Since 1908, the Forest Service (USFS) in the U.S. Department of Agriculture has paid 25% of its gross receipts from timber sales and most other revenue-generating activities to the states for use on roads and schools in the counties where the national forests are located. This was intended to compensate localities for the tax-exempt status of federal lands. Similarly, since 1937, the Bureau of Land Management (BLM) in the U.S. Department of the Interior has paid 50% of its gross receipts to the counties containing the "O&C lands" (described below). Payments have declined substantially in many areas due to falling USFS and BLM timber sales. Congress has enacted temporary programs to sustain the payments at higher levels; the most recent such program, the Secure Rural Schools and Community Self-Determination Act of 2000 (SRS), expired following payments made for FY2011. Because of continuing concerns about substantial declines in USFS and BLM timber sales and payments for county roads and schools, Congress is considering related legislation. Title I of H.R. 4019 , the Federal Forests County Revenue, Schools, and Jobs Act of 2012, addresses federal land management to provide timber jobs and revenues for county roads and schools. The House Committee on Natural Resources ordered the bill reported on February 16, 2012. The USFS has been selling timber for more than a century. The President was authorized to proclaim national forests (originally called forest reserves) in 1891. Congressional concerns over proclamations by President Grover Cleveland led to provisions in the Sundry Civil Expenses Appropriations Act for FY1898 limiting the forest reservations to specific purposes, including "to furnish a continuous supply of timber for the use and necessities of citizens," and authorizing the sale of "dead, matured, or large growth of trees." The first timber sale was in 1899 to the Homestake Mining Company in South Dakota. USFS timber sales grew slowly in the subsequent decades. Then, in the 1950s, USFS sales expanded rapidly, fueled by demand from the post-World War II economic expansion and by the decline in timber supply from private forests. (See Figure 1 .) Except for the 1980 and 1982 recessions, the high USFS timber sale level was sustained through the 1980s. The decline in USFS sales began in 1990 with litigation to protect the northern spotted owl in western Washington, western Oregon, and northwestern California. Though commonly believed to be a result of listing the northern spotted owl as threatened under the Endangered Species Act (ESA), the original litigation was primarily under a provision of the regulations to implement the National Forest Management Act of 1976 (NFMA) that required management for viable populations of native species. However, USFS timber sales declined in nearly all regions in the early 1990s, indicating more widespread problems than just northern spotted owls. USFS timber sales have continued at relatively modest levels for the past two decades, owing to continued concerns about the environmental effects of timber sales and relatively weak wood products demand in the United States and globally. The Bureau of Land Management (BLM) in the U.S. Department of the Interior (DOI) also sells timber. The vast majority (about 95%) of BLM timber sales are from the Oregon and California (O&C) grant lands in western Oregon. These lands were granted to the Oregon and California Railroad Company in 1869 for building a railroad north from the Oregon-California border, and the lands were to be sold to settlers. The 2.5 million acres of timberland in western Oregon were returned to ("revested in") federal ownership under a U.S. Supreme Court decision in 1915 for violations of the terms of the grant. The O&C lands are often understood to include the Coos Bay Wagon Road (CBWR) grant lands, 74,547 acres of timberland amid the O&C lands. These lands were granted in 1869 to the Southern Oregon Company to build a military wagon road between Coos Bay and Roseburg, Oregon, and returned ("reconveyed") to federal ownership by an act of Congress in 1919 to terminate litigation over violations of the terms of the original grant. Federal administration of the O&C and CBWR lands was subject to various statutes until Congress directed management by the DOI in the O&C Act of 1937. Management was initially by the General Land Office, which was merged with the U.S. Grazing Service in 1946 to create the BLM. As with USFS timber sales, O&C timber sales declined after 1990, as shown in Figure 1 , initially owing to protection of northern spotted owl habitat. In 1908, Congress added a provision to the Agriculture Appropriations Act directing the USFS to give 25% of its gross receipts to the states for use on roads and schools in the counties where the national forest lands are located. Thus, the money is paid to the state, and the state determines how much goes toward roads and how much toward schools (or leaves some or all of the discretion to the counties). The state also determines which programs can be funded (e.g., salaries, construction, maintenance, etc.) and which local governmental agency receives the funds (e.g., counties, townships, school districts, etc. ), but the state cannot retain any of the funds, even for administrative costs. How much must be spent in each county is calculated by the USFS based on gross receipts from all sources (timber, grazing, special use permits, etc.) and acres in each county for each of the 156 proclaimed national forests. The payment basis was altered in 2008 to provide 25% of a seven-year rolling average of receipts (rather than current-year receipts), to reduce annual fluctuations in payments. The USFS 25% payments to states have mandatory spending authority, and thus the payments are made automatically, unless Congress acts to alter the payments. The O&C Act of 1937 provided for payments from the O&C lands. The act allocated 50% of receipts directly to the counties for any governmental purpose, 25% for administering the O&C lands (with any remainder returned to the Treasury), and 25% to pay the counties for accrued tax liabilities through March 1, 1938; after the accrued tax liabilities were paid, the 25% was to be used for administering the O&C lands, with any remainder provided to the counties. In practice, after the tax liabilities were paid (by 1952), all of the 25% has been used to administer the O&C lands, raising the Treasury share to 50%. Thus, the counties receive 50% of receipts. Payments for the CBWR lands were not included in the O&C Act, but were included in a later act. The program paralleled the O&C payments: the counties could effectively receive up to 50% of receipts. However, the CBWR act also directed that the payments "be computed by applying the same rates of taxation as are applied to privately owned property of similar character in such counties." Thus, the actual payments are the county tax bills (county tax rates for assessed value of the lands), up to 50% of the receipts from the CBWR lands. Concern over declining timber sales and thus declining payments, attributed to protecting spotted owls and other species, led President Clinton to propose a 10-year payment program to address regional economic problems resulting from protection efforts that reduced federal timber harvests in the Pacific Northwest. Congress enacted this program in the Omnibus Budget Reconciliation Act of 1993. For 1994, these "spotted owl payments" began at 85% of the average payments between FY1986 and FY1990, and declined by 3 percentage points annually, to 58% in FY2003. Concerns about declining timber sales and county payments continued and expanded, especially with the declining spotted owl payments and in areas without northern spotted owls. Congress responded with a temporary, optional substitute payment program: the Secure Rural Schools and Community Self-Determination (SRS) Act of 2000. For counties that chose the SRS payments, the program provided payments at the average of the three highest payments between FY1986 and FY1999. (Some counties with USFS lands chose to continue receiving payments of 25% of gross receipts.) Under Title II of SRS, counties receiving payments of $100,000 or more were required to spend 15%-20% of the payment on reinvestment projects (e.g., watershed improvement, wildfire fuel reduction, etc.) on the federal lands, and under Title III up to 7% could be used for additional specified purposes (e.g., search and rescue on federal lands). SRS payments were authorized for six years, FY2001-FY2006. Congress enacted a one-year extension for FY2007, then amended the SRS law in 2008. The amendment authorized a four-year extension (though FY2011) and modified the payments through a complicated formula that included the average of the three highest payments between FY1986 and FY1999, the eligible federal lands in each county, and relative per capita income in each county. The amended version also included transition payments for several states, and retained the Title II (federal land reinvestment) and Title III (special purposes) provisions of the payments. The amended SRS payments expired at the end of FY2011, and the USFS and O&C payments will return to their previous historic levels (25% and 50% of receipts, respectively) for FY2012 unless Congress enacts an alternative payment program before September 30, 2012. There have been many issues involved in congressional efforts to reauthorize SRS, as described in CRS Report R41303, Reauthorizing the Secure Rural Schools and Community Self-Determination Act of 2000 . One of the most significant difficulties has been the need for offsets to fund the reauthorization of the mandatory payments, and Congress continues to examine options on this issue. One other issue relates to the payments more generally.