LAO 2003 Budget Analysis: Resources

Legislative Analyst's Office

Analysis of the 2003-04 Budget Bill

Timber Harvest Fees

We recommend the enactment of legislation imposing fees on timber operators to fully cover the costs incurred by state agencies in their review and enforcement of timber harvesting plans. This would result in a savings of about $22 million to the General Fund and $806,000 to special funds. (Reduce Item 3480-001-0001 by $1.2 million, Item 3540-001-0001 by $13.2 million, Item 3540-001-0235 by $384,000, Item 3600-001-0001 by $4.9 million, Item 3600-001-0200 by $422,000, and Item 3940-001-0001 by $2.8 million; Increase new special fund item under Items 3480, 3540, 3600, and 3940 by like amounts.)

Background. The state regulates the harvesting of timber on nonfederal lands in California under the Forest Practice Act. Specifically, timber harvesting is prohibited unless harvest operations comply with a timber harvest plan (THP) prepared by a registered professional forester and approved by the Director of the California Department of Forestry and Fire Protection (CDFFP). The THP covers such matters as harvest volume, cutting method, erosion control, and wildlife habitat protection.

Timber harvest plans are reviewed by multiple state agencies in addition to CDFFP, including the Departments of Conservation, Fish and Game, and the State Water Resources Control Board (SWRCB). For example, SWRCB is responsible for reviewing the impact of a THP on water quality. The review process can include initial desk reviews, preharvest inspections, inspections during harvesting, and inspections and monitoring after harvesting is completed.

There is a significant amount of variation in the type of plans submitted to CDFFP for review. For example, plans can vary in the amount of timber proposed to be harvested, the type of harvesting methods that will be used, and sensitivity of the natural resources where the harvesting will occur. Furthermore, the type of timber proposed to be harvested and thus the value represented by the THP also varies.

Budget-Year Proposal. As shown in Figure 1, the budget proposes expenditures totaling $23.5 million for various state agencies to review and enforce THPs. Most of this funding is from the General Fund.

Figure 1

Timber Harvest Plan Review Expenditures

2003-04 (In Millions)


General Fund



Forestry and Fire Protection




Fish and Game




State Water Resources Control Board










a Public Resources Account, Timber Tax Fund, and reimbursements.

b Environmental License Plate Fund and reimbursements.

Fees Should Fully Cover Program Costs. We think that fees levied on timber operators should cover the total state agency costs to review and enforce THPs, including the cost of monitoring the impact of timber harvesting on natural resources. This is because there is a direct link between the THP review and enforcement and those who directly benefit from it through their harvesting of timber. In other words, without the state review and approval of the THP, businesses would not be able to harvest timber. Doing so would be consistent with the Legislature's actions in requiring the costs of most other environmental regulatory programs, such as those protecting air and water quality, to be fully or partially reimbursed through industry fees and assessments.

Since CDFFP and other state agencies reviewing and enforcing THPs currently do not have the authority to charge fees for their costs associated with these activities, the Legislature would have to enact legislation to provide them with this authority.

Various Fee Mechanisms Could Be Established. We have reviewed a number of potential ways that fees could be structured to recover state agency costs related to THPs. These fee mechanisms include the following: 

Our analysis of the various potential fee mechanisms concludes that the preferred fee structure would be a timber yield fee. This is because unlike the first three options, the timber yield fee would be directly proportional to the monetary gain from the harvest. This addresses concerns with the flat fee that all timber operators would pay the same regardless of the value harvested. Similarly, there is a concern that under a per acre fee, timber operators submitting the same size THP, but which represent different harvest values, would pay the same fee. We also find that a timber yield fee is preferable because unlike the other options, a yield fee would use an existing process to collect the fee, thereby saving the administrative costs to set up a totally new collection process. 

Recommend Legislation to Enact Timber Yield Fee.We recommend that the Legislature enact a timber yield fee, calculated as a percentage of the value of timber that is harvested subject to the Forest Practice Act. We recommend that the Legislature specify that such a fee be collected using the existing timber tax collection system, administered by BOE. We also recommend that the fee rate be set initially at a level sufficient to fund the state's costs of review and enforcement of timber harvest plans and the BOE's administration costs. In order to account for fluctuations in the market value of timber (and thus the amount of revenue raised from the fee), the legislation should also authorize BOE to make biannual adjustments in the fee rate in order that the fee would raise sufficient revenues to cover state costs as specified. We further recommend that the legislation create a special fund into which the fee revenues would be deposited, with expenditures from the fund subject to appropriation by the Legislature. We think that this would increase the Legislature's oversight of the use of the new fees. Similar legislation, AB 1172 (Keeley), was introduced last year to enact a fee on timber yield to cover state agency costs for THP review and enforcement.

General Fund and Special Fund Savings. Implementing our recommendation to shift funding in the forest practices regulatory program to fees levied on timber operators would result in General Fund savings of about $22 million, savings to the Public Resources Account (PRA) of $384,000, and savings to the Environmental License Plate Fund (ELPF) of $422,000 in the budget year.

We therefore recommend that the Legislature make the corresponding reductions in General Fund, PRA, and ELPF and the increases of a like amount from the new special fund that we recommend be established. In estimating the savings to the General Fund, PRA, and ELPF, we have assumed that the fee structure and collection process would be in place to allow for collection of the timber yield fee for four quarters of the budget year.

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