Lost in this year's budget tangle is the realization that the share for natural resources and the environment just keeps getting smaller.

—By Gerry Gray, VP Forest Policy

The Administration and Congress are engaged in heated discussions over the FY 2006 budget, with a major political objective of reducing the federal deficit while increasing tax cuts and continuing funding for the war in Iraq. That adds up to a need for significant spending cuts in many domestic programs, with exceptions such as Defense and Homeland Security. Programs that support communities and collaborative forestry efforts have taken more than their fair share of those cuts (see Washington Outlook).

It's easy to get caught up in these short-term funding discussions, haggling about which programs merit higher priority and which programs will get eliminated or reduced. These are important policy discussions, but what about the bigger picture and long-term trends for federal spending?

Over the past 40 years, annual federal spending has increased steadily from $624 billion in 1964 to $2.1 trillion in 2004 (in constant FY2000 dollars). Over the same period, annual spending for natural resources and environment programs increased much more slowly-$14.5 billion to $27.8 billion.

In fact, as a percentage of annual federal spending, support for natural resources and the environment has been cut nearly in half over the last 40 years. For every dollar of federal spending in the early 1960s, 2.4 cents went toward these important programs; in 2004, it's just 1.3 cents. Despite some fluctuation in the annual percentage over the years, that spells a clear trend-one you might miss if you focus solely on the current budget battle.

So, where has that extra money gone? The major shift has been from Discretionary to Mandatory spending. In 1964, Discretionary spending programs (those over which congressional appropriators make decisions, including national defense and other domestic programs) made up nearly 72 percent of federal spending while Mandatory spending (programs like Medicaid, Social Security, and other entitlements) made up the remaining 28 percent.

By 2004, Discretionary spending had dropped from nearly 72 percent to just 38 percent, while Mandatory spending had grown from 28 percent to 62 percent. Funding for Discretionary programs has become a much smaller piece of the federal spending pie; all domestic discretionary programs must compete annually for part of that slice.

Natural resources and environment programs have fared all right in maintaining their share of this slice, but their share now is about 3.4 percent and on a downward trend since the 1990s (the analyses here borrow from the work of our former executive vice president, Neil Sampson; see Conservation in Practice, Winter 03).

What can you do with this information? Use it to better understand the context of federal budget debates, even if you don't like the outcome. Recognize that issues like Social Security and Medicaid have increased in importance while domestic nondefense programs are now relatively less important-and relatively easy targets for cuts.

Our challenge now is to find ways to counter these trends and to advocate more clearly for programs that involve collaboration with states and communities, recognizing their critical need for federal involvement and support. A second challenge is to identify and develop sources of funding other than federal spending to help make the needed long-term investment in restoring, protecting, and conserving forests. State governments, local communities, private businesses, and landowners all will need to make different types of investments to meet this long-term conservation challenge.

A major part of American Forests' strategic focus on forests as natural capital is to increase such investments by helping to identify real economic values for the ecosystem services provided by trees and forests and to create financial incentives and markets for those services. If forests-as natural capital-are to compete among the many, diverse, and changing demands for public and private investment, there will need to be an array of new policy tools, financial incentives, and markets for the services they provide to society. AF

Gerry Gray is American Forests' vice president of forest policy. [TOP]