INDIANAPOLIS – Gov. Mitch Daniels’ administration has found $288 million in
corporate tax revenue that had not been appropriately moved from the
Department of Revenue to the state’s main checking account since 2007.
That new revenue – combined with tax receipts that have been beating state
estimates – means that taxpayers might receive a state government refund
Daniels said Tuesday it probably wouldn’t be much.
And estimates from Budget Director Adam Horst showed a refund could be
roughly $50 per person – if revenue trends continue. But the governor said
it would be another sign that the state’s fiscal condition is strong.
“Christmas came early,” Daniels said. “There’s a very good possibility that
we’d been in the zone triggering an automatic refund to taxpayers next
But Democrat Rep. Scott Pelath of Michigan City said the problem is a
serious one that should not be celebrated but further investigated.
“This is a lot different than finding change behind the couch when you’re
scrounging for pizza money,” said Pelath, who serves on the budget-writing
Ways and Means Committee. “This is a very serious problem and I believe the
governor needs to conduct his own investigation immediately and – if
necessary – cause heads to roll.”
He said the Daniels administration might have been able to avoid cuts to
schools and other programs if the corporate tax revenue had been
appropriately moved to the state’s main checking account.
“The people of Indiana have been asked to sacrifice for several years,”
Pelath said. “And now there’s a credibility issue because people were asked
to sacrifice but the need might not have really been there.”
Daniels, though, downplayed the mistake, saying the state always had control
of the money and its discovery is now a “bonus” for Hoosiers.
The General Assembly passed a law earlier this year creating the automatic
taxpayer refund. It applies when the state’s reserves equal more than 10
percent of the following year’s budget. That calculation will next be made
on June 30.
State Budget Director Adam Horst said in a memo the state could have $1.7
billion in its checking account and reserves at that time.
The law would apply half of the excess revenue – which could be about $300
million – to the state’s underfunded teacher pension accounts and half to a
taxpayer refund, which would be applied to the taxpayer’s return the
following year. That would mean an average refund of roughly $50.
It’s “better that it stay in the pockets of those who earned it than burn a
hole in the pocket of government,” Daniels said.
An auditor discovered the problem with the Department of Revenue funds. It
stemmed from a software programming omission that left some corporate tax
payments – those made through a system called e-check – in an agency fund,
rather than being transferred to the state’s general fund.
The money, which accumulated slowly, earned interest and was properly
credited to the companies that had paid it.
The money has now been transferred to the general fund, creating a one-time
gain for the state’s budget. But Daniels said it’s also a sign that
corporate tax revenue has been somewhat stronger than budget officials had
Senate Minority Leader Vi Simpson, D-Ellettsville, said lawmakers should
launch “an investigation immediately to determine how this ‘mistake’
occurred and how the people of Indiana can be assured that this will never
“The first question we should be asking is, How did this happen?” Simpson
said. “Was this incompetence or were the people of Indiana intentionally
State budget officials also said Tuesday that state tax receipts are
generally running ahead of targets. In November, sales, income and other tax
receipts were $10 million ahead of projections made last spring.
Through the first five months of the 2012 fiscal year, state general fund
revenues are now more than $117 million ahead of target.
Horst said he expects the next revenue forecast, which will be presented
later this month, to raise the state’s projections.
“My projections are based upon stronger than anticipated revenues during the
last few months of FY 2011 and stronger than forecasted revenues during the
first five months of FY 2012,” Horst wrote. “These factors have increased
the state’s base revenue, meaning that even slower economic growth rates can
produce sufficient revenue to meet or possibly exceed the April 2011