State Revenue Error Shortchanged Local Governments Over $200 Million

Last December, the Indiana Department of Revenue announced that it discovered over $300 million in misplaced state revenues. Today, the Department announced that it had shortchanged counties more than $206 million since 2011 because of a miscalculation in revenue distributions. The latest blunder cost two senior Department officials their jobs and the ouster of the Department Commissioner John Eckart. The state's budget director, Adam Horst, learned of the error weeks ago but did not tell Gov. Mitch Daniels until he was about to leave on an 8-day trip to Israel. The Star's Mary Beth Schneider explains:

We are taking this very seriously,” Horst told reporters this morning.

Eckart offered to resign immediately, Horst said, but will stay on until tax season is over. No date was specified for him to leave. The two officials who left state employment Wednesday are Chief Information Officer Roy D. Gabriel, who retired after having been with the Department of Revenue since January 2004 and previously worked for the Family and Social Services Administration, and Chief Financial Officer Darrel Anderson, who resigned after having been with the revenue department since June 2005. According to the state’s website, Gabriel was paid $100,000 annually, and Anderson $99,500.

The biggest admission that a change in personnel isn’t enough is the state’s decision to hire an outside firm to conduct an independent audit.

Democrats had called for that very step in December, after the first error was found, but Daniels, Horst and Republican fiscal leaders in the legislature had firmly opposed that. Horst said that the internal reviews after the first error worked, as they found this new error. Both resulted from programming errors, though of a different nature. The first involved electronic checks by corporations that were not properly accounted for in the state’s general fund; the new error comes from miscalculations of how much counties are owed in income tax collections.

Today's announcement will erase a substantial hole recently uncovered in Indianapolis' city-county budget. Indianapolis was shortchanged $33.8 million, which it will now be receiving from the state along with interest. In total, all taxing units in Marion County will receive about $55 million in combined new revenues. About $41 million is payable to the city-county operating fund. Hamilton County will get $17.3 million, Hendricks County will receive $4.8 million and Johnson County will get about $3.8 million.