**Statement of Julie Jacobson**

**Deputy Assistant Secretary for Land and Minerals Management**

**U.S. Department of the Interior**

**On H.R. 3058, the Public Land Communities Transition Assistance Act of
2007**

**Subcommittee on National Parks, Forests, and Public Lands**

**House Committee on Natural Resources**

**July 26, 2007**

Thank you for the opportunity to testify at today's hearing on H.R.
3058, the Public Land Communities Transition Assistance Act of 2007.

The Administration supports the reauthorization of the Secure Rural
Schools and Community Self Determination Act with agreed upon offsets
and eventual phase out of payments. The Administration also supports
helping local governments deal with the loss of property tax revenue
when they contain certain Federally-owned lands within their boundaries;
in fact, the President's FY 2008 Budget includes \$190 million for PILT
payments. While we appreciate the Committee holding a hearing on this
bill, the Administration strongly opposes the mandatory spending
provisions contained in H.R. 3058. Additionally, we have serious
concerns about the adequacy of the funding mechanisms contained in the
bill.

**[Background: The Secure Rural Schools and Community Self-Determination
Act of 2000 and the Payments in Lieu of Taxes Program]{.underline}**

The BLM manages 69 million acres of forests and woodlands on the public
lands, approximately 2.5 million of which are located in the 18 western
Oregon counties covered by the Revested Oregon and California Railroad
and Reconveyed Coos Bay Wagon Road Grant Lands Act of 1937 (O&C Act.).
With respect to the BLM, the Secure Rural Schools Act applied
exclusively to the 18 O&C counties in western Oregon.

Congress set the stage for the long and close association between the
BLM and the O&C counties when, in the O&C Act, it directed the
Department of the Interior to manage the O&C lands for "the purpose of
providing a permanent source of timber supply, protecting watersheds,
regulating stream flow, and contributing to the economic stability of
local communities and industries, and providing recreational
facilities." The O&C counties receive approximately 50 percent of the
receipts from timber harvested from public lands in the counties.

By the late 1980s and early 1990s, litigation regarding the northern
spotted owl resulted in steep reductions in timber harvests in the
Pacific Northwest, and correspondingly steep reductions in income to
counties that depended on revenues from timber harvests on public lands
to fund essential local government services. In the years between 1989
and 1993, income to O&C counties from timber harvests dropped by nearly
30 percent, to approximately \$79 million. In response to this, Congress
enacted "safety net payments" to stabilize income flow to
timber-dependent counties during this tumultuous period, through the
Omnibus Budget Reconciliation Act of 1993 (P.L.103-66).

In 2000, Congress repealed the "safety net payments" and enacted the
Secure Rural Schools Act to set a stable level of payments to counties
over 6 years. The Act provided the O&C counties with the option of
receiving a full payment amount equal to the average of their three
highest timber receipt years from 1986 through 1999. In addition, under
the Act the counties elect the percentage of the payment (80-85 percent)
to be distributed directly to the counties (Title I), and the remaining
percentage (15-20 percent) to be allocated between Title II projects
(administered by the BLM), Title III projects (administered by the
counties), or returned to the Treasury. A provision was included in the
U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq
Accountability Appropriations Act of 2007 (P.L. 110-28) to extend
provisions under Title II and Title III of the Secure Rural Schools Act,
which expired in September 2006, for one additional year.

BLM has a long history with the O&C counties, and we look forward to
continuing this relationship. In fact, the BLM is currently working on
revisions to the Western Oregon Resource Management Plans. Seventeen out
of 18 O&C counties, as well as the State of Oregon, are cooperating
agencies in this important effort which will include public input. These
documents will serve as the basis for land management in these areas and
will be critical to the counties and communities.

The PILT Act (P.L. 94-565) was passed by Congress in 1976 to provide
payments to local governments in counties that contain certain Federal
lands within their boundaries.  PILT is based on the concept that local
governments incur costs associated with maintaining infrastructure on
Federal lands within their boundaries, but are unable to collect taxes
on these lands; thus, they need to be compensated for these losses in
tax revenues.  The payments are made to local governments in lieu of tax
revenues and to supplement other Federal land receipts shared with local
governments. The amounts available for payments to local governments
require annual appropriation by Congress.  The Department allocates
payments according to the formula in the PILT Act.  The Act provides for
annual inflationary adjustments to the authorized amounts. Incorporating
these annual adjustments, the formula takes into account the population
within an affected unit of local government and the number of acres of
eligible Federal land. The annual PILT payment also is partially
adjusted based on the amounts of prior year payments for a select number
of Federal revenue payments (such as receipts from mineral leasing,
livestock grazing, and timber harvesting). 

In the current Fiscal Year, on June 15, 2007, approximately 1,900 local
governments received payments under the PILT program totaling \$232.1
million. The FY 2007 payments maintained the levels provided in FY 2006,
which were the highest funding level in history. Along with other
discretionary programs, decisions on PILT funding are made in balance
with other priorities. We support this process in contrast with a
mandatory spending program that would force the Federal government to
cut into other programs that are integral to the President\'s Budget and
important to the American people.

**[H.R. 3058]{.underline}**

The Secure Rural Schools payments provided for in H.R. 3058 that apply
to BLM lands would only involve western Oregon counties. H.R. 3058
provides for transition payments based on the amounts paid in 2007.
Payments in 2008 would be 100 percent of that amount, then would
decrease to 90 percent, 81 percent, and 73 percent of that amount
respectively for the years 2009 through 2011. In 2012, the payments are
based on a new method for determining the amount and distribution of the
payments and would be significantly lower. The payments using the new
method are called the "full funding amount." The new method takes into
account historical payment levels, but distributes the payments by a
complicated formula that accounts for use acreage and median per capita
income levels in states and counties. Under H.R. 3058, counties must
elect to receive payments under the new method or to receive 50 percent
payments authorized in the 1937 and 1939 statutes.

The Secure Rural Schools Act provides that Title II funds be used to
support cooperative projects, to restore healthy conditions on public or
private lands. Title II amounts are retained by BLM in a special
account, but spent on projects in the counties for those purposes. Title
III funds are used for emergency services, community service work camps,
purchase of easements for recreation or conservation, forest related
after-school programs, and fire prevention activities. H.R. 3058 would
continue the requirement that at least 15 percent of the funds be used
for Title II and Title III projects. We are concerned, however, that the
bill does not extend the expiration dates of these critical provisions
or authorize resource advisory committees to implement the projects. We
would like to work with the Committee to ensure that these provisions
and other technical corrections are included in any amendments to H.R.
3058.

Regarding PILT, H.R. 3058 would amend chapter 69 of title 31, United
States Code, by making full funding of the PILT Program mandatory for
fiscal years 2008 through 2012. This would significantly increase PILT
funding over recent appropriated levels, despite the fact that PILT
funding has already increased by 74% since 2000. Including PILT
substantially increases the cost of the bill and result in the need for
additional mandatory spending offsets.

The bill also would add a new section that provides a new formula for
payments to counties that previously received funding under P.L 110-28,
which, as noted earlier, extended provisions under Title II and Title
III of the Secure Rural Schools Act for one year.

To fund the PILT and Secure Rural Schools payments, H.R. 3058 would
direct the Secretary of the Interior and the Secretary of Agriculture to
promulgate regulations to establish new fees or fee increases for
commercial activities on Federal lands, National Forest System lands,
and National Grasslands. The new fees would apply to commercial leases
or activities that are in effect on the date the regulations are
promulgated or that are issued or that commence after that time.

As stated earlier, the Administration strongly opposes creating a new
mandatory spending category. In addition, we have serious concerns about
the proposed offsets in H.R. 3058. These provisions would direct the
Secretary to raise or establish fees for commercial activities, which
could severely harm Interior programs that provide tremendous value to
the American people.

H.R. 3058 would require that the fees for commercial activities used to
offset the payments total \$4,025,000. However, we estimate the cost of
the bill to be approximately \$4.6 billion for the five year period of
FY 2008 through FY 2012. The offset provision is not only unacceptable
to the Administration and difficult for the Department to implement, but
is also highly unlikely to generate the \$4.6 billion in funds needed
under this bill.

An across-the-board increase in fees would be tantamount to a tax, while
selective increases could result in litigation. Fees are not royalties,
bonus bids, or rents, and the fees that are currently charged are
designed to compensate for certain activities that take place on Federal
lands. The Department charges many different cost-recovery fees, and the
fee levels are based on the costs related to the activity at issue. For
example, certain rights of way fees, fees to film on public lands, and
reimbursements by water users paid to the Bureau of Reclamation, all are
set at a level to cover costs to the Federal government and are expended
for that purpose.

The Department also charges other fees for specific purposes. For
example, grazing fees are collected by the BLM and shared with states
and counties. Recreation fees and special recreation permit fees
collected by the National Park Service, BLM, the U.S. Fish and Wildlife
Service, and the Bureau of Reclamation from individuals and commercial
recreation providers are reinvested at the site where they are collected
and used to enhance visitor services and facilities. The National Park
Service sets franchise fees for concession contracts at levels based
upon a detailed statutory standard. Such fees are contractual, and
changes to existing fees require renegotiation of the contracts or
referral to binding arbitration when agreement cannot be reached, as
provided under statute. Diverting such fees would be detrimental to
these important programs; raising the fees could result in contractual
disputes and litigation, and make those activities cost-prohibitive for
the users.

Existing fees, and even new fees, are highly unlikely to generate the
revenue necessary to cover the costs for the bill. For example, the
Department annually collects a total of approximately \$30 million
through BLM cost recovery fees, \$5.6 million in grazing fees, and
\$178.8 million in recreation fees. Even if all these fees were diverted
from the important programs they now fund, these totals fall far short
of the \$4.6 billion needed in offsets over five years.

We note that H.R. 3058 also does not include language in previous
appropriations bills that would cover administrative expenses for PILT
and would exempt the Secretary from making PILT payments to units of
local governments whose computed payment is less than \$100 dollars.

**[Conclusion]{.underline}**

The Administration recognizes that Secure Rural Schools and PILT
payments are important to local governments, in some states comprising a
significant portion of their operating budgets.  Again, the
Administration supports the reauthorization of the Secure Rural Schools
and Community Self Determination Act with agreed upon offsets and
eventual phase out of payments. Also, the President's budget includes
\$190 million for PILT. The Department looks forward to continuing to
work cooperatively with the Congress and the communities on these
important issues.

Mr. Chairman, this concludes my prepared statement.  I would be pleased
to answer any questions that you or the other members may have.