Living on the edge

Living on the edge

Living on the edge
Solutions are hard to find as school districts in eastern Kentucky’s coal country struggle to adjust
to a drop in unmined minerals tax revenue, population loss and the attendant fiscal side effects
Kentucky School Advocate
December 2017
By Madelynn Coldiron
Staff writer
Pike County Finance Director Nancy Ratliff gets it when state education officials tell the district it needs to adjust to “the new normal.” 

The eastern Kentucky school system, which has lost $2.4 million annually in unmined minerals tax revenue and 1,250 students over the past five years, is trying to adjust, she said.

“We’re all here working hard to come up with a plan to accommodate the loss of revenue, but it’s very hard to do that – it’s like stopping a fast-moving train on a dime. It doesn’t happen,” Ratliff said. “And in the meantime, your kids still have to be educated, they still have to be transported. You still have to cover the classroom by the state minimum. We still have electricity at $3.5 million a year plus a possible increase.”

It is not clear whether a couple of ideas being considered by the state board of education will help these districts in the short or long term. Officials in some of the districts affected are skeptical.

For districts in the coal fields, the bottom fell out with the evaporation of the unmined minerals tax assessments in the middle of the last fiscal year, compounded by population loss over time and a drop in property values. Some Kentucky school districts have historically faced financial problems, but by making efficiencies and adjustments, “they come out the other side,” said Robin Kinney, associate commissioner for the state education department’s Office of Administration and Support.

“I think we’re seeing a different type of district impact now than what we have seen historically,” she said. “The ones we are seeing now are due to things more like outside economic factors that are influencing them, so it’s just not a matter of them adjusting their processes or practices, but it’s more that they’ve lost a certain revenue source.”

These districts, said Chay Ritter, KDE branch manager over funding and reporting, “are going to be in a new dynamic, which is less kids, less staff, a totally different picture.”

Legislative action is needed for both possibilities for assistance that the state board of education is considering as part of its legislative/budget priorities for 2018. One is an emergency loan program that is already set up – but not funded – in state law. The other requires a change in state law to allow county school districts to merge. The law currently addresses only independent and county district mergers.

Kinney acknowledges that a short-term emergency loan to help with cash flow is not addressing the long-term problem of the need for more funding. She said some district leaders have expressed concern that the cuts they have made are reaching the point of affecting student services. 

“It’s sort of like the Jenga game, where you build a tower and you take out that piece,” she said. “How many pieces can you take out before it just falls? When we’re talking about local revenues being the important part of that equation, and local revenues start drying up, that cannot be sustained very long.”

Magoffin County Schools Superintendent Scott Helton put it bluntly: “If I cut now, it’s at the school level.”

Ritter said the situation is not as simple as finding a new source of revenue “when local economics don’t allow for that and people have difficulty in paying property taxes.” Other states earmark part of their sales tax or fuel tax for school funding, he said. “Does the state have an appetite for something like that? Probably not.”

Even in Pike County, which at first glance appears to have a more diversified local economy than some other coal counties, the county school district’s plight is not easily addressed. Most of the local businesses are located within the city of Pikeville and within the boundaries of the Pikeville Independent school district, Ratliff pointed out. “A lot of stuff that was in the county was coal-related, period,” she said.

Solutions or stopgap?
Leslie County Schools Superintendent Linda Rains said the district “might be interested in a loan,” but hopes it is more like a Pell grant or, added district Chief Information Officer Harold Morgan, interest-free.

Pike County does need help of some kind during this transition to new economic circumstances, Ratliff said, but she also notes an emergency loan assumes the ability to pay it back.

Knott County Schools Superintendent Kim King echoed that, and said she’ll take a wait-and-see stance on the possibility of an emergency loan. “I would rather not have to go that route, but we may have to,” she said.

As for county-to-county district mergers, Rains noted surrounding county districts “are no better off than we are.” 

It’s also not feasible for Pike County, Ratliff said. “Geographically, we’re already the largest county in the state of Kentucky. And even with the loss of students, we’re considered a bigger district,” she said.

Such a merger would not go over well in Magoffin County, Helton said. “I think they like the idea of having their own district.” He wonders about the effect of a merger with a struggling district on the system that is absorbing it. “I think you run the risk of jeopardizing two districts rather than one,” he said.
Board View: Progress despite a faltering economy
When Jesse Rudd ran for school board in Magoffin County three years ago, he didn’t expect the district to be going through the financial struggles it now faces.

“It’s not easy, that’s for certain,” he said.

“It’s been tough,” agreed Leslie County school board Chairman Lonnie Napier, a 19-year veteran. The sudden, near total loss of unmined minerals tax revenue “was a shock to us,” he said.

Though their outcomes were different, the decision on setting property tax rates by both Magoffin and Leslie county boards was difficult since taxpayers in both counties are facing hard times. The Leslie County board maintained the same tax rate, with Napier explaining, “66.1 cents is plenty high enough. Our people just can’t stand any more taxes.”

The Magoffin board increased local property taxes each of the last two years.

“Last year we didn’t get as much negative feedback, but this year is a different story – we’re getting a lot of disgruntled citizens,” said Rudd, a pharmacist and the board’s vice chairman. “I just try to explain to them that we had to do it, we had to cut, we’re to the bare bones.”

“For the most part,” they understand when he explains, he said. It’s also personally difficult for him to raise taxes because he owns a pharmacy business that is impacted by higher taxes.

Napier said he has met with his area’s state representative and state senator to discuss the district’s revenue plight. He said he’s just thankful the Leslie County district was able to build two new schools and renovate others before the downturn hit.

Rudd is a member of the Magoffin County Economic Development Board, which is “just brainstorming, trying to attract industry so that we can get some different companies in here and get some revenue so in the future taxes may start to decrease.”

Napier, meanwhile, wants to do his part by starting up a mining operation in hopes of bringing some jobs back and improving the tax base. He had owned a coal mine but sold out in 2003.

Rudd said he plans to run for re-election because he believes the district has made gains, with improved morale and better test scores.

“The economy side of it, ‘Woe is me,’” he said. “The education side of it is uplifting and exciting. I wouldn’t want my kids to go anywhere else.”
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