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Forest Service Nearly Went Bankrupt In 1996

Sat., Sept. 13, 1997

Sharp declines in logging revenue combined with unauthorized payments to Northwest timber towns nearly bankrupted the Forest Service’s national forest fund last year, a government audit said Friday.

Forest Service officials transferred money out of reforestation and salvage timber accounts at the last minute to overcome a $77 million deficit and keep the forest system afloat, the General Accounting Office said.

But the auditors criticized the agency’s slow response and warned in a copy of the audit obtained by The Associated Press that the problems “are an illustration of the much larger fiscal accountability problems facing the Forest Service.”

“Many forests - especially in the Pacific Northwest - had negative year-end balances in their National Forest Fund accounts,” the GAO said. “A negative balance in the national forest fund is very similar to writing a check without any money in the bank.”

Neither the Forest Service nor its parent Agriculture Department had seen the audit and had no immediate response, agency spokesmen said.

Rep. Bob Smith, R-Ore., chairman of the House Agriculture Committee, told Agriculture Secretary Dan Glickman in a letter Friday that the audit raises grave concerns about the status of more than $100 million Congress has pledged to Northwest logging communities hit hard by sharp declines in timber harvests during the past decade.

“Although, according to the GAO, the Forest Service ultimately averted a crisis, I question why steps were not taken sooner,” Smith wrote. “Even more fundamentally, I question the timber management policies that brought the NFF to brink of collapse in the first place.”

The national forest fund is a “receipts-holding account” used to pay Forest Service bills and meet other obligations, such as payments to local counties, the GAO said.

It contains money from a variety of resources, although timber revenues traditionally have been the largest contributor.

Overall, national forest timber receipts have been halved - from $1.3 billion to $609 million last fiscal year - since the northern spotted owl was declared a threatened species in 1990, resulting in logging reductions to protect the bird’s habitat.

The forest fund followed a similar pattern, from $822.7 million in 1990 to as low as $186.8 million in the summer of 1996. A portion of timber receipts goes directly to reforestation before deposits are made into the forest fund.

“Lured into a false sense of security by the historically larger returns to the treasury, the Forest Service was unprepared to handle the crises it faced in fiscal year 1996,” the GAO said.

National forests in Oregon and Washington combined showed a $24 million balance in their forest funds last year, but 10 of the 19 combined to lose about $37 million, the audit said.

Part of the shortfall nationally was the result of legislation Northwest lawmakers pushed through Congress in the early 1990s to offset the loss of logging revenue with a specially appropriated “spotted owl guarantee” to Northwest counties.

The money, $135 million in 1993, was to be paid out of the general treasury, but the Forest Service instead tapped the national forest fund, the GAO said.

“This was an unauthorized use of the fund,” the audit said.

As a result, in fiscal 1996 the fund “lacked sufficient funds to meet its obligations - including the spotted owl payments - by a deficit of $77.6 million,” the report said.

“Even though the Forest Service was aware as early as May 1996 that the NFF was projected to be dangerously low at the end of 1996, and informally discussed the potential of a shortage internally between April and August, it did not formally initiate procedures to activate the spotted owl guarantee appropriation (from the treasury) until September 1996.”

The Forest Service has taken a good first step in response to the problems by establishing a special task force to review trust funds, GAO said.

But “the Forest Service has a long way to go toward solving its fiscal and accountability problems.”

The Forest Service told GAO it intends to ask Congress this fall for a $129 million appropriation for the spotted owl guarantee for the current fiscal year and does not expect any problems in the future.



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