The Richmond Register

January 14, 2013

Edelen’s ‘ghost government’ efforts could create millions of new auditors

By Jim Waters
Bluegrass Institute

— American revolutionary James Otis gets credit for saying: “Taxation without representation is tyranny.”

Whoever said it, those words ring just as true here today in Kentucky as they did in 18th century colonial Massachusetts.

Thankfully, State Auditor Adam Edelen also is demonstrating his belief in this founding principle with his initiative to hold accountable the more than 1,200 special taxing districts strung out across the commonwealth.

The crescendo of the Kentucky Citizen Auditor Initiative on special districts is an interactive online database designed to finally shine some light on these governments.

Edelen calls them “ghost governments” that have operated in the shadows of Kentucky for more than a century.

These special districts are as spooky as they sound. That’s because the state officials who run them have the power to assess fees and levy taxes on Kentuckians – without having to be elected by Bluegrass citizens.

Add in the fact that 40 percent of these ghost governments ignore their legal obligation to submit budgets to county governments, and that half with revenues over $750,000 per year are not subjected to the audits required by law, and you may feel like you’ve been whisked back in time to an era of colonial history where state masters would taketh without having to giveth account.

That’s truly taxation without representation – not to mention without transparency.

And the lack of accountability isn’t a nickels-and-dimes type of problem either.

The 1,268 special districts that can be found in every county in Kentucky spend more than $2.7 billion per year – which equals approximately one-fourth of the total annual general fund state budget.

At $1.3 billion, even the total reserves held by these ghost governments are more than twice those of Kentucky’s 174 school systems.

In 117 of 120 counties in Kentucky, taxpayers pay more to these unelected ghost governments than they do to their elected county governments.

As Edelen notes in his report, one must separate the epic lack of transparency and accountability within these special districts from the services provided.

Fire departments, sanitation services and libraries provide highly demanded goods and services. But to allow the $2.7 billion earned by Kentucky citizens and taken by these typically unelected officials to be spent without transparency or accountability is unacceptable.

Thankfully, Kentucky’s legislature is finally taking measures to turn these ghost governments into good governments.

Legislation likely will be filed next week that would require these special districts to submit appropriate accounting and reporting information to Kentucky’s Department for Local Government, and would streamline the process by creating a uniform system of transparency.

While taxpayers deserve to get even more details on spending by these special districts, these steps represent a big improvement over the current system, which, as Edelen describes in his recent report, represent “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.”

Utmost transparency and the kind of accountability expected from those who tax and spend citizens’ hard-earned income are necessary in defeating the type of tyranny American revolutionaries opined against 250 years ago.

Let’s hope the legislature will take a bold step toward reaching that ideal.

Edelen has provided the leadership through his efforts to establish an online database that any citizen watchdog can use to hold these tax collectors accountable.  

By following his lead, lawmakers will empower Kentuckians, creating millions of auditors rather than just one.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.freedomkentucky.org/

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