Workers' Comp Tax on Coal Industry Soars as Production Drops
Thursday, October 6, 2016 | 0
With Kentucky coal production at its lowest since 1954, a special workers' compensation tax assessed on coal companies has risen 34.7 percentage points.
In 2016, coal employers were assessed at a rate of 14.82%. Next year, that rate rises to 49.5%.
The tax goes to the Coal Workers' Pneumoconiosis Fund, which provides income and retraining benefits to workers sickened by coal dust exposure. Pneumoconiosis claims filed after Dec. 12, 1996, are eligible for coverage.
The steep rate hike is "based on a perfect storm of events," said Reuben Jones, the executive director of the Kentucky Workers' Compensation Funding Commission.
"The only people who fund that fund are coal companies, and there's been a great reduction in the number of companies since 2010," Jones said. "You don't have as many employees that pay those funds, and you don't have the amount of coal that's being severed. It quickly becomes apparent you have to assess more to meet the obligations."
In eastern Kentucky last year, more than 2,000 people lost their jobs as coal production plunged to a level not seen since the Great Depression, according to a state report. Statewide, jobs dropped about 30%, and production dropped roughly 20%.
The state closed its last union mine last year, Highland Mine in western Kentucky. The mine had employed about 400 hourly workers represented by the United Mine Workers of America.
Nationwide, coal production shrank about 10% last year, according to the Energy Information Administration.
Environmental regulations spurred by efforts to fight climate change have placed a squeeze on the coal industry, Jones said.
"Obama has turned his attention to clean power plants. That's been a legacy for his administration," said Bill Bissett, president of the Kentucky Coal Association, which represents coal companies. "All we have are plants retiring, and no new ones being built, so that causes our market to only contract."
"As an industry, we've been hard hit by some EPA regulations, so you get to that solution pretty quickly," Jones said.
The state workers' comp funding commission also taxes the amount of coal produced. The so-called severed coal assessment, which also goes to the pneumoconiosis fund, will rise from $0.15 per ton to $0.42 per ton next year. In 2015, Kentucky produced 61.4 million tons of coal.
Other employers in the state will see a slight rise in their assessment rate. The "all employers rate" will rise from 5.51% to 6.29% in 2017, after experiencing a slight drop between 2015 and 2016.
View the notice announcing the 2017 rates here, and view the rates over the years here.
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