The National Forest System was formed in 1905 from the Forest Reserves, which were established between 1891 and 1905 by presidential proclamation. During that time, 153 million acres of forestlands were set aside in Forest Reserves and removed from future settlement and economic development. This imposed great hardships on those counties that were in and adjacent to these new reserves. In many cases, 65 to 90 percent of the land in those counties was sequestered in the new forest reserves, leaving little land for settlement, economic development and diminishing the potential tax base to support essential community infrastructure such as roads and schools. There was considerable public opposition in the forest counties to establishing these reserves.

In 1908, in response to the mounting opposition to the reserves in the West, Congress passed a bill which created a revenue sharing mechanism to offset for forest counties the effects of removing these lands from economic development. The 1908 Act specified that 25% of all revenues generated from the multiple-use management of our National Forests would be shared with the counties to support public roads and public schools. People in our forest counties refer to this as the "Contract with the People of Rural Counties" which was part of the foundation for establishing our National Forest System. This mitigation mechanism was and continues to be a part of the foundation of our National Forest System.

It was the intent of Congress in establishing our National Forests, that they would be managed in a sustained multiple-use manner in perpetuity, and that they would provide revenues for local counties and the federal treasury in perpetuity as well. And, from 1908 until about 1986, this revenue sharing mechanism worked extremely well. However, from 1986 to the present, we have, as a result of environmental activism, lawsuits, and legal challenges reduced our active multiple-use management of the National Forests and revenues have declined precipitously. Most counties have seen a decline of over 90% in actual revenues generated on our National Forests, largely as a result of the decline in all forms of timber harvesting, grazing, and minerals extraction.