44 



al overhead and put that out by forest, based on the volume that 

 each forest sells. We allocate those costs back to the individual for- 

 ests. 



The difference when you get to the bottom line is that the Forest 

 Service does put back in the Washington regional office at the 

 bottom line, yet we still include the payments to counties and the 

 $193 million in road costs that they do not put back in. 



Senator Craig. The reason why I ask that question is I think it is 

 important for the record to show why we have done what we have 

 done in public policy. Historically, we decided that prior to PILT 

 payments, those forested lands were going to contribute to the local 

 revenue base for the purposes of road building, one-time police pro- 

 tection, and certainly the schools. We wanted a consistent revenue 

 source, and because it was relatively predictable over extended pe- 

 riods of time, a revenue source coming from timber sales. In other 

 words, we did apply these payments to schools, roads, county pay- 

 ments, and we didn't apply it to campground revenue, because they 

 did not exist in those days. We did not apply it to the general reve- 

 nue of the Forest Service, because that didn't exist in general other 

 than timber sales. We did not apply it to grazing fees. We did not 

 apply it to hard rock mineral royalties because they don't exist. 



Now, my point is this. Is it really realistic to apply that 25-per- 

 cent factor to timber sales? Why don't you apply it to the general 

 revenue of the Forest Service instead of to timber sales specifical- 

 ly? You don't factor in, nor can you suggest, I don't believe, that to 

 prepare a timber sale, you have to factor in the cost of the local 

 school room or the cost of the bridge that is built by the county. 

 Can you realistically do that, or ought you not remember the his- 

 toric reason why those were originally attached? 



Mr. Francis. Mr. Craig, we factored back in the payments to 

 counties because it is a cost to the Forest Service; it is a lack of 

 revenue coming back to the Treasury of the United States. Certain- 

 ly, the Federal Government under the PILT system pays in lieu of 

 taxes, contributes to county government and local government. 

 And while the 25-percent payment is a means of doing that, it cer- 

 tainly reduces the revenues back to the Treasury of the United 

 States, and therefore we have counted it in that sense. 



We think there is an obligation on the part of the Federal Gov- 

 ernment to contribute for the lack of taxes. A 25-percent payment 

 is one method of doing that. We think it is not a very good method 

 for most counties because of the fluctuation in the timber markets 

 year to year. And you have seen what has happened in the Pacific 

 Northwest, where we have had to make those adjustments for 

 those communities because of the declining timber volumes. And 

 with the boom and bust cycle in the timber industry, counties don't 

 have a stable form of income coming in from the Federal lands 

 that are part of them. 



We think that the 25-percent payments or payments to counties 

 should be decoupled from the timber program, and the PILT pro- 

 gram should be rewritten to reflect a real, honest analysis of the 

 value of those lands to the counties, and that we ought to contrib- 

 ute to the counties based on the value of those lands and not hold 

 the counties hostage to the rise and fall in timber revenues or 

 timber program, because they are 25 percent of gross revenues. In 



