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Updated April 12, 2018
The Reclamation Fund
The Reclamation Act of 1902 authorized the Secretary of
and the Central Valley Project, also provided significant
the Interior to construct irrigation works in western states
hydropower revenues. Hydropower revenues from some
through the Reclamation Service (later renamed the Bureau
other projects (e.g., the Boulder Canyon Project, the
of Reclamation [BOR]). It also established the Reclamation
Colorado River Storage Project, and the Colorado River
Fund to pay for these projects. The Reclamation Fund was
Basin Project) are deposited into their own special funds, in
established as a special fund within the U.S. Treasury.
accordance with congressional direction. Major sources of
(Special funds are fund accounts for receipts and spending
receipts credited to the Reclamation Fund are shown below
with specific taxes or revenues earmarked for a specific
in Table 1.
purpose.) The fund was designated to receive receipts from
the sale of federal lands in the western United States, as
Table 1. Major Reclamation Fund Revenue Sources
well as other sources. It was originally conceived as a
Year
revolving fund (i.e., a business-like fund). That is, after its
Source
Description
Authorized
initial capitalization by federal appropriations, receipts from
existing project repayments were expected to fund new
Public Land and
95% of proceeds from
1902
projects. Congress later made substantial changes to the
Timber Sales
sales in western states
fund, including adding new receipt sources and making it
subject to annual appropriations.
BOR Project
100% of receipts/proceeds
1902
Repayments and
Early Issues with Reclamation Fund
Water
During its early years, the Reclamation Fund was unable to
Contracts/Sales
operate as a revolving fund. Due in part to difficulties
BOR Project
100% of proceeds
1938
maintaining the fund’s solvency, Congress provided it with
Power Revenues
additional funding and made changes to the fund over time.
Following its earliest construction projects, the fund
Federal Public
40% of bonuses, royalties,
1920
received additional amounts from Congress via the
Lands Natural
and rentals from onshore
Treasury’s General Fund in 1910 ($20 million) and 1931
Resource Royalties
public lands (excluding
($5 million). In an effort to avoid future funding shortfalls,
Alaska)
Congress in 1914 limited Reclamation’s ability to carry out
Sources: 43 U.S.C. §391; 43 U.S.C. §392a; 30 U.S.C. §191.
the 1902 act to those items for which Congress made annual
appropriations to BOR (thereby rescinding its ability to
Recent Trends
build projects without further appropriation). Despite these
After the Reclamation Fund’s early issues with solvency, it
changes, the Reclamation Fund was not sufficient to fund
maintained a relatively stable balance through the early
many of the large investments in water infrastructure
1990s. At that point the fund’s balance began to increase as
throughout the West that were initiated beginning in the
revenues from natural resource royalties significantly
1930s. Thus, construction of some large projects (e.g.,
exceeded appropriations from the fund. For every year
Hoover and Glen Canyon Dams) was funded by the
since FY1994, except FY2009 (when the American
General Fund.
Recovery and Reinvestment Act [P.L. 111-5] also
New Receipts/Revenue Sources
appropriated funding for Reclamation projects from the
fund), receipts going into the Reclamation Fund have
Originally, the Reclamation Fund was expected to be
exceeded appropriations made from it by more than $100
funded by three main revenue sources: public land and
million. From FY2010 to FY2017, the average difference
timber sales in the western United States, BOR project
between credits and appropriations was $1.027 billion. As
repayment, and BOR project water contracts and sales (the
of the end of FY2017, the fund’s balance was $13.8 billion.
latter two categories are typically referred to collectively as
Trends in fund credits, appropriations, and balances are
proprietary receipts). As a result of the aforementioned
shown below in Figure 1.
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 project 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, such as Grand Coulee Dam and Shasta Dam. Later
projects, such as the Pick-Sloan Missouri Basin Program
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The Reclamation Fund
Figure 1. Reclamation Fund Receipts and
appropriations by Congress. The surplus balance tracked for
Appropriations, FY1990-FY2017
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
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
Source: CRS, based on Bureau of Reclamation data.
discretionary appropriations from the Reclamation Fund to
match collections, but such an increase still would have to
Appropriations. Most expenditures of Reclamation Fund
compete with other appropriations (including those from
balances are made through appropriations to the Bureau of
the Treasury’s General Fund) as they would be subject to
Reclamation’s Water and Related Resources account,
congressional 302(b) allocations. Congress also could
which funds operations and maintenance and construction
dedicate a stream of revenue from the Reclamation Fund
costs for designated BOR water projects. (As noted above,
for a subset of specific projects or to a new account. This
other projects are funded by the General Fund or by
could be done with or without further appropriations (i.e.,
individual project funds.) Appropriations also are made for
discretionary funding or mandatory funding). Congressional
the expenses under Reclamation’s Policy and
PAYGO requirements might necessitate offsets in
Administrative account (approximately $60 million/year),
mandatory spending corresponding to these changes.
and Western Area Power Administration’s construction and
maintenance activities (approximately $180 million/year).
Congressional Interest
Since FY2003, average appropriations from the fund have
Some have proposed altering the balance between receipts
been $1.006 billion.
and appropriations by funding new or ongoing water
projects (such as those related to drought) with dedicated
Receipts. Average receipts since FY2000 have been
funding from the Reclamation Fund. In the 115th Congress,
approximately $1.782 billion. Receipts from natural
S. 1556, the Authorized Rural Water Project Completion
resource royalties and hydropower sales are by far the
Act, proposes to direct $115 million annually from FY2018
largest sources of credits to the fund and the primary reason
to FY2038 ($2.3 billion total) that otherwise would have
for the fund’s recent balance increase. From FY2003 to
been credited to the Reclamation Fund to a set of newly
FY2017, 91% of the Reclamation Fund’s receipts came
established accounts to fund qualifying BOR rural water
from these two sources, including 75% from natural
projects ($80 million per year) and water rights settlements
resource royalties. Based on the source (by state) of natural
($35 million per year). These funds would be available for
resource royalties credited to the Reclamation Fund from
expenditure by the Secretary of the Interior without further
FY2003 to FY2017, CRS estimates that an average of 98%
appropriation (i.e., mandatory funds).
of natural resource royalty receipts came from seven
western states: Wyoming (50%), New Mexico (27%),
Congress has previously enacted changes to how the
Colorado (7%), Utah (7%), California (3%), Montana (2%),
Reclamation Fund may be used in future years. Title X of
and North Dakota (2%). (Pursuant to statute, natural
the Omnibus Public Lands Management Act of 2009 (P.L.
resource royalties from Alaska are handled separately and
111-11) redirected $120 million per year of Reclamation
do not accrue to the Reclamation Fund.)
Fund receipts for FY2020-FY2034 toward qualifying
Understanding “Surplus” Fund Balances
Indian water rights settlement projects, without further
appropriations. (For more information, see CRS Report
Similar to other special funds that are subject to
R44148, Indian Water Rights Settlements.)
appropriation, the Reclamation Fund is an accounting
mechanism within the larger federal budget and the fund’s
apparent “surplus” does not represent real resources
Charles V. Stern, Specialist in Natural Resources Policy
available for spending. Instead, it reflects the status of the
IF10042
intended uses of the fund compared with actual
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The Reclamation Fund
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