The report by the Government Accountability Office, the investigative arm of Congress, said costs of caring for wild horses have skyrocketed in recent years and likely will account for 74 percent of the program's overall budget this year, or more than $27 million.
Within its current budget, "BLM cannot afford to care for all the animals off the range, while at the same time manage wild horse and burro populations on the range," the report said.
The BLM determines how many wild horses can graze in various areas and rounds up the excess number to protect the herd, the range and other foraging animals. The horses are offered for adoption.
There are about 33,000 wild horses on the range in 10 Western states, half of those in Nevada. The BLM has set a target "appropriate management level" of horses at 27,000. About 30,000 more horses are in holding facilities.
Tom Gorey, a BLM spokesman in Washington, D.C., said the agency welcomed the findings.
"The GAO report correctly depicts the difficult situation that the BLM finds itself in with regard to maintaining unadopted or unsold animals in holding facilities," Gorey said in a written statement.
In late June, BLM Deputy Director Henri Bisson said the agency would consider killing and selling horses to reduce costs.
The report noted the agency has authority to euthanize or sell large numbers of horses without restrictions but has not done that because of fear of outrage from the public or Congress.
Other options could be explored, the report said, including relocating infertile herds to areas outside original boundaries set by the 1971 Wild Horse and Burro Act, or giving tax breaks to large land owners willing to care for large numbers of animals.
Some of those measures, however, are outside the agency's authority and would require congressional approval.
The BLM has relied on adoption programs that require people who adopt the animals not to sell them for slaughter. The agency also keeps older animals or those deemed unadoptable in long-term facilities. Some live for 15 to 20 years in the pens.
Some advocates say horse populations are a result of years of mismanagement by the BLM. They also say horses are given short shrift on public lands because they compete with livestock for available forage.
Advocates could not be reached for immediate comment on the lengthy report, but they have said other alternatives need to be considered.
"There are better ways to deal with the problems BLM is facing," Lacy Dalton, president of the Let 'Em Run Foundation, said in July. Dalton says the government should build sanctuaries and give tax breaks to ranchers who let wild horses in their grazing areas.
"These horses are a beautiful symbol of this country, and I believe the public will not stand for their deaths. The public is willing to do what they can to prevent that," Dalton said.