Follow the Money

Forest Service Grazing & Timber Payments

More than 142 million of the Forest Service’s 193 million acres are in the eleven western states, and since 1906 the FS has returned a portion of its timber sales and grazing leases to counties.

The federal government began to worry about the nations’ rapidly shrinking forests in the 1870s, but it wasn’t until 1891 that Congress passed substantial legislation to protect trees on federal lands. The first effort was a brief rider (PL 51-561) granting presidents the power to withdraw forested lands from settlement. This resulted in an ever growing number of “forest reserves,” all located in the eleven far western states, but administration of these forests was divided between the Departments of Interior and Agriculture. The General Land Office had nominal authority over these lands, so in 1897 Congress passed legislation (PL 55-2) giving Interior authority to manage them. The following year Congress also allowed (PL 55-221) Interior to lease the lands and use the revenues to manage the reserves. In practice, though, Interior had little knowledge about forestry. That was the province of Agriculture, which first created a special agent to study forest problems in 1877 and in 1881 created the Division of Forestry. The agent and office had no power in the reserves, however, and this remained the situation in 1898, when the Secretary of Agriculture appointed Gifford Pinchot to head the Division and, in 1901, to rename it as the Bureau of Forestry. Thus authority over federal forests resided in Interior, but expertise lay in Agriculture. Pinchot soon sought to gain control of the reserves, and in 1905, Congress passed the Transfer Act (PL 58-34) to shift authority over the renamed “National Forests” and, of equal importance, over its revenues.

Pinchot envisioned a financial scheme in which the Forest Service would retain timber sales and grazing leases, making it a self-sufficient arm of the federal government. His dream did not last. When the Forest Service reported its first year’s receipts in 1906, they were much larger than anticipated, and a tug-of-war over revenues broke out in the House of Representatives. Members revealed several impulses. Most were of one mind that they did not want the Forest Service—or any bureau—to have a blank check, so they rewrote the fiscal contract to control the FS budget. Beyond that, though, members divided into a number of different, often mutually antagonistic camps. Western anger had been rising for some time because constituents felt they were being charged for access to resources that historically had been free for the taking, and the FS grazing lease program, which Pinchot announced only after passage of the Transfer Act, only heightened resentment. Western officials also recognized that federal leasing signaled the permanent loss of tax bases, and they complained about the long-term implications of lost taxes on their ability to provide basic social services such as roads, schools, and courts. Non-westerners largely viewed the FS revenues as a gift, a new pool of money from which to fund projects and as a means to escape the ever more fraught politics of the tariff.

What followed was a years-long battle over how to divvy FS revenues. Representative Frank Mondell, a Republican from Wyoming who was crucial to the passage of the Transfer Act and later Majority Leader of the House, submitted H.R. 19575 to return 10 percent of gross receipts to the counties from which FS revenues had come. The House Committee on Public Lands supported the bill but it went nowhere, partly because the Committee on Agriculture had actual control of FS revenues. The latter committee was not completely insensitive to western concerns. It too considered in-lieu payments, but there was no consensus on the matter. Thus in 1906 it adopted the temporary expedient of following the outlines of Mondell’s bill and returning 10 percent of revenues in the Department of Agriculture appropriation bill of 1907 (PL 59-382) and again in 1908 (PL 59-242). Finally in the 1909 budget (PL 60-136), the committee made the payments permanent by adding the words “hereafter” to a 25 percent return of gross receipts to each county for schools and roads, leaving to each state the final division of the school-to-road ratio. Thus although payments had already been made for two fiscal years, it was the 1908 legislation that established the first official in-lieu policy for federal lands in the West.

Non-western members hoped the in-lieu payments would ameliorate tensions. Political scientists Sally Fairfax and R. McGreggor Cawley suggest they were “an attempt to ‘buy’ western states’ compliance” (436), but little in western responses to the policy suggests the West was mollified. Most western representatives instead regarded the FS with suspicion and simmering discontent. They bitterly contested the 25 percent formula in the next few Congresses, hoping at least to increase, if not capture all the revenues. The basis of their complaint was that states in the East, South, and Midwest did control their lands, and thus the revenues derived from those lands, so in basic material ways western states were being denied “equal footing” with other states. That constitutional complaint lingers to this day, albeit in simplistic ways, but in the meantime the House Committee on Agriculture relented in 1912 (PL 62-261) by investing another 10 percent on roads in the national forests of counties from which receipts came. Western representatives soon used the 35 percent ratio as a baseline for negotiating the Oregon & California Railroad Lands Revestment Act of 1916, the Federal Mineral Leasing Act of 1920, and the Federal Power Act of 1920. In all three cases western demands eventually prevailed.

Historical treatments tend to portray the FS 25-percent payments as a stable source of income for rural western counties, but the substance of that percentage has evolved in subtle ways. When Congress passed the Knutson-Vandenberg Act in 1930 (PL 71-319), it set aside a portion of each year’s FS receipts for tree planting programs, effectively converting the in-lieu formula from a share of gross to net receipts, and in 1944 Congress further changed the formula (PL 78-425) by basing payments on the stumpage value of timber. In the 1960s and 1970s the capacity of forests to generate timber and grazing revenue altered repeatedly due to legislation mandating management for multiple-uses and for what we now call sustainability. The laws had the effect of reducing harvests—and thus revenues for roads and education—to serve an ever growing set of recreational and ecological considerations. In the process, untaxable federal lands made an ever smaller contribution to western county government coffers, and recent analyses suggest that payments fall far short of what most counties would receive if federal lands were taxed as private lands. Congress attempted to offset these issues with the Secure Rural Schools and Community Self-Determination Act of 2000 (PL 106-393). Most western counties soon elected to replace FS payments with the compensatory formula of the SRS program, but a few held on to the old 25-percent payments because local harvests generated more revenue than the formulas offered. Over the next fifteen years SRS payments, funded by Congressional appropriations, often fell short of what the formulas promised, and vanished altogether in 2014. Thus more and more western counties have gone back to the old 25-percent payment program. One categorical exception, at least to date, are the O&C counties in western Oregon, which from the beginning of the SRS program have elected to receive SRS payments for both its Forest Service and O&C lands. We have decided to combine the two land-based revenue streams into one figure in the SRS maps, but you can final an annual breakdown of those figures in a spreadsheet located in the Notes section of this website.

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