized under this section remain available until expended.

Sec. 48408. Military and public use of the air traffic system

(a) Authorization of Appropriations.-- The following amounts are appropriated to the Air Traffic Performance Fund (established under section 45303(c)(1) of this title) to pay the costs of the use of the air traffic system by military and other public aircraft:

(1) $600,000,000 for fiscal year 1999;

(2) $600,000,000 for fiscal year 2000;

(3) $600,000,000 for fiscal year 2001; and

(4) $600,000,000 for fiscal year 2002.

(b) Availability of Amounts.-- Amounts authorized under this section remain available until expended.

SEC. N. CONSOLIDATION OF FACILITIES.

The Administrator, with the approval of the PBO-ATS Board as necessary, shall consolidate the nine regions of the Administration into three regions.

SEC. O. MULTIYEAR APPROPRIATIONS.

Chapter 482 is amended by--

(1) in the chapter heading, striking "FOR AIRPORT AND AIRWAY TRUST FUND FACILITIES" after "APPROPRIATIONS";

(2) in subsection (a), striking "for which amounts are to be appropriated from the Airport and Airway Trust Fund established under 9502 of the Internal Revenue Code of 1986" and inserting in the same place "under sections 48404-48408 of this title"; and

(3) in subsection (b), striking "from the Airport and Airway Trust Fund" and inserting in the same place "under sections 48404-48408 of this title".

SEC. P. MANAGEMENT ADVISORY COUNCIL

Subparagraph (c) of section 106(p)(2) is amended by striking "the President by and with the advice and consent of the Senate" and inserting "the Administrator" after "appointed by".

SECTION-BY-SECTION ANALYSIS OF DRAFT LEGISLATION

Section 1. Short title; table of contents

Section 1 cites the title of the bill as the "Aviation System Performance Improvement Act". This section also contains a table of contents for the bill.

Section 2. Amendments to title 49, United States Code

Section 2 provides that, unless otherwise provided, references in the bill to sections or provisions in the law are considered to be sections or provisions of title 49, United States Code.

Section 3. Applicability

Section 3 provides that the Act will only apply to fiscal years beginning after September 30, 1998.

Section 4. Definitions

Section 4 defines the terms "Administration", "Administrator", and "Secretary" for the purposes of the Act.

Section 5. Effective date

Section 5 establishes that, unless otherwise specified in the Act, the provisions of the Act will take effect 30 days after enactment of the legislation.

Section 6. Findings

Section 6 sets forth a series of findings establishing the general basis for enactment of provisions contained in the Act. The findings recognize, for example, the unique character of the FAA's programs and activities and the critical need for reform of its funding system.

Section 7. Purposes

Section 7 sets forth 11 critical purposes underpinning the Act.

Section A. Establishment of the Performance Based Organization for the Air Traffic System

Section A establishes, within the FAA, the Performance Based Organization for the Air Traffic System (hereinafter PBO-ATS). The PBO-ATS is the key part of the governance recommendations made by the NCARC. By establishing the PBO-ATS, a governing Board, and the position of Chief Operating Officer (COO), the NCARC is proposing a bold, new course for management of the air traffic system in the United States. These new entities and positions will provide a more effective and comprehensive approach to overseeing and managing the complex and rapidly changing needs of the air traffic system.

The concept of a PBO, which is run on a day-to-day basis by a COO, came out of the Administration's National Performance Review. The proposal to have a governing board stems from concerns that there are currently too many actors playing a role in the oversight and running of the intensely operational air traffic system, which includes the development of capital infrastructure. Authority is too dispersed and accountability lacking under the current system. The public interest-oriented Board will provide a more singular and coherent measure of oversight than the current system.

The new section 44611 of title 49 specifies the operational authorities and responsibilities of the PBO-ATS over the movement of aircraft in U.S. airspace. Related authority, such as research and development authority in support of air traffic management, is also authorized.

The new section 44612 of title 49 establishes the functions and makeup of the Board that would oversee the PBO-ATS as a whole. In particular, the Board is responsible for the core areas of cost-based user fee determination, the annual budget, the issuance of indebtedness, and appointment of the Chief Operating Officer. The makeup of the Board is directed both toward accountability for the public goals of aviation safety and efficient operation of the system and the goal of closer accountability to the needs of those users that rely most on air traffic services. There would be seven Board members, including the FAA Administrator, who would serve as chairperson. Other than the Administrator, Board members would be appointed by the President with the advice and consent of the Senate. None of these members would serve as representatives of segments of the aviation community.

The new section 44613 of title 49 establishes the broad authorities of the Chief Operating Officer (COO) to manage the day-to-day operations of the PBO-ATS.

The new section 44614 of title 49 requires the PBO-ATS to establish a performance management system which links employee compensation and reward to performance. The system would both maintain individual accountability and strengthen the PBO-ATS's effectiveness in certain specified ways.

The new section 44615 of title 49 authorizes the PBO-ATS, beginning in July 2000, when new cost-based user fees go into effect, to borrow from the U.S. Treasury, or to enter private financial markets to sell bonds or other obligations, to raise capital for development of air traffic facilities and equipment. One of the primary purposes for creation of the PBO-ATS is to provide a means of raising needed capital without affecting the federal deficit. The FAA's existing air traffic facilities require modernization, and the newest technologies coming online may justify further, cost-beneficial investment that is not now even contemplated. Section 106 of title 49 is amended so that the PBO-ATS will act through the Administrator as may be necessary to carry out the decisions of the governing Board. Also, the PBO-ATS and the Administrator would enter into a Memorandum of Understanding to clearly define the lines of authority and responsibility separating the PBO-ATS from the remainder of the FAA.

Section B. Air Traffic Performance Fund

Section B gives a name to the account that was established in the Federal Aviation Reauthorization Act of 1996. This account is a key component of the new funding system for the FAA and its PBO-ATS. The PBO-ATS, including related research and development, and the Airport Improvement Program (AIP) will be funded through this account, which acts as a revolving fund since the Administrator can spend from the account subject only to the amount of money deposited into the account and congressional limits. Because all aviation-related fees will be deposited into the new trust fund, there will now actually be a link between revenues that come from the users of the system and the expenditures on that system. This section also makes clear that all fees would be credited as "offsetting collections" ensuring appropriate budget treatment. This type of scoring is consistent with the scoring of other fees, such as the customs user fees authorized under 19 U.S.C. 58c(f).

Section C. Fees to support FAA programs through June 2000

This section sets forth the basis for funding the FAA through the end of June 2000, at which time there would be a transition to a cost-based user fee structure (as described in Section E of this Act). The language for new sections 45305 through 45312 of title 49 is taken almost word-for-word from the sections of the Internal Revenue Code (title 26, United States Code) that establish the vast majority of the existing financing for the Airport and Airway Trust Fund. In essence, the existing ticket tax, flight segment charge, cargo waybill tax, and international arrival and departure taxes are temporarily converted into an identical set of fees. The existing fuel taxes would remain part of the Internal Revenue Code. Nevertheless, all aviation-derived fees and taxes would flow into the new Air Traffic Performance Fund (see Section H of this Act). These fees would expire at the time when new cost-based user fees go into effect in July 2000. Because all fees flow directly to the Air Traffic Performance Fund, from which the Administrator may spend as needed (subject to congressional authorization), spending would be directly linked to contributions from users.

The purely technical conversion of the "taxes" into "fees" is consistent with the historical uses of such receipts, as well as the Constitutional definition of "revenues". Because the receipts from the current aviation taxes are credited to the Airport and Airway Trust Fund, these monies are ostensibly dedicated to support the programs of the FAA and, thus, are not "revenues" to support government generally. Therefore, there is no clear reason why such user charges must be in the Internal Revenue Code, which exists to raise revenues to support the government generally. Placing the current user charges in title 49 of the United States Code also makes for an easier transition to the cost-based user charges that will eventually replace the current structure. Any argument that an ad valorem user charge (such as for 10 percent of the price of a ticket) is by definition a tax (and therefore must be in the Internal Revenue Code) is unsupported by precedent. There already is at least one ad valorem user fee as in the case of a customs user fee (see 19 U.S.C. 58c(f)). Furthermore, there is no Constitutional requirement that user charges be based directly or indirectly on the costs of the services provided.

Section D. Ticketing and advertising

Section D also is language taken from the Internal Revenue Code and relates to what must appear on an airline ticket and in any advertising related to airfares.

Section E. Fees to support FAA programs beginning in July 2000

This section sets forth the basis on which the PBO-ATS and AIP would be financed beyond FY 2000. This section mandates that the establishment of fees be undertaken using a public process (Notice of Proposed Rulemaking) to permit the input of direct users and other interested parties. In addition, the Management Advisory Council would still retain its role in providing counsel on the development of any such fees. Other statutory limits and considerations are mandated by this section on the imposition of user fees. For example, the fees could not discriminate against similarly situated users. The precise nature and structure of the fees would be subject to the approval of the PBO-ATS Board. Although the fees are to be based on the costs of services provided, there are very few limits on how they may be tailored. For example, it is theoretically possible for the fees to be based, in part or in whole, on the price of a ticket or the purchase of fuel. As previously mentioned, such ad valorem fees are permissible and already exist.

In the case of noncommercial aviation, general aviation excise taxes levied on aviation fuels would continue at their current levels (which now include the former deficit reduction tax of $0.043 per gallon). In addition, Federal Aviation Regulation Part 135 on-demand, air taxi operators would not pay any of the new cost-based fees, but would instead pay at a fuel tax rate to be determined. Furthermore, the aviation excise taxes on general aviation would be reevaluated based on an accurate analysis of the costs of providing air traffic control (ATC) and related services to them.

Section F. Modification of current funding system for FAA

Section F amends the termination dates of the existing statutory provisions relating to the ticket tax, the international arrival and departure taxes, and the cargo waybill tax. The termination dates have been changed to match the dates when taxes are converted into fees. Also, this section applies the existing fuel taxes to Part 135 on-demand and air taxi operators, beginning in July 2000 when cost-based fees take effect.

Section G. Extension of Airport and Airway Trust Fund expenditures

Section G extends through FY 2002 the authority for expenditure of funds from the Airport and Airway Trust Fund. This allows the expenditure of amounts already obligated under the old funding system. Even though Section J provides for the transfer of the bulk of the Airport and Airway Trust Fund to the new Air Traffic Performance Fund, this section is necessary to continue expenditures on safety, security, and administrative obligations made before the changes proposed in this Act.

Section H. Transfers to the Air Traffic Performance Fund

Section H establishes provisions requiring the Secretary of the Treasury to credit to the new Air Traffic Performance Fund any funds deposited into the general fund of the Treasury pursuant to the old aviation excise tax structure. This means that any monies paid to the government under the old system, but after the conversion of most taxes to fees, goes into the new Air Traffic Performance Fund. Because the general aviation fuel taxes would remain, this section also ensures that the monies contributed by those users goes into the new Air Traffic Performance Fund and thereby receives appropriate budget treatment.

This section also requires the Administrator to invest any monies (in the new Air Traffic Performance Fund) in Treasury certificates so that interest may be earned on unexpended balances.

Section I. Termination of transfers to trust fund

Section I terminates the old system of crediting to the Airport and Airway Trust Fund monies that had been received in the Treasury as aviation excise taxes. This is done to conform with the changes made by Section H so that any residual tax receipts are credited to only one Trust Fund.

Section J. Transfers from the Airport and Airway Trust Fund

Section J essentially transfers existing balances from the Airport and Airway Trust Fund to the new Air Traffic Performance Fund. The PBO-ATS will be largely self-supporting from its new user fee system (except for the general fund contribution for government use of the ATC system). However, a transition of funding will be provided to ensure that PBO-ATS is fully capable of undertaking its responsibilities immediately. The estimated "obligated but unexpended balance" of appropriations on October 1, 1998 would be transferred on a one-time basis to the new Air Traffic Performance Fund.

Section K. Budget treatment

Section K exempts the contingent appropriation of amounts from the Airport and Airway Trust Fund to the new Air Traffic Performance Fund authorized by Section J. So long as the balanced budget agreement is not adversely impacted by revenues and spending associated with the Air Traffic Performance Fund, the such revenues and spending would not be subject to most budget restrictions. This section also exempts the Air Traffic Performance Fund from sequestration under the Balanced Budget and Emergency Deficit Control Act of 1985. In addition, this section gives an even greater level of budget protection to any spending associated with borrowed monies.

Section L. Discretionary spending limits

Section L adjusts the "domestic discretionary caps" in the Budget Enforcement Act to reflect moving most of the FAA's spending, including the PBO-ATS, from the discretionary part of the budget to the mandatory part. This provision, in essence, requires a one-time waiver of the pay-as-you-go restrictions that apply to increases in mandatory spending.

Section M. Outlay limits on FAA expenditures

Section M authorizes FAA spending along its new lines of business (LOB) budgeting structure. This section also provides limits on spending out of the Air Traffic Performance Fund so total federal deficit spending prior to FY 2002 will not increase. This section also authorizes appropriations out of the general fund of the Treasury for the following FAA programs or activities: safety, security, administrative and other expenses, the Office of Commercial Space Transportation, and government use of the air traffic system (which is a mandatory appropriation of $600 million each fiscal year through FY 2002).

Section N. Consolidation of facilities

Section N requires the FAA to consolidate its nine regions into three.

Section O. Multiyear appropriations

To conform existing law with the new funding system, section O amends the current requirement that authorizations and appropriations for the FAA be done on a multiyear basis. The new language would require that the parts of the FAA's budget supported by the general fund would be funded on a multiyear basis.

Section P. Management Advisory Council

Section P modifies the requirement that members of the MAC must be appointed by the President and approved by the Senate. Instead, the members of the MAC would be appointed by the Administrator. This is to reflect the role of the new PBO-ATS Board, the members of which must now be confirmed by the Senate. However, the MAC continues to have a vital role in providing needed industry input into the deliberation and decisions at the FAA.