FAA Scrutinizes California's Use of Jet Fuel Tax Revenue for Airports

State risks losing hundreds of millions in federal funding over dispute on proper spending of aviation fuel tax proceeds

Mar. 28, 2026 at 3:05pm

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The Federal Aviation Administration (FAA) is questioning whether California is correctly spending revenue from a jet fuel tax on airport projects, as required by federal rules. The FAA has given the state's Finance Department until the end of March to provide detailed records on how it is spending those taxes, warning that it 'reserves the right to take appropriate compliance and enforcement actions as necessary' if the state is not in compliance.

Why it matters

This dispute over the use of jet fuel tax revenue could have significant financial implications for California, as the state risks losing hundreds of millions of dollars in federal airport funding if it cannot resolve the issue with the FAA. The outcome of this dispute will impact the ability of airports across California to maintain and improve their infrastructure.

The details

According to the state's Finance Department, California spends more on its airports than it collects in jet fuel taxes, and therefore believes it is in compliance with the federal regulations. However, the FAA's audit found that California has long reallocated funds from jet fuel tax revenue to other accounts, including its general fund, which is not allowed under federal rules. The discrepancy may be explained by disagreements over which taxes are exempt from the FAA's policy.

  • The FAA gave the California Finance Department until the end of March 2026 to provide detailed records on jet fuel tax spending.
  • In September 2020, the FAA warned it was 'prepared to seek assistance from the U.S. Attorney's Office' if California was not in compliance.
  • In December 2023, a U.S. Transportation Department audit found that California was one of four states not in compliance with the FAA's mandate that aviation fuel tax revenue be used for airports.

The players

Federal Aviation Administration (FAA)

The U.S. government agency responsible for the regulation and oversight of civil aviation.

California Finance Department

The state agency responsible for managing California's finances, including the spending of jet fuel tax revenue on airport projects.

California Airports Council

A trade group representing the state's airports, which is concerned about the potential loss of federal funding for airport infrastructure projects.

Sen. Melissa Hurtado

A Democratic state senator representing Bakersfield who has introduced a bill to ensure that jet fuel tax revenue is allocated to support both commercial and non-commercial airports in California.

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What they’re saying

“Obviously I represent a rural community and the goal is to ensure that these funds are able to go back to those communities, and right now they're not.”

— Sen. Melissa Hurtado, State Senator

“We spend more on our airports than we collect in jet fuel taxes, and therefore we believe we are in compliance with the spirit of the regulations.”

— California Finance Department

What’s next

The FAA is assessing whether California is in compliance with federal regulations on the use of jet fuel tax revenue for airport projects. If the state cannot provide satisfactory documentation, the FAA has warned it may take 'appropriate compliance and enforcement actions' which could jeopardize hundreds of millions of dollars in federal airport funding for California.

The takeaway

This dispute highlights the ongoing tension between state and federal authorities over the proper use of aviation-related tax revenue. The outcome will have significant financial implications for California's airports and their ability to maintain and improve critical infrastructure. It also underscores the need for clear and consistent policies governing the allocation of such specialized tax revenue streams.