Operators Get the Mines — What Do Miners and Taxpayers Get?
President Trump and Senate Majority Leader McConnell (R-KY) promised to stop the war on coal and put miners back to work. Because of market economics, these promises are hollow and cannot be kept. However, what of other promises that can still be kept?
This is a tale about the negative environmental and health effects of coal and obtaining justice for America’s coal miners. It is also a tale of how large contributors to the campaigns of both Trump and McConnell can appear to have been given dispensation to duck out of their obligations.
The heart of today’s health and pension fund problems dates to 1946 when President Truman took control of the nation’s coal mines to keep them operating during the biggest strike wave in US history. During the war years, labor worked under a no-strike pledge. With World War II over, virtually every sector of industry — auto, oil steel, coal, meatpacking, railroads, electrical transportation, communication, and utilities — walked off their jobs seeking higher wages and benefits.
The coal strike was settled by the Krug-Lewis Agreement of 1946. The agreement was between the federal government and the United Mine Workers of America (UMWA). The deal was subsequently accepted by coal operators. It established two funds for miners — one covering health care (black lung) and the other union pensions.
Because of the Krug-Lewis Agreement, coal companies have historically borne responsibility for funding the miners’ health and pension funds. Today both funds are in trouble and being made worse by companies seeking the protection of bankruptcy courts and asking to be relieved of their health and pension fund obligations. Requests granted by the courts.
Black Lung Disability Trust Fund revenue primarily flows from the coal tax levied on mine operators. In the turmoil of the recent government shutdown, the tax was automatically cut in half by the terms of its legislation. For the temporarily higher rate to have remained in place, the Republican-controlled Congress would have needed to pass new legislation. The failure to act has left sick miners fearing for their futures. The Fund was already $4 billion in debt before the tax cut.
With cash now just trickling into the fund, federal budget officials estimate that by the middle of 2020 there won’t be enough money to cover the fund’s benefit payments fully. The Fund now covers around 25,000 retired miners — most of whom worked for now-bankrupt coal companies.
The White House, Senator Majority Leader McConnell and their conservative allies, e.g., the Heritage Foundation, insist that miners with black lung will continue to be covered. At least one coal-state Republican, Representative Hal Rogers (KY) has worried out loud that the promises will never be kept. The shortfalls in the fund are considerable.
According to a GAO report Trust Fund, expenditures had consistently exceeded revenue requiring it to borrow almost every year since it was first established in 1979. Legislative actions to keep funds flowing have been taken over the years, e.g., raising the rate of the coal tax that feeds the Fund revenues and forgiving company debt by appropriating taxpayer dollars as it did in the Energy Improvement and Extension Act of 2008. The Act appropriated about 6.5 billion taxpayer dollars in debt forgiveness.
Coal tax revenues have been less than expected due, in part, to the 2008 recession and lower coal sales due to competition from other energy sources. After the recession, the Trust Fund has continued to borrow from Treasury’s general fund for fiscal years 2010 through 2017. The Trust Fund is expected to continue borrowing monies from the Treasury through fiscal year 2050. (Figure 1)
The second of the two funds — union pensions — is covered by the Pension Benefit Guaranty Corporation (PBGC) established under the Employee Retirement Income Security Act of 1974, as amended. It promises payment of basic pension benefits earned by nearly 37,000,000 American workers and retirees participating in nearly 25,000 private-sector defined benefit pension plans.
Because the PBGC is facing insolvency plans covered by it are also threatened. One of the first plans expected to go under covers more than 100,000 UMWA miners. Although the president’s 2020 budget requests around $450 million, the sum is insufficient to stave off the predicted insolvency by the end of the 2025 fiscal year.
As reported a UMWA spokesman expressed disappointment with the White House budget numbers stating that:
We’ve been talking to them, and they understand what our issues are…They claim they want to be helpful, so maybe they are going to be able to do that from a different perspective than just the budget process, but we’ll see.
Fixing the problems of both funds potentially offers fertile fields for bipartisan cooperation. Several pieces of legislation have recently been introduced to address the problems. One legislative option is for Congress to restore the tax paid into the Black Lung Disability Trust Fund back to the 2018 levels of a $1.10/ton from underground mines and $.55 from surface mines that were lost in the government shut-down at the end of 2018. It is the path proposed by Senators Shelley Moore Capito, (R-WV) and Portman (R-OH). They have introduced S. 671 a bill directed at restoring monies to the pension fund.
The bill (S. 671) mirrors a similar proposal (H. R. 935) by Congressman McKinley (R-WV). Both proposals are entitled the Miners Pension Protection Act would dip into taxpayer dollars set aside for the Abandoned Mine Land cleanup program while increasing the total available from $490 million to $750 million. Neither bill, however, addresses the pension fund shortfalls.
Senators Manchin, Warner, Kaine (D-VA), Brown (D-OH), Jones (D-AL) and Casey (D-PA) dropped the American Miners Act (S. 71) into the hopper in January. Unlike the Capito and McKinley bills, S. 71 is an effort to backstop both the Black Lung and Pension Funds. The proposed Act makes up for the payments that would have been made into health care by now-bankrupt coal companies and incorporates the Capito and McKinley provisions that use available Abandoned Mine dollars to pay into the Black Lung Trust Fund.
Senate Majority Leader McConnell has indicated his intent to do something about the looming insolvency of both funds — although he has yet to indicate his stance on the enrolled legislative proposals. His spokesman has stated that the Majority Leader requires a bipartisan House and Senate effort. The requirement is undoubtedly based on concerns that anything less than a bipartisan bill runs a high veto risk.
The White House has made no definitive statements of support or even intention regarding the restoration and protection of coal miner benefit funds. All it has said about the miners’ situation is that President Trump and this administration have always supported the mining industry by prioritizing deregulation and less Washington interference. Hardly a reason for miners to breathe more easily about their future.
It is fair to ask why Trump might not sign any partisan or bi-partisan legislation that benefits the very coal miners he’s stood before — with hardhat in hand — promising to have their backs. At least one possibility is because mine operators were overwhelmingly in favor of the return to lower tax rates that are saving them hundreds of millions of dollars a year — some of which will undoubtedly find their way into re-election coffers of both McConnell and Trump as they did during the 2016 election cycle.
The proffered financial problems never prevented mine owners, executives and the companies themselves from making political contributions during the 2016 elections. The day before it sent layoff notices to 4,400 miners, Murray Energy’s PAC gave $100,000 to Trump’s joint fundraising committee. Bob Murray, the company’s owner, invested $300,000 of his own money in Trump’s run for the roses. Are these the actions of insolvents?
Murray Energy handed a total of $1.5 million to political candidates, party committees and outside groups over the 2016 election cycle, a record high for the company and tops for the industry. It was not alone in its largesse: (Source)
- Alliance Resource Partners, the third-largest producer of coal in the East, announced 275 layoffs in February 2016, partly due to what it said were “overreaching regulations.” The organization’s PAC spent $126,000 this last cycle. In total Alliance employees, i.e., executives contributed $3.4 million in the 2016 cycle, up from 2014.
- Alliance CEO Joe Craft gave $750,000 to pro-Trump Future45, and, through his personal trust, gave $1 million to anti-Clinton super PAC American Crossroads and $100,000 to the pro-Mitch McConnell group Kentuckians for Strong Leadership. Craft also gave $1 million to Trump’s inaugural committee.
- Arch Coal’s PAC gave $328,000 during the 2016 campaign.,
- Peabody Energy PAC gave $78,000, its smallest total since 1998, donating $10,000 to House Majority Leader Kevin McCarthy (R-Calif.), $7,500 to Sen. Lisa Murkowski (R-Alaska) and $6,000 to the Republican National Committee.
- Murray Energy gave $1 million to Trump’s inaugural committee.
- Five other coal mining firms donated thousands through their PACs–albeit in much smaller amounts — despite filing for bankruptcy in the past couple of years.
Senator McConnell, for his part, received more than $297,000 in coal industry donations since 2014 when he was last up for election.
The willingness of coal companies to support politicians, before honoring their health and pension promises, is their business — except when it’s the business of taxpayers who will now be footing the entire cost of both funds’ solvency for decades to come. It is the more reprehensible given the game of musical bankruptcies played by several of them.
Through a series of setups, Arch, Peabody, and Patriot managed to pass the benefits of the hapless miners back and forth between the companies and in advance of their bankruptcies. Once declared bankrupt — legally if not morally — the companies ceased being responsible for the fate of the miners, who were now facing the loss of coverage.
Arch Coal, having cleared $5 billion of its debt off its books through bankruptcy, was one of several companies given the Restructuring Deal of the Year award. The honor was presented to them at the annual Distressed Investing Summit, hosted by The M&A Advisor and held at President Trump’s Mar-a-Lago resort.
The health and financial problems of America’s coal miners are only going to get worse unless something is done to put both the pension and black lung funds on a stable footing. These are not easy problems to solve.
Last year the 115th Congress saw the establishment of a special joint committee to seek a solution to the miners’ dilemmas. The effort came up dry because neither Senate Majority Leader McConnell and then Speaker of the House Ryan (R-WI) never moved legislation through committees and onto the floor for a vote.
The co-chairs of the special committee Senators Orrin Hatch (R-Utah) and Sherrod Brown (D-Ohio) expressed their understanding that the longer these problems persist, the more burdensome and expensive for taxpayers they become. They also recognized that conservatives had condemned the use of taxpayer money, but proponents of pension reform say that without action, the Pension Benefit Guaranty Corporation will implode.
The senators’ sentiment has been echoed by Congresswoman Federica Wilson (D-FL), chair of the House Education and Labor Subcommittee on Health, Employment, Labor and Pensions. Following a recent hearing, Wilson challenged members of Congress to put aside their differences and to find a “bipartisan solution to the crisis.”
Some of what should have been at least a partial solution to the funds’ problems have already gone by the boards. The administration has never stepped into the bankruptcy proceedings or used its influence with the mine operators to secure support for the UMWA’s pension fund.
In a recent decision from the 11th Circuit Court of Appeals, which hears cases from federal district and bankruptcy courts in Florida, Alabama, and Georgia, the court affirmed the sale of a bankrupt coal company’s assets to a purchaser free and clear of claims and liabilities, including retiree healthcare benefits. The bankrupt company in the case was Walter Energy.
The health and pension plights of America’s miners are rarely mentioned when the environmental and health hazards of coal are debated by climate deniers and defenders. Yet, these are hazards that cannot be denied; neither should they be ignored — particularly by Republican coal state politicians and the Trump administration.
I believe Congress will at some point step up and do the right thing by the nation’s coal miners. It won’t happen, however, without pressure being brought to bear on the lawmakers. I especially encourage all environmental justice advocates to raise their voices to that end.
The transition to a low-carbon economy should not be done on the backs of the nation’s coal miners who, since 1946, have been promised they would be taken care of and without whom the US would not be the economic power it is today. Fairness dictates nothing less.
Lead image: Wiki Commons