Item 425 C.1 through C.2, enacted by Chapter 725 of the 2025 Session of the General Assembly (2025 Appropriations Act), modified the distribution of entitlement and discretionary funds (Appendix A) and airport classifications (Appendix B) in the Commonwealth Aviation Fund (CAF) for FY2026. These changes conform to current practice, overriding the current statutory distribution of CAF funding under Code of Virginia § 33.2-1526.6 (Statutory CAF Distribution). Further, paragraph C.3 of Item 425 directed the Virginia Department of Aviation (DOAV) to submit to the chairs of the House Appropriations and Senate Finance and Appropriations committees a report addressing:

• the amounts each airport in the Commonwealth is to receive under the updated allocations pursuant to paragraphs C.1 through C.2 of Item 425

• previous allocations of the Commonwealth Aviation Fund to each airport in the Commonwealth dating back to FY2020, and

• recommendations on how to best allocate the Commonwealth Aviation Fund in future years to ensure the financial health of all airports in the Commonwealth.

This report and the recommendations herein have been prepared in response to Item 425 C.3.

The Commonwealth Aviation Fund (CAF), which receives 1.5% of the Transportation Trust Fund every year, provides funding for capital planning and engineering projects that support airport facility development at the 65 public-use airports in Virginia. Formulas in Code of Virginia § 33.2-1526.6 establish how the CAF is allocated for entitlement and discretionary funding. Since FY2021, the CAF has experienced significant growth due to increased revenues from the Commonwealth Transportation Fund and, by default, the Transportation Trust Fund which receives 49% of Commonwealth Transportation Fund revenues every year. While adequate for many years, the Statutory CAF Distribution more recently has failed to align with airport needs and activity levels and failed to optimize the use of funds in the CAF.

Entitlement Funding: Under the Statutory CAF Distribution, each commercial service airport received $2 million in entitlement funds(*1) regardless of airport activity, passenger traffic, service area, or infrastructure need between FY2021 and FY2025. For example, in FY2025, both Richmond International Airport and Shenandoah Valley Regional Airport each received $2 million in entitlement funds despite the fact that Richmond International Airport handles 300 times as many passengers. Under the new 2025 Appropriations Act CAF funding formula for FY2026, more entitlement funding is available to those airports with higher enplanement levels, i.e., entitlement funding is no longer capped and allocated to airports based on demonstrated need. Under the updated formula, MWAA is no longer capped at $2 million but receives 6% of the CAF prior to all other allocations. All other Commercial Service airports receive entitlement funds corresponding to the airport’s passenger activity. In FY2026, Richmond International Airport is expected to receive $4.5 million; Shenandoah Valley Regional Airport is expected to receive $1.4 million.

Discretionary Funding: Both Commercial Service and General Aviation airports are eligible to receive discretionary funding from the CAF for capital projects. Discretionary funds are allocated by the Virginia Aviation Board (VAB) for eligible project requests based on a competitive process. These discretionary funds support facility development, planning projects, and engineering projects. Through FY2025, the imbalances in discretionary funding levels have limited the Commonwealth’s ability to sufficiently fund much-needed capital projects, especially at General Aviation airports. Under the FY2026 funding formulas and the new airport roles, discretionary funding is more balanced, ensuring a more fair and equitable opportunity to fund projects at General Aviation airports.

Restructured Airport Roles: Through FY2025, under the Statutory CAF Distribution, 85% of General Aviation airports competed for limited discretionary funding. As such, eligible projects at smaller airports went unfunded. Based on recommendations made in the FY2023 Virginia Air Transportation System Plan, airports were assessed and reclassified (Appendix A). This new structure reclassified larger General Aviation airports as Regional Business airports, while smaller General Aviation airports were reclassified as Community Business and Local Service airports. This new airport classification structure provides additional discretionary funding for growing General Aviation airports while protecting funding for projects at smaller airports.

State funds are an important resource for all airports and are a means to invest in infrastructure. Through the implementation of the new funding formulas and new airport roles for FY2026 in the 2025 Appropriations Act, all airport project funding needs were met in the first two rounds of discretionary funding allocations in the current fiscal year. The implementation of the new funding formulas and airport roles are proving successful in providing necessary funding to all airport classifications. DOAV recommends codifying these new funding formulas and airport roles set out in the 2025 Appropriations Act to address continued growth in revenues and better align CAF distributions with airport infrastructure needs.
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(*1) While the entitlement funding formula was based on the percentage of enplanements for each airport to total enplanements at all commercial service airports, the formula also capped the entitlement funds any one airport could receive at $2 million. Because of the growth of the CAF over the years, all airports eligible for entitlement funding eventually received the maximum $2 million in entitlement funding despite their differing percentages of enplanements.