Solutions: Fixing the Endangered Species Act

The Endangered Species Act is broken. It never really worked very well, and today it has so polarized the public--including the landowners and land managers whose cooperation is essential to save species--that in many cases it may be doing more harm than good.

All of the alternative proposals described on the previous pages agree that the law creates poor incentives and that new incentives are needed to protect species. Endangered species advocates and property rights proponents remain divided over the regulatory nature of the law.

Yet none of the proposals address the original causes of species decline, which are that federal subsidies and other government policies give landowners and land managers incentives to destroy wildlife habitat. Instead, they merely layer new subsidies and regulations on top of, and often in conflict with, the old ones.

Different Drummer starts from the proposition that a new or revised endangered species law must accomplish two key goals:

In short, the act must take a firmer stance against harmful subsidies and a gentler, more incentive-based stance towards both public land managers and private landowners. To achieve these goals, changes to the Endangered Species Act must:
  1. Stop or significantly reduce subsidies to destructive activities;
  2. Give both private landowners and public land managers incentives to protect species and their habitat;
  3. Encourage endangered species advocates to work with local communities;
  4. Provide a mechanism for calculating trade offs among species and between species and other resources;
  5. Insure protection for uncharismatic species;
  6. Provide a source of funds for species and habitat protection;
  7. Define a funding mechanism that is both steady and adequate; and
  8. Alleviate landowner concerns about their property rights.
Five proposals that will accomplish all of these objectives are briefly described below and described in detail in the following sections.

Different Drummer's Proposals for Fixing the Law

1. Create a Biodiversity Trust Fund

A biodiversity trust fund could be used to buy land, buy conservation easements, pay landowners or land managers to use or avoid certain practices, or pay "bounties" to landowners whose land provided habitat to listed species. This would make private landowners eager to see species listed rather than opposed to the law.

2. Turn the Act into a Subsidies Killer

A "budget squad" would have the authority to impound funds from subsidized federal programs that harm listed species. A fifth of impounded funds--at least $200 million per year--would go to the biodiversity trust fund; another fifth to the departments of Commerce or Labor to help worker transitions. The remainder would be used to pay off the federal debt.

Different Drummer also proposes that the budget squad would include representatives of the agencies that would get some of the impounded funds, so they would have incentives to find and eliminate subsidies. This would have the triple benefit of reducing threats to endangered species, increasing funds for biodiversity, and reducing federal deficit spending in a way that allows members of Congress to avoid blame.

3. Reform Public Land Management

Despite their historic differences, federal land management and federal endangered species management suffer from a common problem: Congressional micromanagement and resort to command control rather than incentives. The federal lands will also play a crucial rule in endangered species recovery. Federal land reform should therefore be a key goal of endangered species advocates even though it may require separate legislation.

Two major reforms are needed. First, federal land management should be funded exclusively out of a fixed share of net public land user fees, thus insulating the agencies from meddling by appropriations committees. Second, federal land managers should be allowed to charge fair market value for all resources.

These reforms will allow federal land managers to respond to incentives offered by the biodiversity trust fund. Managers will also respond to recreation needs, which will act as a proxy for species that prefer unfragmented landscapes. Finally, the increased receipts provide another source of revenues--an estimated $650 million per year--for the biodiversity trust fund.

4. Experiment with Property Rights

The Fish & Wildlife Service, biodiversity trust fund, or other appropriate agency should be allowed to assign various forms of property rights in a particular species to states, non-government organizations, or perhaps even for-profit companies. This may improve the chances of recovery for some species that the federal government might not have the resources--or political will--to protect.

5. Eliminate Regulation of Private Land

In attempting to regulate private land, the law unfairly imposes huge costs on a few people and generates increasing hostility to wildlife and the idea of protecting endangered species. If the regulations worked they might be easier to defend, but in many cases they do more harm than good. We can save more species without them.

Proposal #1: Create a Biodiversity Trust Fund

Imagine that the authors of interstate highway legislation had
decided to use a model similar to the Endangered Species
Act. Their bill would have called for highway planners in Washington, DC, to draw lines on maps showing where the roads would go. Then it would decree that everyone whose land was crossed by one of those lines would have to build, at their own expense, a highway to federal standards and open that highway to public use.

If someone's house stood in the way of a highway, they would have to tear it down or move it at their own expense. Where the lines crossed public land, the public managers would be required to build the roads without any significant increases in their budgets for such construction.

Such a law would be perfectly rational from the viewpoint that people should act selflessly for the benefit of society. But it is hard to imagine that it would lead to the construction of very many miles of highway. It is much easier to imagine a revolt of landowners, lawsuits, even violence if the government persisted in forcing owners to build roads at their own expense.

Of course, the Interstate Highway System wasn't based on an endangered-species-act model. Instead, fees assessed on highway users were dedicated to a trust fund that bought land at fair market value and paid for road construction. Landowners were fairly compensated and disputes were minor. The system isn't perfect, but it works better than most government programs. If anything, the result is too many highways.

Is it possible to design a biodiversity trust fund that would work as well as, if not better, than the federal highway trust fund? The first problem is to find a source of funds; Different Drummer's proposals 2 and 3 provide an estimated $850 million in funding each year. The second problem is to keep this funding from being another pork barrel. Designated revenues must be off-budget--that is, they should automatically accrue to the biodiversity trust fund and not go through Congressional appropriations.

Just as important is to find an organizational design that will work fairly and efficiently. One possible model is the Diversity Funding Initiative proposed by the International Association of Fish & Wildlife Agencies. Under this proposal, funds would be spent largely by state wildlife agencies and distributed to those agencies based on population and geographic area.

The advantage of this proposal is that its resemblance to the Pittman-Robertson fund makes it familiar to members of Congress. It places a firm limit on the share of funds that can be spent on administrative overhead.

The disadvantage, as noted earlier, is that the proposed distribution formula favors large and populous states, which aren't necessarily the states with the most biodiversity problems. Another problem is that state agencies may not always be the best ones to recover species, especially species whose ranges are either very limited or cover several states.

Different Drummer's proposal is to create a biodiversity board of trustees that would allocate funds to federal, state, or local agencies or private entities according to priorities set by the board. Like the god squad, the board could consist of a set of predesignated federal officials such as the directors of the Fish & Wildlife Service and National Marine Fisheries Service. But since their agencies' budgets are vulnerable to political manipulation, it would be better to keep the board more independent by having it consist of, say, conservation biologists appointed to terms of at least four years by the Secretary of the Interior or the director of the Smithsonian.

As with Pittman-Robertson, the law should place limits on the share of funds that could be spent on overhead and research. Otherwise, the funds should be available for any activity that would enhance biodiversity or help recover endangered species. These activities might include but are not limited to:

The two major sources of revenues proposed below should provide between $750 million and $1 billion per year to spend on biodiversity. While some may argue that this is not enough, it is far more than is being spent today or that Congress is likely to appropriate to endangered species at any time in the foreseeable future. Moreover, since the fund will be independent of the appropriations process, it will not be subject to the political whims of whatever party happens to be in charge.

Proposal #2: Turn the Law into a Subsidy Killer

Under the Endangered Species Act, the federal govern-
ment is supposed to protect rare species from human
threats. But this issue of Different Drummer has shown that the greatest single threat to endangered species is the federal government itself.

Congress itself is facing a dilemma over federal spending. On one hand, most members of Congress know that the government cannot run up $300 billion annual deficits forever. In just a few years, interest on the national debt will be the largest item in the federal budget; soon after that, it will be more than all available discretionary income.

On the other hand, since pork is such an important part of reelection strategies, Congress hasn't been able to figure out a way to stop spending. The Gramm-Rudman Act, line-item veto, and various balanced budget amendments are all various ways that Congress is saying, "Stop me before I spend again!"

One successful way of reducing spending was conceived by Representative (now House majority leader) Richard Armey. Armey knew that the Pentagon wanted to close hundreds of obsolete military bases, but that they were kept open to please members of Congress. So Armey proposed, and Congress created, a base closures commission.

The commission decided that nearly one hundred should be closed. Under Armey's law, Congress could overrule this decision only if both houses voted to do so. Since the proposed closures did not affect a majority of the members, attempts to overrule the commission failed. The only problem with the process was that the commission dissolved after one year, so many obsolete bases remain open.

Armey's device can be used as a model for the Endangered Species Act. The act already includes a "god squad" that can exempt a species from protection. Why not also include a "budget squad" that can impound federal funds if it finds that those funds are being used to subsidize an activity that is harmful to any listed species?

The budget squad would be a standing committee consisting of, perhaps, the director of the Smithsonian, the director of the Fish & Wildlife Service (or Secretary of the Interior), the director of the National Marine Fisheries Service (or Secretary of Commerce), the chair of the Council of Economic Advisors, and the director of the U.S. Employment Service (or Secretary of Labor). The committee would meet at the beginning of each fiscal year to review the upcoming year's budget.

Any citizen could petition the squad to review a federal program, and the squad could decide to review programs on its own. If it finds that a program is directly or indirectly harmful to any listed species or its habitat, the squad could decide to impound some or all of the program's funding. Congress might exempt certain defense department and other national security programs from review.

Impounded money would be split three ways. First, 20 percent would go into a biodiversity trust fund that would be used to give managers and landowners incentives to restore and maintain habitat. Another 20 percent could go to the U.S. Employment Service or Department of Labor to be used to help people whose jobs might be lost as a result of the funding cuts. Thus, several members of the budget squad would benefit from impounded funds, giving them a strong incentive to eliminate subsidies. The remaining 60 percent would be dedicated to paying off the national debt.

The budget squad would be a standing committee that would meet every year. After it makes its decisions, Congress would have thirty days to overrule any impoundment. Since few impoundments are likely to affect many members of Congress, such vetoes would be rare.

How much money could the budget squad provide for the biodiversity trust fund? The federal government spends about $40 billion per year on agricultural subsidies and natural resources, almost all of which could harm rare species. Other spending on transportation and community development (such as the Tennessee Valley Authority) might also be open for impoundment.

Of course, the budget squad would not try to impound all of these funds in the first year, both for political reasons and because immediate evidence of harm to endangered species might be lacking. But it is likely that it could impound at least $1 billion per year, adding $200 million per year to the trust fund.

Once funds have been impounded, Congress might not try to fund the same activities in future years. But as the budget squad reviews more activities, it is likely to find impoundable funds for many years.

Would Congress agree to such a scheme? As noted, many members of Congress would like to get out of the pork-barrel rat race. A budget squad would allow them to tell their constituents, "I worked as hard as I could for you, but I was overruled." Moreover, the initial law would please both voters who like endangered species and voters who like cutting budgets.

Proposal #3: Reform Public Land Agencies

Endangered species and federal land management are
generally seen as two distinct issues. In fact, problems
with endangered species and controversies over federal lands have the same ultimate source: Congressional micromanagement.

Endangered species advocates are counting on federal lands to provide most of the habitat for many rare species. Yet federal subsidies, Congressional output targets, and manipulations by appropriations committees are the main obstacle to both sound federal land management and habitat protection on those lands.

Even though reforms of the Forest Service, Bureau of Land Management, and other federal resource agencies might require separate legislation from endangered species reforms, it makes sense to contemplate such reforms as a package. For one thing, the proposed biodiversity trust fund could have little influence over the agencies as they exist today. Public land laws do not forbid conservation easements, but the budgetary process--which is focused on commodity output targets--discourage such easements.

Nor is it clear that the agencies would get to keep any of the revenues from easements or from other payments made by a biodiversity trust fund. If managers don't get to add a share of the revenues to their budgets, they will prefer to emphasize timber, grazing, or other resources that do add to their budgets.

The one public land reform that is absolutely vital is to fund agencies out of the same fixed share of all of their receipts. If they get the same share of recreation fees as timber fees and the same share of conservation easement fees and grazing fees, managers will not be biased towards any single resource.

A refinement to this reform is to fund agencies out of their net user fees. Agencies funded out of gross fees are certain to make a profit from some of their activities. Since they get to keep a share of the gross, they must make up for their profits by losing money on other activities. Such cross-subsidies are likely to be bad for biodiversity.

A second refinement is to fund agencies exclusively out of their net user fees. If Congressional appropriators are allowed to spend tax dollars on federal lands, they are most likely to spend them on activities hazardous to endangered species because such activities will provide the greatest political payoff.

Finally, agencies should be allowed to charge fair market value for recreation as well as all other resources in their care. This will level the playing field among marketable resources, and some forms of recreation are likely to make good proxies for the habitat needs of many species.

Taken together, these reforms will produce multiple benefits. First, they will encourage agencies to produce more net receipts, and thereby to produce more revenues for a biodiversity trust fund. Second, funding out of net income will discourage activities destructive to many species. Third, funding agencies out of a share of all their income will allow them to respond to incentives offered by the biodiversity trust fund.

Finally, allowing the agencies to charge market value for recreation and other resources should significantly add to their revenues, which in turn would provide another source of income for the biodiversity trust fund. Since such fees might otherwise go into the U.S. Treasury, they would effectively be "paid" by every U.S. resident. But since the payment of such fees is made by people who are using public lands--and affecting public land biodiversity--such "abuser fees" would seem fair to both users and taxpayers.

In recent years, total revenues to the four major public land agencies--Forest Service, Park Service, Bureau of Land Management, and Fish & Wildlife Service--have been around $1.3 to $1.5 billion per year. Most of these revenues have been retained by the agencies or passed on to some other agency, such as counties or (in the case of some BLM revenues) the Bureau of Reclamation.

The Treasury retains about $600 million per year from renewable resources, plus additional public land receipts collected by the Minerals Management Service. Dedicating a fifth of the total receipts to the biodiversity trust fund would add well over $250 million per year to that fund while still leaving some returns for the Treasury.

Funding to both biodiversity and the Treasury could be significantly increased by allowing federal agencies to charge fair market value for recreation. The four public land agencies host well over 450 million visitor days of recreation per year. The Corps of Engineers and Bureau of Reclamation provide 220 million more. If these recreationists paid an average of just $3 per day--half the price of a two-hour movie--total revenues would be about $2 billion per year. A fifth of those revenues would add $400 million per year to the biodiversity trust fund.

To the extent that recreation makes a fairly reasonable proxy for at least some species, federal recreation fees would have another benefit: Such fees would encourage private landowners to charge recreationists, give those landowners an incentive to protect habitat as well. To the extent that recreation makes a poor proxy for some species, the revenues generated for the biodiversity trust fund should more than offset any problems.

Proposal #4: Experiment with Wildlife Property Rights

Congress should give the the Fish & Wildlife Service,
biodiversity trust fund, or other appropriate agency the
authority to assign property rights in a particular species to individuals, non-government organizations, or perhaps even for-profit companies. This may improve the chances of recovering some species that the federal government might not have the resources--or political will--to protect.

Several types of species could be prime candidates for such experiments:

Various types of property rights could be conveyed, including: At the simplist level, landowners could be given the exclusive right to hunt, or lease hunting rights to others, for animals that happen to be on their land. This would require changes in the wildlife policies of some states. But it would give landowners powerful incentives to protect game habitat--and the habitat of animals whose needs are similar to game.

The next step is to give private parties or organizations the right to own in captivity individual members of a particular species. Distributing captive members of a rare species to more locations could lead to better methods of, say, conditioning juveniles to better survive after they are released into the wild.

The next step up would be to grant private parties or organizations the right to own all members of a particular species, whether they are in the wild or in captivity. The owners would be responsible for maintaining habitat for the species, which might require land purchases or compensation to private landowners.

Private ownership of a species could take advantage of the fact that a few people may love many species that most people would not even notice. Botanically minded people, for example, might enthusiastically purchase the habitat for a species of lichens, whereas convincing Congress--or even a biodiversity trust fund that may have other priorities--to make such a purchase could be difficult.

Private recovery efforts wouldn't always be free: The Fish & Wildlife Service or biodiversity trust fund might offer to pay someone to recover another species and seek the lowest bid for such a recovery. On the other hand, if a species of plant in private ownership were found to be a source of some medicine, the owner of that species would reap the benefits.

In an extreme case, a private organization might be granted, or sold, the rights to own a species as well as certain rights to its habitat that are currently in the public domain. A hypothetical Salmon Trust could own all rights to a particular variety of salmon as well as the streams in which it migrates and spawns (which are now considered public). The trust could sell fishing rights, negotiate water rights with irrigators, and go to court to defend the fish against polluters.

Not all experiments would be successful, but many experiments would result in creative new techniques for species and habitat protection. The law should be amended to specifically allow such experiments.

These experiments could be initiated by the agencies now administering the act--the Fish & Wildlife Service and the National Marine Fisheries Service. But if proposal #1 is passed, it makes more sense to have them administered by the biodiversity trust fund. Whichever federal agency is involved, it would have to negotiate with state agencies to promote changes in state wildlife rules or laws to as to allow these experiments to take place.

Proposal #5: Eliminate Regulatory Language

The fact that qualifiers such as "where practicable" were
eliminated from the 1973 version of the Endangered
Species Act has often been touted as its strength. In practice, the absolute terms of the law have done little good. Arguably, the act's regulation of private land has done considerable harm.

  • Private landowners have an incentive to "shoot, shovel, and shut up."
  • Any proposal to list a species is followed by a rush to cut trees, bulldoze grasslands, or otherwise develop habitat while it is still legal to do so.
  • Most significantly, the wise-use and property rights movements have developed a powerful following, in part by playing on people's fears of the Endangered Species Act. Whether or not those fears are valid is less important than the fact that the act has, as Montana economist Richard Stroup says, "made enemies of innocent species." The other reforms proposed by Different Drummer do not absolutely require the repeal of this regulatory language. But, on balance, we think that endangered species are better off without such language, at least as applied to private lands.

    The supposed value of such language is the certainty it gives to protection, especially when dealing with public agencies who are easily monitored and seemingly have to obey the law regardless of the cost. Actual experience suggests that this certainty is more apparent than real, especially since it seems to depend on citizen enforcement through lawsuits: Environmentalists lack the resources to file repeated lawsuits on each of more than a thousand listed and candidate species.

    The cost of such language is the hostility to wildlife that it generates among landowners and the political opposition to the law itself that it generates among rural people whose livelihoods depend on either public or private lands.

    Repealing the regulatory provisions will force wildlife advocates to find creative new solutions to diminishing species problems. While this will require more work, the creative ideas they develop will ultimately be more successful than simply commanding uncaring public land managers and hostile private landowners to protect habitat.

    Eliminating regulatory language will make cooperation with local communities and landowners much more likely than ever before. For one thing, endangered species advocates will have more of an incentive to seek cooperation. But more important, the willing cooperation of landowners can be better assured by offering them carrots than by holding a gun to their heads.

    Weighing these benefits and costs, the balance is tipped by the extreme inequities of requiring a relatively few landowners to pay most of the costs of protecting most of the listed species. Ask the American public if they believe in protecting endangered species, and most will say "yes." Ask if they believe in making a few people pay the costs of things that everyone will benefit from, and most will say "no."

    In the long run, changing the law to fix these problems will do more to save endangered species than defending a law that has proven more successful at provoking controversy and polarization than at recovering species. A new law must provide more funding for species recovery. It must be given more teeth to end subsidies that are draining our economy as they damage species habitat. But most important, it must rely on carrots rather than sticks, or it will continue to fail.

    It may still be appropriate to retain regulatory language in parts of the law applying to federal agencies. But never forget that twenty-three years of having such language on the books has done little for most listed species. While the spotted owl may be a prominent exception, even in that case other laws and changes within the Forest Service made more of a difference than the Endangered Species Act.

    Even on public lands, carrots work better than sticks. Endangered species advocates would do well to insure that any carrots they put into the law will work on both public and private lands.

    Five Reasons to not Regulate Private Land

    1. Regulation doesn't work very well, and may do more harm than good.
    2. Regulation makes habitat owners and managers hostile to endangered species.
    3. It is unfair to require a few to pay the cost for something that benefits everyone.
    4. Restricting private property for public purposes without compensation violates an American freedom as important as freedom of speech.
    5. We can save more species without regulation

    ESA Table of Contents | Different Drummer | Electronic Drummer