Recently, it has been reported that $2.5 million in coal-severance tax money will be used for the planning and design phases of Rupp Arena renovations. What was left out, though, was the “rest of the story” that explains just why this step was taken.
It first helps to understand how coal severance revenues are distributed. To begin with, half is sent to the General Fund, which pays for such ongoing state government expenses as education, and 15 percent is combined with other mineral taxes in what is called the Local Government Economic Assistance Fund. The remainder is transferred to the similarly named Local Government Economic Development Fund, which is the focus of this debate.
That account helps counties in two ways: Two-thirds go directly to coal counties in what are known as Single County accounts, which can only be spent locally and are determined by factors such as mining employment, coal severance tax collections, and earnings from mining. The other third, meanwhile, goes to a Multi County account that can be used by coal and non-coal counties alike.
There is a bright red line between the Single County and Multi County accounts. In the former, no other county or the state is entitled to a single penny, and projects are included in the state’s budget or are funded through grants from the Department for Local Government. This is the account that aids county and city budgets; builds our waterlines (helping Floyd County provide treated water to 96 percent of its homes, for example); and supports such vital organizations as volunteer fire departments and senior citizens’ centers.
The Multi County money, meanwhile, can be accessed by non-coal mining counties. Those projects that have a broader reach include an industrial park used by Rowan County; the Robert Stivers II Appalachian Rural Wellness Initiative Center in Knox County; a community kitchen in Boyd County; and the Operation Unite program, which serves 32 counties in Eastern and Southeastern Kentucky. Historically, this account has a surplus, and that is where the planning funds for Rupp Arena came from.
Now for the rest of the story. In 1996, Governor Patton included a transfer of $19 million in coal severance taxes as part of workers’ compensation reform. This came “off the top,” before any of the funds I described received money.
A new law last year, House Bill 499, stopped that transfer permanently, putting that money back where it belongs. That change could not have come at a better time, and it is helping coal counties receive more than they otherwise would have; in Floyd County’s case alone, it will return approximately $182,100 to its Single County account.
Because this additional money was coming back to the coal counties, we agreed that surplus revenue in the Multi County fund could go to Rupp Arena. It is important to note that other coal-county legislators, including current Senate President Robert Stivers, also signed off on this agreement.
By striking this deal, the Multi County account may have set aside $2.5 million for Rupp in the current biennium – which I am confident will be paid back as the project moves forward – but we will see about $6.6 million restored to the Single County and Multi County funds each and every year. In Floyd County’s case, our contribution to the funding used by Rupp Arena is much smaller than the proportional gain we’re seeing in the Multi County fund. This additional revenue for both accounts is also helping to offset part of the 23 percent decline in this year’s coal severance receipts, and it remains what I think is a good deal for the state and coal counties in particular.
Now that you know the rest of the story, I hope you will agree.