Call to Order and Roll Call
The first meeting of the Budget Review Subcommittee on General Government, Finance, and Public Protection of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, November 29, 2012, at 10:00 AM, in Room 129 of the Capitol Annex. Senator Jack Westwood, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Jack Westwood, Co-Chair; Representative Royce W. Adams, Co-Chair; Senator Joey Pendleton; Representatives Dwight D. Butler, Leslie Combs, Mike Denham, Adam Koenig, Tom McKee, Tanya Pullin, Tom Riner, and Wilson Stone.
Guests: Adam Edelen, Auditor of Public Accounts.
LRC Staff: Tom Willis, Jennifer Rowe, Katherine Halloran, and Spring Emerson.
Report on Special Districts in Kentucky
Adam Edelen, Auditor of Public Accounts, provided an overview of the report on special districts in Kentucky. He said there is an opportunity to make Kentucky a national leader in good government with a four-point approach, which includes modernization and reform of 1,017 individual statutes in order to develop clarity; a better system of compelling compliance; a centralized registry of special districts that tax, fee, hold money in reserves, or borrow funds, including organizational structures; and, a method of accountability and transparency such as the ethics code.
In response to questions from Representative McKee, Auditor Edelen said under existing law there are 23 categories of taxing districts and 20 categories of non-taxing special districts which charge fees. He added that there is a citizen auditor database available on the internet which can be accessed for information regarding individual counties.
In response to a question from Chair Westwood, Auditor Edelen stated that there are some special districts that neither tax nor charge fees, such as local health departments and area development districts.
In response to a question from Co-Chair Adams, Auditor Edelen said expectations and responsibilities of special districts need to be identified and clearly outlined for newly formed special districts as well as current ones. He also said the laws are unclear regarding the dissolution of special districts that do not exist or are operating illegally.
In response to questions from Representative Koenig, Auditor Edelen said the disparity of approximately $1 billion accounts for federal, state, and local grants, and corporate grants, which become a part of their revenue stream. He also said when the website was launched, numbers were scrambled in one area due to a computer glitch, and that issue has been resolved. He added that the cost of a centralized registry would be approximately $250,000 per year and should be housed at the Department of Local Government, with the cost being covered by a staggered fee system and paid for by the special districts.
In response to questions from Representative Stone, Auditor Edelen said the current threshold for annual audits is $750,000, and those districts with less revenue are audited every four years, by law. He added that only 45 percent of those districts with revenues over $750,000 get annual audits, and of those who fall below that threshold, one in three does not get audited every four years.
In response to questions from Representative Pullin, Auditor Edelen said some boards are comprised of elected officials, which allows for more accountability in those special districts. He added that nonprofits report to the Secretary of State, not the special district. He reiterated the need to reform the oversight of the system.
In response to questions from Chair Westwood, Auditor Edelen said there are many special districts in northern Kentucky. He went on to say that if the special districts’ ability to change their power to tax to the fiscal courts would be disastrous for the county governments’ ability to bond. Audits are conducted by APA career staff as well as private CPA firms under contract, and are paid for by the special districts.
Representative Denham said there are four members of this committee who are leaving the General Assembly, and he made a motion for a resolution to thank Co-Chairs Westwood and Adams and Senators McGaha and Pendleton for their contributions to this committee and their service to the commonwealth; the motion was seconded by Representative Combs and passed without objection.
Co-Chair Adams stated that he had been on the committee for over 15 years and thanked everyone for the opportunity to serve in this capacity. Co-Chair Westwood echoed those sentiments and thanked everyone for their support.
There being no further business before the committee, Chair Westwood asked for a motion to adjourn. A motion was made by Representative McKee and seconded by Representative Stone, and the meeting was adjourned at 11:18 AM.