U.S. Forest Service. Economic Effects, USDA Forest Service Strategic Plan (2000 Revision). Appendix D. FS-682, October 2000, www.fs.fed.us/plan
RELEVANT TO: ALL FOREST MANAGEMENT
DESCRIPTION
This appendix describes how the economic effects of goods and services derived from National Forests are measured, and estimates them for a future seven-year period. An efficiency analysis compares the future flow of benefits to agency costs. The contributions to the economy are measured as effects on employment and income. Monetary estimates of benefits are available for recreation use, fishing, hunting, wildlife viewing, timber harvest, minerals production, domestic livestock grazing, commercial fish harvest, and lands leased for utility uses.
Nonuse and aesthetic values, native biodiversity, water quality protection, and the value of the forest for carbon storage were not included as separate benefits. However, some aesthetic and water quality values are captured in the estimates of recreation use, fishing, hunting, and wildlife viewing benefits.
MAJOR FINDINGS
Net Economic Benefits The values of goods are priced "on forest". The 7-year analysis period in this appendix is 1999-2006. All costs and benefits are expressed in constant 1999 dollars. Two separate accounting stances for benefits were developed for comparison to agency costs: 1) agency receipts and 2) willingness to pay.
- Receipts: Receipts Accounting measures the flow of benefits to the Government from collection of fees for use of NF lands and resources. Fees are collected from sale of forest products, extraction of minerals, use of some recreation areas, and issuance of permits for special uses including livestock grazing.
- Timber sales account for 65 percent of the receipts in 1999, a share that is expected to remain nearly constant through 2006.
- The percentage of receipts attributed to recreation use drops by nearly 50 percent, due to the exclusion of fee demonstration revenue in 2006.
- The value of receipts from mineral resource uses is expected to increase by 2006.
- Receipts from special uses include fees collected from communication site leases and linear right-of-way uses. Overall, fees from these sources increase through 2006, primarily from increases in the number of communication uses and changes in fee policy and schedules.
- A portion of the receipts (25 percent of nonmineral revenues) collected for the use of national forests and grasslands is returned to States for distribution to counties for maintaining and improving roads and schools. Revenues from some mineral sales and some mineral leases also require payments at the 25-percent level. In 1999, the payments totaled $208.3 million.
- Willingness To Pay: Estimates of the total economic value from production of resource outputs provide dollar measures of benefits derived from use of resource outputs.
- Willingness to pay includes the value of the market transaction and the value individuals place on access to forest resources over and above the amount typically captured in the market price.
- It provides a legitimate measure of total economic value from all resource uses, including those the Forest Service prices at market value (such as timber harvest) and those priced below market value (such as recreation use).
- The largest share of willingness-to-pay benefits is associated with recreation use.
- The value of water flowing from NFS lands was not included as part of the estimates of willingness-to-pay benefits. According to the January 2000 report, "Water & The Forest Service," by the USDA Forest Service Policy Analysis Staff, the instream and offstream value of water flowing from the national forests is approximately $3.7 billion.
- A large portion of the instream value is included in the analysis as part of the benefit estimates for recreation use. [p, 59]
Comparison of Benefits to Agency Costs: When converted to Present Net Value (PNV), receipts and costs (a subset of total FS budget costs) are predicted to be essentially flat throughout the seven year period, with costs exceeding revenue from receipts each year.
- However, willingness-to-pay benefits are substantially higher than costs, signifying considerable value associated with (primarily recreation) resource uses of NFS lands over and above the costs of management.
- The PNV for willingness to pay versus agency costs yields net discounted benefits exceeding $82 billion.
- For the 7 years covered by the 2000 Revision, the net benefits are about $427 per acre across 192 million acres.
Total Income and Employment Effects: The Forest Service uses a model that captures the cumulative effects of production relationships associated with immediate users of forest resources. These cumulative effects are composed of direct, indirect, and induced effects.
- Direct effects capture the economic stimulus of the user of the forest resource.
- Indirect effects account for additional production by industries that supply the user.
- Induced effects capture the economic activity of household spending resulting from increased jobs in the direct and indirect industries.
- This analysis includes direct effects and multiplier effects captured in the indirect and induced components.
The reader is encouraged to review the explanation of how National Forest income and employment estimates are made, beginning on page 59. The results are summarized in Table D-1 reproduced below.
- About 62% of income effects are derived from recreation.
- Recreation added to hunting, fishing, and wildlife viewing total over 78 percent of income effects.
- The Employment Effects columns show the number of jobs associated with FS activities.
- Barely 18% of jobs are associated with traditional commodity production, grazing, mining and timber.
Wages: wage income is based on the average of all jobs and income stimulated (direct, indirect, and induced) by the resource use, not just the direct jobs of cutting trees or guiding visitors. Thus, the wage incomes for the average job stimulated by forest resource uses are about:
- Recreation---$23,000;
- Hunting, fishing, and wildlife viewing---$24,000;
- Livestock grazing---$13,000;
- Minerals & Energy Extraction---$36,000;
- Timber harvest---$26,000.
Caveat: National Forests play a significant role in providing other types of benefits. Some of these benefits are not easy to quantify in monetary terms, but nonetheless are highly valued. These include the value of watersheds for maintaining high-quality drinking water and the value of forests for a variety of ecosystem services. (p. 65) The analysis fails to mention the value of (or obligation to) retain and restore native biodiversity, and wilderness.
(p. 61, Total Outputs and Total Costs added by reviewer)
Footnote 1: Total Income and Employment Effects includes all economic effects (direct, indirect, and induced.
Footnote 2: Recreation Use includes all recreation activities except hunting, fishing, and wildlife viewing.
Explanatory notes:
- In the income Effects columns MM stands for millions of dollars, i.e., the Total Output in 1999 was estimated to be $32,822,000,000.
- The Employment Effects columns show actual numbers of jobs.
- The line, Agency Expenditures, shows income effects and jobs created by Forest management expenditures.
QUESTIONS RAISED FOR THE THREE FORESTS
- Does the Forest acknowledge that ignoring non-market benefits is the same thing as denying they exist?
- How will the Forest be acknowledging the opportunity costs that commodity production, or one form of recreation may have on other recreation opportunities, e.g., ATVs spoiling riparian/fishing opportunities?
- Will the Forest be developing goals and objectives for your LRMPs that would guide the use of both policy and project specific economic analysis---for example, how to rank the value of protecting or restoring fishing opportunities vis-à-vis the value of managing motorized recreation to accommodate the user rather than the Forest and grazing or not grazing livestock in riparian areas?
RELEVANCE TO FOREST MANAGEMENT
- Traditional commodity production yields only a small part of social/economic benefits derived from national forests, yet it accounts for a large part of management costs.
- Traditional economic thinking holds that the only way to bring new, or additional, wealth and income to an area is to produce and sell commodities. But money brought to an area by retirees, new businesses, visitors and recreationists has the same effect: it creates new business, jobs, and tax revenues.
- Inclusion of costs and benefits not quantified by a market exchange (sale) is essential in order to protect forest amenities that attract new wealth, retirees, and businesses.
- For the Three Forests, the major sources of new, additional wealth and income are recreation, hunting, fishing, and wildlife viewing. The wild landscape and the native plants and animals that live on it, not the commodities that can be removed from it, provide for these sources of additional wealth and income.
- In south-central Utah, some locals have embraced motor recreation as though it were a logical extension of ranching and mining and will help fill the economic void left by the decline of those two industries. For the sake of community well-being they contend that Forest management must accommodate the use. To the extent, however, that ORV activities damage ecosystems, fragment habitat, and destroy quiet and solitude, motorized recreation diminishes resources as surely as commodity extraction.
- Economic analysis is another tool available to:
- justify the goals and objectives of long-term forest sustainability; and
- choose the most cost-effective ways to achieve those goals and objectives.
Includes all economic effects (direct, indirect, and induced).
Includes all recreation activities except hunting, fishing, and wildlife viewing.