FRANKFORT—The state’s estimated 1,268 special taxing districts spend two-and-a-half times the budget of the state road fund without much oversight, according State Auditor of Public Accounts Adam Edelen, who urged a state legislative committee Wednesday to consider four key proposals to improve accountability of these districts.
“We’re talking about an enormous level of government that I think for too long has been allowed to operate with a lack of accountability and oversight system wide,” Edelen told the Interim Joint Committee on Local Government.
Topping the list of four key recommendations Edelen asked lawmakers to consider for action during the 2013 Regular Session was modernization and reform of statutes that affect special taxing districts. Edelen said there are currently over 1,000 Kentucky laws on special taxing districts, many written a century ago or more. “That has to be cleaned up,” he said.
Second was the recommendation that lawmakers put “real teeth” in the law to compel the districts to comply with auditing requirements now in state law. Every special taxing district in Kentucky with a budget of $750,000 a year or more is required to have an annual audit but only around 55 percent do, Edelen said.
“The cash value of public money that has gone unaudited among those 45 percent…is $461 million,” he told lawmakers.
Other recommendations include requiring special taxing districts to operate under county ethics codes and establishing a centralized registry so that basic information about what a district is and where it operates is on file. “It needs to be available to the public in a way that’s easy to understand…” Edelen said.
A few members of the committee questioned why Edelen’s office did not recommend requiring those who serve on special district boards to be elected rather than appointed. Currently, only an appointment is necessary. Sen. John Schickel, R-Union, said another recommendation needs to be that every person in the state with the power to raise or lower taxes is elected.
“We had a little bill in the Kentucky State Senate that didn’t even go that far. All it said was that the people who are on these boards will be appointed by elected officials… It died in the other chamber,” said Schickel. Senate Bill 49, sponsored by Schickel during the 2012 Regular Session, would have instituted similar requirements for public library district boards.
Committee Co-Chair Sen. Damon Thayer, R-Georgetown, said he agreed. Thayer said a former state local taxation task force on which he served recommended that special districts be accountable to county fiscal courts “for approval of any tax or rate increase. That bill has been filed a couple of times, and we’ve not been able to get it going.”
“I like your recommendations,” Thayer told Edelen. “But, when there are tax dollars in play, there ought to be some accountability to someone who is elected because then they can answer for their vote.” Thayer said lawmakers will decide whether or not to address that issue in the upcoming session.
Also questioning the need for more accountability to elected officials was Rep. Kevin Sinnette, D-Ashland. “I’m not really seeing accountability … (the special districts) can still issue taxes without accountability to somebody elected, whether that be the fiscal court (or otherwise).”
A centralized registry will help the state get a handle on special taxing district issues, Edelen said. “Before we go the route of trying to subordinate all these different entities to elected officials, or indeed begin the process of electing them, I think we need to have a clear sense of precisely what we’re dealing with, which I think is what you get with a centralized registry.”
The State Auditor’s office spent most of 2012 studying the number, location, spending, reserves and other aspects of special taxing districts and issued the findings in a November report titled “Ghost Government.” That report shows that Kentucky’s special districts combined spend $2.7 billion collectively each year, or two and half times the annual state road fund budget. Their total reserves are estimated at $1.4 billion—which Edelen said is double the amount of rainy day funds held by the state’s 174 public school districts—and they fee and tax Kentuckians around $1.5 billion annually.
Examples of the dozens of special taxing districts operating in Kentucky include housing authorities, libraries, sewer districts, fire protection districts and public health districts. Special taxing districts operate in all 120 Kentucky counties.