The General Assembly briefly returns to session this week, though the real work will not take place until February and March. One key topic legislators should address, though it has not received much attention in the statewide press, is what to do with the state’s coal-severance tax.
As we reported Jan. 2, one bill that has already been proposed would return all coal-severance tax receipts to coal-producing counties and would streamline the complicated distribution process by simply turning the money over to local governments.
If that sounds like a good idea to you, don’t get your hopes up. While we would certainly be in favor of returning more coal tax money to the counties from which it originates, the political reality is that state government is itself strapped for cash, and we cannot see any proposal to take money out of the general fund gaining much traction. Nor can we see legislators voting to strip themselves of the authority to determine how a third of the money is spent through budget line-items.
Still, something must be done. The recent downturn in the coal industry has created a shortfall in anticipated coal-severance revenue, leaving many counties with project plans in the works, but no way to pay for them. Even more troubling is the increasing reliance on coal-severance tax revenue to fund day-to-day expenses.
State law explicitly prohibits using coal-severance revenue to fund administrative functions of local government, with the money instead intended to be used to alleviate the toll the coal industry exacts on local roads and to diversify the region’s economy. However, given that much of the money is currently being spent to provide operational funding for such things as fire departments, senior citizens centers, drug courts and sheriff’s departments, it has become increasingly clear that proscription was written with a wink and a nod.
Floyd County, for example, was slated to receive $2.7 million in the latest round of coal-severance tax funding, though that figure was later revised downward by $1 million due to a shortfall in tax receipts. However, of that $2.7 million, only about 10 percent would have had anything more than a tangential effect on economic development.
The reality is that state legislators are allowing local governments to squander Eastern Kentucky’s future to pay for current basic needs. Instead of forcing city councils, fiscal courts and school boards to make some hard decisions about their spending choices, the legislature is instead enabling local officials to go on their merry way, pretending as if they are not beset by serious budget issues.
It is really not much different than a family, faced with a sudden loss of income, choosing to put groceries and utilities on the credit card and cashing out the 401K to make mortgage payments, instead of looking to cut expenses or find new income. Such temporary fixes provide the illusion that nothing is wrong, until such time as that house of cards collapses.
There is something wrong in Eastern Kentucky. The house of cards has begun to sway. In the very near future, the day of reckoning will arrive, when the money that was supposed pay for our future can no longer pay for our present, and the opportunity to replace that revenue will have been lost.
Legislators must take control of the coal-severance quandary, by insisting that local governments invest the bulk of revenue generated into developing new industry that will provide the tax receipts needed to pay for future needs. It would also help if a portion of coal-severance revenue were to be invested in a trust fund that can serve as a stopgap, once the coal tax begins to dry up.
And maybe, just maybe, coalfield counties can limp by a little longer, if our state senators and representatives exercise a little discipline themselves, and put an end to their habit of allocating every dime of coal-severance tax money to pet projects and political patronage.
— The Floyd County Times