WASHINGTON - Oregon Sen. Gordon Smith says he will fight hard to renew a program that has pumped more than $2 billion into Oregon and other states hurt by logging cutbacks on federal land. But the Republican said rural counties and school districts across the West should not depend on the federal subsidies indefinitely.

“I have a duty to my colleagues in county government to remind them this was a temporary program. This was never meant to be a permanent thing,” Smith said in an interview with The Associated Press.

Smith said he was speaking out because many counties - including some in Oregon - are locking the federal payments into their operating budgets for such basics as schools and roads.

“This is a mistake,” Smith said. “It just isn't wise to lock it into permanent baseline budgets.”

Instead, counties should try to diversify their economies and move forward with multiple use of national forests - including increased timber production, Smith said.

“That's the old-fashioned way, that's the American way,” he said. “And that is truly more healthy for Oregon than this notion held by some editorial writers that this is a long-term entitlement due timber-dependent communities.”

Asked if he was scolding the very people he represents in Congress, Smith said no.

“My duty is to go to bat for Oregon every time I'm asked, and do that as well as I can for our people. I will do that,” he said. “But I owe the people of Oregon an honest discussion of the difficulty we're in.”

Gil Riddell, policy manager of the Association of Oregon Counties, said Smith's message has been heard, but added: “Let's be clear: That money is going into (operating) budgets because it has to.”

Indeed, at least 10 counties in Oregon depend on federal payments for more than 40 percent of the budget, Riddell said. Three counties - Curry, Douglas and Grant - receive more than 60 percent of their revenue through the county payments law.

The six-year-old law, formally known as the Secure Rural Schools and Community Self-Determination Act, has helped offset sharp declines in timber sales in Western states in the wake of federal forest policy that restricts logging to protect endangered species such as the spotted owl.

Oregon received more than $190 million in the current budget year, followed by California ($64.6 million), Washington ($41.8 million) and Idaho ($21 million).

While most local officials recognize the timber program is temporary, the reality is that without the payments, many rural counties and school districts would face economic ruin, Riddell said.

That's because Oregon and other Western states are so dominated by federal lands that local officials have little choice but to use federal money to fund operating budgets, he said.

“They are such an enormous neighbor,” he said, referring to federal agencies such as the Forest Service and Bureau of Land Management. “It's hard to build or sustain” alternative industries that could help the regions survive economically on their own.

Smith said most members of Congress support reauthorization of the timber law. The Bush administration supports the program, but has proposed phasing out funding by 2011.

The president's budget would give schools $320 million next year, but spending would drop sharply after that, to just $40 million in the final year. The administration would pay for the $800 million program by selling up to 300,000 acres of national forest - a plan lawmakers from both parties oppose.

Smith called the land sale plan dead, and said opponents should concentrate on finding ways to fund the program beyond what Bush has proposed.

“That's not going to happen, so everybody ought to take a breather,” he said of the land sales.

Smith said he was open to a plan by Democratic Sens. Max Baucus of Montana and Ron Wyden of Oregon to pay for the program by closing a tax loophole for government contractors, but needed to see more details.

A spokeswoman for Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, said the loophole idea was included in a report received last year by Congress.

“Chairman Grassley continues to look at the report's many recommendations and consider whether to work to enact them,” said spokeswoman Jill Gerber. “That applies to this provision.”

Smith said he was optimistic the timber law will be renewed, but said the discussion underlined a basic reality: “how hard it is to push this string uphill.”