WASHINGTON - The skyrocketing federal cost of preventing and fighting wildfires won't drop until state and local governments and the insurance industry work to stem the number of new homes built near wild lands, lawmakers and officials said Tuesday at a Senate hearing.

Federal agencies responsible for fire suppression also came under criticism at the Energy and Natural Resources Committee hearing for failing to make needed changes over the past seven years to improve management of wildfires.

In response, the agencies outlined new cost-containment steps they will take this fire season, including putting fire crews and helicopters under more federal control.

The federal government spent $1.9 billion on fire suppression in 2006, the worst wildfire year on record, officials said. Nearly 10 million acres burned.

Senators of both parties said that with the ever-increasing costs of fighting wildfires, the Forest Service does not have money left for its other priorities.

Both lawmakers and witnesses cited two factors adding to the growing wildfire threat. One main cause is the increasing number of new homes being built on border areas known as the wildland urban interface, particularly in the intermountain West.

About 8.4 million new homes, or 60 percent of new homes, were built in the those border areas in the 1990s, officials said.

"Federal fire suppression costs will not go down, they will continue to rise, unless something is done to regulate development in the (wildland urban interface)," said Agriculture Department Inspector General Phyllis Fong. "We have to somehow incentivize state and local governments to regulate development."

Agriculture Undersecretary Mark Rey noted that the growth of such housing has not been a federal responsibility and little has been done about it. He said state and local governments will have to work to slow that growth.

But he also compared today's wildfire planning to where the country was on flood planning 15 or 20 years ago. He suggested that the federal government could provide incentives to the insurance industry to look more closely at fire-prone areas as they have done with flood-prone areas.

The insurance industry in turn could provide incentives for homeowners to incorporate more fire-prevention features or not to build in border areas in the first place, he added.

Another factor in the increasing wildfire threat is the over-accumulation of dead vegetation that can fuel fires. The increase in such hazardous fuels stems from extended drought conditions, widespread disease and insect infestations and the past aversion to the natural use of wildland fire, Fong said.

Sen. Jon Tester, D-Mont., asked whether the federal Healthy Forests Initiative had worked to reduce such fuels. The number of acres needing treatment is actually growing three times faster than the acres treated, responded Robin Nazzaro of the Government Accountability Office.

A report released Tuesday said the GAO has recommended a number of actions over the past seven years that the agencies should take to improve their management of wildland fires.

The agencies "concurred with GAO's recommendations but have not completed, or in some cases have not yet begun, needed actions," the report said.

Additional actions the report said agencies need to take include developing a cohesive strategy identifying options and funding to reduce fuels and address fire problems, clarify their guidance for sharing fire suppression costs with nonfederal entities, and establish clear goals, strategies and performance measures to help contain costs.

Rey said he disagreed over the cohesive fuel strategy criticism, saying the department issued one last April.

"As I understand it, GAO is not satisfied with that strategy because it doesn't provide multi-year funding assessments for fuels treatment priorities," Rey said. "We respectfully disagree with the utility of those kinds of multi-year funding estimates, because conditions on the ground change priorities as years play out."

The government has reduced hazardous fuels on 20 million acres since 2001 and is encouraged at its overall progress, said Nina Rose Hatfield, Interior deputy assistant secretary.

Rey announced new cost-containment measures that will be put in place for the 2007 fire season and beyond. They include a draft guidebook with a strategy for managing fires in relation to the risk they pose to property or communities; an individual chosen by the Forest Service chief to provide oversight on fires of national significance; and improved cost management of helicopters.

Also, smoke jumpers, hot shot crews and helicopters will be treated as "national assets" and moved to areas and incidents through more centralized management, Rey said.

After the hearing, Rey said that change may make some governors nervous.

"It's going to be a politically sensitive issue," he said.

He also criticized lawmakers for their role in cost containment problems. He said they tell him in January that cost containment is an important priority, but it becomes less so in August when fires are burning.

"The greatest inconsistency that I see in the fire program is the advice I get from elected officials while the fires are burning as compared to the advice I get after the money has been spent to put them out," Rey said. "And that's elected officials at all levels of government."