FRANKFORT — A bill filed in advance of this year’s General Assembly would overhaul how money collected from the state’s coal severance tax is spent, by among other things returning 100 percent of the tax to the coal-producing counties that generate it.
Rep. Fitz Steele, a Democrat representing Perry County and a portion of Harlan County, filed the bill Dec. 5. In addition to returning all coal severance funds to coal-producing counties, it would also abolish a fund aimed at industrial development and do away with a program approved during the last legislative session to fund scholarships to the University of Pikeville’s Kentucky College of Osteopathic Medicine.
The way the tax is currently structured, half of all coal severance tax funds collected are assigned to the Local Government Economic Development Fund, which provides grants to industrial projects in coal-producing counties. Of that amount, 15 percent is set aside for the Local Government Economic Assistance program, which provides money directly to city councils and fiscal courts to spend on roads and other specific purposes. Another 5 percent is reserved for transfer to the Kentucky Secondary Wood Products Development Fund.
The remaining money left in LGEDF is split into three equal portions, with one-third going to counties based on tax collected, another third going to counties based on mining employment and earnings, and the final third reserved for projects benefitting two or more coal-producing counties. The grants are administered by the Department of Local Government, although legislators can sidestep the grant application and approval process by including specific projects directly in the state budget.
Steele’s bill would do away with much of that. It would do away with LGEDF and instead allocate 100 percent of coal severance tax funds for LGEA, giving local governments much more say in how funds are spent. In addition, allocation of the fund would be based strictly on the amount of tax produced in each county.
This year’s General Assembly begins Jan. 8 and ends March 26.