INDIANAPOLIS | State Budget Director Adam Horst blamed a Department of Revenue programming error Thursday for Indiana's failure to distribute $206 million in county income tax revenue since January 2011, including $3.7 million to Porter County.
Revenue Commissioner John Eckart has resigned because of the error and will leave the agency by the end of the month. The Department of Revenue's chief information officer has retired and its chief financial officer quit Wednesday.
Horst said the programming error, which has been corrected, did not properly pay counties when individuals making estimated income tax payments identified the portion of their taxes going to the state and to their county, causing an under-distribution of income tax revenue to counties and an overstatement of state revenue.
"There's very little in state government more complex than local option income tax distributions," Horst said. "It's unfortunate that this error occurred."
Republican Gov. Mitch Daniels, who is traveling in Israel, ordered the Office of Management and Budget to give counties their money back as fast as possible. Payments are set to be distributed Friday.
In addition to the $3.7 million going to Porter County, LaPorte County will receive $2.7 million, Jasper County $2.6 million and Newton County $331,000. They also will receive an interest payment later in the year.
Lake County does not have a county income tax and won't receive any money because the county was not shorted.
The lump-sum payments to counties and the corrected income tax distributions that will continue in 2012 and future years do not imperil the state's budget reserve, which is projected to grow to $1.85 billion by the end of the budget year in June, Horst said. That's because of growth in sales and income taxes, particularly corporate income taxes, compared to 2011.
Hoosiers are still on track to receive a $60 to $75 automatic taxpayer refund in 2013 due to the state's budget surplus.
This is the second Department of Revenue programming error in the past five months. In December 2011, Daniels announced Indiana found $320 million in business tax payments the department lost track of over a five-year period.
Horst said a review of the department's records and computer systems following that error led to the latest finding that counties were not receiving all of their income tax revenue.
An outside auditor will be hired to assess the department, a move Horst voted against when Democrats on the State Budget Committee requested it in December.
"In light of this second error, we believe it is even more prudent to bring in additional resources so we can more aggressively investigate all the different errors and restore confidence in the functions of the department," Horst said.
House Democratic Leader Pat Bauer, D-South Bend, and Senate Democratic Leader Vi Simpson, D-Ellettsville, said in a joint statement the error shows Daniels has no credibility as a competent manager of state government.
"In the business world, these kinds of mistakes would cost him his job," they said. "We only wonder what horrors await through the rest of this administration's time in office."