State's Airports At Risk Of Losing Millions

May 5, 2008
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GRAND RAPIDS — If state lawmakers don’t reach a compromise soon, nearly $180 million in federal dollars for Michigan airport projects could be lost to neighboring states.

The standoff in Lansing is over the Capital Outlay bill. For some strange historical reason, all the federal funding for aeronautics passes through the state’s Capital Outlay budget. It’s what Kent County Aeronautics Director James Koslosky calls a “quirk” in the state’s budgeting process.

The Capital Outlay budget provides for university, community college, museum, zoo and other minor capital projects that the state funds with its general fund dollars. The aeronautics portion of that budget provides state spending authority for the Airport Improvement Program, a federal program of capital assistance to eligible state airports. Federal dollars for aeronautics are protected by federal law.

“None of these aeronautics funds are general fund dollars,” Koslosky pointed out. “In fact, 95 percent of them are federal funds and the others come from the Michigan Department of Transportation’s aeronautics fund, which is all user-generated.”

Through airline ticket taxes, fuel taxes, aircraft registration and licensing fees, users pay into aeronautics trust funds at the federal and state levels. The federal and state governments allocate money back out of the trust funds (by formula) to airports for capital improvements only. In Michigan, those monies come back to airports through the state. Other states don’t have the “middleman”; they get their money directly from the Fed, Koslosky noted.

Passage of the Capital Outlay bill has only been a problem recently, he said. Historically, the Legislature and the governor have approved a Capital Outlay bill each year in the summer proceeding the state’s fiscal year, which starts Oct. 1. In March 2007, the Legislature literally carved out the aeronautics portion of the Capital Outlay bill, passed it, and the governor signed off on it, Koslosky recalled. Now politics are playing into the process, principally on the university funding side.

Democrats are pushing primarily for new university and college facilities, whereas Republicans favor more spending on airport and transportation capital projects. Lawmakers on both sides of the aisle know that the federal funds for aeronautics are in jeopardy, and they’re trying to use that to leverage and advance local projects paid for by the state’s general fund, according to what Koslosky has heard.  

“We’re being used as a pawn,” he added. “They have tied up the bill and, as a result, tied up $180 million in mostly federal funds that belongs to airports. These dollars don’t belong to the state, but because the state has a channeling act requiring that all federal dollars flow through the state process and be accounted for, they can tie up our money like this.”

If the discretionary and earmarked portions of those federal dollars don’t get obligated by a certain point in time, the Fed can move those dollars to other states, Koslosky stressed.  So while lawmakers duke it out in Lansing, the clock is ticking away for the state’s airports and the fast-approaching construction season.

Ford International Airport needs the money to pay for a $500,000 fire truck on which it has awarded a bid, and to cover about $3 million worth of land reimbursement, Koslosky said.

“We’re just fortunate that we don’t have construction or we’d have to, right now, be withholding award to bid. Most airports are in the same situation.”

The Capital Outlay bill process that requires the Legislature and the governor to approve the “pass through” of federal dollars for aeronautics is a broken process in Koslosky’s estimation.

“We don’t belong there,” he remarked. “We belong in the transportation fund where there are other restrictive funds like ours and where the Legislature can’t play politics with them.”

Sen. Bill Hardiman, R-Kentwood, told Koslosky he’s willing to consider moving a bill that would decouple aeronautics funds from the Capital Outlay bill process and move them to the transportation fund where they would be protected.

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