And now for something completely different: Market prices

Montana will use the market to manage demand for some hunting licenses; other states place limits, tinker with nonresident fees

David Fettig | Editor

Published April 1, 1996  | April 1996 issue

When a group of Montana citizens and state officials sat down to determine a market price for the state's new variable-priced, big game hunting licenses for nonresidents, they had no historical precedent to follow, because it was the first time that Montana or any other state had attempted such a plan.

So they did the logical thing: They guessed.

Not really, but if you ask Russ Smith, a Montana hunting outfitter and a member of the advisory council established to develop the new pricing structure, that's what he'll tell you. And then he'll laugh. "I'd give us the benefit of the doubt," Smith continues, still laughing, "and call it an educated guess."

Rob Brooks, bioeconomist for Montana's Fish, Wildlife and Parks Department (FWP), understands that response and appreciates the humor. Brooks says it was difficult—absent historical data or such tools of the trade as demand models—to determine the new price for the nonresident big game licenses. Previously, Montana—like other states—managed the demand for such licenses by establishing a quota; in Montana's case, the quota was filled by lottery. Under the new plan, though, Montana will use price to ensure that demand for the licenses is equal to the supply of licenses that the state is willing to offer.

Montana's introduction of variable-priced hunting licenses is perhaps the most dramatic example of how a Ninth District state has decided to introduce price to manage demand for one of its resources, and also to raise revenues. Other states have routinely varied some pricing plans for hunting and fishing licenses, as well as for management of their park systems, and Minnesota is considering the use of toll roads and congestion pricing to manage traffic in the Minneapolis/St. Paul metro area.

Montana guaranteesa license, but at a price

For years, nonresidents who wanted to hunt big game in Montana had one option: submit a nonrefundable deposit and enter their names in a lottery. For lottery losers, their deposit would remain with the state's FWP Department and their name would automatically be entered in the following year's lottery.

This process not only wreaked havoc with a hunter's vacation expectations, but also impacted the business of Montana's hunting outfitters, those individuals who provide hunting guides and/or room and board for hunters. Of the state's 17,000 nonresidential big game licenses, 5,500 are reserved for outfitters. These outfitters accept reservations for their services well in advance of the lottery disbursal, which means that in recent years, depending on the luck of the draw, an outfitter could lose as much as 40 percent of his planned business, since many of his pre-registered hunters inevitably lost out in the lottery.

At the same time that outfitters and hunters were bemoaning this process, there was growing interest in offering compensation to landowners to encourage them to open more of their land to hunters. In addition to its wildlife, one of the Montana hunting industry's biggest selling points is its expansive and often attractive landscapes, and hunting advocates are eager to add more acreage for hunting, says Mike Korn, landowner /sportsmen relations coordinator for the FWP. Korn says the state has a long tradition of landowner cooperation with hunters, but some landowners have been reluctant to open their land because of the cost and nuisance. In addition, there has been a growing recognition that all landowners should receive compensation for providing access to their land.

The concerns of outfitters, hunters, landowners and those who benefit from a thriving hunting industry in the state led Montana Gov. Mark Racicot to form the Private Land/Public Wildlife Advisory Council that worked with the FWP and Montana's lawmakers to develop a solution. The answer was House Bill 195, passed by the state Legislature in 1995 and taking effect this year. The bill's highlights:

  • The market price for the 1996 outfitter-sponsored big game combination license is $835, and allows the purchaser to hunt elk, deer, upland game birds and includes a full-season fishing license. For $515, a hunter can receive a combination license that does not include elk. These licenses are guaranteed for nonresidents who hunt with a Montana outfitter. Any of the market priced licenses that aren't sold will be added to the general lottery.

  • The new market prices have been established to limit demand for the big game combination licenses to 5,500 sales, and the deer combination to 2,300. Each year, depending on the demand for the new licenses, the price will be reviewed and possibly reset. For example, if less than 5,500 of the licenses are sold, the FWP may adjust the price downward; likewise, if more than 5,500 are sold, the price may rise.

  • Nonresidents also have the option of entering a lottery for one of the 11,500 big game licenses for $475—the lottery success rate in 1995 was 40 percent; or nonresidents can enter the lottery for one of the 2,300 deer combination licenses at $245—1995 success was about 20 percent.

  • All additional dollars generated from the sale of the new licenses will go to provide benefits for landowners who agree to provide public access, at no charge, to hunters.

"All of a sudden, sportsmen are happy because they have more land to hunt on," says Smith; also, landowners are pleased with the compensation, outfitters are guaranteed a full fall schedule, and nonresident big game hunters can plan on getting their license—for an extra $360.

"There's been some resistance to the increased price, but we have to deal with that," says Smith, who says the new system is working well for him. "I will be able to stay in business this fall," he says.

The state has received some criticism that the new pricing structure means only the rich will be allowed to hunt in Montana, says Brooks, the FWP's bioeconomist. But he scoffs at that notion. Based on a survey of nonresident hunters who use outfitters, over 70 percent earn more than $80,000 annually, and all nonresident big game hunters—regardless of their earnings—spend between $3,000 and $4,000 per trip.

"An extra $360 is a pittance, really," says Brooks. Besides, hunters who want to pay less can still apply for a license through the lottery, and they also receive the benefits of increased acreage opened to all hunters, Brooks says.

How did Montana determine the new price?

Those surveys of hunter expenditures were important to the FWP and the governor's advisory council when they tried to determine the price for the guaranteed licenses. They considered the incomes and education levels of hunters who used outfitters and those who did not. They calculated the ratio of the license fee to the total cost of the trip for those who did not use outfitters, and then applied that ratio to those who use outfitters, on the theory that those who choose to use an outfitter should at least pay the same ratio as those who don't, or can't, use an outfitter. That may not be strong evidence for a new price, but it was at least something to consider, Brooks says. "We're grasping here."

State officials also knew that an even more unlikely source would also help them determine the price: the amount of coverage the state receives in hunting magazines. It is generally understood, Brooks says, that if a state receives a large amount of favorable coverage in hunting magazines in a given year, then requests for licenses from nonresidents will increase.

FWP and the governor's advisory council also studied other states' attempts to control demand for certain hunting licenses, but none offered a good model. One state raised its nonresident price but then allowed an unlimited number of nonresidents to hunt. Montana, though, wants to limit the number of nonresident big game hunters to an average of 5,500 from 1996 to 2000, when the bill expires and will be considered for renewal. Other states severely limit the number of days that nonresidents can hunt, or they restrict nonresident hunters to only certain areas, but Montana wants nonresident hunters to enjoy the full hunting season and to explore the whole state.

Brooks and his colleagues initially came up with a price of $875—$40 more than was ultimately established. They then presented the price, and their rationale, to economists at the University of Montana and Montana State University, and those economists generally concurred. Finally, Brooks met with the advisory council, and after nearly two days of meetings—and after considering prices ranging from $785 to $1,000—the council settled on $835.

One important feature of Montana's new pricing structure, and one that Brooks had to sometimes fight for, is that there is no upper limit to the number of nonresident big game combination licenses that can be sold. Some people were getting nervous about guaranteeing a license, for fear that too many would apply. "In any given year, if 8,000 put in their money, they're going to get their license. There's no upper limit," Brooks says. You can't put a cap on the number of annual licenses if you want a market-based system, Brooks says, otherwise you just have another form of quotas. "You have to give the market place a little bit of wiggle room."

Technically, however, while there is no annual cap, there is a cap on the five-year program—only 27,500 of the licenses can be sold by the year 2000. So, if the demand goes well beyond 5,500 in a given year, the price will be adjusted upwards enough to limit applications. After a couple of years of running the program and accruing data, it will become easier to manage the number of licenses, Brooks says.

As for the landowners, the FWP's Mike Korn says the department has not finalized its reimbursement program for landowners that allow hunters on their property, but the landowners may be given a lump sum for enrolling their property—say, $500—and then receive a payment for each day a hunter spends on their land; for example, $6 per day, with an additional payment of, perhaps, $2 per day if landowners place no seasonal or species restrictions on their property.

Currently, of the 94 million acres in Montana, about 5.1 million acres are open to hunting—3.5 million of those acres are private land. With the new incentives, Korn would like to see the private acreage at least double, bringing the total hunting acreage to about 10 million.

Other states, other plans

In 1993, North Dakota's Game and Fish Department, raised the price of its nonresident small game hunting license from $64 to $83 because of pressure from in-state hunters who had begun to resent the growing numbers of hunters from other states. Following the price increase, the state promptly sold 17,128 of the licenses in 1993, an increase of 1,316, or about 8.3 percent. After dipping the following year, 1995 sales were 17,368. "It was opposite of what you'd think," says Paul Schadewald, chief of Game and Fish Administrative Services. Those increased sales, of course, were heartwarming to businesses that benefit from out-of-state hunters.

Apparently the state's hunting reputation had a greater effect on nonresident hunters than the increase in price, Schadewald says. Rather than readjust the price to try to reach a point where it would become high enough to discourage applications, Schadewald says the state has thus far chosen not to revisit the issue.

In South Dakota, which enjoys a good hunting reputation, especially for pheasant, there are no plans to alter nonresident fees to manage demand. Al Bahi, of the state's Department of Game, Fish and Parks, says the state is currently reviewing all of its licenses and fees, but with no intention to manage nonresident applications through price. South Dakota currently holds a drawing for deer and antelope licenses. The state is committed to setting prices that "reflect an affordable, quality hunt," Bahi says.

While states routinely charge more to nonresidents for fishing licenses, no states have instituted pricing schemes to limit nonresident fishing licenses.

Parks are another service where states often adjust prices, mostly to reflect market demand and to keep prices in line with private campsites, but sometimes to manage nonresident use. About 10 years ago in Wisconsin, after receiving complaints from residents who resented all of the out-of-state license plates in their parks, the Wisconsin Legislature voted to increase park fees for nonresidents—current rates for nonresidents are $2 above resident fees for daily park and usage fees, and $7 higher for an annual admission sticker. "That's not that far apart, but it's enough for people to notice it," says Kimberly Currie, Wisconsin Parks Customer Relations Manager.

Immediately after the price increase, nonresident demand for Wisconsin parks tumbled, along with revenues. This may have pleased Wisconsin campers, but in a state where tourism is the second largest industry, many others are concerned, Currie says. Even though some may have the perception that Wisconsin parks are full of nonresidents, that's not the case, she says.

A 1994 report by a "blue ribbon task force" on Wisconsin state parks, listed the elimination of sticker price differentials as one of its high priorities. "Revenues from nonresident annual sticker sales have been less at the current $24 rate [now $25] than when nonresident stickers sold for $20. ... This means residents have to pick up more of the costs of maintaining parks."

In an official response to the task force, the state's Natural Resources Board wrote last year: "Decrease the resident-nonresident sticker price differential. If it is necessary to ask for increased park sticker fees in the budget, we will request that only resident fees be increased. While this is not a popular approach, Wisconsin is one of only a few states that charge nonresidents more than residents for park admissions. Nonresident tourists are key contributors to Wisconsin's economy."

Wisconsin's lessons have not been lost on their neighboring park systems. Dan Breva, operations coordinator for Minnesota State Parks, said campers and park users are sensitive to price, and he wasn't surprised that Wisconsin's measures ended up reducing revenue. Neil Lacasse, supervisor of concession operations with Michigan's Department of Natural Resources-Parks and Recreation Division, says Michigan has crowding problems in some of its parks, but the state will not use price to discourage nonresidents. He says that Wisconsin's increased nonresident fees were the best thing that ever happened to Michigan parks.

"The park system should be viewed as a drawing card for tourism," Lacasse says. "Higher nonresident fees are not exactly what you'd call a policy to increase tourism."