In early February, Martin County, Kentucky Sheriff John Kirk took to Facebook to announce that his office was unable to continue providing law enforcement, warning residents to protect themselves instead.

“I have had to operate the last little bit with just myself and one other paid deputy. There are volunteers that help when they can,” he wrote. “I am going to have to cut even more tomorrow. I have no choice. I can’t expect people to work if I can’t pay them.”

The lack of funding Kirk faces is an acute example of a growing crisis confronting the Central Appalachian states of Kentucky, Virginia, and West Virginia. A decline in global demand for coal, plus competition from natural gas and renewables, has decimated the market and drastically reduced coal severance taxes, the fees coal companies pay to counties for extracting coal out of the ground.

With counties stripped bare of their once bounteous cash flows from the coal industry, the revenue squeeze is exposing financial mismanagement, worsening a dire economic situation, and resulting in partial government shutdowns and cutbacks in core government services like infrastructure, education, and healthcare.

“It’s a tough time to be in a small community that has relied for so many years on coal for its main economic driver,” said Rep. Angie Hatton, who represents Letcher County and part of Pike County in the Kentucky House of Representatives. “They’re cutting everything. We have laid off employees. Road maintenance, garbage service, water. Everything.”

Some Eastern Kentucky and West Virginia counties, for instance, lack funding to deliver drinkable water to residents. In Floyd County, Kentucky, a new school sits unused because of the lack of water pressure. Knott County, Kentucky approved a partial government shutdown in January, and county officials plan to cut a program that delivers meals to poor senior citizens as an alternative to raising taxes.

The funding problems are exacerbated by financial mismanagement. Auditors have accused administrators in Elliott and Perry County, Kentucky of mismanaging county funds in the last few years, and prosecutors charged officials in Clay, Morgan, and Union counties with corruption-related crimes.

“You can have low-level corruption and bad management, and things go along fine as long as you have coal severance money coming in to right the ship,”  said Mary Cromer, a lawyer with the Appalachian Citizens’ Law Center who represents the Martin County Concerned Citizens. “But we’re in the position now where the coal severance money is gone.”

The number of U.S. coal jobs has fallen 61 percent over the last three decades — from 136,400 in 1989 to just 52,700 in 2019 — according to the Bureau of Labor Statistics. Over roughly the same time period, the number of mining and logging jobs fell by 36 percent in West Virginia, by 48 percent in Virginia, and by 69 percent in Kentucky.

Counties in all three states rely on coal severance taxes for economic development and core government services. In Kentucky, state government collects the coal severance tax and runs it through a complicated formula that splits it between state and county governments and a variety of different programs. It has paid for road maintenance and construction of 11 regional industrial parks, as well as a number of other projects, including education programs, mine safety research and workers’ compensation for injured miners, water and sewer infrastructure, and facilities like senior centers, community centers, and cemeteries. Localities also used a portion of the coal severance tax to pay for law enforcement, and waste management.

Less coal coming out of the ground means a sharp decline in that tax. In 2012, Kentucky distributed $32.2 million back to 29 coal-producing counties. That amount fell to $12.4 million in 2018 — a 61 percent decline in six years, according to Southerly’s analysis of data.

Virginia’s coal severance tax, collected by eight southwest Virginia localities, has also been cut. The Virginia Coalfield Economic Development Authority, funded by a portion of the coal and natural gas severance tax, saw the tax drop 62 percent from 2011 to 2017. West Virginia’s coal severance tax receipts went up in 2018 because of overseas demand for metallurgical, or steelmaking, coal, but not every coal county has seen growth.

The loss of coal severance money is one of many fiscal challenges for the region caused by the struggling fossil fuel industry. The shuttering of coal operations and subsequent departure of jobs and people have also resulted in declines in property tax, the primary source of local revenue for county governments.

“It’s a perfect storm when it comes to revenue,” said Pam Thomas, senior fellow with the Kentucky Center for Economic Policy. “Population is declining, and in a lot of instances, when you lose people you can’t really cut expenses. If you’re sheriff, you still have to patrol the whole county. It doesn’t matter if there’s 2,000 people or two people, it’s your job.”

Counties can levy some other taxes and fees, but they depend largely on having high numbers of employees and a viable local economy. And with ever-smaller numbers of county employees to enforce tax collection, Thomas said, the revenue situation becomes even more challenging.

“When you look at the options that are viable for cities and counties, and school districts, there aren’t a lot of places for them to go,” she said.

For the last four years, Ben Hale served as judge-executive in Floyd County, a coal county in southeastern Kentucky. He spent much of his energy during that time trying to make up for the county’s liability for a $2.7 million bond it underwrote in the 1990s to build a horse racing track, an economic development project touted for the area that never came to fruition. When local revenues began drying up, Hale renegotiated the county’s health insurance coverage, adjusted its garbage service rate and cut employees through attrition.

He lost in the 2018 primaries, which he said he attributes to the revenue struggles. Other judge-executives across eastern Kentucky faced with similar conundrums were also voted out in the 2018 elections. Out of 29 counties in Kentucky that receive local assistance funds from the coal severance tax, 17 elected new judge-executives in 2019, according to Southerly’s analysis of county data.

Martin County, Kentucky residents attend a meeting for the Martin County Concerned Citizens in October 2018. The county is struggling to fund water system upgrades.

“They still have their fixed cost to operate the counties: the same number of roads, the same jail,” said Hale, who now is executive director of the Big Sandy Area Development District, a regional economic development agency. “Before, those counties were able to take care of extra costs — that jails had or roads had or a flash flood or whatever — because they were always pretty flush with extra money from the severance tax coming in on a quarterly basis. Those days are gone.”

These crises are forcing many Central Appalachian lawmakers to reevaluate how to fund critical government services. In Virginia, key Appalachian Republicans split with their caucus and joined Democrats to expand Medicaid in 2018. This year, some coalfield lawmakers tried to push bills that would let counties fill revenue holes by selling advertising on school buses and taxing cigarettes by referendum. One Kentucky bill currently being considered by a House committee would give a larger percentage of the coal severance tax to local governments.

The bills only nibble around the edges of the revenue crisis coal counties face. Meanwhile, the fossil fuel industry is pushing lawmakers to reduce taxes. This week, the West Virginia House passed a bill to decrease the severance tax on electricity-generating coal by more than $60 million a year.

There still isn’t a “comprehensive plan action to deal with population loss” and resulting cuts to schools and budgets, said Ted Boettner, executive director at the West Virginia Center on Budget and Policy.

But there is a grassroots push for sustainable economic development initiatives throughout the region. Boettner said he wants to see West Virginia lean hard into the outdoor economy and clean energy transition, while also creating a jobs program based around cleaning up former underground and surface mines.

Still, there’s no quick-fix solution. Thomas, from the Kentucky Center for Economic Policy, said the coal severance shortfall represents a “tipping point” in a cycle afflicting rural Central Appalachian communities.

“Pointing just to the coal industry and saying ‘that’s the reason’ is just very one-dimensional,” she said. “It’s really a multi-dimensional problem that in a lot of instances these counties and cities just can’t solve.”

Correction: The number of U.S. coal jobs fell 61 percent in the last three decades. An earlier version of the story miscalculated the number.

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