Leaders from the state’s coal-producing regions want counties to receive a greater share of coal severance tax revenue.
Funds from the severance tax are split evenly between the state and counties. They have declined in recent years as a result of Kentucky’s flagging coal industry. Webster County Judge/Executive Jim Townsend said his county’s severance tax revenue has declined from $6 million per year in 2011 to $300,000 last year.
“If something isn’t done, our county’s going to go out of business, it’s just that simple,” Townsend said.
Counties often use their shares of the funds for local projects such as parks, senior centers, rescue squads and industrial parks.
Miners are extracting less coal from the mountains of Kentucky and companies are selling it for cheap, leading to massive declines in severance tax revenue going to county coffers.
Statewide, coal severance revenue dropped from $20.5 million per month in January 2011 to $8.9 million last month.
House Speaker Greg Stumbo, a Democrat from Prestonsburg, said the state needs to give up part of its share of the severance tax for the sake of counties that need the funds.
“What I would suggest that the General Assembly do is start weaning back some of the money that the state gets from the severance tax and returning it to these counties, knowing that probably this downward spiral will continue,” Stumbo said.
Senate President Robert Stivers, a Republican from Manchester, said coal severance funds are sometimes spent on questionable projects. He blamed Democrats, who controlled the legislative process for much of the past half-century.
“They have wasted millions of dollars for things that don’t sustain functions or create job opportunity, and that was the whole rationale behind the severance tax years ago,” Stivers said.
About $2.5 million in coal severance funds was used to design a recent renovation of Rupp Arena in Lexington.
Several bills have been proposed that would increase the percentage of severance revenue going to counties, including one that would send 70 percent of revenue to counties.
The proposals will be considered in budget negotiations, which must be settled by the time the legislature closes the session on April 13.