Appalachian Communities Scraping By as Coal Taxes Drop

Appalachian Communities Scraping By as Coal Taxes Drop

Counties in West Virginia, elsewhere lay off employees and weigh consolidating schools amid dwindling revenues tied to coal mining

By Kris Maher in the Wall Street Journal

Just three years ago, Nicholas County in West Virginia had eight working mines and took in $1.2 million from coal-related tax revenue. Today, just one mine is still churning out coal.

The county’s share of the state’s taxes on coal mining, partly based on local production and county population, plummeted to about $100,000 in 2014.

County officials recently responded by laying off 20 employees, including four police officers, meaning there won’t be any officers on duty after 4 p.m., the sheriff said. An additional 74 employees will take a 20% pay cut. A spokesman for the state police said more troopers will be assigned to patrol the county.

 “For the first time that anybody alive can remember, we’re having to lay off some county employees,” said Ken Altizer, president of the Nicholas County Commission. “The biggest reason is the coal severance,” he said, referring to taxes on the amount of coal extracted, or “severed,” from the ground.

For decades, severance taxes paid by coal companies helped fill the coffers of coalfield communities throughout Central Appalachia—roughly encompassing southern West Virginia, eastern Kentucky and southern Virginia. The money helped pay for road and sewer projects, parks, libraries, Little Leagues and more.

In the first decade of the century, revenue grew as the price of coal soared thanks to overseas demand. But since then, markets have cooled, and coal-fired power plants have closed across the nation under pressure from tighter federal emissions standards and a natural-gas drilling boom. Prices for coal in Central Appalachia are down 30% in the past four years.

The decline of coal-related revenue in a region that has often struggled economically even when production was high bodes ill for the future of local communities.

 “Absent the coal industry, the economy in those areas isn’t large enough to support the populations,” said Mark Muchow, deputy secretary of the West Virginia Department of Revenue. “There’s going to be a period of serious adjustment.”

In West Virginia, revenue collected from coal-severance taxes, which were first enacted in 1921, hit a peak of $531.1 million in the fiscal year ended June 2012. In fiscal 2014, the state collected $407.1 million from the taxes. Tax revenue has plunged further in the past nine months.

From mid-2012 to mid-2014, revenue from natural-gas severance taxes rose to $206 million from $91.1 million, roughly making up for the lost coal revenue. But in most cases, the local distribution of severance taxes from the booming natural-gas industry—including in the part of the Marcellus Shale that extends across West Virginia—doesn’t make up for the loss in coal-related revenue in counties that have traditionally relied on coal production.

In Virginia, where companies pay a coal-severance tax at the county or municipal level, counties in the hilly region along the border with West Virginia are also tightening spending.

In Dickenson County, Va., coal-severance revenue is expected to fall to $2.25 million this fiscal year, down from $6.5 million three years ago. In the past four years, the county’s population has fallen to under 14,000 residents from 17,000, as laid-off miners have left to find work elsewhere.

“It’s all coal-related,” said Mike Yates, the county’s commissioner of revenue. He said the county hopes to save money by consolidating schools. Its revenue from natural-gas severance taxes is coming in above projections, and will total more than $600,000 for the current year, but it’s still far less than the amount of lost coal tax revenue. That isn’t expected to change in most counties.

Meanwhile, in Kentucky, state coal-severance taxes fell to $191.3 million in 2014 from $310.5 million in 2012. Earlier this year, officials in Henderson County, in the western part of the state, raised a county tax that insurers pay on premiums they collect to 9.75% from 8% to make up for the drop in its share of state coal-tax revenue from a high of $968,000 in 2012 to $318,000 this year.

Coal operators also pay local property taxes to counties on land, mining equipment and coal inventories, and counties lose a significant amount of revenue when companies shut mines and ship mining equipment elsewhere.

In Mingo County, W.Va., officials are projecting a decline in property taxes of more than $500,000, and roughly the same drop in coal-severance tax revenue.

Greg “Hootie” Smith, a county commissioner, said the county has cut next year’s budget by 22%, and hasn’t allocated any funds to libraries, parks, fire departments and Little Leagues. The county ended funding for an ambulance service, which stopped operating April 1.

“We’re going to have to make tough decisions about layoffs and terminations to make sure we’re in the black,” Mr. Smith said. “We’ve never had to do that before.”

Poster’s comments:

1)      I live in such a place in east Tennessee and on the Cumberland Plateau.

2)      I have personally used my locally mined high quality anthracite coal to cook food for me to eat. It was an experiment that worked.

3)      During the Depression in the 1930’s I read that 1 out of 4 did not have jobs, which of course means 3 out of 4 did have some kind of jobs, like some jobs are probably better than others.

4)      So how “noblesse oblige” and Golden Rule are you in helping our fellow man during hard times when most will most likely be suffering some?