Forestry failure: Oregon forestry department faces financial crisis

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The Oregon Forestry Department has failed to raise nearly $ 100 million owed to it for the costs of wildfires dating back to 2015, creating a cash flow crisis that is undermining basic operations and forcing its leaders to engage in a financial game to pay the bills.

In June, agency executives restructured a $ 50 million line of credit with the Oregon Treasury to avoid default. Then they borrowed $ 18 million from the Department of Administrative Services to cover two months of salary costs – loans that they have to “pay off” in the coming months but will renew immediately to keep money on hand. .

Meanwhile, the agency was forced to drain the internal cash reserves that support other departments, operating a fund supposed to support state forests for $ 27 million and one for private forest owners for $ 15 million. dollars.

These funds must also be repaid, and officials admit that their temporary subsidy of fire costs hinders work in other areas. The agency has frozen all non-essential spending to save money, including computer and motor purchases, travel and training.

The cash flow problem only emerged in mid-June, when the agency nearly defaulted on its Treasury line of credit. He eventually repaid half of his $ 50 million bond, but extended the repayment period for the other half until April. This may not be an option in the future, as the Treasury may not be willing to continue this practice.

“As the frequency and severity of Oregon fire costs increase, along with the complexity and duration of the underlying repayment mechanisms, the Treasury’s inter-fund borrowing program may no longer be the right tool for meet these ongoing cash needs, ”Rachel Wray, Treasury spokesperson. said Tuesday.

The near-default prompted the co-chairs of the Legislature’s Ways and Means Committee to demand a monthly note from state forester Peter Daugherty detailing the agency’s financial situation and the steps he is taking to address the issue.

Senator Betsy Johnson, D-Scappoose and one of the three co-chairs, said the agency had not been made aware of the size or nature of the problem with the legislature or the forestry council. She said she was still trying to piece together “what I consider a crisis”.

“In my opinion, there has not been full disclosure of the problem,” she said. “I am terribly disappointed with the agency’s inability to deal with its outstanding claims which go back four years,” Johnson said. “At some point, the data can become unrecoverable. “

Daugherty emailed members of the Forestry Council in mid-July outlining the nature and extent of the problem.

“I take full responsibility for the ministry, which finds itself in such a precarious position, with only two weeks remaining in the fiscal year,” he said. “It will be important for me to ensure that clear and consistent communication between the financial functions of the Fire Protection and Administration divisions is transparent and that adequate controls are in place to identify and escalate this type of problem as early as possible. “

In his August and September notes to the co-chairs, Daugherty said the root of the problem was Oregon’s outdated approach to covering the costs of fighting fires at a time when the severity of wildfires has increased. and the associated costs have multiplied.

The agency’s fire division is responsible for fighting fires on private and public land. It also provides much of the resources needed to fight fires on lands owned by the Bureau of Land Management and the US Forest Service. Most of these costs are reimbursable by the state and the federal government, but the agency says it simply does not have the financial capacity to float these rising costs until the bills are paid.

Bill Herber, the agency’s deputy director of administration, said another problem is that the agency has not been adequately staffed to deal with the backlog of claims after years of seasoned claims. costly fires. This involves rummaging through boxes of old shift tickets and lists of equipment used on fires since 2015, comparing them to old cost-sharing agreements, verifying the results and submitting claims.

The agency just closed its expense reports for the 2013 and 2014 fires. It has $ 93 million in unreimbursed costs for the fires between 2015 and 2018, half of which has yet to be billed. And while the 2019 fire season has been fairly mild so far, it still has $ 32 million in costs that will take at least a year to pay off.

“Some of these things have come over us,” Herber said. “It all came to a head quite suddenly. It is beyond our ability to really follow it… There is a lot of work to be done in determining how much should be paid and by whom.

The agency is currently working with the legislative office of finance and the state’s chief financial officer to strengthen its collection efforts, improve its documentation and invoicing processes, and track its cash flow on a weekly basis. Herber said the agency had transferred staff internally to deal with the backlog, and those efforts led to faster recovery of more recent spending and successful collection of some older debts.

Agency executives plan to ask for more money to help deal with the crisis in the 2020 session. Longer term, they say Oregon needs to restructure its approach to cover the cost of the fight. against large forest fires.

“We are committed to responding appropriately to the new challenges presented by fire seasons and to working closely with the governor’s office, the governor’s council on wildfire response and lawmakers to identify a long-term solution. term, “Daugherty said in a September 3 memo to the Co-Chairs.

Johnson said she was skeptical of the agency’s general fund requests when it had $ 93 million in unpaid refunds.

“It’s a management problem, or a prioritization problem,” she said.

Tom Imeson, chairman of the Board of Forestry, said the problem needs a legislative solution and the board will address it at an October meeting focused on strategic planning.

“This topic will be an important point of discussion at this meeting. “

Kristina McNitt, president of the Oregon Forest & Industries Council, described fire protection as the number one priority for Oregon private forest owners and said the department’s protection program is the envy of the nation.

But she said that “the current fiscal crisis is alarming, including the agency’s rushed $ 15 million loan to itself from the Oregon Forest Protection Fund, mostly funded by fees and taxes paid by owners of private forests. The state legislature, the Oregon Forestry Council and Oregon’s private forest owners deserve answers and transparency from the agency. “

Read more about the current series

Forestry failure: Oregon forestry department is on an unsustainable path

Forestry failure: Oregon’s forest management plans still in the works

Forestry failure: Oregon wanted to clearcut above its water supply. The plan is on hold at the moment.

Forestry failure: Oregon forestry department faces financial crisis

Forestry failure: Governor Brown launches team to fix ministry financial mess


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