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Kentucky State Auditor: Special Tax Districts Spend Much, Laws Need Overhaul

Taken together, Kentucky's special taxing districts spend more money than the state spends on Medicaid and infrastructure -- and nearly half of those districts are not following rules on filing budgets or submitting audits, said a report from State Auditor Adam Edelen released Wednesday. 

A special taxing district is a quasi-governmental agency that collects fees or taxes, such as library boards, soil districts and health districts.In the report, Edelen said Kentucky has about 1,270 special taxing districts spread throughout all of the state's 120 counties. And in all but three counties, special districts collect more tax and fee money than county governments. The exceptions are Pike, Daviess and McLean counties.

That amounts to $2.7 billion  in spending for the districts, which is more than the state spends on Medicaid and infrastructure.

Edelen said that’s more than he initially estimated, but the most shocking number is that the special district's spending matches Kentucky's spending on education -- a fact Edelen called "extraordinary."

Collectively, the districts also hold more than $1.4 billion in reserves.But there is no way for taxpayers to recoup any of that money. The report was supported by many governmental organizations, including the Kentucky Leagues of Cities, library and conservation groups that make up special districts and government watchdog groups.

With almost half of special districts not following rules on filing budgets or submitting to audits, Edelen said the next step is forcing compliance and an overhaul of the special districts system."The system we have right now fundamentally fails everyone at every level," Edelen said."It fails taxpayers who pay the freight, it fails the special districts that are operating in a way that is admirable and it fails those of us who are watchdogs in being able to make determinations on how that money follows. All that is unacceptable and it speaks to the need for big change."is encouraging the public and local governments to start looking into the compliance and spending of their own local districts through a new online database that is tracking the districts. The database can be found at www.citizenauditor.ky.gov.Edelen says he will now lobby Kentucky lawmakers to tweak more than 1,000 laws that govern special districts.