FOREST SERVICE ACCOUNTABILITY IN ADMINISTERING ITS TRUST FUNDS
CRS Report for Congress
Forest Service Accountability in Administering Its
Trust Funds
Ross W. Gorte
Natural Resource Economist and Senior Policy Analyst
Resources, Science, and Industry Division
Summary
The USDA Forest Service has numerous permanently appropriated trust funds and
special funds that provide substantial funding independent of the annual appropriations
process. Critics have alleged abuse of the funds and have sought greater congressional
oversight, and the General Accounting Office has testified on the agency’s management
of some of these accounts. While the Administration has offered few responses to the
criticisms of these funds, it has, in its FY2001 budget request, proposed creating two
new trust funds and combining several existing funds into a new fund with expanded
purposes. This report provides an overview of the permanently appropriated Forest
Service accounts and concerns over their use and proposed alternative structures that
could provide greater public and congressional oversight and control over permanently
appropriated funds. This report will be updated if events warrant.
Overview and Concerns
The Forest Service has 18 permanently appropriated accounts, providing substantial1
funding for agency programs (22% in FY1998) independent of annual appropriations.
Nine accounts had more than $25 million in budget authority in FY2000, for a total of
$628 million. In descending order of FY2000 budget authority, the nine accounts are:
!the Timber Salvage Sale Fund, to recover from timber purchasers the cost
of preparing salvage sales (including necessary roads) and administering
harvests: $127.9 million in FY2000;
!the Knutson-Vandenberg (K-V) Fund, originally to collect funds from
timber purchasers funds to reforest and improve timber stands, and since
$115.6 million in FY2000;
1 For more information on permanent appropriations generally, a description of the Forest Service
accounts, and a comparison of the Forest Service accounts with those of the Department of the
Interior’s land management agencies, see CRS Report RL30335, Federal Land Management
Agencies’ Permanently Appropriated Accounts.
Congressional Research Service ˜ The Library of Congress
!the “Spotted Owl” Payments, to compensate counties for FY1994–
FY2003 for the tax-exempt national forest lands that contain northern
spotted owl habitat: $114.5 million in FY2000;
!the (25%) Payments to States, to compensate counties for tax-exempt
national forests by sharing 25% of receipts: $113.1 million in FY2000;
!other cooperative work, to collect from timber purchasers funds for road
work after timber harvesting is completed: $50.0 million in FY2000;
!the Reforestation Trust Fund, originally to eliminate the reforestation
backlog, and since 1985 to supplement appropriations for reforestation
and timber stand improvement: $30.0 million in FY2000;
!the National Forest Roads and Trails (10%) Fund, originally to
supplement appropriations for road construction, and since 1999, also to
supplement appropriations for forest health improvement: $26.0 million
in FY2000;
!the Brush Disposal (BD) Fund, to collect from timber purchasers funds
to reduce the hazards from the limbs and tops left following timber
harvests: $25.9 million in FY2000; and
!the Recreation Fee Demonstration Program, to collect from recreation
users funds to maintain and restore recreation facilities and sites: $25.0
million in FY2000.
These accounts have two major purposes, as described above: to compensate local
governments for the tax-exempt status of the national forests, and to fund various specific
agency activities within the national forests. The 25% Payments to States have been
criticized as providing insufficient and/or inappropriate compensation, and legislation to
alter this program has been introduced and has passed the House.2
In contrast to the compensation accounts, the permanent funds for agency activities
have been widely criticized both for alleged misuse of the funds and for the agency’s poor
accounting of their performance. In the past three years, the General Accounting Office
(GAO) has testified several times and issued numerous critical reports on these issues:
!GAO/RCED-96-15 (June 1996), Forest Service’s Reforestation Funding:
Financial Sources, Uses, and Condition of the Knutson-Vandenberg
Fund;
!GAO/RCED-96-240R (B-274114, Aug. 22, 1996), Salvage Sale Fund’s
Deposits and Outlays;
!GAO/RCED-97-216 (Aug. 1997), Forest Service: Unauthorized Use of
the National Forest Fund;
!GAO/RCED-97-228 (Sept. 1997), Forest Service: Actions Needed to
Ensure That Salvage Sale Fund Is Adequately Managed;
!GAO/T-RCED-98-214 (June 4, 1998 testimony), Forest Service: Indirect
Expenditures Charged to Five Funds;
!GAO/T-RCED-98-240 (July 7, 1998 testimony), Forest Service:
Agency’s Response to Our Recommendations of the Knutson-Vandenberg
Fund; and
2 For more information, see CRS Report RS20178, Forest Service Receipt-Sharing Payments:
Proposals for Change.
!GAO/RCED-98-258 (Aug. 1998), Forest Service: Better Procedures and
Oversight Needed to Address Indirect Expenditures.
Others have also criticized Forest Service accounting for its performance and its use
of the permanently appropriated accounts. Congress’s Office of Technology Assessment
produced two reports in the early 1990s assessing Forest Service performance: OTA-F-
Forest Service Planning: Accommodating Uses, Producing Outputs, and Sustaining
Ecosystems. Analysis of Forest Service timber financial practices led Randal O’Toole to
write Reforming the Forest Service (Washington, DC: Island Press, 1988) and then to
cooperate with an array of interests — environmentalists, industry, and others — tond
develop the alternative financing and governance ideas presented in 2 Century: Options
for the Forest Service. In August 1999, the National Academy of Public Administration
presented recommendations on Forest Service fiscal management and accounting in
Restoring Managerial Accountability to the United States Forest Service. The agency has
argued that the accounts are necessary tools for effective resource management, although
better fiscal accounting and management are needed.3
In its FY2001 budget, the Administration announced its intent to offer legislation to
create three new permanent accounts, one of which addresses the concerns cited above:
!the Healthy Investments in Rural Environments (HIRE) Fund, to “reform
the Forest Service’s trust fund system” to reduce the backlog of road and
recreation maintenance and reconstruction, fire suppression, and forest
health projects, while funding “work currently performed under the trust
funds” using a “baseline” of funds from the Treasury;
!the Land Acquisition Reinvestment Fund, to acquire environmentally
valuable lands using funds from increased authority for land sales; and
!the Facilities Acquisition and Enhancement Fund, to build new facilities
and acquire environmentally sensitive lands from new authority to sell
“facilities, buildings, constructed features, and land in excess of ...” the
agency’s needs.
Situations That Have Led to the Concerns
The existing permanently appropriated accounts were created for specific purposes.
The K-V Fund, for example, was established to assure adequate funding for reforestation
and other needed work on timber sale areas following timber harvests; it was expanded in
1976 to allow timber receipts to be used to mitigate damages to resource values in timber
sale areas. The Salvage Sale Fund was established to assure recovery of the direct costs
from low-value salvage sales. Deposits for other cooperative work were authorized to
ensure that cooperators (e.g., timber purchasers) funded the necessary subsequent agency
activities (e.g., road maintenance needed because of logging truck traffic). Such reasoning
underlies most, if not all, of the permanent accounts.
3 Ronald E. Stewart, Deputy Chief, USDA Forest Service, “Testimony,” Fiscal Accountability in
the U.S. Forest Service, Hearings before the House Agriculture Committee on June 4, 1998
(Washington, DC: U.S. Govt. Print. Off., 1998), Serial No. 105-53, pp. 7-9.
One issue concerns the use of permanent accounts to fund activities beyond the intent
of the original authorizing legislation. The K-V Fund, for example, is no longer restricted
to funding reforestation of the timber sale area from which the funds were collected.
Instead, they can now be used on any sale area in the national forest where they were
collected, and “sale areas” (the entire area within the boundaries of the sale, not just the
area where trees are cut) have been expanding to allow broader use of K-V Funds. In
addition, the 1976 amendment allowed K-V funds to be used to enhance resource values,
not just to reforest timber sale areas. In 1999, the Administration proposed allowing the
use of deposits to the K-V Fund (and other accounts) anywhere in the National Forest
System to reduce hazardous fuel loadings. These several changes (including amendments
to the original authorization as well as the implementing rules) reduce accountability for
achieving the performance originally intended by Congress when it established the K-V
Fund in 1930, because they establish multiple, competing purposes, with Forest Service
discretion to allocate funds among those purposes, and virtually no limit on the level of the
deposits (up to the total amount of money received from the timber sale).
Critics have expressed concerns about funds with multiple authorized purposes when
one activity generates the receipts, notably the K-V Fund. This Fund receives a portion
of the revenues from most timber sales, which can then be allocated to timber purposes
(e.g., reforestation) and/or other purposes (e.g., watershed improvement). Critics assert
that some managers might support a damaging activity (e.g., a timber sale), because it
generates local funds for other desired activities (e.g., wildlife habitat improvement).
Others argue that mitigating damages or improving site conditions is an appropriate use
of the timber receipts.
Another situation is the disposition of “excess” collections — where the deposits are
more than was actually needed to perform the authorized task. Several accounts —
including the K-V Fund, the Salvage Fund, other cooperative work, and the BD Fund —
specify that any excess collections are to be transferred to the General Treasury. The
managers have no incentive to identify excess collections, since the money is effectively
“lost” to the Treasury, and cannot be used by the agency. There have been numerous
charges of misuse, but until recently, congressional oversight has been limited.
Some of the authorities for the existing permanent accounts attempt to provide quite
specific directions for the use of the funds. The Salvage Sale Fund, for example, was
created in §14(h) of the National Forest Management Act of 1976 “to cover the cost to
the United States for design, engineering, and supervision of the construction of needed
roads and the cost for Forest Service sale preparation and supervision of the harvesting of
such timber.” Other uses of the Salvage Sale Fund are apparently not authorized.
Similarly, the act establishing the BD Fund states: “Purchasers of national forest timber
may be required ... to deposit the estimated cost to the United States of disposing of brush
and other debris resulting from their cutting operations ....” However, even accounts with
narrowly written laws have been criticized as being used for unauthorized purposes. For
example, GAO reported that 27% of FY1997 expenditures from five accounts (ranging
from 9–34%, and including the Salvage Sale and BD Funds) were used for overhead costs.
This prompted widespread criticism from Members and legislation (H.R. 4149 of the 105th
Congress) to restrict such use, which had been endorsed by GAO in 1947 as appropriate.4
Structures to Achieve the Intended Results
Various proposals have been offered to restructure the permanently appropriated
accounts to increase the likelihood that they fulfill congressional intent efficiently. One
option that has been suggested would be to eliminate the accounts (i.e., to require annual
appropriations for all agency activities) or at least to require annual approval for spending
any of the deposits in a special account (probably in the appropriations bill). Both would
increase congressional control over expenditures for various purposes, and the latter might
also increase congressional oversight of revenues and deposits. However, some argue that
this is a difficult choice, between hoping that Congress will fund the desirable programs
(in annual appropriations) and trusting the agency’s discretion to fund desirable programs
(from the permanent trust funds). Some critics have suggested that Congress has not
provided balanced funding to achieve the desired outputs from and desired conditions in
the national forests.5
Another structure for achieving specific purposes on specific sites would be for the
statute that authorizes deposits to a permanent account to narrowly specify the level of
deposits, the activities and sites on which they could be used, and the amount of overhead
costs which could be paid. That would probably be most efficient and effective if there
were a cause-and-effect relationship between the sources and uses of the funds, such as
using harvest receipts to pay for reforestation needed because of the timber harvest.
That second structure would require some means to minimize “excess” collections.
Some have suggested that an external organization oversee the collections and determine
when collections are excessive. A simpler suggested approach might be to require that
collections not used for the authorized purposes on the appropriate sites be returned to the
depositor. That approach could work effectively for deposits by timber purchasers — for
the K-V Fund, Salvage Sale Fund, BD Fund, and some other cooperative work. Timber
purchasers would have an interest in assuring that the Forest Service minimized the funds
used, since any unused funds would be returned. It might also encourage purchasers to
alter their timber harvesting operations to reduce the subsequent site preparation and
reforestation expenses. Devising sufficiently clear statutory language for a contractual
arrangement and to prevent litigation on each timber sale could be difficult. That might
also require relatively precise accounting for receipts and expenditures for each timber sale
4 In 1947, responding to a request from the Secretary of Agriculture to allow use of K-V Funds to
pay administrative costs, the Comptroller General of the United States wrote: “In view of the
matters outlined above ... there would appear to be a reasonable basis for the view that the [K-V]
fund established under the act of June 9, 1930, ... properly may be charged with a part of the cost
of the services referred to [indirect costs], and no objection to such practice will be interposed by
this office.” B-67619, Dec. 3, 1947. GAO thus determined that some indirect costs could properly
be paid from deposits to the K-V Fund. Comparable letters may exist for other Forest Service
accounts, although none has been identified.
5 See Randal O’Toole, Reforming the Forest Service (Washington, DC: Island Press, 1988); and
Paul W. Hirt, A Conspiracy of Optimism: Management of the National Forests Since World War
Two (Lincoln, NB; Univ. of Nebraska Press, 1994).
which provided deposits to the special account. On the other hand, simplification might
also be feasible, for example, if site preparation (from the BD Fund) were combined with
reforestation (from the K-V Fund). That approach would benefit from very close linkage
— both geographically and causally — between the sources and uses of the funds, with
limits on the allowable use of the funds and external or independent oversight of those
uses.
For some of the existing funds — notably, the Reforestation Trust Fund, the 10%
Roads and Trails Fund, the Recreation Fee Demonstration Program, and the resource
enhancement and stand improvement activities of the K-V Fund — the conceptual link
between the activities that generate the funds and those on which the funds are used is
obscure, and developing a connection that would be transparent might be difficult. An
alternative approach, suggested by Randal O’Toole and others in 2nd Century: Options for
the Forest Service, would be to deposit a fixed share of receipts (e.g., 10%) to a special
fund. Such funds could then be used on specified activities and allocated to address
identified priorities, with oversight by an advisory group to assure that the priorities and
funded activities fulfill the intent of the program.6 That would not establish close
geographic and causal links, but it would fund specific activities and focus on priority
needs, with oversight by interested parties (although the financial stake of depositors who
were refunded “excess” collections would be missing).
Conclusion
Critics have alleged that the Forest Service’s permanently appropriated trust funds
have been abused — funding unauthorized activities and providing inappropriate incentives
for agency managers. Such alleged abuse could result from the structure of the specific
funds, but could also result from inadequate oversight. Minimal oversight, in turn, could
at least partly result from non-transparent financial management practices and other
inadequate performance-accountability measurement and reporting.
Various options have been suggested to address the concerns, including:
!terminate the funds and require annual appropriations for all activities;
!require annual appropriations to spend money from the funds;
!authorize and test new governance and funding structures (although this
generally addresses the entire agency, not just the permanent funds);
!establish direct cause-and-effect linkages between fund sources and uses,
with independent oversight to assure performance and prevent excess
collections; and
!centralize collections and allocate funds to achieve priority needs, with
independent oversight.
However, any changes in the permanent trust funds and special funds would require
legislation which would likely be controversial, because of the numerous local, state, and
national interests involved.
6 The Migratory Bird Conservation Commission (16 U.S.C. 715a) might be a useful analogy. This
Commission, composed of three Administration officials and four Members of Congress, is
authorized to review U.S. Fish and Wildlife Service recommendations for land purchases using the
permanently-appropriated Migratory Bird Conservation Fund.