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Backgrounder #1370 on Smart Growth

May 9, 2000

Why CARA is Fiscally Irresponsible and a Threat to Local Land Use Decisions

By and

Representative Don Young (R-AK) introduced H.R. 701, the Conservation and Reinvestment Act (CARA), in February 1999 to establish an off-budget dedicated trust fund for the acquisition and protection of land. The bill authorizes placing more than $42 billion of Outer Continental Shelf (OCS) oil royalties into the trust fund over the next 15 years to enable federal and state governments and special-interest groups to purchase land for wildlife protection, urban recreation, and other "conservation" needs. Because it would create a significant new source of revenue for the states, it should not be surprising that CARA has gained significant bipartisan support. However, in return for the funds, there is much the federal government wants, and its demands could seriously undermine the freedom of state and local communities to make their own land use decisions in the future.

The intention of H.R. 701--to improve land conservation and recreation in the United States--at first glance is noble, but in reality the bill represents little more than a pork-filled land grab by federal and state land management and recreation agencies. All 50 states and Washington, D.C., would receive millions of dollars annually in new federal funding, ranging from $7 million for the District of Columbia to $324 million for California. States would receive money even though they are enjoying record surpluses and choosing to use their excess revenue to fund other priorities (such as improving education, reducing crime, and implementing other programs) more important than land management and recreation. And CARA's requirements that states match federal monies provided to them mean that state and local communities will need to make land acquisition funding, relative to education, crime prevention, and other services, more of a priority in the future.

The long-term cost to the taxpayer of implementing CARA would extend well beyond the money in its trust fund. Inevitably, acquiring new land will also require funding both for its maintenance and to compensate jurisdictions for the loss of economic development; but such needs are not the focus of this legislation. Consequently, the bill would likely trigger significant increases in discretionary spending above and beyond what is dedicated to the trust fund. The new demands for discretionary spending would build over the 15-year life of the act and inevitably squeeze out spending for other discretionary programs.

In this respect, CARA violates the spirit of the just-passed fiscal year (FY) 2001 budget resolution. Congress established its fiscal priorities in this resolution, which include protecting the Social Security surplus, setting discretionary spending limits, paying down the debt, and providing tax cuts. Congress did plan for significant increases in discretionary spending for federal land management in FY 2001, but the much higher levels of spending reflected in CARA were not taken into account in the resolution.

Making CARA's proposed programs off-budget also violates the spirit of the budget resolution, incorporating accounting gimmicks to increase spending in FY 2001 beyond what Members had agreed to spend. Congress would be dedicating money to CARA that it otherwise would have saved to shore up Social Security, reduce the debt, or give Americans a tax cut.

CARA also represents a vast expansion of federal and state roles in local land management decisions. Unlike the practice in many of the programs that CARA would replace, H.R. 701 would require the U.S. Department of the Interior to review and approve many of the plans the states submit for the use of the funds. The funds would not be disbursed to a state without the Secretary of the Interior's approval. And while the bill's supporters argue that states and local communities will have a variety of ways to spend the money, the reality is that the federal government could disapprove their desired uses and force them to spend the money differently. One needs only to look at the experiences of the federal implementation of the Clean Air Act and the withholding of federal highway funds to see how powerful a threat the federal government can become to state and local land use decisionmaking.2

Finally, CARA is inherently unfair because it empowers government at all levels and special interests to buy land, placing average Americans at a disadvantage. Rather than support private property ownership, which the Founding Fathers understood was critical to maintaining liberty, CARA would fund the purchase of land by governments and special-interest groups. Government at any level--federal, state, or local--should own property only if a compelling natural resource need must be met that cannot be encouraged by private ownership or enterprise. At the same time, it is unfair to use tax dollars to give special interests more power and resources to purchase private property than average Americans have. Special-interest groups like environmental and conservation organizations should compete in the market with private citizens, businesses, or anyone else for property, and local communities should determine how land in their jurisdictions should be used.

Congress should go back to the drawing board and develop an approach that balances conservation of land resources with the needs of humans and local communities, not the whims of federal bureaucracies and special-interest groups that want more power over communities and Americans. It is clear that with accurate information, proper priorities, and smart choices, a great deal of good could be accomplished by bringing into the discussion of land use the principles of federalism. The Framers of the Constitution understood that people care most about the environment in which they live, and the level of government closest to the people is the most effective at implementing policies that promote land conservation while respecting property rights. Privatization of the land that is not appropriately under federal or state jurisdiction would increase the public's involvement in caring for natural resources.

CARA is exceedingly misguided in its approach to protecting America's land resources. It is fiscally irresponsible and will threaten the sovereignty of the states and local jurisdictions by taking away their ability to make land use decisions and control their economic destiny.

CARA'S FUNDING TREK INTO LOCAL LAND USE

The Conservation and Reinvestment Act (H.R. 701) now before Congress would establish a Conservation and Reinvestment Act Fund (CRAF) into which the Secretary of the Treasury would deposit, beginning in FY 2001, about $2.8 billion annually from oil and natural gas royalties as well as other income derived from the exploration and development of the Outer Continental Shelf. In each year after FY 2001, the Secretary of the Treasury would transfer amounts in the CRAF as follows:

  • $1 billion would be given to the Secretary of the Interior for the purpose of making payments to "coastal" states under Title I, Impact Assistance and Coastal Conservation;

  • $900 million would go to the Land and Water Conservation Fund (LWCF), including $450 million to the federal LWCF and $450 million to state LWCFs;

  • $350 million would fund programs under the Federal Aid in Wildlife Restoration Act;

  • $125 million would be given to the Secretary of the Interior to carry out the Urban Park and Recreation Recovery Act of 1978;

  • $100 million would go to the Secretary of the Interior to carry out the National Historic Preservation Act;

  • $200 million would go to the Secretary of the Interior and the Secretary of Agriculture for federal and Indian lands restoration;

  • $100 million would go to the Secretary of the Interior for conservation easements; and

  • $50 million would go to the Secretary of the Interior for recovery of endangered and threatened species.

CARA would make $2.4 billion of the $2.8 billion immediately available for spending with no further appropriations action by Congress needed in the future. Only $450 million--the federal portion of the LWCF--could not be spent without obtaining congressional approval through an appropriations act.3 Because CARA would take the funds off-budget, the bill would effectively reduce the on-budget surplus by $2.8 billion each year over the next 15 years, for a total of approximately $42 billion.

WHY CARA IS FISCALLY IRRESPONSIBLE

These transfers of funds to federal bureaucracies demonstrate how CARA would authorize fiscally irresponsible spending of federal tax dollars. For example:

  • CARA trust fund spending would be used primarily to expand the levels of current spending. Those who support the bill make it appear as though CARA would be used to fund significantly underfunded accounts. Nothing could be further from the truth. In FY 2000, for example, Congress already provided $75 million for the Historic Preservation Fund and $55 million for the Cooperative Endangered Species Conservation Fund.4 Overall, Congress appropriated almost a half a billion dollars ($467 million) in FY 2000 to the Departments of the Interior and Agriculture to buy land.5

  • The spending of the trust fund monies would be made less accountable by taking it off-budget. Section 7 of H.R. 701 would move all spending and revenues of the CRAF off-budget. As a result, $2.8 billion would be exempt from congressional budgetary control mechanisms and would receive a level of protection now afforded only to such vital programs as Social Security. Taking the Conservation and Reinvestment Act Trust Fund off-budget would increase to 65 percent, or $1.1 trillion, the portion of the federal budget that is off-limits to congressional appropriators today--making the size of the budget even more deceptive.6 Between FY 1989 and FY 1997, outlays for the federal trust funds increased from 33 percent of total federal spending to 46 percent of federal spending.7 (See Chart 1.)

  • Taking the CRAF off-budget would give it a protected status even higher than that afforded such critical programs as national defense and education. By taking the CRAF off-budget, Congress would be sending a signal that it considers CARA's trust fund one of the highest spending priorities of Congress, and of future Congresses--more than education or defense. Moreover, besides forfeiting control over funding decisions, Congress would face a flurry of requests from other, perhaps more deserving, programs that would clamor for the same preferential off-budget treatment. In fact, CARA is not the only legislation that hoped to create an off-budget trust fund in FY 2001. Representative Bud Shuster (R-PA) had been pushing hard to move the Airport and Airway Trust Fund off-budget (H.R. 1000) as well.

  • Creating a CARA trust fund would violate the recently passed FY 2001 budget resolution. The FY 2001 budget resolution does not assume spending for a CRAF. Thus, if CARA becomes law, the spending priorities that Congress agreed to in April 2000 would be violated. The CARA trust fund would reduce the on-budget surplus and gain a higher funding priority than education, defense, and other forms of discretionary spending. The Congressional Budget Office (CBO) estimates that funding CRAF would reduce the projected on-budget surplus by $14 billion between FY 2001 and FY 2005.8

The costs of CARA will go well beyond what is in the proposed trust fund. Inevitably, the acquisition of new land will demand additional funding to maintain the land acquired and to compensate the states for loss of economic development through PILT (payment in lieu of taxes)9--yet these spending items are not the focus of CARA. The U.S. General Accounting Office (GAO) reports that eliminating the existing maintenance backlog on federally owned land already would cost more than $12 billion.10 The federal government owns 30 percent of the land--more than 650 million acres--in the United States. CARA would make the situation worse by providing at least $900 million for land acquisition while authorizing only $200 million for maintenance. CARA inevitably would trigger significant pressure to increase discretionary spending beyond what is dedicated to the trust fund. The new demands would continue to build over the 15-year life of the act, inevitably squeezing out spending for other discretionary programs.

  • The CRAF would distribute monies to the states that currently are running significant surpluses but choosing not to spend their excess revenue on land acquisition. As Chart 2 shows, most states are running considerable surpluses today. They are spending the excess revenue on education, health, and other higher priority programs, not on many of the existing programs CARA would reauthorize. However, CARA will force them to make new funding trade-offs. If they accept CARA money, the maintenance-of-effort and matching fund provisions of H.R. 701 make it clear that grants would be awarded "to supplement and, to the extent practicable, increase the level of State, local, or other non-Federal funds available for such programs."11 Thus, it would appear that Congress is interested in forcing states to make CARA programs more of a priority, which means that less money could be dedicated to education, crime, and other social services.

  • The CARA trust fund spending would shrink state and local tax bases and provide no guaranteed compensation. As more and more land is taken out of use, states and local communities would suffer from shrinking tax bases at the same time CARA is demanding that they commit matching funds to support more acquisition and maintenance. Declining revenues would squeeze out spending on education, crime, and other local services. Today, the PILT program is already seriously underfunded. CARA would require that funding for PILT be appropriated each year by Congress. Thus, there would be no guaranteed level of funding. It is entirely possible that the federal government could continue to acquire land while continuing to underfund PILT.

Old-Fashioned Pork-Barrel Spending. The bipartisan support for H.R. 701 is grounded less in an understanding of what is really needed to improve and enhance America's natural resources and more in an attempt to cash in on pork-barrel spending. CARA would distribute funding to states via formulas.12 Of course, as is true with any spending bill, there would be winners and losers. Under the current language of H.R. 701, oil-producing California would receive far less per capita in funding than non-oil-producing Vermont, despite the fact that the U.S. Code states that OCS funds are intended to "Provide states [and] local governments which are impacted by Outer Continental Shelf oil and gas exploration, development, and production with comprehensive assistance...."13 Not only do all 50 states stand to gain from the proposed bill, but U.S. protectorates such as Puerto Rico, Micronesia, Palau, and the Marianas Islands also would receive benefits from the OCS royalties.

In effect, what was meant to be a dedicated benefit to areas that bore the cost of oil exploration and extraction would become a massive nationwide welfare program. Gimmicks such as declaring states adjoining the Great Lakes to be "coastal" cannot hide the fact that OCS funds would be used in an incongruous fashion, and these Great Lakes states would benefit greatly even though they are not affected by oil exploration and drilling. The House Committee on Resources' state-by-state estimates for H.R. 701 reveal the wide reach of the dollars originally intended for coastal regions. (See Table 1.)

WHY CARA THREATENS STATE AND LOCAL DECISIONMAKING

Sadly, much of the grassroots support for CARA comes from shortsighted state and local governments that are focusing only on the inflow of new money the bill would release. The federal government wants much in return for this money, and its demands could seriously undermine the freedom of state and local communities to make local land use decisions.

As far back as 1818, the U.S. Supreme Court ruled in U.S. v. Bevans that a state's right to control property within its borders was an essential part of its sovereignty. Despite this precedent, CARA contains a number of provisions that would override both state sovereignty and private property rights. For example:

  • Title I, Impact Assistance and Coastal Conservation. To receive funds under Title I (Grants to Coastal States), each state would be required to submit a Coastal State Conservation and Impact Assistance Plan outlining how the funds would be used. The plan would have to be approved by the U.S. Secretary of the Interior before the grant funds could be disbursed. The bill outlines 11 criteria for how the money can be spent, making it clear that these are the "only" ways the money could be spent--rather than giving states flexibility to determine how to address their own natural resource needs. The criteria include using the money to implement "bilateral or multilateral international fishery or marine mammal conservation and management agreements or both"; "federally approved marine, coastal, or comprehensive conservation and management plans"; and, most disturbingly, "projects that promote research, education, training, and advisory services in fields related to ocean, coastal, and Great Lakes resources."14

The Secretary of the Interior would have considerable regulatory latitude to determine whether the money was being spent inappropriately. And it is clear that money would be given to the states with the expectation that the states would spend the money to implement any future federal ocean, coastal, and marine policies that might be developed. The Secretary would have the authority to ensure that the grants accomplish this. In addition, grant money apparently could now flow freely to special-interest groups for educational purposes and undefined "advisory" services to advance such an agenda.

  • Title II, Land and Water Conservation Fund
    Under this title, some very good private property rights protection language is included for the funds of the federal portion of the LWCF, but that protection is undermined by the very fact that so much money would be dedicated annually for acquiring private property. In addition, although the Secretary of the Interior is to develop a list of proposed acquisitions to be approved by Congress, there are a series of objectives the Secretary may seek in developing such a list. An example of one of the criteria is to "seek to consolidate Federal landholdings in States with checkerboard Federal land ownership patterns." How much latitude will this really give the federal government to acquire a parcel of private property simply because it lies next to federal property?

For the state portion of the LWCF, states must develop a "State Action Agenda" that identifies needs, priorities, and the criteria it has established. However, states are required to consult with "local governments and Federal agencies," which they have not been required to do in the past.15 In addition, states could spend money "to enhance public safety within a designated park or recreation area." Thus, although parks and recreation areas would be safer, state and local communities would have less money overall to dedicate to general community-wide public safety efforts.

States would also be held to a higher level of accountability for land acquisition than federal agencies, except for the protection of private property rights. They would be required to show, for example, that their agenda is "strategic, originating in broad-based and long-term needs." For the federal portion of the LWCF, the Department of the Interior in its reporting to Congress simply must show how money was spent but not mention the larger strategic objectives for which the money was used. At the same time, the private property protections in the federal LWCF are not extended to the state LWCF.

Finally, Title II expands the ability of the Secretary of the Interior to disapprove conversion requests submitted by state and local governments. Current law states that if a state or local government wishes to convert land that had been acquired or developed with the assistance of federal funds to some other non-conservation or non-recreation purpose (such as a new road), it must seek the approval of the Secretary of the Interior. Current law provides that the Secretary shall approve such conversions if he is satisfied that other properties of equivalent fair market value and usefulness are set aside to replace the land being converted. CARA would expand the authority of the Secretary of the Interior by providing that he shall approve a conversion request only if the state "demonstrates [that] no prudent or feasible alternative exists."

  • Title III, Wildlife Conservation and Restoration
    Title III expands the applicability of the Pittman-Robertson Act by providing grants for the protection of any wildlife species, including non-game. Instead of focusing on endangered species or species that are hunted by sportsmen, this title gives the federal and state governments and special-interest groups the resources and power to protect any type of wildlife they so choose. This vastly expands the reach of this program. The definition of "wildlife" is broadened beyond game to include nearly everything but plants.

States previously had applied to the U.S. Fish and Wildlife Service for funding for individual projects or developed plans for multiple projects. Under H.R. 701, they would be required to develop "wildlife conservation and restoration programs" that must be approved by the Secretary of the Interior. The approved program could be implemented through grants to "other State, Federal, or local agencies...wildlife conservation organizations, and outdoor recreation and conservation education entities," which means that the grant money could flow freely to local special interests, such as environmental organizations.

Title III outlines how the money can be used, and many of its provisions will no doubt be defined more specifically in implementing regulations. For example, the money can be used to "sustain healthy populations" in ways that include the "management of habitat." And "conservation education" means "projects, including public outreach, intended to foster responsible natural resources stewardship."

  • Title IV, Urban Park and Recreation
    This title sets up a dedicated fund "to assist local governments in improving their park and recreation systems." The money is available to communities of more than 250,000 people. Although local governments must apply for the grant money, the title specifies that, "at the discretion of the applicant, a grant may be transferred in whole or part to independent special purpose local governments, private non-profit agencies, or county or regional park authorities." Once again, considerable money can flow to special-interest groups under this title. The federal government's role is expanded: The Secretary of the Interior, with the local government, would make sure that the programs under this title are "coordinated" with Title II LWCF programs so that urban parks and recreation programs can be used to help meet state and local qualifications for receipt of the money. Title IV clearly changes the existing urban park program, which specifically prohibits using funds to acquire property, and makes it clear that funds can be used to acquire land for purposes of meeting Title II and Title IV goals and objectives.

  • Title VII, Conservation Easements and the Endangered and Threatened Species Recovery Act. This title provides a dedicated funding source for the purchase of permanent easements to maintain traditional uses and prevent losses due to development that is inconsistent with these uses. The Secretary of the Interior can provide funds directly to private "conservation" entities for the purpose of purchasing the permanent easements at the state and local level, and these organizations can hold title to the conservation easement.

The Endangered and Threatened Species Recovery Program establishes a source of funding for the U.S. Fish and Wildlife Service and the National Marine Fisheries Service to implement an incentives-based program that promotes the recovery of endangered and threatened species and their habitat, and to involve more non-federal entities. Although this appears to be a positive change in efforts to protect endangered species, the bill spoils that objective by outlining a series of very prescriptive requirements -- principally through Endangered and Threatened Species Recovery Agreements which must be approved by the Secretary of the Interior -- that a grant recipient must meet in return for the funds, thereby making the grant so burdensome that the intent of helping small landowners appears to be thwarted.

H.R. 701 combines in one massive bill a number of different natural resources programs and creates dedicated funds to support them. In return for this consolidation, the federal government establishes a natural resource management system that includes an expanded role for both the federal government and special-interest groups in local land use decisions. In some cases, such as endangered species recovery, its burdensome requirements would ensure that an incentives-based program of protecting endangered species would fail.

WHAT CONGRESS SHOULD DO

As the Framers of the Constitution understood, people care most about their immediate environment, and the level of government closest to the people is the most effective at implementing policies that promote effective land conservation while respecting property rights.16 The Conservation and Reinvestment Act introduced by Representative Don Young would enhance the federal government's appetite for--and ability to own--even more of the nation's land while reducing the amount of private property individual Americans could own. This proposal clearly runs counter to America's constitutional legacy.

Federal agencies spend billions of dollars today to manage existing federal land holdings, but as findings by the GAO show, they are not doing a very good job. Rewarding failing federal bureaucracies with more money and power is like rewarding an incompetent employee with a bigger salary, more responsibilities, and more authority. It simply makes no sense.

Before passing legislation that increases the federal government's control over land use, Congress should investigate the federal government's current land holdings and land management activities. Indeed, the Congressional Budget Office recently recommended a moratorium on new federal land acquisition by the Departments of the Interior and Agriculture because federal land management agencies need to improve the stewardship of the land they already own.17

A new federal land management policy should be developed based on core American principles of conservation of resources, federalism, and property rights. To that end, Congress should:

  • Define when a federal taking of private property is in the national interest
    The federal government should manage only public land possessing unique historic, recreational, or biological qualities. If the federal government wants to purchase additional land, it should first decide which of its current holdings can be turned back to the states or privatized. Privatizing land that should not be under government control would ease the financial burden that inappropriate federal holdings inflict on taxpayers and the U.S. Treasury, and would encourage local investment in conserving land resources.

  • Devolve to the states ownership of land that does not meet the criteria for federal ownership or that is not suitable for privatization
    State and local governments generally manage public land more efficiently and with greater responsiveness to local needs and interests. However, if money for land use under CARA has to pass through Washington's land management bureaucracies, it is not at all clear that this historical trend would continue.

  • Facilitate the privatization of land that should not be under federal or state control
    The goal of federal, state, and local governments should be to improve the stewardship of our natural resources while protecting private property rights. Congress should assist state and local governments in transferring lands to individuals, corporations, and other organizations with strong local stakes in maintaining economically and environmentally beneficial activities. If a government buys land, it should be required to divest itself of an equal amount of land so that there is, at a minimum, no net gain of government-held land. And the purchase of land by large private organizations certainly should not be subsidized by U.S. taxpayers to the disadvantage of average American families and small property owners.

CONCLUSION

As Justice Sandra Day O'Connor wrote in New York v. United States, "some truths are so basic that, like the air around us, they are easily overlooked."18 Today, the importance of balancing the principles of natural resource conservation, federalism, and private property rights is just such a truth.

Congress must go back to the drawing board and develop an approach that balances conservation with the needs of humans and local communities, not the self-interest of federal bureaucracies and special-interest groups. With accurate information, proper priorities, and smart choices, the principles of federalism could generate a great deal of good in managing America's great land resources. These principles are not inherent in the CARA proposal, making it fiscally irresponsible and a threat to state and local sovereignty by taking away the ability for those closest to the land to make land use decisions and control their own economic destiny.

Gregg VanHelmond is a former Research Assistant in, and Angela Antonelli is formerly Director of, the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

 

Endnotes

1. The authors thank Devin Brown of the Domestic Policy Studies Department for his contributions to the research for this paper.

2. See Angela M. Antonelli, "The Atlanta Experiment," in Jane S. Shaw and Ronald D. Utt, eds., A Guide to Smart Growth: Shattering Myths, Providing Solutions, (Washington, D.C. and Bozeman, Mont.: The Heritage Foundation and the Political Economy Research Center, 2000).

3. Congressional Budget Office, Cost Estimate: H.R. 701, Conservation and Reinvestment Act of 1999, February 16, 2000, p. 1.

4. Budget of the United States, Fiscal Year 2001, Appendix, pp. 574 and 585.

5. Congressional Budget Office, Budget Options, March 2000, p. 127.

6. Sixty-five percent of federal outlays are "non-discretionary."

7. Congressional Research Service, Federal Trust Funds: How Many, How Big, and What Are They For? 96-686 EPW, June 30, 1998, p. 8.

8. Congressional Budget Office, Cost Estimate: H.R. 701, p. 5.

9. The PILT program compensates local governments for lost revenues that result from their inability to levy property taxes on federally owned land. In theory, PILT is used to offset purchases of tax-generating private land by the federal government.

10. Opening Remarks of Ralph Regula, Chairman, Subcommittee on the Department of the Interior and Related Agencies, in hearings, Department of the Interior and Related Agencies Appropriations for 1999, Committee on Appropriations, U.S. House of Representatives, 105th Cong., 2nd Sess., February 4, 1998, p. 147. 

11. Emphasis added. The text of H.R. 701 is available at http://thomas.loc.gov

12. For a detailed analysis of TEA-21, see Ronald D. Utt, Ph.D., "How Congressional Earmarks and Pork-Barrel Spending Undermine State and Local Decisionmaking," Heritage Foundation Backgrounder No. 1266, April 2, 1999.

13. U.S. Code, "Congressional Declaration of Purposes," Title 43, Section 1802.

14. Emphasis added.

15. Emphasis added.

16. The recommendations that follow are derived from Alexander F. Annett, "The Federal Government's Poor Management of America's Land Resources," Heritage Foundation Backgrounder No. 1282, May 17, 1999.

17. Congressional Budget Office, Budget Options, March 2000, p. 127.

18. 504 U.S. 144 (1992).

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