Ford County joined 51 other counties in a lawsuit seeking to reclaim its portion of roughly $7.4 million in oil and gas taxes the counties believe was erroneously taken by the state.
The Oil and Gas Valuation Depletion Trust Fund was created in 2005 as a hedge for counties against future steep declines in oil and gas production, and the steep decline of tax revenue that would follow.
Gov. Sam Brownback sought to end the trust fund program to divert the 12.41 percent to the state, but met resistance from the counties during the last legislative session. The compromise, Senate Bill 171, created a two-year plan in which counties' trust funds would receive 6 percent the first year and 8 percent the next. Afterward, the 12.41 percent remittance would be restored.
The counties believed this process would begin next year. However, the 69 oil and gas producing counties received checks less than half of what they expected on Oct. 1 when the payments were made for the 2013 fiscal year that ended on June 30.
Last year, Ford County received $241,443.67 for its trust fund. This year it received $149,283.91.
Under the Kansas Judicial Review Act, the counties had 30 days from Oct. 1 to make a claim against the state. The coalition of counties filed the suit in Topeka on Oct. 29.
The Ford County Commission sent a letter to the county's state legislative delegation outlining its grievances and informing the legislators of the purpose of the lawsuit, which was to reserve the right to judicial review while "putting on hold" legal action until the legislature meets in Jan. 2014. The commission said "Review is not unusual and rather routine when clarification of an agency action is sought."
Kansas collects a severance tax, a tax on non-renewable resource extraction, from oil and gas production equal to 8 percent of the value of those extracts. Last year, nearly 80 percent of that tax revenue went to the state general fund, 7 percent was remitted to the county where the production took place and 12.41 percent was added to the county's trust fund.
If a county loses 50 percent of its oil and gas valuation for two consecutive years, it can access that fund rather than balance the budget on sharp property tax increases.
The letter indicated that "many legislators" have indicated a willingness to seek a resolution to the issue early in the next session. The commission believes the legislature will arrange that the "counties are paid as intended."
The lawsuit "is necessary to preserve and protect the interests of the counties and their local taxpayers," the letter concludes.
Following the passage of the compromise bill, the Kansas Legislative Research Department's summary of the bill agrees with the counties' interpretation, saying the reduction of trust fund payments would impact the state's fiscal year 2014 budget, which began on July 1.