Major STUART. It is well understood, however, that the national forest enterprise is not set up to be a paying proposition. There could be larger receipts obtained from it, if an effort were made to do so.

Mr. BUCHANAN. Well that is a peculiar statement, in a way. You mean there could be larger receipts obtained from it, without injury to the national forests or the future supply of timber, if an effort was made to do so?

Major STUART. There are many provisions made by Congress for the use of national forests that involve small or moderate return. One provision is that timber may be given free to prospectors, miners, and settlers; another is, as to settlers and homesteaders, that under certain conditions timber is sold to them at the cost of administration. As to our grazing fee-a question which was discussed yesterday-it has always been the policy of the department to fix a reasonable grazing fee-not as large as the market or competitive value of the grazing privilege. And so as to the other uses of the national forests that are made, such as for hunting or recreation, no charge is made for that privilege; except where it becomes an exclusive occupancy or use. If a party wishes to lease an area or to put up a structure for his exclusive use, we charge him for that privilege. If on the other hand, he wishes to go into the national forests to hunt, or for general recreation, there is no admission fee-no charge of any kind incident to it.

Mr. BUCHANAN. Have you ever figured out-of course this 25 per cent of gross receipts of national forests goes to the States in lieu of the taxes, I guess in the main, that would be derived by the States if they were not owned by the Government. That is the basis for it, is it not?

Mr. BUCHANAN. Have you ever figured out whether or not this 25 per cent of the gross receipts is more than they otherwise would have received for taxes, if the land had been in private ownership?

Major STUART. It works out diversely. By and large, the 25 per cent of the receipts paid directly to national forests' counties, plus the 10 per cent additional and other appropriations that go for the construction of roads and trails within the national forests

Mr. BUCHANAN. In such State or county?

Major STUART. Yes, sir-is broadly equivalent, if not in excess, of the amount of money that would come to those counties if those lands were privately owned. I speak of the situation being diverse in this respect, Mr. Chairman, because those receipts go only to those counties, of course, within which receipts are obtained. There are places where, due to the inaccessibility of the country, the sale or use of the national forest resources is nil, or very small; so that those particular counties might not, for that year, or for a period of years, get any return.

Mr. SANDLIN. It is paid to the counties, then, instead of the States? Major STUART. It is paid to the States for distribution to the counties; but if there are no receipts from the national forest in that particular county, that particlar county does not get any receipts.

Mr. SANDLIN. Therefore, I say it goes to the counties, really, instead of to the States?

Major STUART. It goes to the counties through the State, under State legislation built up for the purpose. The State is required,

under the Federal statute, to disburse the funds sent to it [the State] for this purpose, on the basis of the area of the respective counties in national forest land. So the State simply becomes the disbursing means, under a well-prescribed method, of getting this money to the counties.

Mr. BUCHANAN. I expect the State takes its part of it.
Major STUART. It can not under the law, Mr. Chairman.
Mr. BUCHANAN. I wonder.

Major STUART. If the committee wishes to go into this question of what the 25 per cent of the receipts means in relation to State and county finances, I would be very glad to submit for the record what we have found out in relation to the situation; for example, in Washington, or any other State.

Mr. BUCHANAN. It won't be very long, will it?

Major STUART. No. It should be borne in mind that much of these lands in the national forests are lands that are so inaccessible that they have small value; some would have no value, in fact, they have been, in years past, open to settlement and entry, but have had such small value that nobody felt justified in settling on them, or taking them under permissive law. So I shall be pleased to go into that question just as far as the committee would like to go into it.

Mr. BUCHANAN. I guess, Major, if you have those facts in reply to the first question I asked you on that 25 per cent, you had better put them in the record and let us see what it is. I would like to know whether or not it is in excess or not equal to; or, if in excess, what it is in excess of what ordinarily would be received from taxation. Major STUART. Yes, sir.

Mr. BUCHANAN. In my judgment-I am not speaking of these permanent and indefinite appropriations of the Department of Agriculture alone, but I think all these indefinite appropriations ought to be gone into and their merits investigated thoroughly and perhaps some reform made in the manner of handling them, the amounts, and so forth.

STATEMENT BY MAJOR STUART SUBMITTED IN CONFORMITY WITH CHAIRMAN'S REQUEST

In 1927 two bills were before Congress proposing that the State share of gross national-forest revenues be increased to 50 per cent. To secure a correct understanding of the situation the Forest Service made a detailed study of the conditions prevailing during the preceding 5-year period. First, it determined for each State the exact average payments made under the 25 per cent provisions, the sums expended in highway, road, and trail construction, and the approximate value of the cooperation extended to the States and counties. By this process the average net effect of national-forest administration upon the financial status of each State was specifically determined.

The next question was: "Would the same lands have contributed more largely and effectively towards State financial welfare had they been subject during the same period to some other form of ownership, control, management, and use; provided they had been given approximately the same degree of protection and management in order to conserve their economic and public values." Two general courses of action were practicable of adoption. One was to allow all of the national-forest lands adapted to permanent private management to pass to private ownership and become subject to taxation; the State adequately to protect and administer all lands remaining or revested in public ownership, meeting all costs without Federal aid other than that generally applicable in all States, and deriving in return not only the taxes from the privately owned lands but also 149139-32-30

the gross revenues from the public lands. The other was the free cession to the States of all national-forest lands for permanent administration as State forests, the States to bear all costs of protection, management, and development, and to retain all gross revenues.

To determine the possibilities of the first course county records were studied in detail to ascertain the acreages of other than urban lands subject to taxation, the assessed values thereof exclusive of improvements, the rates of taxation, and the actual taxes levied. The detailed classifications of the national-forest lands were then used to determine the parts thereof which probably would be privately appropriated if the national forests did not exist. The probable assessed values and tax levies of such lands were then computed by comparison with lands of the same character and value actually subject to taxation in the same county. By this process the potential taxability of the national-forest lands was computed. To this there later were added the probable revenues derivable from the lands remaining or revested in public ownership by comparison with the known returns from such lands under national-forest management. Then estimates were made of the costs of protecting and administering on acceptable standards the lands which would remain in or revert to public ownership. The deduction of these costs from the combined total of estimated tax returns and revenues indicated the net effect upon State and county finances which could be anticipated under the condition described.

The possibilities of the second possible course of action, namely, administration as State forests of the lands which during the period of the study actually had been administered as national forests were computed by assuming the possibility that the States would derive a 10 per cent greater revenue from the lands and could administer them at 20 per cent lower cost than actually was the case under national-forest management during the period. There were no valid grounds upon which to base such assumptions, as there are no facts to support the theory that higher revenues could be obtained from the natural resources of the lands or that the same standards of administration and management could be maintained by State agencies at any lower cost than those actually incurred; but to minimize doubt the computations were made as above stated.

The results of the study described are summarized in the following table, which shows conclusively that, even under the conditions prevailing during the fiscal years 1923-1927, the benefits and advantages derived from the national-forest areas, under the prevailing principles of State participation in national receipts and Federal participation in road construction and maintenance, were as great and in most instances greater than the States and counties could have derived in any other way. A similar study covering the current situation would make the comparison even more favorable to national-forest administration than the attached table would indicate. During the intervening five years the values of types of forest lands such as characteristic of the national forests have declined markedly and such lands are reverting to public ownership through tax delinquency in constantly increasing degree. A current study of the potential taxability of nationalforest lands undoubtedly would yield results much below those shown in the table and the income the States would derive if the national-forest lands were subject to unrestricted private appropriation would fall substantially short of that theoretically computed on the basis of the 1927 study.

Table 1 might create the impression that the States are profiting unduly from the existence of the national forests under the prevailing principles of compensation and cooperation. Consideration should, however, be given to the fact that on lands other than the national forests the States are sharing in the program of forest conservation to a degree greater possibly than would be the case if they did not enjoy the benefits and advantages which accrue through the existence of the national forests. The benefits from the national forests can not properly be regarded as net grants or subsidies to the States. But neither would it be just to assume that through the existence of the national forests the States are being deprived of benefits and advantages which they would enjoy if the national forests did not exist. There are no facts to support such a premise.

COOPERATIVE WORK

Major STUART. The next item is "Cooperative work, Forest Service," in the amount of $1,676,545 for the fiscal year 1934. It will be remembered that in order to pay out funds used in cooperative work it is necessary to have a special appropriation. This item makes possible disbursements from the United States Treasury of moneys deposited in the United States Treasury by cooperators. The money involved here is money deposited in the Treasury of the United States by outsiders to cooperate with the Forest Service in the performance of work on the national forests, or incident to some particular Forest Service work.

Mr. BUCHANAN. You mean it is money paid in there that contemplates expenditure?

Major STUART. Our cooperative agreements, such as are involved in forest protection work; telephone line construction, and the building of roads, with States, counties, and individuals, provide that they shall place their money, used in cooperation, in the United States Treasury. Those funds can not be disbursed for payment of expenses on that cooperative project without this means of appropriation.

Mr. BUCHANAN. Well I thought a portion of this fund, at least, was to cover guaranties by timber purchasers to clean up the brush, and, when the brush was cleaned up, it has to be refunded?

Major STUART. It is true, in the cooperative fund, that timber-sale operators and others will deposit with the Treasury sums they are obligated to so deposit in order to meet expenditures; but, to get that money out of the Treasury after it is deposited, it requires this particular action by Congress.

Mr. SANDLIN. Approximately how much was deposited or will be deposited in 1934, of this $1,676,545?

Major STUART. It is anticipated that all of that will be deposited by cooperators.

PAYMENT TO SCHOOL FUNDS, ARIZONA AND NEW MEXICO

Major STUART. The next item is "Payment to school funds, Arizona and New Mexico, national forests' fund," in the amount of $25,000 for the fiscal year 1934. This represents a return to the States of Arizona and New Mexico of the proportionate receipts taken from the joint holdings of the Federal Government and those States, under an agreement by which the States of New Mexico and Arizona have the Forest Service administer their forest lands.

Mr. SANDLIN. Administer their own lands?