January 8, 2015Updated April 12, 2018
The Reclamation Fund
The Reclamation Act of 1902 authorized the Secretary of
the Interior to construct irrigation works in western states
andthrough the Reclamation Service (later renamed the Bureau
of Reclamation [BOR]). It also established the Reclamation
Fund to pay for these
projects. The Reclamation Fund was
established as a
special fund within the U.S. Treasury.
(Special funds are
fund accounts for receipts and spending
with specific taxes
or revenues earmarked for a specific purpose. See CRS
Report R41328, Federal Trust Funds and the Budget, by
Mindy R. Levit, for more information.) The Reclamation
Fund
purpose.) The fund was designated to receive receipts from
the sale of
federal landlands in the western United States, as
well as other
sources.
All moneys received from the sale and disposal of public
lands in … [the western United States] … shall be, and the
same are hereby, reserved set aside, and appropriated as a
special fund in the Treasury to be known as the “reclamation
fund, ” to be used in the examination and survey for and the
construction and maintenance of irrigation works for the
storage, diversion, and development of waters for the
reclamation of arid and semiarid lands in the said States and
Territories, and for the payment of all other expenditures
provided for in this Act.
The fund was conceived as a revolving fund, with receipts
from existing project repayments expected to be sufficient
to fund new projects. The 1902 Act made funding from the
Reclamation Fund available for the purposes outlined in the
legislation without further appropriation by Congress.
However, subsequently Congress required appropriations to
utilize the funds.
Expanded Revenue Sources
Receipts accruing to the Reclamation Fund are shown
below in Table 1. Originally the Reclamation Fund was
expected to be funded by three main revenue sources:
public land and timber sales in the western United States,
Reclamation Project repayment, and Reclamation Project
water contracts and sales. As a result of the aforementioned
shortfalls in the fund, over time Congress directed
additional receipts toward the Reclamation Fund sources. It was originally conceived as a
revolving fund (i.e., a business-like fund). That is, after its
initial capitalization by federal appropriations, receipts from
existing project repayments were expected to fund new
projects. Congress later made substantial changes to the
fund, including adding new receipt sources and making it
subject to annual appropriations.
Early Issues with Reclamation Fund
During its early years, the Reclamation Fund was unable to
operate as a revolving fund. Due in part to difficulties
maintaining the fund’s solvency, Congress provided it with
additional funding and made changes to the fund over time.
Following its earliest construction projects, the fund
received additional amounts from Congress via the
Treasury’s General Fund in 1910 ($20 million) and 1931
($5 million). In an effort to avoid future funding shortfalls,
Congress in 1914 limited Reclamation’s ability to carry out
the 1902 act to those items for which Congress made annual
appropriations to BOR (thereby rescinding its ability to
build projects without further appropriation). Despite these
changes, the Reclamation Fund was not sufficient to fund
many of the large investments in water infrastructure
throughout the West that were initiated beginning in the
1930s. Thus, construction of some large projects (e.g.,
Hoover and Glen Canyon Dams) was funded by the
General Fund.
New Receipts/Revenue Sources
Originally, the Reclamation Fund was expected to be
funded by three main revenue sources: public land and
timber sales in the western United States, BOR project
repayment, and BOR project water contracts and sales (the
latter two categories are typically referred to collectively as
proprietary receipts). As a result of the aforementioned
shortfalls in the fund, over time Congress directed
additional receipts toward the Reclamation Fund, in the
form of 40% of onshore royalties from mineral and natural
resource leasing on public lands (authorized in 1920) and
the full amount of Reclamation Projectproject power revenues
(authorized in 1938). The latter change, known as the
Hayden-O’Mahoney amendment, was enacted to secure
power revenues from projects under construction at the time
time, such as Grand Coulee Dam and Shasta Dam. Later projects
projects, such as the Pick-Sloan Missouri Basin Program
and the
Central Valley Project, also provided significant
hydropower revenues. Several other Reclamation projects,
Hydropower revenues from some
other projects (e.g., the Boulder Canyon Project, the
Colorado River
Storage Project, and the Colorado River
Basin Project) are
deposited into separatetheir own special funds, in
accordance with
congressional direction.
Table 1. Major Sources of Reclamation Fund Revenue
Description
Public Land Sales
95% of proceeds from
public land sales in
western states
1902
Reclamation
Project
Repayments
100% of receipts
1902
Reclamation
Project Water
Contracts/Sales
100% of proceeds
1902
Reclamation
Project Power
Revenues
100% of proceeds
1938
Natural
Resource/Mineral
Royalties
40% of bonuses, royalties,
and rentals from onshore
public lands
1920
Early Issues with the Reclamation Fund
During its early years, the Reclamation Fund was unable to
operate as a “revolving” fund. Due in part to difficulties
maintaining the fund’s solvency, Congress provided
advances and made changes to the fund over time.
Following its earliest construction projects, the fund
received advances from Congress via the General Fund in
1910 ($20 million) and 1931 ($5 million). In an effort to
avoid future funding shortfalls, Congress in 1914 limited
Reclamation’s ability to carry out the 1902 act to those
items for which Congress made annual appropriations to
Reclamation (thereby rescinding Reclamation’s ability to
build projects without further appropriation). Despite these
changes, the Reclamation Fund was not sufficient to fund
many of the large investments in water infrastructure
throughout the West that were initiated beginning in the
1930s. Thus, construction of some large projects (e.g.,
Hoover and Glen Canyon dams) was funded by the
Treasury’s General Fund.
Year
Authorized
Source
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The Reclamation Fund
Recent Trends
Understanding “Surplus” Fund Balances
After the early financial issues between the Reclamation
Fund’s establishment in 1902 and the supplemental funding
from the General Fund in the 1930s, the fund maintained a
relatively stable balance through the early 1990s. Beginning
in the mid-1990s, the fund’s balance began to increase
significantly as revenues from power sales and natural
resource royalties significantly exceeded appropriations
from the fund. For every year since FY1994, receipts going
into the Reclamation Fund have exceeded appropriations
made from it by more than $100 million, and in some years
receipts have exceeded appropriations by more than $1
billion. The exception to this trend was FY2009, when the
American Recovery and Reinvestment Act (P.L. 111-5)
appropriated funding for Reclamation from the Reclamation
Fund. Trends in the fund credits and appropriations are
shown below in Figure 1.
Similar to other special funds that are subject to
appropriation, the Reclamation Fund is an accounting
mechanism within the larger federal budget, and it is
important to note that the fund’s apparent “surplus” does
not represent real resources available for spending. Instead,
it reflects the status of the intended uses of the fund
compared to actual appropriations. It shows that in recent
years, receipts credited to the fund have significantly
outstripped its expenditures. Some point out that this runs
contrary to the congressional intent of the Reclamation Act
of 1902 and subsequent acts affecting the Reclamation
Fund. However, Congress’s direction that the fund’s
expenditures be subject to annual appropriations means that
the final say on the fund’s expenditures rests with
congressional appropriators. That is, Congress may at any
time choose to increase or decrease appropriations from the
fund to match incoming receipts, and/or dedicate these
funds to other purposes.
Figure 1. Reclamation Fund Receipts and
Appropriations, FY1990-FY2012
Recent Proposals
Some have proposed increasing appropriations from the
Reclamation Fund, either by funding new projects or as a
supplement to ongoing authorized expenditures. Such a
change could take one or more forms, each of which may
have associated budget scoring impacts. For instance,
Congress could increase appropriations from the
Reclamation Fund in annual discretionary appropriations,
but such an increase would have to compete with other
appropriations (including General Fund appropriations)
subject to congressional 302 (b) allocations. Congress could
also dedicate a stream of revenue from the Reclamation
Fund for a subset of specific projects and make it available,
with or without further appropriations (i.e., discretionary
funding or mandatory funding). Congressional PAYGO
requirements might necessitate offsets in spending
corresponding to some of these changes.
Source: CRS, with Bureau of Reclamation data.
Appropriations. The largest recipient of the fund’s
appropriations is Reclamation’s Water and Related
Resources Account, which funds operations and
maintenance and construction of qualifying Reclamation
projects (other projects are funded by the General Fund, or
individual project funds). These appropriations have been
declining in real terms in recent years.
Receipts. Natural resource royalties and hydropower
revenues are the largest sources of receipts accruing to the
fund and are the primary reason for the fund’s recent
imbalance between receipts and appropriations. From
FY1990 to FY2011, an average of 87% of the Reclamation
Fund’s receipts came from these two sources. Data on the
source (by state) of the natural resource receipts going into
the Reclamation Fund indicated that from FY2006 to
FY2011, an average of 93% of these receipts came from
five western states: Wyoming, New Mexico, Colorado,
California, and Utah. Two states, Wyoming and New
Mexico, accounted for about 64% of these receipts.
Congress in 2009 enacted changes to the Reclamation
Fund. Title X of the Omnibus Lands Act (P.L. 111-11)
redirected $120 million per year of Reclamation Fund
receipts for FY2020-FY2034 toward Indian water rights
settlement projects, without further appropriation. In the
113th Congress, the Authorized Rural Water Projects
Completion Act (S. 715) proposed to direct funds that
would otherwise be credited to the Reclamation Fund to a
set of newly established accounts for water projects,
including new accounts for rural water projects, Indian
irrigation projects, and other purposes. This proposal would
have directed the status quo approach, in which these funds
would have been subject to appropriations (i.e.,
appropriated as discretionary funds). However some have
advocated for making this funding available for expenditure
without further appropriations (i.e., mandatory funds). To
date, these proposals have not been enacted.
Charles V. Stern, cstern@crs.loc.gov, 7-7786
www.crs.gov | 7-5700
IF10042 Major sources of
receipts credited to the Reclamation Fund are shown below
in Table 1.
Table 1. Major Reclamation Fund Revenue Sources
Year
Authorized
Source
Description
Public Land and
Timber Sales
95% of proceeds from
sales in western states
1902
BOR Project
Repayments and
Water
Contracts/Sales
100% of receipts/proceeds
1902
BOR Project
Power Revenues
100% of proceeds
1938
Federal Public
Lands Natural
Resource Royalties
40% of bonuses, royalties,
and rentals from onshore
public lands (excluding
Alaska)
1920
Sources: 43 U.S.C. §391; 43 U.S.C. §392a; 30 U.S.C. §191.
Recent Trends
After the Reclamation Fund’s early issues with solvency, it
maintained a relatively stable balance through the early
1990s. At that point the fund’s balance began to increase as
revenues from natural resource royalties significantly
exceeded appropriations from the fund. For every year
since FY1994, except FY2009 (when the American
Recovery and Reinvestment Act [P.L. 111-5] also
appropriated funding for Reclamation projects from the
fund), receipts going into the Reclamation Fund have
exceeded appropriations made from it by more than $100
million. From FY2010 to FY2017, the average difference
between credits and appropriations was $1.027 billion. As
of the end of FY2017, the fund’s balance was $13.8 billion.
Trends in fund credits, appropriations, and balances are
shown below in Figure 1.
https://crsreports.congress.gov
The Reclamation Fund
Figure 1. Reclamation Fund Receipts and
Appropriations, FY1990-FY2017
appropriations by Congress. The surplus balance tracked for
the fund shows that in recent years, receipts credited to the
fund have significantly exceeded appropriations made from
it. Some point out that this runs contrary to the
congressional intent of the Reclamation Act of 1902.
However, Congress’s direction since 1914 that fund
expenditures be subject to annual appropriations means that
the final say on the use of the fund rests with congressional
appropriators. That is, Congress may at any time choose to
increase or decrease appropriations from the fund to better
correlate with incoming receipts and/or other congressional
priorities.
Recent Proposals
Source: CRS, based on Bureau of Reclamation data.
Appropriations. Most expenditures of Reclamation Fund
balances are made through appropriations to the Bureau of
Reclamation’s Water and Related Resources account,
which funds operations and maintenance and construction
costs for designated BOR water projects. (As noted above,
other projects are funded by the General Fund or by
individual project funds.) Appropriations also are made for
the expenses under Reclamation’s Policy and
Administrative account (approximately $60 million/year),
and Western Area Power Administration’s construction and
maintenance activities (approximately $180 million/year).
Since FY2003, average appropriations from the fund have
been $1.006 billion.
Receipts. Average receipts since FY2000 have been
approximately $1.782 billion. Receipts from natural
resource royalties and hydropower sales are by far the
largest sources of credits to the fund and the primary reason
for the fund’s recent balance increase. From FY2003 to
FY2017, 91% of the Reclamation Fund’s receipts came
from these two sources, including 75% from natural
resource royalties. Based on the source (by state) of natural
resource royalties credited to the Reclamation Fund from
FY2003 to FY2017, CRS estimates that an average of 98%
of natural resource royalty receipts came from seven
western states: Wyoming (50%), New Mexico (27%),
Colorado (7%), Utah (7%), California (3%), Montana (2%),
and North Dakota (2%). (Pursuant to statute, natural
resource royalties from Alaska are handled separately and
do not accrue to the Reclamation Fund.)
Understanding “Surplus” Fund Balances
Similar to other special funds that are subject to
appropriation, the Reclamation Fund is an accounting
mechanism within the larger federal budget and the fund’s
apparent “surplus” does not represent real resources
available for spending. Instead, it reflects the status of the
intended uses of the fund compared with actual
Some have proposed increasing appropriations from the
Reclamation Fund, either by funding new projects or as a
supplement to ongoing authorized BOR project
expenditures. Such a change could take one or more forms,
each of which may have associated budget scoring impacts.
For instance, Congress could significantly increase
discretionary appropriations from the Reclamation Fund to
match collections, but such an increase still would have to
compete with other appropriations (including those from
the Treasury’s General Fund) as they would be subject to
congressional 302(b) allocations. Congress also could
dedicate a stream of revenue from the Reclamation Fund
for a subset of specific projects or to a new account. This
could be done with or without further appropriations (i.e.,
discretionary funding or mandatory funding). Congressional
PAYGO requirements might necessitate offsets in
mandatory spending corresponding to these changes.
Congressional Interest
Some have proposed altering the balance between receipts
and appropriations by funding new or ongoing water
projects (such as those related to drought) with dedicated
funding from the Reclamation Fund. In the 115th Congress,
S. 1556, the Authorized Rural Water Project Completion
Act, proposes to direct $115 million annually from FY2018
to FY2038 ($2.3 billion total) that otherwise would have
been credited to the Reclamation Fund to a set of newly
established accounts to fund qualifying BOR rural water
projects ($80 million per year) and water rights settlements
($35 million per year). These funds would be available for
expenditure by the Secretary of the Interior without further
appropriation (i.e., mandatory funds).
Congress has previously enacted changes to how the
Reclamation Fund may be used in future years. Title X of
the Omnibus Public Lands Management Act of 2009 (P.L.
111-11) redirected $120 million per year of Reclamation
Fund receipts for FY2020-FY2034 toward qualifying
Indian water rights settlement projects, without further
appropriations. (For more information, see CRS Report
R44148, Indian Water Rights Settlements.)
Charles V. Stern, Specialist in Natural Resources Policy
https://crsreports.congress.gov
IF10042
The Reclamation Fund
Disclaimer
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