FRANKFORT — Elected county commissioners and magistrates could veto increases in taxes and fees imposed by local taxing districts under changes the Kentucky Senate has written into a House bill.
The Senate voted 23-10 to approve House Bill 1, with several Senate Democrats voting for the bill even though they did not like the Senate's changes.
The Senate State and Local Government Committee voted 8-2 earlier Wednesday to alter the bill, which would increase oversight of the more than 1,200 tiny taxing districts that have existed largely under the radar of government auditors.
Giving county governments power over special taxing districts is an addition that Auditor Adam Edelen called unacceptable because he said it could jeopardize the support of a broad coalition of local officials that has been pushing the legislation.
"To have that potentially jeopardized and lost over something that isn't even germane to the bill that we have proposed, I think, represents a sad occasion," Edelen said.
If the Democrat-led House does not accept the Republican-led Senate's version of the bill, a conference committee of members from both chambers could be appointed to iron out differences between the two bills.
Sen. Walter Blevins, D-Morehead, said he was voting for the bill on the Senate floor even though "it is being hijacked" by Sen. Damon Thayer, R-Georgetown, who proposed giving county governments a say on tax increases by special taxing districts.
Thayer, during the committee meeting, said that the provision is crucial to the bill in that it gives elected officials the right to strike down hikes in taxes and fees, rather than leaving that to the sole discretion of appointed officials.
"For me, it's a deeply held philosophical belief that taxpayer dollars should not be expended unless there is some kind of oversight component by those who are elected by the people," he said.
Edelen released a report last year identifying 1,268 taxing districts that collect $1.5 billion in taxes and fees each year, plus an additional $1 billion in grants and private donations. He said the districts also hold about $1.3 billion in reserves.
Because they've operated with little oversight, Edelen said the taxing districts represent a "ghost government."
Edelen's staff found that about 40 percent of the taxing districts that are required to submit budgets to elected leaders in fiscal year 2011 did not, and just 55 percent with revenues or expenditures exceeding $750,000 underwent annual audits.
House Speaker Greg Stumbo, D-Prestonsburg, sponsored the measure and gave it the designation House Bill 1, meaning it is considered the top priority for the session. The House passed the measure 96-1 in early February.
Besides improved oversight, Stumbo's proposal also would create a centralized registry for taxing districts so that taxpayers and government agencies will know how many of them exist in Kentucky. And it would require leaders of local taxing districts to undergo ethics training and to answer to a local ethics commission, just as other government officials do.
Edelen said he's hopeful that Thayer's provision will be removed and that the legislature will pass the original version of the bill.
"House Bill 1 represents a historic opportunity to bring meaningful reform, transparency and accountability to a layer of government that hasn't had it, essentially, ever," Edelen said.