Eastern Kentucky: A Region in Flux
Part 1 of a 4-part Forefront series examining eastern Kentucky's transition away from a coal-centric economy. Read the series
A recent Bloomberg headline says it all: “Coal’s decline is choking Appalachia towns.”
Eastern Kentucky has a long and storied history, with coal mining the principal player. The spectacular fall and subsequent bankruptcies of some of the largest coal mining firms in the country may come as a surprise, but recent events in eastern Kentucky have been years in the making. The confluence of cost, competition, and regulation has accelerated the economic decline, yet at the same time it’s stimulated action to counter it.
In this region, 26 of 31 counties are considered “distressed” by the Appalachian Regional Commission, a designation based on continued high unemployment rates, low per capita income, and high poverty rates. While headlines continue to tout the region’s dire present state, others are imagining a “post-coal” Appalachia.
A little history
Eastern Kentucky is a tangled landscape of mountains and valleys with a hardscrabble reputation and a long history with coal dating back over 200 years to the first recorded commercial production: 20 tons in 1790. Production didn’t truly take off until after the Civil War when land speculators crawled across the region purchasing leases for the coal below the ground. Rail lines constructed in the late 1800s ferried loads of coal to the nation’s growing industrial markets. Coal production grew exponentially as eastern Kentucky mines produced 1 million tons in 1888, surpassed 10 million tons in 1913, and peaked in 1990 at nearly 131 million tons.
Four things to know
Coal production in eastern Kentucky has been declining for a quarter century
The eastern Kentucky coal industry has seen its share of booms and busts, but none as long as the current 25-year slide, which since its peak has seen production drop 79 percent. At first, the impact was felt primarily in the coal mines of Central Appalachia, which includes eastern Kentucky, but more recent developments have since impacted coal production nationally.
The eastern Kentucky coal industry has seen its share of booms and busts, but none as long as the current 25-year slide, which since its peak has seen production drop 79 percent.
Early on, accessibility was an issue, as easier to reach coal seams were exhausted, leaving harder to reach deposits. This contributed to higher coal production rates in western states such as Wyoming, where production costs were lower. The national share of coal produced in eastern Kentucky declined from 13 percent in 1984 to 4 percent in 2014, while Wyoming’s share increased from 15 percent to 40 percent over that same period. However, recent more stringent emission regulations have caused many coal-fired electrical power plants across the country to either shutdown or convert to natural gas. This decline in demand has led some of the largest US coal producers to declare bankruptcy, affecting coal mines across the country.
Coal mining employment has been declining for more than 60 years, but it’s still important to the region
Around 1950, eastern Kentucky’s coal production and employment decoupled and began moving in different directions. Production continued to surge, while employment, aside from a brief resurgence in the late 1970s, declined as a result of improved mechanization and the increased use of surface mining that requires less labor.
All told, coal mining employment declined 92 percent in eastern Kentucky from its 1948 peak, a loss of more than 61,000 jobs, or 900 jobs per year since 1979.
Yet, even with this constant decline, the state still contains an above-average share of coal mining jobs. In 2014, the state of Kentucky had a location quotient (the comparison of the share of an industry in one region against that of a larger geographic area) of 11.20 for coal mining employment, 11 times greater than the national average. Although a decline from the 2001 rate of 15.34, it still indicates the coal mining industry’s importance to the state economy.
This impact of the sustained loss of coal jobs ripples through the local economy. While the rest of the state and nation recovered from the Great Recession, eastern Kentucky didn’t, and it’s been declining the past 4 years. Incomes have been impacted, too. In 2014, the average annual income in eastern Kentucky was $35,982, while the average coal miner earned $72,809 per year, nearly double the region’s average. The loss of thousands of high-paying coal mining jobs represents a significant decline in local spending power.
The decline in production and jobs is hitting local governments hard as coal-related tax revenue declines
Decreasing coal production has led to a dramatic decline in severance tax revenue for the state, nearly 40 percent, from $298 million collected in 2011–2012 to $180 million collected in 2014–2015, straining city and county budgets that have become dependent on the tax revenue for maintaining services.
Letcher County, for example, until a few years ago had been receiving payments in excess of $1 million per quarter, but lately that number has dropped to $350,000. Kentucky collects a severance tax, a tax imposed on a nonrenewable resource that is “severed” or extracted within a specified taxing jurisdiction, on coal at a current rate of 4.5 percent of the gross value of mined coal in the state. Revenue from this tax goes in a few directions:
- 50 percent, Kentucky’s general fund
- 35 percent, local government economic development fund, where it’s available as grants for eligible counties to use on projects helping to diversify their economies
- 15 percent, local government economic assistance fund, a revenue-sharing fund that cities and counties in coal-impacted regions receive automatically
One additional related strain is population decline. According to US Census Bureau estimates, from 1996 to 2009 eastern Kentucky’s overall population was essentially unchanged. Since 2009, though, it’s declined by nearly 14,000 people, shrinking the tax base cities rely on to maintain services.
A region with deep-rooted social issues
This is what makes finding a solution to eastern Kentucky’s economic problem so difficult. It’s not as simple as attracting new jobs: the region has been wracked with a host of social issues spanning generations. The poverty rate for eastern Kentucky has declined from a staggeringly high 61 percent in 1960 to 26 percent in 2010, but that’s still nearly double the national average of 15 percent— and is 9 percentage points higher than that of the state, which comes in at 17 percent.
Drug abuse, too, is becoming a bane across the country, and eastern Kentucky is firmly in its grasp. According to an analysis by the Kentucky Injury Prevention and Research Center, in 2013 Kentucky had the second-highest number of drug overdoses per 100,000 people in the US. West Virginia, its neighbor to the east, had the highest. In fact, total statewide drug overdose deaths in Kentucky have increased a stunning 347 percent, from 241 in 2000 to 1,077 in 2014. Rates in eastern Kentucky counties are some of the highest in the state, with the majority of overdoses there caused by prescription drugs commonly used to treat pain, anxiety, and insomnia.
Pulling it together
So what is eastern Kentucky? It’s a region tied to coal—economically, personally—for over 200 years. It has seen coal production and employment decline for decades. The boom and bust cycle inherent to natural resource extraction caused many to hope the next boom was just around the corner. Both international and domestic changes in energy production, pricing, and policy make the next boom increasingly improbable, and communities are suffering financially as tax revenue lags and more residents become unemployed. All of this is occurring in a region that suffers historically from a slew of social issues such as high poverty and drug abuse rates. What can turn this around that hasn’t already been attempted?
Sum and substance: Decreasing coal production in eastern Kentucky has exacerbated the region’s difficulties.
Stay tuned: We have more work focusing on eastern Kentucky planned for this year. This includes future articles on how the region is using arts and culture as economic development, ways regions can diversify their economies, and a look at migration data to see what trends are occurring in eastern Kentucky.
Working toward a post-coal economy
While the slow, steady decline in coal employment and production has exacerbated the region’s economic malaise, there are numerous groups, partnerships, and projects looking to a post-coal economy. Here are a few examples.
|Shaping Our Appalachian Region (SOAR)||SOAR began as a partnership between the Kentucky governor’s office and Hal Rogers, the US congressman serving eastern Kentucky. Its annual conference and ongoing working committees seek to bring together organizations and stakeholders to discuss the region’s future.|
|The Appalachian Funders Network (AFN)||On the philanthropic side is the Appalachian Funders Network (AFN), a collection of 80 grant makers focused on Central Appalachia, which includes eastern Kentucky. Its goal is to build stronger relationships among grant-making participants in order to help the region transition economically. A recent project is the Just Transition Fund, designed to help communities impacted by the declining coal industry to develop economic and workforce development plans.|
|Eastern Kentucky Concentrated Employment Program (EKCEP)||In a region where thousands of unemployed coal miners need retraining for new careers, the Eastern Kentucky Concentrated Employment Program (EKCEP) manages workforce development, job training, and unemployment programs in a 23-county region. Formed in 1968, it was one of 87 Concentrated Employment Programs (CEPs) developed during the Johnson Administration. CEPs were designed to focus on employment programs and related services in areas with high unemployment rates. Of note is the Hiring Our Miners Everyday (H.O.M.E) program, which retrains unemployed miners and their spouses in hopes that they will be re-employed in the region.|
|Arts and culture as economic development||The idea of using arts and culture to stimulate a local economy is not new, but in eastern Kentucky, it has become another tool in the economic development toolbox. From 1998 to 2015, grants from the National Endowment for the Arts have averaged nearly $150,000 annually to fund art- and culture-related projects in the region.|
|Broadband||Infrastructure typically conjures up images of roads, bridges, and sewers, but broadband Internet access falls into this category, as well. KentuckyWired, a state initiative, is committed to bringing Internet access to every county in the state by 2018. Such a feat is of particular importance to eastern Kentucky, where it is hoped that broadband access will stimulate job creation and entrepreneurship to help diversify the economy.|