Forest Funds: Often mentioned in county and school district budgets--what exactly are they? The details are right here . . .

March 5, 2015

[This story has had a brief added update / correction, which you can read by clicking here] Forest funds. Those are the words that always make their way into any conversation about money and budgets for Boundary County. Any Boundary County School District discussion about funding our local schools, or about the District budget--you'll hear those words spoken. Forest funds, or lack of forest funds, are a big part of the equation that led to the School Board's request for county voters to approve $2.4 million for this year's School District Supplemental Maintenance and Operations Levy (the vote for which is coming up March 10). Some people love Forest Funds and how that money can help our county. Some people hate Forest Funds, considering them to be yet another federal government handout. What exactly are these Forest Funds? We've got the story right here. They've got a lot to do with federally-managed land within Boundary County Let's start off with personal property--we're talking real estate property--here in Boundary County. Like counties across America, much of the money the county raises to provide essential government services such as law enforcement, roads, snow clearing and removal, ambulance services, and much more, comes from taxes on private property. Usually, counties across America have a lot of privately-owned real estate within their borders, so when that property is taxed, they can raise the money they need to provide all those essential services. However, in rural counties, such as Boundary County, the story is different. Only 25% of all the land in Boundary County is owned by private individuals. The remaining 75% is owned by government, and cannot be taxed. According to documents on the Boundary County official website, land ownership in Boundary County breaks down as follows: Federally owned land: 61.0% State owned land: 13.2% City/County owned land: 0.2% Privately owned land: 25.6% The numbers behind those percentages: of the 1,278 square miles that make up Boundary County, almost 1,000 of those square miles are government owned. The remaining 300 square miles or so are privately owned, and those private 300 square miles or so are the lands that are taxed to pay for government services for the entire 1,278 square miles of Boundary County. Unlike more metropolitan, urban, heavily populated counties in the United States, where most of the land is privately-owned and subject to paying property taxes, in Boundary County and hundreds of other rural counties around the country, a small privately-owned fraction of the county pays all the taxes for services for the entire county. Make up for lost funding within the county This has led to efforts to make up in some way for that lost taxation funding for these rural counties that have lots of government-owned land within their borders, and even further, to share with those counties some of the revenues the federal government generates from those lands. Two federal programs exist which provide money to rural counties to help compensate for large amounts of federal land within county borders. The money counties receive from these two programs could be called the "Forest Funds" that everyone talks about around budgeting, election, and school district levy times. Those two programs are the Secure Rural Schools program (its full name: Secure Rural Schools and Community Self-Determination Act) and the federal government's Payment in Lieu of Taxes program. One Program: Secure Rural Schools We'll start with the Secure Rural Schools program (SRS). The federal government generates a lot of revenue from timber sales and timber harvests on forest land located within small, rural, sparsely populated counties, like Boundary County. The federal government began a program back in 1906 to share with those counties some of the revenue from timber harvest on federal lands. Initially, the federal government paid back to the counties 10% of gross revenues from Forest Service and Bureau of Land Management (BLM) lands, those revenues generated largely from timber sales. In 1908, the amount paid to counties was increased to 25% of revenues, with the stipulation that those funds be used to pay for schools and for roads within the counties. For many years, rural counties relied upon and used that money, generated from federal lands within their own borders, to help with important schools and roads funding needs. But some unexpected problems arose, beginning in the late 1980s. Timber harvests began to decline, and that decline soon became significant. In the late 1980s, with the timber industry booming, from 11 to 12 billion board feet of timber was being harvested in National Forest System timber annually around the country. That was the heyday of those timber harvests, and that 25% of timber revenues shared with counties provided a substantial boost to county roads and school district budgets. Compare that with timber now harvested from those same forest lands: in 2014, around 2.5 billion board feet of timber was harvested from national forest lands, a drop of 80% since the 1980s heyday. The dollar value of those timber harvests: the peak year was 1989, when over $1.3 billion was generated from timber harvests. That amount appears to be in 1989 dollars---converting to 2014 dollars puts that number in today's terms at around $2.48 billion dollars. Compare that to 2014's paltry timber harvest, on a full nationwide basis, of $146 million. One can easily see how rural counties, who for years had received and depended on their 25% of those big-money timber harvests in the 1980s, took a severe financial blow when timber harvesting dropped dramatically. As that 25% revenue share which had been turned over to the counties shrunk more and more over the years, it became increasingly hard for rural counties to find the funds to support their roads and schools. Congress acts to help rural counties In 2000, Congress acted to help rural counties make up some of that lost money, when the Secure Rural Schools and Community Self-Determination Act was passed. This act was intended to be temporary, and allowed for increased payments to these rural counties for the fiscal years 2001 - 2006. The money to be paid to these rural counties under the act was not tied to current, depressed timber revenues, instead it was based on past, historic timber revenues--revenue numbers that did not really exist anymore, but the payments were made at the higher levels nevertheless. The original SRS act expired in 2006, but since then it has been renewed on a year-to-year basis, through last year's 2014 fiscal year. In Boundary County, funds received from the SRS program are divided to give 30% of those funds to schools, with the remaining 70% going to roads. For fiscal year 2014, Boundary County received $1,235,815 of these SRS funds. Of that money, Boundary County Schools received $370,745, and County Road and Bridge received $865,071 (all rounded to the nearest dollar). To date, the Secure Rural Schools Act has not been renewed for fiscal year 2015. However, discussion in Washington, D.C. on the Secure Rural Schools program is still on the table, and the possibility exists that it may yet be funded for another year--or it may not, but it has not been completely ruled out.  Keep watching on this. The Other Program: Payment in Lieu of Taxes A second source of county payments based on federal lands within the county is the federal program known as "Payment in Lieu of Taxes." Whereas the Secure Rural Schools program was set up to share with the counties revenues generated from federal timberland, the Payment in Lieu of Taxes program (also known as the PILT program), is specifically designed to make up for counties being unable to collect taxes on federal land within their borders. The initial law for Payment in Lieu of Taxes was passed in 1976, and was rewritten and amended in 1982. This federal law, now U.S. Code Chapter 69, Title 31, provides that "The Secretary of the Interior shall make a payment for each fiscal year to each unit of general local government in which entitlement land [meaning land owned by the United States government] is located, as set forth in this chapter. A unit of general local government may use the payment for any governmental purpose." Federally-owned acreage is what PILT funds are based on--PILT funds are specifically set up to look at a county's acreage in federal lands, and make payments to the county starting with that acreage (and taking other factors into account). PILT acres and money in Boundary County According to the U.S. government's Department of the Interior, the Forest Service owns 470,980 acres within Boundary County, and the Bureau of Land Management owns 4,256 acres, for a total of 475,236 federally-controlled acres in our county. For fiscal year 2014, Boundary County received its annual PILT payment from the federal government for $362,097. All of the PILT funds received by Boundary County go directly into the County's Justice Fund, used to fund several departments, but which mainly helps fund the Sheriff's Office. PILT funds paid to counties are not based on the same rate that local property owners pay as taxes on their privately-owned land. Instead, federal PILT payments are based upon a complex formula that incorporates five factors: • the number of acres within the county that are eligible for PILT payments • the county’s population • payments made to the county in prior years from other specified federal land payment programs • state laws directing payments to a particular government purpose • the Consumer Price Index as calculated by the Bureau of Labor Statistics For Boundary County's $362,097 in PILT funds received in 2014, the above formula worked out to a payment of about 76 cents per acre of federal land. No PILT money yet this year PILT funding for counties is not a guaranteed revenue that counties can automatically expect to annually receive. Before 2008, PILT payments to counties required an annual appropriation by Congress. From 2008-2012, PILT payments were set up for all counties to receive 100% of their authorized payments. This was renewed for another year for 2013, then renewed again for fiscal year 2014. PILT payments for our current fiscal year 2015 have not yet been authorized, even though we are now five months into the fiscal year. President Obama's Fiscal Year 2015 Budget Submission to Congress requested a one-year extension of the PILT program for 2015, but his budget submission did not get through Congress. Last year, in 2014, Boundary County received a total of $1,597,312 in combined SRS and PILT funds payments. So far this year, zero dollars have been received for those programs. At the present time, neither SRS payments nor PILT funds have been authorized for the current fiscal year, leaving rural counties in somewhat of a financial difficulty, and leading Idaho school districts to consider making drastic cuts, or requesting additional funding from tax payers. SRS and PILT for 2015 still being discussed in Congress Idaho Republican Senators Mike Crapo and Jim Risch, along with Oregon Democrat Senator Ron Wyden, have introduced a bill to renew the Secure Rural Schools program, proposing to extend the program for three years at its 2011 funding levels. Their bill would also restore mandatory funding for Payments in Lieu of Taxes. "Our bill renews county payments under the SRS program," said Senator Crapo in a recent press release. Senator Crapo continued, saying "Full, mandatory funding for PILT expired in 2013, and the program now relies on yearly appropriations, creating uncertainty for counties burdened with large federally-managed, untaxable lands in their jurisdictions. This bill would keep the promise made to local governments in 1976 that the government would mitigate for the lost tax revenue by restoring mandatory funding status to PILT.” Oregon Senator Wyden added, "County payments are a lifeline for cash-strapped rural communities that are already facing shortfalls to pave roads, keep teachers in schools and firefighters on call.” Their introduction of this legislation is no guarantee that any funding for these federal payment programs will be authorized--theirs is simply a bill that has been introduced for consideration. Idaho Congressman Mike Simpson, in a recent Appropriations Subcommittee meeting where Secretary of the Interior Sally Jewell was testifying, encouraged the Secretary to look at a long-term solution for the Payment in Lieu of Taxes program that he said "would provide certainty to Idaho counties" in their revenue and budgeting processes. Is there a chance that one or both of these programs will ultimately be authorized for 2015, with those big payments eventually made to the counties this year? Yes, there is a chance. Funding for both of these federal programs could be restored and still paid out for 2015, and it may happen. But whether this will happen depends upon Congress agreeing to pass legislation authorizing those payments, and that legislation being signed by the President. And for that to happen, politics needs to happen first. Now you're an expert There you go. The next time someone starts talking about those "Forest Funds" that seem so important in Boundary County and Boundary County School District fiscal conversations, you will now be an expert. [This story has had a brief added update / correction, which you can read by clicking here]