Make Forest Service Pay Its Own Way

Rocky Mountain News
June 7, 1998

By Terry L. Anderson

The threat of budget cuts for the Forest Service is some of the best fiscal and environmental news yet out of this congress. Angered by years of declining timber sales, Western conservatives are threatening to wield the budget ax. The net result could be a breath of fresh air to an antiquated agency.

If Congress is serious about reforming the Forest Service, however, it must do more than simply cut its budget. It should force the agency to fund its spending out of revenues and earmark any "profits" for a specific cause such as endangered species protection. Consider the benefits from such reform.

Gains to the taxpayer are obvious. In FY 1996 the Forest Service lost $388 million on logging, $24 million on grazing, $18 million on mining, and $164 million on recreation. Each one of these could be turning a profit if managed correctly.

Comparing national and state forests illustrates what efficient land management could mean. For every dollar the Forest Service spent between 1994 and 1996, it took in only 31 cents. State land management in 12 western states netted $6.58 for every dollar spent. The Forest Service averaged 202 employees per acre while the states averaged only 43 employees per acre.

In the case of timber production, Montana state forests illustrate the differences in efficiency. Between 1988 and 1991 the State of Montana spent about $65 per thousand board-feet of harvest to administer its timber program. National forests spent about $140 per thousand board-feet.

What accounts for these big differences? In a word--incentives.

National Forest officials depend on Congress, not efficient management, for funding. In contrast, state managers basically fund their budgets out of receipts. And with net receipts or profits earmarked to fund public schools, there is good reason for teacher's unions, school administrators, parent organizations, and school boards to serve as watchdogs for efficiency. Like share holders in a corporation, they care about the bottom line over the long term.

Suppose the national forests were managed with the same efficiency as state forests. If our national forests had state costs that are approximately 50 percent lower per unit of timber cut, the Forest Service could have turned a profit in FY1996 of $85 million. Instead it only contributed more to the flow of red ink from Washington.

If the same efficiencies were applied to grazing, Robert Nelson, an economist formerly with the Department of Interior, estimates that Idaho and Montana each could earn net profits of about $15 million per year if they managed Bureau of Land Management lands with the same efficiency they do state lands.

Clearly the taxpayers would be big winners from reforming the Forest Service, but what about forest users? First, logging interests are hardly doing well under the current system. Total harvest has fallen 60 percent from fiscal year 1989 to fiscal year 1996. The biggest reason for this decline is regulation and litigation associated with environmental regulations (such as the spotted owl). If the agency were earning a profit from timber sales, there would be more support for logging and other commodity production such as grazing and mining.

How would recreational and environmental interests fare under a pay-as-you go system? Needless-to-say, they paid nothing in FY 1996, while the Forest Service spent $211 million on recreation.

But suppose recreationist paid fees for activities such as hiking, fishing, camping and hunting. As a fee demonstration program authorized by the last Congress shows, fees can enhance local forest budgets and enhance the recreational experience. Smart managers take fees collected from boaters for launch facilities and invest them in improving the sites. In national parks such a Yellowstone or Yosemite, higher entrance fees are giving park superintendents the resources necessary to improve roads, sewage systems, and interpretative exhibits. The adage "he who pays the piper calls the tune" applies even in the public sector.

And when the environment becomes an asset to managers, it also wins. An independent environmental audit of forests in Montana consistently ranked water quality and wildlife habitat better on state owned forests.

By designating at least a share of profits from national forest management to a trust fund with an environmental focus--say leasing private land for endangered species habit--a profit-based management system could be even more effective.

The big loser in a profit oriented reformation would be the Forest Service bureaucracy in Washington. Not surprisingly, Forest Service Chief Michael P. Dombeck is on the defensive as a result of the proposed budget cuts. Since it inception in 1905, the Forest Service has grown into a socialistic dinosaur. Despite the reductions in timber harvests, the agency's budget and employment have marched upward. This growth in bureaucratic growth would have to stop if the agency had to fund operations out of revenues.

The time has come to put this leviathan on the endangered species list and to fill its niche with a management system that is economically and environmentally sustainable.

Mr. Anderson is the executive director of the Political Economy Research Center in Bozeman, Montana, a senior fellow at the Hoover Institution at Stanford University, and an economics professor at Montana State University.

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Terry Anderson is president of PERC and the John and Jean De Nault Senior Fellow at the Hoover Institution, Stanford University. He believes that market approaches can be both economically sound and environmentally sensitive. His research helped launch the idea of free market environmentalism and has prompted public debate over the proper role of...
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