Bill proposed to regulate special districts
FRANKFORT — A bill which would hold the state’s special districts more accountable for financial reporting was filed Tuesday in the House.
House Speaker Greg Stumbo and Kentucky Auditor Adam Edelen introduced House Bill 1, which was brought to the floor Wednesday for consideration by the House Local Government Committee.
“This is an important piece of legislation, one that will go a long way in ensuring that Kentucky taxpayers know how their hard earned money is being spent,” Stumbo said.
Stumbo started working with Edelen on the bill after the auditor’s office issued a report in November 2012 titled “Ghost Government: A Report on Special Districts in Kentucky” which highlighted the inadequacies of the commonwealth in giving its citizens ways to see how the estimated $2.7 billion in taxes are being spent every year by these districts. The report found that even basic information about the special districts, like phone numbers or addresses, was often difficult or even impossible to find.
“My effort to answer basic questions about special districts was a significant first step toward shining light on a $2.7 billion layer of ghost government in the commonwealth,” Edelen said.
In the report, Edelen wrote: “This is an enormous opportunity in legacy building for a state that has often been marred by shortcomings in public integrity. We have a historic opportunity to make Kentucky a national leader in good government with modernization and reform of our system governing special districts. In doing so, we also provide hope for addressing other great challenges.”
Stumbo’s bill would essentially address confusion of what is and is not a special district by creating a new term, “special purpose government entities,” and would streamline financial reporting. To do this, the bill asks the Department for Local Government to create an online database to make it easier for taxpayers, auditors, and the districts themselves to keep track of where and how taxpayer money is being spent by the districts. It would also create ethics provisions to ensure the districts are acting in the best interest of the public, and give auditors the authority to make sure the districts keep up with the law.
There are 1,268 special districts in Kentucky, 776 of those are taxing districts, according to the report; Perry County has 17, with taxing districts including the Perry County Extension Office, the soil and water conservation district, and the public library.
Bobby Brown, chairman of the soil conservation board and a member of the county’s sanitation board, said he’s not sure what more his districts can do to be transparent.
“We’re as transparent as transparent can be,” Brown said. “I don’t know what else that they could do that could make us more accountable, as far as the conservation district is concerned.”
Brown said his main concern going forward, if this bill passes, is what would be the cost for the districts to implement and follow these new regulations and changes.
“This year is our turn to do the audit again, but we end up having to pay for that audit. When you start shoveling out $5,000 or more for an audit … we can’t stand anymore costs, we really can’t,” Brown said. “That should be one of the things that they consider. I don’t think the audit department or the state has the money, the staff, or the time to audit all these special districts.”
Matt Erwin, a spokesperson for Stumbo’s office, said the bill will initially need $250,000 to start up, $63,000 of that will need to come from the general fund and the rest will be paid for by annual regulation fees from the districts themselves.
Erwin said the regulation fees would be determined based on the size of the district, and would pay for any maintenance of the accountability tracker and site. A district making more than $500,000 a year will have to pay $500 a year in regulation fees, a district making between $500,000 and $100,000 will have to pay $250, and a district making less than $100,000 a year will have to pay $25.
The bill has been supported by numerous legislators, both Democrats and Republicans, and organizations, including the Kentucky Library Association, the Kentucky Fire Commission, and the Kentucky County Clerks Association.
“I’m proud we have come up with a bill that takes a huge step toward transparency and taxpayer protection while making sure these organizations can continue to provide vital services to Kentuckians,” Stumbo said.
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