Background The Airline Deregulation Act of 1978, which established the EAS program, specifies that if DOT determines that air service will not be provided without subsidy, DOT shall use EAS program funds to award a subsidy to a carrier willing to provide service. As of October 1, 2018, 108 communities within the contiguous United States (as well as 65 in Alaska and Hawaii) were receiving EAS (see fig.1). To be eligible for EAS, a community must: be located more than 70 miles from the nearest large or medium hub require a subsidy per passenger of $200 or less, unless the community is more than 210 miles from the nearest large or medium hub airport or unless DOT decides to issue a waiver; have a subsidy per passenger of less than $1,000 during the most recent fiscal year at the end of each EAS contract, regardless of the distance from a hub airport; have had an average of 10 or more enplanements per service day during the most recent fiscal year, unless the community is more than 175 driving miles from the nearest medium or large hub airport or unless DOT is satisfied that any decline below 10 enplanements is temporary; and have received subsidized EAS in fiscal year 2011 or were provided a 90-day termination notice by an air carrier, and the Secretary required the air carrier to continue such service to the community. EAS is funded through appropriations from a combination of discretionary funding provided through annual appropriations acts, and overflight fees, which are collected by the Federal Aviation Administration (FAA) from foreign aircraft traveling over U.S. airspace without taking off or landing in the United States. Historically, the amount of overflight fees provided to EAS has been $50 million per year, but the FAA Modernization and Reform Act of 2012 directed that all overflight fees be directed to EAS, an action that which resulted in an increased proportion of the program being funded by overflight fees (see fig. 2). The minimal level of service each community is required to receive—the minimum number of roundtrips and passenger seats that must be provided, certain characteristics of aircraft to be used, and the maximum number of permissible stops to a medium or large hub airport—are all established in law. In general, current law requires that an EAS carrier provide the following: service to a hub airport, defined as an FAA-designated medium- or large-hub airport; two daily round trips, 6 days a week, with not more than one intermediate stop to the hub; flights at reasonable times taking into account the needs of passengers with connecting flights and at prices that are not excessive compared to prices of other air carriers for like service between similar places; service in an aircraft with an effective capacity of at least 15 passengers, under certain circumstances, unless the affected community agrees in writing to the use of smaller air craft; service in an aircraft with at least two engines and using two pilots; and service with pressurized aircraft under certain circumstances. DOT awards contracts to individual air carriers to serve EAS communities on a rolling basis throughout the year. According to DOT officials, DOT takes the following steps: DOT issues a request for proposals to all carriers to provide air service to an eligible community. Air carriers submit proposals that include the size of the aircraft to be used, the frequency of service, potential hubs, and the amount of subsidy required. Air carriers request subsidies at a level to cover the difference between their projected revenues and expenses, and to provide a profit. While there are no limits on the amount of subsidy that a carrier can request in its proposal, a community can become ineligible for EAS if the annual subsidy exceeds $1,000 per passenger regardless of distance from the nearest hub airport or $200 per passenger if it is located fewer than 210 miles from the nearest large or medium hub airport. DOT reviews the proposals and selects an air carrier to provide air service to the community, generally for a contract period ranging from 2 to 5 years. When selecting air carriers to provide service to EAS communities, DOT is directed by statute to consider five factors: service reliability, contracting and marketing arrangements with a larger carrier at the hub, “interline agreements” with a larger carrier at the hub, whether the air carrier has included a plan in its proposal to market its service to the community, and user preferences. In addition, the Secretary may consider the relative subsidy requirements of the carriers. By statute, the subsidy is set at an amount to cover the difference between the carrier’s projected costs of operation and its expected passenger revenues, while providing the carrier with a profit element typically equal to 5 percent of total operating expenses. DOT awards a contract and pays air carriers based on the number of flights completed in the prior month. Air fares on EAS routes are set at the air carrier’s discretion without input from DOT. In 2003, the Vision 100—Century of Aviation Reauthorization Act established the AEAS, which allows communities to forgo subsidized EAS for a prescribed amount of time in exchange for a grant to spend on options that may better suit their transportation needs. For example, a community under AEAS may use the grant to purchase an aircraft to meet transportation needs or may receive some flexibility on operating requirements. Under AEAS, the community must still adhere to EAS eligibility requirements, and the maximum annual grant amount may not exceed the annual EAS subsidy at the time of application to the program or what DOT would pay to maintain EAS at the eligible community. For example, if an air carrier received a subsidy of $1 million per year to serve a community and the community decides to leave EAS and enter AEAS, then the grant amount to the community under AEAS may not be more than $1 million per year. As of September 2019, 8 of the 108 EAS communities in the contiguous United States were participating in the AEAS. In addition, federal funds are available to support airports—including airports that receive subsidized EAS—through the Airport Improvement Program (AIP). AIP grants are awarded to public entities to make capital improvements—such as runway and taxiway improvements. The level of AIP funding that an airport receives is based on the number of annual enplanements at the airport. For fiscal year 2018, airports with 10,000 or more passengers were entitled to at least $1 million; airports with between 8,000 and 10,000 passengers were entitled to $600,000, and airports with fewer than 8,000 passengers were eligible for $150,000. Thus, the number of enplanements at an airport receiving subsidized EAS may affect the amount of AIP funds for which the airport is eligible. EAS Can Provide a Number of Benefits to Communities Officials from the 14 communities receiving EAS that we interviewed cited several economic benefits of the local air service they receive: Economic development, including the ability to attract and retain businesses and professionals: When asked what benefits they received from local air service, officials from all 14 communities mentioned that having access to reliable air service through EAS was crucial for economic development in their community, including the ability to attract and retain businesses and professionals. In three of the communities, officials told us that the first question a business asks when deciding to locate to the area is if air service is available. Increased tourism to the community: When asked about benefits, officials in 6 of the 14 communities mentioned that EAS helps to bring tourists to the community. One community official told us that having access to air service through EAS was a key factor in the community’s being selected to host the Boy Scout Jamboree, which brought 8,000 volunteers and 45,000 Boy Scouts to the area. Creation of jobs related to air service: Officials from 4 of the 14 communities also mentioned that EAS brought jobs related to air service to the community, including TSA personnel, airport employees, airline employees, and concessionaire employees such as those at fixed-based operators and airport restaurants. In addition, some community officials told us that having air service in the community creates other types of jobs and supports area industries, such as hotels, restaurants, and rental car companies. Further, community officials told us that EAS provides other benefits in addition to economic benefits. Officials from 11 of the 14 communities mentioned that EAS allows residents to more easily travel and be connected to the rest of the world. Officials in 3 communities said that residents use EAS to travel to larger cities for medical services that are not available locally, such as procedures and appointments with specialists. Officials whom we interviewed in three communities that lost eligibility for subsidized EAS told us that losing air service has had a negative economic effect. For example, officials in one community told us that the lack of air service has decreased the ability of local businesses, hospitals, and colleges to recruit for professional-level jobs, such as physicians and professors, who have travel needs to maintain proficiency in their field. An official from another community told us that losing EAS led to decreased enplanements, which, in turn, reduced the amount of AIP funding that the airport receives. With less AIP funding, the airport is not able to pay for improvements that would attract or enable air carriers to serve the community. Most of the studies we reviewed found there to be a correlation between aviation activity and economic development. Specifically, several of the findings indicate that greater aviation activity in a region is correlated with some increase in the growth in population, employment, or per capita incomes. The size of the influence in these findings was relatively small but statistically significant. For example, one study found that a 1 percent rise in passengers per capita was associated with 0.055 percent rise in output per capita and another study found that a 10 percent increase in number of nonstop destinations served from an airport was associated with a 0.13 percent increase in employment and a 0.2 percent increase in average wage. One study that specifically examined the effect of subsidized air service found that the availability of EAS was related to a small but statistically significant increase in per-capita income in the local market. Specifically, this study found that a 1 percent increase in traffic at an airport receiving subsidized EAS was related to a 0.12 percent increase in per-capita income. Further, another study that focused solely on small airports found airport activity was associated with higher per-capita income, while another study found that more rural areas experienced an even greater benefit of nearby aviation activity than did more urban areas. However, two of the studies we reviewed found that the effect of aviation activity on local economic factors may be greater in areas with larger airports, which tend to be in larger metro areas, than in areas with smaller airports. Statutory Changes Have Limited Communities’ EAS Eligibility, but Nearly One-Third of Communities in the Program Continue to Receive Service through Waivers Since 2010, Changes Limited Communities’ EAS Eligibility and Increased Flexibility of Air Carriers’ Operations Since 2010, four statutory changes and a change in DOT’s enforcement policy have limited the number of communities that are eligible to receive EAS. (See app. II for a detailed list of statutory changes.) The Airport and Airway Extension Act of 2011 prohibited DOT from continuing to provide subsidies to communities with annual per- passenger EAS subsidies of over $1,000, regardless of their distance from the nearest hub airport. The FAA Modernization and Reform Act of 2012 removed eligibility for communities within 175 miles of a large- or medium-hub airport that do not have an average of least 10 enplanements per day during the most recent fiscal year, unless DOT grants them a waiver. The FAA Modernization and Reform Act of 2012 removed EAS eligibility for communities that did not receive EAS between September 30, 2010, and September 30, 2011, thus preventing further growth of the program. This limitation does not apply to Alaska and Hawaii. The number of communities that would otherwise be eligible for service if not for this provision is unknown. We are aware of at least one community that lost eligibility based on this requirement. However, DOT has not been able to determine how many communities fall into this category due to a number of complicating factors, including an unclear count of the number of communities that were initially eligible for EAS in January 1979 and changes in eligibility in the intervening years. The Consolidated Appropriations Act of 2014 and subsequent appropriations acts required the Secretary of Transportation to negotiate a local cost share with communities located less than 40 miles from the smallest hub airport before entering into a new contract using EAS subsidies. Two communities in the contiguous United States—Pueblo, Colorado and Lancaster, Pennsylvania—were initially subject to this provision. Currently, Lancaster, Pennsylvania is the only community in the contiguous United States subject to the provision. In October 2014, DOT issued a Notice of Enforcement Policy stating that it would start enforcing the annual subsidy-per-passenger cap of $200 for communities located less than 210 miles from a medium- or large-hub airport after September 30, 2015, thereby limiting the number of communities eligible for EAS in 2016. However, DOT may grant a waiver to communities that have not met the cap. We also identified two statutory changes since 2010 that increased the flexibility of air carriers’ operations for the EAS program, and one that automatically grants waivers for the $200 subsidy-per-passenger cap to communities that meet certain requirements. The Consolidated and Further Continuing Appropriations Act of 2012 and subsequent appropriations acts eliminated the requirement that aircraft providing service under the EAS program have a minimum 15- seat passenger capacity. Officials from about half (8 of 17) of the communities that we interviewed were in favor of the elimination of this requirement. As a result of this change, the number of EAS communities in the contiguous United States receiving service with eight- or nine-seat aircraft increased from 23 percent (25 of 107 communities) in 2010 to 47 percent (50 of 107 communities) in 2019. The FAA Reauthorization Act of 2018 explicitly allowed the Secretary of Transportation to consider the flexibility of current operational dates and airport accessibility when issuing requests for proposal of EAS at seasonal airports. DOT had already been considering seasonal service for some communities. Two of the communities that we interviewed—Bar Harbor, ME, and Cody, WY—have seasonal EAS because the number of passengers fluctuates during different times of the year. The FAA Reauthorization Act of 2018 required DOT to automatically grant waivers for annual subsidy-per-passenger cap of $200 if (1) a community’s subsidy per passenger for a fiscal year is lower than any of the previous 3 fiscal years or (2) if the subsidy per passenger for a fiscal year is less than 10 percent higher than the highest subsidy per passenger for the previous 3 fiscal years. The Secretary may only waive this subsidy cap once per community. According to DOT, it began implementing this provision in 2019 using fiscal year 2018 data. As described earlier, DOT is allowed to waive some eligibility requirements. DOT can grant waivers to communities for (1) not meeting the 10-enplanements per-day requirement or (2) exceeding the $200 subsidy-per-passenger cap in the prior fiscal year. There are several steps that DOT generally follows when granting EAS waivers: DOT collects information from the prior fiscal year to determine which communities no longer meet EAS eligibility requirements. DOT issues a “show cause” order that directs the EAS community or other interested persons to submit information to show why DOT should not terminate the eligibility of the community. The communities that are listed in the “show cause” order may provide DOT with information demonstrating that they met EAS requirements or submit a petition to DOT that demonstrates that the community’s failure to meet eligibility requirements is a temporary situation in order to retain eligibility. If the community does not provide new information to demonstrate that they met EAS requirements or submit a petition, then the community’s eligibility for EAS is terminated. DOT then issues a final order that changes its initial determination, grants a waiver to the community, or terminates the community’s eligibility for EAS. If a community disagrees with DOT’s decision to terminate eligibility, it may submit a petition for restoration. While Some Communities Lost Eligibility for EAS since 2010, DOT Granted Most Waiver Requests, Enabling Many EAS Communities to Continue to Receive EAS As a result of these changes in statute and enforcement policy, 12 communities lost eligibility for EAS since 2010 and either were not eligible for a waiver, did not apply for one, or applied for a waiver and were not granted one (see table 1). While some communities lost eligibility for EAS, many communities that did not meet eligibility requirements since 2014 continue to receive EAS because they were granted at least one waiver from DOT. From fiscal year 2014 through fiscal year 2019, DOT granted a total of 110 waivers to 37 communities—about one-third of the number of communities currently in the program (see fig. 3). The number of communities that received waivers in recent years has increased during this time period, in part due to DOT’s decision to enforce the $200 subsidy-per-passenger cap. DOT granted waivers to 15 communities because they experienced a hiatus in service during the year that resulted in the community’s not meeting the 10 average daily enplanements requirement or exceeding the $200 subsidy-per-passenger cap. Of the communities that petitioned for waivers, DOT granted waivers to all but three—Jamestown, NY; Franklin/Oil City, PA; and Hagerstown, MD. Jamestown did not meet the 10 enplanements per-day requirement and exceeded the $200 subsidy cap in fiscal year 2016. DOT officials did not grant a waiver to Jamestown because they did not think there was sufficient evidence that Jamestown would ever have enough service to meet eligibility requirements. Franklin/Oil City has not met the 10 enplanements per-day requirement in each year since fiscal year 2013 and has exceeded the $200 subsidy cap in each year since fiscal year 2015. DOT did not grant a waiver to Franklin/Oil City because of its continued non- compliance with these requirements and its proximity to a medium hub airport. Pittsburgh International Airport is 85 driving miles away. In September 2019, Franklin/Oil City filed a petition to DOT for reconsideration. DOT denied the petition. Hagerstown has not met the 10 enplanements per-day requirement since fiscal year 2013 (except fiscal year 2016), and has exceeded the $200 subsidy cap each fiscal year since fiscal year 2015. DOT did not grant a waiver to Hagerstown because of its proximity to a large hub airport— Hagerstown is less than 70 miles from Washington Dulles International Airport—and the fact that there was not sufficient evidence to indicate that Hagerstown would be able to meet eligibility requirements in the future. In August 2019, Hagerstown filed a petition to DOT for reconsideration. DOT denied the petition, and Hagerstown filed suit to challenge the decision in federal court. Athens, GA, which did not meet the 10-enplanements per-day requirement, was eligible to submit a waiver request but did not do so. While The Number of Communities Receiving EAS Has Remained Relatively Stable Since 2010, Program Expenditures Have Increased by About 70 Percent The number of communities in the contiguous United States receiving EAS changed little since the beginning of fiscal year 2010 to the beginning of fiscal year 2018—from 104 on October 1, 2009, to 109 on October 1, 2017. However, program expenditures for EAS communities in the contiguous United States have increased from approximately $161.3 million in fiscal year 2010 to $276.9 million in fiscal year 2018—an increase of nearly 72 percent (see fig.4). Some of the increased program expenditures were due to increased costs of certain critical resources over the last several years, such as pilots’ salaries. However, even when total expenditures are adjusted for the effect of inflation, expenditures still rose substantially. Notably, we found a nearly 50 percent increase in spending that is not accounted for by the general rise in prices over these years, despite a roughly consistent number of communities served by the program. According to DOT officials, some of the cost increase is related to factors that also affected the rest of the airline industry, such as increased costs for pilots, flight crew, and mechanics. For example, in 2018 we found that compensation for commercial airline pilots has increased in recent years, most noticeably in new-hire compensation at regional airlines. Our analysis of Bureau of Labor Statistics data from 2012 through 2017 showed that the median wages in the pilot occupation increased by approximately 2.4 percent per year, while wages for all occupations increased by about 1 percent per year over this period. DOT officials told us that other factors contributing to increased program costs are more specific to EAS. For example, some regional airlines that serve EAS communities have experienced financial difficulties, and in some cases, contracts with new carriers have increased in price to factor in costs associated with replacing the previous carrier’s service. DOT officials noted that larger air carriers that serve many markets have more options available to help offset industry-wide cost increases, such as increasing fares on more commercially viable routes, whereas some of the smaller carriers that primarily service EAS markets have fewer options on the revenue side to offset cost increases. EAS Program Stakeholders Cited Challenges to Retaining Eligibility and Suggested Options for Reform Communities and Air Carriers Reported Challenges That Include Maintaining Quality Air Service and Dealing with a Shortage of Qualified Pilots to Serve EAS Routes Community officials and air carriers that we interviewed described several challenges they face with regard to maintaining viable service. Many of these challenges compound each other. Quality of Service: According to officials from the communities we interviewed, an air carrier provides good quality service to an EAS community when the service is reliable (i.e., flights are on time, at convenient times, and are not frequently cancelled), offers connections to multiple locations, and includes benefits such as the ability to easily catch a connecting flight and check bags to the final location. Some community officials also said good quality service involves seamless connections to large hubs with regional jets. When a carrier does not provide what communities and passengers see as quality service, the number of enplanements decreases because people stop using the service. As a result, the carrier may decrease the number of flights per day to make the service financially viable. However, the reduction in frequency could further degrade the quality of service. Carrier representatives explained that many factors affect the quality of service carriers are able to provide and communities explained that unreliable service can result in several problems for them. Decline in Enplanements: Officials in most of the communities (15 of 17) said that a lack of quality service from the carrier had been a challenge and in many instances (14 of 17) had led residents to opt to travel to an alternative larger airport for service. The resulting decline in the number of enplanements can put a community at risk of losing EAS eligibility because it may not be able to achieve an average of at least 10 enplanements per service day or stay under the $200 subsidy-per-passenger cap. Officials from one community said that its EAS carriers’ cancelled flights and lack of interline agreements with mainline airlines had resulted in customers choosing to drive 80 miles to fly out of a large hub airport rather than use the local airport. Providing Service within Subsidy Caps: Four of the carriers we interviewed said that increased costs—such as those resulting from increased pilot wages—make it difficult to provide service within the subsidy caps, which have not been increased to account for inflation. An official from one carrier said that factors such as the increasing costs for pilots and an insufficient number of aircraft operating with less than 50 seats make it difficult for a community airport to comply with the $200 subsidy-per-passenger cap. According to representatives of the carrier, in some instances, they are paying their pilots 75 percent more than they were 5 years ago. They said that to compensate, the carrier may have to raise fares, a step that could lead to losing passengers and potentially put communities at risk of losing eligibility for EAS. Loss of Customers’ Confidence: Three of the carriers we interviewed said that when they were selected to replace carriers that had not provided reliable service to a community, it took time to regain the community’s confidence and attract people to use their EAS air service. If these air carriers had not been able to regain the community’s confidence and increase enplanements, the community may have lost eligibility for EAS. Loss of AIP Funding: A decline in the number of enplanements may also lead to a reduction in AIP funding available to the airport. AIP funding is important for small communities that have fewer financial resources than large- or medium-sized airports. AIP funding can help airports make improvements that could attract more business, such as from commercial and business aviation. Pilot shortage: Aviation stakeholders have voiced concerns that there is an insufficient supply of qualified pilots to support current and future demand from U.S. regional and mainline airlines. In May, 2017, the Working Group on Improving Air Service to Small Communities found that as a result of the pilot shortage, there were too few pilots to fly all the EAS routes. In June 2018, we found that labor market indicators for the pilot occupation were consistent with the existence of a pilot shortage. Carriers and community officials that we interviewed cited the following as issues related to the pilot shortage. Difficulty Retaining Pilots: Officials from 6 of the 10 carriers we interviewed said that it has been a challenge to retain sufficient pilots to provide the air service they have committed to providing under EAS. Pilots often start their careers with smaller air carriers that may serve EAS communities, and after a few years in the business, pilots are hired by larger airlines offering higher pay and more opportunities for advancement. Officials from 3 of the 10 carriers we interviewed said that they have responded to the pilot shortage by operating eight- or nine-seat aircraft under Part 135 regulations, which allows them to use pilots that have less flight time as first-officers. This increases the pool of pilots who can fill first-officer positions and gives these pilots the opportunity to build flight hours toward their Airport Transport Pilot license. Reduced Service Quality: Officials from 15 of the 17 communities we spoke with said that a shortage of pilots has been a challenge. Specifically, the pilot shortage has resulted in a reduction in service quality for some EAS communities because the air carrier has not been able to attract enough pilots to provide reliable service. Six of 17 communities told us that their enplanements declined and that some had lost service for a period of time due to a lack of pilots. For example, an official from one community said their carrier ended service to the community in 2014 due the industry-wide pilot shortage. Airport costs: Air carriers must pay fees to use airport facilities. Fees are charged for landing, counter and gate space, parking, and other airport facilities. These varied fees are part of carriers’ operating costs. Officials from 3 of the 10 carriers we talked to said that these airport costs may be difficult to cover because carriers serving the EAS program use relatively smaller aircraft with fewer passengers, and therefore, the carrier must charge more per passenger to cover the costs. For example, an official from one carrier we interviewed said that a community wanted to have an EAS flight that flew into Las Vegas; however, the airport in Las Vegas charged a single-aisle 9-seat aircraft the same landing fee as any other single-aisle aircraft, some of which can hold hundreds of passengers. Production and supply of small aircraft: Because there is a lack of availability of aircraft between 19 and 50 seats, in some cases, DOT, airlines, and communities have to choose service with a plane that is either too small or too large for demand. Manufacturers have said they are generally not producing this size aircraft because there is less demand and higher costs since they must certify them under Part 25 regulations for scheduled commercial service as opposed to the lower costs incurred under Part 23 regulations. Insufficient or Excess Capacity: Officials from 12 of the 17 communities we interviewed said that the declining production and supply of 19- to 50-seat aircraft has been a challenge for the EAS program. Officials from 2 communities we interviewed said they have moved to larger 50-seat aircraft, which means the communities might have too much capacity. On the other hand, officials from 11 of the 17 communities we interviewed expressed concerns about receiving service from a carrier that operates aircraft with less than 15 seats because, according to six communities we spoke with receiving air service from a carrier that only operates eight- or nine-seat aircraft may not provide sufficient capacity to allow the community to fulfill the EAS annual enplanement requirements, and thus, the community could lose eligibility for EAS. In addition, officials from 5 of the 17 communities were concerned that some people have an aversion to or difficulty getting into small aircraft that could deter them from using the service. Financial Effects on Air Carriers: Officials from 5 of the 10 carriers we interviewed said that the lack of available aircraft between 19 and 50 seats is a challenge. For example, an official from one carrier was concerned that operating eight- or nine-seat aircraft may limit their ability to serve EAS communities whose enplanements are increasing because the carriers would have to add seat capacity either through increased frequency of flights or larger aircraft they do not currently own in order to decrease the subsidy-per-passenger costs. However, if the carrier uses an aircraft with 50 or more seats, the carrier must have sufficient increasing demand to fill that plane on a regular basis to justify the capital expenditure and increased costs to operate. Furthermore, according to officials from another air carrier, eight- or nine-seat aircraft were not designed to operate with the frequency that small carriers are using them, which can reduce reliability and increase maintenance and operating costs. Driving Distance Calculation: While communities that we interviewed cited several specific benefits of the local air service they receive, as previously discussed, some expressed concerns about specific aspects of the program. Officials from 5 of the 17 communities we interviewed said that DOT’s calculation of the shortest driving distance between the community and the nearest large- or medium-hub can affect their eligibility requirements. DOT relies on the driving distance calculation to determine which communities are subject to the 10-enplanement and $200 subsidy-cap requirements. According to community officials, the easiest, safest, and quickest route from the community to the airport may be further than what DOT has calculated as the shortest driving distance, which could make the community exempt from these requirements. For example, one community official we spoke with told us that most people in the community take the expressway to the nearest hub airport, which is further from the center of the community to the airport than the two-lane route DOT uses in its calculation. An official from another community we interviewed said that DOT should take into account the time required to drive the route and the safety of the roadway when calculating the distance for EAS eligibility. The official explained that the route should take 2 hours to drive but often takes much longer due to traffic and delays, and expressed concerns that the route is very dangerous. Carrier Contracts: Contracts in the EAS program are in the form of DOT Orders announcing the carrier selected to serve a route and the subsidy awarded to the carrier. The Orders contain information such as the annual subsidy rate, the time frame for service, and various carrier requirements. Officials from 6 of the 17 communities we interviewed said that the structure of DOT’s contracts with EAS carriers can present a challenge because the communities feel they provide little to no leverage over a carrier that provides unreliable service. Officials from five communities said that EAS contracts do not include performance requirements or have penalties if the carrier does not meet service quality standards or targets. As previously discussed, officials from 15 of the 17 communities we interviewed told us that they had not received quality service at some point in the EAS program, which can result in declining enplanements and, ultimately, the community losing eligibility for the EAS program. However, if a community wants to have DOT cancel a contract, the community might lose air service if there is not another carrier interested in providing service. DOT has stated that the EAS program already provides financial incentives for carriers to provide reliable service. For example, DOT states that its “no fly, no pay” policy encourages carriers to complete flights because DOT reimburses carriers only for flights that they actually operated. Further, DOT also believes that carriers have financial incentives to increase completion rates above the rate estimated in their proposals. Because carriers frequently account for predictable flight cancellations they have an incentive to beat their estimate. Furthermore, carriers have the financial incentive to provide quality service to avoid losing enplanements and maintain a financially viable service. Stakeholders Suggested Several Options for Changing the EAS Program to Improve Service, but Some Would Likely Increase Costs The communities and air carriers we interviewed suggested potential reforms to EAS that they believed would improve service to their communities. Several of these changes would likely result in increased program costs. Change the subsidy cap: Officials from two communities and four carriers we interviewed said that the $200 per-passenger-subsidy cap should be changed, either by indexing the cap to inflation or increasing the cap temporarily for a community to allow a carrier more flexibility to develop a market for new service in a community or to account for higher labor costs. Since the subsidy cap is established in statute, revising it would require a legislative change. An official from one community said that increasing the cap for inflation would allow a carrier to use a larger aircraft, thereby improving use of the airport. One air carrier official said the cap needs to be increased to reflect rising labor costs. In its October 2014 notice of enforcement policy, DOT said that while it recognized the cap has not kept pace with inflation, the requirements of the statute did not provide DOT with the discretion to adjust the subsidy cap amount or refrain from enforcement. However, DOT issued waivers to 34 communities that did not meet the $200 subsidy cap from 2014 through 2019. If the subsidy cap were tied to inflation since its inception in 2000, the cap would be $283 in 2018. Of the 55 communities that were subject to the subsidy cap in 2018 because they are within 210 miles of a medium- or large-hub airport, 39 were under the subsidy cap and 16 exceeded it. Our analysis shows that if the subsidy cap were adjusted for inflation, an additional 10 communities would fall under the subsidy cap, and only 6 communities would exceed it. See figure 5. Renegotiate EAS agreements: Officials from 3 of the 10 carriers we interviewed said they should be permitted to request additional funds from DOT during the course of a contract. In 2009, we reported that allowing air carriers to renegotiate EAS contracts in response to rising costs would enable carriers to continue rather than file a Notice of Termination. As previously discussed, carriers we interviewed cited airport and operating costs as challenges they have encountered over the course of an EAS contract. Legislation passed in 2003 explicitly provided DOT with the option of adjusting the subsidy paid to an EAS carrier if the carrier’s expenses substantially increased. However, DOT officials said that to date no carrier has petitioned for such an increase. Revise DOT’s calculation of the driving distance: As mentioned earlier, to determine whether an EAS community is subject to the 10- enplanement-per-day and subsidy-cap requirements, DOT must determine the shortest driving distance from the center of the community to the nearest large- or medium-hub airport. Officials from four of 17 communities we interviewed suggested that DOT adjust its calculation to account for local factors, such as the time required to drive the shortest route, the condition of the road, and the most common route that members of the community use to get to the nearest large- or medium-hub airport. Considering these factors could result in communities not being subject to the limit on eligibility of requiring an annual subsidy per passenger of $200 or less, if the more commonly used or faster route is more than 210 miles from the nearest large or medium hub airport. Allow communities to regain eligibility: Officials from two communities and two carriers we interviewed suggested that subject to the availability of funds, communities that lost eligibility for the EAS program should be allowed to regain it if they are having difficulty obtaining air service without a subsidy. Officials from one community and one carrier we interviewed said communities that lost EAS eligibility as a result of unreliable service from their carrier should not be penalized by losing EAS program eligibility. According to DOT, they consider such circumstances when deciding to grant a community a waiver. In other instances, communities lost eligibility because they were not receiving EAS in fiscal year 2011. An official from one carrier suggested communities that regain eligibility could pay a co-share of the subsidy costs, possibly limiting the effect on the cost of the program. Some of the options that communities and carriers suggested, such as revising DOT’s process for carrier selection and restructuring DOT’s contracts with carriers could address the challenges in the EAS program but not necessarily increase program costs. Revise DOT’s process for carrier selection: Officials from 3 of the 17 communities and 4 of the 10 carriers we interviewed suggested that DOT adjust its method for carrier selection to account for factors such as the carrier’s financial viability, ability to comply with enplanement requirements, and agreements with mainline carriers, as well as the number of available pilots and mechanics in order to ensure that carriers are capable of providing good service to EAS communities. In addition, officials from one community also suggested that DOT give more weight to community preferences regarding carrier selection. While DOT is required to consider factors such as service reliability, interline agreements, and carrier financial and operating fitness when selecting a carrier, most of the communities we interviewed cited the quality of service they have received through the EAS program as a challenge. Include performance measures in DOT’s contracts with air carriers: Officials from four communities and one carrier suggested that DOT include performance measures in EAS contracts to ensure carriers are held accountable for providing a given level of service and subject to penalties for not meeting service quality targets. For example, one community official suggested that on-time performance and percentage of flights cancelled could be included as performance measures for EAS carriers. Officials from three communities and one carrier suggested that DOT include more requirements for service to EAS communities. For example, DOT could require that EAS carriers provide service to large-hub airports and have agreements with mainline carriers that could enhance quality of service; however, an official from one air carrier told us the carrier was reluctant to enter into agreements with smaller air carriers that serve EAS communities because they did not want their reputation to be negatively affected if the air carrier did not provide reliable service. An official from another carrier suggested that it is beneficial for carriers to enter into longer contracts because they can spend more time building the air service market for the communities they serve rather than renewing contracts. The officials said that for longer contracts DOT should include performance measures that require the carrier to provide a minimum level of reliable service or lose the route. Limit airport fees for EAS carriers: Officials from 3 of the 10 carriers we interviewed thought DOT should limit fees airports charge to EAS flights, such as landing fees and gate charges in order to increase the financial viability of EAS routes. Airport fees can be based on any number of factors including weight and number of seats on the aircraft. According to FAA’s policy on establishing airport charges, it recognizes airports are allowed to charge fees to help ensure their financial viability and at the same time those fees should be reasonable and not unjustly discriminatory. FAA’s policy further indicates that the issue of rates and charges is best addressed at the local level by agreement between users and airports. Change EAS from a carrier subsidy program to a community grant program: Officials from three communities we interviewed thought that similar to AEAS, DOT could consider providing a grant to a community in lieu of traditional EAS to allow the community more control over the service they receive. For example, an official from one community said that they liked the additional control the AEAS program has given the community over the service and that AEAS gives the community more weight with the carrier when there is a complaint about the service. Officials from three air carriers told us that a potential downside to this option is that it would be more complicated because carriers would need to work with individual communities for payment instead of just DOT. In addition, officials from three communities told us that they lack the technical expertise needed to effectively administer such a program. Agency Comments We provided a draft of this report to DOT for review and comment. DOT provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Transportation, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report please contact me at 202-512-2834 or vonaha@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: List of Entities GAO Interviewed Appendix II: Federal Laws Enacted Since 2010 That Affect the Essential Air Service Program Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact above, Cathy Colwell (Assistant Director); Stephanie Purcell (Analyst in Charge); Amy Abramowitz; David Hooper; Bonnie Pignatiello Leer; John Mingus; Dominic Nadarski; Malika Rice; Pamela Snedden; Laurel Voloder; and Elizabeth Wood made key contributions to this report.


Background The Bureau is charged with counting every person in the decennial census once, only once, and in the right place. To ensure fairness and consistency in where people are counted, for the first decennial in 1790, Congress established the concept of counting people where they usually reside. The Bureau has relied on that concept ever since. Building on the concept of usual residence, the Bureau subsequently established criteria, which it refers to as residence criteria, to determine where people should be counted during each decennial (see text box). Residence criteria 1. Count people at their usual residence, which is the place where they live and sleep most of the time. 2. People in certain types of group facilities on Census Day are counted at the group facility. 3. People who do not have a usual residence, or who cannot determine a usual residence, are counted where they are on Census Day. For most people, applying the concept of usual residence and the Bureau’s associated residence criteria is straightforward. For others who may be more mobile, like members of the military, college students, migrant farm workers, and people living in group quarters, determining where to count them can be more complicated. Therefore, for each decennial the Bureau issues guidance describing how the criteria should be applied to certain complex living situations for which people commonly request clarification. The guidance is intended to inform the public about how to respond and to assist enumerators and other Bureau staff in administering a proper count. In addition to counting the nation’s population accurately, the Bureau must complete the count and tabulate it against a backdrop of immutable deadlines. The Bureau is required by law to count the population as of April 1, 2020 (Census Day); deliver state apportionment counts to the President by December 31, 2020; and provide redistricting data to the states by April 1, 2021. To meet these deadlines and ensure an accurate count, the Bureau carries out thousands of interrelated activities before, during, and after data collection (see figure 1 for a timeline of selected key activities). The Bureau Has Refined its Residence Guidance to Help Ensure More People Are Counted in the Right Place The Bureau Has Updated Its Guidance on Where to Count People in Six Complex Living Situations The Bureau plans to use its concept of usual residence and its associated residence criteria to determine where to count people in the 2020 Census generally as it did in 2010, but in 2018 the Bureau updated its guidance on how to apply that concept to count people in six complex living situations (see figure 2 for an overview of these changes). In developing the guidance for 2020, the Bureau sought input from external stakeholders on needed changes and solicited public comments on the draft guidance through the Federal Register. In response, the Bureau received input and comments from a variety of entities including federal, state, local, and tribal governments, as well as civil rights and other advocacy organizations. Military and civilian employees of the United States deployed overseas. In 2010, overseas military and civilian employees of the United States who were U.S. citizens were counted at their home state of record for apportionment purposes only. For 2020, the Bureau decided to count these personnel differently depending on whether their permanent duty station was in the United States. Personnel assigned or stationed overseas will continue to be counted as they were in 2010. Personnel stationed in the United States while deployed overseas, however, will instead be counted at their usual home address in the United States for both apportionment and redistricting purposes. According to Bureau documentation, this change resulted from Bureau analysis of data from the Department of Defense which found that personnel deployed overseas were there for shorter periods and were likely to return to their prior usual place of residence, whereas personnel assigned or stationed overseas generally remained overseas for greater periods and often did not return to their prior stateside location. Military and civilian employees of the United States deployed, stationed, or assigned overseas who are legal U.S. residents but not citizens. For 2020, the Bureau plans to count this population the same way it counts U.S. citizens working for the federal government overseas, as described above. According to a Bureau assessment of how it counted personnel overseas in 2010, its guidance for federal agencies that provide the Bureau with data on overseas personnel was unclear on the treatment of non-citizens. According to Bureau officials, it is therefore likely that other federal agencies following that guidance generally excluded non-citizens from the 2010 count. Based on the Bureau’s assessment, the Bureau plans to make clear in its 2020 guidance that U.S.-resident non-citizens working for the federal government overseas are to be counted the same way as U.S. citizens. Bureau officials stated that this change should ensure that U.S.-resident non-citizens are counted more consistently with other U.S. residents. Crews of U.S. maritime and merchant vessels sailing between a U.S. and a foreign port. In 2010, if a U.S. maritime or merchant vessel was sailing between a U.S. and a foreign port on Census Day, then the crewmembers were not counted. For 2020, the Bureau plans to count these crewmembers at their onshore usual residence in the United States or, if they have none, then at the vessel’s U.S. port of departure or arrival. This matches how the Bureau counts crewmembers if their vessel is at a U.S. port or sailing between two U.S. ports. According to Bureau documentation, this change resulted from Bureau analysis and consultation with stakeholders (including the Maritime Administration) which found that crewmembers in each of these situations usually retain an onshore residence in the United States where they live and sleep most of the time so they should be counted in the same way. Juveniles in non-correctional residential treatment centers. For 2020, the Bureau plans to count this population at the U.S. residence where they live and sleep most of the time or, if they have no usual home address, then at the facility. In 2010, they were counted at the facility. The Bureau made this change after concluding that these juveniles typically only stay at residential treatment center facilities temporarily and generally have a usual home elsewhere to which they return after treatment is completed. Religious group quarters residents. For the 2020 Census, the Bureau will count this population at the religious group quarters facility. In 2010, this population was counted at their usual home address or, if they had no usual home address, then at the facility. The Bureau made this change after concluding that this population typically does not have a place of usual residence elsewhere. According to Bureau officials, the Bureau expects the updated guidance will provide greater clarity and result in more informed responses and, thus, higher quality data. Among other things, Bureau officials stated that the data will more accurately reflect the composition of local communities. The Bureau Will Continue to Count People in Other Living Situations as It Did in 2010 For the 2020 Census, the Bureau did not change its guidance regarding where to count people in other complex living situations. For example, the Bureau did not make changes to where it will count college students, who will continue to be counted at their parents’ or guardians’ home if they live and sleep there most of the time or, if they live away from their parents’ or guardians’ home, then at their on- or off-campus residence. See table 1 for an overview of where the Bureau will count people in complex living situations the same as it did in 2010. In addition, the Bureau’s guidance includes examples of situations in which people should not be counted in the census, such as the following: people living outside the United States on Census Day who are not military or civilian employees of the U.S. government and are not dependents living with military or civilian employees of the U.S. government; babies born after Census Day or people who die before Census Day; college students living at and attending college outside the United States; and citizens of foreign countries visiting the United States, such as on vacation or a business trip. To help census respondents understand who and where to count household members and others, the Bureau is translating key terms from its census form for 2020 into 59 languages and making it available to community partners and others who may be in a position to help linguistically isolated groups provide accurate responses. It is translating scripted responses to questions about complex living situations into 12 foreign languages to be used by staff who will help answer questions about and take responses over the telephone. The Bureau Will Continue to Count Prisoners at the Correctional Facility but Plans to Offer States Supplemental Tools for Redistricting with Prisoners’ Pre- Incarceration Addresses The Bureau reports that stakeholder feedback on where to count prisoners largely urged the Bureau to count them at their pre- incarceration addresses to avoid shifting political power to the prison locations at the expense of the prisoners’ home communities. However, the Bureau concluded that counting prisoners anywhere other than the correctional facility would be less consistent with the concept of usual residence, since the majority of people in prisons live and sleep there most of the time. Therefore, for 2020, the Bureau decided that it will continue to count prisoners at the correctional facility as it did in 2010. However, the Bureau will make available to states two tools to allow them to “move” their prisoner population to the prisoners’ pre-incarceration addresses for redistricting purposes. The tools are intended to support such movement within but not across state boundaries. The Bureau is providing states with an online tool that will identify the census geographical block that the population would be tabulated in for any state-provided addresses. If a state wants to “move” the tabulation of specific prisoners within its boundaries, this information will let state officials know which block tabulations to adjust. On November 4, 2019, the Bureau launched the web page that will support states in using this tool. The Bureau plans to update it with 2020 Census geographic data in February 2021, before the Bureau is required to provide redistricting data to the states. The Bureau also plans to provide states with data on group quarters, which will contain a separate count of their prisoner populations, as part of each state’s redistricting file. By including group quarters data in the redistricting file, the Bureau plans to provide these group quarters data to users 1 to 2 months earlier than it did in 2010 when it provided group quarters data separately from the redistricting file. According to the Bureau, this earlier release will benefit many users, including state officials who must consider whether to include or exclude certain populations when redrawing boundaries as a result of state legislation. The Bureau Is Planning Additional Changes to Improve Count Accuracy, Completeness, and Consistency Following Data Collection Once the Bureau has completed its decennial data collection efforts, it generally finds that a small proportion of responses have data quality issues that were not resolved during preceding operations. In these cases, (1) some addresses have multiple responses, (2) some households are missing responses altogether, or (3) some responses include answers that are incomplete or conflict with one another. The Bureau has a variety of plans to resolve these issues (see figure 3). Determining Whom to Count at Addresses with Multiple Responses The Bureau may receive multiple census responses from a household for various reasons. For example, different members of the same household could each respond by mail or over the internet, or one member could mail a response and another answer a census worker’s questions in person during the Bureau’s non-response follow-up operation. The Bureau assessed its response processing in 2010, and identified about 14 million responses for households that already had another response (roughly 10 percent of the total number of households included in the final 2010 count). The widespread option to respond over the internet is new for 2020, and while having included it in multiple census tests, Bureau officials have not set expectations on the extent to which it may increase the number of addresses at which it gets multiple responses. To guard against overcounting, as it has in prior decennials, for 2020 the Bureau plans to use an automated routine—referred to as the Primary Selection Algorithm—to determine whom to count at addresses for which it has received multiple responses once data collection is complete. According to Bureau officials, in making this determination, the algorithm takes into account a wide range of information, including results from its fraud detection efforts. We did not examine the algorithm for this review. In addition, to help ensure the integrity of these determinations, the Bureau does not disclose the details of the algorithm publicly and permits only Bureau officials with an operational need to know to access the algorithm. According to Bureau documentation, the Bureau has updated the algorithm for 2020 based on its review of various response scenarios and data from past censuses and census tests. Filling in Missing Household Responses When the Bureau, after its data collection efforts are completed, has been unable to reach anyone able and willing to respond at a particular address or to obtain information about the address and its potential occupants in other ways—such as through neighbors or a building manager—it may be left not knowing whether a housing unit even exists at the address or whether it is occupied, and, if so, by how many people. As it did in 2010, for 2020 the Bureau plans to use a statistical technique it refers to as count imputation to fill in missing data about the existence and number of people living at an address in question. Count imputation has three types. Residence status. This is used when the Bureau does not know whether an address is a real and livable residence. In contrast, it could be a business or in such disrepair that no one could live there. Occupancy status. This is used when the Bureau knows that an address is a real housing unit, but not whether it is vacant or occupied. Household size. This is used when the Bureau knows an address is a real, occupied home, but not how many people live there. To carry out each of these types of count imputation, the Bureau uses a technique referred to as hot-deck imputation which employs continually updated census data from similar nearby households as the basis for filling in the missing statuses and household size. The Bureau has been using some form of hot-deck imputation since at least the 1960 Census. According to Bureau reporting, in 2010, about 500,000 of 137 million addresses counted in the decennial (0.4 percent) were missing an entire response and the Bureau therefore used count imputation to determine a combination of their residence and occupancy status and household size. The Bureau’s count imputation in 2010 added about 1.2 million people to the final census count. For 2020, however, some of the missing responses which otherwise would have required count imputation will instead be resolved through the use of administrative records in conjunction with the Bureau’s door-to-door non-response follow-up effort. Specifically, the Bureau plans to draw on relevant data from records of sufficient quality thereby reducing the amount of follow-up field work needed and the number of households in need of count imputation. According to Bureau officials, they plan to finalize a decision memorandum in December 2019 specifying the Bureau’s thresholds for determining whether administrative records are of sufficient quality for such uses. According to Bureau officials, tests and evaluations performed during the preceding decade demonstrate that these uses of administrative records will provide more accurate results than traditional methods of seeking information about the address from neighbors and others or from count imputation alone. Bureau testing and evaluation also identified improvements to its count imputation technique for 2020, including enhanced use of administrative records in its hot-deck imputation, which it expects will generate results better aligned with actual data for those addresses where it had been missing. Resolving Incomplete and Conflicting Answers within a Household Response Once the Bureau has determined the total number of households and people as of Census Day for apportionment purposes, it resolves incomplete and conflicting information within individual household responses for redistricting and final tabulation purposes. Specifically, for 2020, the Bureau plans to ensure that each household response includes complete and consistent information regarding, for occupied housing units, the age, date of birth, sex, race, and ethnicity (Hispanic or non- Hispanic origin) of each household resident; their relationship to the householder; whether the housing unit is rented or owned by a member of the household; for group quarters, the type of such quarters, such as federal detention center or in-patient hospice facility; and, if the unit is vacant, why (see figure 4). These characteristics (which the Bureau refers to as person and housing characteristics) may be incomplete or conflicting for various reasons, including intentional or accidental omissions or errors by the person filling out the form. According to Bureau data, in 2010, responses for 13 percent of the people counted in the decennial (about 40 million of the about 300 million counted) contained incomplete or conflicting person characteristics that the Bureau had to resolve. For 2020, as it did for 2010, the Bureau plans to use a technique it refers to as edit and characteristic imputation to fill in incomplete and reconcile conflicting information in individual household responses. As summarized in table 2 and described below, it does so using one of three methods, depending on which characteristics are incomplete or conflicting and on what other information the Bureau has about those characteristics. The Bureau has been using some form of characteristic imputation since at least the 1940 Census. Use existing information about same person or household. This method is used when some, but not all, person and household characteristics are incomplete or conflicting and those characteristics can be filled in or reconciled using other information about the same person or household reported within the 2020 response or in prior census or other administrative records. For example, if a person’s date of birth is reported but not his or her age, the Bureau will fill in the age based on the date of birth. If neither age nor date of birth is reported, the Bureau will look to the 2010 Census to fill in both characteristics, adjusting for the intervening years. Use existing information about other people or households. As with the prior method, this method is used when some, but not all, person and household characteristics are incomplete or conflicting. However, unlike the prior method, the incomplete or conflicting characteristics cannot be filled in or reconciled using other information about the same person or household reported within the 2020 response or in prior census or other administrative records. Therefore, the Bureau will look instead to information about other people included in the same 2020 response or to nearby people or households from other 2020 responses. For example, if race is reported for a parent but not a child, the Bureau will fill in the child’s race using the race provided for the parent. If there is no information within the household response that can be used to fill in the child’s race, the Bureau will use a hot-deck imputation method. As discussed earlier, this method employs continually updated census data from similar nearby households as the basis for filling in the needed information. Use existing information about same or other households. This method is used when all person characteristics are incomplete. In this instance, the Bureau will first look to prior census and other administrative records. If the household size reflected in those records matches the household size reflected in the 2020 response, the Bureau will use those records to fill in all person characteristics available in previous census and administrative records. Remaining characteristics not filled in by previous census and other administrative records will be filled in using the methods discussed above. If the household size totals do not match, the Bureau will use a hot-deck imputation method, drawing the missing information from continually updated census data from similar nearby households. As with other areas of the 2020 Census, the key change in the Bureau’s plan for resolving incomplete and conflicting information is the enhanced use of prior census and other administrative records. Specifically, in 2010 the Bureau relied on such records to fill in only race and ethnicity. In contrast, as discussed above, for 2020 the Bureau plans to use prior census and other administrative records as an integral part of its edit and characteristic imputation methods. The Bureau believes this will result in improved data quality and more accurate results. Agency Comments We provided a copy of this draft report to the Department of Commerce. The Census Bureau provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Secretary of Commerce, the Director of the U.S. Census Bureau, and the appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report please contact me at (202) 512-2757 or goldenkoff@gao.gov. 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