From the Kokomo Tribune:
Last year, state budget officials were demanding counties repay $610 million to the state, claiming the recession threw off tax revenue estimates which led to extra money being paid to local governments since 2008.
But in the wake of last week’s multi-million dollar computer programming error that shortchanged counties $206 million in local tax revenue, state officials have dramatically reduced the amount counties must repay to just $145 million.
Bob Lain, assistant director at the Indiana Board of Accounts, said the same computing error that lead to the $206 million mistake also revealed the state had underestimated tax collection amounts in 2009 and 2010, which drastically inflated the amount counties owed.
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‘Incredibly complex’
John Ketzenberger, president of the Indiana Fiscal Policy Institute, said the fluctuating amounts owed is the byproduct of the complicated system Indiana uses to collect and distribute local income taxes.
“The problem is that the local option income tax system is incredibly complex,” he said.
The elaborate method the state uses is aggravated further because of the sometimes two-year lag between when the state collects taxes and when it distributes them back to counties, he said.
Bottorff said the AIC is advocating changes in the process of how the state accounts for the funds collected and how it distributes those funds back to the counties. He said those changes will be implemented in 2013.
“The reports to the counties have to be more detailed,” he said. “There has to be a historical reference to what was withheld and what was distributed. The counties can’t even ask the proper questions.”
Ketzenberger agreed there needs to be a policy debate about how the state collects and distributes funds, noting the intricacies of the current system makes it susceptible to errors and miscalculations.
Besides systemic issues, Bottorff added some of the problems date back to 2008, when there was a downturn in the economy.
“There is a lack of data to support what the state contends the counties owed,” he said.
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http://kokomotribune.com/local/x1789089608/Questions-remain-with-state-funding
