Annual Privatization Report 2005 - Improving Parks Funding and Services with User Fees

Improving Parks Funding and Services with User Fees


State and federal budget crunches are causing funding shortfalls in public parks across the nation. Facilities are deteriorating, maintenance backlogs are increasing, and budgets are shrinking as funds are shifted to more "vital" services. To raise revenues for parks while improving recreational services to visitors, governments should switch from general tax appropriations to a user-fee funding system.


Greater Fairness

User fees are a more fair way of financing parks because they ensure that only those that use the parks and all the facilities they have to offer must pay to maintain them. By contrast, general tax appropriations tax everyone for benefits that may only be realized by a relatively small portion of taxpayers. At the federal level, for example, Californians subsidize parks in Connecticut and Virginians subsidize parks in Alaska.


Greater Freedom of Choice

The shift from general tax revenue to a voluntary fee system provides park visitors more choice over where their hard-earned dollars are spent and what they get in return. Under a user fee system, people have the freedom to enjoy the recreational services offered by the parks, seek alternative forms of recreation, or simply decide to do without and find other uses for their money. This enables the park visitor to vote with his feet and also communicates market demand to the park manager.


Better Incentives for Improving Park Management and Visitor Services

This brings us to another point: parks must be allowed to keep the user fees they collect so that these revenues may be reinvested in the park where they were collected, rather than shipped off to state capitols or Washington, D.C. where they may never be seen again. This allows park managers to more accurately assess visitor demand—to obtain better information on park visitors' wants and needs—and adjust their spending accordingly. It also provides managers with greater ability and incentives to respond to those wants and needs.

To this end, Congress established the Recreational Fee Demonstration Program (Fee Demo) in 1996, which authorized the National Park Service, Forest Service, Bureau of Land Management, and Fish and Wildlife Service to experiment with user fees and stipulated that at least 80 percent of fees collected must be maintained by the park of origin. The pilot program has been extended several times, most recently in the omnibus appropriations measure for FY 2005, which added the Bureau of Reclamation to the Fee Demo program and continued the program for 10 more years.

A user fee system allows people more choice over where and how dollars are spent than tax appropriations and lets them "vote with their feet." This allows the "market" for recreation to determine necessary services and projects, not arbitrary decisions by politicians and bureaucrats or politically driven pork-barrel (or, in this case, "park-barrel") projects. A funding system driven by supply and park visitor demand, rather than political aspirations, would not be likely to support unnecessary or otherwise wasteful projects.


Eliminating "Park-Barrel" Spending

Under the current system, cost savings is one of an agency's last considerations because any money appropriated to the agencies that goes unspent must be returned to the Treasury. Even worse, since unspent funds imply that an agency is overfunded, bureaucracies have an incentive to exaggerate or overestimate their costs in order to maintain an environment of fiscal crisis sufficient to justify ever-increasing budgets, and pork-barreling abounds. As Richard J. Ansson, Jr., noted in a 1998 article in the Journal of Land Use & Environmental Law, "Over the past thirty years, the appropriation of funding for pet congressional parks and construction projects has diminished the Park Service's ability to adequately care for its parks."1 Examples of such "political entrepreneurship" include:

  • A $333,000 "state-of-the-art," "environmentally-friendly" outhouse at the Delaware Gap National Recreation Area in Pennsylvania ("The two-toilet outhouse has a gabled roof made of Vermont slate, a cobblestone foundation built to withstand earthquakes, and porch railings made from quarried Indiana limestone.");

  • A $1 million outhouse in Glacier Park;

  • An $8 million civic center in Seward, Alaska [population: approximately 4,000]; and

  • Numerous new employee housing units in Yosemite at a cost of $584,000 per unit.2

Self-sufficient national parks could realize significant cost savings as the federal level of the bureaucracy would diminish, allowing managers to devote more of their valuable time to actually managing parks, and costly "park-barrel" projects contrary to the interests of park users (and even conservationists) would not be forced upon park administrators. The Fee Demonstration Program may be a vast improvement over decades past, but until the national parks become completely self-sufficient, expenditure decisions and other management policies will continue to be based on the preferences of Congress and special interests, not the average park-going member of the public.


Effects on the Poor

Some have voiced concerns that the cost of self-sufficient, user-fee-supported parks would prevent the poor from enjoying the nation's natural resources. First of all, self-sufficient parks would be more efficient, and thus cheaper to run, than those supported by general tax appropriations. Self-sufficient parks have inherent service-maximization/cost-minimization incentives that tax-reliant parks do not, and the reduction in bureaucracy necessary to administer funds would keep costs even lower. In addition, self-sufficient parks would not be forced to embark upon legislators' pet projects (such as "state-of-the-art" outhouses) that currently swell the maintenance backlog and often take precedence over needed visitor services and facilities improvements. Moreover, critics often ignore that it is the travel costs—simply getting to and from state or national parks—that are cost prohibitive, not the user fees themselves.

All of this notwithstanding, the poor could be accommodated by offering "fee-free" days, free passes for those who volunteer at park sites, or a certain number of free or reduced-price "first-come, first-served" passes that would allow people to compete for the passes based on their time (i.e., queuing up in line) rather than their disposable income.


Effects on the Environment

Other critics have claimed that outsourcing or increased reliance on user fees will lead to the destruction of natural resources and the "Disneyfication" of the nation's parks. Yet, most people visit parks because they want to enjoy nature and get away from urban development for a time. Thus, self-sufficient parks have no incentive to overdevelop. In fact, they have the best incentives to balance preservation and recreation.

In addition, overdevelopment concerns are often overblown. Consider the following:

  • Less than 5 percent of the nation's land is developed, and three-quarters of the nation's population lives on 3.5 percent of its land area.3

  • Over three-quarters of the states have more than 90 percent of their land in rural uses, including forests, cropland, pasture, wildlife reserves, and parks.4

  • Acreage in protected wildlife areas and rural parks exceeds urbanized areas by 50 percent.5

  • 99 percent of the people visiting Yellowstone stay within the developed areas, which comprise less than 2 percent of the park.6

Moreover, a more market-oriented pricing system would actually help to prevent the depletion of natural resources by eliminating underpricing. Pricing park services below market prices (i.e., below those determined by supply and demand) encourages overuse of facilities and resources. If everyone is allowed to use the parks essentially without having to bear the cost of their use, then no one has an incentive to care for or preserve the park's facilities and natural resources. This is known by economists as the "tragedy-of-the-commons" problem.

Some parks, particularly very popular parks such as Yellowstone, will tend to be more commercialized and cater to people who demand many services and accoutrements. Others will appeal to those seeking the "rugged outdoors" and will show no signs of commercialization.

Put simply, there is no single ideal, "one-size-fits-all" park mold, despite the efforts of a top-down bureaucracy to make it so. Such variety offers park visitors many choices and people will be able to vote their preferences with their feet—and their dollars.


Double Taxation

One very valid concern, given the current financing structure of the National Park System, is that the use of both taxes and user fees constitutes double taxation. "Why should I have to pay user fees," one might rightly argue, "if I am already paying taxes to fund the parks?" Why, indeed? As one senate staffer argued, one of the biggest constituent complaints regarding the Fee Demonstration Program is that "[t]here has been no decline in congressional appropriations as a result of Fee Demo."7

While the double taxation argument is often espoused by those opposed to user fees, the argument is best suited to advocates for the elimination of tax funding. Congress should thus eliminate the practice of double taxation by eliminating tax appropriations for national parks and forcing the parks to rely solely on user fees (or other private sources of funds).


Case Studies


A. New Hampshire

In 1991, New Hampshire passed a law requiring all of the state's parks to be self-sustaining. By using a variety of pricing strategies, cutting costs, and entering into corporate sponsorships to obtain additional funding for educational programs, the state's park system quickly was able to generate enough revenue to cover its entire operating budget of nearly $5 million—and even pay for some capital investment. After 14 years of self-sufficiency, New Hampshire's parks are still in solid financial shape.


B. Vermont

State parks have similarly been self-sustaining in Vermont since 1993. As recently as 13 years prior, nearly 40 percent of the park system's operating budget came from general funds—a dramatic change. The parks sustained themselves through increased fees, downsizing, and marketing efforts. In addition, concessions from state-owned ski areas now provide nearly half of the parks' operating budget. While the ski areas are managed by the state, they are quite profitable and operate similar to private enterprises. A portion of all park revenues is set aside in a sort of "rainy-day" fund for emergency maintenance and periods of poor weather.


C. Texas

Texas state parks took a different approach to moving toward self-sufficiency when, in 1991, the state legislature directed the Texas Parks and Wildlife Department (TPWD) to become self-supporting and announced that general funds, which funded half of the department's operating budget, were going to be cut off by 1994. Faced with this drastic loss of funding from the state and the prospect of closing a number of parks, the TPWD developed the entrepreneurial budgeting system (EBS) to encourage park managers to cut costs and increase revenues. The EBS offers the managers incentive contracts that establish performance goals. Managers that beat spending-limit goals, for example, are allowed to carry a portion of the unspent funds over to the following year. The program was initially tried in a few select parks and was so successful that soon most other parks were clamoring to join in. As a result, the TPWD did not have to close a single park. The parks no longer receive any general funds from the state, although they do receive some money from a tax collected on sporting goods.8


Conclusion

The mere implementation of user fees alone will not solve all park funding problems. Park managers must have incentives to collect and use them properly as well. To this end, 100 percent of park revenues collected should be maintained by the park responsible for collecting the fees so that: 1) parks have the greatest incentive to collect fees in an efficient manner and 2) those funds may be reinvested where the parks' patrons, the park visitors, will actually realize the benefits. In addition, park managers should have the flexibility to change user fees as visitor preferences and economic conditions change. Changes may be required by the year, by the season, by the week, or even by the day, and regulatory hurdles should not prevent managers from responding accordingly.

State and national parks hurting from recent budget cuts should look to user fees as a way to increase revenues while maintaining—and even improving—visitor services and facilities. In order to prevent double taxation, as well as maximize efficiency and improve park managers' incentives, user-fee funding should be seen as an alternative—not a supplement—to general tax funding. This elimination of the political process will offer the greatest incentives to both preserve the nation's parks and provide quality recreation services for park visitors.


For a more detailed analysis of user fees as a solution to parks funding, see Reason Policy Study: "Funding the National Park System: Improving Services and Accountability with User Fees."


Endnotes

1 Richard J. Ansson, Jr., "Our National Parks—Overcrowded, Underfunded, and Besieged With a Myriad of Vexing Problems: How Can We Best Fund Our Imperiled National Park System?" Journal of Land Use & Environmental Law, Vol. 14, No. 1, Fall 1998, http://www.law.fsu.edu/journals/landuse/Vol141/anss.htm.

2 Ibid.

3 Samuel R. Staley, The Sprawling of America: In Defense of the Dynamic City, Policy Study No. 251 (Los Angeles: Reason Foundation, February 1999), http://www.reason.org/ps251.html.

4 Ibid.

5 Ibid.

6 Tarnished Jewels: The Case for Reforming the Park Service (Bandon, Oregon: Thoreau Institute, January 2000), http://www.ti.org/park.html.

7 J. Bishop Grewell, Recreation Fees—Four Philosophic Questions, PERC Policy Series, Issue Number PS-21 (Bozeman, Montana: Property and Environment Research Center, June 2004), p. 20, http://www.perc.org/pdf/ps31.pdf.

8 Donald R. Leal and Holly Lippke Fretwell, Parks in Transition: A Look at State Parks, Research Study 97-1 (Bozeman, Montana: Property and Environment Research Center, 1997), http://www.perc.org/publications/research/stateparks.php?s=2.





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