Don Leal on Self-Supporting National Parks

July 10, 1997

Statement for the Subcommittee on Parks and Public Lands

By Donald R. Leal
PERC Senior Associate

“I believe the time will come when Yellowstone, Yosemite, Mount Rainier, Sequoia, and General Grant national parks and probably one or more members of the system will yield sufficient revenue to cover costs of administration and maintenance improvements.
— Horace M. Albright
Acting Director
National Park Service, 1917

Mr. Chairman:
My name is Don Leal, and I am a Senior Associate at the Political Economy Research Center (PERC) located in Bozeman, Montana. I am here today to present the case for returning our popular national parks to the self-supporting parks they were originally intended to be.

Early Parks Were To Be Self-Supporting Parks

It is not widely known but the intent of our early national parks was that they would be self-supporting parks. Congressional appropriations were to be limited to initial investments in roads and visitor facilities. In 1916, when Congress authorized the creation of the National Park Service, Interior Secretary Franklin Lane appointed Stephen Mather, a successful businessman and millionaire, to run the fourteen existing parks on a self-supporting basis. In Mather’s first report on parks to the secretary, he states:

“It has been your desire that ultimately the revenues of several parks might be sufficient to cover the cost of administration and protection and that Congress should only be requested to appropriate funds for their improvement. It appears at least five parks have a proven earning capacity sufficiently large to make their operation both feasible and practicable.”

The five parks were Yellowstone, Yosemite, Mount Rainier, Sequoia, and General Grant (now part of Kings Canyon-Sequoia).

Importantly, park revenues were held in a special account accessible to the Park Service without congressional appropriation. Mather considered this important for responsible management because from the Park Service’s perspective there was a clear link between serving park visitors and having funds necessary to manage the parks. Unfortunately, Congress took control of all of the financing for parks in 1918 by requiring that all park fees be returned to the treasury, and this critical link was broken. With revenues going to the treasury and the lion’s share of the funding coming from tax dollars the Park Service has had little incentive to serve park visitors.

Moreover, park budgets have become political footballs. Raising money via allocations from the treasury has been a matter of first denying customer service or letting park facilities run down in order to provide the necessary political impetus to free up more money for parks. For example, in the spring of 1996 the Superintendent of Yellowstone Park announced that two museums and a popular campground would be closed for the summer in an effort to save $70,000–the cost of operating these facilities during the year. While Yellowstone’s allocated operating budget had increased over the previous year, it apparently had not increased enough to keep these facilities open. The campground actually earned more than it cost to operate all three facilities for the year. However, since the revenues went to the treasury and not to the park, park management had little economic incentive to keep them open,and a lot of political incentive to close them.

More Tax Dollars Do Not Lead To Well-maintained Parks
Contrary to the view that tax-supported parks guarantees long-term protection, our national parks have suffered from poor incentives to maintain our parks. The Park Service says it has a $4.5 billion backlog of construction improvements and an $800 million backlog of major maintenance.

Are we to assume that our parks have fallen victim of a budget-conscience Congress? From 1980 to 1995, the total budget of the Park Service nearly doubled, from almost $700 million to about $1.3 billion. Spending on operations, which includes staffing and wage increases, grew at a healthy inflation-adjusted annual rate of 3.1 percent, and full-time staff increased from 15,836 to 17,216 employees–more than enough to handle visitation which grew by less than 1.5 percent a year. While spending on the agency itself increased, spending for major park repairs and renovations fell at an inflation-adjusted annual rate of 1.5 percent.

In addition, the healthy increase in operating expenses has not led to better service in Yellowstone, Yosemite, and other popular parks. According to a recent Consumer’s Report survey, the two most frequent complaints were crowded conditions and the lack of adequate visitor facilities.

This sad state of affairs is brought about because most of the money to support parks is not earned from park visitors.

As Tax Dollars Shrink, State Parks Are Becoming More Self-Supporting

States are showing us that as tax support for parks declines, park agencies will generate more revenue from users. Spurred by nearly a 41 percent decline in general tax support for all state parks in the country, user fees collected at all state parks went from $182 million in 1980, or about 17% of total state parks spending, to $513 million in 1994, or about 33% of total parks spending.

State park agencies collected, on average, about $0.68 per visit in 1994. In contrast, the Park Service collected on average about $0.40 per visit (concession fees included), or about 7 percent of total spending by the agency. Like national parks, state parks have increased fees but they have also raised revenue by creating more services for park visitors

Moreover, a number of state park systems are showing us that the idea of self-supporting parks, at least operationally, is a feasible goal. When heavy reliance on tax support for park operations is no longer an option, and legislatures implement institutional reforms to spur managers to raise revenue and save money on their own, state parks respond with innovative programs.

Faced with dramatic declines in general tax support, sixteen state park systems now regularly obtain more than half of their operating costs from user fees. New Hampshire State Parks funds its entire $5 million-plus operating budget out of entrance and camping fees. In 1991, in the midst of a growing general fund crisis, the state legislature required the park system to rely solely on park-generated revenue.

Park revenue had actually exceeded operating expenditure for three consecutive years prior to passage of the new legislation, but park receipts had been handed over to the state treasury. Importantly, the 1991 act let receipts flow into a park fund that carries over unspent park monies from year to year. This encourages self-sufficiency because park officials know that they have a reliable source of money dedicated to parks over the long term.

Prior to the 1990s, over 60 percent of Texas State Parks’ operating budget was funded out of general taxes. In 1991, Texas State Parks was told by the state legislature that general tax support would be eliminated by 1994. Texas State Parks found ways to raise revenue and save money on its own. Moreover, the services park managers created to raise revenue are all compatible with the primary mission of protecting the parks natural amenities Texas parks now derive about two-thirds of their operating budgets from user fees.

In addition, states have implemented institutional reforms to raise revenue and save money. In 1993, Texas park management developed the entrepreneurial budgeting system This innovative, market-based financing system rewards individual parks with larger operating budgets if they surpass their revenue or cost savings targets for the year.

California State Parks derives nearly half of its $188 million operating budget out of user fees. California’s Department of Parks and Recreation recently instituted a new budget allocation program which allows each park district to retain all the revenues earned from its park above a historical base. Budgeted funds not spent can be used the following year at the discretion of the park district. Any shortfall in revenues, however, will be taken from the following year’s budget. This system gives the district managers incentive to save money and to raise revenue.

With financial self-sufficiency as a goal we can expect better service and greater efficiencies in running our parks. Comparing adjacent state and national parks in Texas, California, and South Dakota where the attractions are about the same and where state parks rely heavily on user support and adjacent national parks do not, state parks earn more revenue per acre, spend less per acre, and offer more services (Exhibits A, B, C, and D) .

Where to From Here

Thanks to Congress, the National Park Service is now testing the waters of greater user support at selected national parks. Congress recently authorized a three-year demonstration program that raises user fees at up to one hundred popular parks. Those parks get to keep about 40 percent of the total revenue from fees. Previously, they could keep only 15 percent of the revenue raised from entrance fees.

We must make further changes, however, if we are to create self-supporting parks. To steer national parks in this direction, here are a few recommendations:

Congress should establish a fixed schedule that gradually reduces annual appropriations for park operations over a ten-year period until they reach zero. Removing the dependency on general funds spurred Texas, New Hampshire, and other state park systems to respond. The Park Service has to face the same reality.

Congress should allow park managers to institute their own fee-based services as long as these services are compatible with the protection of natural amenities. Texas park managers have shown that parks can offer a variety of services while protecting natural amenities.

Most of the fees collected in these parks, about 95% should remain in the park in which they were collected, to be used to fund operations there. A small amount, perhaps 5%, could be used to fund system-wide administration. Any revenues in excess of costs should be retained by the parks. The fee demonstration program results in added revenues staying in a popular park such as Yellowstone, but this still constitutes only about 11 percent of the operating budget, hardly enough to spur park management to emphasize fee-based services over greater tax allocations from Congress. In addition, it does nothing to motivate managers to find cost savings.

Therefore, I recommend that park managers should be allowed to keep all cost savings and apply them to the budgets for subsequent years. These funds would be treated as budget enhancements, not offsets to subsequent funding.

Finally, each park should have a special “park endowment fund” for capital improvements and repairs. Profits from user fee revenue, a percentage of concession sales, and park road tolls are possible sources. Allocations from the treasury have a way of going to the creation of new parks instead of maintaining existing ones. Giving park managers a capital fund dedicated to an individual park and the wherewithal to finance it can avoid this problem.

Of course, some parks will not attract enough visitors or have enough commercially valued assets to be self-supporting. If these parks are to remain in the public domain, they should be funded separately out of general funds and not be subsidized by high-use parks. These parks could also be turned over to private, non-profit groups with a one-time endowment to fund maintenance.

Requiring popular parks to be self-supporting–at least operationally–is the surest way of spurring responsible management and financial stability. The idea of self-supporting parks is what early park supporters had in mind near the turn of the century when we were a much poorer nation. Surely, with our higher incomes today, we as users can afford to pay for these amenities and help make our parks the treasures they should be.

Thank you very much for the opportunity to speak here today on this critical issue, Mr. Chairman.