Black Gold

When Lyndon Johnson launched his much-heralded War on Poverty in 1964, he came to the coalfields of Martin County, Kentucky to fire the opening volley. There the television cameras recorded scenes of poverty — houses without indoor plumbing, hungry children, and creeks that were little more than open sewers. Little was said about the reasons for the poverty, except to point to the “isolation and backwardness” of the people.

A decade later, the average income of Martin County residents rose as the coal industry rebounded from the energy crisis of the 1970s, but social services still lagged far behind. Coalfield residents expressed growing dissatisfaction with the crumbling roads, the lack of sewage systems and drinkable water, and the deterioration of local schools. As coal mines became more mechanized, joblessness and poverty began to spread once more.

In 1983, the television cameras returned to eastern Kentucky, this time to film a CBS news special anchored by Bill Moyers. Unlike previous reporters, Moyers directly linked living conditions to land ownership and property taxation. He cited the Appalachian Land Ownership Study, which documented absentee ownership and tax rates across the region. One company, a subsidiary of the Norfolk Southern Railroad, owned 55 percent of all the unmined minerals in Martin County. The annual property tax on the company’s81,000 acres was a total of $76.

Many residents had already made the connection. The television program recorded early efforts by the Kentucky Fair Tax Coalition (KFTC), a citizens group with several hundred members and no paid staff, to force the state to tax coal reserves. It was a long battle—but one that was ultimately successful in gaining compensation from Appalachia’s absentee owners.

Coal and Candy Bars

Tax issues are not very glamorous, and a discussion of taxes can produce more yawns than activism unless one’s own pocketbook is affected. Tax activists who capture headlines are usually conservatives who seek to cut taxes and eliminate social programs. Tax reform would therefore seem an unlikely vehicle for citizens to launch a broad-based progressive movement capable of becoming a force to be reckoned with in state politics. But that is what happened in Martin County.

To the casual observer, the issue of taxing unmined coal reserves appears simple enough. After all, coal is obviously a valuable commodity, and should be taxed as such.

In fact, state officials reached that conclusion only after citizens, most from the mountainous eastern counties, waged a determined campaign to make companies carry their fair share of the tax burden. The intense activism by a handful of citizens highlights the connection between unfair taxation and social injustice, and shows how a local fight that tackles everything from land ownership to strip mining to hazardous waste disposal.

For years, the Kentucky General Assembly has responded to citizen complaints by protecting coal interests. In 1976 the Assembly created a separate classification of taxable property solely for unmined coal. In 1978 lawmakers set the tax rate on unmined coal at $.001 per $100 of assessed value.

In many Kentucky counties, tax bills were never collected because county or state assessors did not know the extent of company holdings. As Scott Akers of the Kentucky Revenue Cabinet recently explained to a Harlan County newspaper, “The rate was so low it simply wasn’t worthwhile to report it.”

Low taxes devastated entire counties. In Martin County, teachers were forced to buy supplies from their own pockets, and children went from door to door selling candy bars to pay basic school bills. In 1982 members of KFTC lobbied the General Assembly to tax coal reserves. The bill received support from some legislators concerned with raising new revenue in the face of Reagan budget cuts. But legislative leaders like House speaker Bobby Richardson were lawyers with mineral industry clients, and they kept the bill from reaching a floor vote.

After the bill died, 50 members of KFTC invaded the office of the evasive Richardson and refused to leave. The speaker grudgingly met with them in the company of two security guards and several aides, and declared that an unmined minerals tax would be unworkable. KFTC attracted its first statewide media attention with its aggressive pursuit of public officials, and the effort continued on a local level.

In Martin County, KFTC appeared before the local tax board and asked officials to raise the assessment on Norfolk Southern’s holdings. The board refused to consider the request, and the state Supreme Court later ruled that citizens had no right to challenge corporate assessments.

Despite the setback, KFTC members got the satisfaction of watching a fleet of company lawyers descend on Martin County, of knowing that the same thing was happening in other counties and that the companies were alarmed. A lawyer in a neighboring county said he’d never in his lifetime seen citizens challenge the companies so directly. “It had never been done before,” agreed Gladys Maynard, then president of KFTC.

“I Don’t Know Anything”

The group challenged the minerals exemption in court, but did not sit idly by waiting for a judge to rule in their favor. The CBS television program filmed KFTC members speaking to the Martin County school board and the local fiscal court, asking them to endorse a state tax on unmined minerals.

The pleas fell on deaf ears. Bill Moyers pointed out that four of five school board members and three of five magistrates on the fiscal court worked for coal companies. On camera, one magistrate declared, “As far as I’m concerned, you’re asking me to vote on something I don’t know anything about.” Both bodies refused to endorse the tax, which would have raised millions of dollars in revenue for local governments.

Still, some coalfield politicians did support the tax. KFTC continued its research and found that Kentucky’ s top 15 coal producing counties raised an average of only $230 per pupil from local revenue sources, compared with a state average of $540 per pupil. The report came at a time when organizations like the Commission for State School Finance and the Prichard Committee for Academic Excellence were launching widely publicized campaigns to equalize school funding in Kentucky and improve the quality of schools statewide.

KFTC cooperated with education reformers to emphasize how underfunded school districts in coal counties were draining state resources. Local endorsements of the unmined minerals tax began to multiply. Facing growing pressure, the General Assembly showed signs of willingness to pass the bill in 1986 and1988, but key conservative leaders continued to use archaic legislative rules to keep it from reaching a vote.

Finally, in 1988 the state Supreme Court heard the KFTC challenge to the minerals exemption —and ruled that unmined coal reserves must be fully assessed and taxed as property. The state Revenue Cabinet increased its staff and began a two-year process of surveying mineral holdings and assessing value. The coal industry tried several legal maneuvers to stall the survey, but ultimately failed.

The Revenue Cabinet estimates that there are 10 million acres of coal land in the state, but as of last summer it had surveyed only five million. In March, the first assessments were mailed to coal companies in three counties, and other companies have been notified since.

In Pike County, the first of the large coal counties to be assessed, reserves surveyed to date are valued at $355 million. Another county, Harlan, holds reserves worth $123 million, up from $39,000 before reassessment. Harlan County should receive over a million dollars in new property taxes, and Pike around three million.

Many Kentuckians remain skeptical that the state will actually collect the taxes, given the coal industry’s track record for escaping its obligations. According to Harlan County school superintendent Robert Shepherd, coal companies have yet to pay their small tax receipts from last year.

Once the money is received, citizens know they will have to remain vigilant to ensure it is used wisely. This is where organizations like KFTC come in. While court cases have sometimes killed activist movements whose members wait passively for a judge to rule, KFTC continued to pursue nonjudicial strategies. As a result, members remain active in their communities, well placed to see that the new revenue does the most good.

KFTC now has members across the state, and has changed its name to Kentuckians for the Commonwealth to reflect its interest in a variety of causes. The group has an office, seven employees, and is building a strong financial base as well. Once virtually ignored by state officials and media, KFTC has injected a widely recognized citizens’ voice into the politics of a state which in the past has been notoriously closed to citizen participation.