1634 A NATIONAL PLAN FOR AMERICAN FORESTRY 



the timber. This would provide a means of liquidating the principal 

 of the loan from current returns at the time of harvesting. 



A financial plan for the capital needs of the Federal Government 

 might be worked out that would involve: 



(1) Authorization to the Treasury to issue 30-year, 3-percent, 

 forest-development bonds in each of the next 10 years as called for 

 by the Secretary of Agriculture, and not exceed a specified amount 

 in any one year. 



(2) Provision for the retirement of these bonds at an amortization 

 rate of 2 percent per annum which would redeem all the bonds during 

 the next 40 years. 



(3) Payment of interest and amortization expense out of Treasury 

 receipts each year as a part of current expenses. 



While financing by the issuance of bonds would, in the end, cost 

 somewhat more than it would by the annual appropriation on the 

 pay-as-you-go basis, the advantages are threefold: first, it would 

 allow the prompt initiation of the plan even though Treasury funds 

 might not at once be available ; second, it would guarantee and stabilize 

 the financing of the project in a manner highly desirable in a a long- 

 time plan; and third, it would place the greater part of the amortiza- 

 tion on the period of time during which the income from the invest- 

 ment would be greatest. 



STATE GOVERNMENTS 



The same general principles of public finance may be readily 

 applied to the porposed State forestry program. Although some 

 States with ample incomes have adopted the pay-as-you-go system, 

 it is recognized as a sound business principle to pay for current ex- 

 penditures from current income or treasury surpluses, and to finance 

 capital investments from borrowed money. However, the scope of 

 the forest problem varies from State to State, as well as the sources 

 of wealth, so that no general proposal can be made to meet conditions 

 in all States. 



The capital investments of the forestry program include the acqui- 

 sition of State forests, and the permanent improvements thereon that 

 increase the value of the property and add to its productivity. Since 

 the acquisition and development of State forests is largely a self- 

 liquidating investment which will be of greatest benefit to future gen- 

 erations, it appears fair and logical to expect future generations to 

 help pay for them. For this reason it is suggested that capital invest- 

 ments might be made from borrowed capital; for instance, 30-year, 

 3-percent bonds with a 2-percent amortization rate. 



The States have already explored and developed the field of financ- 

 ing by borrowing, and in most instances have determined the methods 

 best adapted to individual needs and to conditions of the existing 

 financial structure of the States. 



From the previous tables it will be noted that for the first 10-year 

 period current expenses amount to approximately one third of the 

 total expenditures required, and that in no instance do current ex- 

 penses exceed an annual average of $300,000 for each of the 48 States. 

 Of course, the expenses will not be evenly divided, because the States 

 with the major forest problems will naturally carry a proportionately 

 large share of the expenditures. However, when it is considered that 



