The Reclamation Fund

The Reclamation Fund

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Updated May 21, 2019
The Reclamation Fund
The Reclamation Act of 1902 authorized the Secretary of
projects, such as the Pick-Sloan Missouri Basin Program
the Interior to construct irrigation works in western states
and the Central Valley Project, also provided significant
through the Reclamation Service (later renamed the Bureau
hydropower revenues. Hydropower revenues from some
of Reclamation [BOR or Reclamation]). It also established
other projects (e.g., the Boulder Canyon Project, the
the Reclamation Fund to pay for these projects. The
Colorado River Storage Project, and the Colorado River
Reclamation Fund was established as a special fund within
Basin Project) are deposited into their own special funds
the U.S. Treasury. (Special funds are fund accounts for
and utilized for project operations and maintenance and
receipts and spending with specific taxes or revenues
other project-related purposes in accordance with
earmarked for a specific purpose.) The fund was designated
congressional direction. Major sources of receipts credited
to receive receipts from the sale of federal lands in the
to the Reclamation Fund are shown below in Table 1.
western United States, as well as other sources. It was
originally conceived as a revolving fund (i.e., a business-
Table 1. Major Reclamation Fund Revenue Sources
like fund). That is, after its initial capitalization by federal
Year
appropriations, receipts from existing project repayments
Source
Description
Authorized
were expected to fund new projects. Congress later made
substantial changes to the fund, including adding new
Public Land and
95% of proceeds from
1902
receipt sources and making it subject to annual
Timber Sales
sales in western states
appropriations.
BOR Project
100% of receipts/proceeds
1902
Early Issues with Reclamation Fund
Repayments and
During its early years, the Reclamation Fund was unable to
Water
operate as a revolving fund. Due in part to difficulties
Contracts/Sales
maintaining the fund’s solvency, Congress provided it with
BOR Project
100% of proceeds
1938
additional funding and made changes to the fund over time.
Power Revenues
Following its earliest construction projects, the fund
received additional amounts from Congress via the
Federal Public
40% of bonuses, royalties,
1920
Treasury’s General Fund in 1910 ($20 million) and 1931
Lands Natural
and rentals from onshore
($5 million). In an effort to avoid future funding shortfalls,
Resource Royalties
public lands (excluding
Congress in 1914 limited Reclamation’s ability to carry out
Alaska)
the 1902 act to those items for which Congress made annual
Sources: 43 U.S.C. §391; 43 U.S.C. §392a; 30 U.S.C. §191.
appropriations to BOR (thereby rescinding its ability to
build projects without further appropriation). Despite these
Recent Trends
changes, the Reclamation Fund was not sufficient to fund
After the Reclamation Fund’s early issues with solvency, it
many of the large investments in water infrastructure
maintained a relatively stable balance through the early
throughout the West that were initiated beginning in the
1990s. At that point the fund’s balance began to increase as
1930s. Thus, construction of some large projects (e.g.,
revenues from natural resource royalties significantly
Hoover and Glen Canyon Dams) was funded by the
exceeded appropriations from the fund. For every year
General Fund.
since FY1994 except FY2009—when the American
Revenue Sources
Recovery and Reinvestment Act (P.L. 111-5) also
appropriated funding for Reclamation projects from the
Originally, the Reclamation Fund was expected to be
fund—receipts going into the Reclamation Fund have
funded by three main revenue sources: public land and
exceeded appropriations made from it by more than $100
timber sales in the western United States, BOR project
million. From FY2010 to FY2018, the average difference
repayment, and BOR project water contracts and sales. (The
between credits and appropriations was $980 million. As of
latter two categories are typically referred to collectively as
the end of FY2018, the fund’s balance was $16.6 billion.
proprietary receipts.) As a result of the aforementioned
Trends in fund credits, appropriations, and balances are
shortfalls in the fund, over time Congress directed
shown below in Figure 1.
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
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The Reclamation Fund
Figure 1. Reclamation Fund Receipts and
with actual appropriations by Congress. The current surplus
Appropriations, FY1990-FY2018
reflects the fact that over time, receipts have significantly
exceeded appropriations. Some point out that this runs
contrary to congressional intent. However, Congress’s
direction since 1914 that fund expenditures be subject to
annual appropriations means that congressional
appropriators have the final say on whether appropriations
are set at a level that corresponds with receipts. 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 but
has generally chosen not to do so.
Some have proposed increasing appropriations from the
Reclamation Fund either by funding new projects or as a
supplement to ongoing authorized Reclamation 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 the
overall level of discretionary appropriations from the
Reclamation Fund to match collections, but such an
Source: CRS, based on Bureau of Reclamation data.
increase would have to occur despite competition with other
Note: Balances reflect FY2017-FY2018 balance reconciliation
appropriations accounts (including those from the
adjustment of $2.1 bil ion.
Treasury’s General Fund) that factor into the congressional
budget allocation process. Congress could also dedicate
Appropriations. Most expenditures of Reclamation Fund
revenue accruing to the Reclamation Fund to a subset of
balances are made through appropriations for
specific projects or to a new account or accounts focusing
Reclamation’s Water and Related Resources account,
on specific goals. This could be done via discretionary
which funds operations and maintenance and construction
funding or mandatory funding. In the latter case,
costs for designated BOR water projects. (As noted above,
congressional PAYGO requirements may necessitate
some Reclamation projects are funded by the General Fund
offsets corresponding to these changes. Thus, some have
or by individual project funds.) Appropriations are also
pushed for changes outside of the 10-year scoring window.
made for the expenses under Reclamation’s Policy and
Administrative account (approximately $60 million/year)
Congressional Interest
and Western Area Power Administration’s construction and
Some in Congress have pointed to the discrepancy between
maintenance activities (approximately $180 million/year).
Reclamation Fund receipts and appropriations and
From FY2003 to FY2018, average appropriations from the
advocated for newly dedicated funding from the
fund have been $1.024 billion.
Reclamation Fund. In the 116th Congress, H.R. 2473, the
Securing Access for the Central Valley and Enhancing
Receipts. Average receipts from FY2003 to FY2018 were
Water Resources Act (SAVE Act), proposes to direct $300
approximately $1.785 billion per year. Receipts from
million annually, without further appropriation, from
natural resource royalties and hydropower sales are by far
FY2030 to FY2060 that would have otherwise been
the largest sources of credits to the fund and the primary
credited to the Reclamation Fund. This funding is to be
reason for the fund’s recent increasing balance. Over the
made available for (1) authorized surface and groundwater
aforementioned period, 90% of the Reclamation Fund’s
storage projects, (2) authorized water reclamation and reuse
receipts came from these two sources, including 74% from
projects, and (3) WaterSmart program water
natural resource royalties. Based on the source (by state) of
efficiency/conservation grants. Each category would
natural resource royalties credited to the Reclamation Fund,
receive $100 million per year.
CRS estimates that an average of 98% of natural resource
royalty receipts came from seven western states: Wyoming
Previously enacted legislation has also altered the
(50%), New Mexico (27%), Colorado (7%), Utah (7%),
distribution of funds related to the Reclamation Fund. Title
California (3%), Montana (2%), and North Dakota (2%).
X of the Omnibus Public Lands Management Act of 2009
(Pursuant to statute, natural resource royalties from Alaska
(P.L. 111-11) redirected $120 million per year of
are handled separately and do not accrue to the Reclamation
Reclamation Fund receipts for FY2020-FY2034 toward
Fund.)
qualifying Indian water rights settlement projects without
further appropriations. The FY2020 budget request includes
Understanding “Surplus” Fund Balances
mandatory funding for these projects. (For more
Similar to other special funds that are subject to
information, see CRS Report R44148, Indian Water Rights
appropriation, the Reclamation Fund is an accounting
Settlements.)
mechanism within the larger federal budget. Thus, the
fund’s multi-billion-dollar “surplus” balance does not
Charles V. Stern, Specialist in Natural Resources Policy
represent real resources available for spending. Instead, it
reflects a record of the fund’s authorized uses compared
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The Reclamation Fund

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