Compensating federal-lands states

The economic recovery across the West and Utah varies greatly by region and even by county. Many areas — especially rural ones — are struggling to adapt and grow.

In many communities, the federal government continues to make payments as compensation for public lands that are not taxable. In places where federal lands make up a significant share of lands, these payments support local schools, roads, and other services central to retaining families and jobs.

One of the largest federal land compensation programs, Secure Rural Schools, or SRS, has expired, and funding for payments in lieu of taxes, known as PILT, is uncertain. Now is a good time to review how these payments can provide certainty to counties to support economic recovery and better target payments to save taxpayer dollars.

Originally, the federal government paid for tax-exempt lands by sharing a percent of its timber receipts with counties. Revenue-sharing payments started small but grew dramatically during the post-World War II economic boom. As payments increased, volatility became an important concern as booms and busts in timber markets created uncertainty, and generated pressure to maximize commercial returns.

In 1976, Congress created PILT to address volatility by using appropriations to steady payments. Yet even with PILT, total payments fell by 62 percent during early 1980s recession. The creation of SRS in 2000 further decoupled payments from commodity receipts to help stabilize payments to counties.

Without SRS, federal compensation would again rely largely on revenue-sharing payments, which have declined dramatically. Lower revenue would be felt most acutely in rural communities, especially as PILT caps payments by population levels. As a result, rural counties would lose twice as much as metropolitan counties.

Some have suggested that revenue-sharing payments are the best way to compensate counties. Returning to this model, however, would again expose counties to lower and more volatile timber returns, retrench the timber wars, and result in unequal compensation to counties with federal lands.

This will harm the ability of most rural, federal-lands counties to provide for school, road, and economic development programs needed to compete in today's economy. It also will undermine ongoing collaborative efforts to create jobs around public lands.

As an alternative, we propose a single-payment solution which combines SRS, revenue sharing, and PILT to accomplish several goals: providing stable and predictable payments to counties, using economic benchmarks to target payments to have the highest benefit, and reforming the population cap to avoid harming communities.

Equally important, it saves money. Our proposal reduces federal spending by $45 million, while increasing the share of funding to rural counties, by de-emphasizing payments to metropolitan areas, such as communities near Salt Lake City, in favor of rural areas in southeastern Utah.

The Clearwater Basin Collaborative in central Idaho demonstrates how the single-payment approach can promote local solutions. The CBC — a partnership of tribal, federal, state, local, industry, and conservation interests — is working to enhance and protect the economic and ecological health of the Clearwater Basin, which is largely made up of federal lands.

By providing stable and predictable payments, the single-payment option provides counties with the flexibility to pursue multiple goals such as timber harvests, restoration, recreation and land protection. Allowing for this range of options will create more jobs, while supporting the good schools and roads fundamental to retaining families and existing businesses.

Mark Haggerty is a policy analyst at Headwaters Economics, a Montana-based independent research group that works to improve community development decisions across the West.