Thrawn Rickle 29

Forest Service Accounting

© 1993 Williscroft

Suppose, writes O’Toole, that Lee Iacocca sells $100,000 of Chrysler stock and purchases timber stock on the advice of the former chief. A year later this investment has dropped from $50 to $30 a share, and Iacocca sells before it gets worse.

“Congratulations,” says the chief. “You earned $60,000.”

“Sixty thousand? I started with a hundred grand; now I have only sixty—I lost forty grand.”

“You don’t understand,” says the chief. “Your $100,000 investment doesn’t count because you paid it by selling Chrysler stock.”

“Actually, I lost more than forty,” Iacocca bemoans. “The value of Chrysler stock increased ten percent last year. If I had just left my money there, now I’d have a hundred-ten grand. I lost fifty, not forty grand!”

“In the Forest Service we figure it differently,” answers the chief. Since trees grow slowly, we only use four percent when projecting investments, so you would have earned only $4,000 had you left your money in Chrysler. Since you actually earned $60,000, you have earned fifteen times more than you would have with Chrysler.”

Although this may seem like an exaggeration, this is exactly how the Forest Service actually projects its “profitability.” Within the Forest Service, O’Toole finds a widespread attitude that timber management is cost-free, exemplified by the logo: “Wood is good—Use it and Nature Renews it.” The Forest Service must consider costs, O’Toole argues, even when Nature renews the resource. It is difficult to argue with this logic.

According to O’Toole, the major error in Forest Service cost accounting is the assumption that reforestation costs are “paid for” by returns from existing timber. According to him, the Forest Service does not compare the costs of reforestation to the value of the young growth that replaces the cut timber—something the timber industry routinely does.

Forest Service “investments’ typically are direct reforestation, thinnings, herbicides, fertilization, and similar tree-growth enhancing things. Of these, only thinnings of trees with some commercial value produce income, although most of these still cost more than they produce.

“Altogether,” O’Toole writes, “reforestation, precommercial thinning, herbicide release, fertilization, and the use of shade cards and other protection for seedlings may cost close to $1,000 per acre.” Costs are even higher when a lot of vegetation must first be removed.

One can effectively argue that we have a national interest in preserving or replacing certain forested lands, and that in this respect, the associated costs do not matter. While this may be true, we still need to know what these costs are, in order to manage our resources efficiently within the parameters laid down by congress. The Forest Service ignores obvious cost accounting principles routinely applied by the commercial timber industry, and then uses the resulting figures to justify actions that would drive a private enterprise out of business.

This is unacceptable.