Conclusions and Recommendations

Reality is far different. In timber, grazing, minerals, and recreation, we find the same pattern: Congress wants pork. Agency officials want bigger budgets. BLM budgets grow when Congress decides that a particular program makes good pork or lets managers keep their own receipts. This means:

• BLM managers are rewarded for leasing oil & gas by getting bigger budgets for range improvements to support more grazing--from which they also get to keep half the fees.
• Other managers sell salvage sales to raise funds for "ecosystem health"--which usually means more timber sales.
• Even before the salvage sale rider, many BLM districts regularly sold more than their allowable sale quantities because timber makes such good pork.
• Now that Congress lets the BLM keep recreation fees, many managers are eagerly charging fees that they will use to fund recreation, which they hope will become attractive pork.
• Until recently, the best-funded BLM districts have been those in western Oregon, whose timber made top-notch pork and provided BLM managers with so much revenue--a fourth of the total--that they built fancy office buildings with high-security features to defend themselves (unsuccessfully, as it turned out) from environmentalist onslaughts.
• The fact that the vast majority of BLM districts lose money on all of the resources they manage is ignored by Congress and the agency, neither of which bother to ever compare receipts and costs by resource on a district or even a national basis.

This is the solution advocated by many environmental groups. Other than the fact that environmentalists have been unable to convince Congress to pass such detailed laws for any federal resource agency, the micromanagement solution suffers from two critical flaws.

• Micromanagement requires an omniscient Congress with infinite amounts of time to examine and solve every problem in the federal domain. In fact, Congress is far from omniscient. Even if it had time to review the BLM in detail, people in Washington, DC, are hardly qualified or capable of prescribing on-the-ground management for lands thousands of miles away.
• More important, micromanagement on behalf of one interest group can easily be twisted into micromanagement on behalf of any other interest group. A Congress that can set timber sale ceilings can also set timber sale floors. A Congress that can outlaw below-cost timber sales can also define such sales away by restricting the definition of "below-cost" to only a few of the most flagrant money-losing sales.

This is basically Congress' policy today, though some might argue that Congressional standards for such things as below-cost sales are too vague. But this alternative suffers from the same problems as micromanagement: Congress has neither the time nor expertise to provide oversight, so it ends up writing standards in vague language so that all sides think they have one--when in fact the only winners are the lawyers who endlessly test those standards in court.

So new micromanagement, new standards, new accounting systems, and new oversight practices are not likely to significantly change the BLM. Take, for example, below-cost sales. Does the BLM lose money on timber because it fails to get market value for its timber? Or because its costs are higher than they ought to be? The real answer is that it loses money because it doesn't have to face the discipline of the market place that private timber producers face. As a result, its costs may be too high, its prices too low, and it may be selling timber that isn't worth selling in the first place.

The micromanagement solution requires that Congress scrutinize every dollar of the BLM budget to insure that costs are low and waste is minimal, even as Congress specifies the exact procedures for appraising and selling timber. The standards-and-oversight solution is for Congress to outlaw below-cost sales and then hold frequent hearings to make sure that the BLM obeys the law.

• Funding an agency out of Congressional appropriations gives managers little incentive to control costs or to worry about whether resource sales make money.
• Funding an agency out of gross receipts gives managers an incentive to sell some resources that lose money.
• Funding an agency solely out of net receipts gives managers an incentive to control costs and to sell resources only when they make money.

Any institutional design creates incentives for managers. The decision we must make is, which incentives do we want to give to BLM managers? The incentives they have today are to sell resources at a loss. Those incentives will remain so long as the BLM's budget comes from Congress and despite any amount of monitoring by environmental groups. The only lasting solution is to untie the BLM from Congressional appropriators.

What about cases where commodity resources can make money but other resources are more valuable? Such resources will be protected only if BLM managers have incentives to protect them. One way of doing this is to allow managers to charge fees for competing resources such as recreation. Incentives for multiple resources can then produce a true multiple-use management of the nation's public lands.

The incentive solution does not require that Congress be aware of or understand every aspect of on-the-ground forest management. Ideally, in fact, the incentive solution would largely remove Congress, and its predilections for pork and extractive uses, from the picture.

The Thoreau Institute's BLM reform proposals are:

1. Set up each BLM district as an independent land trust. Title to the land would be held by the federal government, but the land would be managed by the land trust.
2. Anyone would be allowed to join a BLM district land trust on payment of a nominal annual fee--perhaps $20 per year. Land trust members would vote on who is on the board of trustees. The board would hire and fire the district manager and approve the district's annual operating plan.
3. Each land trust would be allowed to charge user fees for all resources within their care, including timber, forage, minerals, recreation, and (where authorized by state laws) water.
4. Land trusts would be funded out of the net income they earn each year. That net would be simply calculated by a U.S.D.I. auditor at the end of each year who would ask a) how much did the land trust receive and b) how much did it spend. The difference--the net--would be added to the land trust's funds. Congress might provide seed money for the first year equal to the district's prior-year budget.
5. Revenues that the land trust did not get to keep--an amount equal to its costs--would be divided between counties, the U.S. Treasury, and a biodiversity trust fund according to some formula. The Thoreau Institute suggests that counties get 15 percent of gross receipts, the biodiversity trust fund 20 percent, and the Treasury the rest, a percentage that would vary from year to year.
6. The biodiversity trust fund would be managed by a biodiversity board of trustees appointed by, say, the Secretary of the Interior. The board would be allowed to use the money in any way it deems fit so long as it is spent protecting and improving biodiversity. This may include buying land, paying federal land trust managers for conservation easements or to use or avoid selected practices, or pay land owners or land managers "bounties" when their land provides breeding habitat for rare or endangered species.
7. Congress could revoke the charter of any land trust that significantly abused the resources within its care. This would be Congress' only role in federal land policy after the land trust system is set up.
8. Minerals underlying BLM lands should be managed by the BLM using the same rules as other resources. Minerals underlying other federal lands should be transferred to the agencies managing those lands so that those agencies can make decisions on a true multiple-use basis.

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Checks and Balances

The only way to solve the basic problems identified in this report--problems of waste, subsidies, and nonsustainable timber cutting--is to provide BLM managers with new incentives that balance resource uses and discourage subsidies. The Thoreau Institute's proposal is designed to meet this objective.

The checks and balances in this system are far superior to those in place today or any possible under a system of Congressional micromanagement or standards and oversight. The land trust system's checks and balances include:

• Funding the trusts out of the net income they earn places a check on bureaucracy and below-cost activities. Managers are not forbidden to sell things below cost or to swell their overhead costs. But if they do either, they will reduce their net income and thereby have to pay for it themselves.
• Allowing land trusts to charge for a broad range of uses balances the scales among resources. Whereas the current system favors timber and grazing, the land trust system favors the resources that users consider to be the most valuable. Users, not Congress or politically driven managers, make the ultimate decisions on the mix of outputs from a particular district.
• The boards of trustees provide an additional check on major decisions, such as the decision to build a campground, to manage a particular piece of land for timber, or the fees charged for selected activities. Since the boards are elected by those most interested in the district, they will have the appropriate balance of national and local interests.
• A biodiversity trust fund provides a balance to protect values that cannot easily be reflected in user fees.
• As an additional balance for non-market values, land trusts could sell conservation easements to individuals or organizations that would prefer not see, for example, a particular forest cut or a particular pasture grazed. Since the cost of managing easements is low, the trust would have an incentive to market easements and add to their net revenues.
• The ultimate check is maintained by Congress, which can revoke a trust's charter for malfeasance.