Published: Saturday, January 21, 2012, 9:45 AM Updated: Saturday, January 21, 2012, 4:31 PM
View full sizeU.S. 101, from base of Cape Sebastian, looking to Pistol River, southern Oregon coast, Curry County, One member of a citizens committee assembled to find a solution wondered if the county's picturesque beaches and mountains could attract corporate sponsorships.
But even as Curry and other counties look for answers, they sit on millions of dollars in road fund reserves -- money deposited over decades of timber harvests and earmarked for county roads. By law, they can't readily be used for sheriff's patrols or other general fund expenses, but some counties find creative ways around restrictions.
The conundrum is a preview of what other Oregon counties may face. The counties lose about $230 million annually with the end of payments under the Secure Rural Schools and Community Self-Determination Act. The act was a safety net for rural communities slammed by the recession and collapse of the timber industry, but it expired with no money available to replace it.
Help from elsewhere is unlikely. It's uncertain whether a bitterly partisan Congress will restore payments or increase county revenue by allowing more logging. State officials, facing their own budget shortfall, have said financial rescue won't come from Salem. Meanwhile, unemployment rates in many Oregon counties are stuck at 10 to 13 percent. Residents routinely vote down property tax increases that would provide more money for local government and schools.
A 2009 state task force said a dozen counties would face severe shortfalls within one or two years of the end of the federal payments.
"For counties already near the financial cliff and facing Depression-like unemployment, this could be the final blow," the state task force concluded.
The impact is widespread. Wallowa County, in Oregon's northeast corner, may allow some of its 700 miles of county roads to revert to gravel, Commissioner Mike Hayward said. The county road fund alone will lose $800,000 to $1 million annually, he said -- about half the road department's budget.
Over time, paved roads will deteriorate. "We will not be able to keep it up, and it will go back to gravel," Hayward said.
Curry, in the southwest corner of the state, is the first to falter. Federal payments provided about 61 percent of its annual general fund revenue and 65 percent of its road fund. Without timber payments, expenses will exceed revenue by more than $350,000 in 2012-13. The deficit grows to more than $3 million the following year.
Philip Dickson, a member of Curry's citizens committee, said during a hearing last week the county will be broke by January 2013. Cutting inevitably means eliminating employees, he said.
"We're going to have a lot less government in Curry County very, very soon," he said.
Money maneuvers
Tapping road reserve funds might help counties temporarily balance budgets and maintain services. Instead, they're stuck cutting or disbanding departments until solutions come about.
Curry County has $33 million in road fund reserves. Grant County saved $50 million from timber sales on the Malheur National Forest. Klamath County has about $90 million in road reserves. The money isn't supposed to be used for health clinics, jails, tax assessors, prosecutors, planners or other county services.
But in 2010, Klamath transferred about $700,000 in restricted road funds to the city of Klamath Falls, which used the money on city streets. The city transferred $700,000 back to the county general fund, where it was used to keep a second jail pod open until June 30.
"What we're struggling with is how to fund law enforcement, because it's such an expensive part of our budget," Klamath County Commission Chair Al Switzer said.
"There was some question about the legality of it," he said, so the arrangement was reviewed beforehand by the attorney general's office.
Switzer said fund transfers won't work for all counties. First, it requires a city or other jurisdiction with the money to trade, he said. "Most counties are reluctant to do that because at some point in time you run out of road reserve."
Lane and Douglas counties received permission from the Legislature to use road reserves for sheriff's patrols. Lane County will have transferred $8.6 million by June 30, but that will be the end of it, county Budget Manager Christine Moody said.
"The road fund doesn't have any more to transfer," she said.
Timber rich
The situation traces primarily to the management of Oregon's national and Bureau of Land Management forests, which make up 60 percent of the state's timberland -- including more than14 million acres of national forests.
Because federal land isn't subject to property taxes, rural counties and school districts since 1908 have received a share of timber sale revenue. The states dictate how the money is distributed; Oregon law directs 75 percent of national forest harvest revenue to county road funds and 25 percent to school districts. Timber receipts from BLM land can be used for county general funds, but the amount is much smaller.
Revenue going to the counties dropped sharply as logging on federal land declined over the past 20 years, however. To ease the blow, Congress in 2000 approved the federal payments.
The payments went to more than 700 counties in 41 states, including 33 of Oregon's 36 counties. Funding was extended twice, ramped down, and the last checks delivered this fiscal year.
It's not just governments that will feel the hit. A study by Oregon State University projected rural counties will lose 3,000 to 4,000 jobs and business sales will drop by up to $400 million if payments aren't restored.
Oregon's congressional delegation and others have proposed to break the deadlock by designating some timberland for sustained harvest to generate money and jobs in rural areas. In the meantime, counties are looking for answers. Many have extremely low tax rates and collect very little in property taxes. Curry's is second lowest in the state: 60 cents per $1,000 of assessed property value.
One of the early suggestions included borrowing enough from Curry's $33 million road reserve to get by until a tax increase passed. The last levy attempt was hammered down: 72 percent to 28 percent.
Curry Roadmaster Dan Crumley opposes borrowing from the road reserve. He expects to begin drawing from it this year. Roadwork is expensive: Repairing two slides on North Bank River Road, near Brookings, will cost $1.2 million. Recent flooding and road damage in Oregon drives home the expense.
"My point is, it's not a very big section of road here, and it's in excess of $1 million," Crumley said. "We're one bad storm away from needing a pretty good section of that replaced."
More to the point, he said, road funds should be spent on roads.
"It's not our money," he said. "It belongs to the public, and was earmarked to be spent on roads.
"I'd like to see that happen, but I understand it's a dire situation."
--Eric Mortenson
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