This is not an attempt to explain and discuss all basic federal budget concepts. Instead, this is an attempt to highlight only those budget issues that relate to the Commission's recommendations.

There are two types of federal government funding and spending: mandatory and discretionary. Mandatory spending (e.g., Social Security, Medicare, and food stamps), accounts for approximately 68 percent of all federal government spending. Mandatory spending is controlled by the authorizing committees (primarily the House Ways and Means Committee and the Senate Finance Committee) and does not need an annual appropriation.

The FAA's budget is primarily discretionary and must be authorized, and then annually appropriated. The Congress appropriates money for the FAA's budget as part of the Department of Transportation's (DOT's) appropriations bill. The DOT's appropriations bill is one of the 13 major appropriations bills. Every year, each of the 13 bills must eventually pass the House and the Senate in an identical form and be signed by the President.

In an effort to reduce the annual budget deficit, the Administration and the Congress try to control spending and revenue raising. There are two different budget rules to control the two types of spending: mandatory spending is controlled by "pay as you go" restrictions, and discretionary spending is controlled by spending (budget) caps.

Mandatory spending is usually included in bills authorizing various federal programs. Once in place, a typical mandatory program receives annual funding sufficient to provide the benefits specified in law without any additional congressional action. Laws providing mandatory spending often do not include expiration dates. Therefore, to stop, lower, or increase the funding level of a mandatory program, the Congress must pass, and the President must sign, another bill. (This is in contrast to discretionary spending, which is usually limited to one year.)

As already mentioned, to control mandatory spending, the Congress must abide by the "pay as you go" (or PAYGO) rules. In its simplest form, PAYGO means that any new mandatory spending must be offset by increases in mandatory revenues (i.e., virtually all taxes) or decreases in other mandatory spending. For instance, if the Congress decided that the FAA's spending should become a mandatory program, the Congress would have to increase mandatory revenues (taxes), or cut mandatory spending, in an amount equal to the proposed mandatory FAA spending. However, the FAA currently is a discretionary spending program, so a bill that included a reduction in aviation taxes could not offer a reduction in FAA spending as a PAYGO offset because the taxes are mandatory and the FAA's spending is classified as discretionary. If a bill including new mandatory spending is considered for passage and there is no PAYGO offset (i.e., mandatory revenue increase or mandatory spending decrease), the bill can be struck down in the House or Senate by a parliamentary point of order because it would increase the federal deficit; however, budget points of order can be waived in the Senate, usually by a three-fifths majority vote, and in the House usually by protective parliamentary procedures.

Discretionary spending is controlled with budget caps. The budget resolution develops overall federal spending levels which are allocated to each committee (with virtually all discretionary spending allocated to the appropriations committees). Each appropriations committee then decides how much each of its subcommittees will be allowed to spend for a fiscal year without going above the budget caps.

The FAA receives funding from both the Airport and Airway Trust Fund and the general revenue fund. The Airport and Airway Trust Fund receives its revenues from aviation user charges and taxes. The general fund receives revenue from general government sources, primarily taxes. The Commission believes the special budget treatment should only apply to those funds collected from aviation users. The Commission is recommending that the general fund contribution continue. It is assumed that the general fund contribution will continue to be allocated under typical budget rules or a multi year appropriation..

The Airport Improvement Program (AIP) is funded with contract authority, which is a mandatory program. However, traditionally the DOT annual appropriations bill has an obligation limitation on AIP funds. For scoring purposes, AIP's contract authority is mandatory and its outlays are discretionary.

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