Forest Service – Growing Losses

Rolling Analysis, FY21 BudgetForest Service – Growing LossesAgency plans could deepen taxpayer losses from timber sales and road-building in national forests

In its budget for fiscal year (FY) 2021, the U.S. Forest Service requests a total of $7.4 billion. Despite a few scattered proposed cuts and plus-ups, the request is largely in line with recent funding trends for the agency. Like past years, the majority of the funding – $4.5 billion – is proposed for wildfire management, including a $140 million increase from the current level. The administration does, however, propose some changes, including some for how it manages its budget, with important consequences for taxpayers.

For years, we’ve criticized the Forest Service’s administration of commercial timber sales within the 154 national forests it manages. Despite incredibly limited accounting by the agency, it’s clear many of these sales generate less revenue than they cost to prepare and conduct, meaning taxpayers are losing money selling timber from federal lands. This is particularly true in the Tongass National Forest in Alaska, where we estimate the Forest Service has lost roughly $600 million over the last 20 years on timber sales.

In this year’s budget, the Forest Service requests $385 million for its “Forest Products” line item, the primary funding source for timber sales. That’s $12 million more than Congress appropriated in the December Omnibus for the current fiscal year. The increase might be justified if the timber sales program was solvent, but all indications point to the contrary. In FY18, the agency spent $388 million on Forest Products, and recouped just $41 million in receipts. Instead of bumping up its timber sales budget, the agency should be chopping it down to size until the timber sales program is reformed.

But the agency seems set on moving in the opposite direction. In its budget justification, the Forest Service raised its target for timber sales in FY21 from 3.7 billion board feet to 4 billion board feet. It’s unclear why. In FY19, the Forest Service sold less than 3.3 billion board feet, missing its target of 3.7 billion by a wide margin. The increase is therefore largely symbolic, an indication of the administration’s aggressive approach to timber sales. Because National Forest timber sales lose money, that aggressive approach could cost taxpayers millions more.

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Those losses could also deepen due to another proposal in the budget request to revive the Roads and Trails for States trust fund. The fund was first authorized in 1913 and gets 10 percent of revenue collected from all activities in the national forests. Since FY2008, that fund was simply emptied into the general Treasury fund – i.e. back to taxpayers. In the budget request, the Forest Service asks Congress to allow them to keep the money and spend $15 million from the fund on roads and trails.

That’s bad for taxpayers for two reasons. First, to the extent those funds don’t reduce road spending elsewhere, it’s a direct loss. Second, building more trails, and especially roads, increases the agency’s tab for maintenance, which it can’t afford. The Forest Service currently has a deferred maintenance backlog of more than $5 billion. The size and distribution of the backlog across types of  assets (buildings, roads, trails, etc) used to be reported in the agency’s budget justification. But the detailed accounting disappeared in recent years just as the Forest Service admits it has no way to pay for the backlog. Sweeping this crisis under the rug and adding to the problem by building new roads is a recipe for fiscal disaster.

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