As counties are struggling to pay a staggering bill to Southern Regional Jail each year, a cornerstone of the county budget – coal severance taxes – is failing.
The result, Raleigh County Commission President David Tolliver, Fayette County Commission President Denise Scalph and officials in other counties say, is a budgetary shortfall that needs immediate attention from state lawmakers in the upcoming session set to kick off early in the new year.
Rising jail bill costs are a given at this point, Scalph said.
“I don’t think that the rise in the jail bill is going to go away,” Scalph said. “It’s going to be on the increase, not just for our county but every county throughout West Virginia.
“If we had that money, we could provide more services for the people in the county.
“The real issue,” she added, “is we have a decline in our coal revenue, and that has been a mess.”
The coal severance tax – a tax placed on the removal of coal – has been in effect since 1987. All counties benefit from the tax, but the State Department of Revenue distributes 75 percent of net state collections to coal-producing counties, primarily in southern West Virginia. The rest is given out to other counties, based on population.
Raleigh’s Tolliver shared data that shows Raleigh County coal severance taxes have fallen from $1.78 million in 2014 to $1.12 million last year – specifically, a $654,406 decline in revenue for the county.
Although in 2019 it collected $1.31 million, the county’s coffers are still $469,846 shy of the gains that the county could rely on in 2014.
Meanwhile, county budget records show jail bills have climbed steadily since pharmaceutical companies flooded the struggling coalfields with highly addictive opioid drugs, leading to an epidemic of addiction and higher jail bills for drug-related crimes.
Tolliver reported the county paid $2.3 million in 2014, $2.2 million in 2015, $2.4 million in 2016, $2.3 million in 2017, $1.7 million in 2018 and $2.5 million in fiscal year 2019.
Raleigh commissioners budgeted $2.5 million for the current fiscal year. Through four months of the current fiscal year, the county has paid out $884,000 to the West Virginia Regional Jail Authority, Tolliver said.
The situation is more acute in Fayette County.
In previous years, Scalph said, Fayette could predictably rely on a “healthy coal severance” of about $1.2 million.
“This past year, it was just up from $300,000,” she said. “So that’s huge. And that’s not going to come back.
“When you had a decline in your revenue, and then you have an increase in your jail bill, somehow, some way, you have to find a balance there.”
Fayette County collected $479,413 from July 2014 to April 2015, according to county accounting records. From July 2015 to April 2016, the coal severance tax placed $313,389 in the county budget. Severance tax collections increased to $330,026 between July 2016 and April 2017 and another $369,172 from April 2017 to July 2018.
From July 2018 to April 2019, collections had plummeted to $313,800.
Fayette accounting records supplied by assistant county administrator Ami Dangerfield show that the county paid jail bills of about $1.16 million in 2014, about $1.18 million in 2015, about $1.3 million in 2016 and nearly $1.4 million in 2017.
Statewide, the November severance tax collection of $25.7 million was 15 percent, or $4.8 million, below estimates, and down 41 percent from the November 2018 collection of $42.44 million. The revenue shortfall for the 2019-20 budget year has grown to $51.33 million, five months into the fiscal year.
Deputy Revenue Secretary Mark Muchow blamed the state’s budget woes on a global oversupply of natural gas that is causing gas prices to plunge, and also resulting in plunging prices and lower demand for coal.
“There’s just a flood of natural gas out there. It’s keeping prices low, not only for natural gas, but for the coal industry,” Muchow told the interim Joint Committee on Finance in early December.
If a county is unable to pay its jail bill, state officials redirect that county’s coal severance tax, along with other taxes, to cover the deficit.
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Wyoming County Circuit Clerk David “Bugs” Stover said the coal severance tax had decreased in his county, too.
“The amount we’re getting is dropping – drastically, almost,” he added. “The severance tax is way down, and the jail bill is way up.”
Although data from Wyoming County was not immediately available, Stover said that, of the coal severance tax collection, the commission gets 23 percent, and the school system gets 75 percent of the proceeds.
“They take the biggest hit,” he noted. “But the thing is, when that thing drops, our ability to function takes a hit.
“Property taxes is the main funder of county government, and the main funder of schools,” Stover added. “But that severance tax is a godsend for us, and it’s down.”
The push for a severance tax on coal had come out of Stover’s own county, a southern county of coalfields – the same stony, unyielding ground that had given the state a mother lode of coal and some of West Virginia’s bloodiest fights.
“The first governor that attempted (to pass the tax) was from Wyoming County,” Stover reported. “They destroyed him.”
Paul Lutz at wvculture.org backed Stover’s account. Lutz wrote that William Marland of Wyoming County, the state’s 24th governor, was the first to propose that the state tax extraction of coal.
Marland’s proposal immediately ended any notion of a gubernatorial honeymoon. His remarks caused an uproar among the state’s coal barons, politicians and media outlets.
Marland shook the coal dust from his feet and left the state.
“He just went to Chicago and drove a taxi after he was finished,” Stover summarized. “He tried to do a severance tax, and they just destroyed him.”
In 1987, West Virginia enacted the severance tax on coal.
In an edition of The United Mine Workers Journal, UMWA President Cecil Roberts once credited Wyoming Circuit Judge Warren McGraw, another Wyoming native and former state lawmaker and chief justice of the Supreme Court of Appeals of West Virginia, with authoring the severance tax legislation.
Stover agreed with the assessment.
“(McGraw) is responsible, more than any other individual in the history of the state, for having that happen,” Stover said of his supervisor, who he reported would not speak with media about the coal severance tax.
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Without a clear tax funding stream for the budget, counties around the state are searching for other ways to pay outstanding jail bills.
Tolliver has led a movement by a coalition of southern commissioners to find a way of paying the jail bill and supports a move by the County Commissioners’ Association of West Virginia to push state lawmakers to pass legislation that will allow counties to enact a 1 percent sales tax.
Cities are already permitted under state code to collect a 1 percent sales tax.
The policy raised $18 million for the City of Beckley in three and a half years, according to figures supplied by the State Tax Department in November.
Scalph said, in response to rising jail costs, Fayette County has implemented a Day Report Center that allows prisoners to stay out of jail and work and operates a Drug Court that focuses on rehabilitation.
The county just started a Teen Court, which focuses on rehabilitation of young drug offenders, before they enter the prison system.
“There’s just not one easy answer,” Scalph noted.
“One way or another, you’re going to have to have some type of revenue that’s going to offset jail cost,” she said.
Raleigh Prosecuting Attorney Kristen Keller told The Register-Herald that a county committee meets weekly to examine the county jail roster.
Scalph said the passage of House Bill 4388, which allows counties to stop making payments to the regional jail system for the cost of housing inmates beyond their conviction dates, has helped Fayette since taking effect on July 1.
“It used to be we carried the per diem (daily jail payment per prisoner) until the date the person was sentenced,” she explained. “Now, it’s the date of conviction.
“That’s helped to save.”
If counties dare to look at what can happen when coal severances taxes continue to fall and their jail bills remain stubbornly high, they can look to Boone County just up the road. In September, Boone County slashed its budget by 20 percent, leading to laying off 10 county employees – five from the sheriff’s department. And all of that was on the heels of an 8 percent budget haircut back in April.
The Boone County budget is off $1.3 million, down from $8.5 million to $7.2 million.
In McDowell County, the situation is becoming dire – and not just because of a decline in coal mining operations.
“The bottom line here is that our tax base has dropped tremendously,” Commissioner Cody Estep said late this past summer, adding that during the time it was dropping the county should have been more aggressive in building a tax base rather than keeping the “same pace.”
“Now it’s caught up with us,” Estep said. “We are up against it.”