27 



ed to the 19 above-cost forests, not only would the taxpayers have 

 saved $351 million spent to prepare and administer money-losing 

 timber sales, but we the taxpayers would have made a health profit 

 of $107 million. Instead, the Forest Service timber program had a 

 net loss of $244 million when all costs were counted. 



Mr. Chairman, I ask that a copy of The Wilderness Society's 

 report, "Losses from National Forest Timber Sales, fiscal year 

 1992," be made a part of the record. 



Senator Daschle. Without objection. 



[The document is retained in the committee file.] 



Mr. Francis. While TSPIRS clearly shows the widespread nature 

 of below-cost timber sales, it contains numerous flaws. One of the 

 most serious is the treatment of Forest Service road costs for the 

 timber sales program. 



From fiscal years 1988 to 1990, TSPIRS amortized road costs over 

 extraordinarily long time periods. In 1989, for example, road costs 

 were amortized over periods of time from 1,743 to 2,818 years. In 

 total, this technique has allowed the agency to hide more than $250 

 million in expenses in any given year. 



As public awareness and criticism of amortization practices grew, 

 the Forest Service changed tactics. Starting in fiscal year 1991, 

 road expenditures were divided into four categories: bridges, cul- 

 verts, road surface, and road base, or prism. Bridges, culverts, and 

 road surface expenses are amortized over 50, 30 and 10 years, re- 

 spectively, following normal accounting principles. Expenditures 

 for road base, or prism, which account for the majority of road-re- 

 lated expenses, are completely excluded. The portion of total road 

 costs attributable to the road base is different for each national 

 forest, and in fiscal year 1991, ranged from 24 to 100 percent. 

 Three-fourths of the national forests excluded at least half of the 

 total fiscal year 1991 road costs, and the nationwide average was 69 

 percent of road costs excluded from TSPIRS. 



It is clear that the Forest Service has not abandoned its practice 

 of disguising costs. It has avoided the problem by closing one loop- 

 hole and opening another. The Forest Service should handle road- 

 based expenditures in a manner similar to other long-term capital 

 expenditures included in TSPIRS. That is, they should be added to 

 past years' costs and amortized over the 20- to 25-year design life 

 standard of logging roads on the national forests. 



For decades, the Forest Service has justified its timber program 

 to Congress largely on the basis of revenue that the timber sales 

 bring to the Treasury. Yet, in 1990, only $470 million, just over a 

 third of the $1.4 billion claimed as timber revenues by the Forest 

 Service, were actually returned to the Treasury. The remainder 

 was retained by the Forest Service for reforestation and other ac- 

 tivities, paid to counties in lieu of taxes, or was not cash to begin 

 with, but rather, payments-in-kind for roads built by timber pur- 

 chasers, a category that on some forests accounts for up to 75 per- 

 cent of total revenues. 



Below-cost sales is a policy based on vested bureaucratic and po- 

 litical interests and an expensive and archaic notion of what consti- 

 tutes good forest management. Proponents of subsidized logging 

 would have us believe that as long as a tree can be made into 

 boards it somehow contributes to social well-being even if it costs 



