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The Federal Aviation Administration has stepped up scrutiny of California’s use of jet-fuel tax revenue for airports, pressing the state for records as part of a long-running dispute over whether California is spending the money in line with federal rules. The FAA said in a March 5 letter that it wants detailed documentation from the state’s finance department by the end of March, warning that it could pursue compliance and enforcement actions if the information is not provided.
In the letter, the FAA questioned whether California is using revenues derived from taxing jet fuel according to federal requirements that aim to ensure states maintain airport infrastructure. The FAA’s request came as the agencies continue to exchange information about the interpretation and handling of the jet-fuel tax proceeds, according to the correspondence described by CalMatters.
California’s finance department responded on March 20, telling the FAA that the state spends more on its airports than it collects in jet-fuel taxes, and therefore is in compliance with the “spirit” of the regulations. The department’s analysis, as described in the reporting, projects that California would have spent more than $2 billion on its airports from 2020 to 2026 and would have taken in a total of $226 million from the tax over that period.
The dispute has also involved disagreements about the amounts at stake and how revenue is treated under federal policy. A U.S. Transportation Department inspector general audit published in December 2023 found that the FAA did not enforce a 1980s mandate requiring aviation fuel tax revenue to be used for airports for decades, and that California remained one of four states not in compliance as of that audit.
The reporting also described how jet-fuel tax revenue has fluctuated depending on jet fuel sales and how different calculations can produce different totals. The audit-era dispute has been complicated by what California’s finance department and federal officials characterize differently, including issues raised around taxes that have been treated as exempt under policy relating to “grandfathered” amounts.
Cassandra Nolan, an FAA spokesperson, confirmed to reporters that the agency is “assessing” whether California is in compliance, but did not answer a question about what enforcement could look like. In a September 2020 letter to the finance department, the FAA had said it was “prepared to seek assistance from the U.S. Attorney’s Office” if needed.
The stakes for some airports appear tied to broader federal funding that could be affected as the FAA reviews the state’s compliance posture. Jim Lites, executive director of the California Airports Council, said at least $650 million in federal funding is pending for eight airports this year, naming airports in San Francisco, Los Angeles, Palm Springs, Burbank, Orange County, Monterey, San Jose and Sacramento.
The story has also unfolded alongside legislative efforts in California aimed at addressing how the jet-fuel tax revenue is allocated. Senate Bill 661, introduced by Democratic Sen. Melissa Hurtado of Bakersfield, would ensure half of the tax revenue supports non-commercial airports, with the other half retained by the airport where the jet fuel is sold, according to an analysis of the bill described in the reporting.
Supporters of the bill include the cities of Merced and Bakersfield, whose airports would benefit from dedicating jet-fuel tax revenue as mandated, as well as the airline industry, the reporting said. Hurtado has said the bill would return funds to the communities that currently receive less of the revenue stream, and she proposed a formula intended to better address the needs of all airports in the state.
California finance department representatives did not agree to be interviewed about ongoing discussions with the FAA, though the department shared some correspondence with the federal agency.