[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
PAYMENTS IN LIEU OF TAXES
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON NATIONAL PARKS, FORESTS
AND PUBLIC LANDS
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
Friday, October 14, 2011
__________
Serial No. 112-71
__________
Printed for the use of the Committee on Natural Resources
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
or
Committee address: http://naturalresources.house.gov
----------
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COMMITTEE ON NATURAL RESOURCES
DOC HASTINGS, WA, Chairman
EDWARD J. MARKEY, MA, Ranking Democrat Member
Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Louie Gohmert, TX Eni F.H. Faleomavaega, AS
Rob Bishop, UT Frank Pallone, Jr., NJ
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Rush D. Holt, NJ
Paul C. Broun, GA Raul M. Grijalva, AZ
John Fleming, LA Madeleine Z. Bordallo, GU
Mike Coffman, CO Jim Costa, CA
Tom McClintock, CA Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Jeff Denham, CA CNMI
Dan Benishek, MI Martin Heinrich, NM
David Rivera, FL Ben Ray Lujan, NM
Jeff Duncan, SC John P. Sarbanes, MD
Scott R. Tipton, CO Betty Sutton, OH
Paul A. Gosar, AZ Niki Tsongas, MA
Raul R. Labrador, ID Pedro R. Pierluisi, PR
Kristi L. Noem, SD John Garamendi, CA
Steve Southerland II, FL Colleen W. Hanabusa, HI
Bill Flores, TX Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann,
TN
Jon Runyan, NJ
Bill Johnson, OH
Todd Young, Chief of Staff
Lisa Pittman, Chief Counsel
Jeffrey Duncan, Democrat Staff Director
David Watkins, Democrat Chief Counsel
------
SUBCOMMITTEE ON NATIONAL PARKS, FORESTS AND PUBLIC LANDS
ROB BISHOP, UT, Chairman
RAUL M. GRIJALVA, AZ, Ranking Democrat Member
Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Doug Lamborn, CO Rush D. Holt, NJ
Paul C. Broun, GA Martin Heinrich, NM
Mike Coffman, CO John P. Sarbanes, MD
Tom McClintock, CA Betty Sutton, OH
David Rivera, FL Niki Tsongas, MA
Scott R. Tipton, CO John Garamendi, CA
Raul R. Labrador, ID Edward J. Markey, MA, ex officio
Kristi L. Noem, SD
Bill Johnson, OH
Doc Hastings, WA, ex officio
----------
CONTENTS
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Page
Hearing held on Friday, October 14, 2011......................... 1
Statement of Members:
Bishop, Hon. Rob, a Representative in Congress from the State
of Utah.................................................... 1
Prepared statement of.................................... 3
Gosar, Hon. Paul A., a Representative in Congress from the
State of Arizona, Prepared statement of.................... 50
Grijalva, Hon. Raul M., a Representative in Congress from the
State of Arizona........................................... 4
Prepared statement of.................................... 4
Statement of Witnesses:
Corn, M. Lynne, Ph.D., Specialist in Natural Resources
Policy, Congressional Research Service, Library of Congress 7
Prepared statement of.................................... 9
Haze, Pamela K., Deputy Assistant Secretary, Office of
Budget, Finance, Performance and Acquisition, U.S.
Department of the Interior................................. 5
Prepared statement of.................................... 6
Yonk, Ryan M., Assistant Professor of Political Science,
Southern Utah University................................... 28
Prepared statement of.................................... 29
Additional materials supplied:
Gila County Board of Supervisors, Letter to The Honorable
Paul Gosar dated October 13, 2011, submitted for the record 41
National Association of Counties, Statement submitted for the
record..................................................... 51
OVERSIGHT HEARING ON ``PAYMENTS IN LIEU OF TAXES.''
----------
Friday, October 14, 2011
U.S. House of Representatives
Subcommittee on National Parks, Forests and Public Lands
Committee on Natural Resources
Washington, D.C.
----------
The Subcommittee met, pursuant to call, at 10:07 a.m., in
Room 1324, Longworth House Office Building, The Honorable Rob
Bishop [Chairman of the Subcommittee] presiding.
Present: Representatives Bishop, Lamborn, Coffman,
McClintock, Tipton, and Grijalva.
Also present: Representative Gosar.
Mr. Bishop. The Subcommittee will be in order. The Chairman
notes the presence of a quorum; grateful for all of you who are
here.
The Subcommittee on National Parks, Forests and Public
Lands is meeting today to hear testimony on the Payment in Lieu
of Taxes programs initiative. It is very important to all
constituents of the West.
Under the Committee Rules, opening statements are limited
to the Chairman and the Ranking Member of the Subcommittee;
however, I ask unanimous consent to include any Members'
opening statements in the hearing record if submitted to the
Clerk by close of business today. And hearing no objections, we
will do that.
I also ask unanimous consent that any member of the
Subcommittee or the full committee wishing to participate in
today's hearing be allowed to participate from the dais. Even
though that doesn't apply to anybody, but we will make that a
UC anyway. OK, no objections; we are doing it.
STATEMENT OF THE HONORABLE ROB BISHOP, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF UTAH
Mr. Bishop. Today we are going to hear testimony on the
history and the construction of PILT and how PILT payments are
configured and how they impact Federal lands and Federal land
management decisions that we have in our communities.
While PILT is enacted to compensate local governments for
the loss of property tax revenues for nontaxable Federally
owned land, it has never fully accounted for the numerous
management proscriptions that accompany that particular land.
Not all Federal public lands are created equal. PILT does not
adjust for variations in land-use designation, especially if
moving from accessible multiple-use to a more restrictive or
non-impairment management status.
PILT has become an essential lifeline for many rural
communities and counties. And since more than half of all the
land in the West is unfortunately owned and managed by the
Federal Government, PILT has a significant impact on all rural
economies of western states.
PILT is not an equalizer. While PILT is a necessary source
of funds for rural and primarily western counties, although
almost every county benefits in some way throughout this
country from it, it often does not accurately reflect the
economic opportunities that would be available through active
management and use of the Federal public lands.
When land management decisions reduce access or utilization
of natural resources, local economies bear the brunt, and too
often vital economic opportunities and resources, including
traditional and renewable energy sources, are lost. And again,
PILT cannot and does not fill that void. PILT alone is not
adequate reimbursement for an absentee Federal landlord,
especially one that pushes additional reductions in access and
multiple use on our public lands.
Contrary to claims by the Administration and others, the
designation of monuments and wilderness are not a boon to local
economies but rather a detriment in most scenarios. And I look
forward to hearing about the work of Dr. Yonk and his
colleagues which clearly calls into question the validity of
recent testimony this Subcommittee had from the Director of
Headwaters Economics.
America is in the midst of a recession with elevated
unemployment, yet the Obama Administration continues to push a
wilderness agenda that competes with our natural priorities of
job creation and domestic energy independence. This is counter-
productive.
At a time when the budgets are tight around the nation,
particularly in the rural West, the Obama Administration needs
to closely evaluate the real impact of advancing a wilderness
agenda. To lock out millions of acres of public lands in the
West without Congressional approval and restricting access for
energy production, recreation and other job-creating activities
would devastate these rural communities that unfairly bear the
brunt of the restrictive land management designations.
With the expiration of the full funding of PILT looming in
Fiscal Year 2012, the interests and livelihoods of all the
residents and stakeholders should be considered and protected
when making land use decisions. Land use designations, such as
national monuments and wilderness, should be initiated at the
local level, not out of pressure from Washington without
adequate understanding of the impact on local communities, who
are too often left shouldering the heavy burden of these
dictates.
The Majority in Congress understands that we are at a
critical juncture when it comes to managing our national assets
and the current state of economic mandates that we do more with
less. It is imperative that we begin to manage our Federal
lands and natural resources for maximum returns on
conservation, economic and public benefit, and improved
management of our Federal lands and resources will create much-
needed jobs, amplify conservation efforts and make America more
self-reliant. This approach will help to keep PILT-reliant
counties productive and viable.
I look forward to hearing from our witnesses today. And I
recognize the Ranking Member for his opening statement.
[The prepared statement of Mr. Bishop follows:]
Statement of The Honorable Rob Bishop, Chairman,
Subcommittee on National Parks, Forests and Public Lands
Today we will hear testimony on the history and construction of
PILT, how PILT payments are configured and the impact federal land
management decisions have on surrounding communities.
While PILT was enacted to compensate local governments for lost
property tax revenues on non-taxable federally owned land, it never
fully accounted for the numerous management prescriptions that
accompany that land.
Not all federal/public lands are created equal. PILT does not
adjust for variations in land use designations, especially if moving
from accessible multiple-use to a more restrictive or non-impairment
management status.
PILT has become an essential lifeline for many rural counties.
Since more than half of all the land in the West is owned and managed
by the federal government, PILT has a significant impact on the rural
economies of Western States.
PILT is not an equalizer. While PILT is a necessary source of funds
for rural, primarily western counties, it often does not adequately
reflect the economic opportunity available through active management
and use of federal public lands.
When land management decisions reduce access and utilization of
natural resources, local economies bear the brunt and too often vital
economic opportunities and resources, including traditional and
renewable energy resources are lost. Again, PILT cannot and does not
fill that void.
PILT alone is not adequate reimbursement for an absentee federal
landlord, especially one that pushes additional reductions in access
and multiple-use on our public lands.
Contrary to claims by the administration and others, the
designation of monuments and wilderness are not a boon to local
economies, but rather a detriment in most scenarios.
I look forward to hearing more about the work Dr. Yonk and his
colleagues have done that clearly calls into question the validity of
recent testimony before this Subcommittee by the Executive Director of
Headwaters Economics.
America is in the midst of a recession with elevated unemployment,
yet the Obama Administration continues to push a ``wilderness agenda''
that competes with our national priorities of job creation and domestic
energy independence. This is counter-productive.
At a time when budgets are tight around the nation and particularly
in the rural West, the Obama Administration needs to closely evaluate
the real impact of advancing a ``wilderness agenda.''
To lock-up millions of acres of public lands in the West, without
Congressional approval, and restricting access for energy production,
recreation, and other job-creating economic activities would devastate
these rural counties that unfairly bear the brunt of these restrictive
land management designations.
With the expiration of full funding for PILT looming in fiscal year
2012, the interests and livelihoods of all residents and stakeholders
should be considered and protected when making land use decisions.
Land use designations such as national monuments and wilderness
should be initiated at the local level, not out of pressure from
Washington without adequate understanding of the impact on local
communities who are too often left shouldering the heavy burden of
these dictates.
The Republican Majority in Congress understands that we are at a
critical juncture when it comes to managing our nation's assets and the
current state of our economy mandates that we do more with less.
It is imperative that we begin to manage our federal lands and
natural resources for a maximum return on conservation, economic and
public benefit.
Improved management of our federal lands and resources will create
much-needed jobs, amplify conservation efforts and make America more
self-reliant. This approach will help to keep PILT-reliant counties
productive and viable.
I look forward to hearing from our witnesses today.
______
STATEMENT OF THE HONORABLE RAUL M. GRIJALVA, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF ARIZONA
Mr. Grijalva. Thank you, Mr. Chairman. I am sorry I was
tardy, and I apologize to the witnesses as well.
Mr. Chairman, in 1976 Congress created the Payment In Lieu
of Taxes or PILT program to ensure that county governments
receive compensation for the presence of public lands within
their county boundaries. The amounts provided under the PILT
program are over and above the revenues generated on Federal
lands, which are shared with local governments.
Since 1976, under Democratic Majorities, the PILT program
has been fully funded. When the Republicans took the Majority
in 1994, PILT was under-funded, with appropriations between 40
and 70 percent of the authorized amount. And it took a
Democratic Majority in 2008 to restore full funding for PILT as
a mandatory spending program for the next five years.
But starting in 2013, PILT will again need to be authorized
and appropriated by Congress. I am worried that history is
about to repeat itself with the Republican Majority either
allowing PILT to expire or targeting the program for
significant cuts in funding.
Just like the Secure Rural Schools program, which the
Republicans allowed to expire in the 109th Congress, the
Republican Majority will have to decide next year what the
future is of PILT. If programs like PILT and Secure Rural
Schools are truly vital to our rural communities throughout the
West, then we must find ways to fully fund them.
What we must not do is cut PILT and then use the cut as an
excuse to degrade our environmental safeguards on our public
lands. Our public lands provide substantial benefits to states
and local counties from travel and tourism dollars. Our public
lands are the backbone of the outdoor recreation economy, which
generates over $730 billion in economic activity, 6.5 million
jobs and $88 billion in annual state and Federal tax revenue.
We need to find bipartisan solutions to helping our rural
counties meet their budgetary needs. We stand ready to work
with the Majority on an effective long-term funding solution
for PILT.
I want to thank the witnesses for joining us today and look
forward to their thoughts on these proposals. Thank you, and I
yield back.
[The prepared statement of Mr. Grijalva follows:]
Statement of The Honorable Raul Grijalva, Ranking Member,
Subcommittee on National Parks, Forests and Public Lands
Mr. Chairman, in 1976, Congress created the Payment in Lieu of
Taxes, or PILT, program to ensure that county governments receive
compensation for the presence of public lands within their county
boundaries. The amounts provided under the PILT program are over and
above the revenues generated on federal lands which are shared with
local governments.
Since 1976, under Democratic majorities, the PILT program had been
fully funded. When the Republicans took the majority in 1994, PILT was
underfunded, with appropriations between 40 and 70 percent of the
authorized amount. And, it took a Democratic majority in 2008 to
restore full funding for PILT as a mandatory spending program for the
next five years.
But starting in 2013, PILT will again need to be authorized and
appropriated by Congress. I am worried that history is about to repeat
itself with the Republican Majority either allowing PILT to expire or
targeting the program for significant cuts in funding.
Just like the Secure Rural Schools program, which the Republicans
allowed to expire in the 109th Congress, the Republican majority will
have to decide next year what the future of PILT will be.
If programs like PILT and Secure Rural Schools are truly vital to
our rural communities throughout the West, then we must find ways to
fully fund them.
What we must not do is cut PILT, and then use that cut as an excuse
to degrade our environmental safeguards on public lands.
Our public lands provide substantial benefits to states and local
counties from travel and tourism dollars. Our public lands are the
backbone of the outdoor recreation economy, which generates over $730
billion in economic activity, 6.5 million jobs, and $88 billion in
annual state and federal tax revenue.
We need to find bipartisan solutions to helping our rural counties
meet their budgetary needs. And, we stand ready to work with the
Majority on an effective, long-term funding solution for PILT.
I thank the witnesses for joining us today and look forward to
their thoughts on these proposals.
______
Mr. Bishop. All right. As I said, we are going to have some
problems here. But we may have time, I think we do have time,
to get at least the first two witnesses' testimony in. Then we
are going to have to take a break to go back to votes, and then
we will come back and finish this panel.
So, like all of our witnesses, your written testimony will
appear in the record. We want to hear your oral testimony here,
and we want you to keep it as best you can to five, this time
we need you to keep it to five minutes.
The lights in front of you indicate green, you are still
going fine; yellow, you have one minute left; please stop when
it hits red.
And with that, we will start with Ms. Pamela Haze, who is
the Deputy Assistant Secretary for the Office of Budget,
Finance, Performance and Acquisition at the Department of the
Interior. Ms. Haze, please.
STATEMENT OF PAMELA K. HAZE, DEPUTY ASSISTANT SECRETARY, OFFICE
OF BUDGET, FINANCE, PERFORMANCE AND ACQUISITION, UNITED STATES
DEPARTMENT OF THE INTERIOR
Ms. Haze. Good morning. As you said, I am the Deputy
Assistant Secretary for Budget, Finance, Performance and
Acquisition, and executing the Payments In Lieu of Taxes is in
my portfolio of programs.
I have here with me today from the Department of the
Interior Jason Buckner, Adrienne Moss and Brian Yost. I just
wanted to mention their names. So, good morning. Thank you for
inviting me to be a part of this panel this morning. I have a
formal statement, and I just have a few brief comments, a quick
overview of the program if you will and how we manage the
program. Many of you are already very knowledgeable about the
program and its history, so hopefully I am not repeating things
you already know.
The Payments in Lieu of Taxes program makes annual payments
to counties to help offset the costs of services and
infrastructure that are incurred by these local jurisdictions
where certain Federal lands are located. Payment eligibility is
reserved for local governments that contain nontaxable Federal
lands, and these jurisdictions provide services related to
public safety, housing, social services, transportation and
other services.
PILT payments are made to counties that have lands within
them. This includes lands that are in the National Forest
System, the National Park System, lands managed by the Bureau
of Land Management, lands affected by the Corps of Engineers
and the Bureau of Reclamation Water Resource Development
projects.
We use a formula in allocating PILT. We use a formula that
is provided in the PILT Act. The annual payment to each county
is computed based on the number of acres of Federal entitlement
land within that jurisdiction, and population serves as a cap
on the formula.
The PILT Act also requires that we consider prior-year
revenue payment amounts from a select number of revenue-sharing
programs in the calculation of the payment.
Since the inception of the program, the Act was passed in
1976, the first payment was made in 1977. So, since 1977 and
through 2011, with the last payment we made in June of 2011,
the Department of the Interior has made payments totaling $5.5
billion. From 1977 through 2008, funding for the PILT program
was included in annual discretionary appropriations, so we
sought funding through our annual budget request, and it was
considered as part of the Appropriations process.
In 2008, the Emergency Economic Stabilization Act
authorized a five-year program of mandatory funding for PILT
payments. So, beginning in 2008, we made full entitlement
payments to the counties and have through 2011. In 2011 we made
payments of $375 million to about 1900 counties. This
authorization expires in 2012, as you have already mentioned.
So, a brief overview of the administration of the program.
Payments are distributed to counties in June. To ensure they
receive funding on a timely manner, in most cases the counties
have a fiscal year that begins in July, as you know. So, we are
trying to accommodate their need to get the money before the
end of the fiscal year.
We use approximately $400,000 to administer the program on
an annual basis. This is about 0.1 percent of the total program
funding. We use a portion of this to make adjustments to prior-
year payments when counties come in and give us new information
or Federal agencies change acreage.
With that, I am going to conclude my remarks. Thank you.
[The prepared statement of Ms. Haze follows:]
Statement of Pamela K. Haze, Deputy Assistant Secretary for Budget,
Finance, Performance and Acquisition, U.S. Department of the Interior
Mr. Chairman and members of the Committee, I am pleased to have the
opportunity to testify today on the Department of the Interior's
Payments-in-Lieu of Taxes (PILT) Program. The Administration strongly
supports ways that the Federal government can fulfill its role of being
a good neighbor to local communities, such as PILT.
Background
The PILT Act (P.L. 94-565) was passed by Congress in 1976 to
provide payments to local governments in counties where certain Federal
lands are located within their boundaries. PILT is based on the concept
that these 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 Department has
distributed more than $5.5 billion dollars in PILT payments since these
payments began in 1977.
The annual PILT payments to local governments are computed based on
the number of acres of Federal entitlement land within each county or
jurisdiction. Federal entitlement lands include lands within the
National Forest and National Park Systems, those managed by the Bureau
of Land Management (BLM), those affected by Corps of Engineers and
Bureau of Reclamation water resources development projects, and certain
other Federal lands. The formula for calculating PILT payments takes
into account the population within an affected unit of local
government, the number of acres of eligible Federal land, and the
amount of certain Federal land payments received by the county in the
preceding year. These payments are made from Federal revenue generating
programs (such as receipts from mineral leasing, livestock grazing, and
timber harvesting) that the Federal Government transfers to the
counties.
Prior to 2008, the amounts available for PILT payments to local
governments required an annual appropriation by Congress. In 2007, the
last year that PILT funding was subject to appropriation, PILT payments
were 64.7 percent of the full authorized level for counties.
The Emergency Economic Stabilization Act of 2008 (Public Law 110-
343) converted PILT to a mandatory program under which counties have
received the full PILT entitlement level. In 2011, a total of $375.2
million was distributed to approximately 1,850 local government units
(mostly counties) in 49 States, the District of Columbia, Guam, Puerto
Rico, and the U.S. Virgin Islands.
The amount authorized for the program in FY 2011 was $375.6
million, comprising $375.2 million for payments to counties and other
local governments and $400,000 for expenses to administer the program.
Conclusion
The Administration recognizes that PILT is important to local
governments, sometimes comprising a significant portion of their
operating budgets. The PILT monies have been used for critical
functions such as local search and rescue operations, road maintenance,
law enforcement, schools, and emergency services. These expenditures
often support the activities of people from around the country who
visit or recreate on Federal lands.
As we look forward to reauthorization of the program, the
Department hopes to continue to work to ensure an efficient and
effective program.
Mr. Chairman, this concludes my prepared statement. I would be
pleased to answer any questions that you or the other members may have.
______
Mr. Bishop. Ms. Haze, thank you very much for your
testimony. We can get one other witness in here easily within
our time limit before we run out of time for the votes, so I
will ask that Dr. Corn, who is a Specialist in Natural
Resources Policy with the Congressional Research Service,
Library of Congress, address us now. Same thing, five minutes,
please, ma'am.
STATEMENT OF M. LYNNE CORN, PhD, SPECIALIST IN NATURAL
RESOURCES POLICY, CONGRESSIONAL RESEARCH SERVICE--RSI, LIBRARY
OF CONGRESS
Dr. Corn. Good morning, Mr. Chairman. I have been asked by
the Subcommittee to describe how the program works for Payments
in Lieu of Taxes. I have submitted written testimony in the
form of a CRS report that I updated recently. With the help of
some slides from that report, I will describe this program.
The original program was designed as an overlay rather than
a substitute for Federal payment programs already in existence
for national forests, BLM lands, wildlife refuges and a few
other specified areas. The emphasis was on, one, providing at
least some payment to counties whose Federal lands produced
little or no revenue from Agency payment programs and two,
paying proportionately more to counties with very low
populations that might be less able to provide government
services.
The result was a formula that capped payments based on
population, subtracted out specified prior-year payments and
set a certain minimum payment so that every county with
eligible lands got at least some PILT payment regardless of
prior-year payments from other agencies.
There was no adjustment for inflation. The program relied
on discretionary spending, and Congress appropriated 90 percent
or more of the full authorized amount in all but one year from
1977 to 1994. All states have at least some acreage eligible
for PILT payments, but most of the acreage is in western
States.
As the years passed, counties receiving PILT payments
raised a variety of concerns, particularly the erosion in the
value of the payments due to inflation. Some counties also
wanted to see more categories of Federal lands or Indian lands
become eligible for payments or to move to a system of tax
equivalency.
In 1994, Senator Hatfield held PILT hearings in the
Committee on Energy and Natural Resources, and many different
views were expressed as virtually all proposed changes would
have helped some counties and hurt others. A compromise was
reached to raise payment rates and then adjust rates in later
years for inflation.
As my next slide shows, the authorization levels rose
rapidly. The program continued to rely on annual
appropriations. So, even though appropriations rose rapidly,
they did not keep up with the authorization level, and counties
tended to focus on the gaps between these two sets of bars.
However, as my next slide shows, whether measured by
current dollars or by constant inflation-adjusted dollars, the
payments did go up. The reliance on discretionary spending
ended in 2008 with Public Law 110-343. This law provided for
mandatory spending authority for PILT from Fiscal Year 2008
through Fiscal Year 2012. The payment next summer is the last
under this provision, and after 2012 the program will return to
annual appropriations unless Congress changes the law.
To calculate the PILT payment for any given county, you
need to know the answers to these five questions. One, how many
acres of eligible lands are in the county? The PILT statute
specifies which lands are eligible, and I have shown these on
page 4 in my written testimony.
Two, what is the population of the county? As my next slide
shows, no matter how many acres, and regardless of prior-year
payments, a county's payments are limited by the population of
the county, and no county is credited with having more than
50,000 people.
Third, what were the previous year's payments, if any, for
all of the eligible lands under other payment programs of
Federal agencies? In the next slide, note that as prior-year
payments, shown there on the X axis, increase, the next year's
payments under PILT, shown on the Y axis, decrease. Only those
payments named in the PILT statute produce any offset. Any
prior-year payment that is not named in PILT as requiring an
offset doesn't count. I have shown these prior-year payments
that result in an offset in Table A-3 in my written testimony.
Four, does the state have any laws requiring the payments
from other Federal agencies to be passed through to other
independent local government entities, such as school
districts, rather than staying with the county government
itself? If they do and the county government never actually
receives the funds, then those funds don't count against that
county in calculating the next year's PILT payment.
And five, what was the increase in the consumer price index
during the year? My next slide shows a very complicated flow
chart as to how this calculation is worked out. I would be
happy to go through the steps in this if the Committee wishes.
And with that, let me thank you for your invitation to
appear today, and I would be pleased to answer your questions
on this program.
[The prepared statement of Dr. Corn follows:]
Statement of M. Lynne Corn, Specialist in Natural Resources Policy,
Congressional Research Service, Library of Congress
I have been asked by the Subcommittee to testify on the program
known as Payments in Lieu of Taxes (PILT). With this memorandum, I am
attaching my written testimony--CRS Report RL31392 PILT (Payments in
Lieu of Taxes): Somewhat Simplified, a report I recently updated on
this program. I appreciate this opportunity to testify on this program,
and will be pleased to answer your questions.
______
PILT (Payments in Lieu of Taxes): Somewhat Simplified
M. Lynne Corn
Specialist in Natural Resources Policy
September 28, 2011
CRS Report for Congress
Prepared for Members and Committees of Congress
Summary
Under federal law, local governments are compensated through
various programs for reductions to their property tax bases due to the
presence of most federally owned land. These lands cannot be taxed, but
may create demand for services such as fire protection, police
cooperation, or simply longer roads to skirt the federal property. Some
of these programs are run by specific agencies and apply only to that
agency's land. The most widely applicable program, administered by the
Department of the Interior (DOI), applies to many types of federally
owned land, and is called ``Payments in Lieu of Taxes,'' or PILT. The
authorized level of PILT payments is calculated under a complex
formula. This report addresses only the PILT program administered by
DOI. There is no PILT-like program generally applicable to military
lands, but a small fraction of military lands are eligible for the DOI
PILT program. Furthermore, PILT does not apply to Indian-owned lands,
virtually none of which are subject to local taxes.
This report explains PILT payments, with an analysis of the five
major factors affecting the calculation of a payment to a given county.
It also describes the effects of certain changes in PILT in 2008.
Previously, annual appropriations were necessary to fund PILT, but a
2008 provision (in P.L. 110-343) for mandatory spending ensured that,
beginning with FY 2008 and continuing through the payment to be made in
2012, all counties will receive 100% of the authorized payment. Efforts
have begun to convert the temporary mandatory spending into a permanent
feature of PILT. However, given current attention to debt and deficits
on the one hand, and the fiscal pressures on local governments on the
other, extension of the mandatory spending feature seems likely to be
controversial. If the provision is not extended, the program would
return to funding through annual appropriations.
Other issues have been the inclusion of additional lands under the
PILT program, particularly some or all Indian lands, which are not now
eligible for PILT. Most categories of Indian-owned lands cannot be
taxed by local governments, though they generally enjoy county
services. In some counties, this means a very substantial portion of
the land is not taxable. The remaining tax burden (for roads, schools,
fire and police protection, etc.) therefore falls more heavily on other
property owners. To help compensate for this burden, some counties have
proposed that Indian lands (variously defined) be included among those
eligible for PILT payments. Other lands mentioned from time to time for
inclusion include those of the National Aeronautics and Space
Administration, and the Departments of Defense and Homeland Security.
In addition, some counties would like to revisit the compensation
formula and emphasize a payment rate more similar to property tax rates
(which vary widely among counties), a feature that would be a major
change in counties with high property values. Finally, for lands in the
National Wildlife Refuge System (NWRS), some would argue that all lands
of the system should be eligible for PILT, rather than limiting the
PILT payments to lands reserved from the public domain and excluding
PILT payments for acquired lands. The exclusion of NWRS-acquired lands
affects primarily counties in eastern states.
Contents
Introduction
Changes to PILT in the 110th Congress
How PILT Works: Five Steps to Calculate Payment
Step 1. How Many Acres of Eligible Lands Are There?
Step 2. What Is the Population in the County?
Step 3. Are There Prior-Year Payments from Other Agencies?
Step 4. Does the State Have Pass-Through Laws?
Step 5. What Is This Year's Consumer Price Index?
Putting It All Together: Calculating a County's Payment
National Totals
From Authorization to Appropriation
Current Issues
Inclusion of Indian Lands
Inclusion of Urban Lands and Tax Equivalency
National Wildlife Refuge Lands
Figures
Figure 1. Total PILT Payments, FY1993-FY2011: Appropriations in Current
and Inflation-Adjusted Dollars (to 2010)
Figure 2. Total PILT Payments, FY1993-FY2011 Authorized Amount and
Appropriation
Figure 3. Ceiling Payments Based on County Population Level, FY2011
Figure 4. PILT Payment Level as a Function of Specific Prior Payments
(FY2011)
Figure 5. Steps in Calculating PILT for Eligible Federal Lands
Tables
Table 1. PILT Payments to Selected Urban Counties, FY2011
Table 2. NWRS Acres Eligible for PILT in Selected States, FY2010
Table A-1. Total PILT Payments, FY1993-FY2011: Appropriations in
Current and Inflation-Adjusted Dollars (to 2010)
Table A-2. Total PILT Payments, FY1993-FY2011, Authorized Amount and
Appropriation
Table A-3. Prior-Year Payment Laws That Are Offset Under Next PILT
Payment
Appendixes
Appendix. PILT Data Tables
Contacts
Author Contact Information.
Introduction
Generally, federal lands may not be taxed by state or local
governments unless the governments are authorized to do so by Congress.
Because local governments are often financed by property or sales
taxes, this inability to tax the property values or products derived
from the federal lands may affect local tax bases, sometimes
significantly. Instead of authorizing taxation, Congress has usually
chosen to create various payment programs designed to compensate for
lost tax revenue. These programs take various forms. Many pertain to
the lands of a particular agency (e.g., the National Forest System or
the National Wildlife Refuge System). \1\ The most wide-ranging payment
program is called ``Payments in Lieu of Taxes'' or PILT. \2\ It is
administered by the Department of the Interior and affects most acreage
under federal ownership. Exceptions include most military lands and
lands under the Department of Energy (DOE lands have their own smaller
payment program). \3\ In FY2011, the PILT program covered 606.9 million
acres, or about 94% of all federal land.
The Payments in Lieu of Taxes Act of 1976 (P.L. 94-565, as amended,
31 U.S.C. Sec. Sec. 6901-6907) was passed at a time when U.S. policy
was shifting from one of disposal of federal lands to one of retention.
The policy meant that the retained lands would no longer be expected to
enter the local tax base at some later date. Because of that shift,
Congress agreed with recommendations of a federal commission that if
these federal lands were never to become part of the local tax base,
some compensation should be offered to local governments to make up for
the presence of non-taxable land within their jurisdictions. \4\
Moreover, there was a long-standing concern that some federal lands
produced large revenues for local governments, while other federal
lands produced little or none. Many Members, especially those from
western states with a high percentage of federal lands, felt that the
imbalance needed to be addressed. The resulting law authorizes federal
PILT payments to local governments that may be used for any
governmental purpose.
Many of the issues addressed when PILT was created have continued.
One issue is the appropriate payment level, complicated by later
erosion of the purchasing power of the payments due to inflation. For
many years, counties held that payments were effectively declining
because of inflation. Then PILT was amended in 1994. The authorized
payment level went up and was to be adjusted annually for inflation,
but was still subject to annual appropriations. Figure 1 shows a major
increase in the actual and inflation-adjusted dollars appropriated for
PILT from FY1993 to
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
But the 1994 amendments, designed to overcome years of erosion
due to inflation, caused the authorized payment level to increase still
faster. (See Figure 2.)
Critics of PILT cite examples of what they view as its
``quirkiness.'' First, while there is no distinction between acquired
and public domain lands \6\ for other categories of eligible lands,
acquired lands of the Fish and Wildlife Service (FWS) are not eligible
for PILT--to the consternation of many states in the East and Midwest,
where nearly all FWS lands were acquired. Second, while payments under
the Secure Rural Schools (SRS) program \7\ require an offset in the
next year's PILT payment for certain lands under the jurisdiction of
the Forest Service, if the eligible lands are under the jurisdiction of
the Bureau of Land Management (BLM), no reduction in the next year's
PILT payment occurs. \8\ Third, while payments under the Bankhead-Jones
Farm Tenant Act (7 U.S.C. Sec. 1012) require a reduction in the next
year's PILT payment if the lands are under BLM, no such reduction
occurs if Bankhead-Jones payments are for lands under the Forest
Service. Fourth, some of the ``units of general local government'' \9\
that receive large payments have other substantial sources of revenue,
while some of the counties receiving little are relatively poor. Fifth,
a few counties which receive very large payments from other federal
revenue-sharing programs (because of valuable timber, mining,
recreation, and other land uses) nonetheless are also authorized to
receive a minimum payment ($0.33 per acre) \10\ from PILT, thus
somewhat cancelling out the goal of evening payments across counties.
Sixth, in some counties the PILT payment greatly exceeds the amount
that the county would receive if the land were taxed at fair market
value, while in others it is much less. Given such problems, and the
complexity of federal land management policies, consensus on
substantive change in the PILT law has been elusive, particularly when
Congress has a stated goal of reducing federal expenditures.
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Changes to PILT in the 110th Congress
The Continuing Appropriations Act, 2009 (P.L. 110-329), provided
the FY2008 level ($228.9 million) through March 6, 2009; if this had
been the full-year appropriation, it would have constituted roughly 61%
of the figure estimated for full payment of the FY2009 authorized
level. However, Section 601(c) of Title VI of P.L. 110-343 (the
Emergency Economic Stabilization Act of 2008) provided for mandatory
spending of the full authorized level for five years--FY2008-FY2012.
For FY2008, an additional payment was made to raise the FY2008 level to
the full authorized amount, and for FY2009-FY2012, the payments are at
100% of the authorized amount.
How PILT Works: Five Steps to Calculate Payment
Calculating a particular county's PILT payment first requires
answering several questions:
1. How many acres of eligible lands are in the county?
2. What is the population of the county?
3. What were the previous year's payments, if any, for all of
the eligible lands under the other payment programs of federal
agencies? \11\
4. Does the state have any laws requiring the payments from
other federal agencies to be passed through to other local
government entities, such as school districts, rather than
staying with the county government?
5. What was the increase in the Consumer Price Index during
the year?
Each of these questions will be discussed below. Finally, their use
in the computation of each county's payment is described.
Step 1. How Many Acres of Eligible Lands Are There?
Nine categories of federal lands are identified in the law as
eligible for PILT payments: \12\
1. lands in the National Park System;
2. lands in the National Forest System;
3. lands administered by the Bureau of Land Management;
4. lands in the National Wildlife Refuge System that are
withdrawn from the public domain;
5. lands dedicated to the use of federal water resources
development projects; \13\
6. dredge disposal areas under the jurisdiction of the U.S.
Army Corps of Engineers;
7. lands located in the vicinity of Purgatory River Canyon and
Pinon Canyon, Colorado, that were acquired after December 31,
1981, to expand the Fort Carson military reservation;
8. lands on which are located semi-active or inactive Army
installations used for mobilization and for reserve component
training; and
9. certain lands acquired by DOI or the Department of
Agriculture under the Southern Nevada Public Land Management
Act (P.L. 105-263).
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In addition, if any lands in the above categories were exempt
from real estate taxes at the time they were acquired by the United
States, those lands are not eligible for PILT, except in three
circumstances:
1. land received by the state or county from a private party
for donation to the federal government within eight years of
the original donation;
2. lands acquired by the state or county in exchange for land
that was eligible for PILT; or
3. lands in Utah acquired by the United States if the lands
were eligible for a payment in lieu of taxes program from the
state of Utah.
Only the nine categories of lands (plus the three exceptions) on
this list are eligible for PILT payments; other federal lands--such as
military bases, post offices, federal office buildings, and the like--
are not eligible for PILT. The exclusion of lands in the National
Wildlife Refuge System that are acquired is an interesting anomaly, and
may reflect nothing more than the House and Senate committee
jurisdictions at the time P.L. 94-565 was enacted. \14\
Step 2. What Is the Population in the County?
The law restricts the payment a county may receive based on
population. Under the schedule provided in 31 U.S.C. Section 6903,
counties are paid at a rate that varies with the population; counties
with low populations are paid at a high rate per person, and populous
counties are paid less per person. For example, for FY2011, a county
with a population of 1,000 people will not receive a PILT payment over
$162,980 ($162.98 per person); a jurisdiction with a population of
30,000 will not receive a payment over $2,445,300 ($81.51 per person).
And no county is credited with a population over 50,000. Consequently,
in FY2011, at the authorized payment level of $65.20 per person, no
county may receive a PILT payment over $3,260,000 (50,000 x $65.20/
person) regardless of population. Figure 3 shows the relationship
between the population of a county and the maximum PILT payment.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Step 3. Are There Prior-Year Payments from Other Federal Agencies?
Federal land varies greatly in revenue production. Some lands have
a large volume of timber sales, some have recreation concessions such
as ski resorts, and some generate no revenue at all. Some federal lands
have payment programs for state or local governments, and these may
vary markedly from year to year. To even out the payments among
counties and prevent grossly disparate payments, Congress provided that
the previous year's payments on eligible federal lands from specific
payment programs to counties would be subtracted from the PILT payment
of the following year. So for a hypothetical county with three
categories of eligible federal land, one paying the county $1,000, the
second $2,000, and the third $3,000, then $6,000 would be subtracted
from the following year's PILT payment. Most counties are paid under
this offset provision, which is called the standard rate. In Figure 4,
the standard rate is shown by the sloping portion of the line,
indicating that as the sum of the payment rates from other agencies
increases, the PILT payment rate declines on a dollar-for-dollar basis.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
At the same time, Congress wanted to ensure that each county
got some PILT payment, however small, even if the eligible lands
produced a substantial county payment from other agencies. If the
county had payments from three federal payment programs of $1,000,
$2,000, and $1 million, for instance, subtracting $1.003 million from a
small PILT payment would produce a negative number--meaning no PILT
payment to the county at all. In that case, a minimum rate applies,
which does not deduct the other agencies' payments. In Figure 4, the
flat portion to the right shows that, after the other agencies'
payments reach a certain level ($2.42 per acre in FY2011), the rate of
the PILT payment remains fixed (at $0.33 per acre in FY2011).
The payments made in prior years that count against future PILT
payments are specified in law (16 U.S.C. Sec. 6903(a)(1)). Any other
payment programs beyond those specified would not affect later PILT
payments. These specified payments are shown in Table A-3. Eligible
lands under some agencies (e.g., National Park Service and Army Corps
of Engineers) have no payment programs that affect later PILT payments.
Step 4. Does the State Have Pass-Through Laws?
Counties may receive payments above the calculated amount described
above, depending on state law. Specifically, states may require that
the payments from federal land agencies pass through the county
government to some other entity (typically a local school district),
rather than accrue to the county government itself. When counties in a
``pass-through'' state are paid under the formula which deducts their
prior year payments from other agencies (e.g., from the Refuge Revenue
Sharing Fund (RRSF; 16 U.S.C. Sec. 715s of FWS), or the Forest Service
(FS) Payments to States (16 U.S.C. Sec. 500) \15\), the amount paid to
the other entity is not deducted from the county's PILT payments in the
following year. According to DOI:
Only the amount of Federal land payments actually received by
units of government in the prior fiscal year are deducted. If a
unit receives a Federal land payment, but is required by State
law to pass all or part of it to financially and politically
independent school districts, or any other single or special
purpose district, payments are considered to have not been
received by the unit of local government and are not deducted
from the Section 6902 payment. \16\
For example, if a state requires all counties to pass along some or
all of their RRSF payments from FWS to the local school boards, the
amount passed along is not deducted from the counties' PILT payments
for the following year (31 U.S.C. Sec. 6907). Or if two counties of
equal population in two states each received $2,000 under the FS
Payments to States, and State #1 pays that amount directly to the local
school board, but State #2 does not, then under this provision, the
PILT payment to the county in State #1 will not be reduced in the
following year, but that of the county in State #2 will drop by $2,000.
State #1 will have increased the total revenue coming to the state and
to each county by taking advantage of this feature. \17\
Consequently, the feature of PILT that was apparently intended to
even out payments among counties (at least of equal population size)
may not have that result if the state takes advantage of this pass-
through feature. \18\ Under 31 U.S.C. Section 6903(b)(2), each governor
gives the Secretary of the Interior an annual statement of the amounts
actually paid to each county government under the relevant federal
payment laws. DOI checks each governor's report against the records of
the payment programs of federal agencies.
In addition, there is a pass-through option for the PILT payment
itself. A state may require that the PILT payment itself go to a
smaller unit of government, contained within the county (typically a
school district) (16 U.S.C. Sec. 6907). If so, one check is sent by the
federal government to the state for distribution by the state to these
smaller units of government. The distribution must occur within 30
days. As of FY2011, Wisconsin is the only state to have selected this
feature of PILT.
Step 5. What Is This Year's Consumer Price Index?
A provision in the 1994 amendments to PILT adjusts the
authorization levels for inflation. The standard and minimum rates, as
well as the payment ceilings, are adjusted each year. Under 31 U.S.C.
Section 6903(d), ``the Secretary of the Interior shall adjust each
dollar amount specified in subsections (b) and (c) to reflect changes
in the Consumer Price Index published by the Bureau of Labor Statistics
of the Department of Labor, for the 12 months ending the preceding June
30.'' This is an unusual degree of inflation adjustment; no other
federal land agency's payment program has this feature. But as will be
shown below, increases in the authorization do not necessarily lead to
a commensurate increase in the funds received by the counties.
Putting It All Together: Calculating a County's Payment
Knowing the answers to these questions, one can then make two
comparisons to calculate the authorized payment level for a county.
(Figure 5 shows a flow chart of the steps in these comparisons.) All
charts and comparisons in this report are based on FY2011 payment
levels.
Alternative A. Which is less: the county's eligible acreage times
$2.42 per acre or the county's ceiling payment based on its population?
Pick the lesser of these two numbers. From it, subtract the previous
year's total payments for these eligible lands under specific payment
or revenue-sharing programs of the federal agencies that control the
eligible land. \19\ The amount to be deducted is based on an annual
report from the governor of each state to DOI. This option is called
the standard provision.
Alternative B. Which is less: the county's eligible acreage times
$0.33 per acre or the county's ceiling payment? Pick the lesser of
these two. This option is called the minimum provision, and is used in
the counties that received relatively large payments (over $2.09 per
acre for FY2011) from other federal agencies in the previous year.
The county is authorized to receive whichever of the above
calculations--(A) or (B)--is greater. This calculation must be made for
all counties individually to determine the national authorization
level. From the program's inception through FY2007, the authorized
payments were subject to annual appropriations, and if appropriations
were insufficient for full funding, each county received a pro rata
share of the appropriation. After passage of P.L. 110-343, each county
receives the full authorized amount for FY2008-FY2012.
The combination of specific payments and PILT in the standard
option means that reductions (or increases) in those other payments in
the previous year could be exactly offset by increases (or reductions)
in PILT payments. However, provided that the county's population is not
so low as to affect the outcome, PILT payments cannot fall below $0.33
per acre for FY2011 (see Alternative B, above), so the full offset
occurs only when the other federal payments in the previous year total
less than $2.09 per acre (i.e., the maximum payment of $2.42 per acre
minus the $0.33 per acre minimum payment from PILT). \20\
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The standard option, with its offset between agency-specific
payments and PILT payments, still does not guarantee a constant level
of federal payments to counties, because of the time lag in determining
PILT payments. Federal payments for a given fiscal year are generally
based on the receipts of the prior year. PILT payments of the following
fiscal year are offset by these payments.
To illustrate, consider a county whose only eligible federal lands
are under the jurisdiction of FWS. If the federal receipts on the FWS
lands drop in FY2011 (compared to FY2010), payments in FY2012 from the
FWS Refuge Revenue Sharing Fund will fall. PILT payments will therefore
increase to offset the drop--in FY2013. (This example assumes that the
PILT payment is calculated under the standard option.) The counties
will be authorized to receive at least $2.42 per acre from RRSF and
PILT payments combined, \21\ but the two payments would not come in the
same year. Consequently, if RRSF payments fall from year to year, the
combined payments in the given year would be less than $2.42 per acre,
but if RRSF payments rise, the authorized combined payment in the given
year would be more than $2.42 per acre.
National Totals
Information from all counties with eligible land is needed on a
national scale before an aggregate figure for the nation can be
calculated precisely, and consequently no precise dollar figure can be
given in advance for each year's PILT authorization level. \22\
However, because the amount for full authorization for FY2011 has been
calculated, and because major changes in the factors stated above are
not likely to decrease the payments at the national level, the full
authorization level for FY2012 seems likely to be similar to the amount
shown for full authorization in FY2011, which was $375.5 million, even
though individual counties' payments may vary.
From Authorization to Appropriation
Until about 1994, the full amount authorized under the law's
formula had generally been appropriated, with a few exceptions such as
sequestration under the Gramm-Rudman-Hollings Act (Title II of P.L. 99-
177). But the buying power of the payments fell due to inflation. In
response, Congress amended the law in 1994 (P.L. 103-397).
The amendment focused on increasing the total payments, building in
inflation protection, and making certain additional categories of land
eligible. \23\ After the amendments passed, the increasing discrepancy
between appropriations and the rapidly rising authorization levels led
to even greater levels of frustration among local governments, and
prompted intense interest among some Members in increasing
appropriations, until the passage of P.L. 110-343. (See Figure 2,
above.) Whether Congress will make the mandatory spending authority
permanent remains to be seen.
Current Issues
While the enactment of five years of mandatory spending put the
issue of full funding to rest for the time being, no doubt county
governments will strongly support continuing mandatory spending for
PILT. This question has been the biggest issue facing the program in
the 112th Congress, particularly given congressional debate over
spending levels in general. Three other issues are also being debated:
inclusion of Indian or other categories of lands; tax equivalency,
especially for eligible urban lands; and payments affecting the
National Wildlife Refuge System.
Inclusion of Indian Lands
While the inclusion of other lands (e.g., military lands generally
or those of specific agencies such as the National Aeronautics and
Space Administration) under the PILT program has been mentioned from
time to time, some counties with many acres of non-taxable Indian lands
within their boundaries have long supported adding Indian lands to the
list of lands eligible for PILT. The primary arguments made are that
these lands receive benefits from the county, such as road networks,
but Indian residents do not pay for them with property taxes; on the
other hand, the federal government does not actually own these lands.
The complexity of the PILT formula makes it very difficult to
calculate the consequences of such a move, either for authorization
levels or appropriation levels. Additionally, Congress would have to
decide what sorts of ``Indian lands'' would be eligible for such
payments and a variety of other complex issues. \24\ Once the eligible
categories were determined, Congress might wish to limit payments to
counties with more than some minimum percentage of Indian lands within
their borders. Regardless, even a very restrictive definition of
``Indian lands'' seems likely to add many millions of acres to those
already eligible. Once the criteria for eligibility were fixed, it
would still be difficult to determine the effect on authorization
levels. To paint an extreme example, if all of the eligible Indian
lands were in counties whose PILT payments were already capped due to
the population ceiling, inclusion of Indian lands would have no effect
on PILT authorization levels.
As long as mandatory spending is in place, appropriations would go
up to fund the newly eligible lands. If mandatory spending expires and
annual appropriations are less than the authorized level, each county
would receive a pro rata share of the full authorized payment level.
Individual counties whose eligible acres had jumped markedly with the
inclusion of Indian lands might receive substantially more than in the
past. Other counties (particularly those with few or no eligible Indian
acres) would receive a smaller fraction of the authorized amount as
limited dollars would be distributed among more lands.
Inclusion of Urban Lands and Tax Equivalency
Some observers have wondered whether urban federal lands are
included in the PILT program. The response is that urban lands are not
excluded from PILT under the current law. For example, in FY2011, the
counties in which Sacramento, Chicago, and Cleveland are found, as well
as the District of Columbia, all received PILT payments (see Table 1),
though the property tax on similar, but non-federal, lands would likely
have been substantially greater.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Eastern counties, which tend to be small, rarely have large
populations and large eligible acreage in the same county. On the other
hand, western counties tend to be very large and may have many eligible
acres, and some, like Sacramento, may have large populations as well.
Furthermore, as the cases of Arlington and the District illustrate,
PILT payments are by no means acting as an equivalent to property tax
payments, because if the 6,963 acres in the District or the 27 acres in
Arlington were owned by taxable entities, those entities would surely
pay much more than $25,087, or $0, respectively, in property taxes.
Because the formula in PILT does not reflect an amount commensurate
with property taxes, counties such as these might support a revised
formula that would approach property tax payments.
National Wildlife Refuge Lands
As noted above, lands in the National Wildlife Refuge System (NWRS)
that were withdrawn from the public domain are eligible for PILT, and
those that were acquired are not. In addition, the National Wildlife
Refuge Fund (NWRF, also called the Refuge Revenue-Sharing Fund, or
RRSF) relies on annual appropriations for full funding. For FY2011,
payments for NWRF are approximately 38% of the authorized level. For
refuge lands eligible for PILT, some or perhaps all of the NWRF payment
will be made up for in the following year's PILT payment, but for
acquired lands, this will not occur because they are not eligible for
PILT. Congress may consider making all refuge lands eligible for PILT,
and/or providing mandatory spending for NWRF, as it has for PILT.
Eastern counties could be the largest beneficiaries of such a change,
although some western states may also have many NWRS acres that are not
currently eligible for PILT. (See Table 2 for selected state examples.)
Adding the 10.9 million acres of NWRS lands currently ineligible for
PILT would increase PILT lands by 1.8%.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Appendix. PILT Data Tables
The first two tables below show the data presented in Figures 1 and
2. The third shows the agency payments that offset payments under PILT
in the following year.
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ENDNOTES
\1\ For more information on some of these agency-specific payment
programs, see CRS Report RL30335, Federal Land Management
Agencies' Mandatory Spending Authorities, coordinated by Ross
W. Gorte; and CRS Report R41303, Reauthorizing the Secure Rural
Schools and Community Self-Determination Act of 2000, by Ross
W. Gorte. The program under the Department of Energy is
described in U.S. General Accounting Office [now Government
Accountability Office], Energy Management: Payments in Lieu of
Taxes for DOE Property May Need to Be Reassessed, GAO/RCED-94-
204 (Washington, DC: July 1994).
\2\ U.S. Department of the Interior, Office of Budget, Payments in Lieu
of Taxes: National Summary Fiscal Year 2010, Washington, DC,
2010. A similar document is issued every year; each contains
tables for payments and acreage by state and county. To query
data from the most recent fiscal year, see http://www.doi.gov/
pilt/.
\3\ A program to support local schools for the presence of children of
federal employees, including military dependents, provides some
support to local governments, however, and to some extent
compensates for lost property tax revenue when military
families live on federally owned land. For more information,
see CRS Report RL33960, The Elementary and Secondary Education
Act, as Amended by the No Child Left Behind Act: A Primer, by
Rebecca R. Skinner.
\4\ Public Land Law Review Commission, One third of the Nation's Land:
A Report to the President and to the Congress, Washington, DC,
June 1970, pp. 235-241. FY2011.
\5\ Inflation adjustments in this report use the implicit price
deflator for the Gross Domestic Product. See http://
faq.bea.gov/cgi-bin/bea.cfg/php/enduser/
std_adp.php?p_faqid=513.
\6\ Acquired lands are those which the United States obtained from a
state or individual. Public domain lands are generally those
which the United States obtained from a sovereign nation.
\7\ See CRS Report R41303, Reauthorizing the Secure Rural Schools and
Community Self-Determination Act of 2000, by Ross W. Gorte.
\8\ All of the BLM lands eligible for SRS payments are in Oregon.
\9\ Unit of general local government is defined in the law (31 U.S.C.
Sec. 6901(2)) as ``a county (or parish), township, borough, or
city where the city is independent of any other unit of general
local government, that (i) is within the class or classes of
such political subdivisions in a State that the Secretary of
the Interior, in his discretion, determines to be the principal
provider or providers of governmental services within the
State; and (ii) is a unit of general government as determined
by the Secretary of the Interior on the basis of the same
principles as were used on January 1, 1983, by the Secretary of
Commerce for general statistical purposes'' plus the District
of Columbia, Puerto Rico, Guam, and the Virgin Islands. To
avoid the use of the unwieldy unit of general local government,
the word county will be used in the rest of this report, and
must be understood here to be equivalent to the above
definition. This shorthand is often used by DOI.
\10\ This and subsequent references to payment rates and ceilings are
based on FY2011 figures unless otherwise noted.
\11\ Regardless of how many agencies have jurisdiction over eligible
lands in a county, all of the payments specified in 31 U.S.C.
Sec. 6903(a)(1) are added together and deducted from the
following year's single PILT payment. Any other federal lands
payments the county may get that are not specified in that
provision are not deducted. The formula in 31 U.S.C. Sec. 6903
sets a cap on the total PILT payment for all of the eligible
land in the county.
\12\ See 31 U.S.C. Sec. 6901. The law refers to these nine categories
of lands as ``entitlement lands,'' and the term is used
throughout the act. However, because entitlement is a word
which is used in a very different, and potentially confusing,
context in the congressional budget process, these lands will
be called eligible lands in this report.
\13\ These lands are under the jurisdiction of the Bureau of
Reclamation, for the most part.
\14\ At the time, jurisdiction over the National Wildlife Refuge System
(NWRS) generally was in one committee, while jurisdiction over
public domain lands was within the jurisdiction of a different
committees. This was true in both the House and Senate. The
committees considering PILT had no jurisdiction over the
acquired lands within the NWRS.
\15\ Under 16 U.S.C. Sec. 500, these payments are made to the states or
territories, and must be used for schools or roads in the
counties where the national forests are located. Each state has
its own rules on the mechanics of that transfer, on the
proportion to be used for roads and the proportion for schools.
Some states direct that the education portion be given directly
to school boards. For more information see CRS Congressional
Distribution Memo, Forest Service Revenue-Sharing Payments:
Distribution System, by Ross W. Gorte, Nov. 19, 1999.
\16\ U.S. Dept. of the Interior, Payments in Lieu of Taxes: National
Summary, Fiscal Year 2010, p. 11.
\17\ Note that even though a county as a whole may benefit from this
provision, the county government itself will not, because it
forgoes the revenues given directly to its school system.
\18\ However, the Supreme Court has held that states cannot direct
counties to spend their PILT payments (i.e., payments under the
DOI-managed program described in this report) for particular
purposes, once they have actually received their PILT payment.
Lawrence County v. Lead-Deadwood School District, 469 U.S. 256
(1985).
\19\ Payments under the Secure Rural Schools program for Forest Service
lands (but not Bureau of Land Management lands) are included
among those prior year payments to be deducted. See CRS Report
R41303, Reauthorizing the Secure Rural Schools and Community
Self-Determination Act of 2000, by Ross W. Gorte.
\20\ To illustrate more concretely, imagine each county as a large
bucket, whose sides are marked off in ``$/acre.'' PILT, in
effect, checks the payment already in the bucket from other
agencies, then adds at least enough money to the bucket to
bring it to the $2.42/acre mark. Moreover, if the bucket is
already above the $2.09/acre mark, PILT adds 33 cents/acre,
regardless of the amount in the bucket already. The money
bucket could reach levels of $15/acre or more, with the last
33 cents added by PILT. The county population ceilings might
then be thought of as holes in the sides of some of the buckets
that prevent the buckets from filling beyond a certain level
for that bucket (i.e., county).
\21\ An exception would occur if the county's population is so small
that the county is affected by the PILT ceiling on payments due
to population.
\22\ DOI does not include estimated full payment levels in its annual
budget justification to Congress, and confines itself to the
Administration's request for the year. However, DOI's annual
report of current year PILT payments to counties includes this
information.
\23\ Other important issues in 1994 were the question of the equity of
the payments and the balance struck in the payment formula (a)
between heavily and sparsely populated communities, (b) between
those with federal lands generating large revenues and those
with lands generating little or no revenue, and (c) between the
amounts paid under PILT and the amounts that would be paid if
the lands were simply taxed at fair market value. But these
issues were not addressed in the 1994 amendments and have
scarcely been mentioned in the debate since then.
\24\ The many classifications of ``Indian lands'' include trust lands,
restricted lands, and fee (private) lands, both on and off
reservations. Trust lands are lands held by the federal
government in trust for an Indian tribe or individual.
Restricted lands are lands held by an Indian tribe or
individual but subject to federal restrictions on alienation
(e.g., sale) or encumbrance (e.g., mortgaging). Most, but by no
means all, Indian trust and restricted lands are on Indian
reservations. Trust and restricted lands, whether on or off
reservations, are not subject to state or local land taxes. On-
reservation Indian fee lands may or may not be subject to state
and local land taxes, depending on the federal statute under
which the land was fee-patented. Off-reservation Indian fee
lands are generally subject to state and local land taxes.
(Indian reservations may also include non-Indian fee lands,
which are subject to state and local taxation.) Alaskan Native
corporation lands (none of which are trust lands) are affected
by the Alaska Native Claims Settlement Act's limits on state
taxation. Congress would have to decide which of these many
classifications of Indian lands would be subject to PILT
benefits. Further, Congress might choose to distinguish between
Indian lands which have never been taxed by a county or state
versus those Indian lands that were once taxable but which were
acquired into non-taxable status after some specified date.
______
Mr. Bishop. Dr. Corn, thank you. And thank you for keeping
within the five minutes. I know that was a lot of material to
cover in that short period of time.
We are now going to call a recess to go vote. There are
only a couple, so I am estimating maybe 15 minutes, 20 at the
most unless something weird happens on the Floor.
So, I would ask you if you would just be kind enough to do
that when we come back. Dr. Yonk, we will take your testimony,
and then we will turn to the Committee for questions.
[Recess.]
Mr. Bishop. OK. The Committee will come back to order. I
apologize once again for the length of our delay. Let us just
say something weird happened on the Floor.
So, with that, we thank the two panelists who have spoken
already. We have yet to hear the testimony from Dr. Ryan Yonk
from Southern Utah University. Go, Thunderbirds. And your old
coach is not related. So, we are happy to hear your testimony
if you would, please.
STATEMENT OF RYAN M. YONK, ASSISTANT PROFESSOR OF POLITICAL
SCIENCE, SOUTHERN UTAH UNIVERSITY
Dr. Yonk. Great. Chairman Bishop, Ranking Member Grijalva
and members of the Subcommittee, I appreciate the opportunity
to share with you the results of a number of studies conducted
by some colleagues of mine at Utah State University and myself,
Brian Steed, who is here with me today, and then Dr. Randy
Simmons.
As I said, as you introduced, my name is Ryan Yonk, and I
am Assistant Professor of Political Science at Southern Utah
University, with a primary emphasis in the issues that surround
public lands and how they impact rural communities.
I will skip the background in PILT that we have received
from the other witnesses today other than to say that the
fundamental logic of PILT funds was to prevent the systematic
disadvantaging of counties where vast Federal land holdings
would be forever excluded from the taxable land base. And this
initial recognition of the potential harms of these large,
permanent Federal ownership has unfortunately given way to
claims that suggest this ownership imposes not a cost to local
communities but a benefit regardless of the types of lands that
are owned.
Questions about the effectiveness and importance of PILT
should explore the tradeoffs that occur when large tracts of
land are Federally owned and the opportunity costs that arise
from these sorts of holdings.
Beginning in 2004, the Center for Public Lands and Rural
Economics at Utah State University began a series of studies
funded by the Department of Agriculture to investigate the
effects these public lands have on rural communities. These
studies have focused on healthcare markets, social services,
education, the effect of wilderness on life quality and on the
economic conditions, and all share similar results, suggesting
that across a wide variety of policy areas, the presence of
public lands has a non-positive effect on rural communities at
best and a negative effect at worst.
For example, we find with regards to education that one of
the effects of large Federal ownership is an increase in the
size of the county and school district, resulting in increased
costs of administration and a reduction due to the Federal land
ownership in the tax base available to provide the service.
One other short example suggests that public-lands counties
are disadvantaged directly in their economic conditions. Our
research indicates that communities with 25 percent of their
gross acreage held by the Federal Govqernment have an average
household income that is between $741 and $1450 per year less
than their non-public-lands counterpart.
This is not to say that these funds are not an essential
portion, these PILT funds, but rather that they are not the
panacea that corrects for the myriad of other effects of large-
scale Federal land ownership. Indeed, counties with substantial
public lands are severely disadvantaged when PILT payments are
reduced or delayed.
We have sort of three examples to present that call into
question the idea that in fact Federal lands are a net positive
for the communities.
The first is a study that was conducted on the Grand
Staircase-Escalante Monument in Utah, designated in 1996 by
President Bill Clinton. And our evaluation of the monument
focused on the most basic assertion presented by those who
supported that designation, that the protection of those lands
should have resulted in increased tourism dollars and a net
positive impact on the communities in Kane and Garfield
Counties. We find no evidence of any positive result other than
a single statistical test that indicates the possibility of
increased tax revenue in a single year.
Our second study that speaks to this is a study of
wilderness areas, and wilderness, to sort of cut to the chase
of it, there are lots of other things here in my written
testimony. Wilderness, when you control for other factors that
influence county economic conditions, wilderness designation is
associated with lower per-capita income, lower total payroll
and lower total tax receipts in counties where it is present.
There is a third example that I am happy to answer
questions about that is incurred. It is called the Treasured
Landscapes Memorandum that came out from President Obama's
Administration, and we look at the opportunity costs that are
there.
To conclude, our research suggests that the reality of
Federal land ownership and the effects of those lands can be
best summed up with two core economic concepts. First,
tradeoffs. Every policy action necessarily chooses to do
something and not to do others.
The second is opportunity costs. Anytime land is removed
from the active economic base, there will, in fact, be costs
that are difficult to estimate and that counties, where these
lands are protected, have to bear.
Thank you.
[The prepared statement of Dr. Yonk follows:]
Statement of Ryan M. Yonk PhD, Assistant Professor,
Southern Utah University
Chairman Bishop and members of the Subcommittee, I appreciate the
opportunity to share with you the results of a number of studies
conducted by myself and my colleagues Dr. Randy T. Simmons and Dr.
Brian C. Steed of Utah State University. My Name is Ryan Yonk and I am
an assistant professor of political science at Southern Utah
University. My primary area of research is focused on issues
surrounding public lands and the effects they have on rural
communities.
Understanding PILT and its role in Local Communities:
The Department of the Interior describes the PILT Program as,
``Payments in Lieu of Taxes (or PILT) are federal payments to local
governments which help offset losses in property taxes due to
nontaxable federal lands within their boundaries. PILT was passed at a
time when US policy was shifting from one of disposal of federal lands
to one of retention. With that shift, Congress agreed with
recommendations of a federal commission that if these federal lands
were never to become part of the local tax base, then some compensation
should be offered to local governments to make up for the presence of
non-taxable lands within their jurisdictions. The DOI has distributed
more than $5.5 billion dollars in PILT payments (on average, $157
million annually) to each State (except RI) plus the District of
Columbia, Puerto Rico, Guam and the Virgin Islands since the program
began in 1977.'' \1\
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\1\ Language directly taken from the Department of the Interior
Website www.doi.gov/pilt/summary.html
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PILT legislation was put into place to help local governments avoid
the negative financial impact resulting from their inability to collect
property taxes on federally-owned land. Congress appropriates PILT
payments each year according to a formula that includes population and
the amount of federal land within an affected county. Payments are made
annually for tax-exempt federal lands administered by the BLM, the
National Park Service, the U.S. Fish and Wildlife Service, the U.S.
Forest Service and for federal water projects and for some military
installations.
The fundamental logic of the establishment of PILT funds was to
prevent the systematic disadvantaging of counties where vast federal
land holdings would forever be excluded from taxable land base. This
initial recognition of the potential harms of large permanent federal
ownership of large portions of rural primarily western counties has
unfortunately given way to claims that suggest this ownership imposes
not a cost to local communities but a benefit regardless of the type of
lands owned. Questions about the effectiveness and importance of PILT
should explore the trade-offs that occur when large tracts of land are
federally owned and the opportunity costs that arise from those
holdings.
The Current State of Public Lands Counties:
Beginning in 2004 the Center for Public Lands and Rural Economics
began a series of studies funded by the Department of Agriculture to
investigate the effect of public lands on rural communities. These
studies, which focused on Health, Social Services, Education, The
effect of Wilderness on Life Quality, and on economic conditions all
share similar results. These results suggest that across the wide
variety of policy areas the presence of public lands has a non-positive
effect on rural communities at best and a negative effect in the worst
case.
For example, we find with regards to education that one of the
effects of large federal ownership of areas is an increase in the size
of the county and school district. Large blocks of federal ownership
increase costs as local communities attempt to provide educational
service for students. Transportation costs were of particular concern
for public officials in Nevada for example. They complain that millions
of miles are put on school buses without adequate compensation from the
federal government. Similar stories and costs are expressed across the
west where federal lands cross-sect counties leading to smaller
populations dispersed over an increasingly large area.
We further find that areas with large federal lands holdings face
market conditions for health care services that lead to higher prices
as a result of those lands holdings and that public lands that cross
sect rural communities lead to changes in the way in which hospital
markets are defined.
One last example illustrates the current state of public lands
counties namely their economic conditions. Our research indicates that
communities with 25% of their gross acreage held by the federal
government have on average household incomes that are between $741
dollars and $1450 less than their non-public lands counterparts.
Further despite the logic of PILT payments we find no effect on the
budgetary processes and decisions of public lands counties as a result
of those funds. This is not to say that these funds are not an
essential portion of any single counties budget but rather that they
are not the panacea that corrects the other effects of large scale
federal land ownership. Indeed counties with substantial public lands
are severely disadvantaged when PILT payments are reduced or delayed.
Our work in these areas have attempted to provide a clear
understanding of the problems faced by public counties but does not
take into account the opportunity costs imposed on these counties by
large scale federal ownership. Indeed attempting to estimate these
costs is problematic because we have no clear example of whole sale
transfers of public to private lands in the recent past. We do find,
however, examples where lands are transferred from one category of
protection to another and those transfers can help illustrate the
potential costs of excluding lands from active commercial use.
Example One: The Grand Staircase
One example that provides a clear opportunity to test the effect of
these transfers is the Establishment of the Grand Staircase-Escalante
National Monument.
The Grand Staircase-Escalante National Monument was created by
President Clinton in 1996. The Monument spans nearly 1.9 million acres
in south-central Utah along the Arizona border. The monument resides
completely within Utah, and as can be seen in Figure 1 below, occupies
the majority of Kane County and much of Garfield County. Each of these
counties already contained a vast majority of public land. Much of this
land had been placed in protected status. Bryce Canyon National Park,
for instance, straddles Kane and Garfield Counties. Capitol Reef
National Park crosses into eastern Garfield County, and much of
Southern Kane County contains the Glen Canyon Dam National Recreation
Area.
Located in a geologically diverse region, the Grand Staircase
contains a treasure trove of mineral deposits. The area contains an
estimated 62 billion tons of coal--estimated to be worth hundreds of
billions of dollars. The area also contains large oil deposits,
estimated at around 270 million barrels of oil. In the early 1990s,
Andalex Resources Company, a Dutch based coal mining company, had
acquired permits to mine coal from the area. Conoco Oil, PacifiCorp,
and various other companies had also acquired permission to develop
mineral extraction activities in the area.
In 1996, President Clinton stood atop the South Rim of the Grand
Canyon in Arizona to make the announcement regarding the creation of
the Monument.\2\ In making the announcement, the President alluded to
the vast mineral deposits found within the Grand Staircase. He stated,
``[m]ining jobs are good jobs, and mining is important to our national
economy and to our national security. But we can't have mines
everywhere, and we shouldn't have mines that threaten our national
treasures'' (1996 1787). The national treasures contained in the Grand
Staircase identified by the President included the area's aesthetic
quality, geology, archeological artifacts, fossils, biology, and its
history. Each of these items provides recreational opportunities for
explorers and research opportunities for geologists, archeologists,
biologists, and historians.
---------------------------------------------------------------------------
\2\ The fact that the President did not enter Utah in making the
announcement was not lost on the local residents and further fueled the
resentment regarding the creation of the Monument.
---------------------------------------------------------------------------
The Grand Staircase-Escalante National Monument became the largest
National Monument in the United States. Due to its size, the President
established a new management regime for the park. Although all National
Monuments up to that date had been managed by the National Park
Service, the determination was made that the Grand Staircase would
remain under the management of the Bureau of Land Management.
Many local officials complained bitterly about the dramatic
negative economic impact that the designation would have. One
newsmagazine reported in 1996 regarding the sentiments expressed by
Kane County Commissioner Joe Judd:
``Kane Commissioner Joe Judd fumed, `The most powerful
politician in the world just kicked me in the teeth.' Judd
figures he can kiss goodbye the 900 jobs and millions in tax
revenue promised by a coal mine that Andalex Resources Corp., a
Dutch company, had planned for the sandstone bluffs and wind-
carved buttes of the Kaiparowits Plateau.'' (Glick and Begley
1996)
In direct contrast to Commissioner Judd's view, many academics,
environmentalists, and federal government officials have alleged that
large federal land holdings and protected lands help generate economic
growth. The Sonoran Institute, for example, recently noted:
[T]he presence of public lands is good for the economy.
Personal income, adjusted for inflation, grows faster in
counties with significant percentages of their land base in
public ownership. What's more, counties with protected lands--
land set aside for conservation--show an even more marked
increase in personal income (2006).
National Park Service (NPS) data seems to bolster the finding that
the National Park and Monument System contributes greatly to local
economies.\3\ 2008 data from all units administered by the NPS
generated the following findings:
---------------------------------------------------------------------------
\3\ It should be pointed out that the NPS does not manage the Grand
Staircase Escalante. Due to its size, the service declined management,
leaving management decisions to the Bureau of Land Management. The
Grand Staircase was the first National Monument not managed by the NPS.
---------------------------------------------------------------------------
[P]ark visitors spent $11.56 billion in the local region
surrounding the parks in 2008. Local residents account for 9.8%
of this spending. Visitors staying in motels and lodges outside
the park account for 55% of the total spending, while non-local
visitors on day trips contribute 21% of all spending (Stynes
2009).
All of this spending resulted in over 200,000 jobs with 4.4 billion
dollars in labor income, and 6.9 billion dollars of value added. The
industries most benefitted from this activity include lodging,
restaurants, retail trade, and amusements (Stynes 2009). The Federal
Government may also add to the local economy where parks exist by
employing various workers to maintain the infrastructure or otherwise
conduct the activities of the park.
Our evaluation of the monument focuses on one of the most basic
assertion presented by proponents of protected land designation,
including those who advocated the creation of the monument, that
protection of physical lands should over time increase economic
prosperity in communities where the protected land is located. This
theory runs counter to other approaches that have generally focused on
the consumptive extraction of resources in order to power economic
development.
We sought to test which assessment of the effect of the designation
was correct and we found that we could identify a particular effect of
the designation. The single result where the designation appears to
have an effect is in Kane County where the designation appears to have
provided between 5 and 16 million dollars in additional tax revenues in
comparison with the match counties for Kane. However the evidence for
increased payroll which is a measure of the gross economic activity
shows no such effect. As well in Grand County we see no effect with
relation to the comparison counties, and as we cannot reject the null
find no evidence that the designation of the monument is either helping
or hurting the Economy of Grand County.
The net of our evaluation of the designation of the Grand
Staircase-Escalante National Monument is that like general protection,
this specific designation has had little or no effect on the economic
situation of the host counties. Only with respect to tax revenues in a
single model can we identify a statistically significant effect of the
monument, and taken on sum these results confirm our broader results.
Example Two: Wilderness Areas
Wilderness, so designated pursuant to the Wilderness Act of 1964,
is the most restrictive of all federal land-use designations. The
Wilderness Act protects areas ``untrammeled by man'' that have not been
developed for other human uses. To preserve wild characteristics, the
Wilderness designation prohibits roads, road construction, mechanized
travel, and the use of mechanized equipment. Wilderness also impacts
extractive industries such as mining, logging, and grazing. The
stringent requirements of the Wilderness Act also disallow the
construction of telecommunication towers, facilities for power
generation, transmission lines, and energy pipelines.
Due to these restrictions, local officials frequently complain that
Wilderness harms local economies by limiting the opportunities for
economic development. The State of Utah, for instance, recently passed
House Joint Resolution 10 which requested that the U.S. Congress not
designate any additional Wilderness in Utah. Through a vote by a
supermajority of members, the state legislature asserted that
Wilderness' limitation of multiple uses causes substantial economic
hardship for the state.
Environmentalists counter that the presence of Wilderness actually
attracts residents and businesses to nearby communities. Wilderness is
claimed to increase property values and create a higher quality of life
in those communities. Environmentalists also claim that Wilderness
contributes to a healthy tourism industry. The Wilderness Society notes
``[d]esignated wilderness areas on public lands generate a range of
economic benefits for individuals, communities, and the nation--among
them, the attraction and retention of residents and businesses.'' The
Sonoran Institute similarly finds, ``protected natural places are vital
economic assets for those local economies in the West that are
prospering the most.'' The Sonoran Institute further notes,
``Wilderness, National Parks, National Monuments, and other protected
public lands, set aside for their wild land characteristics, can and do
play an important role in stimulating economic growth--and the more
protected, the better.''
Despite these differing views, Congress has continued creating
Wilderness Areas. There are 759 Wilderness Areas currently in the
United States, totaling 109,663,992 Acres (Gorte 2010). Wilderness is
managed by four federal agencies: the National Forest Service, the
National Park Service, the Fish and Wildlife Service, and the Bureau of
Land Management. Wilderness Areas dramatically vary in size from the
Pelican Island Wilderness in Florida, which occupies a mere six acres,
to the 9,078,675-acre Wrangle Island Wilderness in Alaska. Due to the
stringent requirements laying out Wilderness characteristics, the
majority of Wilderness Areas are found within largely rural and lightly
populated counties within Alaska, California, Colorado, Montana, New
Mexico, Nevada, Oregon, Utah, and Washington. Only six states contain
no Wilderness: Connecticut, Delaware, Iowa, Kansas, Maryland, and Rhode
Island.
Understanding the Economic Impact of Wilderness
To provide better evidence of economic impacts, we use longitudinal
statistical analysis over every county in the United States dating back
to 1995. The panels each contain measurements of economic conditions
taken every five years. We selected three uniformly applicable
variables as proxies for county economic conditions: average household
income, total payroll, and total tax receipts. Average household income
and total tax receipts are gathered by the U.S. Census Bureau. Total
payroll figures are gathered by the Bureau of Labor Statistics.
Average household income is calculated by dividing the sum of all
income of the residents over the age of 18 in each household by number
of households. Average household income has the advantage of
specifically addressing how individual households are on average
affected by Wilderness designation in these counties. It has the
disadvantage of being self-reported to the U.S. Census Bureau and,
accordingly, may not be as valid as more direct measures.
Total payroll is a broader metric that captures those under the age
of 18 and commuters who may live outside but work within a county.
Further, it is a measure of the economic situation of individuals
rather than households. Total payroll is not a perfect proxy because it
does not capture the capital investment, county residents who work
outside the county, or most importantly, retirees who do not receive
payroll. Nevertheless, the data are readily available and considered a
reliable metric for local economic conditions.
County tax receipts present two advantages over the others
measures. First, the data are largely complete; local governments are
required by state and federal statute to report tax receipts correctly.
These requirements provide some confidence in the data that self-
reporting does not provide. Second, tax receipts represent all taxable
transactions in the county. This provides a useful metric of economic
activity. Tax receipts, however, are not a perfect proxy as there are
significant institutional differences across states, regions, and often
counties themselves about how, when, and why taxes may be collected.
Although none of our dependent variables is a perfect proxy for
economic conditions, taken together, they paint a relatively complete
picture of the economic situation. We expect that the presence of
Wilderness would have similar effects on each variable. To ensure that
it is the effect of Wilderness and not simply federal land ownership
that harms economic conditions we include control variables for each of
the federal agencies that manage public land. We also include variables
that control for the significant differences among counties. These
variables include population, land area, number of households, birth
rate and school enrollment, and infant death rate. Further, we include
variables indicated by the economic development literature as likely
important in determining outcomes: high school graduates, median
household income, poverty rate, crime rate, government employment,
unemployment rate, and social security recipients.
Controlling for other factors influencing county economic
conditions, the Wilderness designation is significantly associated with
lower per capita income, lower total payroll, and lower total tax
receipts in counties. These results indicate that Wilderness impacts
both households and counties. Average household income within
Wilderness Counties is estimated to be $1,446.06 less than Non-
Wilderness Counties. Total payroll in Wilderness Counties is also
estimated to be $37,500 less than in Non-Wilderness Counties. County
Tax Receipts in Wilderness Counties is estimated to be $92,910 dollars
less than in Non-Wilderness Counties.
The argument often stated by the environmental community that
Wilderness is good for local economies is simply not supported by the
data. When comparing Wilderness and Non-Wilderness Counties, Wilderness
Counties are at an economic disadvantage to their Non-Wilderness
counterparts. Accordingly, if the test for whether or not to designate
Wilderness is economic, Wilderness fails. But economics did not
underlie the Wilderness Act or any of the Wilderness Areas established
since the Act was passed. Wilderness is established for emotional,
ecological, and cultural purposes. Our results show that those purposes
are accomplished at a cost to local economies.
A variety of factors could lead to the negative relationship
between Wilderness and economic conditions. Arguably, areas
``untrammeled by man'' have less existing economic activity and
reducing the potential for future economic development by designating
those areas as Wilderness will not, on net, be economically positive.
It is also possible that different types of Wilderness may have
different implications for economic conditions. As noted, four federal
agencies currently manage Wilderness Areas, and different agencies may
have different economic impacts on counties. Wilderness within National
Parks, for instance, may more effectively attract tourists than
Wilderness on Bureau of Land Management or National Forest Service
lands.
Finally, it is probable that the location of Wilderness has an
impact on the direction and magnitude of its economic impact. Phillips
(2004), for instance, found that Wilderness designation in the Green
Mountains of Vermont had a positive impact on private land values in
that area of Vermont. We should assume that some Wilderness can, in
fact, have positive economic impacts, even though our findings indicate
that this is not the general rule.
While there may be other legitimate, non-economic reasons for the
designation of Wilderness, the tradeoff will likely impose an economic
burden on local families and businesses. The benefits and costs from
Wilderness are unevenly distributed between local and non-local
communities, with local communities incurring a larger burden of the
costs. This provides a good reason why local officials often rally
against and adamantly oppose Wilderness.
When environmentalists and national agencies consider the creation
of Wilderness designations in the future, they should pay attention to
the interests of local communities. This paper illustrates the adverse
economic costs of Wilderness on local economies. By working together
with local communities to address their concerns, environmentalists can
help develop balanced policy that genuinely acknowledges the local
economic costs associated with Wilderness.
Example Three: Treasured Landscapes
In 2011 we conducted a review of the fifteen areas identified by
the ``Treasured Landscapes'' memorandum evaluating the likely
boundaries, interested parties and most significantly, the energy
production potential of each proposed area. The focus of this study was
on whether there are substantial opportunity costs to imposing
increased legal protection in these areas. To explore this question we
use data from the US Department of the Interior, US Department of
Agriculture, local environmental groups, energy development companies,
and state agencies.
Summary of Results
In conducting the inventory of energy potential for each site we
focused on both traditional fossil fuel energies, and the renewable
potential of each site. In conducting this review we found that
relatively few of the sites identified as candidates by the DOI had
significant fossil fuel reserves, although many had the potential for
shale extraction, including oil shale. Our review indicates that only
the Berryessa Snow Mountains and the Vermillion Basin have readily
identifiable oil production possibilities. Similarly only the San
Rafael Swell and Montana's Northern Prairie have a high likelihood of
coal production. Natural gas production appears possible only in
Montana's Northern Prairie, the Heart of the Great Basin, and the
Vermillion Basin.
While these fossil fuel resources appear only in a handful of the
potential monuments, over half have shale formations likely to enable
commercial fossil fuel production. While these areas have identifiable
potential for shale production the development of shale fields is
highly controversial and the subject of a number of ongoing
environmental reviews and lawsuits. \4\
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\4\ These suits leave us skeptical whether production of large
scale shale projects will be allowed on any federal lands.
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These findings while interesting tell only part of the energy
development story. We also evaluated the possibility of renewable
energy development in each of these potential monuments. Most of the
potential monuments have significant renewable energy possibilities
that would be foreclosed by increased protections. Twelve of the
fifteen potential monuments have the potential for multiple types of
renewable energy development, and only the San Rafael Swell has no
renewable energy potential. Developing renewable energy has been a
priority of the DOI, environmental groups and energy production
companies and has been deemed a national priority by President Obama.
The reality, however, is that should these monuments be created,
renewable energy production on a significant scale and across a variety
of landscapes will be foreclosed.
These results paint a difficult picture for those, including the
authors, who in many instances support both the preservation of
landscapes like those proposed in the `Treasured Landscapes'
memorandum, and who also support increased production of renewable
energy. Indeed the most significant lesson we draw from this data is
that conflicts between priorities, including environmental priorities,
will inevitably require trade-offs. Indeed the potential monuments pose
significant costs to renewable energy production if the preservationist
impulse is to be followed.
Conclusion
Our research suggests that the reality of federal land ownership
and the effects of those lands can be best summed up in two core
economic concepts. First, trade-offs, every policy action necessarily
chooses to do something and not others. In the case of federal lands
local communities face the realities of the decisions of federal policy
makers. These decisions often represent choices which place other
interests above those of local communities. These sorts of choices
suggest that the potential tradeoffs need to be thoroughly evaluated
and considered. It is not simply enough to claim that any decision
leads to better outcomes and thus the choice can only help local
communities. Our research finds no evidence that this assertion can be
supported by the data. Second when considering these trade-offs
opportunity costs must be appropriately accounted for in the decision
making process. Often the trade-offs of large federal land ownership
are not about precluding currently active projects and activities but
rather about prevention future opportunities from being developed.
These costs are and substantial and should be considered carefully in
making decisions about federal lands.
A final observation is rooted in the nature of federally owned
public lands. These lands have varying potential and treating each as
having identical trade-offs and opportunity costs as the current PILT
system does fails to recognize the context that each community and
public lands area functions within and arbitrarily assigns a value that
independent of that context.
______
Mr. Bishop. Thank you, Dr. Yonk, I appreciate it. I
appreciate the testimony of all three witnesses. I will now
turn to questions. I will go last.
Mr. Tipton, you were here in the earlier session. Do you
have questions for these witnesses?
Mr. Tipton. Thank you, Mr. Chairman. And I would like to
thank our panel for taking the time to be able to be here.
I guess I would like to ask Ms. Haze first, understanding
that PILT is fully funded for one more year, does the
Administration to the best of your knowledge plan to maintain
full funding in their presentations for PILT for the 2013
budget?
Ms. Haze. I don't think I can answer that. That would be
predeciding what we are going to do in future budgets. So, I am
not really able to say that at this point.
Mr. Tipton. OK. You know in your testimony you had
mentioned that the payments are typically made in June.
Ms. Haze. Right.
Mr. Tipton. There was a decision that was made to delay
payments without providing any notice, was it this last year?
Ms. Haze. There was a delay this past year, yes, to the
2011 payment.
Mr. Tipton. You know, that creates a lot of problems. I
come from a small rural county that has a lot of public lands.
We have one county in my district where 98 percent of the
entire county is public lands or Federal lands. And the real
issue is that does create a real problem for those communities.
What are your plans going forward in terms of making sure that
the counties are compensated properly?
Ms. Haze. I am glad you brought that up. I actually would
tell you we learned a lot last year about probably how to
better communicate with the counties and the states and the
members. We didn't send our notification out soon enough, so we
know we need to do that.
And we were able to accelerate the process and make the
payment before the end of June, so we ended up really only
being about a week later than normal. But we assured the
counties at that point, and the Secretary was very engaged as
well, that we would do earlier notifications and we would just
try very hard not to have a delay and we would stick to that
early June date.
Mr. Tipton. Great. Can you expand on this for me a little
bit more in terms of the entitlement acres where counties don't
receive payments for some acreage that they currently have? Can
you explain some of that inequity for me?
Ms. Haze. So, we make payments for certain lands, the lands
that are in the Forest System and the Park System. And there
are some lands for which we don't make payments. And I am a
little sheepish to tell you, I don't specifically know the
distinction, but Dr. Corn does.
Mr. Tipton. OK. Dr. Corn?
Dr. Corn. Under the PILT statute, the lands that receive
compensation are specified in the statute. So, if there is a
category of land, DOD or whatever, that is not specified in the
statute, it will not receive compensation.
So, if there is a category, let us say, of Forest Service
land that does not get compensation under the PILT statute,
then it won't. That is not discretionary with the Department of
the Interior.
Mr. Tipton. OK. You know, I guess the question that I have,
and it goes back a little bit to Mr. Yonk's comments, and if I
could maybe get you to comment. It seems that we are at cross-
purposes. Education is very important for me, for my family,
for our entire communities. And we have had restrictions in
terms of being able to get in and harvest timber as an example,
access to some minerals to be able to provide resources back
into our communities.
We see that PILT has only been fully funded I think--I just
did a couple of sketches there. If we go back to the beginning,
it looks like it has been underfunded to the tune of about $1.5
billion since its inception in generic round numbers.
Are some of the restrictions that we are going to be
putting on going to further impact our ability to make payments
that is going to be able to provide for schools, provide for
public safety and the building of highways in your estimation?
Dr. Corn. Do you mean under PILT?
Mr. Tipton. Yes.
Dr. Corn. The factor that would relate to that is any
effect in the prior-year payments. In other words, to the
extent that you reduce a prior-year payment or increase a
prior-year payment, you may--and you will remember I had a very
complex formula up there for this calculation--but you may
reduce a given county's PILT payment or you may increase it.
And it is difficult to tell what the net effect would be.
Mr. Tipton. Talking about that, and I am about to run out
of time here, we have counties like Hinsdale County in my
district, which is 98 percent Federal land with a very small
population, but they received less.
But if our friends from New York come out to their public
lands and drive off the end of the road, they want to have
public services there to be able to provide those services. In
your estimation, is that fair simply to have that part of the
calculation, population, or should it be strictly on the size?
Dr. Corn. As you know, it is difficult for CRS to deal with
that sort of question. Let me just say that this is not
discretionary with the PILT statute. In other words, they
receive whatever the statute calls for.
Mr. Tipton. I was just going to ask for a comment in terms
of fairness, but I understand. Thank you.
Mr. Chairman, I yield back.
Mr. Bishop. Thank you, thank you. What is for you guys a
hypothetical unfortunately is for us a reality.
Mr. Grijalva.
Mr. Grijalva. Thank you. Ms. Haze, there have been some
suggestions that the formula for PILT payments results in some
inequities. Some units of local governments that are already
fairly well off receive large PILT payments while some areas
that have very limited resources do not receive as much from
the PILT program. Does the Department have any suggestions on
how the program might be reformed so that we more fairly
allocate this funding?
Ms. Haze. That is a great question. I anticipated you would
ask me that and struggled with what I would say.
I hesitate to suggest anything. The formula was so
extensively discussed while they were putting the Act together
many years ago, and I have gone back and looked at all of that,
and there were so many different options they looked at before
they settled on what they enacted. So, I really don't have a
better way to build that mousetrap.
Mr. Grijalva. Thank you. The other question if I may, Ms.
Haze. The Department of the Interior shares receipts from
resource-development activities on public lands with the units
of local government. Can you give us some examples of various
programs that have revenue sharing?
Ms. Haze. I sure can. Many of our revenue-sharing programs
share the receipts with states as opposed to going directly to
the counties, but their formulas are very diverse across all of
the programs.
So, for example, mineral revenue payments to states for
onshore mineral production, we share $2 billion a year with the
states. There is also the--let me think what else we have. Of
course there is offshore, which has nothing to do with PILT.
Grazing revenues. So, there are a number of them.
Mr. Grijalva. And that would be a significant transfer of
funds, would it not?
Ms. Haze. It is. It is a significant transfer of funds. On
an annual basis, we are sharing about $8 billion a year.
Mr. Grijalva. Thank you. Ms. Corn, according to CRS data,
how did the amount of funding authorized for the PILT program
compare to the amount actually appropriated between 1976 and
1994?
Dr. Corn. Congressman, the first payment was made in 1977,
so between then and 1994, the range was between 100 percent
down to 88 percent in 1979. All of the rest of them were over
90 percent, generally over 94 percent.
Even then, in the early years, it was difficult to figure
out what a 100 percent payment was because the baseline data
were so confused. In other words, counties didn't know
accurately the Federal land, or the Agency did not, or how much
they had received in the previous year.
Mr. Grijalva. And do the same comparison if you would for
2008 to the current year.
Dr. Corn. Between, wait, 2008 did you say?
Mr. Grijalva. Yes.
Dr. Corn. That is 100 percent.
Mr. Grijalva. And it appears that there was a period from
1995 to 2007 when the amounts appropriated to the program fell
short of the authorized levels.
Dr. Corn. That is true.
Mr. Grijalva. I will not ask you which party was in
Majority from 1995 to 2006. I will leave that for people to
figure it out.
Let me ask if I could, Professor, one question. In your
written testimony you suggest an analysis of opportunity costs
that would be useful in evaluating the merits of Federal land
ownership. In other words, we should estimate what is being
lost because a coal mine, a uranium mine, another extraction
activity is not in place on those lands.
Would an analysis of these opportunity costs as you see it
deduct the potential costs for mitigation, cleanup of any waste
or pollution that was caused as associated with these projects?
Would that deduction be fair, part of the opportunity scale?
Dr. Yonk. Absolutely. A good measure of opportunity costs
would have to take into account the costs both of production
and then post-production timelines. But again, it should be
something that is appropriately included and estimated.
Mr. Grijalva. My time is up. I yield back.
Mr. Bishop. Thank you. Mr. McClintock.
Mr. McClintock. Dr. Yonk, how much of the State of Nevada,
for example, is owned by the Federal Government? Do you have
figures on that?
Dr. Yonk. Sure, if I were sitting in my office, I could
tell you. It is well into 90 percent.
Mr. McClintock. How about of California, my home state?
Dr. Yonk. I do not know the answer in California.
Mr. McClintock. I represent the northeast corner, and we do
have counties of which the Federal Government owns 70 to 80
percent of the land area, which stuns me when we reflect on the
fact that Washington, D.C., the Federal District of Columbia,
with all of its government buildings, the National Malls, all
of the memorials and parks, the Federal Government owns about
25 percent of land area of the Federal District of Columbia.
What happened? How was it that the Federal Government
seized the vast proportions of the western United States away
from the local people?
Dr. Yonk. That is quite a question. The short answer is
that you had a period where you had divestment occurring in the
United States, where you had land holdings that were held by
the Federal Government that were being in large measure
privatized. And that era ended prior to the introduction of the
PILT program, that it was no longer interested in doing those
sorts of things. And so it was sort of a default setting as we
came out of the Homestead Era when what did you do with the
balance of the land? Well, that land was held by in most cases
the Federal Government and was not fully allocated.
Mr. McClintock. Well, what we have found in the
northeastern corner of California is the Federal Government is
a lousy landlord and an even worse neighbor. We are watching
these Federal agencies shutting down community events that had
been exercised in these communities in some cases for
generations, driving grazing operations out, forcing people to
abandon cabins that had been in their families for generations.
It really is a lousy neighbor.
What do we do about all of this? Not only are they
consuming vast proportions of land that would otherwise be
going for productive use, but they have become an active
impediment to simple commerce and activity in these mountain
communities.
Dr. Yonk. I think the short answer to your question is that
that is a fundamentally political question that is left in your
capable hands. But there needs to be a recognition that the
costs are real to these communities. And it is far too often
that those costs are discounted or even suggested that the
results are positive, that you should be grateful to have
increased levels of protection because you will see increased
tourism dollars. Our work does not bear out that that is
consistently the case.
Mr. McClintock. The Ranking Member has pointed out that
there have been years when the Federal Government has been
unwilling or unable even to match the current authorization for
PILT, which is very low. And of course, as we all know, the
Federal cupboard is bare. We are actually borrowing that money,
and I am not entirely sure how much more China is going to loan
us.
Shouldn't PILT be funded by simply selling off these excess
Federal land holdings? Shouldn't we set perhaps a 25 percent
limit on the amount of a land area of any state or locality
that the Federal Government, certainly any state, that the
Federal Government can own considering the fact that it does
just fine owning just 25 percent of the land area of the
Federal District of Columbia?
Dr. Yonk. Again, I think that is a fundamentally political
question that this body will have to decide. There are real
costs, especially as you cross that 25 percent threshold, and
as those land holdings expand, there are increasing costs.
Mr. McClintock. If we were selling off this excess land, it
seems to me two things would happen. If we were using that to
fund PILT, that would provide a source of revenues to provide
relief to these communities without tapping a Treasury that is
deeply in debt and at the same time would begin reducing the
problem by restoring this land from unproductive Federal
holding to productive local holding.
Dr. Yonk. I think one of the interesting things in response
to that is that PILT is not the solution for these public lands
counties. I mean, we have heard testimony today that it has
typically been funded at over 90 percent, and yet public lands
counties still lag behind their non-public lands counterparts
in a variety of measures. And so I think the more fundamental
question that you are asking is an interesting policy question:
Should we be divesting public lands?
Mr. McClintock. So, there is a solution then that would
create jobs throughout these regions, would create additional
tax revenues throughout these regions because of productive
activity and would still leave the Federal Government holding
far more of the land area of these states than it does of its
own Federal District of Columbia. Thank you.
Dr. Yonk. The short answer if I may is----
Mr. Bishop. Five seconds.
Dr. Yonk.--maybe that would happen. Thanks.
Mr. Bishop. You did that in less than five, good job. Mr.
Coffman.
Mr. Coffman. Thank you, Mr. Chairman. And thank you,
Chairman Bishop, for holding this important briefing. I would
also like to thank the witnesses for testifying, giving this
Committee the information it needs on the program.
As a Member from Colorado, I understand how vital the PILT
program is to my District, to Colorado and to other western
States. Specifically, Douglas County in my District is slotted
to receive nearly $300,000 in PILT payments.
Mr. Yonk, right now we have a continued budgetary problem
on the Federal level, but there is a significant need for PILT
funding on the local level. So, how can the Department of the
Interior increase flexibility for the local communities to
extract more dollars from their lands and therefore become less
reliant on Federal PILT dollars?
Dr. Yonk. Again I refer to part of sort of my written
testimony, that as you increase the levels of protection,
particularly as it expands beyond simple Federal ownership, and
many of these PILT counties have large areas that are protected
at some level greater than the standard just ownership, and
when that occurs, you see increased costs to those communities.
And so one of the potential avenues would be to reduce some
of those levels of protection that could potentially have a
positive outcome depending on the context. Now there were a lot
of ``potentiallys'' in that statement because estimating what
would happen gets to be very difficult, and it becomes
dependent on what resources actually are available on which
public lands.
Mr. Coffman. Thank you, Mr. Yonk, Professor. Ms. Corn, you
testified that the addition of Indian lands to the PILT program
is a current issue of debate. But my question is how the
addition of these lands will affect the decision to continue
the five-year mandatory authorization in the future, and how
will this addition affect local communities' ability to earn
revenue from these lands and become less reliant on PILT
funding?
Dr. Corn. Congressman, this was an issue that was brought
up extensively in 1994 in the hearings that were held in the
Senate. The biggest difficulty that I recall was that defining
Indian lands all by itself was a monumental task. There were
multiple categories: reservation lands, trust lands that may or
may not be on a reservation, allotments, land holdings that
were once owned by other entities and acquired. So, it was
practically impossible they felt at the time to determine
exactly what should be included. That was the big stumbling
block.
In some counties, I don't recall where, but in some
counties, the holdings by, let us say a Federally recognized
tribe on a reservation, are a very substantial fraction of that
county's land. And since they are not taxable, then the burden,
the tax burden falls that much more heavily in terms of
property taxes on the non-reservation land. And some counties
have complained that this is a very severe burden.
Having said that, the reservation lands do sometimes
receive important county services, such as fire protection,
emergency services and so on. It could vary quite a lot from
one county to another.
Mr. Coffman. Mr. Chairman, thank you. I yield back.
Mr. Bishop. Thank you. Dr. Gosar, we welcome you to our
Committee. Do you have any questions?
Dr. Gosar. I do. Mr. Chairman, I ask permission to have
included in the record a letter from Ms. Tommie Martin, Board
of Supervisors from Gila County, Arizona. And because of the
staggering amount of Federal land in Gila County, Supervisor
Martin reports that Gila County property owners now shoulder
over 90 percent of the burden of the county's budget.
Mr. Bishop. Without objection, it will be added to the
record.
[The letter from Ms. Martin follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Dr. Gosar. So, Professor Yonk, I am curious to hear
your views on something that is really affecting my District.
District 1 is roughly 70 percent Federal lands, and we know how
the PILT is calculated. It is the eligible lands divided by or
times by a dollar amount received. And this actually is a
substitute for the lost property taxes, and that is important.
So, here comes my question.
Let me ask you, does PILT compensate localities when
natural disasters caused by mismanagement of Federal lands,
like forest fires, require the services of local firefighters,
policemen and emergency responders?
Dr. Yonk. One of the things we do see in public lands
counties is that their budgets, when you compare them to non-
public lands counties, they spend more on average on public
safety and the very things that you are describing than their
non-public lands counterparts. So, it would appear that there
is at least a cost of having public lands in the county.
Dr. Gosar. So, do you know if they compensate for natural
disasters? That they are inherently--you know, take for
example, we have a big, old fire like the Wallow Wildfire. So,
this is the biggest fire in Arizona history, and it is directly
related to our management of the forests. And yet the counties
are impugned by this, and there is no way of compensating back
for that.
Dr. Yonk. It is difficult to answer that question because
PILT in my estimation and what we found, it does not cover the
day-to-day operations; it is not a full replacement of property
tax revenue in every case. And so, based on that logic, the
answer to your question is no. But I can't say that
conclusively based on any data or study.
Dr. Gosar. But it is asking a requirement. The Federal
Government is asking a requirement for these Federal lands that
they do maintain these on a day-to-day basis yet not compensate
it on a day-to-day basis. Is that not true?
Dr. Yonk. That sounds correct.
Dr. Gosar. So, I know that my counterpart from Arizona
brought up a compensation mechanism, you know, the minerals.
Ms. Haze, is it not true that those mineral allocations are
determined by the state Constitution in their allocation?
Ms. Haze. I don't know about the state Constitution.
Dr. Gosar. I do. So, let us go back to Arizona.
Ms. Haze. OK.
Dr. Gosar. Just so the record states, those monies for
compensation for mineral royalties goes to the Land Department,
which goes strictly to education. Nothing else, nothing more.
So, let me ask you another question, Ms. Corn. Is there any way
in a procedural way that counties have the ability or states
have the ability to either increase or decrease the numbers of
lands in regards to compensation for PILT?
Dr. Corn. No, because that provision is defined in statute.
In other words, the eligibility of a Federal land holding to
receive a PILT payment is defined in statute. So, any change in
a county would require a change in the statute.
Dr. Gosar. So, we would have to do it here.
Dr. Corn. Yes, barring, now let me just say, one exception.
If some lands were to be acquired let us say to fill in an in-
holding in a national forest, then that would become National
Forest land and would therefore be eligible for a PILT payment.
But the status of the land is fixed in the statute. In other
words, the types of land that can receive payment are fixed in
the statute.
Dr. Gosar. So, you brought up another question for me in
the definition of Indian lands. So, let us say, for example,
that a tribe buys a piece of property that is considered part
of their holdings. If it was a part of a PILT, does it then
become a non-PILT?
Dr. Corn. In effect, you are suggesting that the tribe has
acquired some type of Federal holding and it has changed from
Federal land that was eligible for PILT into land that is now
part of the reservation. I haven't heard of that happening. I
am afraid I can't answer that. I don't know what the result
would be.
Dr. Gosar. The reason I ask is that we spent the better
part of 100 years trying to get criminal law with native tribes
and us fairly similar, and it is fairly similar. But we have
yet to touch civil actions in regards to the tribes.
And that is why I have a number of big tribes, Indian
tribes in my District, and we have an example of this possibly
occurring. And so what we have to do is look at the
ramifications because I have some of those holdings where a big
tribe has a lock on the land ownership within a county but
still drives a lot of those maintenance. And there is no way
they can actually compensate or maintain. There is just no way.
Navajo County is an example. What those people do is heroic all
the way around. The emergency responders, law enforcement, it
is just unbelievable what they do at the expense of the Federal
Government.
So, I yield back my time.
Mr. Bishop. Thank you. In fact, I have more questions that
have come to my mind as I have been listening to the discussion
going on here. So, Ms. Haze, let me start with you if I could.
I first want to say it was troubling, very troubling, to hear
your answer to one of the other questions, that you don't know
if the Department will be requesting full funding for PILT in
the 2013 budget year proposal. I understand that may be at a
pay grade different than yours to make that statement or that
decision, but it is troubling that the Department has not
determined to do that and is willing to publicly say they are
determined to do that. Can I ask a question simply about the
payment schedule though? Is there statutorily a date certain
when PILT payments must go out the door?
Ms. Haze. Yes. The statutory requirement is that they need
to go out the door before the end of the fiscal year, the
Federal fiscal year.
Mr. Bishop. So, there is a cutoff date; there is not a date
that it has to be done.
Ms. Haze. Correct.
Mr. Bishop. Will the Department of the Interior then this
year in PILT payments, will they be made to the county before
that date?
Ms. Haze. They will.
Mr. Bishop. OK. I appreciate you being that definitive in
some time. Can you tell me what then the specific reason was
when you all announced the expected delay in the 2010 payment?
Ms. Haze. We had received some information from a state
that impacted our calculation of the payments to the counties,
and it had to do with the way Dr. Corn described it as the
pass-through money. And it was a new procedure that they had
put into the state; the State Assembly had passed new
legislation. And so a set of prior-year deductions we would
have ordinarily considered in the formula----
Mr. Bishop. So, it was an accounting problem you had within
the Department of the Interior.
Ms. Haze. I think I am understanding your question, but if
not, ask me again. So, it was a delay in trying to understand
what happened in the state and get legal clarification around
whether we should deduct those payments or not. So, it was a
legal interpretation of the new process.
Mr. Bishop. If there is a statute that tells you that you
have to make a payment by this date, then why did you tell the
state you may break that statute in order to do the internal
calculations?
Ms. Haze. There is a statute that requires that we make the
payment by the end of the Federal fiscal year, September 30. We
try to make the payment early June. We had gotten initial
information in from the state later than we normally ask for
it. We normally get the information in from the states in
December. We didn't get it until later in the spring, and then
we had additional clarification discussions with that state
that went on for a while.
Mr. Bishop. Thank you. I appreciate that. I think it would
probably be helpful for the counties if there was a specific
date on which they could depend, not when it has to be done as
an end date, but there was a specific date on which those
payments had to be going out at some time. And I realize that
there is not a statute that demands that particular thing.
I am also under the impression, and correct me if I am
wrong, the Department of the Interior does not have the ability
to increase or add categories of land or to adjust valuations
of land statutorily. That has to be done in a legislative
change within the basic bill, within the basic program itself
statutorily. The Department of the Interior does not have, am I
right, the flexibility to change classifications of land,
categories of land, ceiling payments, population payments,
those type of things?
Ms. Haze. Correct. As Dr. Corn explained, there is a set
definition for which lands are subject and get PILT payments
and lands that do not.
Mr. Bishop. Thank you. Let me turn to Dr. Corn then if I
could for a few questions. And I think you have already said
this. Are there county payments that are not counted against
future PILT payments for some counties but not others?
Dr. Corn. The PILT provides for----
Mr. Bishop. Actually, Doctor, I am going to run out of time
before I get through you with all of these. I will come up with
that one later on what counties get and what counties don't.
Dr. Corn. Sure. OK.
Mr. Bishop. Mr. Grijalva, you have sat here through the
Republicans; you are the only one on your side. Do you want
another round, another question set this round?
Mr. Grijalva. I thought I would get one after each one of
you.
[Laughter.]
Mr. Bishop. I am not that nice, but you can go now if you
would like.
Mr. McClintock. You can have my other 32 seconds.
Mr. Grijalva. Thank you, appreciate it. Professor, let me
ask you a followup on a question. I believe that the wildfire
was the result of a lightning strike. Had that land been all
private, OK, who would bear the costs for fighting that fire?
Dr. Yonk. I don't have any specific information about
Arizona's laws, but it would have been borne most likely by
whatever level of government is assigned in Arizona primary
responsibility for fighting those fires.
Mr. Grijalva. And you know, on page 5 of your testimony,
let me quote, ``The designation of the Grand Staircase-
Escalante National Monument has had little or no effect on the
economic situation of the host counties.'' Is that correct?
Dr. Yonk. We can find no statistically significant impact
of the designation of the monument in either Kane or Garfield
Counties.
Mr. Grijalva. So, the designation of that monument has had
little or no effect on the economies of Kane and Garfield?
Dr. Yonk. That is what the data and our study has led us
to.
Mr. Grijalva. Well, thank you. It is a relief to have that
question resolved once and for all. I appreciate it. And with
that, I yield back.
Mr. Bishop. Thank you. Mr. Tipton, do you have other
questions?
Mr. Tipton. Thank you, Mr. Chairman. I have just one more.
Mr. Yonk, it is kind of disturbing since we have so many public
lands throughout the West, and I come from an area that is
typically economically depressed, and unfortunately right now
we have better than double-digit unemployment in many of our
counties. Going off of some of your analysis, and I would like
to be able to actually see that full report, if lands are
further designated that becomes more restricted, do you see
further negative economic impact? Because I am hearing
testimony, I just held a public hearing out in one of my
communities, and one of the contentions is that we are able to
actually see positive economic impact off of some designations,
but you seem to be indicating to the contrary.
And if you see more restricted designation, we understand
not all regulations ever go away. As long as it is BLM land, as
long as it is Forest Service lands, there are going to be
protections that are going to be in place. But if it gets more
restrictive, is there more negative economic impact, or does it
stay the same?
Dr. Yonk. In response to that, so this notion that there is
a positive effect, in none of our studies have we found a
consistent positive effect of increasing designation.
We do find, especially in the case if you designate
wilderness areas, a greater negative effect on those
communities. Now, as we go beyond that, it becomes less clear.
For example, the monument study of the Grand Staircase, it is
not that it is a positive; we can find no effect where when the
claims were that the effect would be this great boon to those
two counties through recreation dollars. So, it is a little bit
of a mixed bag in answer to your question. There are clearly
costs as you restrict the uses of lands.
Mr. Tipton. OK, great. Ms. Haze, would you like to comment
on that at all? Do you have any studies?
Ms. Haze. No, I am not prepared to do economic study
comments. Thank you though.
Mr. Tipton. Any sort of comment on that? CRS have anything,
Doctor, on that?
Dr. Corn. No, I am afraid not. Well, nothing that I am
aware of.
Mr. Tipton. OK, thank you. I yield back, Mr. Chairman.
Mr. Bishop. All right. Dr. Corn, can I start over this one
again here? So, what I was trying to ask is, are there county
payments that are not counted against future PILT payments in
some counties but are in other counties?
Dr. Corn. Yes. Where states have laws that require this
pass-through--in other words, this is a feature where a state
may say the payments resulting from BLM must go straight to
this entirely separate entity, a school board for example, does
not go to the county government. In that case, that payment,
let us say $10,000, would not be counted as having gone to the
county government. So, it would not be deducted from the
following year's payment.
Mr. Bishop. So, let me give you another hypothetical just
along that same line, different issue. So, we have already
established some counties will be treated differently according
to those pass-throughs.
Dr. Corn. Right.
Mr. Bishop. So, for example, on Secure Rural School
payments, are they always deducted from the prior year's
payments? The following year's payments.
Dr. Corn. They would be for National Forest lands.
Mr. Bishop. So, is that going to be uniform in all
counties? For example, let us talk about ONC counties, an ONC
county in the West. Secure Rural School payments would go
there. Would they also have PILT payments as well?
Dr. Corn. In the case of ONC lands, the Secure Rural
Schools provision does not apply. In other words, if we are
talking about National Forest lands, then any prior-year
payment under Secure Rural Schools is deducted from the
following year's PILT payment.
If, on the other hand, the land in question, an ONC county,
has chosen Secure Rural Schools, that payment under Secure
Rural Schools would not be deducted from the following year's
PILT payment.
Now bear in mind that this is an incredibly complicated
problem simply because some of those counties will be limited
by the population ceiling, so it wouldn't make any difference
anyway. Or some of those counties may be receiving the minimum
33-cents-per-acre payment, so it still wouldn't make any
difference. But at least potentially there would be a
distinction between ONC lands versus Forest Service lands.
Mr. Bishop. It could be, and I appreciate that. And I also
appreciate you saying that 33-cent figure.
Usually I don't want to ask the question unless I know the
answer; I have no clue what this answer is. When that dollar
figure was established, why? Was there a specific reason or
matrix that we used? We talk about how the formula goes out
based on the amount of land and a certain dollar figure
attached to it. Was there a matrix used to come up with that
figure?
Dr. Corn. In the original law, the dollar figures were 75
cents per acre and 10 cents per acre.
Mr. Bishop. Why?
Dr. Corn. You know, I just tried to look that up quite
recently. I looked at the hearing records in the House and
Senate, the committee reports. I haven't looked at the Floor
debate yet, but that number just pops out. And in the House
Report it says that instead of choosing, and then it lists
various options, the Committee selected 75 cents per acre.
Mr. Bishop. So, it could well be then that if states were
allowed to charge a tax levy based on their own standard, they
would be getting significantly more money from the Federal
Government than they will get in PILT because we have those
arbitrary numbers that are there.
Dr. Corn. As long as you bear in mind that some might be
getting significantly less, yes, that is possible.
Mr. Bishop. OK. That is theoretically--in my own mind, I
can't envision that scenario, but it is theoretically possible.
Could I also ask one other question too just on the history of
it? I know population is included as a figure. Historically
why?
Dr. Corn. The reason at the time for including population
was that they did not want to give counties that had very large
population resources. In other words, in the West, the counties
tend to be really big geographically. And some of them--I am
thinking of Sacramento for instance--are both big counties, a
fair amount of public land, and they also have substantial
population.
In contrast, there may be other counties just as large,
also with a fair amount of public land, but they have very
small populations. It was felt that the county that had the
very small population needed proportionately more assistance
than a presumably more resourceful if that is the word I want
county like one like Sacramento. That was where that started.
Mr. Bishop. All right. Once again, it seems like once again
we made maybe an entirely appropriate decision, but it was a
fairly subjective decision.
Dr. Corn. The numeric figures for the 75 cents, 10 cents
and the actual county ceiling numbers, I have not found a
specific justification for those. And in fact, shortly after
the PILT law was passed in 1978, there was a study by the
Council on Inter-Governmental Relations which asserted looking
back at that 75-cent figure that there was, and I am nearly
quoting, no fiscal reason that they could determine for having
chosen that number.
Mr. Bishop. Thank you. Like I said, I didn't know the
answer to that. You have given me an answer. I have to admit it
is a troubling answer, but it is a good answer. Thank you, Dr.
Corn.
Dr. Yonk, if I could ask you a couple of questions, and let
us go on to this. I think in your written testimony you gave a
sentence in there that I thought was interesting and that the
idea of PILT was tied to a change in the attitude we had about
public lands in the first place. Would you want more time to
just reinforce why you said that?
Dr. Yonk. Sure. So, the logic of PILT was that there was a
change happening in this orientation toward what public lands
were meant to do and increasing Federal oversight of what was
occurring on those Federal lands. And so part of what PILT was
desiring to do, especially those that had advocated very
strongly for it, was to prevent the systematic disadvantaging
of those counties with large public land holdings based on this
change and this new focus on conservation at sort of that time
and we might term it environmentalism today. But it was
designed with the recognition that there would be costs to
these areas with this change.
Mr. Bishop. So, you have given us another avenue of
attacking this problem if we look outside the box in some way.
Are you familiar with Headwater Economics and their analysis on
the impact to national monuments?
Dr. Yonk. I am.
Mr. Bishop. Can you just tell me why your conclusions
differ so starkly from their conclusions?
Dr. Yonk. The Headwater Economics analysis uses a simple
growth model where they take in Time A what the value of some
specific measure was, compare it against Time B, holding
constant the dollars for, they used 2009, and they create this
notion that there has been an increase. That is great, but it
is possible that the increase has happened everywhere.
Our approach suggests that we look at it by controlling for
what the other factors are and comparing it against the
counties that were most like the counties where a monument was
designated, in our case, Grand and Kane, at the time the
designation happened. And then we want to see what happens in
the intervening years.
And so it is simple to look and say yes, there are in fact
larger household incomes in 2011 than there were in, like he
uses I think it is 1995. Yes, the household incomes are larger.
But there is no clear discussion in that report about why you
would see the increase. And the assumption made and the
implication that is made in that report that has been taken
from it is that it is the national monument that has led to
that. Our work finds no evidence that that is the case.
Mr. Bishop. So, in your answer to Mr. Grijalva, when you
said there is no impact, what you are saying in practical terms
is tourists were not flocking to that designation, dropping
money on the streets as they went there.
Dr. Yonk. Correct.
Mr. Bishop. But in your study, though, did you include
economic opportunities that were lost by those designations?
Dr. Yonk. No. In this case, there are two primary reasons.
The main opportunity cost that has been identified in the Grand
Staircase-Escalante monument is the Andalex Mine. We have
serious questions about whether that mine would have been
operative in the period based on the regulatory environment.
So, an estimation of what that effect would be we felt was
inappropriate, primarily because we have serious doubts about
whether or not it would have been open today. Someday would it
have been open? Perhaps. But the regulatory environment, which
is a whole other discussion, would likely have prevented it.
Mr. Bishop. Let me finish off with three questions to you,
and then I will let you all go. To what extent do PILT payments
reimburse counties that are blessed with wilderness or monument
designations?
Dr. Yonk. At some level, less than the costs of those
designations.
Mr. Bishop. States, like my State of Utah, have productive
or try to do with productive state lands, especially School
Trust lands. Do you evaluate the economic benefits from state-
owned lands as opposed to similarly Federally owned lands?
Dr. Yonk. We do include a control for those state-owned
lands because we want to make sure we are not inappropriately
ascribing the impacts of those lands to the Federal lands. But
we have not done a full-scale study of what those impacts would
be.
Mr. Bishop. Do you have an assumption--no, that is unfair--
of what you would find out? If I had an assumption of what you
would find out, would that be fair? Never mind, that is not a
real question.
One last one I would like to do. After our last hearing,
and I would just like a quick reaction from you, there was a
survey that was done by an interest group that was published in
one of the Salt Lake papers that said basically people are
loving the Grand Staircase-Escalante monument.
I want to read what the question was to you. And the
question that was given was, ``The Grand Staircase-Escalante
National Monument protects public lands between Bryce and
Capital Reef in southern Utah. The national monument allows for
continued public use for grazing and recreation, including
hunting, but prohibits new development. Do you think the Grand
Staircase-Escalante National Monument is good or bad for
Utah?''
In their survey, they asked one person who lived in
Garfield County, one person who lived in Kane County, one in
Wayne, nobody in Piute, and then went five miles by car away
and asked 132 people in Salt Lake City.
As somebody who works in the academic area, what kind of
validity would you give to that type of survey, both the
question and the survey sample?
Dr. Yonk. Having not seen the actual sampling methodology,
the question is clearly both vague and provides direction to
the answer.
We just recently completed a survey of broadband internet
penetration in Utah, and one of our primary concerns was if we
simply draw a random sample in Utah, we are going to get a
large majority from the Wasatch Front Counties of Salt Lake,
Davis and Weber. And if that is the only people we ask, we can
identify what the result of that survey will be. They will in
fact almost all have access to high-speed internet. So, we had
to use a different sampling methodology to ensure that you got
geographic representation in the sample. And so that would be
our approach to dealing with those potential problems.
Mr. Bishop. I appreciate that very much except those three
counties are all in my District, so they are good people, they
are good people.
I want to thank the witnesses who have been here to give
their testimony and thank the Members who have shown up to ask
questions. I want to make public, the hearing record will be
open for 10 days to receive responses if anyone here wants to
add to their testimony or if we send you those other responses.
Sometimes I think just for me, I have found this very
illuminating. Ms. Haze, I think it would be very helpful if
there were some specific deadlines or dates on when those
checks need to be going out, and I appreciate your answers to
the reason for the delay that was announced at one time.
Dr. Corn, I appreciate your historical insight. If you can
tell me why 75 cents was picked sometime, good for you, and I
would actually appreciate that data.
Dr. Yonk, I appreciate your being here, and I appreciate
the studies you have had on the impacts these lands have on the
people who live in those areas. I thank you for your testimony.
With that, this Subcommittee hearing is adjourned.
[Whereupon, at 11:46 a.m., the Subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Statement of The Honorable Paul Gosar, a Representative
in Congress from the State of Arizona
Chairman Bishop and Ranking Member Grijalva, thank you for
orchestrating this important hearing, to examine the Payment in Lieu of
Taxes or PILT program. From the very beginning of our nation's history,
we have recognized that states and localities are unable under the
principles of federalism to tax federal land. In states such as my
state and the Ranking Member's state of Arizona, where the majority of
land is federally owned, the inability to impose local property tax on
federal land has real world consequences for states and localities that
still have to provide all the public safety and education services that
citizens count on with a greatly reduced tax base. Additionally,
federal workers, contractors and concessionaries, as well as their
families utilize local schools and services. Without programs like the
PILT program, which provides a payment to local counties in lieu of the
property taxes that cannot otherwise be assessed, local school
districts and counties shoulder the entire financial burden for the
impact of federal land within their locality.
The positive impact of PILT in Western states particularly, and
more specifically in Arizona's First District, cannot be stated enough.
My district boasts an array of federal forest land, and federal parks
that are counted among our nation's treasures. In fact, the majority of
land in my district is owned and managed by the United States
government. This state of affairs unfortunately limits the economic
development potential of western states, and also requires the county
officials in my district to manage a delicate balancing act to find the
revenues that every community needs to pay for essential services. PILT
is a crucial part of this balancing act and failing to reauthorize it
at the end of this fiscal year would jeopardize the health, safety, and
prosperity of all eight counties in Arizona's First District. PILT is
not a giveaway, it is not an entitlement, and it is not an earmark. It
is a crucial portion of the agreement that the federal government has
made in exchange for its ownership of land in the West. A staggering 28
million acres in Arizona alone is eligible for PILT, and yet the PILT
program yielded only slightly more than $31 million for Arizona
counties in Fiscal Year 2011.
In Graham County, Arizona, for example nearly 40% of the county's
land is owned by the Bureau of Land Management and the Forest Service
combined. Only 10% of the county's land is private land, subject to
property tax. The PILT program is a vital source of revenue for a
county like Graham, providing 14% of the county's budget. Local
officials tell me that PILT is ``live or die'' for Graham County--and
what many do not realize is, that local officials must still budget for
law enforcement and public safety services for anything that happens on
federal land. For example, in Navajo County Arizona, only 14% of the
county's land mass is subject to property tax. This state of affairs,
combined with state budget reductions, make the PILT program more
important than ever. I cannot envision a scenario for Arizona's
counties that doesn't involve the PILT program.
In other instances before the Natural Resources Committee, I have
made the argument that the future of the PILT program is a question to
be considered within the broader question affecting my district every
day. Does the federal government own too much land altogether,
particularly in the West? Could some of these lands be better managed
than they are, and provide more opportunities for economic development
that might compensate localities more fairly for the services they
provide on federal land? I believe the answers to these questions are a
firm yes and no respectively--but until we can meaningfully tackle
these questions, the Payment in Lieu of Taxes program is a vital
program. We must reauthorize PILT and we must continue to provide the
support these counties and communities need.
Thank you and I look forward to hearing the witnesses' testimony.
______
Statement submitted for the record by the National Association of
Counties
Chairman Bishop, Ranking Member Grijalva, we appreciate the
subcommittee scheduling the hearing on Payments in Lieu of Taxes (PILT)
held on Friday, October 14th 2011. Thank you for giving counties and
the National Association of Counties (NACo) the opportunity to submit
testimony for the record.
The PILT program provides payments to counties and other local
governments to offset losses in tax revenues due to the presence of
substantial acreage of federal land in their jurisdictions. Since local
governments are unable to tax the property values or products derived
from federal lands, these payments are essential to support essential
government services (mandated by law) such as education, first
responders, transportation infrastructure, law enforcement and
healthcare in nearly 2,000 counties in 49 states, the District of
Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.
HISTORY
In 1954, elected county officials from several western states
joined together to develop a regional coalition of counties called the
Interstate Association of Public Land Counties--an organization that
would ultimately evolve into the Western Interstate Region of the
National Association of Counties. The primary purpose of the
organization was to educate policy makers in Washington, DC and
advocate for Federal payments to counties in lieu of lost property tax
revenue due to the presence of a vast Federal estate.
The organization grew and incorporated membership from counties in
the fifteen western states and enlisted support from other public land
counties in other regions of the United States through what was then
the National Association of County Officials. After several years of
growing pressure from county officials nationwide, the 94th Congress
passed the Payment in Lieu of Taxes Act (PL 94-565). The PILT Act was
codified in Chapter 69 of Title 31 of the United State Code. Applicable
regulations are in Subpart 1881, Title 43 of the Code of Federal
Regulations.
The impetus for its passage in 1976 was the passage of the Federal
Land Policy and Management Act (FLPMA), specifically FLPMA established
that disposal of public lands would largely cease. In lieu of a future
in which lands could continue to pass from Federal ownership to private
ownership (such as the Homestead Act), Congress opted to reimburse
local governments for land that would remain in Federal ownership ``in
lieu'' of paying direct property taxes.
Congress established national formulas which took into account
population, existing revenue-sharing payments for resources harvested
or extracted from public lands, and base acreage of the Federal estate
within the jurisdiction. With a few exceptions in New England and
Wisconsin, states determined that counties were the jurisdictions that
would receive payments.
Local governments (usually counties) which provide services such as
public safety, environment, housing, social services and transportation
and have non-taxed federal land within their jurisdiction, are eligible
for annual payments.
Payments are made directly to the counties unless the state
government concerned chooses to receive the payments and, in turn, pass
the money on to other smaller governmental units such as a township or
city. (Wisconsin is the only state currently employing this option)
Historically, payments were limited to an amount appropriated by
Congress. Initially authorized at $100,000,000, that amount was
appropriated annually during the first decade of the Act. During the
1980s there were attempts to zero out the amount in budgets, but
Congress consistently restored the funds to the authorized level, such
that the minimum amount was available each year.
The Act was amended in 1994 to provide for a more equitable
authorization level in light of disparities that existed between
property values and current PILT payments. The law as amended, uses the
consumer price index to adjust the population limitation and the per
acre dollar amounts used to calculate alternative ``A'' and ``B'' under
Section 6902. However, an individual county's payment from one year to
the next may not necessarily increase since the total amount of money
available under the PILT program is set by Congress each year in the
Department of the Interior and Related Agencies Appropriations Bill.
Payments also vary with changes in ``prior-year'' payments.
From 1994 on, the authorized level and the appropriated level began
to diverge, since the authorization crept up by an amount equal to the
CPI each year, while appropriations stayed almost constant. Initial
payments were set at $0.75/acre (Alternative A) and $0.10/acre
(Alternative B).
PILT is one of the few Federal funding programs that has a
``floating'' authorization. Most enabling acts set an authorized
amount. Since the 1994 amendment that indexed individual payments, the
total authorized for the program has grown from the $100 million to
over $375 million (FY2011) since the authorized level flows directly
from a summation of each county's indexed maximum payment level.
Until the passage of PL110-343, appropriation levels had never
reached authorized levels. The table below shows the national levels of
authorization and appropriation since 2000. There was a large increase
in FY 2001, and steady increases until FY 2006. In FY 2008, the DOI
submitted two payments--the first payment in June was fixed at the FY
2007 level by Continuing Resolution, less a 1.6% rescission. The second
payment was paid following the signing of the Emergency Economic
Stabilization Act (PL110-343) on October 3, 2008--which modified the
PILT program from a discretionary program (subject to annual
appropriations) to a fully funded mandatory entitlement program. PILT
has been fully funded from FY 2008 to FY 2012.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
HOW ARE PAYMENTS CALCULATED
Payments under each section of the Act are calculated as follows:
Section 6902 payments:
Alternative A:
$2.42 (in fiscal year 2011) times the number of acres of
qualified federal land in the county, reduced by the amount of
funds received by the county in the prior fiscal year under
certain other federal programs.
($2.42 X [number of acres of qualified federal land])--[prior
year funds received]
OR
Alternative B:
Thirty three cents (in fiscal year 2011) times the number of
acres of qualified federal land in the county, with no
deduction for prior year payments.
$0.33 X [number of qualified acres]
Payments under either alternative are subject to population payment
limitations.
Section 6904 and 6905 payments--
Payments on Federal lands acquired after December 30, 1970 as
additions to lands in the National Park System or National Forest
Wilderness Areas (Section 6904) and payments on Federal lands in the
Redwood National Park or lands acquired in the Lake Tahoe Basin near
Lake Tahoe under the Act of December 23, 1980 (Section 6905) are
computed by taking one percent of the fair market value of the
purchased land and comparing the results to the amount of property
taxes paid on the land in the year prior to federal acquisition. The
payment to the county is the lesser of the two.
Section 6904 Payments are made for a period of five years following
each acquisition.
Section 6905 Payments are made each year from the date the land was
purchased by the federal government until an amount equal to 5% of the
fair market value at the time of acquisition is fully paid. However,
the yearly payment may not exceed the lesser of one percent of the fair
market value or the property taxes assessed prior to federal
acquisition.
DEFINITIONS
Federal entitlement acreage
All Federally held lands in all States, Commonwealths and
Territories are counted with the exception of those lands that are part
of Department of Defense installations and withdrawals. Nationally the
following lands are counted:
a. All land administered by the United States Forest Service
b. All land administered by the National Park Service
c. All land administered by the Bureau of Land Management
d. All land withdrawn from public lands administered as part
of the National Wildlife Refuge System (acquired land is not
included)
e. All dredge and flood control land administered by the Corps
of Engineers
f. Project lands withdrawn and administered by the Bureau of
Reclamation
g. Lands in Colorado acquired after Dec. 31, 1981 to expand
Ft. Carson
h. Land on which are located semi-active or inactive Army
installations for ``use for mobilization and for reserve
component training''
i. Land in Utah acquired for the inter-basin water transfer
(URC land) project
Prior Year Payments
Prior year payments are payments to local government under programs
other than PILT during the previous fiscal year. These payments include
those made under:
a. the Refuge Revenue Sharing Fund,
b. the National Forest Fund (``25% Fund'')
c. the Taylor Grazing Act,
d. the Mineral Leasing Act for acquired lands,
e. the Federal Power Act,
f. Titles I and III of the Secure Rural Schools and Community
Self-Determination Act.
The PILT Act requires each state to report these payments to the
Department of the Interior each year.
DISBURSEMENTS
In 2010, the Department of the Interior announced a decision to
delay the annual PILT payments. This decision caused widespread panic
and confusion for counties nationwide as local governments have
historically received annual PILT payments in June of each year and
plan their budgets accordingly. The DOI last minute decision to delay
payments without providing any notice was problematic, and placed
countless public lands counties in difficult financial hardship.
Many counties begin their fiscal year July 1 and rely on the June
PILT payment to be available as net working capital available to the
county general fund. For example, in the state of Oregon, property
taxes are primarily received in November. The PILT payment being
received in June allows for adequate operating funds to provide
services to the community until the tax revenue flows again. In
counties that are heavily encumbered by Federal lands, the PILT payment
represents anywhere from 50-80% of the counties beginning cash balance.
Another problem created by the DOI decision to delay payments has
to do with violating individual state budget laws. In a number of
states, counties operate on a cash basis, which requires posting of
revenue once it is received. In counties whose fiscal year ends June
30th, without the PILT payment those counties could be in violation of
state budget law.
NACo and a bipartisan list of United States Senators and members of
the House of Representatives requested Secretary Salazar take every
effort to disburse payments to counties prior to June 30, 2010 in order
to avert substantial financial distress in public lands counties across
the nation.
Ultimately, the DOI resolved the problem in time and released the
payments in late June, 2010. In light of the payment disbursement
conflict, Senators Ensign (R-NV), Tom Udall (D-NM), and Begich (D-AK)
introduced Payment in Lieu of Taxes Amendments Act of 2010 (S. 3730).
The legislation would require the Department of the Interior to issue
payments to counties not later than May 1 of each fiscal year. While
the legislation was not enacted, the DOI received a very strong message
from Congress and NACo that payments need to be made in a timely
fashion.
STATUS QUO
On October 3, 2008, Congress enacted the Emergency Economic
Stabilization Act of 2008 (PL 110-343) which authorized counties to
receive their full PILT entitlement from 2008 through 2012. The amount
authorized for the program in FY 2011 was $375.6 million.
Currently, the Department of the Interior has one remaining payment
that will be disbursed in June 2012. Congress will be required to act
in order to maintain mandatory funding for fiscal years FY 2013 and
beyond. Currently, only one piece of legislation has been introduced in
the 112th Congress to provide continued funding for the PILT program.
Senator(s) Jeff Bingaman (D-NM) and Lisa Murkowski (R-AK) introduced S.
1692 the County Payments Reauthorization Act of 2011 on October 12,
2011. The proposal would provide continued mandatory funding for PILT
for FY 2013 through FY 2017.
While the United States Senate and the House of Representatives may
approach legislative solutions for funding the PILT program
differently, NACo will continue to urge leadership on both sides of the
isle to act in a spirit of bipartisan and bicameral cooperation and
work together to move a final legislative solution to the President's
desk.
POTENTIAL MODIFICATIONS TO PILT
NACo believes several policy modifications should be explored by
Congress to identify ways to make payments to counties more equitable.
A range of possible alternatives should be considered to more evenly
distribute PILT funds to counties to provide more budget certainty.
Over time, some programmatic anomalies have become evident. Among
these are the non-inclusion of Federal acquisitions, substantially
reduced payments to jurisdictions with large Federal estates, and the
inability of current formulas to account for externally induced costs
resulting from Federal land use by persons originating from outside the
jurisdiction.
Some suggest, population (up to 50,000 persons) may not be the most
appropriate method for providing fair allocation. The 1994 amendments
primarily changed the method of establishing the annual authorization
level, but left the basic distribution formulas intact. Revenue sharing
programs identified as prior year payments have provided some
additional funding to county governments, such as the Secure Rural
Schools program. However, increases in these other payment programs
have reduced the amount of PILT funding annually in many resource
dependant counties. Such payments have generally evolved downward as
Federal land use has shifted from revenue-producing use to public
outdoor recreation use. Such shifts have not only reduced or altered
the inflow of revenue sharing; they have also created cost impacts to
jurisdictions to provide services such as emergency search and rescue,
law enforcement and increased road maintenance, among other impacts.
PILT is not only an important element to county funding, the fact
that it is indexed to inflation and is paid to counties for general
purposes is critically important so as to assure it retains its
character as a property tax payment and can be utilized for any general
fund purpose, and we believe it should retain this basic character.
Counties with extensive Federal estates, however, receive PILT payments
which neither reflect the local government costs resulting from that
estate, or the payment is not fully reflective of the vastness of such
estate within the jurisdiction.
National formulas inadequately account for all the factors present.
NACo has reviewed a number of possible formula changes, but as with any
formula there are ``winners and losers.'' We agree that PILT should
count acres first and consider local population last, if at all. We
believe that more fair distributions can result through modifications
to the current formula to reflect not only acreage and current revenue
payments, but also other factors such as external use pressures that
may be present within some of the jurisdictions.
CONCLUSION
Again, NACo appreciates the opportunity to provide testimony before
the House Natural Resources Subcommittee on Parks, Forests and Public
Lands. We look forward to working with members of the Committee to pass
legislation that will continue the historic partnership between Federal
and county government by extending continued mandatory funding for the
Payment in Lieu of Taxes program for fiscal years 2013 and beyond.
Please contact Ryan R. Yates, Associate Legislative Director for the
National Association of Counties for more information.