The Rumored Aviation Security Fee Increase Explained

A recent CNN Money article suggests that budget conferees are likely to propose an increase in aviation security fees. When added to an increase in federal retirement contributions and other changes being floated, these higher fees could help pay for a reduction in the 2014 and 2015 sequester.

For background, the federal government has played an increased role in airport security since the 9/11 terrorist attacks. To help fund TSA security costs, the federal government charges a ticket fee of $2.50 per non-stop flight and $5 per indirect flight. In 2012, the fee raised $2 billion, covering only 40 percent of the $5 billion aviation security budget.

Given this shortfall, a number of proposals including the Simpson-Bowles Bipartisan Path Forward and the President’s Budget have proposed increasing aviation fees.

One option would be to charge a flat $5 fee, regardless of the number of stops. This proposal would raise $11 billion over ten years if it started in 2015, or $13 billion if it began in 2014. If in place today, this increase would allow TSA fees to cover 60 percent of costs. Most of these proposals would not increase the total amount of money going toward aviation security but increase the share paid by air passengers rather than taxpayers. The House budget resolution uses this option, although it is not clear when the policy takes effect.

Of course, policymakers could go further. A $6 flat fee would raise close to $20 billion over ten years and cover about 70 percent of costs. The President's budget and the Senate budget resolution would go further still, gradually increasing the flat fee from $5 to $7.50 by 2019 and allowing the Homeland Security Secretary to increase it further as necessary. This would save $26 billion over ten years, with $8 billion dedicated go toward a higher aviation security budget for net savings of $18 billion. This approach would allow TSA fees to cover about 85 percent of the costs.

There are other options as well, such as indexing a $5 flat fee to inflation (it would reach about $6.10 by 2023) or requiring the fee cover a certain percentage of the aviation security budget. Policymakers could also keep the current fee structure while raising the rates.

The below table includes a number of potential options:

 Savings from Aviation Security Fee Increases
Policy Options
Ten-Year Savings
Increase to $5 flat fee in 2014$13 billion
Increase to $6 flat fee in 2014$20 billion
Increase to $7.50 flat fee in 2014$31 billion
Increase to $5 flat fee in 2014, then gradually increase to $7.50 by 2019$26 billion
Increase to $7.50 flat fee by 2019 and increase aviation security budget by $8 billion$18 billion
Increase to $5 flat fee in 2014 and index for inflation$17 billion
Increase to $7.50 flat fee in 2014 and index for inflation$36 billion
Require fee to be adjusted to cover 75% of aviation security budget~$23 billion
Increase current direct and indirect flight fees by 50% (to $3.75 and $7.50)~$15 billion

Source: CBO, OMB, rough CRFB calculations

Raising the aviation security fee would not be a significant entitlement reform, but replacing temporary sequester cuts with permanent mandatory savings would be a small step forward for the budget.