A report released this week by state Auditor Adam Edelen found local taxing districts across Kentucky take in millions in revenue with scant oversight and few laws to ensure they operate in the public’s best interest.
“Special districts are a multi-billion dollar layer of government — rivaling county governments in sheer size — that operate outside any uniform system of accountability,” Edelen wrote.
“It is a scandal that for generations no Kentuckian could answer basic questions as to the number of special districts, nor how much they tax, fee, spend, or hold in reserves.”
The report on what Edelen refers to as Kentucky’s “ghost government” took more than six months to put together and includes an online database that will allow the public to search for financial information about districts across Kentucky.
Edelen’s office found that more than 1,200 special districts receive more than $1.5 billion in tax and fee revenue and spend more than $2.7 billion annually.
Special districts include both taxing districts, which can levy their own property taxes, and non-taxing districts with the authority to collect fees or receive revenue collected by another entity.
According to the report, there are eight special districts each in Boyle, Garrard and Mercer counties, nine in Lincoln County and 10 in Casey County.
The report found annual revenue and expenditures for special districts were $5.7 million and $6.3 million, respectively, in Boyle; $18.5 million and $20.2 million in Casey; $1.7 million and $1.2 million in Garrard; $13.6 million and $14.2 million in Lincoln; and $3.4 million and $4.8 million in Mercer.
Edelen said one of the more startling findings was that special district cash reserves are twice the total of the contingency funds for all 174 school districts in Kentucky.
The $2.7 billion special district spending is almost exactly what the entire state spends on the SEEK funding formula for education.
Edelen reserved a large share of the blame for what he called a “muddled morass of more than 50 chapters of law and more than 1,000 individual statutes (some of which are a century old), bizarre classifications, uncertain responsibilities, confusing mandates and the absence of meaningful tools to compel compliance.”
All special districts are required by law to turn their budgets over to their county’s fiscal court, which must then file them with the Department for Local Government.
Stephenie Steitzer, communications director for the auditor’s office, said many entities had been listed as out of compliance because the fiscal courts had not filed the records with DLG.
During a conference call with newspaper editors Thursday afternoon, Edelen emphasized that the intention of the report was not to malign many agencies that provide necessary services in an exemplary manner, but instead to shine a light on the massive amount of resources being handled without public scrutiny.
He acknowledged there has been push back from some of the agencies but said in many cases districts that had not submitted records as required by law quit doing so years ago because county officials were not asking for them or even sure what to do with them.
In addition to a call for widespread statutory reform, Edelen recommended creating a centralized online database maintained by the Department of Local Government, similar to the registry used by the Secretary of State to display the business filings, where all taxing districts would be compelled to file their records.
The auditor also called for educating stakeholders and new legislation with “real teeth” that mandates financial reporting and adherence to ethics codes.
Edelen is confident legislators will understand the need to revamp the laws in the coming session.
He said there is support in the House and he has already had positive talks with Robert Stivers, the likely president of the Senate, and Sen. Damon Thayer, chairman of the State and Local Government committee.
For access to the online database visit the Kentucky Auditor of Public Accounts website at auditor.ky.gov and click on the Citizen Auditor Initiative icon.