58 



Below-Cost Forest Service Timber Sales 



You are holding this hearing while the Senate is debating how to reduce 

 annual budget deficit and curb the rapidly mounting National Debt. Below-cc 

 Forest Service timber sales are a contributor to both. 



The Forest Service "accounting" system (TSPIRS), is not and could not be used 

 to determine the annual appropriation needed to run the timber program. 



But for a moment, let's assume it is relevant. The Forest Service Annual 

 Report for 1992, as in prior years, claims the timber program had "Net 

 Revenue" of $254,657,000. It misuses the term. The actual outcome, even under 

 their accounting was a Net Loss of -$50,821,000. Despite major efforts to 

 make costs disappear, and continued abuse of the term "net revenue", this is 

 the first year in the last 6 that TSPIRS shows a real loss when all costs are 

 counted. In prior years, using all costs, TSPIRS showed a profit. 



To give you an idea of how misleading TSPIRS is, for the 5 years, 1987-1991, 

 the claimed "profits on sales" were 5 times those of the Fortune "500". 



This is typical of the agency's inaccurate portrayal of its timber program. 



Using TSPIRS for the 5 years, 1988-1992, 84 Forests lost a total of 

 -$557,472,375. TSPIRS losses range from -$2,639/acre cut on the Bridger-Teton 

 to as little -$3/acre on the Alabama. These Forests accounted for 39% of the 

 timber cut and 46% of the acres cut, as displayed by TSPIRS. The likel ihoocT* 1 . 

 that a firm losing money on 84 units that covered 39% of the volume sold I 

 would post profits 5 times the Fortune 500 stretches credulity beyond \ 

 real ity . 



The Forest Service has an All Service Financial System. I have run this data 

 since it is real money. For these 5 years 42 Forests earmarked over 100% of 

 their timber receipts. It doesn't take an accountant to realize that there is 

 no way these Forests could come close to breaking even. 



Average appropriated costs for the timber program were $70/MBF. Using this 

 test, 103 Forests consumed so much of their receipts that on a "cash" basis 

 for the 5 years, they needed an appropriation subsidy to break even. 



A good example is the Black Hills in South Dakota. It cut an average of 

 139,972 MBF for the 5 years from an average of 36,043 acres. TSPIRS would 

 have you believe that it had a "Net Revenue" of $3.89/MBF, an average of $15 

 per acre cut. The ASR figures show that the Forest earmarked $5.96/MBF MORE 

 THAN ITS TIMBER RECEIPTS. If the average timber program appropriated cost 

 applied to this Forest, its average annual subsidy was $76/MBF, at least 

 $10,600,000 a year. 



On witness today is Jim Riley with IFIA. In 1991, testifying before the House 

 Committee on below-cost sales said, "Management successes on the Black Hills 

 National Forest tell the story of a financial turnaround". He was talking 

 about 1988-1990. The real financial facts are this Forest was terrible then; 

 it has since gone to tragic. Enclosed is my letter to Cong. Volkmer. 



