INDIANAPOLIS - Indiana’s governor announced Tuesday that state officials have found $300 million that went untouched even as lawmakers made deep cuts to education and slashed vacant government jobs while it weathered the recession.

Republican Gov. Mitch Daniels said the money was collected but never transferred to the state’s general spending account, which lawmakers use to allocate funds to various programs and departments.

While Daniels tried to downplay the discovery, Indiana Democrats called for investigations into how an administration sometimes held up by Republicans as a model for the rest of the U.S. could misplace so much money.

“This is a very serious error and the governor himself, he needs to launch an investigation into why this happened,” said state Rep. Scott Pelath, a Democrat from Michigan City who is a member of the House Ways and Means Committee.

Daniels said the administration was looking into how the money went unaccounted for so long, but he also tried to minimize the amount that went untouched by comparing it to the state’s entire yearly budget, which is about $14 billion.

But Senate Appropriations Committee Chairman Luke Kenley, a Republican from Noblesville, noted that adding just $120 million to the state coffers would be almost equivalent to opening two new racinos (horse racetracks with slot machines). Kenley said he hasn’t had much time yet to ponder how such a large sum of money could go missing.

“I was so glad to see the money I guess I haven’t worried about that part much,” he said.

The issue arose in the state’s e-filing tax system for companies. Money collected through that system wasn’t moved to the general spending account. The problem started in the 2007 budget year and wasn’t found until after the end of the 2011 fiscal year.

As more companies started using the e-filing system, the amount of money that went untouched increased. The amount missed in the first year was $4.7 million, but by the most recent budget the state had left untouched $140 million in corporate tax receipts - an amount equivalent to roughly 10 percent of expected collections.

An auditor in the Indiana Department of Revenue discovered the problem late last month while tracking a $25,000 tax check through the state’s tax collection system.

Daniels said he had chalked up reduced tax collections to wild fluctuations in corporate profits during the recession.

In the last two years, lawmakers have cut education spending by $300 million. But the state also has been able to build a $1.2 billion nest egg - one of the reasons Republicans both in Indiana and nationally sometimes hold up the state as an example of fiscal responsibility and proper management.

“This wasn’t just an accounting error. Children got hurt by this, families have suffered. And it all could have been avoided,” Senate Minority Leader Vi Simpson, a Democrat from Bloomington, said in a statement.

Daniels didn’t say whether he thought the money should be spent or banked, which would trigger automatic taxpayer refunds under a plan he pushed through the Legislature earlier this year.

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INDIANAPOLIS (WISH) — An auditor with the state Department of Revenue discovered $300 million in corporate taxes paid in since 2007 were misdirected at the state level, Indiana Governor Mitch Daniels announced Tuesday.

As a result, the money has been earning interest and had not been placed into the general fund until recently.

With a growing economy and the addition of the $300 million, the governor is now hopeful that Indiana tax payers could receive an automatic refund in 2013.

Last year, the Indiana General Assembly passed a Daniels proposal that calls for automatic tax refunds if the state surplus exceeds 10 percent of the budget. In that circumstance, half of the excess would go to a teacher pension fund and half would go toward tax refunds.

Daniels said Tuesday that if current projections hold, Indiana tax payers could be in line for a tax refund in the neighborhood of $50.

Democrats want audit of state finances
Lawmakers call for independent review after revelation $320M had been overlooked

Democratic lawmakers in the House and Senate want an independent audit of the state's finances, in light of the discovery that $320 million had been accumulating in a fund unbeknownst to state officials.

Sen. John Broden, D-South Bend, and Rep. Scott Pelath, D-Michigan City, said they and other Democrats are sending a letter to House Ways and Means Chairman Jeff Espich, the Uniondale Republican who is chairman of the State Budget Committee, asking for the audit.

The committee will meet Wednesday to discuss the state's finances. Certain to be discussed is Gov. Mitch Daniels' disclosure that e-check payments on corporate income taxes had been sitting in a holding account since 2007. Although the checks were cashed, the payments were credited to the businesses and the money earned interest, it was never shifted to the state's general fund.

The snafu, recently discovered by the Department of Revenue, occurred during years when the state was making severe budget cuts -- including $300 million to public education -- as the recession drained state revenues.

Broden said this should not be laughed off as a "one-time fluke."

An independent audit is needed, he said, to determine "how we had essentially five years of revenues sitting in an account unknown to anyone in the state of Indiana and how this situation happened and, of course, most importantly, to prevent it from occurring again."

Pelath said "the public's confidence has to be restored. . . . The people have to understand how these dollars were ignored and frankly what other dollars might lie in the dusty corners of state government."

Neither expressed much confidence in the state auditor, Republican Tim Berry, to conduct the audit.

"They obviously had no clue that there was this $320 million that had accumulated," Broden said.

Berry, though, said his title may be "auditor," but auditing incoming funds is not his job.

His office, he said, pays the bills and audits the money being spent. It doesn't audit the money coming in or the state accounts.

"As the state auditor, we don't have any role in (auditing the incoming funds to the state) until those dollars are reported in to the general fund by the Department of Revenue," Berry said.

He said he did not oppose having an independent audit but noted that would cost the state money. Still, Berry said an independent audit might provide taxpayers more comfort and confidence in Indiana's internal financial systems.

Call Star reporter Mary Beth Schneider at (317) 444-2772.

Region lawmakers prepare to debate uses for state's 'found' $320 million
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By JEFF SCHULTZ

The Indiana General Assembly goes to work next Wednesday and regional lawmakers say the biggest debate for 2012 may not be education or even right-to-work, but what is to be done with the untouched $320 million found missing from the state’s General Fund.

“There are all kinds of talk. It’s all over the board,” said state Rep. Ed Soliday, R-Valparaiso.

A recent audit revealed the millions in corporate income tax payments had not been properly placed into the state’s General Fund since 2007.

While general fund money pays for state services, individuals have called for the money to be spent on programs that received the ax over the past three years, like K-12 education which saw $300 million in cuts.

Another option suggests the money should be held onto or invested for future needs, while others have pitched the idea of using the money for tax relief. A recently enacted bill would give taxpayers an automatic refund if what is left in state reserves exceeds ten percent of the state’s operating budget, said state Rep. Charles Moseley, D-Portage.

“I think if we have a bill saying we should do that, then by golly I guess we need to keep our promise and do it,” Moseley said. “I don’t think we should sit there and hoard it because the taxpayers are the ones who put it there, not the politicians.”

State Sen. Karen Tallian, D-Ogden Dunes, who serves as an advisor on the state’s budget committee, said committee members were curious as to why revenues from corporate income taxes were coming up short, but thought it possibly an effect of the dwindling economy, until the accounting error was discovered.

The possibility of reopening the budget to include the missing funds is doubtful since the committee has already set the budget for this year, Tallian said, with approximately $1.1 billion in reserves.

“It is unfortunate because we have cut a lot of programs that we have needed. We could have used that (money) in other places,” said Tallian.

Should the money be used for tax relief, Tallian said the reimbursements would be minimal, probably less than $50 per taxpayer, and some lawmakers have asked to reconsider dispensing the money back into state funded programs. Refunds can be canceled if the state increases its’ spending or changes the parameters of the law.

While believing in a strong education system for the state, Soliday said those who are urging the money go to K-12 education should take notice that education was the least cut program last year. State workers suffered huge layoffs to minimize cuts to education, he said.

“I think we should take care of our teachers, but they have to appreciate there were no raises given for years to state workers,” he said. “Giving the ($320 million) to schools may sound good but there is a time to keep our roads paved and other basics of government.”

Representing House District 9 which now includes northeast sections of Porter County, state Rep. Scott Pelath, D-Michigan City, said he plans to ask the State Budget Committee to conduct an independent review of state finances to ensure there are no other cases of un-transferred monies “lying around” in the state coffers.

“We must, as lawmakers, need to ensure that there is no additional money lying around. We need to restore credibility to our budgeting process and see that the people of Indiana are not asked to sacrifice any more,” said Pelath.

Thorough checks can put plans in place to prevent any more accounting gaffes in the future, he said.

A motion made on Dec. 14 by State Sen. John Broden, D-South Bend, to have the State Budget Committee hire an outside auditor was voted down by the Republican majority who consequently decided the matter should be looked at by the State Board of Accounts.

On Education

While the 2011 General Assembly arguably made the biggest reform to the state’s education system in over 50 years (passing bills that would allow state funding vouchers for charter schools, private companies to take over troubled schools and restricting teacher bargaining rights), regional lawmakers say little is expected in this year’s session regarding schools.

Soliday said some reformers had been pressuring leaders of the house and senate earlier this month to do more in education but both Speaker of the House Brian Bosma, R-Indianapolis, and Pro Tem of the Senate David Long, R-Fort Wayne, have advocated holding off on any further measures until tangible results can be seen from the 2011 reforms.

Reactions to school vouchers were mixed, but Soliday pointed out the state put a 7,500 person cap on the vouchers and only 3,800 signed up for them, mainly in the larger cities.

The assembly leadership are also interested in hearing results of the teacher evaluation law before “passing a bunch of other stuff,” Soliday said.

Tallian mentioned a few members of her caucus, Sen. Earline Rogers, D-Gary, and Sen. Tim Skinner, D-Terre Haute, have authored bills that will provide oversight and accountability on private schools receiving school vouchers and organizations that have been contracted with the state to run underachieving schools.

In a separate matter, the state may consider bills taking up the issue of half or whole day kindergarten. Tallian is one lawmaker who has drafted a bill calling for half-day kindergarten to be mandated after discovering there is no such rule in the current law.

“Most people send their kids to kindergarten but it is expected there are a few thousand parents, just for whatever reason, don’t,” said Tallian.

On Right-To-Work

The so-called “Right-to-Work” bill has already caused a stir among politicians and labor groups alike.

Bosma announced in November passing the bill is his top priority for the upcoming legislative session.

The bill, which would make it illegal for an employer to require a worker to pay union dues as a condition of employment, has come under fire by Democrats who hold only 40 seats out of 100 in the house and 13 out of 50 in the senate.

Pelath is one of the house’s most outspoken opponents of the measure, vowing to fight against any legislation he believes attacks the wages of middle class workers. He contends the plan would cause people to work longer hours for less pay for union and non-union members alike.

“It will destroy the same middle class jobs we need in order to cure this economy. It’s wrong and I’ve made it clear in the past,” he said. “I feel very good in the fact that there is some very strong bipartisan opposition to the measure and I am hoping that we can build upon that.”

Meanwhile, Soliday, said he is unsure whether the bill will pass.

“All it has done so far is make a lot of noise,” said Soliday.

The last state to adopt a Right-to-Work law was Oklahoma over a decade ago, Soliday said, and many of the other Right-to-Work states are in the south.

“There are a lot of things we have to get done (in session) and suddenly this is our number one issue?” he said.

Moseley said he sees the Right-to-Work issue as nothing more than “political bologna’ that has been dragged out by certain lawmakers.

“I’m really disappointed that the number one priority in some people’s minds is a political issue when we have so many people out of work. You’d think we would have a lot more things to make a priority,” said Moseley.

As ranking minority member of the state senate’s Pensions and Labor Committee, Tallian said she plans to spend much of her time debating the issues of the Right-to-Work bill.

On E-911 Surcharges

Counties in Indiana, including Porter, are asking state lawmakers to devise a way to make more funds available for Enhanced 911 systems. Revenues have been driven down due to the general decrease in use of landline phones. Porter County officials say they will see shortfalls of $2 million per year starting in 2013 if no remedy is implemented.

A boost in charges for cell phones or pay-as-you-go phone cards has been advocated but it is uncertain if any changes will pass in the upcoming session.

As a standing member on the Public Safety committee, Soliday said he plans to have a bill drafted in the next few days but cautioned there will need to be much more discussion as the issue carries “very conflicting” sides.

While not breaking down the specifics of the bill, Soliday said he would like to see fairness created for those with landline surcharges and secondly to let the counties know exactly the amount of state funding they will receive for their E-911 centers.

Other bills:

• Moseley on Thursday morning announced a bill he authored that would create more opportunities for eligible steel fabrication companies in the state to produce wind turbines. A longtime advocate of local steel production, Moseley said this would be the biggest jobs bill for Northwest Indiana, encouraging steel companies to build fabrication sites in the area. If passed, the measure would give a host of tax credits to the companies as economic incentives. The project would be directed by the Indiana Economic Development Corporation.

“It’s real important. I hope people realize this is a shot for putting more people to work,” said Moseley.

• Tallian will introduce her bill on categorizing marijuana possession as an infraction instead of felony or misdemeanor with no jail time. She says she has yet to decide what amount of marijuana would be permissible under the infraction rule as other states have differed in their possession laws.

Tallian called for the study done this past year on the state’s marijuana possession laws as a the first step to lessen the severity of punishment.

• Soliday is a co-author of bill that would lower the minimum bid for a property at a sheriff’s sale starting at 75 percent of its assessed valuation. Delinquent taxpayers would also be given the opportunity to work out a payment plan with the county’s treasurer office on taxes that are past due.

　

Personally, I'd rather see the money used for the state and education, not given back to the tax payers. If the amount per person is in the vacinity of only $50, then just let the state keep it and improve education and performing arts.