When  necessary for the Trust Fund to make relevant expenditures under federal  law, the Trust Fund borrows from the Treasury’s general fund. Multiple Factors Have Challenged Trust Fund Finances Resulting in Growing Debt

Multiple factors have challenged Trust Fund finances since it was  established about 40 years ago. Its expenditures have consistently  exceeded its revenue, interest payments have grown, and legislative  actions taken that were expected to improve Trust Fund finances did not  completely address its debt. Specifically, EIEA (1) generally extended the  coal tax rates at their current rates until December 31, 2018 (after  which they are scheduled to decrease to their original levels of $0.50  per ton of underground-mined coal, and $0.25 per ton of surface- mined coal, up to 2 percent of the sales price); (2) provided for a one- time federal appropriation toward Trust Fund debt forgiveness (about  $6.5 billion, according to DOL data); and (3) provided for the  refinancing of the Trust Fund’s debt that was not forgiven as a result  of EIEA (which we refer to as the Trust Fund’s legacy debt). These  officials said that models showed that debt would be eliminated by fiscal  year 2040; however, they noted that coal tax revenue has been less than  originally projected due, in part, to the 2008 recession and increased  market competition from other energy sources. As a result, the Trust  Fund’s total expenditures continued to exceed revenue and the Trust  Fund borrowed from Treasury’s general fund each year from fiscal years  2010 through 2017 to cover debt repayments expenditures. Trust Fund Borrowing Will Likely Continue to Increase through 2050, and Multiple Options Could Reduce Future Debt

		Trust Fund Borrowing Will Likely Continue to Increase through 2050

Trust Fund borrowing will likely continue to increase from fiscal years  2019 through 2050 due, in part, to the scheduled coal tax rate decrease  of about 55 percent that will take effect in 2019 and declining coal  production, according to our moderate simulation. 4). Specifically, we simulated the effects of (1) adjusting the  coal tax, (2) forgiving interest, and (3) forgiving debt. While adjusting coal tax rates and forgiving interest or debt could reduce  the Trust Fund’s simulated borrowing by 2050, implementing them could  affect the coal industry or general taxpayers, according to stakeholders  we interviewed. For instance, a coal industry representative noted that  maintaining the coal tax at its current rate would continue to burden the  coal industry and increasing the tax would exacerbate the burden at a  time when coal production has been declining. Treasury officials noted  that the costs associated with forgiving Trust Fund interest or debt would  be borne by the general taxpayer since Treasury borrows from taxpayers  to lend to the Trust Fund as needed. Agency Comments

We provided a draft of this report to the Departments of Labor (DOL),  Treasury, and Health and Human Services (HHS) for review and  comment. DOL, Treasury, and HHS provided technical comments, which  we incorporated as appropriate. Appendix I: Black Lung Disability Trust Fund Simulation Methodology

We examined the extent to which (1) Black Lung Disability Trust Fund  (Trust Fund) debt may change through 2050 and (2) selected options to  improve its future financial position. We interviewed officials from the  Departments of Labor (DOL), Treasury, and Health and Human Services  (HHS), as well as representatives from the National Mining Association  and the United Mine Workers of America. The options we simulated  are not intended to be exhaustive and we are not endorsing any particular  option or combination of options. For options that involve adjusting coal tax rates,  we estimated the amount of debt that would need to be forgiven in fiscal  year 2019 for the Trust Fund’s revenues to be sufficient to cover its  expenditures through fiscal year 2050, assuming the Trust Fund does not  borrow from Treasury’s general fund after fiscal year 2018. We  simulated how various coal tax and debt forgiveness options could  balance the Trust Fund by fiscal year 2050, whereby its simulated  revenue would be sufficient to cover its simulated expenditures.
Why GAO Did This Study

With revenue of about $450 million in fiscal year 2017, the Trust Fund paid about $184 million in benefits to more than 25,000 coal miners and eligible dependents. However, the Trust Fund also borrowed about $1.3 billion from the Treasury's general fund in fiscal year 2017 to cover its debt repayment expenditures. Adding to this financial challenge, the coal tax that supports the Trust Fund is scheduled to decrease by about 55 percent beginning in 2019. GAO was asked to review the financial positon of the Trust Fund and identify options to improve it.
This report examines (1) factors that have challenged the financial position of the Trust Fund since its inception and (2) the extent to which Trust Fund debt may change through 2050, and selected options that could improve its future financial position. GAO reviewed Trust Fund financial data from fiscal years 1979 through 2017. GAO also interviewed officials from the Departments of Labor, Treasury, Health and Human Services (HHS) and representatives of coal industry and union groups. Using assumptions, such as the about 55 percent coal tax decrease and moderately declining coal production, GAO simulated the extent to which Trust Fund debt may change through 2050. GAO also simulated how selected options, such as forgiveness of debt, could improve finances. The options simulated are not intended to be exhaustive. Further, GAO is not endorsing any particular option or combination of options.
GAO provided a draft of this report to DOL, Treasury, and HHS. The agencies provided technical comments, which were incorporated as appropriate.

What GAO Found

Multiple factors have challenged Black Lung Disability Trust Fund (Trust Fund) finances since it was established about 40 years ago. Its expenditures have consistently exceeded its revenues, interest payments have grown, and actions taken that were expected to improve Trust Fund finances did not completely address its debt. When necessary to make expenditures, the Trust Fund borrows with interest from the Department of the Treasury's (Treasury) general fund. Because Trust Fund expenditures have consistently exceeded revenue, it has borrowed almost every year since 1979, its first complete fiscal year, and as a result debt and interest payments increased. Legislative actions were taken over the years including (1) raising the rate of the coal tax that provides Trust Fund revenues and (2) forgiving debt. For example, the Energy Improvement and Extension Act of 2008 provided an appropriation toward Trust Fund debt forgiveness; about $6.5 billion was forgiven, according to Department of Labor (DOL) data (see figure). However, coal tax revenues were less than expected due, in part, to the 2008 recession and increased competition from other energy sources, according to DOL and Treasury officials. As a result, the Trust Fund continued to borrow from Treasury's general fund from fiscal years 2010 through 2017 to cover debt repayment expenditures.
GAO's simulation suggests that Trust Fund borrowing will likely increase from fiscal years 2019 through 2050 due, in part, to the coal tax rate decrease of about 55 percent that will take effect in 2019 and declining coal production. The simulation estimates that Trust Fund borrowing may exceed $15 billion by 2050 (see figure). However, various options, such as adjusting the coal tax and forgiving interest or debt, could reduce future borrowing and improve the Trust Fund's financial position. For example, maintaining the current coal tax rates and forgiving debt of $2.4 billion could, under certain circumstances, balance the Trust Fund by 2050, whereby revenue would be sufficient to cover expenditures. However, a coal industry representative said that maintaining or increasing the coal tax would burden the coal industry, particularly at a time when coal production has been declining. Further, Treasury officials noted that the costs associated with forgiving Trust Fund interest or debt would be paid by taxpayers.