Analyzing the Forest Service's 1997 Budget

Each year, I review the Forest Service's budget request to Congress, contained in a document known as the "Budget Explanatory Notes for Committee on Appropriations." The document presents final receipts and budgetary data for the previous year, the amounts appropriated for the current year, and the amounts requested or projected for the coming year.

The Forest Service budget has roughly a hundred items in it. When I look at it, I compare the receipts and costs of selected resources, look for any dramatic changes in costs or cost trends, and examine any changes in cost trends and the budgetary process.


The Forest Service's total budget peaked at $3.5 billion in 1990. At $3.4 billion, the 1994 budget was only a bit below this peak. But the budget fell to $3.1 billion in 1995, and Congress has appropriated only $3.0 billion for 1996.

The 1995 budget included $2.0 billion for national forest operations paid out of tax funds, plus another $420 million paid out of revenues--mostly timber receipts. Just over $300 million were paid to counties in lieu of property taxes. The rest of the budget is split between research, state & private forestry, and international forestry.

Congress' 1996 budget showed a strong bias for commodity resources. Timber and range management budgets were significantly increased. Funding for nearly everything else was reduced, usually by about 10 percent.

The Forest Service proposing to restore some of the cuts. But the agency has a poor record of getting what it wants from Congress in specific line items, other than timber and grazing line items. But it has proven good at padding budgets, especially for timber and grazing, so that its record of both outputs per dollar spent and dollars returned per dollar spent get worse every year.

Some people still say that the Forest Service is the only agency of the federal government that makes more money than it costs. This may have been true for a few years during the 1950s, but it is far from true today. Forest Service cash receipts peaked at $1.7 billion in 1989 and have fallen to just $1 billion in 1995.

The Treasury only keeps a fraction of these receipts: about a billion in 1989, well under $400 million in 1995. The 1989 returns to the Treasury offset a little over half of the Treasury's costs of national forest management; today they cover only a fifth of those costs.

Timber Receipts and Costs

Although Forest Service timber sales have fallen by over 50 percent since 1990, timber remains the most important group of line items in the Forest Service budget. It is also the biggest source of revenue.


The Forest Service collected about $640 million in timber receipts in 1995, down from $860 million in 1994 and a record high of $1.3 billion in 1989. The agency projects that receipts will be nearly $700 million in 1996 and 1997, but it has a history of overestimating projections of timber receipts.

Not all of these receipts will make it to the U.S. Treasury. Four different laws allow the Forest Service to keep an unspecified share of timber receipts to spend on forest management. When timber receipts decline, the Forest Service protects its budget by increasing the share of receipts that it keeps.

Back in the mid-1970s, the Forest Service typically kept only about 15 percent of timber receipts for itself, with the amounts fluctuating between 13 and 17 percent. In 1976, Congress significantly expanded the agency's authority to keep receipts, so by the mid-1980s the share retained by the agency ranged from a quarter to a third of the total.

National forest timber sales fell from around 11 billion board feet through the 1980s to around 3 to 5 billion board feet during the 1990s. The Forest Service responded by increasing the share it keeps from timber sales to more than 50 percent. In 1995, the share was 52 percent; the agency projects it will be 55 percent in 1996 and 1997.

In terms of dollars per thousand board feet of timber cut, the receipts kept by the Forest Service have risen from $8 in 1975 to $25 in 1985 to $90 in 1995. The Forest Service expects to keep $94 per thousand board feet in 1996.

A portion of timber sale receipts are also collected in the form of road construction by the timber purchaser. This is accepted as an in-kind payment. "Purchaser credits," as they are known, have remained roughly proportional to timber volumes, falling from around $100 million per year during the 1980s to around $60 million per year in the 1990s.

Deducting purchaser credits and receipts retained by the Forest Service from total receipts leaves the receipts returned to the U.S. Treasury. These averaged $630 million during the 1980s, reaching an all-time high of $875 million in 1989.

By 1995, they had fallen to under $295 million. Although total receipts are projected to increase in 1996 and 1997, since the agency expects to keep a larger share for itself the returns to the Treasury are expected to fall below $290 million.

Direct Costs

Against these returns must be counted the direct costs of timber sales, and possibly some indirect costs. Direct costs include timber sale management, which is running around $180 to $190 million per year (down from well over $300 million in 1990). Direct costs also include the costs of roads, most of which are design and engineering costs for roads built by timber purchasers. These are running around $50 to $65 million per year (down from well over $120 million in the 1980s).

The most interesting thing about these direct costs is that they have not declined anywhere near as much as sales. The result is that the costs per thousand board feet have sharply increased. In the late 1980s, the Forest Service spent about $40 per thousand board feet on sales. In the early 1990s, when sales fell by more than half, Congress kept pumping money into the program hoping to get some timber out the other end. So direct sale costs jumped to $120 per thousand board feet.

In 1995, costs fell to $97 per thousand--the first time they were below $100 in four years. The Forest Service projects that they will stay at this level. Congressional memories are short, so the agency will probably get credit for reducing costs rather than blame for more than doubling them from their pre-1990 levels.

Indirect Costs

Indirect costs would include, at minimum, reforestation, overhead, and payments to counties in lieu of property taxes. Other indirect costs that won't be considered here might include a share of planning, inventory, monitoring, and fire management.

Reforestation after timber sales is mostly paid out of some of the receipts retained by the Forest Service. But when initial reforestation attempts fail, second efforts are paid for out of tax dollars. Tax dollars are also often used to reforest after salvage sales. Appropriated reforestation costs totaled $85 million in 1995. This includes $29 million from a so-called "reforestation trust fund." This is not really a trust fund but an earmarking of timber import tariffs to the Forest Service's budget.

Overhead is represented in the Forest Service budget as "general administration." This adds about 15 percent (ranging from 12 to 19 percent in various years) to the agency's budget (not counting items that include their own general administration funds). So timber's share of general administration in 1995 is 15 percent of $181 million (for timber management) plus $53 million (for road construction), which is about $57 million.

Payments to counties are supposed to be 25 percent of most receipts. Since the Forest Service's only really valuable timber is in Oregon, Washington, and California, this formula meant that Pacific Coast counties made out like bandits, with Oregon alone getting 40 percent of all county payments, which is several hundred times what they would get if the lands were taxed the same as private lands. Meanwhile, many if not most counties elsewhere get less than they would if the forests were taxed like private land.

Now that Northwest sales have fallen to very low levels, county payments have declined. This is complicated by the fact that Northwest counties convinced Congress to east the pain of reduced sales by placing floors on payments that step them down over several years. If we just count the 25 percent the counties would get at minimum, the counties' share of 1995 receipts was $163 million. This is down from a high of $340 million in 1989 and $219 million in 1994.

There will always be a debate about what non-direct costs should be assigned to timber. But the table below makes it clear that even a small fraction of the indirect costs counted here will put the entire Forest Service sale program in the red--especially since the returns net of direct costs along are rapidly declining toward zero.

National Forest Timber Receipts and Costs
(millions of dollars)

                                1994    1995    1996    1997
Total timber receipts           $856    $641    $698    $686
Share kept by Forest Service     436     347     409     395
Purchaser road credits            68      48      62      56
Returned to Treasury             421     294     289     290
                     Direct timber costs
Timber management                189     181     189     190
Road construction                 53      53      63      67
Total direct costs               242     233     252     257
Net to Treasury                 $179     $61     $37     $33
                    Indirect timber costs
Overhead                          56      57      64      55
Reforestation                     62      57      52      52
County payments                  219     163     175     170
Total indirect costs            $337    $277    $291    $277
Figures for 1994 and 1995 are final. Figures for 1996 are based on the conference report of December 12, 1995. Figures for 1997 are the administration's proposal.

Other Receipts and Costs

The Forest Service collects significant receipts for three other resources: recreation, livestock forage, and minerals. With the possible exception of minerals, the budgets for these resources are far simpler than for timber.


Recreation receipts have increased from under $5 million in 1975 to $30 million in 1985 to $46 million in 1995. The main limit on fee collection is Congress, which only allows the Forest Service to charge fees for a few types of recreation--mainly for campgrounds.

Recreation management costs are significantly higher, rising from under $40 million in 1975 to $100 million in 1985 to more than $220 million in 1995. The agency spends another $35 to $50 million per year on construction and reconstruction of recreation facilities.

Livestock Grazing

Grazing fees have remained constant at around $10 million per year since 1975. This is due to a fee formula imposed by Congress in 1978 that guaranteed low fees to ranchers. Although the formula expired in 1985, no administration since that time has dared to change it.

The formula also allows the Forest Service to keep half the fees for "range improvements," so the Treasury gets only half--only a quarter after the counties get their 25 percent share.

Total grazing receipts declined from $9.8 million in 1994 to $7.8 million in 1995. The agency projects that they will fall even further to $6.5 million in 1996 and 1997. These declines are due to the fee formula, which reduces fees whenever the price of beef falls or costs of cattle production increase, not to declines in grazing levels, which actually went up slightly in 1995.

Range costs, meanwhile, are rapidly increasing. On the books, 1995 costs of $18.5 million are just a little more than 1994 costs of $16.4 million. But the 1995 costs do not include $15 million reprogrammed to range, mainly to do analyses required under the National Environmental Policy Act.

Moreover, for 1996 Congress significantly boosted the Forest Service's range budget to $27 million. This was partly accomplished by some accounting slight-of-hand when the Forest Service rearranged its line items (see pages 16 and 17 of the Spring, 1995, issue of Different Drummer).

This slight-of-hand made it appear that the Forest Service was requesting the same range budget as the previous year when in fact it was seeking a 50 percent increase. Congress obviously fell for it. The Forest Service is asking for a further increase, to $31 million, in 1997. That's quite a bit for a resource that returns less than $2 million per year (after making payments to counties) to the Treasury.


Forest Service minerals receipts have totaled more than $200 million per year since 1992. In 1995 they were more than $253 million. The agency expects to collect $217 million in 1996 and 1997. Direct minerals costs, meanwhile, are under $40 million per year.

Unfortunately, I have no idea where the minerals receipts go. A large chunk are transferred to the Minerals Management Service, a USDI agency that the Thoreau Institute plans to study this year. Some are retained by the Forest Service. I hope that by next year at this time we will know how much makes it to the U.S. Treasury.

Receipts & Costs Summary

In sum:

Other Cost Trends

True to form (no matter which party is in power), the 104th Congress cut almost every line item in the Forest Service's budget except range (increased by 46 percent), timber sales (increased by 1 percent), and activities funded out of timber receipts (increased by more than 30 percent).

The Forest Service budget as a whole fell by 2.3 percent, while the budget items pertaining to the national forests fell by just 0.7 percent. This suggests that Congress had a goal of not increasing or slightly reducing the overall budget. To achieve this decrease while increasing timber and grazing budgets, nearly all other items were cut around 10 percent. Here is a brief discussion of the items that were cut by more than 10 percent.

Land Acquisition

Land acquisition is one of the first things Congress cuts when it feels a budget pinch. As a result, this item fluctuates tremendously over time. The 1996 budget was cut by 35 percent below the 1995 level to $41 million, its lowest level since 1986. (It was cut even more--by two-thirds--in 1980 when the Carter administration was trying to look fiscally responsible.) The Forest Service is asking for no increase in funding in 1997 (probably so that the Clinton administration can look fiscally responsible).


Congress cut the overall construction budget by 17 percent, from $197 million in 1995 to 164 million in 1996. But the budget for timber-related road construction was increased by 10 percent from $52 million to $57 million.

To more than offset this increase, Congress reduced the budgets for construction of facilities (buildings, campgrounds, etc.) by 26 percent, trail construction by 38 percent, and construction of roads for recreation and other non-timber purposes by 18 percent.

The Forest Service is asking for a $6 million increase in construction funding for 1997. Two-thirds of this increase would go to timber-related roads.

Ecosystem Planning, Inventory, and Monitoring

In 1994 some dunderhead in the Clinton administration got the brilliant idea that they could "reinvent" the Forest Service by creating a new line item with the bureaucratic title of "Ecosystem Planning, Inventory, and Monitoring" (EPIM for short). All of the funds that were once spent by timber, recreation, and other resource areas on inventory, planning, and monitoring were transferred to this line item.

It is probable that the person who thought this up expected that giving these activities their own line item would underscore their importance and encourage Congress to give them more funds. Fat chance. By divorcing these activities from outputs like board feet of timber or animal unit months of forage, the budget makes these items less important than before.

So it should be no surprise that Congress cut the budget for these items by 13.2 percent--from $150 to $130 million--which is more than any other item except land acquisition and construction. The Forest Service wants most of the money back in 1997, but is unlikely to get it.

In part, Congress is correct: Most of the dollars spent on planning are a complete waste. But inventory is critical to any land or resource management. Monitoring can also be important, although if people had incentives to do a good job we would need to look over their shoulders all the time.

The problem is that the Forest Service is likely to maintain the funding for planning while it cuts budgets for inventory and monitoring. Many forests haven't had a decent timber inventory in decades, and the Forest Service acts as though it is more important to publish its plans on time than to make sure that the data in the plans are accurate.

Soils and Water

The national forest budget for soils, water, and air fell 13 percent from $48 million in 1995 to $42 million in 1996. However, that is still more than the 1994 budget of $36 million. The Forest Service is asking to have the budget restored to the 1995 level of $48 million.

State & Private Forestry

State & Private Forestry is a boondoggle that provides extension services and pesticide spray operations on private lands. While the program began by giving people advice, it is now a tool for powerful members of Congress to direct favors--in the form of free pesticide applications--to their constituents.

The program is always under fire by either a budget-cutting administration or members of Congress. It's budget fell from $165 million in 1994 to $154 million in 1995 and then to $138 million in 1996, an 11 percent drop from 1995. The Forest Service is asking for $164 in 1997, but probably will not get it.

General Administration

Even though the total Forest Service budget fell by only 1 percent and the total national forest budget fell by 7 percent, Congress dropped the general administration budget by 11 percent. The effect was to drop the general administration percentage factor from 14.6 percent to just under 14 percent.

Some members of Congress have a theory that they can force agencies to save money by arbitrarily reducing their general administration line items. A more likely effect is that the agencies will simply transfer funds from other line items to cover activities once paid out of general administration.

Changes in the Budgetary Process

Fire Management

After timber, fire is probably the biggest headache in the Forest Service budget. Back in 1908, Congress passed a law giving the Forest Service a blank check to suppress wildfires. This made the agency obsessive about putting out all fires, even when fires were good for the forest. As a result, most forests have built up huge fuel loads which normally would have burned in small ground fires. This makes fire suppression more expensive than ever.

The Forest Service has told Congress for years that it would be better off providing more money for prescribed fires. This would allow the agency to burn off some of those fuel loads and reduce the costs of fire suppression later. Congress has been reluctant to do so.

In 1980, Congress repealed the law giving the Forest Service a blank check and just appropriated $125 million per year to a fund that would be available for fire suppression until expended. In 1987 and 1988, however, drought conditions over much of the West led to huge fires. The Forest Service habitually spent huge amounts of money suppressing these fires, which left its fire suppression fund with a $500 million deficit.

In 1990, Congress agreed to pay this deficit. But this just left it with the old dilemma: how to pay for fire suppression? In 1995, Congress decided to create a new wildfire management fund and to give that fund about $385 million per year, to be available until expended. The difference between this fund and the previous one is that this money can be used on prescribed burning as well as fire suppression.

There is still a danger that a bad fire year or two could eat up all of this fund, leaving little for prescribed burning or even forcing another Congressional bailout. Prescribed burning may also be controversial in some regions where people worry about air pollution. But there is also a chance that the Forest Service could put a significant dent in the national forest fuel load before the next serious drought.

If the agency is smart, it will invest in prescribed burning primarily along the borders of the national forests, especially near communities and structures. This would create an effective fire break that would protect private lands from fires that start on the national forests. Then national forest wildfires could be allowed to burn up to the firebreaks, reducing even more fuel loads while minimizing suppression costs.

"Available Until Expended"

Traditionally, Congress gives an agency its budget for one year. When the year is up, if the agency hasn't spent all of the money, it loses it--and maybe gets its budget cut the next year. This leads to a last-minute rush to spend funds.

For nearly a decade, the Forest Service has pushed the idea that its budgets should be available until expended. With no time limit on spending the money, managers will be less likely to waste the funds. Congress has agreed to include this in the language for a few line items.

Unfortunately, these are not the line items which will make a large difference. Funds are available until expended for state & private forestry, wildland fire management, construction, and land acquisition. Funds are only available until the end of the fiscal year for research and nearly all national forest management items (timber, recreation, wildlife, etc.).

Adding the words "available until expended" to appropriations language is no panacea. But the fact that Congress won't even make this change for most line items indicates that Congress is still more interested in micromanagement than in letting managers do a good job.


The Forest Service's proposed 1997 budget present no real surprises, no significant new ideas, and no major changes in trends. The agency loses a huge amount of money and continues to lose more every year.

Although Congress cut the budget by a small amount in 1996, it still gives the Forest Service so much money for timber that the agency has learned to pad its timber requests. The long-run result is bad for forests and bad for taxpayers.

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