House passes bill to rein in taxing districts

By Roger Alford/Associated Press, Published:

(AP) — The House approved strengthened oversight Friday for a multitude of tiny taxing districts that have existed largely under the radar of government auditors.

The measure sets up a system for auditing the entities that collect and spend more than $2 billion a year to operate a variety of government services, including rural fire departments, airports, sanitation districts, even libraries. It also would create an online database where taxpayers could review financial reports for each taxing district.

The House passed the measure 96-1, making it one of the first bills to clear the chamber this year. It now goes to the Senate, where it already is receiving favorable reviews.

"That it has moved through the House so swiftly speaks to the overwhelming need to bring transparency and accountability to a $2.7 billion layer of government," state Auditor Adam Edelen said. "I encourage the Senate to give similar treatment to this important legislation and deliver to taxpayers the reform that they deserve."

Edelen released a report last year identifying 1,268 taxing districts that collect $1.5 billion in taxes and fees each year, plus another $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.

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.

Although questionable spending has been identified among a handful of taxing districts, Stumbo said he believes most are operating lawfully and honorably.

"This is not an act in response to bad conduct," he said. "This is an act that compliments good conduct."

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