ly, a Federal responsibility, and we will continue to meet that responsibility through the F. & E. and R.E. & D. programs. Furthermore, the F. & E. and R.E. & D. programs make particularly important contributions to aviation safety. Accordingly, our forthcoming legislative proposal will assure the funding needed to maintain a high level of safety.

Let me briefly mention how the President's proposal to reduce the airport grant program relates to the administration's position on the defederalization of airports. As Secretary Lewis indicated at his confirmation hearing, we are in agreement with the concept of defederalizing large airports. The President's economic message also noted that excluding large airports from the grant program would be one way of achieving program reductions. The question remaining is the most equitable way in which this type of reduction in Federal funding can be phased into the program. We are working on the details of incorporating the defederalization concept into the legislative proposal we will be submitting.

Our focus in the first few weeks has been to develop a budget at DOT that will meet transportation needs and help implement the President's economic program. Thus, at this time, reductions have been set forth as necessary totals for program requirements in both the entitlement and discretionary programs for fiscal years 1981 and 1982. Ongoing studies and analyses will be used to determine the particulars of implementing defederalization.

Let me turn now to the issue of user taxes. One of the fundamental guidelines applied by the President to his review of the budget Iwas that the Federal Government should recover its costs when they can be allocated to users. When people who benefit from particular Government services do not pay for those services, the general taxpayer has to pick up the tab. The President has spoken forcefully on the need for prompt action to relieve the general tax burden, and continued Federal subsidy of particular groups is contrary to the President's efforts.

Aviation is one of the areas where the application of the President's principles requires significant changes in present legislation. Accordingly, our forthcoming recommendations will call for increased user taxes and increased trust fund financing of FAA's costs.

At present, general aviation pays for a small percentage of the cost of the FAA services it receives. This cannot continue if we are to advance the President's program.

We have set forth one scenario which could be used to accomplish full funding. It includes an increase in the ticket tax, the general aviation fuel tax, and waybill charges. Other options are also being explored and will be evaluated on the basis of economic modeling analyses and program evaluations between now and submission of proposed legislation.

As the department drafts its detailed legislative recommendations in the next few days, we will be reexamining and updating our data and underlying assumptions to consider revenue increases which can accommodate the President's objectives in establishing a self-supporting system.

Our goal is to recover costs from users while retaining an adequate trust fund balance to insure that costs for an improved air

traffic control system can be met. We will reflect in proposed legislation those tax and levels necessary to meet our goals.

Madam Chairwoman, in summary, our detailed recommendations on airport and airway programs are still under development. Those recommendations will be consistent with the continued safety of air travel and the President's emphasis on user charges and State and local responsibilities.

We feel that reducing the airport grant program is appropriate in view of the financial participation of local governments and private parties. The collection of appropriate user taxes will ease the burden on general taxpayers, thereby advancing the President's economic program.

In closing, I would like to emphasize that legislation in this area-like legislation in all areas-must be considered in light of the Nation's overall economic and fiscal policies. The American people are looking for the Congress and the executive branch to work together to solve our national economic and budgetary problems.

The issues before us today are clearly part of that larger effort. Recognizing this, we in the Department of Transportation look forward to working with this committee and the entire Congress in a cooperative effort to meet aviation needs and national goals through airport and airway legislation.

That completes my prepared statement, Madam Chairwoman, and at this time I would be pleased to respond to questions from you and other members of the committee.

Senator KASSEBAUM. Thank you, Secretary Trent. I would like to ask first a question regarding an issue that, of course, has caused a great deal of confusion. That is, just exactly what the Office of Management and Budget has in mind, and the Department of Transportation, as well, regarding taxing of either aviation fuel or increased ticket tax.

Some of this confusion has come about because the budget reform plan, as presented in the so-called new white book, it was advocated there be a 20-percent tax on aviation fuel. You have stated, as has Secretary Lewis, that there will be an increased tax, but that figure is not yet set.

Mr. Stockman, in testimony before the Budget Committee, said that it would be 20 cents per gallon. I wonder if you do have some indication of what we can expect.

Mr. TRENT. I've had an opportunity to discuss that with Dave Stockman and Drew Lewis has participated in discussions with Dave Stockman over the last week. We are trying to determine and set forth the best and most equitable way in which we can move toward the objective of the President of a self-supporting system that can be paid for by the users of the Federal aviation system. The 20 percent which was set forth in the white book-those on my staff have started referring to it as the fat book because of the size and the short period of time that we had in putting it together-the scenario set forth with a 20-percent fuel tax and a 9percent ticket tax and a 5-percent waybill tax was developed and proposed as one scenario, to give an example of methods that could be used to bring the costs of operating the FAA into balance with

the user fees that should be charged to make the system selfsupporting.

We are not locked into those numbers. At this time we are locked into a concept: the concept of user taxes.

We will be developing information to make projections through the 1980's into 1990 and beyond, during which time we are going to have to have a very major commitment of capital to revitalize the air traffic control system. In developing those projections, we would appreciate the guidance and benefit of you and your staff in an effort to make sure that we have a reconciliation of percentage of use of the FAA's system as well as costs that can be properly attributed.

Senator KASSEBAUM. Mr. Trent, if the cost of the operation of the FAA is to be covered by-totally by users' fees, has there been any estimate made, do you know, of what the costs of the operation of the FAA are, and will be-estimated costs for the next 3 years? Mr. TRENT. I have a series of projections, Senator, that I've been reviewing and will continue to review through the remainder of the week. Unfortunately, the different projections don't exactly equate at this time, and it's necessary to have general agreement as to the costs that we are going to be dealing with.

The most difficult projection that we have now is the cost of revitalizing the air traffic control system. As you know, there is a balance of $3.7 billion in the airport and airways trust fund at present.

Secretary Lewis has said that the estimates that we have, and they are very preliminary estimates, indicate that we may be looking at expenditures as high as $10 billion for the revitalization and restructuring and reworking of the air traffic control system. It is extremely important because of safety and the increased use that we are going to have to deal with in the 1980's and the 1990's, that we have the funding available to cover this.

A part of our projections will include numbers for this. So at this time I can't give you specific numbers. Before legislation is submitted we will have a scenario that we would be glad to discuss with

you.

Senator KASSEBAUM. Do you contemplate spending out the balance of the trust fund money?

Mr. TRENT. I think the commitment we are willing to make through the 1980's is that the money in the trust fund should remain as an integral part of the trust fund and should be used for supporting the programs of the FAA.

As to whether the balance will be zeroed out, I'm not prepared to make a commitment on that at this stage.

Senator KASSEBAUM. Supporting FAA?

Mr. TRENT. Yes.

Senator KASSEBAUM. Not used for airports development as such? Or entirely to operation and maintenance of FAA?

Mr. TRENT. The legislation we are discussing today contemplates a continuation of a base of support for construction at airports as well as construction of other facilities at airports that relate to safety. The F. & E. and R.E. & D. are also included as well as the O. & N. programs in FAA.

What we are looking for is a concept that would have the FAA system self-supporting to the extent that the services are applied to general aviation and commercial aviation.

Senator KASSEBAUM. I think that one interesting aspect, I suppose, is the question we will all have to ask ourselves, is just how much the general public does benefit.

There have been studies that have been shown in Atlanta, for instance, that the airport contributed $2 billion per year to the local economy. Shouldn't there be some contribution, then, from the general fund, the Treasury, toward the costs of running the FAA when, indeed, the general public has benefit?

Mr. TRENT. There are two areas of particular concern that we have been addressing in the Department of Transportation and specifically in the FAA. One area relates to the use of the system by the military, and the second relates to the use of the system which could be attributed to public benefit.

The percentage and allocation is extremely difficult, and the variants of the figures that I have looked at so far are hard to completely justify either with one group or the other.

What we are going to attempt to do before legislation is submitted is to identify that percentage of use and try to build that into the formula that we will use in developing and proposing this legislation.

Senator KASSEBAUM. Thank you. Senator Cannon.

Senator CANNON. Thank you very much, Madam Chairwoman. Mr. Trent, this is further along the line of Senator Kassebaum's question. But I don't understand how the administration developed the tax levels of 9 percent and 20 percent.

Your own projections show that the revenue from these taxes would grow from $3.3 billion in 1982, to over $5 billion in 1986. Now, that appears by far to exceed the potential expenditures under your plan, even if the entire FAA budget was funded from the trust fund.

I know that you're not in a position to give us the details, but I wonder if we could ask you to supply for the record your balance sheet that would utilize both the proposed tax revenues and the existing surplus of the $3.7 billion as soon as you're able to develop that.

Mr. TRENT. Senator, I agree with you that the numbers that were used as a part of the presentation that you are referring to are hard to support, because the calculations that were made in presenting those numbers are not complete.

I think it is best for me to go on record at this stage as saying that those numbers are offered as an example of the type of revenue that we will expect to raise in order to make the system selfsupporting, and moving toward user taxes.

But I am not able to support the 20 percent, or the 9 percent, or the 5 percent at this time, and we would be glad to furnish for the record that information as soon as we complete the development of our proposal.

Senator CANNON. You know, when we use figures as examples that are completely unrealistic, that gets a lot of people stirred up and headed in the wrong direction, perhaps.

I think it maybe would be better if we used examples that were somewhat along the realistic side, rather than examples that are completely unrealistic. Wouldn't you agree with that?

Mr. TRENT. I am willing to agree, Senator, that those numbers are unfortunate at this stage. I would, however, like to emphasize that the revenue that we are expecting to raise with user taxes, both from general aviation and from a ticket tax, and from waybill expenditures, are going to be substantial.

The commitment that we have from the President and the Administration is to move toward a system that would be equitably self-supporting. And the taxes that would be necessary in order to make the system self-supporting, even though I am not prepared to give you a number today, will be substantial, We will be presenting that to you on March 10 as a part of our legislative package. Senator CANNON. I understand what you are saying there, but when you say equitably self-supporting, that raises a lot of problems.

Senator Kassebaum has already referred to the military. You know, the aviation industry is one which has seen, in 1980, fare increases twice as fast as inflation, cost increases by over 20 percent, fuel decontrolled, employment reduced, the passenger market down. And the industry has gone from $1 billion in profits in 1978 and 1979 to a combined loss of $200 million in 1980.

In other words, virtually all of our general economic ills are present and, indeed, magnified by the aviation industry. Yet, the Reagan administration's new beginning proposals say the way to revitalize the general economy is to reduce taxes and reduce Federal expenditures.

But the way to treat the aviation industry is to nearly double taxes while reducing capital investment by the user's own money. Now, can you explain how those plans are suppose to be consistent with each other.

Mr. TRENT. Yes, sir, I am pleased to have an opportunity to address those questions.

As you know from the President's economic message, we feel one of the primary problems we have to deal with in trying to bring the economy under control is the proliferation of Federal spending that has occurred over the last few years and the deficits that have been run on a continuing basis throughout the 1970's.

We feel that in dealing with the high interest rates and inflation that is a part of the system that President Reagan is pledged to bring under control, it is going to be necessary to tie as closely as possible the benefits that are received from the Federal Government to the expenditures and support it has given to the private sector.

I think the aviation industry is one good example. The aviation industry receives considerable benefits from the air traffic control system that can be targeted and directed, I think, along much more specific lines than many of the other programs.

And in tying user charges to the benefits received for aviation in this particular sector, we feel we will be setting guidelines that will lead to better control of the Federal budget in the future.

We think that the primary problem we have to deal with is the overall difficulty that we face with the economy and that by bring