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Inflation could boost payments for federal land

The Interior Department budgeted $580 million for local governments in 2023, up 5.5% from the year prior.

WASHINGTON (CN) — Persistent inflation could lead to bigger payouts for local governments through an often overlooked federal compensation program, but not everyone is happy with the formula used to compensate different regions across the United States.

Poised to announce one of the biggest funding totals in its 47-year history, the U.S. Department of the Interior is busy calculating allocations for this year under its PILT program, short for payment in lieu of taxes.

The Department of the Interior budget for fiscal 2023, which ends Sept. 30, included up to $580 million for the program, which would be the largest amount in its history. The allocations are typically announced each year in June.

When Secretary of the Interior Deb Haaland announced 2022 numbers last year, she noted that the $549.5 million being paid by the government would support vital local government services such as firefighting, police protection, the construction of public schools and roads, and search-and-rescue operations.

“This program is an important example of the federal government’s commitment to continuing to be a good neighbor to the communities we serve,” Haaland said.

PILT compensation is calculated through a formula based on acreage, prior year payment deductions, the consumer price index and population. Inflation, which has been persistently rising in the three years since the start of the Covid-19 pandemic, raises the consumer price index and can lead to bigger payments.

The initiative was started in 1976 to acknowledge the loss in tax revenue felt by local governments because the federal government owned land in their borders. But the payments are nowhere close to the revenue the property would generate through real estate taxes. 

“It’s typically pennies on the dollar compared to what they’d collect in property taxes,” said Jonathan Shuffield, legislative director for public lands at the National Association of Counties.

For example, Rockingham County, Virginia, which is home to parts of Shenandoah National Park and the George Washington and Jefferson National Forests, has 176,512 acres of federal land within its boundaries.

In 2022, the local government valued the land at more than $2.7 million, which would have produced nearly $1.9 million in real estate tax revenue. Rockingham received $518,574 from the federal government for the land last year.

The biggest payments go to Western states, which also have the most federal land in their borders.

Alaska has more than 225 million acres of federal land, while Nevada is a distant second with 56.7 million acres followed by California with 43.7 million and Utah with 32.98 million.

The 2022 payments range widely from $58.78 million to California at the top to $2,738 for Guam.

About half of all land in California is owned by the federal government, said Ada Waelder, a legislative advocate for the California State Association of Counties. Some counties have 80% to 90% of their land controlled by the federal government, and a direct injection of funding into their general funds is vital.

“The PILT program is pretty crucial for a lot of counties in California,” she said. “PILT helps to support those counties in their budgeting.”

The allocations don’t directly correlate to the acreage. Yuma County, Arizona, and Tooele County, Utah, received the most of any jurisdiction in 2022 at $3.95 million. Yuma has about 1.56 million acres, however, compared with Tooele’s 2.1 million. North Slope Borough, Alaska, on the other hand, received only $1.4 million for 40.1 million acres.

Nils Andreassen, executive director of the Alaska Municipal League, said the state has many small population centers with little commercial or residential tax base as more than 100 communities have less than 1,000 people.

In these sparsely populated places, Andreassen said PILT payments can make up 20% of the local budget.

“It ends up being a pretty big deal in relation to their budget,” he said in an interview.


Despite having less people, Alaska’s local governments still have the same responsibilities for federal land as all other states.

“They still have to have the same capacity to plan and manage and respond even though they have a small population.” Andreassen said.

On a per acre basis among the top 30 payouts, Imperial County, California, received the most at $2.94 per acre, while Kenai Peninsula Borough, Alaska, got a rate of 52 cents per acre. Comparing statewide numbers, Maine received the most at $3.62 per acre and Alaska received the lowest at 15 cents per acre.

While local governments miss out on large amounts of tax revenue because of the federal land in their borders, Shuffield pointed out several benefits. National parks or a “gem of the federal land system” can drive tourism, while other areas provide access to oil, gas and timber harvests, Shuffield said.

“There’s really a net benefit,” he said. “Counties certainly recognize the potential economic benefits of having federal lands.”

In Rockingham County, Virginia, for example, about 27% of the tax revenue came from its federal land, but Shenandoah National Park alone generated $129 million in economic impact to surrounding communities in 2019, with visitors spending an estimated $96.7 million in the areas near the park.

Mount Denali and Kenai Fjords National Park might bring in many visitors to Alaska, but some areas don’t get the benefit of heavy tourism driven by federal lands because they are so remote. 

“Where there’s lower visitation and no development, there’s not going to be much of a benefit to those economies,” Andreassen said.

Federal land is always subject to heavy regulations, which Shuffield said “limits your ability for communities to expand.” Local governments are also responsible for law enforcement, search and rescue and assisting combating fires. They must conduct infrastructure maintenance as well on water, sewer and waste-disposal systems.

Waelder said California counties face many responsibilities for federal land but they have embraced a different economic focus.

“A lot of our counties have really leaned into recreation economies,” she said. “Being the gateway community into a national park or a national forest that’s a tourist attraction can often get people out to areas that are a little more isolated.”

The National Association of Counties has lobbied for changes to how the program calculates funding. Shuffield said the formula provides more money per person for places with smaller populations, but that benefit cuts off at 5,000 people. The organization wants that limit removed to benefit smaller rural counties.

NaCo also supports removing some of the deductions calculated from other federal revenue-sharing programs.

The California State Association of Counties doesn’t take a formal policy stance on the program, but Waelder said the organization wants to ensure the program remains fully funded and supports revising the minimum population counts.

“We’d love to have conversations at the federal level about increasing funding,” she said.

Andreassen noted Alaska is heavily impacted by limits on per capita allocations because of its small populations. The Alaska Municipal League has advocated for reducing the population minimum from 5,000 to 2,500 or 1,000.

“We’ve argued for years now that the small population limitations really need to be addressed to better fit Alaska's circumstance,” he said. “It’s not all about land and population, it’s about roles and responsibilities and making sure Americans are safe in these spaces.”

The PILT program provides payouts for nontaxable federal land administered by agencies of the Department of the Interior, the Department of Agriculture’s Forest Service, the Army Corps of Engineers, and the Utah Reclamation Mitigation and Conservation Commission. It does not apply to any other federally owned land, including military bases.

Shuffield said the program was chronically underfunded in its first 30 years, but for the past decade has received strong support for Congress. Since 2018, lawmakers have been giving full funding on a year-by-year basis.

The previous funding high was $552 million in fiscal 2018, which Shuffield said was driven by a reduction in a different revenue-sharing program that lessened deductions. He pointed to the effects of inflation on the consumer price index as a reason why the 2023 payments could be historically large. Inflation has historically stayed around 2% or less, but was 4.7% in 2021 and 8% in 2022. 

For fiscal year 2024, officials have proposed a drop to $535 million in the budget, but Shuffield said this number is usually a placeholder while numbers are calculated.

Tyler Cherry, senior spokesperson for Secretary of the Interior Deb Haaland, said the department had no comment on the program because the 2023 allocations have not been announced. He directed questions to the PILT website.

Since the PILT program was created in 1976, it has distributed nearly $10.8 billion to 49 states plus Washington, D.C., Puerto Rico, Guam and the U.S. Virgin Islands, according to Interior.

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