The Department of Agriculture’s Forest Service manages about 192 million acres of land—nearly 9 percent of the nation’s total surface area (about the size of California, Oregon, and Washington State combined) and about 30 percent of all federal lands. In fiscal year 1996, revenue generated from the sale or use of resources and lands within the National Forest System totaled about $0.9 billion. Over $2.0 billion in appropriations and over $0.4 billion in trust funds were available to manage the system’s 155 national forests. The Forest Service’s motto is “caring for the land and serving people.” Laws guiding the management of the national forests require the Forest Service to manage its lands under the principles of multiple use and sustained yield to meet the diverse needs of the American people. The Forest Service is required to plan for six renewable surface uses—outdoor recreation, rangeland, timber, watersheds and water flows, wilderness, and wildlife and fish. In addition, the agency’s guidance and regulations require the Forest Service to consider the production of nonrenewable subsurface resources—such as oil, gas, and hardrock minerals—in its planning. Under the Organic Administration Act of 1897, the national forests are to be established to improve and protect the forests within their boundaries or to secure favorable water flow conditions and provide a continuous supply of timber to citizens. The Multiple-Use Sustained-Yield Act of 1960 added the uses of outdoor recreation, range, watershed, and fish and wildlife. The act also requires the agency to manage its lands to provide high levels of all of these uses to current users while sustaining undiminished the lands’ ability to produce these uses for future generations (the sustained-yield principle). Under the National Forest Management Act of 1976 (NFMA) and its implementing regulations, the Forest Service is to (1) recognize wilderness as a use of the forests and (2) maintain the diversity of plant and animal communities (biological diversity). The Forest Service must comply with the requirements of the National Environmental Policy Act of 1969 (NEPA). NEPA and its implementing regulations specify procedures for integrating environmental considerations through environmental analyses and for incorporating public input into the agency’s decision-making process. NEPA requires that a federal agency prepare a detailed environmental impact statement (EIS) for every major federal action that may significantly affect the quality of the human environment. The EIS is designed to ensure that important effects on the environment will not be overlooked or understated before the government makes a commitment to a proposed action. In planning and reaching decisions, the Forest Service must also comply with the requirements of other environmental statutes, including the Endangered Species Act, the Clean Water Act, the Clean Air Act, the Wilderness Act, and the Migratory Bird Treaty Act, as well as other laws, such as the National Historic Preservation Act. The Forest Service is subject to more than 200 laws affecting its activities and programs. Many laws governing national forest management and planning, dating back to the Organic Administration Act of 1897, have implied or stated that economics should be included in managing the national forests. The Forest and Rangeland Renewable Resources Planning Act of 1974 (known as RPA) requires the Forest Service to (1) periodically analyze trends in supply and demand and to report on investment opportunities in comprehensive assessments of the nation’s renewable resources conducted every 10 years; (2) discuss investment priorities and provide data for examining cost accountability in programs prepared every 5 years to respond to the trends and opportunities identified in the assessments; (3) use an interdisciplinary approach, including economics, in land and resource management planning; and (4) consider economics and financing in building the transportation system for the National Forest System. NFMA added numerous subsections to RPA. As noted by the Congressional Research Service, under NFMA, the Forest Service is required to include economic factors both in general and in the following specific conditions: (1) when considering various resource management systems, (2) when determining where even-aged timber management is allowed, and (3) when identifying lands not suited for timber production. In addition, RPA requires that the Forest Service prepare an annual report assessing its accomplishments and progress in implementing the RPA program. NFMA requires that the annual report include a comparison of returns to the government with estimated expenditures for a representative sample of timber sales. The Federal Land Policy and Management Act of 1976, as amended, generally requires federal agencies to obtain fair market value for the use of federal lands. This act and the Mineral Leasing Act, as amended, generally require federal agencies to obtain fair market value for the use of federal lands for rights-of-way for oil and gas pipelines, power lines, and communications lines. Title V of the Independent Offices Appropriation Act of 1952, as amended, authorizes federal agencies to issue regulations to assess a fair fee for a service or thing of value provided to an identifiable recipient beyond that provided to the general public. The Office of Management and Budget’s (OMB) Circular A-25 implements the Independent Offices Appropriation Act’s fee requirements. The circular classifies charges into two categories—special services and leases or sales. When providing special services, such as reviewing and processing permits or leases, federal agencies are to recover the costs of providing the services, resources, or goods. When the government sells or leases goods, resources, or real property, agencies are to establish user fees to recover the fair market value of the goods, resources, or services provided. Under the provisions of the Independent Offices Appropriation Act and OMB Circular A-25, federal agencies are to obtain fair market value in the absence of specific legislation to the contrary. The Forest Service is prohibited by law from obtaining a fair return for certain goods or recovering costs for certain services. For example, the agency provides recreation through numerous recreation facilities that it manages directly, including about 3,000 campgrounds, over 120,000 miles of hiking trails, and thousands of picnic areas and boating sites. However, according to the Land and Water Conservation Fund Act of 1964 (P.L. 88-578), the Forest Service can charge fees only for the use of (1) boat launching facilities that offer services such as mechanical or hydraulic boat lifts and (2) campgrounds that offer certain amenities such as toilet facilities, drinking water, refuse containers, and tent or trailer spaces. The House Committee on the Budget has an ongoing interest in the Forest Service’s management of the nation’s 155 forests, including efforts by the agency to be more cost-effective and businesslike in its operations. To assist the Committee in its deliberations and oversight, the Chairman asked us to identify (1) the lessons that can be learned from efforts by nonfederal land managers to generate revenue and/or become financially self-sufficient from the sale or use of natural resources on their lands and (2) legal and other barriers that may preclude the Forest Service from implementing similar efforts on its lands. As agreed with the Chairman’s office, we limited our review to the efforts of seven judgmentally selected nonfederal land managers located throughout the United States (see fig. 1.1): (1) the about 2.9 million acres of trust lands managed by Washington State’s Department of Natural Resources; (2) the 1.6 million-acre Fort Apache Indian Reservation in Arizona, home to the White Mountain Apache tribe; (3) the 125 parks, sites, and natural areas, encompassing over 669,000 acres, managed by the Texas Parks Division of the Texas Parks and Wildlife Department; (4) the 201,000-acre Deseret Land and Livestock ranch located in Utah and owned and managed by the Church of Jesus Christ of Latter-day Saints; (5) The Nature Conservancy’s 55,000-acre Niobrara Valley Preserve in Nebraska; (6) the National Audubon Society’s 27,000-acre Paul J. Rainey Wildlife Sanctuary in Louisiana; and (7) International Paper’s 16,000-acre Southlands Experiment Forest in Georgia. These land managers were selected primarily because they appeared to be (1) generating revenue or making a profit from one or more of the six renewable surface uses that the Forest Service is legislatively mandated to sustain on its lands and/or from nonrenewable subsurface resources that the agency is required to consider in its planning and (2) maintaining the long-term health of the land and resources by emphasizing environmental management and protection. To identify the lessons that can be learned from efforts by nonfederal land managers to generate revenue and/or become financially self-sufficient from the sale or use of natural resources on their lands, we interviewed officials and obtained and reviewed relevant documents and data on their (1) revenue-generating programs and activities, (2) missions and goals, (3) degree of financial self-sufficiency, (4) environmental protection and management, and (5) accountability for expenditures and results. The managers’ revenue-generating programs and activities are summarized in appendix I and discussed in more detail in appendixes II through VIII. To identify legal and other barriers that may preclude the Forest Service from implementing similar efforts on its lands, we relied extensively on prior GAO reports and testimonies. In addition, we provided the agency and the Department of Agriculture’s Office of General Counsel with, and received comments on, the approaches and techniques being used by the nonfederal land managers included in our review to generate revenue and/or become financially self-sufficient from the sale or use of natural resources on their lands. We also interviewed, and obtained and reviewed relevant documents and data from, responsible officials in Forest Service headquarters (Washington Office) as well as on selected forests, including the Apache-Sitgreaves in Arizona and the Wasatch-Cache in Utah. We performed our work from October 1996 through January 1998 in accordance with generally accepted government auditing standards. In conducting our work, we did not independently verify or test the reliability of the data provided by the nonfederal land managers or the Forest Service. We provided each of the nonfederal land managers with a draft of the appendix discussing their particular effort and made changes in response to their comments. We then obtained comments on a draft of the entire report from the Forest Service. The agency’s comments are presented in appendix IX. Of the seven uses that the Forest Service is legislatively mandated to sustain or consider in its decision-making, the seven nonfederal land managers whose efforts we reviewed are generating revenue from one or more of five—timber, outdoor recreation, wildlife and fish, rangeland, and subsurface resources. While not always attaining financial self-sufficiency, these nonfederal land managers are employing a variety of sometimes innovative approaches and techniques to generate revenue or reduce costs from the sale or use of natural resources on their lands. Rather than applying a one-size-fits-all approach or technique, the managers have (1) usually tailored their efforts to meet either a clear mission to make a profit over time or an incentive to generate revenue for other mission-related goals and objectives and (2) often been delegated the discretion and flexibility to make choices while being held accountable for their expenditures and results. Although most of the nonfederal land managers whose efforts we reviewed are attempting to increase revenue and/or decrease costs from the sale or use of natural resources on their lands, their success in becoming financially self-sufficient has varied and their revenue has not always covered the costs of providing the goods or services. Moreover, many of the managers are also generating revenue from programs and activities not related to natural resources, including a casino, commercial real estate, land sales, contributions, and investments. However, some of the more innovative approaches and techniques being employed by these land managers appeared to increase revenue or decrease costs from the sale or use of natural resources on certain lands or under certain conditions. Timber and related activities generated the most revenue for Washington State’s Department of Natural Resources and for International Paper on its Southlands Experiment Forest. Timber also generated most of the revenue that the White Mountain Apache tribe derived from natural resources. Natural gas production was the dominant revenue-generating use on the Audubon Society’s Paul J. Rainey Wildlife Refuge, livestock grazing generated the most revenue on The Nature Conservancy’s Niobrara Valley Preserve, livestock grazing and recreational hunting for big-game wildlife species provided virtually all of the revenue on the Church of Jesus Christ of Latter-day Saints’ Deseret Land and Livestock ranch, and recreational entrance and user fees produced the most revenue for the Texas Parks Division. Some of the more innovative approaches and techniques being employed to generate revenue or reduce costs from the sale or use of natural resources are discussed below. Managers from Washington State’s Department of Natural Resources and International Paper’s Southlands Experiment Forest emphasize the production of goods and services on some lands or within certain programs or functions while setting aside other lands, programs, or functions for non-revenue-generating activities, such as conservation, resource protection, and research. For example, the department divides its lands and programs between those that are managed primarily to generate long-term sustainable revenue for its trust beneficiaries and those that are managed primarily to meet regulatory objectives for the protection of resources on public and private lands. The department has also developed several programs to (1) transfer, sell, or exchange trust lands that have a low capability of generating revenue or are more suited for conservation or non-revenue-generating recreation and (2) purchase or otherwise acquire replacement lands capable of generating revenue. As a result, between 1981 and 1994, the department transferred, sold, exchanged, purchased, or otherwise acquired 355,000 acres, or 11 percent of its land base, including transferring about 59,000 acres from commodity production to conservation status since 1989. The state legislature provided funds to the department to compensate the trust for the fair market value of the lands transferred to conservation status. In addition, officials from Washington State’s Department of Natural Resources informed us that as opportunities become available, they attempt to optimize short- and long-term income within acceptable levels of risk by shifting to the highest and best land uses in selected geographic areas. For instance, during the past 25 years, the agency has converted more than 34,000 acres of drylands to higher revenue-producing lands by competitively leasing lands for commercial uses and by replacing livestock with more profitable agricultural uses, such as growing wheat and other dryland grains. While International Paper manages Southlands Experiment Forest to generate revenue, the company’s annual budget separates the forest’s research and policy functions from the forest’s revenue-generating timber operations. This separation reflects the company’s recognition that the forest’s research and policy functions sometimes require operational decisions that do not seek to maximize revenue. Managers on the White Mountain Apache tribe’s Fort Apache Indian Reservation, the Church of Jesus Christ of Latter-day Saints’ Deseret Land and Livestock ranch, and the Southlands Experiment Forest were managing game species as a profitable resource. For example, a hunter can pay over $24,000 on the Fort Apache Indian Reservation and up to $8,500 on the Deseret ranch for a trophy bull elk, and the hunts generate more than $850,000 in annual income for the tribe and most of the $340,000 in annual net income from Deseret’s wildlife program. About 25 percent of Southlands’ revenue is generated by recreational hunting, and, according to International Paper officials, is indicative of the company’s efforts to generate revenue from growing timber stands. Although grazing revenue varies with such factors as weather conditions and the price of beef cattle, the livestock grazing programs on Deseret and The Nature Conservancy’s Niobrara Valley Preserve contributed significantly to the land units’ financial self-sufficiency. For example, on average, livestock grazing provides at least 80 percent of Niobrara’s total revenue, and, over about the last 10 years, revenue from all activities on the preserve have been sufficient to cover both operating and capital costs, other than the costs to acquire the land, which were paid by the Conservancy. Deseret and Niobrara are two of a small but growing number of ranches that practice what is often referred to as “time-control” or “time-managed” grazing. On Deseret, this management practice involves developing an annual written plan to (1) set the time of year and limit the length of time that cattle are allowed to graze in an area by moving them among fenced pastures rather than allowing them to graze on open rangeland and (2) rest pastures every year by not allowing cattle to graze on them. Trust lands managed by Washington State’s Department of Natural Resources are funded from total revenue and generate considerable net income for the trust beneficiaries, primarily from timber sales and related activities. The department has initiated several efforts to increase net income from its timber program. For example, according to department officials, they have increased timber revenue by identifying and marketing high-value trees, such as those that can be used as utility or transmission poles or as logs for the log home industry (“merchandising” timber). Since 1990, this practice has generated about $41 million in additional revenue at a cost of about $2 million in staff salaries. The department is also performing both precommercial and commercial thinning, and, to a lesser extent, pruning and fertilizing timber stands to spur tree growth. In fiscal year 1996, tree sales resulting from commercial thinning generated some $17 million in revenue. In addition, according to officials from Washington State’s Department of Natural Resources, they have (1) increased the efficiency of their timber sale appraisal system by adopting an approach that looks only at prior comparable sales; (2) stopped reimbursing contractors for constructing logging roads, thus reducing the costs to monitor the roads’ construction as well as avoiding reimbursing contractors for inefficient road construction practices; (3) initiated lump-sum bidding procedures in which all timber within a stand is sold, thus lowering the costs of monitoring the buyer’s removal of timber; (4) replaced oral bidding of timber sales with sealed bids to avoid artificially suppressing the highest bid value; and (5) pilot-tested contracting with a company to harvest timber and then having the department, rather than the company, market the logs. According to department officials, this last effort—called contract logging—has increased the department’s return by eliminating the middle man. It also gives the department more control over the timing and environmental impact of logging operations. Since fiscal year 1994, managers of Texas state parks (1) have increased entrance and campground fees, sometimes by 100 percent; (2) are managing retail stores previously contracted to concessionaires and have opened new ones; (3) have installed park-leased soft drink machines; and (4) have increased the number of fee-based interpretative and tourist-oriented programs. As a result, park-generated net income—primarily from entrance and campground fees—grew from $14.8 million in fiscal year 1993 to $18.5 million in fiscal year 1995, an increase of 25 percent. Similarly, the White Mountain Apache tribe charges fees for amenity-based recreation on the Fort Apache Indian Reservation, including hiking, camping, boating, river rafting, and snow skiing. In addition, the tribe requires outdoor recreation permits to travel on the reservation’s unpaved roads. As a result, recreational fees provide a relatively stable source of revenue to the tribe. A use that the Forest Service is legislatively mandated to sustain—watersheds and water flows—played an important role in generating revenue from other uses, such as irrigating rangelands; sustaining recreational fishing; and providing boating, river rafting, and other outdoor recreational activities. For example, according to the manager of the Deseret Land and Livestock ranch, the ranch is financially self-sufficient, in part, because it has a substantial water right that predates Utah’s statehood, as well as most other state water rights. The water is used to irrigate pastures that represent less than 4 percent of the ranch’s acreage but provide over 55 percent of the total cattle forage. Recognizing the importance of water to generating revenue from other uses, Washington State’s Department of Natural Resources has obtained and is continuing to pursue water rights from the state’s water and irrigation districts as well as other surface water and groundwater irrigation rights and contracted for water from the federal Columbia Basin Irrigation Project. The department has also developed irrigation infrastructure (drilling wells and laying pipes). The water has been used to convert many acres of drylands to irrigated farmlands, grape vineyards, and apple orchards and to significantly increase the earning potential of the department’s agricultural lands within central Washington by replacing some livestock with more profitable agricultural crops. As a result of these and other efforts, revenue from the department’s agricultural program has grown by nearly 200 percent in the last 15 years, according to department officials. Both Washington State’s Department of Natural Resources and the White Mountain Apache tribe have entered into agreements with federal regulatory agencies to reduce costs and to provide more regulatory certainty and predictability to revenue-generating timber and other programs. Specifically, in January 1997, the department signed a habitat conservation plan with two federal regulatory agencies. This plan covers 1.6 million acres, or 76 percent of the department’s 2.1 million acres of forestland. The agreement includes a “no surprise policy” under which the federal government will not ask for more land or mitigation funding from the state even if a species protected by the plan continues to decline. Furthermore, the subsequent listing of a species as endangered or threatened under the Endangered Species Act will not result in additional mitigation requirements. Similarly, the White Mountain Apache tribe has assumed responsibility from federal regulatory agencies for accommodating the objectives of federal environmental laws, especially the Endangered Species Act, on the Fort Apache Indian Reservation. In December 1994, the Chairman of the tribe and the Director of the Department of the Interior’s Fish and Wildlife Service signed an innovative statement of relationship between the tribe and the agency that recognizes the tribe as the primary manager of the reservation with the institutional capability to ensure that economic activity does not have an adverse impact on species listed under the Endangered Species Act, as well as on sensitive wildlife and plants. In addition, in June 1997, the Secretary of the Interior signed an order that clarifies the responsibilities of the Department when the implementation of the Endangered Species Act affects federally recognized Indian lands, tribal trust resources, or the exercise of tribal rights. The order contains a provision stating that the United States defers to tribal conservation management plans. Both federal regulatory and tribal officials agree that these agreements will greatly reduce the time and costs associated with accommodating environmental objectives. Other efforts to increase net income through savings included reducing the number of salaried employees by increasing the use of volunteers and prison inmates. For instance, in fiscal years 1994 and 1995, Texas state park managers reduced the number of salaried employees and increased the number of campground volunteers and hosts. They also increased their use of prison inmates to perform routine cleaning, renovation, and improvements at park facilities, as well as other services. Finally, they reduced the number of months worked by seasonal employees. In fiscal year 1995, volunteers donated about 490,000 hours of work valued at $2.6 million, equal to the work of about 238 full-time employees. The estimated value of the inmates’ labor was about $2.4 million over 2 fiscal years, according to Texas Parks Division officials. None of the approaches or techniques for increasing revenue or decreasing costs used by the nonfederal land managers in our review were legislatively mandated or otherwise required. Rather, these approaches and techniques usually resulted because the managers had either a clear mission to make a profit over time or an incentive to generate revenue for other mission-related goals and objectives. Moreover, many of the approaches or techniques seemed to be applicable in only certain geographical areas or under certain conditions, thus requiring that the nonfederal managers be given the discretion and flexibility to make choices while being held accountable for their expenditures and results. The primary goal of private businesses, such as the Deseret Land and Livestock ranch and International Paper, is to make a profit. For example, Deseret ranch is expected not only to be financially self-sufficient but also to earn a 5-percent return on investment on its operations. Armed with this clear mission priority, managers on both the ranch and International Paper’s Southlands Experiment Forest have initiated efforts to increase revenue and decrease costs. Having a clear mission priority to generate long-term sustainable revenue has produced similar results for public agencies. For example, trust lands and programs managed by Washington State’s Department of Natural Resources are funded from total revenue and generate considerable net income for the designated trust beneficiaries. Conversely, lands managed by the department that have been set aside for conservation and non-revenue-generating recreation, as well as programs to protect public resources, are not expected to generate revenue and are supported primarily by legislatively appropriated funds. Businesses and agencies that emphasize making a profit often establish incentives to increase revenue. For example, Deseret ranch’s employees have two financial incentive plans—one based on the ranch’s net income and the other based on annual, individual performance goals. Lands and programs managed by Washington State’s Department of Natural Resources to generate long-term sustainable revenue for the designated trust beneficiaries are funded solely from a percentage of the total revenue they generate, thus providing employees with an incentive to maximize revenue. And, when the Texas Parks and Wildlife Department established a financial incentive by returning a portion of any increased revenue or decreased costs to the park where the revenue or savings was generated, state park managers responded by increasing revenue by 25 percent and reducing expenditures for operations by almost 10 percent over 2 years, according to Texas Parks Division officials. The need to generate revenue for other mission-related goals and objectives can also provide an incentive. For example, the Niobrara Valley Preserve can spend money to fulfill The Nature Conservancy’s biological diversity goal only when it raises money. In addition, the Conservancy requires all of its preserves to strive for financial self-sufficiency and allows them to retain most of the revenue that they generate. Since bison and cattle, on average, provide at least 80 percent of the preserve’s total revenue, Niobrara has an incentive to generate revenue from grazing. Virtually all of the nonfederal land managers whose efforts we reviewed have the discretion and flexibility to (1) explore innovative entrepreneurial ideas or conduct research to increase profits and (2) choose where and when to apply the results. One result has been that they have tailored their approaches and techniques for generating revenue or reducing costs to their particular geographical areas or conditions. However, this freedom to make choices is often accompanied by oversight by the parent organization, the beneficiaries of the revenue generated, or others to ensure accountability for expenditures and results. For example, the managers of the Deseret Land and Livestock ranch and the Southlands Experiment Forest have the freedom to try innovative approaches and techniques to increase net income. However, the ranch manager is held accountable for his expenditures and results by the church and the forest manager by the company and its stockholders. Washington State’s Department of Natural Resources is held accountable for the expenditures and results of its management of state trust lands by the designated trust beneficiaries, including state school districts, colleges, and universities, as well as other public agencies and charitable institutions within the state. Thus, when the department makes a decision that may reduce current income and return on investment over the short term, it must show these beneficiaries that it has exercised skill and care in protecting trust resources (the “prudent person” doctrine), ensured equal treatment for all generations (the “intergenerational equity” principle), and not foreclosed reasonably foreseeable future sources of income by actions taken today. Each of these principles may reduce current income and return on investment over the short term but may be viewed over the long term as having been the most prudent course. Washington State’s Department of Natural Resources also has two initiatives under way that address accountability. One is the Asset Stewardship Program, which is to look at the current and possible future mix of assets to determine which mix will best generate long-term revenue for the trust beneficiaries. As part of this initiative, the department plans to (1) set standards for evaluating the mix of assets on the basis of their profitability, biological diversity, carrying capacity, and overall positioning and (2) develop measurement tools to monitor the assets’ ecological, social, and economic performance. The agency also hopes to develop a longer-term management framework that will give its managers flexibility to respond to future population and other changes that affect the management of state lands and programs. The second effort is the department’s March 1997 long-term Strategic Plan—the “10-Year Direction”—which, among other things, sets out major goals, objectives, and specific strategies to achieve them. According to department officials, the plan (1) will be consistent with a statewide performance budgeting system now being developed and (2) parallels the Asset Stewardship Plan by identifying specific targets for managing various trust assets. Some of the approaches and techniques being employed by the nonfederal land managers whose efforts we reviewed appear to have the potential to increase revenue or decrease costs from the sale or use of natural resources on certain Forest Service lands, or within certain programs and activities, under certain conditions. The Forest Service is, to a limited extent, employing a few of these approaches and techniques, such as performing both precommercial and commercial thinning on some lands suitable for commercial timber harvesting, and is not prohibited by law from using other approaches and techniques, including selling logs and other cut roundwood products. In addition, the agency had reduced staffing from about 46,000 permanent positions in fiscal year 1992 to about 39,400 in fiscal year 1996, or by about 14 percent. However, generating revenue and reducing costs are not mission priorities for the agency, and managers lack both flexibility to make choices and accountability for results. The low priority assigned to increasing revenue and decreasing costs results, in part, from the importance or emphasis given to ecological, social, and other values and concerns. Statutory language implies that maximizing revenue should not be the overriding criterion in managing the national forests. Requirements in environmental and planning laws and their judicial interpretations have increasingly required the Forest Service to shift its emphasis from uses that generate revenue to those that do not. In recent years, legislative and administrative decisions have set aside or withdrawn an increasing percentage of Forest Service lands for conservation and, in keeping with the existing legislative framework, the Forest Service is moving away from, rather than toward, financial self-sufficiency. The agency is required to continue providing certain goods and services at less than their fair market value. Finally, certain congressional expectations and revenue-sharing provisions serve as disincentives to either increasing revenue or decreasing costs. When the Congress has provided the Forest Service with the authority to obtain fair market value for goods or recover costs for services, the agency often has not done so. The Forest Service also has not always acted to contain costs, even when requested to do so by the Congress. Underlying these shortcomings is the failure to hold the agency adequately accountable for its performance for increasing revenue or decreasing costs. The Forest Service’s recent strategic plan, which is intended to form the foundation for holding the Forest Service accountable for its performance, contains no goals or performance measures for obtaining fair market value or for reducing or containing costs. “Multiple use means . . . that some land will be used for less than all the resources; and harmonious and coordinated management of the various resources, each with the other, without impairment of the productivity of the land, with consideration being given to the relative values of the various resources, and not necessarily the combination of uses that will give the greatest dollar return or the greatest unit output.” (Emphasis added by GAO.) Thus, according to the Congressional Research Service, the Congress expected economic values to affect the management of the national forests but “specifically ruled out maximizing receipts or outputs as the overriding economic criterion.” In addition, the National Forest Management Act of 1976, which provides guidance for forest planning, requires the Secretary of Agriculture to promulgate regulations that “insure that timber will be harvested from National Forest System lands only where . . . the harvesting system to be used is not selected primarily because it will give the greatest dollar return or the greatest unit output of timber. . . .” Thus, according to the Congressional Research Service, the act provides that maximizing returns or volume cannot be the only criterion for determining the harvesting system to be used. Requirements in environmental and planning laws and their judicial interpretations limit the Forest Service’s ability to generate revenue. In particular, section 7 of the Endangered Species Act represents a congressional design to give greater priority to the protection of endangered species than to the primary missions of the Forest Service and of other federal agencies. When proposing a project, such as a timber sale, the Forest Service bears the burden of demonstrating that its actions will not be likely to jeopardize listed species. Other laws enacted primarily during the 1960s and 1970s—such as the Clean Water Act, the Clean Air Act, the Migratory Bird Treaty Act, and the National Forest Management Act—and their judicial interpretations and implementing regulations also establish minimum requirements for these components of natural systems. In response to these requirements, the Forest Service has, during the last 10 years, increasingly shifted the emphasis under its broad multiple-use and sustained-yield mandate from revenue-generating uses (primarily producing timber) to uses that do not generate revenue (primarily sustaining wildlife and fish and their habitats). For example, in the states of Washington, Oregon, and California, federal lands, managed primarily by the Forest Service, represent almost half (47.8 percent) of the total lands suitable for commercial timber harvesting. In western Washington State, western Oregon, and northern California, 24.5 million acres of federal land were available for commercial timber harvesting. However, about 7.6 million acres, or 31 percent of the available acreage, have been set aside or withdrawn as habitat for species that live in old-growth forests, including the threatened northern spotted owl, or as riparian reserves to protect watersheds. To protect the forests’ health, only limited timber harvesting and salvage timber sales are allowed in some of these areas. In addition, requirements for maintaining biological diversity under the National Forest Management Act—as well as for meeting standards for air and water quality under the Clean Air and Clean Water acts, respectively—may limit the timing, location, and amount of harvesting that can occur. Moreover, harvests from these lands could be further reduced by plans to protect threatened and endangered salmon. Requirements in environmental and planning laws have also necessitated the use of more costly and time-consuming timber-harvesting methods.For example, in June 1992, the Forest Service announced plans to reduce the amount of timber harvested by clear-cutting by as much as 70 percent from fiscal year 1988 levels in order to manage the national forests in a more environmentally sensitive manner. This policy change has increased the timber program’s costs, since clear-cutting is a relatively economical method of harvesting. However, according to the Forest Service, these increased costs may be offset to some unknown degree by reductions in the number of administrative and legal challenges to individual timber sales. The Forest Service’s ability to generate revenue is not static and changes on the basis of new information and events, such as the listing of a species as endangered or threatened; the results of analyses, monitoring, and evaluation; and new judicial interpretations. For example, the Forest Service is required by the National Environmental Policy Act to assess activities occurring outside the national forests in deciding which uses to emphasize on its lands. A January 1997 habitat conservation plan between Washington State’s Department of Natural Resources and two federal regulatory agencies and similar agreements—which now cover 18 million acres of state and private land—require that any additional mitigation deemed necessary to protect listed species covered by the plans first be accomplished on federal lands. Therefore, while these agreements are expected to reduce costs and to provide more regulatory certainty and predictability on nonfederal lands, they may increase costs and regulatory uncertainty on Forest Service lands. Some Forest Service officials believe that future assessments are likely to show that the national forests are assuming a growing proportion of the responsibility for protecting wildlife and fish and that endangered and threatened species and their habitats are increasingly being concentrated on federal lands. In recent years, legislative and administrative decisions have set aside or withdrawn an increasing percentage of Forest Service lands for conservation. In keeping with the existing legislative framework, the Forest Service’s management approach has increasingly emphasized non-revenue-generating uses over other uses that can and have generated revenue. For example, an increasing percentage of Forest Service lands has been set aside by the Congress or administratively withdrawn for conservation—as wilderness, wild and scenic rivers, national monuments, and recreation. Only limited timber sales and oil and gas leasing—both of which are usually offered in competitive auction—are allowed in some of these areas. In 1964, less than 9 percent (16 million acres) of the national forests’ acreage was managed as wilderness, wild and scenic rivers, and national monuments and for recreation. By 1994, this figure had increased to 26 percent (almost 50 million acres). (See fig. 3.1.) According to the Forest Service, of the 96 million acres within national forests that contain timber suitable for commercial harvesting, 49 million acres, or 51 percent, have been approved for timber harvesting in the agency’s forest plans. Another 35 million acres, or 36 percent, have been approved for other uses, such as wildlife habitat and soil and watershed management, while the remaining 12 million acres, or 13 percent, have been formally withdrawn for other uses, such as wilderness areas. (See fig. 3.2.) Most of the federal acreage that has been set aside for conservation is located in 12 western states. In western Washington, western Oregon, and northern California, 11.4 million acres—or 47 percent of the 24.5 million acres of federal land available for commercial timber harvesting—have been set aside or withdrawn for conservation. Added to the about 7.6 million acres in these three states that have been set aside or withdrawn as habitat for old-growth forest species and as riparian reserves, 77 percent of the federal lands in the three states that were available for commercial timber harvesting have been set aside or withdrawn, primarily to meet environmental requirements or achieve conservation purposes. Setting aside lands for environmental or conservation purposes has reduced both the volume of timber sold from Forest Service lands and receipts from timber sales. Timber volume and receipts have also been reduced by (1) an increasing knowledge of the importance of naturally functioning systems—such as watersheds, airsheds, soils, and vegetative and animal communities—to the long-term sustainability of other forest uses, including timber production and (2) an increasing recognition that past Forest Service management decisions have led to degraded aquatic habitats, declining populations of some wildlife species, and increased forest health problems. In addition, the thrust of the Forest Service’s timber sales program is changing from primarily supplying commercially valuable timber to the wood-using industry in response to the nation’s demand for wood to using timber sales as a “tool” for achieving land stewardship objectives that require manipulating the existing vegetation. To achieve a land stewardship objective—such as promoting the forests’ health, creating desired wildlife habitat, and reducing fuels and abnormally dense undergrowth that have accumulated in many forests and have increased the threat of unnaturally catastrophic fires—often necessitates preparing sales that include a mixture of both low- and high-value material, further reducing receipts from timber sales. Historically, the volume of timber sold from Forest Service lands in western Washington, western Oregon, and northern California constituted from a third to a half of all Forest Service timber sales. However, the volume of timber sold from this region declined from 4.3 billion board feet in 1989 to 0.9 billion board feet in 1994, a decrease of about 80 percent. Nationwide, the volume of timber sold from Forest Service lands decreased from over 11.3 billion board feet in 1988 to 3.4 billion board feet in 1996, a decrease of about 70 percent. (See fig. 3.3.) During this time, timber sales receipts decreased from $1.4 billion to $0.6 billion, or by 57 percent. (See fig. 3.4.) Timber sales receipts (dollars in billions) Like the acreage available for timber harvesting, the acreage available for oil and gas leasing has declined. According to a 1997 study by a consortium of oil and gas trade and professional associations, the amount of federal land in eight western states open to oil and gas leasing declined from 114 million acres in 1983 to fewer than 33 million acres in 1997, a drop of more than 60 percent. Of the 82 million acres of Forest Service land included in the study, 71 million acres, or 86 percent, are subject to a restriction that either forbids oil and gas development entirely or imposes stringent requirements on surface occupancy and access, according to the consortium. As the acreage available for commodity uses has decreased, the American public has increased its recreational use of the national forests substantially, according to the Forest Service. This demand is expected to increase steadily over the next 50 years, requiring the agency to spend more time and resources on this use. However, the Forest Service is currently prohibited by law from charging fees for the use of most recreational sites and areas and from obtaining fair market value for the use of other areas that it manages directly. The decision not to charge fees for the use of most recreational sites and areas directly managed by the Forest Service reflects a long-standing philosophy of free access to public lands. Other legislative requirements that limit the generation of revenue on Forest Service lands also reflect this philosophy or a desire to promote the economic stability of certain historic commodity uses. As a result, the Forest Service is required to continue to provide certain goods and services at less than their fair market value. The number of visitor days in national forests has grown from about 25 million in 1950 to over 340 million in 1996. (See fig. 3.5.) Compared with timber and minerals, recreation generates substantially less revenue. According to the Forest Service, it collected only about 7 cents per visit in receipts and special use fees in 1993. Among the factors contributing to this low rate of return is that the agency is prohibited by law from charging fees for the use of most recreational sites and areas that it manages directly. In addition, the Omnibus Parks and Public Lands Management Act of 1996 (P.L. 104-333) included a new fee system for ski areas that was developed by the ski industry. As noted in an April 1993 report, this system does not ensure that fees collected from ski areas reflect fair market value. The Forest Service’s inability to obtain a fair return for the recreational opportunities provided on national forests can distort comparisons of revenue and operating costs. For example, in a June 1997 report, we compared the operations of a state forest (the Bladen Lakes) and two national forests (the Nantahala and Pisgah) in North Carolina. The state forest generated enough revenue to make it almost financially self-sufficient, while the two national forests generated enough to cover only about 4 percent of their operating costs. Whereas the state forest emphasized the sale of timber and other forest products, the national forests emphasized the provision of non-revenue-generating visitor services. The Forest Service manages half of the nation’s big-game and coldwater fish habitat. However, federal statutes and regulations have narrowly defined the instances in which the Forest Service can charge fees for noncommercial recreational activities, such as hunting and fishing, on its lands, and the agency generally defers to state laws regulating these activities. For example, while a hunter can pay over $24,000 on the Fort Apache Indian Reservation and up to $8,500 on the Deseret Land and Livestock ranch for a trophy bull elk, Forest Service managers on the Apache-Sitgreaves and Wasatch-Cache forests—which abut the reservation and the ranch, respectively—cannot charge individuals for hunting on their lands. Thus, while receipts from trophy bull elk hunts on the 1.8 million acres within the Fort Apache Indian Reservation and the Deseret ranch totaled about $1.2 million a year (about 66 cents an acre), outfitter-guide operations, including big-game hunting, on the 192 million acres of Forest Service lands generate only $2 million a year (about 1 cent per acre). Other legislative requirements—reflecting a philosophy of free access to public lands or a desire to promote the economic stability of certain historic commodity uses—also limit the generation of revenue on Forest Service lands. For example, the Mining Law of 1872 was enacted to promote the exploration and development of domestic mineral resources as well as the settlement of the western United States. Under the act’s provisions, the federal government receives no financial compensation for hardrock minerals, such as gold and silver, extracted from Forest Service and other federal lands. In 1990, hardrock minerals worth at least $1.2 billion were extracted from federal lands, while known, economically recoverable reserves of hardrock minerals remaining on federal lands were valued at $64.9 billion. In contrast, the 11 western states that lease state-owned lands for mining purposes impose a royalty on minerals extracted from those lands. The 104th Congress considered, but did not enact, several bills that would have imposed royalties on hardrock minerals extracted from federal lands. A bill to impose royalties on hardrock minerals extracted from federal lands has also been introduced in the 105th Congress. If the Congress were to adopt an 8-percent royalty on gross profits, as proposed in two bills in the 104th Congress, the Congressional Budget Office estimates that the government would receive $184 million in fiscal years 1998-2002. Similarly, the formula that the Forest Service uses to charge for grazing livestock on its lands keeps fees low to promote the economic stability of western livestock grazing operators with federal permits. In a June 1991 report, we compared the existing grazing fee formula with alternatives that had been jointly developed by the Forest Service and the Bureau of Land Management. We noted that evaluating the soundness of any formula depends on the primary objective to be achieved and that deciding among objectives involves policy trade-offs more than analytical solutions. Nevertheless, the fees were too low to cover the government’s costs of managing the grazing program. Congressional expectations and revenue-sharing provisions have sometimes served as disincentives to either increasing revenue or decreasing costs from the sale or use of natural resources on Forest Service lands. Establishing annual output targets and sharing revenue that has been generated before deducting the costs of providing goods or services furnish two examples. For instance, to prepare and administer timber sales, the Forest Service relies primarily on annual appropriations based on such criteria as the anticipated volume of timber to be offered for sale, and the Forest Service’s performance measures are based on the volumes of timber offered for sale. In addition, congressional expectations for the agency’s timber program are often expressed as timber sale targets. To meet these expectations and targets, the Forest Service may not always recover its costs to prepare and administer the sales. When the Forest Service is allowed to retain a portion of the revenue it generates, it does so without deducting its costs, which are funded from annual appropriations. By law, states and counties also often share in revenue before deducting the full costs of providing the goods or services. Thus, neither the agency nor the states and counties have an incentive to control costs. For example, from fiscal year 1992 through fiscal year 1994, the Forest Service spent about $1.3 billion to prepare and administer timber sales. During that period, the agency collected nearly $3 billion in timber sales receipts. Instead of being required to return the money it spent to the Treasury, the Forest Service was allowed to retain about $1.7 billion, or 57 percent, in various funds and accounts for specific purposes, such as the reforestation of harvested areas, preparation and administration of salvage timber sales, removal of brush, control of erosion, and building of roads that provide access to the timber sales areas, as provided for by law. Another $887 million, or 30 percent, was distributed to the states in which the forests are located. The funds can be used by the states to benefit roads and schools in the counties where the receipts were earned. The remaining $437 million was deposited in, or transferred to, the General Fund of the Treasury. (See fig. 3.6.) Similarly, 50 percent of the total revenue from livestock grazing on national forests and grasslands is returned to the Forest Service to fund various range improvements, such as fences and water developments, and 25 percent is distributed to the states, even though the revenue does not cover the agency’s costs of managing its grazing program. Under the Mineral Leasing Act (30 U.S.C. 181 et seq., as amended), 50 percent of the revenue for federal onshore minerals is distributed to the state in which the production occurred. Another 10 percent is distributed to the General Fund of the Treasury and the remaining 40 percent goes to a reclamation fund used for the construction of irrigation projects.However, in 1991, after the passage of Interior’s appropriations bill, states receiving revenue from federal onshore minerals development began paying a portion of the costs to administer the onshore leasing laws—a practice known as “net receipts sharing.” Net receipts sharing became permanent with the passage of the Omnibus Budget Reconciliation Act of 1993, which effectively requires that the federal government recover from the states about 25 percent of the prior year’s federal appropriations allocated to mineral-leasing activities. In fiscal year 1996, 41 states received about $481 million in revenue from the development of federal onshore minerals. The states paid the federal government about $22 million as their portion of the costs to administer the onshore leasing laws. Sharing revenue after deducting these costs may provide a strong incentive for the states to ensure that the costs are contained or reduced. The Congress has given the Forest Service the authority to obtain fair market value for some goods or to recover costs for some services. However, the agency has not always taken advantage of this authority, as the following examples from our prior work show. In June 1997, we reported that the sealed bid auction method is significantly and positively related to higher bid premiums on timber sales. However, the Forest Service used oral bids at single-bidder sales rather than sealed bids, resulting in an estimated decrease in timber sales receipts of $56 million from fiscal year 1992 through fiscal year 1996. In December 1996, we reported that, in many instances, the Forest Service has not obtained fair market fees for commercial activities on the national forests, including resort lodges, marinas, and guide services, or for special noncommercial uses, such as private recreational cabins and special group events. Fees for such activities are the second largest generator of revenue for the agency, after timber sales. The Forest Service’s fee system, which sets fees for most commercial uses other than ski operations, had not been updated for nearly 30 years and generally limited fees to less than 3 percent of a permittee’s gross revenue. In comparison, fees for similar commercial uses of nearby state-held lands averaged 5 to 15 percent of a permittee’s total revenue.In December 1996, we also reported that although the Forest Service had been authorized to recover the costs incurred in reviewing and processing all types of special-use permit applications since as far back as 1952, it had not done so. On the basis of information provided by the agency, we estimated that in 1994 the costs to review and process special-use permits were about $13 million. In April 1996, we reported that the Forest Service’s fees for rights-of-way for oil and gas pipelines, power lines, and communications lines frequently did not reflect fair market value. Agency officials estimated that in many cases—particularly in high-value areas near major cities—the Forest Service may have been charging as little as 10 percent of the fair market value. The Forest Service has been aware for some time of the need to improve its efforts to obtain fair market value for goods or recover costs for services. However, it has studied and restudied issues without reaching closure. For example, in 1987 and 1995, the agency developed draft regulations that, if enacted, would have allowed forest managers to recover the costs incurred in reviewing and processing special-use permit applications. However, the draft regulations were never finalized or published because, according to Forest Service headquarters officials, the staff resources assigned to develop and publish the regulations were diverted to other higher-priority tasks. The Forest Service has not always acted to contain costs, even when requested to do so by the Congress. Instead, consistent with its tendency to study and restudy issues without reaching closure, the agency has not established a clear sequence or schedule to improve its performance. Studies comparing federal and state costs to manage programs such as timber and leasable minerals have been frustrated by significant differences in legislative and regulatory requirements and guidance, types of lands managed, and funding sources. However, reviews of the Forest Service’s internal processes and procedures, as well as comparisons with the Bureau of Land Management’s operations, have identified opportunities to improve operational efficiency at virtually every organizational level within the Forest Service. For example, in April 1997 we reported that, according to an internal agency report, inefficiencies within the Forest Service’s decision-making process cost up to $100 million a year at the individual project level alone and that delays in finalizing forest plans, coupled with delays in finalizing agencywide regulations and in reaching decisions for individual projects, can total a decade or longer. The process used by the Forest Service to revise the land management plan for the Tongass National Forest in southeastern Alaska illustrates the results of the agency’s not being held accountable for making timely, orderly, and cost-effective decisions. The Forest Service originally planned to spend 3 years revising the plan. At the end of 3 years, the agency had spent about $4 million. However, the Forest Service spent another 7 years and $9 million revising the plan. Approved forest plans sometimes do not satisfy the requirements of environmental and planning laws. For example, from October 1992 through June 1996, the Forest Service paid almost $6.5 million in claims for timber sales contracts that were suspended or canceled to protect endangered or threatened species. As of October 1996, the agency had pending claims with potential damages of about $61 million, and it could incur at least an additional $198 million in damages. Some of the contracts were suspended or canceled because the Forest Service had not developed plans that satisfied environmental and planning requirements. Moreover, although the Bureau of Land Management had repeatedly revised its timber sales contract to minimize its liability when it must suspend or cancel a timber sales contract to protect threatened or endangered species, the Forest Service had not. Since the late 1980s, the Forest Service had been developing new regulations and a new timber sales contract that would limit the government’s liability on canceled timber sales contracts and redistribute the risk between the agency and the purchaser. However, the Forest Service had not finalized either the regulations or the contract, and agency officials believe that additional congressional appropriations may be required to help pay for pending and future claims. Similarly, the Forest Service could incur significant costs because the Eldorado National Forest in northern California failed to comply with the requirements of planning and environmental laws. Forest officials decided to proceed with a number of timber sales on the basis of cursory, out-of-date environmental assessments that did not adequately analyze the sales’ potential effects on fish, wildlife, plants, cultural resources, and water quality and did not consider significant new information, as required under regulations implementing the National Environmental Policy Act. The contracts that were awarded have since been suspended. As a result, the Forest Service could incur $30 million in potential damages. Concerned with the escalating costs of the Forest Service’s timber program, the Congress, in fiscal year 1991, asked the agency to develop a multiyear program to reduce the costs of its timber program by not less than 5 percent per year. However, in April 1997, the Forest Service was preparing to undertake the third major examination of its timber program in the last 4 years. Meanwhile, the costs associated with preparing and administering timber sales remain significantly higher than in fiscal year 1991. (See fig. 3.7.) Similarly, in mid-1996, the Forest Service began a study to streamline its commercial and noncommercial recreation special-use permit process. However, similar attempts to improve the process had been made in prior years but had met with little success. For example, a National Task Force on Special-Use Management, done in 1993 and 1994, addressed issues similar to the Forest Service’s streamlining effort. The task force identified numerous problems with the program and suggested ways to streamline the permit process and make the program more consistent throughout the agency. But none of the task force’s recommended actions were adopted by the agency. These and other findings led us to conclude in July 1997 that inefficiency and waste within the Forest Service have cost taxpayers hundreds of millions of dollars and that opportunities for economic gains have been lost through indecision and delay. We noted that past efforts by the Forest Service to change its behavior have not been successful and that decision-making within the agency is broken and in need of repair. The Forest Service has not obtained fair market value for goods, recovered costs for services, or improved operational efficiency because it has not been held accountable for increasing revenue or decreasing costs. Holding it accountable would require measuring its performance against revenue-generating and cost-reducing goals and objectives. However, the Forest Service’s September 30, 1997, strategic plan, developed to comply with the requirements of the Government Performance and Results Act of 1993 (Results Act), contains no goals or performance measures for obtaining fair market value or for reducing or containing costs. In 1994, we suggested that obtaining a better return for the sale or use of natural resources on federal lands and finding ways to reduce costs should be considered in developing a strategy to reform the Forest Service and that the agency would need to work closely with the Congress to accomplish these objectives. In our April 1997 report on the Forest Service’s decision-making and our July 1997 testimony on the Forest Service’s implementation of the Results Act, we noted the act requires every executive department and agency to develop a strategic plan that includes long-term general goals and objectives—or strategic goals—that form the foundation for holding it accountable for its performance. The Department of Agriculture submitted its first strategic plan—which included a strategic plan for the Forest Service—to the Office of Management and Budget and the Congress on September 30, 1997, as the act required. The Forest Service’s strategic plan contains no goals or performance measures for generating revenue or reducing costs. For instance, the plan’s objective for recreation does not identify a performance measure for obtaining a fair return for commercial and noncommercial recreation special-use permits. In addition, although the plan says that the agency intends to ensure that “taxpayers receive a fair return for the use and sale of wood fiber” from national forests, it does not identify any performance measures that could be used to hold the agency accountable for obtaining a fair return for timber and other forest products. Holding a public agency accountable for increasing revenue or decreasing costs from the sale or use of natural resources is not without precedent. As noted in chapter 2, Washington State’s Department of Natural Resources is looking at its current and possible future mix of assets to determine which mix will best generate long-term revenue for its trust beneficiaries. As part of this effort, the department plans to (1) set standards for evaluating the mix of assets on the basis of their profitability, biological diversity, carrying capacity, and overall positioning and (2) develop measurement tools to monitor the trust assets’ ecological, social, and economic performance. Among the Forest Service’s mission priorities, generating revenue and reducing costs rank below both protecting resources and providing goods and services. Efforts by the Forest Service to implement approaches and techniques to increase revenue or decrease costs—similar to many of the approaches and techniques being employed by the nonfederal land managers whose efforts we reviewed—would face a formidable array of statutory, regulatory, and other barriers. These barriers—which limit the Forest Service’s ability to move toward financial self-sufficiency and limit managers’ flexibility to make choices—include (1) language in federal statutes implying that maximizing revenue should not be the overriding criterion in managing the national forests, (2) requirements in environmental and planning laws necessitating a shift in the Forest Service’s management emphasis to uses that do not generate revenue, (3) legislative and administrative decisions setting aside an increasing percentage of Forest Service lands for conservation, (4) requirements that the agency continue to provide certain goods and services at less than their fair market value, and (5) disincentives embedded in laws and congressional expectations. Although the Forest Service’s ability to generate revenue or recover costs is limited, the Congress has provided the agency with the authority to obtain fair market value for certain goods or recover costs for certain services. However, the Forest Service often has not done so, nor has it always acted to contain costs, even when requested to do so by the Congress. Underlying these shortcomings is the failure to hold the agency adequately accountable for its performance for increasing revenue or decreasing costs. Revising the strategic plan that it developed to comply with the requirements of the Results Act to include goals and performance measures for obtaining fair market value and for reducing or containing costs would provide the necessary first step for holding the Forest Service accountable for its performance. If the Congress believes that increasing revenue or decreasing costs from the sale or use of natural resources should be mission priorities for the Forest Service, it will need to work with the agency to identify legislative and other changes that are needed to clarify or modify the Congress’s intent and expectations for revenue generation relative to ecological, social, and other values and concerns. Because the Forest Service has not exercised its authority to obtain fair market value for certain goods and to recover costs for certain services and has not always acted to contain costs, even when requested to do so by the Congress, we recommend that the Secretary of Agriculture direct the Chief of the Forest Service to revise the strategic plan that the agency developed to comply with the requirements of the Results Act to include goals and performance measures for obtaining fair market value for goods, recovering costs for services, and containing expenses as the necessary first step in holding the Forest Service accountable for its performance. We provided copies of a draft of this report to the Forest Service for its review and comment. The agency’s comments appear in appendix IX. The Forest Service (1) agreed with the report’s conclusions and recommendations, (2) stated that the report fairly presents relevant factors that must be understood when comparing land managers or land management within different time periods, and (3) noted that it has made some progress in increasing revenue and improving financial accountability. We revised the report to recognize that the agency is employing some of the approaches and techniques used by the nonfederal land managers to increase revenue and has reduced staffing.

Summary: Pursuant to a congressional request, GAO reviewed: (1) the efforts by nonfederal land managers to generate revenue or become financially self-sufficient from the sale or use of natural resources on their lands; and (2) legal and other barriers that may preclude the Forest Service from implementing similar efforts on its lands. GAO noted that: (1) the nonfederal land managers whose efforts GAO reviewed--while not always attaining financial self-sufficiency--are using a variety of sometimes innovative approaches and techniques to generate revenue or reduce costs from the sale or use of natural resources on their lands; (2) none of the approaches or techniques are legislatively mandated or otherwise required; (3) rather, the land managers have: (a) usually tailored their efforts to meet either a clear mission to make a profit over time or an incentive to generate revenue for other mission-related goals and objectives; and (b) often been delegated the discretion and flexibility to explore innovative entrepreneurial ideas or conduct research to increase profits and to choose where and when to apply the results while being held accountable for their expenditures and performance; (4) generating revenue and reducing costs are not mission priorities for the Forest Service; (5) in keeping with its existing legislative framework, the agency is moving away from, rather than toward, financial self-sufficiency; (6) increasingly, legislative and administrative decisions--such as setting aside an increasing percentage of Forest Service lands for conservation as wilderness, wild and scenic rivers, and national monuments--and judicial interpretations of statutory requirements have required the Forest Service to shift its emphasis from uses that generate revenue to those that do not; and (7) furthermore: (a) the agency is required to continue providing certain goods and services--such as recreational sites, hardrock minerals, and livestock grazing--at less than their fair-market value; and (b) certain congressional expectations and legislative provisions--including those that require sharing revenue before deducting the costs of providing the goods or services--serve as disincentives to either increasing revenue or decreasing costs.