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Thursday, July 28, 2011

The Reclamation Fund: A Primer

Charles V. Stern
Analyst in Natural Resources Policy

The Reclamation Fund was established in 1902 to fund the development of irrigation projects on arid and semiarid lands of the 17 western states. It originated as a revolving fund for construction projects and was supported by the proceeds of the sale of land and water in the western United States. Over time, it was amended to receive proceeds from a number of other sources. It is currently derived from repayments and revenues associated with federal water resources development as well as the sales, rentals, and leases (including natural resource leasing) of federal land in the western United States. Portions of the fund’s balance are appropriated annually by Congress for multiple purposes, including some of the operational expenditures of the Bureau of Reclamation (Reclamation) and the Power Marketing Administrations. Through FY2010, collections deposited into the Reclamation Fund totaled more than $40 billion, while total appropriations from the fund totaled approximately $30 billion.

The Reclamation Fund did not finance all Reclamation investments in the western United States. As a result of limited funding availability, a number of large dams and other Reclamation investments were financed by the General Fund of the U.S. Treasury. Notwithstanding advances to the Reclamation Fund by Congress in 1910 and 1931, deposits into and appropriations out of the fund have been roughly equal over time. From the 1940s until the 1990s, the fund maintained a small, relatively stable balance. Beginning in the mid-1990s, balances in the fund began to increase significantly as receipts from mineral leasing and power sales increased, while appropriations from the fund largely remained static. By FY2010, the balance of the fund exceeded $8.5 billion and was expected to continue to grow.

The Reclamation Fund is not a trust fund. Receipts deposited into the Reclamation Fund are made available to Reclamation by Congress through annual appropriations bills (which are subject to congressional budgetary allocations). Some have proposed that Congress appropriate some portion of the surplus balance in the Reclamation Fund to reclamation activities in western states, including new water storage projects or the rehabilitation of existing projects. These interests argue that the Reclamation Fund was set up to benefit western states and should now be used to increase investments in these areas.

As the balance of the Reclamation Fund continues to increase, Congress may reevaluate the Reclamation Fund’s status, including its financing of new or ongoing activities. Major changes to the fund’s mechanics may have scoring implications in the annual budgetary context and under congressional pay-as-you-go rules.

Date of Report: July 13, 2011
Number of Pages: 10
Order Number: R41844
Price: $29.95

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