Forest Harvests Are Subsidized, Advisers Report White House Report Says Forest Service Accounting Practices Hide Overall Costs

After decades of Forest Service claims that logging operations turn a profit for taxpayers, the president’s economic advisers have concluded the national forest harvests cost more money than they make.

The $234 million in logging subsidies identified in the annual report of the Council of Economic Advisers marks the first time an administration has formally accepted environmentalists’ claims that Forest Service accounting practices hide overall logging costs.

The Forest Service, in its own annual report earlier this year, said its commercial logging operations turned a $59 million profit for the fiscal year ending Sept. 30, 1995.

The White House report, however, concluded that during the same period, the service collected $616 million in timber receipts but spent more than $850 million on timber management, reforestation, logging roads, payments to states and other costs.

“Generally, U.S. Forest Service subsidizes timber extraction from public lands by collecting less in timber sale revenues than it spends on timber program costs,” said the White House report, which was sent to Congress last week.

“Current policies toward natural resource use are mainly rooted in past legislation intended to stimulate the economies of the West and encourage settlement of the region,” the report said. “These policies facilitate the development and exploitation of natural resources.”

The system where timber companies are reimbursed for the roads they build to log public lands has been a key contributor to the Forest Service’s bottom-line problems, according to some analysts.

Timber producers receive credits to bid for future public timber sales equal to the cost of building roads to harvest current sales.

Some in Congress, such as Rep. John Kasich, R-Ohio, want the program ended, calling it corporate welfare.

President Clinton’s proposed budget for the next year also targets the road building subsidy program. The administration projects dropping the program could save an estimated $55 million.

Local timber companies warn that cutting the program in the name of making the Forest Service profitable would, in fact, do just the opposite.

Without the road building program, the price of public timber would rise to the point where fewer or no companies would bid on the trees. If the Forest Service can’t sell the timber, it certainly cannot make money, argue timber lobbyists.

Idaho Republican Sen. Larry Craig says the roads built by timber companies provide people free access to remote areas.

Forest Service officials said Wednesday they are willing to subject their accounting practices to an independent audit in response to the report.

David Hessel, director of forest management, issued a statement on Wednesday largely defending the service’s accounting practices.

Its Timber Sale Program Reporting System was developed by the service and Congress’ General Accounting Office in the late 1980s, in accordance with “generally accepted accounting principles,” Hessel said.

The system has been reviewed by an independent accounting firm before and the service “is willing to subject TSPIRS to an independent audit” again, he said.

“The Forest Service recognizes that differences in accounting procedures do occur and will entertain changes that will improve the system’s overall integrity,” Hessel said.

“We welcome the opportunity to meet with the president’s Council of Economic Advisers to gain an understanding of the procedures they used,” he said.

The agency traditionally has excluded from its bottom line some road-building costs, as well as the 25 percent share of timber revenue it is required to give to states.

“This is the first time there has been a recognition of the significant subsidies in the timber program,” said Carolyn Alkire, an economist for The Wilderness Society, a conservation group.

“It’s astounding. It’s what we’ve been saying all along,” she said.

The society projected in a report earlier this month that logging of national forests costs federal taxpayers $398 million more than the timber sales returned to the Treasury in 1995. It said the Forest Service failed to account for $200 million in road construction costs and $257 million in payments to counties.

Industry officials objected to the apparent division between White House and Forest Service thinking on the matter.

“It is always interesting when an administration doesn’t listen to the U.S. Forest Service. If the professional foresters are not making the decisions, who is?” asked M.J. Jamison, spokeswoman for the American Forest and Paper Association.

, DataTimes The following fields overflowed: CREDIT = From staff and wire reports Staff writer Eric Torbenson contributed to this report.