Politics & Government

Bill would put $7.5 million a year in ‘trust fund’ to help Kentucky’s coal regions

Aerial photo of the Knott County town of Sassafras in Eastern Kentucky.
Aerial photo of the Knott County town of Sassafras in Eastern Kentucky. Charles Bertram

The Kentucky Senate is getting a bill that would create a public corporation authorized to collect $7.5 million a year to diversify the struggling local economies of the state’s coal regions.

The Senate budget committee on Tuesday unanimously approved Senate Bill 215, establishing the Kentucky Coal Fields Endowment Authority.

Money for the authority would come from the state General Fund’s 50 percent share of coal severance tax revenue, estimated to be $112 million this year after deductions for various programs. The other half of that tax revenue is returned by the state to coal-producing counties.

The authority would start an endowment to finance projects in Eastern and Western Kentucky’s coalfields including economic development, public infrastructure, public health and information technology. It would be overseen by a seven-member board appointed by the governor.

Coal-producing counties have watched their coal severance tax revenue plummet in recent years as the mining industry collapsed, so they have little left to spend, said Sen. Brandon Smith, R-Hazard, the bill’s sponsor. Senate President Robert Stivers, R-Manchester, is a co-sponsor.

“This bill was put together to try and bring some sort of stability to the coal regions of Kentucky,” Smith told the Senate panel. “Honestly, if this had been put into play years ago, we would have a tremendous trust fund built up right now that would allow these counties to be able to offset the losses they’re seeing from out-migration and a loss of jobs.”

The local share of coal severance tax revenue that returns to the Knott County courthouse in Hindman has dropped by 90 percent, from about $3 million a quarter to about $300,000, Judge-Executive Zachary Weinberg said in a phone interview Tuesday.

“That’s why we’re all having to erect new revenue streams, which is not popular with our people, to say the least, because they’re struggling, too,” Weinberg said. “We passed an insurance premium of 8 percent in Knott County on everything but life and health insurance. That was a last resort. It was that or else we basically would have to shut down nearly everything that we do.”

Weinberg said he supports Smith’s bill, but he would go further.

“The fact of the matter is, we should be getting all of the coal severance back,” Weinberg said. “I wouldn’t stop at $7.5 million. I just don’t see how the rest of the state should be getting to keep any of it.”

Smith said the authority would complement, not compete with, the federal-state initiative called Shaping Our Appalachian Region. SOAR, a Pikeville-based nonprofit, has an annual budget of about $800,000 in public and private funds that it uses to plan economic diversification projects around Eastern Kentucky. Smith’s bill does not include any formal role for SOAR.

“SOAR has a different mission,” Smith said. “My view of SOAR is, I’m on the ground. I’m looking at a smaller picture than SOAR is. I’m looking at day-to-day stuff like water and sewer projects. They’re looking at bringing in Boeing and coupling that with work skills programs — much bigger stuff that is not in my wheelhouse.”

However, SOAR executive director Jared Arnett said his group would welcome a chance to help decide how the authority’s money is invested in Eastern Kentucky.

Several thousand people have helped SOAR to develop its “Blueprint for Economic Growth” at regional summits, drawing up plans for tourism, broadband, health care, food systems and other economic models that could sustain the region apart from mining, Arnett said.

“This amount of money would be a game-changer,” Arnett said. “We would be able for the first time to make the proactive investments necessary to start some of these local projects.”

John Cheves: 859-231-3266, @BGPolitics