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Partial FAA shutdown cuts jobs, tax coffers

WASHINGTON — A dispute over $16.5 million in airline subsidies to Ely and a dozen other rural communities led to a partial shutdown at midnight of the Federal Aviation Administration, putting 4,000 people temporarily out of work and suspending the collection of federal airline ticket taxes.

Lawmakers were unable to resolve a partisan impasse over an extension of the agency’s operating authority. Fingers pointed in both Republican and Democratic directions over who was to blame.

Obama administration officials have said the shutdown will not will not affect air safety. Air traffic controllers will remain on the job. But airlines will lose the authority to collect about $200 million a week in ticket taxes that go into a trust fund that pays for FAA programs.

Officials said the impact in Nevada would be minimal. The partial shutdown would furlough just one FAA employee, an engineer based in Las Vegas, according to the agency.

Beyond that, improvement grants that are made available to individual airports based on size would be put out of reach until the FAA is fully operational again. For Nevada airports, that amounted to $3.55 million, according to agency figures.

The manager of the airport in Ely said there were no projects under way there that would be affected by the grant freeze. The situation at other airports in Nevada could not be determined on Friday.

McCarran International Airport has a separate relationship with the FAA. A spokesman said there would be no immediate impact on ongoing projects.

Ely emerged as ground zero in the congressional fight, which involved legislation to keep the FAA operating until Sept. 16 while lawmakers continue to debate a multiyear measure. Congress has passed 20 such short-term bills since the agency’s authority expired in 2007, but hit a wall on the latest one.

The House passed a short-term bill this week that made cuts in the Essential Air Service Program, which subsidizes commercial airlines that fly into 109 remote communities at a cost of $163 million annually.

The House set a $1,000 per person cap on the subsidy. That effectively would cut off Ely, where Great Lakes Airlines gets what amounts to a subsidy of $3,270 per passenger — the highest in the nation — for its daily flight to Las Vegas.

Other communities affected included Alamogordo, N.M., where the subsidy is $1,563, and Glendive, Mont., with a subsidy of $1,358.

The House bill also would have limited eligibility to communities that are more than 90 miles away from a hub airport. That would have cut off another 10 destinations.

The subsidy limits proved to be a showstopper for Senate Majority Leader Harry Reid, D-Nev., and other senior Democrats who refused to pass the FAA bill with such restrictions that were not negotiated in advance.

House Republicans refused to consider a bill without subsidy limits.

In Ely, Great Lakes Airlines will continue its daily flight to Las Vegas as scheduled, according to airport manager Mike Coster. The airline operates under a contract with the Department of Transportation that runs until summer of 2012. That could change, though, if the subsidy is scrapped or substantially reduced before then.

Generally, airline passengers could see a big savings on their airfares, but the situation is complicated. Federal taxes on a $300 round-trip airfare are about $61, according to the Air Transport Association.

Airlines, alerted earlier this week that FAA authority could expire, had been making adjustments to their computer systems and websites so that at midnight, taxes would no longer be added to airfares, according to the association.

One airline, U.S. Airways, was already raising its fares. Other airlines may try to reap a windfall profit from the tax holiday.

Passengers who bought their tickets before the shutdown, but who travel during the shutdown, may wind up due a refund, Treasury Department spokeswoman Sandra Salstrom said. That is because it is not clear whether the government can keep taxes for travel that takes place during a period when the government doesn’t have authority to collect taxes, she said.

Likewise, it is not clear if passengers who buy tickets after midnight with no taxes included will wind up owing taxes if their travel takes place after FAA’s operating authority is restored, she said.

“Obviously an IRS ruling will be needed on this,” Salstrom said.

The Associated Press contributed to this story. Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760.

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