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Editorial

Confidence tested by state errors

“What other dollars might lie in the dusty corners of state government?” State Rep. Scott Pelath asked last December, after state officials announced they had found $320 million in misplaced revenue.

Another $206 million, it turns out.

The Michigan City Democrat’s call for an independent audit last year looks in hindsight to be a good move. It’s even more important now to restore confidence in the administration’s bookkeeping and to ensure future policy decisions are based on a clear picture of the state’s financial condition.

Republican legislative leaders acknowledged as much in calling for an independent audit after the second major accounting error was disclosed. Their refusal to do so last year left them operating without vital information.

“Every session I’ve been down there, we’ve been told there’s no money,” said Rep. Phil GiaQuinta, D-Fort Wayne. “It does shake your confidence in what they are saying. They are supposed to be the money experts.”

The Department of Revenue commissioner, John Eckart, will resign when tax season is over; two other top officials left immediately.

Some Democratic officials were calling for State Budget Director Adam Horst’s resignation, but Gov. Mitch Daniels, vacationing in Israel, said Horst should receive a commendation, apparently for revealing the errors.

With accounting errors now exceeding a half-billion dollars, it’s tough to see any heroes in the Statehouse fiscal operation. The latest error apparently comes from a programming mistake involving local option income tax revenues.

The mistake uncovered in December gave lawmakers additional money to put toward full-day kindergarten, to compensate victims of the Indiana State Fair stage collapse and to return to taxpayers as a credit on 2013 income tax filings. But the error revealed last week is money that should have been distributed to local government – more than $10 million in Allen County’s case. For all of northeast Indiana, the amount exceeded $22 million. That’s $22 million local communities could have used beginning in January 2011 for public safety or to improve streets and roads. In communities still hurting from the recession, the extra dollars would have gone a long way to bolster local spending.

Statewide, the $206 million also symbolizes undeserved grief heaped on local government officials. The Department of Revenue’s error wrongly made them out to be poor fiscal managers when, in fact, they were often on target in estimating revenues to be distributed by the state. The painful cuts they were forced to make were the flip side of an overly optimistic budget picture presented by the state.

Fort Wayne City Controller Pat Roller said the aim is always to put forth the best budget possible, based on the best information. The state’s error had serious repercussions locally.

“It impacts our infrastructure budget – paving streets and roads. We didn’t replace any of our police cars,” she said. “Those are difficult decisions.”

Roller said she’s looking forward to distribution numbers she can rely on when creating a budget.

“This is three times now,” she said. “I can understand once, even twice – but the third time? This wouldn’t happen with the city of Fort Wayne’s accounts. We know where all of our money is.”

The governor has boasted of the administration’s financial acumen, but the disclosure of a second large accounting error sorely tests those claims. The upcoming audit should be conducted with an aim of complete thoroughness. Public confidence depends on it.

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