The Forest Service within the U.S. Department of Agriculture (USDA) manages 193 million acres of land across the United States.¹ The agency has 28,000 employees and annual outlays of more than $7 billion.² Forest Service lands are managed for multiple uses, including timber harvesting, recreation, grazing, and fish and wildlife habitats.

The Forest Service had its origins in the 19th century. Congress established a Division of Forestry in the USDA in 1881.³ The division focused on research and information provision, but it did not actively manage forest lands. The agency's name was later changed to the Bureau of Forestry.

Meanwhile, Congress passed the Forest Reserve Act (also known as the Creative Act) in 1891, which allowed presidents to set aside forest reserves out of public lands by executive order. Initially, those reserves were managed by the Department of the Interior. By 1897, 40 million acres had been set aside.

The Federal Forest Transfer Act of 1905, signed into law by President Theodore Roosevelt, moved control of the forest reserves from Interior to the USDA's Bureau of Forestry, soon renamed the Forest Service. The new Forest Service grew quickly—by 1908, it had 1,500 employees and controlled 150 million acres of land.⁴

An important early law, the Weeks Act of 1911, expanded Forest Service powers. The law authorized federal subsidies to the states for forest fire prevention, and it allowed the Forest Service to purchase private lands for the creation of national forests.

The Forest Service was heavily influenced by its charismatic first chief, Gifford Pinchot, a close friend of Roosevelt's. Pinchot was a progressive who believed that forest managers employed by the government could manage forests better than private owners. He made no secret of the fact that his eventual goal was for the Forest Service to gain authority over all public and private forest lands in the nation, a goal that was the policy of the agency until 1953.

Pinchot and others also believed that the nation was about to experience a timber famine that could be relieved only by huge investments in forest management. The reality was far different. U.S. timber consumption peaked in 1910 as the use of wood for fuel declined and as wood products manufacturers greatly increased the amount of useful wood they produced from a log.

Because of the continued availability of private supplies, Forest Service lands accounted for just two percent of the nation's lumber supply by the early 1940s.⁵ The "national wood famine" that the Forest Service had predicted never happened.⁶ Indeed, the United States had a glut of wood on the market from the time the Forest Service was created through at least the 1980s.

Despite its flawed outlook, by 1952 the Forest Service was one of the most popular agencies in government. "No one can deny that the Forest Service is one of Uncle Sam's soundest and most businesslike investments," gushed Newsweek that year.⁷ "It is the only major government branch showing a cash profit."⁸ In addition, the magazine lauded the agency's contribution to the value of recreation, wildlife management, timber stands, and pure and abundant water. The Newsweek issue, which featured Smokey the Bear on its cover, ascribed the agency's success to decentralized management.

Incentives to Cut

The popularity of the Forest Service did not last. Incentives built into the agency's budget by well-intentioned but poorly conceived laws effectively rewarded forest managers for losing money on environmentally questionable practices.⁹ At the same time, managers were penalized for earning a positive return on environmentally sound practices.

Congress gave the Forest Service funding to arrange timber sales, but it directed the agency to fund reforestation and other postsale activities out of the timber receipts. Agency managers soon learned to maximize timber sales in order to fund an array of programs. The budgetary system created perverse incentives. Because extra funds could be spent on restoration, the more damage timber sales did, the larger the budgets managers got to control. Every level of the agency's hierarchy had a stake in the below-cost timber sale program because as much as a third of the funds went for agency overhead.

Forest Service cutting practices were also problematic. At the time of the 1952 Newsweek story, most national forest timber was managed using selection cutting: individual trees were cut when they were mature, leaving behind beautiful stands of younger trees. When done right, a selection cut forest is hard to distinguish from wilderness.

Clearcutting, in which all trees on 20 to 100 acres or more are cut regardless of maturity, imposed higher reforestation and rehabilitation costs. But since agency managers got to keep those costs out of timber receipts, they had an incentive to clearcut even when other cutting techniques were more compatible with recreation and other uses. From a timber industry point of view, clearcutting sometimes makes sense. But when considering recreation, wildlife, and watershed, it was often devastating. The cash profits of the 1950s also vanished, and by the 1980s the Forest Service was losing billions of dollars a year on the timber and other programs.

By 1970 the Forest Service was cutting almost four times as much timber as it did in 1952, almost all of it clearcut. The resulting controversies over both clearcutting and the volume of timber cut rocked the agency and led to lawsuits, congressional hearings, and tree-sitting protesters. Ironically, agency leaders responded to the controversies by becoming more centralized, which only made the Forest Service more vulnerable to criticism.

In 1976 Congress tried to resolve the debate by instituting a comprehensive forest planning process. The resulting plans proved to be a costly mistake: the agency spent more than a billion dollars planning the national forests, but the plans were often based on fabricated data, and they did not resolve any debates.

The Forest Service's legacy of poor management continues today. A 2003 report by the Government Accountability Office (GAO) concluded: "Historically, the Forest Service has not been able to provide Congress or the public with a clear understanding of what the Forest Service's 30,000 employees accomplish with the approximately $5 billion the agency receives each year. Since 1990, the GAO has reported seven times on performance accountability weaknesses at the Forest Service."¹⁰ The agency's financial operations were on the GAO's "high-risk" list for waste between 1999 and 2005.¹¹

The timber program has long been subject to inefficiency and scandal. The Washington Post reported in 2004, for example, that a large area of the Tongass National Forest in Alaska was clearcut and the trees left to rot because of inept planning by the Forest Service.¹² U.S. taxpayers have lost millions of dollars in the Tongass. The agency's costs of selling timber from Tongass have substantially exceeded fees collected from companies. In 1992 a quirk in timber sale contracts even caused the Forest Service to pay timber companies $14 million to cut Tongass timber, which was a cost to taxpayers on top of the $40 million that the agency spent to manage the timber.¹³

Nonetheless, big changes have come to the agency despite its poor planning and management. Starting in 1990 a new generation of national forest managers started winding down the agency's timber program. Within six years, timber sales had fallen by 85 percent, and they remain at fairly low levels. This relieved the controversies about overcutting, but it led many to wonder where the agency would shift its focus after timber: Recreation? Wildlife management?

Fires Are the New Cash Cow

The answer came in 2000, when a fire burned more than a billion dollars worth of homes in Los Alamos, New Mexico. Congress responded by giving the Forest Service a huge increase in its budget, mostly for fire activities. While the agency's budget in the late 1990s averaged $3.5 billion a year, it topped $4 billion in 2001 and then $5 billion in 2002. In 2016 the budget surpassed $7 billion.¹⁴

Most of the increases have been for forest fire spending. Fire expenditures have grown from less than 15 percent of the Forest Service budget in early 1990s to about 50 percent today. Forest Service fire expenditures have increased from less than $1 billion in the late 1990s to $3.5 billion in 2016.¹⁵
 
Much of this money is being spent reducing hazardous fuels within the forests. Far more is spent preparing for and suppressing fires. Yet much of the spending on fire activities is as questionable as the Forest Service's earlier timber programs. National forest fire problems are not as bad as the Forest Service claims; hazardous fuels are only a major issue on about 15 percent of federal lands in the West.

Forest managers have known for decades that some fires should be allowed to burn for the good of forest ecosystems. But from the beginning, Congress has given a virtual blank check to the Forest Service for fire suppression activities, and much of the spending has been of dubious value. The agency has made poor management decisions regarding prescribed burnings over many decades.¹⁶

Agency leaders are taking advantage of Congress's willingness to throw money at the fire issue. With an increasingly large share of the Forest Service bureaucracy dependent on the extra funding that comes around each fire season, the agency blindly puts out almost all fires. Even people within the Forest Service fear that the agency's traditional commitment to conservation is being lost in an orgy of spending on fire.¹⁷

Table 1 shows that the Forest Service routinely spends five times as much on fire suppression per acre burned as the Department of the Interior, which has never had a blank check.¹⁸ No matter how much money Congress allocates for fire, the Forest Service almost invariably uses it all. That leads to demands for more, such as a 2015 proposal to allow the agency to tap into federal disaster relief funds.¹⁹ In fact, the real problem is that it has too much money, not too little.

Table 1. Fire Suppression Dollars Spent Per Acre Burned

Reform Options

Today, the Forest Service controls 193 million acres of land, has a budget of more than $7 billion, and employs 28,000 workers.²⁰ The Forest Service is in need of serious reforms. The services provided by the agency should be restructured to reduce taxpayer costs and to improve forest management practices.

One option is for Congress to allow the agency to charge fair market value for recreation and other resources. That would probably raise enough revenue to cover all of the agency's costs. Taxpayers would save about $7 billion annually if the Forest Service was shifted to a self-funding structure.

If Forest Service activities were self-funded, it would force the agency to be more efficient in its operations and more responsive to forest land users. Self-funding would create incentives for the agency to decentralize its operations, allowing managers to respond to local conditions instead of being controlled by top-down plans from Washington.

Another reform step would be to revive federalism by eliminating federal forest subsidies to the states and turning portions of the national forests over to the states. The Forest Service could turn national forest fire protection over to the states, as the Bureau of Land Management does in some places, paying an annual fee while letting the states determine the most cost-effective way to protect resources. Alternatively, national forests could buy private fire insurance, as Oregon does for its fire suppression program.

Some experts have proposed full privatization of the national forests.²¹ Alternately, the national forests could be structured as independent trusts that would be owned by the federal government but managed by a board of directors and funded out of forest-related receipts. The trusts would have special obligations to promote conservation while still producing many valuable resources.

For decades, the Forest Service has been plagued by mismanagement of taxpayer funds and subject to perverse and damaging incentives. In the coming years, policymakers should focus on the goal of reforming the Forest Service to reduce taxpayer costs while improving the sound and ecological management of forest lands.

¹ Carol Hardy Vincent, Laura A. Hanson, and Jerome P. Bjelopera, "Federal Land Ownership: Overview and Data," Congressional Research Service Report no. R42346, December 29, 2014.

² Budget of the U.S. Government, Fiscal Year 2017, Analytical Perspectives (Washington: Government Printing Office, 2016), Table 29-1.

³ Information on Forest Service history is available at www.foresthistory.org/research/usfscoll/index.html.

⁴ Terry L. West, U.S. Department of Agriculture, "Centennial Mini-Histories of the Forest Service," report FS-518, July 1992, Chapter 15, www.foresthistory.org/ASPNET/Publications/centennial_minis.

⁵ Ibid., Chapter 10. 

⁶ Ibid., Chapter 10. 

⁷ Newsweek, "Fabulous Bear, Famous Service Fight Annual Billion-Dollar Fire," June 2, 1952, pp. 50–54.

⁸ Ibid.

⁹ For background on Forest Service policies, see Randal O'Toole, Reforming the Forest Service (Covelo, CA: Island Press, 1988).

¹⁰ Government Accountability Office, "Forest Service: Little Progress on Performance Accountability Likely Unless Management Addresses Key Challenges," GAO-03-503, May 2003, p. 1.

¹¹ Government Accountability Office, "High-Risk Series: An Update," GAO-05-207, January 2005.

¹² Blaine Harden, "Reopening Forest Areas Stirs Debate in Alaska," Washington Post, August 1, 2004, p. A3.

¹³ Randal O'Toole, The $64 Million Question: How Taxpayers Pay Pulpmills to Clearcut the Tongass National Forest (Bandon, OR: Thoreau Institute, 1993), p. ii.

¹⁴ Budget of the U.S. Government, Fiscal Year 2017 (Washington: Government Printing Office, 2016), Public Budget Database.

¹⁵ Budget of the U.S. Government, Fiscal Year 2017 (Washington: Government Printing Office, 2016), Public Budget Database.

¹⁶ Randal O'Toole, "The Perfect Firestorm: Bringing Forest Service Wildfire Costs under Control," Cato Institute Policy Analysis no. 591, April 30, 2007.

¹⁷ Ibid.

¹⁸ National Interagency Fire Center, "Federal Firefighting Costs (Suppression Only)," 2016, www.nifc.gov/fireInfo/fireInfo_documents/SuppCosts.pdf. Annual acres burned by agency are found in the year-end situation reports downloadable from "Incident Management Situation Report Archives," National Interagency Fire Center, 2016, tinyurl.com/SitRepArchives.

¹⁹ H.R. 167—Wildfire Disaster Funding Act, 114th Congress, 2015, tinyurl.com/WildfireDisasterFunding.

²⁰ Budget of the U.S. Government, Fiscal Year 2017, Analytical Perspectives (Washington: Government Printing Office, 2016), Table 29-1. And see Carol Hardy Vincent, Laura A. Hanson, and Jerome P. Bjelopera, "Federal Land Ownership: Overview and Data," Congressional Research Service Report no. R42346, December 29, 2014.

²¹ Robert H. Nelson, A Burning Issue: A Case for Abolishing the U.S. Forest Service (Lanham: MD: Rowman and Littlefield, 2000).