For more than a century the federal government has diverted some proceeds off public lands to local governments to ease the financial challenges associated with a nontaxable land base.
These programs, which send millions to Utah counties, are at a crossroads as Congress re-evaluates funding levels on a yearly basis and debates whether payments should be based on a county’s need or on the amount of revenue generated on public land within its borders.
Utah remains the nation’s second-leading recipient under PILT, or the Payment in Lieu of Taxes program, receiving $35.4 million in this fiscal year. Only California, with 11 million more federal acres and 13 times more residents, received more, according to data released this month by the U.S. Department of Interior.
Meanwhile, a cloud is looming. Future funding for PILT is far from certain. Its kid-sister need-based program called SRS, or Secure Rural Schools, has expired and may not get extended because of sharp disagreement over how to calculate payments.
These programs are no longer funded in multi-year blocks but on an annual basis, and funding levels are not constant, which makes it hard for rural counties to plan their budgets.
“It seems to get smaller and smaller every year. It’s like death by slow oxygen deprivation,” said Mark Ward, policy director for the Utah Association of Counties.
PILT revenue to Utah, which would stop coming should the state succeed in its effort to gain title to 30 million acres of federal land, has helped fund law enforcement, schools, county services and roads. But a closer look at payment data highlights a problem that arises from the complex formula to calculate a county’s payment, which is based on its population and federal acreage.
None of Utah’s top five public lands counties — Millard, San Juan, Garfield, Kane and Emery, in that order — are among the top five counties receiving PILT revenue. No. 6 Tooele County, with 2 million acres, earned the most, $3.2 million.
Utah’s top five PILT recipients are among the state’s most populated counties off the Wasatch Front.
In other words, the counties getting the most could be those that need it the least, since they have larger tax bases, and this imbalance would only get worse should SRS disappear, according to Headwaters Economics, a Montana-based think tank.
“The result is a shift toward PILT. Rural counties will lose the most and urban get more. It shifts $115 million away from rural counties,” said Mark Haggerty, a Headwaters policy analyst.
SRS was launched in 2001 to address the impact of declining logging on Forest Service lands. When it was reauthorized in 2008, the program decoupled payments from resource revenue.
But that program, which paid out $274 million last year, has expired, and its chances for an extension are tenuous. Republican leaders of the U.S. House Natural Resources Committee, including Utah’s Rob Bishop, want to see a return to a revenue-sharing arrangement as a way to encourage logging.
Ward agrees revenue sharing would be a good idea, but only if the Forest Service resumes active timber harvests. “Without commodity receipts [to share] that would be a cruel twist of the knife,” he said.
Regardless of logging’s future, however, the revenue-sharing model is fraught with pitfalls, according to Haggerty.
“It would re-expose counties to lower and more volatile timber returns, retrench the timber wars and result in unequal compensation to counties with federal lands,” Haggerty said.
And timber extraction cannot support the kind of employment it did in its clear-cutting heyday of the 1960s and 1970s because the industry has become so mechanized.
“You need fewer people to process the same amount of timber, and the wages are lower,” Haggerty said. “This problem is not going to get solved by getting the [timber] cut back.”
A solution Haggerty’s group proposes is a single-payment system that combines PILT, SRS and traditional revenue sharing. The goals would be to maintain stable, predictable payments; lift the population-based caps so rural counties can reap higher payments; and target economically stressed counties for extra help.
Headwaters contends such a system could cut federal spending by $45 million and increase the share of money going to low-population counties like those in southeastern Utah, which get stiffed in the current arrangement.
Payment in Lieu of Taxes
The PILT program directs federal money to counties with public land that cannot be taxed. Under the current payment formula, the federal government awards counties $2.54 per acre of public land within their borders, but the payment is adjusted downward based on population. As a result, the program favors higher-population counties. Nearly $400 million in PILT money will be paid out for fiscal year 2013, including $35.4 million to Utah counties.