National Forest Timber Sale Receipts and Costs

Only five national forests made money on timber sales in 1995: the Inyo, Umpqua, Mississippi, Texas, and Allegheny. The Umpqua and Allegheny are perennial money-makers, having valuable Douglas-fir and cherry respectively. The Mississippi and Texas are off-and-on money-makers, and this year they lucked out. The Inyo is a surprise, since it usually loses money.

No surprise at all is the fact that all of the other forests lost money. While many could make money, the Forest Service has responded to declining timber sales by keeping larger shares of the receipts in the Knutson-Vandenberg, salvage sale, and other funds. In 1988, the agency kept less than a third of timber receipts in these funds; in 1995 it was nearly 60 percent. Since counties get a quarter, that doesn't leave much left over for the Treasury.

In addition, even though sales fell by nearly two-thirds between 1990 and 1995, the Forest Service's timber sale budget fell by less than 30 percent. Congress has been so eager to get timber out of the forests that it has more than doubled the Forest Service's expenses per thousand board feet. This also makes it harder to earn a profit for the Treasury.

Of course, it is important to understand that when we say a forest loses money, we mean it is losing the taxpayers' money. It isn't losing money itself; it gets both the tax dollars appropriated by Congress and the timber receipts it keeps in the K-V, salvage sale, and other funds. Thus, the Forest Service wins twice--once out of tax dollars, once out of receipts--when taxpayers lose.

Our calculations of net receipts are based on the simple criteria of comparing returns to the Treasury with costs to the Treasury. The Forest Service accounting system, known as the Timber Sale Program Information Reporting System (TSPIRS), uses the somewhat more liberal criteria of comparing all receipts--even those that don't go to the Treasury--with only some of the costs. But even TSPIRS concludes that 75 out of 120 forests lost money in 1995.

The Forest Service has published TSPIRS every year for nearly a decade. The results generally come out in the May after the fiscal year in question. The 1995 results were held up for nine months by the Clinton administration, which insists on micromanaging the agency even though it doesn't have time to do so (which is true of all micromanagers). Our analysis was held up even longer by the Forest Service's insistence that we file a freedom of information request for data not included in the TSPIRS files.

What Does It All Mean?

Politically, TSPIRS is getting pretty meaningless after all these years. Everyone agrees that the Forest Service wastes a lot of money. For 1995, TSPIRS reported net revenue before payments to counties of $59 million. Since counties got $257 million, that translates to a net loss of $198 million after payments to counties.

Actual losses were much higher because TSPIRS greatly underestimates the actual losses to taxpayers. The Thoreau Institute's reanalysis says that in reality the losses from all money-losing forests totalled nearly $400 million.

But once you admit there are losses the actual numbers are mere quibbles. The question that is still being debated is: Do these losses represent subsidies to the timber industry? In large part, the answer is "no." In fact, most of the losses represent subsidies to the Forest Service bureaucracy.

The timber industry may get two kinds of subsidies from below-cost timber sales.

First, the Forest Service appraisal process notoriously underestimates fair market value. This does not matter when there is competition for timber, since the competition drives the price up to true market value. But when there is no competition, such as in the recently ended fifty-year contracts for timber on the Tongass National Forest, valuable trees are given to timber purchasers at rock-bottom prices.

Second, the Forest Service budget rewards managers for losing money on timber sales. So they often sell more timber than they would sell if they were only rewarded for making money on timber. The extra timber sales mean that timber companies cut more timber. This isn't exactly a subsidy, however, because the extra timber is pretty worthless. It does translate to more environmental damage.

So in general, the losses in the sale program more reflect a bloated bureaucracy than corporate welfare. The timber sale losses are symptoms of serious problems with the Forest Service. Demonizing the industry, however, is probably not a constructive response.

General Methodology

TSPIRS is actually three different reports: In fact, all three of these accounts contain serious flaws. Most of the Thoreau Institute's reanalysis is devoted to turning the financial account into a true cash-flow analysis. The financial account reports all timber receipts and all timber costs. However, it amortizes many of the costs using an inappropriate formula. This leads to an underestimate of cost and, since many of the receipts don't make it to the Treasury, an overestimate of receipts.

The Institute's reanalysis requires four steps:

  1. Identifying the unamortized costs, all of which are displayed on a computer printout titled "TPIR01." Receipts are also on this form.
  2. Distinguishing the costs paid by the Treasury from the costs paid out of the KV, salvage sale, or other Forest Service fund. The TPIR01s distinquish KV, brush disposal, and road maintenance funds, but not salvage sale funds. So the Forest Service provided the Institute with data showing how much each national forest spent out of the salvage sale fund on each line item in TSPIRS.
  3. Distinguishing the receipts paid into the Treasury from the receipts paid into the KV, salvage sale, or another Forest Service fund. TSPIRS never distinguishes this information. So the the Forest Service provided the Institute with data showing how much of each national forests' receipts went into the KV and other funds.
  4. Allocating the regional and Washington office (including experiment station) timber program costs to the individual forests. Although TSPIRS counts these costs, it doesn't count them against receipts. The Institute divides these costs up according to the volume of timber sold by each forest.
Results Posted on the World Wide Web

Forest-by-forest results are posted on the web in four files:

  1. A "key data" spreadsheet shows TSPIRS results and the Institute's calculations of actual returns and costs to the Treasury as well as volume and acres cut.
  2. A "detailed data" spreadsheet shows TSPIRS costs for dozens of different line items.
  3. A "supplemental data" spreadsheet breaks down receipts by the fund they went into and shows the line-item costs paid by the salvage sale fund.
  4. A description file describes every row and column in the spreadsheets.
The three spreadsheets should be downloaded to your computer and viewed in a spreadsheet program as their columns will not line up properly when viewed with a web browser.

The key data spreadsheet, at, has all the basic data most people will need, including a listing of exactly how much each national forest made or lost on timber sales both according to TSPIRS and according to the Institute's calculations.

The detailed data spreadsheet, at, is based on a Forest Service computer data file known as TPIR01. This lists the actual receipts and costs by line item and then shows how TSPIRS manipulates those items. Our spreadsheet includes only the unmanipulated numbers, based on the column in the TPIR01 called "DATA FROM TPIR MST."

TPIR01s distinguish costs paid out of K-V, brush disposal, and road maintenance funds from costs paid out of tax dollars. But they do not distinguish costs paid out of the salvage sale fund from costs paid out of tax dollars. They also do not break down receipts by the fund they go into.

The supplemental data spreadsheet remedies these defects. The first part of the spreadsheet breaks down receipts by fund (KV, SSF, etc.). The second part shows how each forest spent salvage sale funds. The salvage sale line items can be subtracted from the same line items in the detailed spreadsheet to get spending out of tax dollars.

The supplemental spreadsheet, at, is based on computer files provided by the Forest Service's fiscal analysts in Ft. Collins. It uses the same accrual accounting system as TSPIRS so the data are exactly comparable.

1996 Results Will Be Worse

In 1996, the Forest Service kept more than two-thirds of all timber receipts in the K-V, salvage sale, and other funds. After subtracting payments to counties, there was essentially no money left over in the Treasury. In fact, in late August, 1996 (little more than a month before the end of the fiscal year), the Washington office was forced to order forests to transfer money from the K-V and salvage sale funds back to the Treasury so that there would be enough to pay counties.

As a result, 1996 TSPIRS results are likely to be even worse than 1995's, if that is possible. Just as a guess, the Allegheny and Umpqua may turn out to be the only forests that make money.

We hope to expedite 1996 results so that we will have them much sooner than 18 months after the end of the fiscal year. We will let you know as soon as they are available.

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