'Ghost government' of special districts amasses billions of taxpayer dollars with little oversight, auditor finds

11/14/2012 01:35 PM

(UPDATED WITH VIDEO) Calling it a layer of “ghost government,” state Auditor Adam Edelen said the more than 1,200 special districts that can tax and fee Kentuckians have been operating with little oversight even as they spend $2.7 billion a year and have socked away about $1.4 in reserves.

Edelen unveiled the first comprehensive list of as many as 53 types of special taxing districts that include libraries, hospitals, fire departments and districts that deal with air pollution control, health departments and soil conservation. These are entities that are led by un-elected boards that can impose tax and fees for services.

The auditor’s office spent the last six months surveying the districts to find out how they operate and how much money they have on hand. Edelen said there has been little to no oversight and not all the districts were eager or willing to share that basic information about the entities. About 25 percent were loath to cooperate – meaning they will be first in line for a deeper investigation, Edelen added.

Here’s how he opened the press conference as he described the system of keeping track of these taxing districts:

The auditor’s office also created a searchable database for “citizen auditors” to review the special taxing districts that operate across the state at www.citizenauditor.ky.gov

The information the auditor’s office used in its 96-page report came from surveys sent to the districts. But not all of the entities’ leaders were motivated to fill them out. Edelen shared some of the greatest hits of indignant responses from taxing districts that didn’t want to fill out those surveys that asked for basic information like contact information, counties of operation, whether they collect money from taxes or fees, budget information and whether the entity complies with oversight rules.

Here are those “greatest hits:”

Oversight, he said has been a major problem. Of the taxing districts that brought in the most revenue – those with income of $750,000 a year – half failed to be audited as required. A total of 40 percent of the entities didn’t submit their budgets to the county fiscal courts as required.

Edelen called it an “extraordinary mess:”

Edelen said in addition to his office taking a harder look at some of the entities, state leaders will have to have a broader debate about whether all of these types of taxing districts are necessary.

By the numbers:

  • 117 counties in which special districts bring in more revenue than elected county governments.
  • Counties with the most special districts: Jefferson (33), Floyd (24), Marshall (23), Henderson (22) and Boyd (20).
  • $1.4 billion special districts have in reserve is about twice the amount the 174 Kentucky school districts have in their rainy day funds.
  • $461 million in revenue to special districts that had “no oversight,” according to the audit.
About Ryan Alessi

Ryan Alessi joined cn|2 in May 2010 as senior managing editor and host of Pure Politics. He is now pursuing an advanced degree in non-fiction writing from Murray State University and is a regular contributor to Pure Politics. Ryan has covered politics for more than 14 years, including seven years as a reporter for the Lexington Herald-Leader. Ryan can be reached at purepolitics@twcable.com or @mycn2 on Twitter.

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