A recent editorial in the Lexington Herald-Leader called attention to the fact that in a number of eastern Kentucky taxing-districts, the matter of collecting revenue is so badly handled (more likely, not handled at all) that unpaid property-tax bills are sold to collection agencies that, largely because of Kentucky laws, can reap huge profits, collect humongous attorney-fees, and ultimately own a lot of property. What this actually means, of course, is that taxpayers throughout the rest of the state pick up the tab – for instance with regard to funding education – for the shortfalls from the eastern counties. The unpaid-bill-collecting entrepreneurs can let the bills go unpaid for years, if they choose, with the passing of time allowing huge increases in interest charged and attorney-fees, but remitting no funds to county or state coffers.
Sound familiar? Of course! This is the situation that obtained when in the late 80s the legislature was confronted by a judge with the mandate that it “equalize” things with regard to the funding of education. This resulted in the Kentucky Education Reform Act of 1990, perhaps the biggest pork-barrel (and tax-increase) legislation that ever came down the pike. Unfortunately, in the process of “equalizing” education-funding throughout the state (actually robbing Peter to pay Paul) the legislature in its wisdom decided to even enact pedagogical requirements, action so out of its expertise as to be laughable. Results have been predictably terrible and much of this part of the act has been rescinded, bringing about some improvement.
The truth was that in many counties, especially in eastern Kentucky, citizens refused to adequately enhance state taxes with sufficient local taxes to support good school systems. They were content to have their schools operate almost entirely on the funds received from the state, with many systems comprising the most important business enterprise in the county and therefore inevitably corrupt, political patronage being an ever present fact of life. The school-systems in independent/county districts in which citizens were willing to tax themselves in behalf of providing the best educational opportunities possible were far superior to those that simply “lived off the state.”
As pitiful as local support was, the tax situation vis-à-vis collections – not even sending out tax bills one year in Elliot County (one of those suing the state for “equity”) – was deplorable. The worst twelve counties in the state in the matter of tax-collection in 1989 were all located in eastern Kentucky. For instance, more than 18% of all tax accounts in Pike County, the eastern-most county besides being the largest county in the state, were delinquent in 1989. This lack of collecting taxes in eastern Kentucky allowed those counties to impinge on all other counties, forcing them to pick up the slack.
Disappointingly but not surprisingly, nine of those 12 counties noted in 1989 for lax tax-collections were among the 12 worst counties in 2004, a full 15 years later, while all 12 of the worst counties that year were also in eastern Kentucky. By contrast, only three of the best tax-collecting 12 counties in 1989 were among the 12 best counties in that category in 2004. So…did some counties figure they were being had and acted to ease up on collections? Probably not, but would they have been justified in taking that approach?
When the dust settled in 1990, it was discovered by the local systems that had “gone the extra mile” in funding their efforts, as well as collecting taxes, that they were being sorely penalized by the state, with huge sums going to the systems in districts that had leeched off the state, while they received a pittance in comparison. In 1990, for instance, Danville citizens paid 50.8 cents per $100 on property and 66.9 cents per $100 on motor vehicles in school taxes. The Danville board collected locally 25% more per student than the state average – $909 and $727, respectively. Under KERA, the Danville system realized an estimated increase in state funds from the 1988-89 allocation to the 1990-91 allocation of less than nine percent, while Pike County, which didn’t bother with collecting more than 18% of its school taxes received an increase from the state of 25%. Indeed, all 12 of the worst tax-collecting counties received a whopping and immediate increase of 25% in state funds. Fayette County, whose citizens had voted extra funds for excellence received an increase of only eight percent.
According to the 2004 figures, the situation hasn’t changed much, though the worst counties in 1989 have smaller percentages in delinquent taxes. Pike, for instance, was delinquent to the tune of 7.61%, while Menifee County was the champion worst with a delinquency rate of 9.19%. So…it’s no wonder that tax bills are being sold to the highest bidder. Local officials have decided to take a pass, impinge on other counties, and let the devil take the hindmost.
And so it goes.
Jim Clark
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