I was traveling, so I did not get a chance to comment on this one yet. Gov. Daniels yesterday announced that his administration had screwed up the state’s book keeping to the tune of $320 million. He spun it as a good thing, a “bank error in your favor.”
A Department of Revenue auditor last month discovered some corporate income tax payments submitted via electronic check were not being sent to Indiana’s General Fund, which pays for schools, roads and nearly all state services, but were sitting unused in the state’s Collections Fund.
It will be interesting to learn whether the blame for the mistake should be attributed to the Department of Revenue, Richard Mourdock’s office of the Treasurer, or somewhere else. (Charlie White probably gets a pass on this one.) When I heard about the announcement, a scene from Brewster’s Millions came to mind. The premise in that movie is that if Brewster spends $30 million in 30 days without any tangible assets to show for it, he inherits his uncle’s $300 million. Otherwise, the law firm handling the estate gets it. So, one of the firm’s associates, is told to sabotage Brewster’s efforts. To do so, the associate sandbags $20,000 which he “discovers” at the last minute.
The analogy isn’t all that strong; but, if this were not merely incompetence, there would be parallels in the sense that the General Assembly made policy decisions based on incorrect financial information provided to it by the executive branch; and those policy decisions, for the most part, went in the direction the Governor wanted – diminished funds available for infrastructure, education, and other public goods enjoyed by rich and poor alike; not to mention safety net programs mostly used by the poor alone.
Now, instead of using the money to defray the $2 billion we owe the feds for unemployment insurance or shore up the underfunded employee pension system; he is talking about giving a tax rebate to individual taxpayers? I guess I’d have to see the details before passing final judgment; but my suspicion is that, rather than giving $50 to each Indiana citizen or whatever, this money is better used to pay our debts.
I do agree with you that the money should normally be utilized for debts first. That being said, a whole bunch of “reforms” to the unemployment system were passed by the Legislature in 2009, and just became effective (some as recently as October 1, 2011). These reforms include the transitioning of our unemployment insurance to a higher tax rate. My understanding is that these changes were intended to collect more revenue for the state than it provides in benefits (thus paying down the unemployment debt). If that is accurate, then I think non-unemployment insurance tax revenues shouldn’t be used to subsidize unemployment deficits, and Mitch is doing the right thing by constemplating a refund of tax dollars to the general public. However, that analysis would change if we are paying a high interest rate to the federal govt. for the loan they have provided to Indiana .
The spendaholics are already coming out with all kinds of proposals to spend the windfall. Big thing in our area is to rebuild the failed Cline Ave. Bridge, which would blow about $150 million.
I’d take issue with characterizing it as a windfall. It was money paid into the government – not some random gift from a third party. The State already committed itself to obligations that exceed this amount, so it’s not like we have surplus funds. And, hard policy decisions were made cutting into other programs because of incorrect information about funds provided by the executive branch. I don’t think it’s fair to begrudge reconsideration of those policy decisions based on corrected information.
The problem with that, Doug, is that the windfall is not enough to change the policy course we are on.
And it is a windfall. We didn’t have it, and now we do. It’s a one time shot. Windfall.
I think that you would be on better policy ground if you combine the windfall with improving state tax revenues, which have been exceeding expectations despite the increase in unemployment. The windfall in and of itself is not enough to change course.
Why does the skeptic in me wonder if all those revenue projections that were constantly wrong, which led to tons of cuts because “the sky is falling” were actually alot closer and some was “misplaced” on purpose to facilitate that. I know, paranoid.