Editor’s note: This is the second in a series of special articles examining Curry County’s fiscal crisis and possible options.

 Hanging in the balance of the federal budget showdown is a five-year extension of payments to 700 counties in 41 states – including Curry County.

Officially, it’s called the Secure Rural Schools and Community Self-Determination Act. In shorthand, many officials call them “timber payments” or “SRS.” Some bluntly call them “federal welfare.”

 For the state of Oregon overall, it means $250 million in federal payments to 33 of the state’s 36 counties. One economist says that represents 4,000 jobs statewide, and $400 million in business sales.

For Curry County, that federal support of just over $1 million is more than 34 percent of this year’s general fund. In addition, $1.4 million in SRS funds represents one-third of the annual income to the county’s road fund; and additional $265,000 is restricted to use in serving federal forest lands.

“Curry County will be one of the hardest hit Oregon counties by the end of federal timber payments,” says a report by Neil Obringer of Oregon Solutions.

In early October, Oregon Gov. John Kitzhaber met with the state’s congressional delegation for a rare focused discussion of a single problem. They all endorsed a strategy crafted by Sen. Ron Wyden to protect the county payments in the budget battle.

“Without the financial certainty offered by the county payments program,” said the joint statement from the governor and congressmen, “there is no future for Oregon’s rural counties.”

The Secure Rural Schools checks are called “timber payments” because they were based originally in the counties’ share of timber sales revenues from federal lands – sales that dried up in environmental battles of the 1980s and 1990s.

“Rather than correcting the misuse of the Endangered Species Act,” writes State Rep. Dennis Richardson, R-Central Point, “Congress approved the Secure Rural Schools Act. Instead of continuing to fund county services from timber harvest revenues, rural counties were paid hundreds of millions of dollars in federal welfare payments.” 

In addition, the federal program that makes payments in lieu of local taxes (PILT) expires in 2012. That’s another $130,000 a year in Curry County’s general fund budget. PILT is designed to compensate local governments for the negative impact to local economies caused by federal ownership of large amounts of land. The federal government owns 66 percent of Curry County.

Extension of PILT is a separate issue with a separate funding formula, says Rocky McVay, executive director of the O&C Counties Association. 

How the SRS payments are calculated for each county, and how they can be spent, is subject to a myriad of rules. From past and current timber harvests to special projects like search and rescue on federal lands, many factors come into play. In addition, money to schools in each county is swept up by the state under its effort to equalize school funding statewide.

For Curry County’s looming fiscal crisis, the figure to focus on is the payment to the general fund, where the county has discretion to use it where needed.

The SRS extension effort by Wyden and endorsed by the delegation would fund the Secure Rural School program for another five years, but the payments would drop 5 percent each year.

Because it keeps dropping, Curry County Commissioner Bill Waddle says the bill is “a little bit helpful, but it’s not a solution. This level isn’t enough to maintain essential services.” 

The cost of the extension to the U.S. Treasury would be $1.5 billion. To give that number a sense of scale, the automatic federal budget cuts that would be triggered over 10 years by next week’s deadline are nearly 1,000 times that amount.

Wyden believes that with 60 votes supporting the extension in the Senate, (controlled by Democrats) the payments can be a priority in any budget negotiations with the House (controlled by Republicans). The Senate support would attach the SRS extension to a larger “must-pass” bill.

“Ron did a magnificent job” of putting together an extension and support, says Congressman Peter DeFazio, D-Ore.

That’s not a new strategy. The last extension was attached to the TARP legislation, which both Wyden and Rep. Peter DeFazio ended up voting against.

Since the payments began in 1977, the Department of the Interior has paid out more than $5.5 billion. The legislation has been referred to the Senate Committee on Energy and Natural Resources, where a hearing on the bill has not been scheduled.

Support for the SRS extension has been growing gradually. This month, three more senators signed on as co-sponsors, bringing total co-sponsors to 30.

“At this point in time, we have just close to a third who are supporting (the measure),” said Ryan Yates, associate legislative director for the National Association of Counties. “That’s a good sign.”

From the White House side, extension of the SRS payments was in the president’s proposed budget, noted DeFazio. 

The biggest challenge is finding a way to pay for it, he said. 

Yates believes that leaders of the Senate Finance and Energy and Natural Resources committees are talking about finding an offset, but he is not privy to those conversations.

“It cannot be reported to the floor of the U.S. Senate without those offsets being identified,” Yates said. With Washington focused on finding budget cuts, any possible offsets are sure to be in high demand, and the leadership will likely play those close to the vest, he said.

But once one is agreed to, the Senate could move quickly, without even holding a hearing on the measure, as it did in 2008, the last time Secure Rural Schools payments were reauthorized, Yates said.

“I wouldn’t be surprised if we don’t have a hearing on this,” he said.

For the National Association of Counties, Congress has an obligation to address the situation to honor a commitment the federal government made more than a century ago when it assumed ownership of vast amounts of public lands, closing them to private development.

“When you look across the West, you’re looking at rural counties that have a significant dependence on a resource that is owned by an absentee landlord,” Yates said.

The federal government has a choice: It can manage these lands – or allow local governments to manage them – in a way that produces revenue, he said.

“Or, if they won’t do that, they have to provide funding.”

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Next: What else can be cut from the Curry County budget?