sophisticated business operations which are independent and rely on each other for their economic well-being."

Mr. IGNATIUS. I still believe that.

Senator KASSEBAUM. Thank you.

Senator Cannon?

Senator CANNON. Thank you, Madam Chairwoman. To say I am disappointed in the airlines testimony would be the understatement of the year.

After 12 years of supporting defederalization on the Hill, after Senators Packwood and Kassebaum and I frustrated the passage of an 8-percent ticket tax extension last fall, and after the letters and telegrams which ATA and the individual airlines sent to the Senate specifically endorsing the abilities of larger airports to operate without Federal funds, and if you would like, I could read you those, a few to you, to refresh your recollection, I would like to know how the airlines expect to maintain any credibility in Congress if you cry changed circumstances and do a 180-degree on defederalization as you are doing now.

Mr. IGNATIUS. I appreciate the problem this has created for us as well as for you and the members of this committee. And I simply have to tell you that there was a reassessment at the highest levels of our industry based upon detailed studies by individuals who had the day-to-day operating responsibility.

And that is the conclusion that was reached, and we regret, as I say, the problems this has caused both us and you, Senator. That is not to say having said that that we aren't more than grateful for your efforts this past year and continuing efforts.

Senator CANNON. I have got a pretty good idea what the airlines would have said about my credibility last year if I had reassessed my position and claimed changed circumstances required me to support an 8-percent-ticket_tax last fall when the issue came up. Isn't it true that ATA changed its position on defederalization long before any head tax amendments were proposed by any members of this committee?

Mr. IGNATIUS. I don't believe so. I continued testifying through all of the committees of the Congress. The last hearing that I remember was the Senate Finance Committee.

I stated consistently in all of those hearings in the House and Senate the position that we had initially adopted. There were some increasing misgivings, and I had some conversations with some of our chief executives about it.

But they said that they continued to support it and wanted to go all the way through the end of the 96th Congress, which is what we did. There may have been some individuals who had some con

cerns.

There were some people from the very outset who had misgivings, but I do not believe we changed our position. I know we didn't. I continued to support it on behalf of our airline members. Senator CANNON. Is there some reason you don't have representatives of Northwest and TWA with you here today? I have heard reports that those airlines don't share American's and Delta's strong opposition to defederalization.

Mr. IGNATIUS. First, Senator, there is no reason they are not here. Let me explain the reason why the two individuals are here.

Bob Hullet was chairman of our task force that worked on the program. Last year Spencer Leroy had the equivalent position. You may recall Mr. Leroy accompanied me last year.

This year Mr. Hullet had that job, and I asked him to join me. Mr. Leroy is here because he was with us last year and has worked on it. Also, he did a lot of work on our analysis of the head tax material. I thought it would be useful for the committee to have him here.

With respect to Northwest and TWA, I know for certain that Northwest's views on defederalization are consistent with the position which I have described in my statement. That is a position from the highest level of Northwest Airlines.

With regard to TWA, TWA is familiar with what I am saying. TWA was present at board meetings and represented at subsequent discussions, so that I believe I am speaking on behalf of the industry as a whole. I don't think there is any group of 30 people in any organization or industry that doesn't differ on the margin of some problems.

But I can assure you with regard to Northwest explicitly, and I can give you reasonably good assurance with regard to TWA.

Senator CANNON. You're saying there weren't too many of them that were dragged kicking and screaming along with this new position, is that it?

Mr. IGNATIUS. When this new position came out of a board meeting on the fourth of December, 1980 it tended to be, at least at that meeting, a fairly unanimous view. There were some people, perhaps, who had some reservations, but by and large, the review lead to the reassessment that I spoke of.

We had a number of subsequent meetings, and these initial views were reemphasized.

Senator CANNON. I know you addressed this in part, Senator Kassebaum. But if we don't defederalize and must live with an ADAP program of $450 million, how would you suggest we make that funding cut? You kind of hedged. You said it ought to be across the board, but then we ought to take into consideration the needs of the smaller airports. Do you have something specific in mind there?

Mr. IGNATIUS. The administration proposed in its first white paper three approaches. One would be to defederalize, one would cut discretionary funds and the third would cut both discretionary and enplanement funds. Of those three alternatives, based on our present circumstances, we would recommend the third.

As to how within that across the board cut you would give favored treatment to the smaller airports, I'm not prepared to state this morning, but I would be glad to look at it and respond for the record if you wish.

It may be that in some of the various special programs there could be ways to do this. You might, for example, look at one area where I think there is very general agreement, namely, reliever airports.

I think that whatever differences may exist among the elements of the aviation community, and there are some, there is no difference on this one. We need to do more than we have.

So that might be one of the ways in which the cuts were made, Senator, without them being an exact across-the-board proportional cut.

Senator CANNON. The political reality of today is that if you send your customers' money to Washington, it's going to get used largely for O. & M. and balancing the budget. But if you have the customer's money collected and spent by local airports, you have a better chance of getting facilities.

Make no mistake about it, the more airports that are left in ADAP, the more tax money that is going to be brought into Washington.

I wish you would explain to me, after 10 years of fighting this battle, why the passengers and airlines will be better off continuing to launder their capital development funds through Washington. Mr. IGNATIUS. One of the reasons that we believe all of the airports should be included in the Airport Grant Aid Program is the greatly increased cost of financing airport developments. The interest rate on bonds a year ago was on the order of 8 percent. It's now running close to 12 percent.

The cost of financing is extremely high. The retention of all airports in the program will tend to keep that cost lower than it otherwise would be.

I don't think we were anywhere near as aware of this problem, or as concerned about it, a year and a half ago, as we are today when we look at interest rates that are approaching 12 percentthese are the kinds of bonds, tax-free bonds, that are used to support long-term airport developments.

Senator CANNON. Of course, the percentage the larger airports are getting of their total capital needs is very, very small.

Mr. IGNATIUS. It is very small. I checked on that just the other day. Most ADAP grants are less than half a million dollars. It is, I think, 60 percent of the grants are for less than half a million dollars.

Senator CANNON. I was impressed by John Solomon's charts in his testimony here yesterday. When you show the added burden that is put on an airport operator as a result of taking those grants in that fashion, it's just inexpressable to me. I've never been a fan of head taxes, but I think that some of your criticisms are a bit farfetched.

Considering that we already have a passenger head tax at this time of 5 percent, we had one last year of 8 percent, and that you handled the airport-security charge in the early 1970's without great difficulty, and that airports which want to charge unilaterally can do so with ordinances on their landing fees, and some of them do precisely that. They don't negotiate. They just adopt an ordinance, isn't that a fact?

Mr. IGNATIUS. Yes, it is, and it's a matter of concern.

Senator CANNON. Since the committee's concern is how to charge the passenger locally rather than using a Washington middleman, why should the committee accept the airlines' arguments on this issue knowing that you want to continue the Washington role? Mr. IGNATIUS. Well, of course, the reason that we advocate what you call the Washington role is that, first, the bill on which we're

testifying does in fact continue the Washington role for airports other than the largest 69. It's not as if it's being given up entirely. The reason you want to continue it is a good one, namely, that you need this kind of program for those airports. The other 69 airports, which are the larger ones with the more sophisticated people, now suggest that if they're to be eliminated from the grant aid program, that there must be opportunity for them through the imposition of local taxes to make up for what they would have received from ADAP.

It's on that latter point that we've been hung up since the very beginning of these hearings. I recall sitting in this chair a year and a half ago, when the question came up, would I agree on behalf of the airlines, you asked me the question, I remember it, Senator. Senator CANNON. I remember it very well.

Mr. IGNATIUS. On behalf of the airlines, to a kind of mandate in advance, that we would guarantee or make up what was lost as a result of defederalization. And I responded that we would work in good faith, that we would expect some of that reduction in the ticket price to be made up in the form of charges, higher charges that we pay to the airports. But we stopped short of making an explicit guarantee.

Senator CANNON. Yes, I recall that very well. As a matter of fact, I got the impression that you didn't want to support a Taj Mahal, if an airport wanted to put it into effect. Or you didn't want to put in statues or automatic flagpole raisers, electric flagpole raisers and this sort of thing.

But you're suggesting now that you impose an undue burden on the passenger to do precisely that instead of carry out the negotiating process with the local airport, aren't you?

Mr. IGNATIUS. Well, Senator, the passenger's going to pay whether it's in the form of ADAP tax-the ticket tax-or whether it's in the form of a landing fee, or in the form of a local charge that is passed on to him.

You made that point yesterday. It seems to me it's a business fact. That ultimately, the costs are borne by the user. So that the passenger ends up paying in either event.

The question is, What is the most efficient way to do this, what is the most practical efficient way to do it? And it's our belief that you have in place an efficient way for doing it today. It's worked for 10 years.

The alternative, which is to retain it for some airports and then couple it with a locally imposed tax, is a complicated arrangement, and one that gives us concern.

Senator CANNON. Well, and just the fact that it has worked, I don't think is too good an argument, because I'm looking now at your exhibit 1 chart. And you're suggesting that that ticket tax ought to be dropped down to 3 percent.

Mr. IGNATIUS. Yes, sir.

Senator CANNON. We found the 8-percent ticket tax worked, so maybe we ought to continue it at that level, or go up to the administration's suggestion of 9 percent. Do you have a comment on that?

Mr. IGNATIUS. Well, I do. I think the taxes ought to be as high as they need to be to support the agreed-upon program, and no

higher. A 9-percent tax is substantially more than is needed to support the program. So is an 8-percent tax.

If the program that is in your bill is the one that finally gets enacted, it can be accomplished at the 3-percent level. I don't think passengers and shippers who are using these services should be taxed beyond what the cost of those services are.

This is a user tax for a dedicated purpose. It's not a general tax for a general purpose.

Senator CANNON. I noted that you didn't want to suggest what general aviation's share ought to be, but you've used the 6-percent figure. I think that suggestion of 6 percent is more realistic than the administration's proposal of a 20-percent tax, which would equate to a tax increase of over 750 percent, and it would go up as the cost of fuel continues to increase. So I imagine you would have some support from general aviation on your figures here.

One other point that you made that I found of interest. In your footnote, when you said that the authorizations as shown in 508 except for ADAP amounts in 1982 to 1985 are based upon the fiscal year 1981 amount, increased 7 percent annually for inflation. Mr. IGNATIUS. Yes.

Senator CANNON. I believe you said this would be adequate to take care of inflation. I wonder if we could borrow your economist for a period of time. We would find a great deal of interest in seeing that that 7 percent would take care of inflation for the next few years.

Mr. IGNATIUS. If I did say that, I didn't intend to. What I mean to say is, I think you ought to include some factor to account for inflation. I happen to have included 7 percent. But I don't know if that is too high or too low.

But I think something ought to be included because, if you don't, the money in 1985 just won't do what you think it will do in 1981. Senator CANNON. Thank you very much, Mr. Ignatius.

Senator KASSEBAUM. Thank you very much. We appreciate your testimony.

Mr. Blackshear.

STATEMENT OF DAVID L. BLACKSHEAR, PRESIDENT, NATIONAL ASSOCIATION OF STATE AVIATION OFFICIALS, ACCOMPANIED BY WILLARD G. PLENTL, SECOND VICE PRESIDENT; AND JOSEPH G. MASON

Mr. BLACKSHEAR. Good morning.

Senator KASSEBAUM. You are giving testimony on behalf of the National Association of State Aviation Officials.

Mr. BLACKSHEAR. Thank you very much.

I have Mr. Willard Plentl with me today from the North Carolina Department of Transportation, and Mr. Mason, executive vice president of our Washington staff. I am David Blackshear, assistant secretary of the Office of Aviation and Public Transportation, Louisiana Department of Transportation and Development and president of the National Association of State Aviation Officials. We would like to share some comments we have in the interests of the 48 States who have designated specific aviation organizations to represent aeronautics development within their political jurisdictions.