It wasn’t the Mega Millions lottery, but 91 of Indiana’s counties will be receiving millions of unexpected dollars as a result of a computing error at the Indiana Department of Revenue.
And that hasn’t exactly inspired local confidence in the state’s bookkeeping abilities.
The state agency announced Thursday that it failed to distribute to the counties the appropriate local income and economic development income taxes for 2011 and 2012. The amount being returned to the counties amounts to $205 million.
This was the second mistake reported by the Department of Revenue in the past few months. In December, the department said it found an additional $320 million in state revenues.
“I know they’ve had computer problems in the past, [but I] thought they were resolved,” Howard County Treasurer Martha Lake said. “They need someone who is dedicated to making sure the computer software is working properly. The system requires strict oversight and should be audited every year. This is good news for the county.”
Although there are 92 counties in Indiana, one county has not implemented a county option income tax.
Residential property owners should see a reduced property tax bill in 2013 because the local option income tax revenues are designated to provide tax relieve through a Homestead Credit.
Howard County is expected to receive $3.7 million in additional county option and local option income taxes and $533,909 in county economic development income tax revenues. Those funds will be distributed to several local taxing entities including the city of Kokomo, Howard County, Greentown and Russiaville.
Lake said the county will receive a check by April 12 for $1.5 million for the income tax distribution in 2011 and $741,893 for the first four months of this year, the remaining balance will be paid in monthly installments.
The county will also receive $215,371 for the 2011 EDIT distribution and $106,179 for the first four months of 2012.
Richard Miller, president of the Howard County Council, said errors by the state make it difficult for counties to formulate a budget.
Miller said over the years, the county puts together a budget without knowing exactly how much money was available but rather on estimates from the state.
He said the county shouldn’t plan on spending the additional revenues in the near future.
“It would be foolhardy to think we have found new money,” Miller said, “let’s look for a way to spend it. I’m in no rush.”
He said the additional funds could be used to purchase new voting machines or to provide county employees with a raise or bonus.
Commissioner Paul Wyman said with the tight budget, the state money will give the county some breathing room.
“It makes a big difference during the budget process,” he said. “When we’re doing the budget work, you wonder if we’re using real numbers.”
Both Wyman and Miller raised concerns over the money the state contends the counties owe from a previous overpayment.
At one time, state officials said the counties were overpaid by $507 million, but that figure has been adjusted to $147 million.
Lake said the state has adjusted the amount owed by Howard County from $11 million to $4.2 million.
Those funds will be repaid to the state based on the growth of local income taxes. The base year being used is 2011 collections and any collections over that amount will go toward the debt.
Wyman said he wanted to settle up now if county owes the state money.
“It makes sense to settle it,” he said. “If we owe the state $4 million and they’re sending $3.7 million, why not just send them a check for $300,000.”Miller said he has never received an explanation on how that figure was arrived at by the state.
“That number has been hanging over our head,” he said. “We have no way of checking our revenues. We rely on people that don’t seem to know what’s going on. “
Wyman said the fact that the state made an error is troubling.
“When the state collects the money and sends it back, it makes people want to second guess,” he said. “I hope they resolve the problems.”
Miami County
In Miami County, Auditor Jane Lilly said the state is returning $1.2 million in county option income taxes and $254,000 in EDIT funds from 2011 and the first four months of this year.
“When I heard the news, I said a prayer of thanks,” Lilly said. “We’ve been praying for this for a long time.”
“It’s marvelous news,” said Treasurer Becky Morris.
Ralph Duckwall, 2nd District councilman, said the state should mail the checks out by April 12. He said some of the money could possibly be placed in the rainy day fund, which would allow the county to use it as discretionary spending.
The extra funding is especially good news for Miami County, which cut $1.1 million from the general fund in March after the state mandated the budget reduction. The cuts required four departments to terminate personnel.
“We’ve taken so many hits recently, so this is really exciting news,” Lilly said. “But it’s unfortunate we’ve had to suffer for the last eight months over budget cuts. This will give us a chance of surviving.”
Morris said the returned money will hopefully allow the county to avoid further personnel reductions in the 2013 budget.
Duckwall said the $206 million mistake reinforces the lack of confidence many counties have in state decisions and supports the idea that counties should have more autonomy with their finances.
He said no specific spending decisions have been made with the returned funds.
But despite the upcoming influx of money, Lilly said the county still needs to remain cautious about future spending given the recuperating economy.
“We’re going to keep our heads straight and remain fiscally responsible,” she said.
Tipton County
Tipton County is looking at receiving $893,518 in income tax revenues and $263,670 in EDIT revenues.
“It’s like find missing money,” Commissioner Mike Cline said.
Cline said he believes the county will wait and see what it takes to pay the bills in 2012 before any new spending is approved.
“Our finances are tight,” he said.
Cline said it’s a concern any time there is an error.
“They found the error,” he said. “The state is taking positive steps to correct the problem.”
http://kokomotribune.com/local/x2108288938/Another-mistake-rattles-local-officeholders-faith-in-system
