Editor’s Note: This post explores the parallel between the situations of the District of Columbia and counties with national forests with respect to rightful federal compensation.
The parallel was struck over a hundred years ago. In 1908, the U.S. Senate debated raising, from 10 to 25 percent, the timber revenue proportion the U.S. Forest Service shared with counties where national forests were located. In response to a fellow senator who opposed the increase, Wyoming’s Senator Francis E. Warren suggested the analogy of federal support for the District of Columbia (Congressional Record, May 11, 1908, p. 6058): “If the Senator will turn his eye on the District of Columbia,” Warren remarked,
he will recall that the United States Government pays one-half of the expenses of the District of Columbia, because, as I understand the reason of it, it has so much property here that is not taxed by the District government. In that way it contributes to the expense of the government of this District.
Now, take half of a State and throw it Into a forest reserve; it is so much not subject to taxation. Hence this proposition of paying the State some portion of the income, so that the Government may pay a part toward the education of the youth of the State and the care and support of the State government. That is as to the equity and propriety of it. Now, as to the amount, that is a matter of judgment.
Warren’s D.C. analogy has legs even today. Both federal compensation programs — for forested counties and for D.C. – redressed, inter alia, lost property tax revenue owing to federal land ownership. In the District of Columbia, the lost property tax hardship was additionally severe owing to the presence of the city’s host of foreign embassies and consulates, offices of international organizations, headquarters offices of nonprofits, and national monuments – all exempt from property tax too. According to recent estimates, federally owned property comprises about one quarter of the District’s total assessed property valuation. Combined with the other tax-exempt properties and improvements sited in D.C., the free-riding proportion rises to 42 percent. A 2002 Brookings Institution report estimated D.C.’s annual property tax loss at $550 million at then-current valuations and tax rates.
D.C.’s total proportion of tax-exempt property is about the same as Idaho’s quotient of national forest lands. Just under 40 percent of Idaho’s land area is tax-exempt national forest. In our county – Shoshone County, in Idaho’s heavily forested northern panhandle – national forests cover 72 percent of the land. Gifford Pinchot, the great architect of the national forests, pointedly addressed the issue of lost county property tax revenues in his book, The Use of the National Forest, published in 1907. “People who are unfamiliar with the laws about National Forests,” wrote Pinchot,
often argue that they work hardships on the counties in which they lie by withdrawing a great deal of land from taxation. They say that if the lands were left open to pass into private hands there would be much more taxable property for the support of school and road districts. The National Government of course pays no taxes. But it does something better. It pays those counties in which the Forests are located 10 per cent of all the receipts from the sale of timber, use of the range, and various other uses, and it does this every year. It is a sure and steady income, because the resources of National Forests are used in such a way that they keep coming without a break.
As it happens, both federal compensation programs hit the skids in the mid-1990s. Spearheaded by a protracted controversy over the Pacific Northwest’s spotted owl, the Forest Service underwent a profound mission change – from one defined by Gifford Pinchot’s multi-use principle to one organized around the diffuse notion of protecting forest ecology in the 1990s. Layer upon layer of environmental regulatory provisions ultimately made prospective Forest Service timber sales too difficult and too expensive to research and prepare. Court challenges from a vigorous environmental community too often thwarted harvests the Forest Service still attempted. The result was the dwindling of timber production on national forest and, therewith, the collapse of the Forest Service’s longstanding mode of compensating forested counties for lost property tax via a 25 percent share in timber revenues.
In D.C., on the other hand, the mid-1990s brought a different sort of crisis. Municipal overspending, mismanagement, and folly, combined with long-term, unanticipated consequences of the District’s shift to limited home rule in the mid-1970s, occasioned a looming disaster in the city’s financial situation. A 1996 New York Times article called D.C. a city where “everything is broken.” “Police officers,” the article noted, “dip into their own pockets to buy tires and put gasoline in squad cars.” “Two decades into Washington’s experiment in limited self-rule,” it continued, “the city is virtually insolvent. Its bond rating is junk status.”
In both cases, Congress, to its credit, leaped to the rescue. D.C.’s federal payment program dated back to the beginning of the Republic. Over its long history, the feds had employed a number of different formulas and delivery schemes for the payment. In 1995, as D.C.’s financial crisis grew, the federal government replaced a formula-based calculation with a flat $660 million payment annual check, which approach was anticipated to remain in effect through 2000. By 1997, however, it became clear that a radical restructuring of D.C.’s financial relationship to the federal government was necessary. A new paradigm organized around a new idea structured the new federal relationship. It was called the D.C. “Revitalization Act.” Instead of issuing D.C. an annual grant the federal government would assume responsibility for a subset of D.C.’s municipal expenses – namely, expenses that were customarily state-level responsibilities elsewhere in the nation. To take just one example, in U.S. states incarcerated felons are housed in state prisons, not municipal jails; in D.C., therefore, the feds took over this burdensome expense. In the aggregate, and including a number of other sweeping provisions of the Revitalization Act, the new federal relationship amounted to a much better deal for the District’s financial health.
In counties with national forests, which also experienced a time of troubles in the 1990s, Congress enacted the Secure Rural Schools and Community Self Determination Act of 2000 (SRS). This measure indexed continuing federal county timber payments against past, rather than current, levels of timber revenues.
But there was a telling difference between Congress’s response to the D.C. crisis and its response to the national forest crisis. SRS was seen as an interim measure only, intended to tide counties over a period of transition as they shifted their economies away from a dependence on timber. SRS payment levels decreased year by year as Congress, in theory at least, sought to wean counties away from federal compensation. By most accounts, SRS will come to an end altogether after 2014.
D.C.’s Revitalization Act, on the other hand, was seen as reconstituting the federal government’s obligation to the District and placing it on a firmer and long-term footing. Revitalization was an enduring fix, not a move toward the exit. No one ever suggested that the District should adapt to a new funding environment with no federal contribution.
What accounts for the remarkable difference? Both federal programs sprang from the need to compensate local government for lost property tax owing to a large federal presence. In both cases property tax losses recur year after year. Yet Congress, on the one hand, patted forested counties on the back and told them to get used to the loss while, on the other, Congress arranged an enduring, dramatically different, and, incidentally, quite successful restructuring of its obligation to D.C.
Incidentally, along the way D.C.’s relationship to the federal government has drawn detailed attention and study from the likes of the Brookings Institution, the GAO, and other commissions, institutions, and experts. The concept of a “structural imbalance or “structural deficit” has emerged from the process. GAO defines D.C.’s “structural imbalance” as “a fiscal system’s inability to fund an average level of public services with revenues that it could raise with an average level of taxation, plus the federal aid it receives.” It’s a valuable concept. According to GAO calculations, foregone property tax in D.C. might account for anywhere from about half to all of the District’s structural deficit.
But where are all comparable studies of the “structural deficit” counties with national forests will face after 2014?
Why are counties with national forests treated so differently from D.C. with respect to essentially the same enduring federal responsibility and obligation?