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In fact, annual net receipts are consistently negative even if 

 one completely ignores the capital costs for roads and 

 facilities. In 1983 through 1987, annual taxpayer losses on 

 federal timber sales from the Tongass were more than $50 million 

 each year. Stated differently, the Tongass program lost more 

 than 93 cents on every taxpayer dollar t ent. Since 1985, 

 taxpayer losses have been ranged from 99 cents to 85 cents for 

 every spent. If current annual loss rates continue, the Tongass 

 timber program will lose more than half a billion dollars in the 

 next ten years. 



Unfortunately, taxpayer losses are bound to grow because of 

 the chronically high costs of producing wood products in 

 southeast Alaska. These high operating costs along with the the 

 chronically weak markets for southeast Alaska's wood products 

 assure future taxpayer losses. 



Recent increases in the market price for dissolving pulp are 

 an anomoly. It is a temporary condition that has occurred twice 

 previously over the past thirty years. This relatively high 

 "spot market" price has not reversed the secular decline in the 

 market demand for dissolving pulp worldwide. The short-term 

 increase in demand for southeast Alaska's dissolving pulp is 

 overshadowed by the emergence of several lower-cost pulp 

 producers that will compete directly with southeast Alaska in the 

 future. 



These recent developments are consistent with new Forest 

 Service timber supply and demand studies that predict a collapse 

 in demand for southeast Alaska's dissolving pulp by the end of 

 the next decade. Moreover, housing starts in Japan, the primary 

 determinant of demand for Alaskan sawlogs, are expected to remain 

 flat or decline through the rest of the century because of the 

 age structure of the Japanese population. 



While huge taxpayer losses on the Tongass timber program 

 generally reflect changes in wood product markets and very high 

 production costs, the Forest Service has made its own 

 contributions to the red ink. For example, the agency has 

 continually offered timber sales that have not attracted buyers. 

 Between 1980 and 1984, this practice alone caused average annual 

 losses exceeding $8 million due to sale preparation, road design, 

 and road construction costs. 



From the beginning, the primary justification for federal 

 intervention in southeast Alaska has been to promote economic 

 growth. But, in spite of increasing timber program expenditures 

 by the Forest Service, regional timber industry employment has 

 fallen sharply — from more than 3,000 full-time equivalent jobs 

 in 1980 to fewer than 1,900 today. Each job in logging and mill 

 work still maintained by the Tongass timber program costs U.S. 

 taxpayers $36,000 per year. 



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