Lawmakers compromise on tax oversight bill

FRANKFORT, Ky. (AP) -- The House and Senate have passed a bill that would strengthen accountability of Kentucky's 1,200-plus taxing districts that collect revenue for an array of local government entities ranging from fire departments to sewage districts.

The measure is a compromise. It lacks a Senate amendment that would have given county officials the ability to veto increases in taxes and fees. But as part of a deal, the proposal requires the districts to provide annual financial reports to county officials, something that doesn't always happen.

Both chambers passed the bill Tuesday afternoon. It now goes to the governor.

The measure contains its original provision that requires annual financial reports to be displayed online. Leaders of local taxing districts also must undergo ethics training and to answer to a local ethics commission, just as other government officials do.

The legislation, House Bill 1, became a top priority for lawmakers this year after a state auditor's report revealed how many taxing districts there are in Kentucky_and how much they tax and spend.

The office of Auditor Adam Edelen determined that districts collect $1.5 billion in taxes and fees each year, plus $1 billion in government grants and private donations. The districts also hold $1.3 billion in reserves, which the auditor noted was twice the contingency funds of all the state's 174 school districts.

Forty percent of the districts failed to submit budgets to elected leaders in fiscal year 2011, the auditor's office found. And just 55 percent of districts with revenues or expenditures exceeding $750,000 underwent annual audits.

A Senate amendment almost scuttled the bill's passage because it gave county officials veto power over districts' tax and fee increases. The amendment went too far, Edelen and Democratic lawmakers said.

"This is about getting our arms around the number of special districts that exist, what they are, what they are taxing our citizens and how they're spending that money," Sen. R.J. Palmer II, D-Winchester, said of the final bill.

Senate Majority Leader Damon Thayer, R-Georgetown, acknowledged his amendment to provide veto power to counties wasn't politically feasible this session. But he said the final bill will still bring tax rates into the public eye.

"I think the taxpayers deserve more of this," he said.

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The legislation is House Bill 1.