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Forest Magazine article “In the Red,” Summer 2007

In the Red

sad child with sign

A child sits on the steps of a public library in southern Oregon, during a staged sit-in to protest the closure of libraries around the county. Photo © Orville Hector, Ashland Daily Tidings.

By Alice Tallmadge
Forest Magazine, Summer 2007

In the RedPaying the RentCheckered PastBeyond Payments

In the Red

In April of this year, Jackson County in southwestern Oregon closed down all fifteen branches of its popular library system. A remote school district in Alpine County, California, is scrambling to figure out a way to keep its staff of sixteen teachers intact. Throughout the rural West, administrators are preparing to pink-slip teachers and corrections officers, empty out jails, cut back sheriff patrols and delay road repairs.

Such are the unfortunate consequences of not renewing the Secure Rural Schools and Community Self-Determination Act. The law, passed in 2000, provided cash payments in lieu of a percentage of timber receipts to counties with large swaths of federal timber land. In the past, those counties had relied on a portion of timber receipts to offset tax revenue they couldn’t collect for those lands, and used it to fund county services and schools. But after timber harvests on national forests plummeted in the early 1990s, the receipt income dried up, leaving many timber-dependent counties in dire straits.

Since 2000, the act has doled out an estimated $400 million in annual payments. Western states whose federal lands had provided the largest amount of timber—Oregon, California, Washington, Idaho, Montana—received the lion’s share of the funds. Besides shoring up budgets for rural schools and roads, the money has helped pay for an array of county services as well as local and regional restoration and conservation projects.

But now those counties are, once again, up against the downside of having the federal government as their largest landowner: Their budget allocations are at the mercy of political tug-of-wars.

Last year, the 109th Congress declined to renew the Secure Rural Schools bill, with legislators on both sides of the aisle voting down the administration’s proposal to sell off thousands of acres of national forest land to fund it. Earlier this spring, western lawmakers were delighted when the Senate passed a reformulated bill that would have continued payments for the next five years. But Congress cut back the payments to just one year in a war-spending bill it sent to President Bush in April. The bill included a pull-out date for troops in Iraq, and as he had vowed, President Bush vetoed it. Western legislators hope the five-year allocation will make it into the final spending bill, but as Forest Magazine goes to press, continued payments aren’t a sure bet.

For many eastern and midwestern states, the Secure Rural Schools reauthorization doesn’t evoke a blip on the economic radar screen. But for many rural western counties, the end of payments means slashing county and school budgets, and turning to voters to support levies to raise needed funds.

“Now rural counties across the nation are dangling on an economic tightrope without a safety net to catch them,” said Oregon Senator Gordon Smith in January. “We stand here with our timber-dependent counties at the mercy, once more, of the federal government. If we do not extend the safety net, many counties in my state stand to lose nearly 70 percent of their general and road funds.”

The Secure Rural Schools bill was passed with the hope of helping timber-dependent communities transition to new economic realities, but not all areas of the country applauded its passage or support its renewal. The following stories offer some background on the bill, including the convoluted past of Oregon’s O&C lands, history of the legislation and some unexpected successes.

Paying the Rent

Congress has instituted several payment programs to reimburse counties that encompass significant acreage of non-taxable federal land. Although states across the country include federally owned land to varying degrees, the issue of compensation is particularly important in the West, where federal lands can make up half or more of many rural counties. The programs have been amended or added to throughout the years to align with changing economic conditions. Most of the programs are nationwide; one is specific to Oregon, however, because of historical agreements.

THE TWENTY-FIVE PERCENT FUND

Also called the National Forest Revenue Act, this 1908 law gave to counties 25 percent of timber receipts from what were then called “forest reserves.” The act stipulated that funds were to be used to benefit schools and roads in the counties that contained the forests. Under this act, a county’s timber receipt payment is based on the percentage of national forest acreage within its borders, not on the timber that was actually harvested in the county.

OREGON AND CALIFORNIA REVESTED LANDS ACT OF 1937

This law mandated that 50 percent of the timber revenue generated from 2.5 million acres of land that the federal government once gave to the Oregon and California Railroad—but then took back—be shared by the eighteen Oregon counties who had those lands within their borders.

PAYMENT IN LIEU OF TAXES

This program was established in 1976 to help offset losses of property taxes in counties with large amounts of federal land that don’t produce timber receipts. The program covers national forests, national parks, national wildlife refuges, Bureau of Land Management lands and other federally managed acreage. BLM administers the program, which is usually not fully funded.

PAYMENTS TO COUNTIES

Logging in national forests and on BLM land in the Pacific Northwest plummeted in the late 1980s because of litigation relating to northern spotted owl habitat. Congress set up a payment program that provided a base payment equal to the average annual timber receipt payments in 1986–1990 to rural counties who were dependent on timber receipts to fund services and schools.

THE SECURE RURAL SCHOOLS AND COMMUNITY SELF-DETERMINATION ACT

This act, passed in 2000, substituted timber receipt–based payments with a stable funding formula for counties with federal timberland acreage within their borders. The bill, which expired in late 2006, distributed about $400 million annually among thirty-nine states, but four western states received the bulk of the funds. In 2005, Oregon received $159 million, California received $67 million, Washington received $46 million and Idaho received $24 million. The law hasn’t yet been renewed, and its fate remains uncertain.

Checkered Past

Close to 50 percent of the land in Oregon—almost 32 million acres—is owned by the federal government. Because of a convoluted history of land ownership that reaches back into the middle of the nineteenth century, Oregon counties have been on the receiving end of millions of dollars from federal timber receipts, and more recently, the Secure Rural Schools and Community Self-Determination Act.

The history of the state’s O&C lands—named after a land grant to the Oregon and California Railroad—illustrates how rural counties came to rely on federal government payouts to compensate for the loss of tax revenue from the land.

In 1866, in response to developers who saw the potential for commerce in northern California and the Pacific Northwest, Congress granted land in Oregon and California for the purpose of financing the construction of a rail line between Portland, Oregon, and Davis, California.

Land grants of this nature were not uncommon in the West as railroads pushed across undeveloped territory. In the O&C grant, for each mile of rail, alternating square-mile sections that ran twenty miles deep on either side of the line were deeded to the railroad developers—almost 4.25 million acres of land. Congress directed the railroad to sell sections to homesteaders as rail construction proceeded. Congress included three stipulations: no more than one section could be sold to an individual, the land should be sold only to qualified homesteaders and the cost would be no more than $2.50 an acre.

But rules like this begged to be broken. Carpetbaggers, posing as settlers, purchased sections at the government rate and deeded them back to the railroad for a fee. The vast swaths of old-growth forests, often in rugged, steep and inaccessible areas, were more valuable for timber than for agricultural use or settlement and by 1890, timber cruisers from large midwestern companies were showing interest. The going price per acre rose to around forty dollars. The rail company, in violation of the law, sold the land at the higher price until 1903, when the O&C Railroad ceased selling land altogether, either as a hedge against future increases in land values or to retain the timber profits for itself.

Fearing that the cessation of land sales would curtail development in Oregon, the state legislature turned to Congress for help; in 1908, Congress reclaimed all unsold O&C land grants. During the next several years, various interests challenged the federal reclamation in court, but in 1916 Congress passed the O&C Revestment Act, which returned 2.4 million acres of unsold land in Oregon to federal ownership.

By the 1920s, the eighteen Oregon counties that had O&C lands were feeling the pinch of a general economic decline and the loss of property tax from the land that was now owned by the government. Individual school and port districts with high percentages of O&C land were having a hard time paying their bills and meeting bond payments. They formed the Association of O&C Counties, which still exists today, to lobby for federal legislation that would give them annual payments equal to the property taxes they would have garnered if the land had remained in private ownership. In 1926, Congress gave the counties tax-equivalent receipts “off the top” from any timber sales on O&C land.

In 1937, Congress passed the O&C Revested Lands Sustained Yield Management Act, which directed that the land be managed for permanent forest production, and provided approximately 75 percent of timber revenues to the counties. In 1953, the counties decided to return a third of that to the government in a plowback fund to pay for land management services, leaving their revenue at a generous 50 percent of the total receipts. This formula enriched the counties for years, but by the late 1980s environmental laws and overharvesting began to curtail timber sales. In the early 1990s, Congress set base payments to rural counties in the Pacific Northwest, including the O&C counties, to make up for declining timber revenues.

And then, in 1994, logging in the Northwest rolled to an almost complete halt. The Northwest Forest Plan put much of the BLM and U.S. Forest Service land, including O&C land, out of reach for timber harvesting, leaving only 16 percent of the previous acreage available for logging. Jobs in rural communities dried up and services closed down.

In 2000, Congress adopted the Secure Rural Schools Act, which granted six years of payments to rural timber-dependent counties throughout the West and continued reimbursements for Oregon’s eighteen O&C counties.—Patricia Marshall

Beyond Payments

Although touted primarily for its funding mechanism, the Secure Rural Schools and Community Self-Determination Act created an innovative process to help bring together regional players—many of whom had been at loggerheads for years—to oversee a variety of restoration and conservation projects. According to a recent study conducted by the nonprofit Sierra Institute for Community and Environment, this aspect of the bill has “exceeded expectations and accomplished more than most thought possible.”

Under the 2000 law, 80–85 percent of a county’s funding was reserved for schools and roads. The remainder was set aside for conservation projects on or near federal lands that were to be overseen by regional groups, called Resource Advisory Committees, or RACs. They were made up of representatives from local government, industry, federal land management agencies, the surrounding community, environmental groups and local tribes.

Projects can only go ahead with RAC approval, and in its study of sixteen RACs in nine states, the institute found that the committees usually found their way to agreement, rather than getting mired in endless debates.

In March, Sierra Institute director Jonathan Kusel testified to the Senate Subcommittee on Public Lands and Forests that “the collaborative relationships established and learning among RAC members, and between RACs and the counties and the federal agencies, has, in general, been exceptional…As the first legislation to require multi-stakeholder collaboration to advance resource management projects, few would have predicted the breadth and depth of success it achieved.”

RAC projects have included thinning, restoration of fish and wildlife habitat, watershed improvement, culvert replacement and noxious weed eradication. Other projects have bolstered search and rescue services, fire prevention and forest-related education. Many RACs, the report found, used their funds to leverage resources, partnerships and volunteer work.

RACs also led to improved relationships between members and federal agencies, with both sides gaining more insight into the motivations and restrictions each operates under. RAC dollars have enabled the U.S. Forest Service and Bureau of Land Management to complete projects the agencies otherwise wouldn’t have had funds for. “Agency representatives acknowledged that work with the RAC has helped them learn new ways of doing business,” Kusel said.

Uncertain Future

When Oregon Senator Ron Wyden and Idaho Senator Larry Craig first introduced the Secure Rural Schools and Community Self-Determination Act in 1999, environmental groups exhorted their members to oppose it. Because the payments were initially tied to timber receipts, the National Audubon Society called the bill a return to the “dark days of forestry” when “logging was on a subsidized pedestal” and “wildlife roasted on the back burner.” The Western Ancient Forest Campaign warned that it put “commodity production ahead of good stewardship.”

These groups weren’t the only ones waving red flags. Taxpayers for Common Sense called it a “sneak attack by western senators to increase subsidies to the timber industry.” Others pointed out that the financial arrangement proposed in the bill’s fine print would give local counties control over the U.S. Forest Service budget, resulting in diminished congressional appropriations and a severely weakened agency.

None of those fears materialized. Last-minute negotiations led to wording changes that sidestepped the specter of local control. The payments were not tied to timber receipts, but came instead from the general treasury. The bill provided a financial lifeline to rural counties throughout the West. In Oregon, the act yielded a veritable windfall, bringing in about $200 to $250 million a year in payments—half of the bill’s total outlay.

But the discrepancy in payments did not sit well in other parts of the country. The dissatisfaction became more pronounced in 2006 after Undersecretary of Agriculture Mark Rey proposed selling off parcels of national forest land to fund the bill for several more years. States in other parts of the country were adamant: they didn’t want to sell their public lands to fatten the coffers of Western states in general, and Oregon in particular.

Senator Craig refused to back the bill’s extension unless the funding formula was more equitable. An initial Senate bill, passed this March, fully funded the program for 2007 and used a new formula that decreased overall payments, reduced the amount that Oregon, Washington and California would receive, and supported counties demonstrating the greatest economic need. The bill also fully funded the Payment in Lieu of Taxes program, which compensates states for loss of tax revenue from federal lands. The final measure, included in the budget bill which President Bush vetoed in May, contained only a one-year extension of the program.

Whatever agreement Congress and the administration come to in the next few months, it will still be a stopgap measure. The fundamental issue of how to help timber-dependent counties maintain their viability at a time of permanently reduced logging will remain. The West’s broad green bands of public forests are essential for keeping ecosystems intact. They make great outdoor tourist destinations and provide a legacy for future generations. But somehow legislators need to solve the vexing question of how rural counties can survive when their predominant color is green, but it’s no longer the color of money.



 

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Forest Magazine is published by Forest Service Employees for Environmental Ethics, P.O. Box 11615, Eugene, OR 97440. The views expressed in Forest Magazine are those of the authors and do not necessarily reflect FSEEE’s position or that of the Forest Service. Copyright © 2008 Forest Service Employees For Environmental Ethics.

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