Schools and Taxes: Making Industry Pay Its Way

Magazine cover with picture of machinery that reads "Everybody's Business: A People's Guide to Economic Development," a Southerners for Economic Justice and Institute for Southern Studies report

This article originally appeared in Southern Exposure Vol. 14 No. 5/6, "Everybody's Business." Find more from that issue here.

The story is as old as the hills that lie stripped and bare across the eastern Kentucky coalfields. Millions of dollars leave the region every year, loaded onto barges and railroad coal cars, while the people who remain must make do with poor roads, poor services, and poor schools. 

Eastern Kentucky ranks near the bottom of the nation in the quality of education available to its people: 50th among the states in the percent of its adults who can read; 41st in per-pupil spending for public schools; and 38th in average teacher salary. School buildings are overcrowded, and students sell candy, lightbulbs, and magazine subscriptions to buy cleaning supplies and books for their schools. Half of the students who begin high school drop out before they graduate. 

At the same time, the state's coalfields yield $2.5 billion each year, and they hold reserves of coal worth an estimated $22 billion — equivalent to a $6,000 endowment for every man, woman, and child in the state. 

That education is poor in this area of vast coal wealth is no coincidence, according to a growing consensus of Kentuckians. "The coal companies have always wanted us to have strong backs and weak minds," says Eula Hall, founder of a community health clinic and longtime activist in Floyd County. "Ignorant hillbillies. That's what they need, and that's how they try to keep us." 

"It's very easy to intimidate people who don't have the education to get any other kind of jobs," adds Sidney Cornett, immediate past chair of the 1,300-member Kentucky Fair Tax Coalition, a grassroots citizens' organization. "People are afraid to speak out because they are afraid of losing their jobs or their families' jobs in the coal mines." This fear of job loss is not unique to eastern Kentucky; it prevails wherever one industry dominates the local economy, from the mill towns of Georgia to the lumber camps of Washington state. 

Coal miner Raleigh Adams of Yeaddiss, Kentucky was fired from his job last winter after he complained about safety violations in the Blue Diamond mine where he worked. President of his union local and active in a citizens' group in Leslie County, he is convinced that his firing was the result of his activities. Nine months after he was fired, a labor arbitrator ordered Blue Diamond to reinstate Adams, but with no back pay. 

"The coal companies want people who are uneducated to go in and run their mines, and operate the equipment," he says, "because if you're uneducated and ignorant as to what's going on, all you know to do is just work the levers on that piece of equipment. You don't know your rights that the laws give you, and all you're going to do is sit there like a robot and do what the company tells you." 


The Company School 

In the first decades of this century, industry control over the region's education was direct. The early coal operators in Appalachia found that it was more practical to house their workers near the mine than expect them to get to work in all kinds of weather across miles of mountain path. At first, most of the miners were single men, and little attention was paid to the need for schools. As coal production increased, however, operators needed a more stable work force, one which would not disappear during hunting or planting season. They needed family men whose need to provide for wives and children would keep them from walking off the job. 

It was to attract such men that coal companies first hired teachers and built schoolhouses in mining camps. The schools were thus as much a tool for socialization and control as for education. In 1925, the U.S. Coal Commission reported to the Senate that more than two-thirds of the coal miners in eastern Kentucky lived in mining camps. Generations of their children were educated in company schools. 

In recent years industry control over education has been less direct, but in many ways no less complete. "The game is set up here, and if you're not going to play it, if you're not going to be in the coal industry or in some service industry to that, then you have to leave town," says Beverly May, who left the area for college when she was 18. Many of her classmates who went on to college have never come back to the mountains, she says. Those who became doctors or lawyers or teachers have remained in Lexington or Louisville. 

"If you want to be a teacher in Floyd County," says May, "you have to negotiate the proper political support. If you don't have the right political ties, you won't be hired, no matter how excellent a teacher you are." 

Throughout eastern Kentucky, politics are dominated by coal. Some of the industry's political control is direct, including bribes, threats, vote buying, and kickbacks for cooperative public officials. But without the voters, the coal industry could not wield such power. People continue to elect local and state officials who ignore safety and health laws, along with tax assessors who undervalue mineral property and sheriffs who "forget" to collect even those small taxes year after year. Voters also continue to elect to the state legislature mineral owners, mine operators, and coal company lawyers, who again and again pass legislation that protects the industry at the expense of the public. 

Why? Because many voters believe that the welfare of the coal industry is more important than safety, water quality, or revenue for roads and schools. Every time a new tax or regulation is discussed in eastern Kentucky, the industry issues gloomy predictions that it will go broke with any additional burden. That warning translates into the threat of massive lay-offs, something no one wants. Fear of hurting the economic health of the coal industry is reason enough for most eastern Kentuckians to keep quiet. The spectre of a coal depression is real for them, brought home time after time by the boom-bust cycles to which the industry has always been prone. 

In many cases, this fear-induced loyalty to the industry turns workers against the very things that could loosen their dependence on coal for jobs. One of these things is a tax on unmined coal. 


How My School Could Use New Tax Money

The following essay was written by Rebekah Price, a sixth-grader from Hindman, Kentucky in response to the question: "What could your school do with $100,000 from an unmined minerals tax?" Hers was the winning entry in an essay contest sponsored by the Kentucky Fair Tax Coalition, which is working to end the exemption of the state's vast mineral wealth from property taxes. It is perhaps the strongest indictment possible of a school system where politics and the economics of coal have kept the schools underfunded and the children undereducated for generations: 

My school could use money from an unmined minerals tax to build onto the school so we don't have to eat in the gym, also so that the music and art teachers don't have to come to our rooms to teach their classes. 

They could buy some new playground equipment because we only have some swings, a monkey bar, and a slide. They could buy equipment so we could have a proper P.E. class even when it rains and snows. 

Our school could also buy the workbooks so that parents don't have to pay; they could buy the toilet paper for the younger kids so their parents would not have to buy it. Our school could buy tape and the necessary supplies for the teachers so they don't have to buy them themselves. 

They could fix up the bathrooms so they don't smell all the time and they could keep soap in the bathrooms so we could wash our hands after we use the restroom. They could use the money to fix us better lunches so we don't have to eat the same lunches over and over again; they could make the food taste halfway good because their food is very bad. 

Also they could fix the leaks in the ceiling so when it rains the halls will not get slippery because someone could get hurt very badly if they were to fall. They also could buy clocks for all the rooms, and that's what my school could do with money from an unmined minerals tax. 

— Rebekah Price 

Sixth Grade 

Hindman, Kentucky 

Taxing Unmined Wealth 

In Kentucky, as in other mineral-rich states, most of the coal is owned by absentee corporations, while much of the surface land is owned and farmed and lived on by Kentuckians. The minerals under these farms and homes were brought at the turn of the century, often for 50 cents an acre, by speculators and land companies. Today, such mineral property represents millions of dollars in potential profits to these companies — an inventory that is virtually tax-free. One example is Pocahontas Development Corporation, a subsidiary of the Norfolk and Southern Railroad, which owns more than 81,300 acres of mineral rights in Martin County. In 1985, Pocahontas paid $74 in property taxes on this vast reserve of coal, worth millions of dollars. 

A state circuit judge ruled in July 1985 that Kentucky's property tax rate on unmined coal — one-tenth of a cent per $100 valuation — was so low that it amounts to an unconstitutional exemption from taxation. The state has appealed. If the ruling stands, the statewide tax rate of 22 cents will apply. However, a 1978 law exempting coal from local taxation means local school districts, county governments, libraries, and health departments still will not be able to tax coal property as they do all other property. 

In January 1986, a bill was introduced in the Kentucky legislature to re-establish state and local taxation of mineral property at standard rates. The house majority floor leader, a lawyer with coal-related interests, kept it from coming out of committee for consideration. Similar legislation introduced in the Kentucky General Assembly in 1982 and 1984 was also killed in committee. 

Representative N. Clayton Little, a Democrat from the eastern Kentucky community of Virgie, sponsored the bill each time. An educator and storekeeper, Little says that economic development will not reach the mountains without the roads and services and education that such tax money could fund. He is not surprised at the opposition his bill has attracted from the coal industry. "The (coal) holding companies would rather our area not progress educationally. Our people are hostages to that one industry because they do not have a choice." 

"I think the coal industry's really afraid of what we'll do with the education that this money would bring in," adds Mary Jane Adams, a Leslie County schoolteacher and the chairperson of the Kentucky Fair Tax Coalition. "This area is being exploited and education would help people realize that," says coalition past chair Sidney Cornett. "They would start to realize that they are doing all the work and taking all the risks and the companies are making all the money." 

Predictably, the industry argues that such a tax would increase the cost of coal production and reduce profits. If the measure is enacted, the industry says it will pull back production, mines will close, and widespread layoffs will result. However, evidence from other states shows that a tax on unmined minerals has a negligible impact on corporate profits. Kentucky is the only major mineral producing state without such a tax. 

While minimal to the industry, the effect of a tax on unmined minerals would prove dramatic for the state's economy and for local governments. In Pike County alone, an unmined minerals tax would bring in almost $5 million a year for education. Harlan and Floyd counties would get more than $1 million each, and in the coalfields of western Kentucky, counties like Union, Webster, and Henderson would increase their school revenues by $2 million to $4 million annually. 

Counties could use additional tax funds from unmined minerals for roads, health centers, water and sewer systems, and other needed public improvements, enabling them to loosen the grip of the coal industry on local economies. Light industry, long reluctant to move here because of the paucity of services, might find themselves attracted by the temperate climate and large labor force. With adequately funded schools, eastern Kentuckians might begin to train themselves for jobs outside the coal mines; they might begin to read about and understand the economic forces at work on their lives; and they might better prepare their children for the day when the coal industry runs out of mineable coal and leaves eastern Kentucky. 


Signs of Hope 

Despite the recent defeat of the unmined mineral tax and other legislation to regulate the mining industry, there are signs that change is coming to eastern Kentucky. One indication is a statewide push for educational reform. As in other Southern states, an odd mixture of chambers of commerce, parents' groups, governor's commissions, teachers' associations, industrial recruiters, and education bureaucrats have begun to see the connection between education and economic development. 

Even a self-described "new breed" of coal company managers has joined this campaign by funding school programs and conferences across the state. "I think there's a greater awareness on the part of managers of today's (coal) companies of the importance of education," says Raymond Bradbury, president of Martin Coal Company, one of the largest producers in eastern Kentucky. "They're younger and more astute, more business-oriented rather than just coal-oriented." 

"We have some continuous mining equipment that's worth half a million dollars or more," he adds. "I don't like the idea of someone operating that equipment without understanding the instructions. If the operator has at least a high school diploma, it makes him a safer skilled operator." 

Although he favors educational improvements in the state, Bradley opposes a tax on unmined minerals to help pay for them. Yet the charitable contributions of Martin County Coal and other companies for school programs cannot solve the larger problems of the area. The thousands of dollars that Martin gives to local schools and communities is small compared to the millions of dollars its parent companies, the multinational Fluor Corporation and Royal Dutch Shell, have taken out of these mountains. Taxing that wealth in the ground would go a long way toward providing the education and services eastern Kentucky needs. 

The current push for educational reform is certainly a positive sign. Whatever the motives of those behind it, improved education cannot help but improve conditions in eastern Kentucky and loosen the hold of the coal industry. But getting business, particularly the coal industry, to pay its fair share of the costs of these reforms will continue to be a far tougher battle. Under the present system, the cost of reforms will be borne by those least able to pay through increased property and sales taxes. 

Perhaps the most vital sign of hope in the coalfields is the growth of local and statewide groups working for a fair-tax system, landowner rights, and environmental protection. With each success of these groups, the argument that nothing can be done to overcome the grip of the coal industry grows weaker. 

"I get so tired of people saying there's nothing you can do," says Raleigh Adams, who has been active in such organizations. "I say, 'Well, then just go crawl back in your hole and get out of my way!'"