Lawmakers pass bill to shed light on Kentucky's special taxing districts

jbrammer@herald-leader.comMarch 12, 2013 

FRANKFORT — The House and Senate unanimously approved a compromise bill Tuesday pushed by Auditor Adam Edelen that would bring more transparency to Kentucky's special taxing districts.

Key lawmakers spent much of the day negotiating a deal on House Bill 1, which the chambers approved Tuesday night and sent to Gov. Steve Beshear for his consideration.

Edelen, a Democrat, said he was thrilled with the compromise, aimed at making a $2.7 billion layer of Kentucky's government more accountable to taxpayers.

HB 1, sponsored by House Speaker Greg Stumbo, D-Prestonsburg, would require special-purpose government entities — libraries, fire departments, sewer districts and similar agencies — to submit their budgets to a publicly accessible online registry. The state Department for Local Government is expected to unveil the registry to the public in October 2014.

The measure would clarify audit standards and adds teeth to current law to compel compliance with reporting and auditing standards for special taxing districts. Entities that aren't in compliance could be subject to an examination by Edelen's office and could lose state funding. The bill also would establish education for board members and staff and requires entities to adopt ethics codes.

The Republican-controlled Senate had changed the bill to give fiscal courts and city councils veto power over tax and fee increases by the special districts, but the Democratic-controlled House did not approve of the alteration.

Senate Majority Leader Damon Thayer, R-Georgetown, and Senate Minority Leader R.J. Palmer, D-Winchester, crafted a compromise that requires special-purpose government entities to hold public meetings before increasing taxes or fees and requires the entities to give reports to fiscal courts regarding their budgets.

"These compromises are in the spirit of the bill's original intentions," Edelen said. "They add to accountability and transparency without getting into issues of governance that would jeopardize public health and safety, and infrastructure services."

The final bill does not give fiscal courts the ability to veto the entities' tax or fee increases, a proposal that Thayer had pushed.

Thayer said he would allow the compromise bill to become law, but he said state legislators might need to review the law when they return in January for the 2014 General Assembly.

Edelen proposed the legislation after a six-month effort to shine light on special taxing districts last year. That effort culminated in the first database listing Kentucky's special-purpose government entities and a study titled "Ghost Government: A Report on Special Districts in Kentucky."

His office found that more than 1,200 special districts collect $1.5 billion in taxes and fees annually and $1 billion in grants, corporate sponsorships and fund raising. In all but three counties, taxpayers pay more in property taxes to special districts than to their county governments.

The effort found that special districts spend $2.7 billion a year, about $5 less per capita than the state spends on primary and secondary education. The districts hold $1.3 billion in reserves — twice the contingency funds of 174 school districts.

Edelen is the first constitutional officer this year other than the governor to win legislative approval of a bill. Republican Agriculture Commissioner James Comer has pushed a measure to regulate hemp farming, and Secretary of State Alison Lundergan Grimes, a Democrat, has fought for a bill that would allow overseas military members to vote electronically.

Jack Brammer: (502) 227-1198. Twitter: @BGPolitics. Blog: Bluegrasspolitics.bloginky.com.

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