Overview of the 1998 Forest Service Budget

The Forest Service has submitted its 1998 budget proposal to Congress. While there are a few items of note in the proposal, the most interesting part of the budget is to review the final figures for how much the agency actually spent in the most recent year, in this case 1996.

The Big Picture

Total 1996 Forest Service expenses were $3.23 billion, a 4 percent drop from 1995. But Congress has so far approved $3.45 billion for 1997, an 8 percent increase over '96 and a 4 percent increase over '95. The president is proposing a 1998 budget of $3.11 billion, which is an 11 percent drop from 1997.

Without adjusting for inflation, the president's proposal would be the Forest Service's smallest budget since 1988. Accounting for inflation, we have to go back to 1976 to find a smaller budget.

Yet the cuts in the budget are actually very minor. Timber's budget, as we will see, remains pretty bloated. Despite new recreation fees, taxpayers are spending as much on and earning no more from recreationists. The proposed grazing budget is triple that of 1994.

So where are the cuts? The big reason for the decline is a one-time only charge for fire suppression in 1997, leading to a $315 million drop in fire budgets in 1998. The administration proposes a $28 million drop in construction budgets but a $51 million increase in national forest operating costs. Other cuts include a $37 million reduction in the salvage sale budget and a $20 million cut in Knutson-Vandenberg spending, but these are likely to change on the ground.

On the receipts side, national forests earned $892 million in 1996, the lowest amount since 1983. After adjusting for inflation, this is the second lowest amount in more than two decades. The big reason for the drop, of course, is a 32 percent decline in timber receipts from more than $900 million in 1995 to just over $600 million in 1996. Mineral receipts also fell by nearly $60 million (28 percent), and recreation income by nearly $15 million (22 percent).

The Forest Service optimistically projects a $90 million increase in receipts in 1997, including a $30 million increase in timber receipts. This is to be followed by a slight decline in 1998. These predictions are rarely accurate.

Timber Receipts and Costs

Everybody wants to know whether timber sales lost money and how much. In fact, the last time that the Forest Service even came close to making money on timber sales was in 1990. Here are the final figures for 1996, estimates for 1997, and the proposal for 1998. All dollars are in thousands and receipts and costs include receipts and costs to the Treasury only, not paid into or out of the K-V, salvage sale, purchaser credits, or some other fund.
                          1996            1997            1998
Timber receipts         $186,776        $194,387        $210,102
Timber sale costs        188,641         196,000         208,000
Reforestation costs (1)   51,768          55,768          61,765
Road construction (2)     63,209          64,975          51,628
                        --------        --------        --------
Total costs              303,618         316,743         321,393
                        --------        --------        --------
Net to Treasury         -116,842        -122,326        -111,291
County payments (3)      140,679         141,643         129,256
                        --------        --------        --------
Net of county payments  -257,521        -263,969        -240,547
Volume cut in mmbf         3,720           3,900           3,880
1. Includes reforestation and timber stand improvement.

2. Includes purchaser roads built by the Forest Service ("purchaser elect") but not purchaser credit roads.

3. Includes 25 percent of timber receipts. Not only is a $116.7 million loss before county payments a near-record (exceeded only by the recession year of 1982), 1996 is the first year ever that timber sale costs alone exceeded timber receipts. The Forest Service predicts that the same will happen in 1997 and almost happen in 1998.

The agency seemingly has a lot of guts asking for so much money for timber sales when receipts are so low. While the timber sales budgets are down about a third from budgets in the late 1980s, timber volumes cut have gone down by two-thirds, which means that the cost per thousand board feet has doubled from about $60 per thousand in the 1980s to more than $130 per thousand in the late 1990s.

How does the Forest Service get away with this? Because Congress measures national forest management by the volume of timber cut, not by the net or even gross timber receipts. All the appropriations committees want is more timber, and the Forest Service knows that, so it doesn't hesitate to bloat the timber sales budget full of unnecessary people and expenses.

As usual, one important reason why national forest timber sales lose money is that the Forest Service keeps most of the receipts. In 1996, the Treasury got less than a third of timber receipts, down from 43 percent in 1995 and as much as two-thirds in 1988. Most of the rest went into the Knutson-Vandenberg, salvage sale, and brush disposal funds.

The Clinton administration's big initiative this year is to try to kill the purchaser road credit program. Under this program, the Forest Service can require timber purchasers to build roads, and the purchasers can credit the costs of the roads against the price of the timber.

If there were no purchaser credits, the Forest Service could still require that timber purchasers build roads, but the purchasers would simply bid less for the timber. The net effect on the Treasury (except in the weird and no long existing cases of the APC and KPC long-term contracts on the Tongass) is zero. So the administration is, as usual, barking up the wrong tree.


Although Congress has been trying to get the Forest Service to charge some more recreation user fees, 1996 recreation receipts are actually down from 1995. Moreover, no increases are projected for 1997 or 1998.

Total national forest recreation in 1996 was identical to 1995 at 341 million recreation visitor days. This may be because the Forest Service is putting less effort into estimate recreation use and so managers are simply reporting identical numbers to the year before.

Recreation budgets declined slightly in 1996, stagnated in 1997, and only a slight increase is proposed for 1998. The administration does want to boost recreation budgets by taking $16 million out of recreation fees to spend on "fee demonstration programs." Yet it predicts that these programs will not significantly increase fees--certainly not by $16 million.


The Forest Service recently changed the way it calculates range (and other) budgets, attributing planning to a new line item of that name and "resource support" to the resource being supported rather than to the resource doing the supporting. So dollars spent on range managers trying to protect fish were formerly attributed to range, now are attributed to fish. Although the change was made in 1996, it shows up in 1994 data since the final 1994 budget was first published in 1996.

This had a dramatic effect on range budgets, dropping them by two thirds. This doesn't mean that two-thirds of range managers lost their jobs. It just means that time they spent on other resources that they had formerly called range work was now called planning, fish, or whatever other resource was involved.

When the agency made this change, I predicted that Forest Service range staff would use the confusion involved to try to boost their budgets back to the "old" level, which in reality would be a significant increase in their budgets. This is in fact happening.

The range budget in 1993 (before the accounting change) was $44 million. In 1994 (after the accounting change) it was $16 million. By 1996 the agency convinced Congress to boost the budget to $27 million, and to $38 million in 1997. The agency is asking for $45 million in 1998, seemingly a restoration of a "cut" budget but really a tripling of the budget since 1994.

As with timber sales, Congress goes along with these shenanigans because range is an important stave in the pork barrel. Although the total number of animal unit months (AUMs) on national forests has declined slightly since the mid-1980s, and is expected to decline further by 1998, the administration knows that it can get all the money it asks for in range management.


Before timber, fire was the Forest Service's prime motivating force, and it may become so again. This is because no one inside the beltway can quite figure out how to manage fire. Fire isn't really pork, but no politician wants to be blamed for letting the national forests burn down.

After adjusting for inflation, taxpayers have shelled out $300 to $650 million a year for national forest fire over the past two decades, both for preventing fires and for putting them out. The cost zoomed to $900 million in 1990, but the average has been around $450 million.

Until around 1980, Congress gave the Forest Service a blank check for fire suppression. This gave the agency an incentive to waste money. Then Congress replaced the blank check with a "contingency fund" that the agency could carry over from year to year. Congress added about $125 million per year to this fund.

This worked for a few years. But back-to-back bad fire years in 1987 and 1988 led the Forest Service to exhaust the contingency fund and forced it to dip into the K-V fund to put out fires. The agency made only token efforts to make its fire suppression efforts more efficient, and its habits today continue to be wasteful.

Part of the problem is that 80 years of fire suppression has turned many forests into tinder boxes, ready to go off at the slightest spark. Congress and the Forest Service knows this but hasn't figured out what to do about it. The timber industry argues that more timber sales can help solve the problem, but sales are slower than ever.

In an efficient world, many national forests would probably cut or burn fire breaks along their edges, thus protecting adjacent landowners, and then let nature take its course inside. Other national forests might rely on some form of insurance. These are politically unpalatable solutions, partly because they don't produce enough pork.

The 1997 fire budget of $830 million includes $202 million used to finally repay the Knutson-Vandenberg fund for borrowings to suppress the 1988 fires. The 1998 budget of $514 million is thus a significant decline from 1997, but represents a major boost over 1996 and many earlier years.

The 1998 budget combines fire suppression and prescribed burning in one line item of $211 million. Instead of a contingency fund, this line item is to be used for fire suppression if necessary, and otherwise for prescribed burning. This is still not a good solution. During the fiscal year. fire seasons in most areas come after the season for prescribed burning, leaving the Forest Service open for more fire suppression deficits.


Despite lots of lip service about budget cutting, reinvention, and efficiency, the national forests are still costing taxpayers some $3 billion per year and returning ever-decreasing amounts to the U.S. Treasury. Attempts at incremental reform such as recreation fee demonstration programs or eliminating purchaser credits have essentially no effect on this picture.

For all the administration's lip service about the environment, this budget is really more like a Ronald Reagan budget than a Jimmy Carter or George Bush budget. Most programs are allowed to stagnate, timber and range budgets are boosted, incentives are left unchanged, and on-the-ground managers are effectively neglected despite attempts at micromanagement. The only real difference between this budget and a Reagan budget is that this one calls for less timber cutting--but the big decline in timber sales took place during the Bush administration, not the Clinton administration.

The fiscal responsibility and environmental sensitivity of national forest management will improve only after the Forest Service's budget is completely restructured with new incentives. Unfortunately, the Clinton administration has not been willing to consider such changes. Until they do, Forest Service prestige will continue to decline and national forest controversies will continue to divide western communities.

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