Regional Group Recommends Trust Fund For Severance Taxes

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The Central Appalachia Regional Network is recommending that Ohio, West Virginia and Kentucky use severance money to create a permanent trust fund in each state.

The Central Appalachian Network is based in Huntington and serves those three states, as well as Maryland, Tennessee and Virginia, and the severance tax recommendation is for all six.

It comes after the completion of the Central Appalachia Severance Tax Policy Scan.

Roy Silver of Southeast Kentucky Community and Technical College says this new report outlines the severance tax policies in the six states.

Silver is a professor of Sociology and he helped with the writing of the report, which deals with a variety of minerals.

"Generally… in these communities they have tended to be dependent on that resource and not had a divisified economy," he says.

The new report includes information about the rate at which minerals are taxed and the total annual revenue each state receives from the taxes.   

Silver says that rate is typically around 4.5% of the value of the extracted resource.

Silver says a trust fund would provide a long-term financial legacy for the affected communities.

He says, "The intent is to put additional resources back into those communities to diversify the economy."

The Central Appalachia Regional Network advocates that a minimum of one percent of severance taxes collected be placed in these permanent funds.

"And then." says Silver, "use the interest from that trust fund to generate funds for economic development in the community where the resources have been extracted."

Silver says one possible use for this money would be the support of community foundations, an initiatve of the Appalachian Regional Commission.

The idea of establishing a permanent trust fund with severance tax dollars is not new.

It was done in several states, including Alaska, Montana, and Wyoming as long ago as the early 1970s, and Silver says those states were studied to get ideas.

"To asses what best practices were nationwide and then come up with some general policy recommendations," he says.

The West Virginia Center for Budget and Policy has pointed out that those states are now reaping the benefits of millions, and sometimes billions of dollars, for state programs.

The Severance Tax Policy Scan and permanent fund suggestion were announced a couple weeks ago and Silver says feedback so far has been positive.

"We're not really talking about raising taxes, we're just talking about redirecting them in a fashion that gets more bang for the bucks, so to speak," he says.

Ultimately, though, change would require legislative action.