INDIANAPOLIS — Local governments throughout Indiana have been shortchanged almost $206 million in tax revenues since January 2011 due to a computer error at the state revenue department.
The costly mistake, announced today by state budget director Adam Horst, is the second multi-million dollar error that state revenues officials have revealed in less than four months.
For local units of government, discovery of the error means a windfall of money. Horst said Indiana counties will be repaid the $206 million, with interest, beginning as soon as today. A share of that money will then be distributed to cities and towns by county treasurers.
The error also cost two state Department of Revenue senior managers their jobs, and prompted the department’s commissioner, John Eckart, to offer his resignation.
Horst said an outside auditor will be brought in to conduct a thorough review of how the department accounts for and distributes tax revenues.
Horst said the most recent error was caused by a computer programming error that produced faulty information about how much local governments were owed in local income taxes that are collected by the state and distributed back to local governments. The result was that counties were underpaid about $13 million each month since January 2011.
Earlier this year, Republican Gov. Mitch Daniels announced that another computer error had resulted in some $320 million in corporate taxes that were not transferred to Indiana’s general fund, which pays for local schools and public safety. At the time, he rejected a request by Democrat legislators to bring in an outside auditor. Daniels was out of the Statehouse when the most recent error was announced Thursday; his staff said he’s traveling to Israel.
Horst said the $209 million underpaid to local governments since January 2011 represents a small fraction of their budgets.
But State Sen. Tim Lanane, a Democrat from Anderson, said the impact has likely been significant in communities around the state.
“When you break it down for the cities, towns and counties that are strapped financially, this is huge,” Lanane said. “Every one of them is looking for every dime they can.”
A detailed list of how much money will be going back to each county, to be distributed among local units of government, is online at www.in.gov/sba/2591.htm.
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