Daily Independent (Ashland, KY)

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December 9, 2013

SOAR: Creating development fund from coal severance explored

PIKEVILLE — Depending on whom you ask, there are a lot of great ideas or a lot of old ideas at the Shaping Our Appalachian Region (SOAR) Summit here Monday.

But one idea which isn’t all that new stands out and seems to have created the most stir: using coal severance tax funds to create a long-term development fund for the region.

The idea has been around for a while, suggested by community foundations in the region for years and by the Mountain Association for Community Economic Development. But it’s going to be hard to pry those monies from the people and places who now benefit.

Still, when Joe and Tony Sertich of the Iron Range Resources and Rehabilitation Board of Minnesota told the crowd Monday that in their state two-thirds of the severance taxes collected there goes back to a regional board which decides what sort of business development and innovation to support, many in the crowd sat up.

The Minnesota fund was established in the 1970s during a downturn in iron mining similar to the dire coal market for eastern Kentucky coal now. But it now totals $142 million and a regional board uses the interest to fund development projects and even to pay laid off miners for public work projects.

The economic crisis facing eastern Kentucky — which has lost 6,000 coal jobs in a coal-industry dependent economy over the past two years — is the impetus for the summit, convened by Republican U.S. Congressman Harold “Hal” Rogers and Democratic Gov. Steve Beshear.

Joe Sertich told the crowd here Monday morning that paying laid off miners to do public works projects ensures temporarily out of work “get a paycheck and people don’t hook up a U-Haul and take off somewhere else.”

There have been efforts in the General Assembly to return all of the severance tax money to eastern Kentucky — presently half stays in the state General Fund and half goes back to coal-producing counties. But lawmakers can’t meet current state budget needs and have actually cut $1.6 billion from the budget in the past six years.

State Representatives Leslie Combs, D-Pikeville, and Fitz Steele, D-Hazard, have sponsored such legislation in past sessions but couldn’t garner enough support to pass it.

Things don’t look much better in the coming budget session.

Beshear said Monday he sees no way to return more of the severance tax money to the region, at least in the immediate future.

“Obviously our state budget is going to be strapped,” Beshear said when asked about creating such a development fund. “We don’t have a General Fund dollar to waste, so obviously we can’t be fooling with the severance tax formula in this upcoming session.”

Beshear said, however, he’d be interested in talking to officials in the region about creating a development fund with the 50 percent now returned to counties.

But that isn’t going to find a lot of support in the region, said state Rep. Tim Couch, R-Hyden.

“That won’t cut it,” Couch said. Instead, he wants to bring all the severance taxes back to the region and use that which is now devoted to the General Fund to start a development fund.

L. Ray Moncrief, executive vice president and COO of Kentucky Highlands Investment Corporation, a community development financial institution based in London, said it will take more than just coal severance funds to establish an effectively functioning development fund.

“It can’t be all public money,” Moncrief said afterward. “It’s got to be public, private and philanthropic and it’s got to invest in businesses that are local to this area.”

Whether there is an effort to establish such a fund in the 2014 session or not, the excitement in the East Kentucky Expo Center Monday about the idea will probably make it a key issue in eastern Kentucky during the 2015 governor’s race, however.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

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