The large number of money-losing timber sales indicates that something is wrong at the Forest Service. From 1989 to 1994 alone, at least half of our national forests lost money each year. Combined losses totaled more than $400 million for the 5-year period. There is no economic excuse for these below-cost sales.
Some critics suggest the solution is raising the price of timber. Others recommend easing environmental standards to reduce costs. Still other groups would like to see sales of federal timber halted altogether. None of these proposals is the answer to below-cost timber sales.
PERC Senior Associate Donald R. Leal compared timber sales on state and national forests in Montana. The growing potential and natural characteristics of these forests were closely matched. Overall, the state's timber sales earned nearly $14 million from 1988 to 1992, while the national forests showed a loss of $42 million. This is particularly startling because the state harvest was just one-twelfth of what the Forest Service harvested.
How could the results differ so drastically? The answer is that the state carries out its responsibilities at substantially lower costs. The Forest Service is losing money on timber sales because its management approach is unnecessarily costly.
Based on state performance, it appears that the Forest Service could reduce costs in many areas. The environmental process could be streamlined without sacrificing environmental protection. Rigid, bureaucratic rules could be eliminated. Less money could be spent preparing timber sales, and expensive permanent road systems could be replaced by temporary roads.
The question is whether the Forest Service has the motivation to do this. In Montana, the State Forestry Division has a constitutional mandate to make money for public schools. The Forest Service has no such mandate. Any losses are merely offset by congressional appropriations. Requiring that Forest Service lands generate income and designating a specific beneficiary, such as the local counties where the land is located, could force the Forest Service to become fiscally accountable.
The Forest Service needs strong incentives to adhere to the bottom line. The right motivation could help create a profitable timber program.
For more information on timber programs, see "Turning a Profit on Public Forests," PERC Policy Series PS-4, by Donald R. Leal.