April 4, 2012

State uncovers $14 million in extra revenue

An accounting error led officials to underestimate December revenue, Maine Revenue Services says.

By Susan M. Cover scover@mainetoday.com
State House Bureau

AUGUSTA — An accounting error by Maine Revenue Services led state officials to underestimate revenue by more than $14 million and will force another delay in state budget negotiations.

While lawmakers felt heartened to learn that holiday sales were better than previously thought, they asked Maine Revenue Services officials Tuesday how – and why – the mistake happened.

"We all owe taxpayers an explanation," said Rep. Peggy Rotundo, D-Lewiston.

Administrative and Financial Services Commissioner Sawin Millett said a longtime employee died in the fall, and her supervisor took over the work of reconciling deposits. One of the deposits made in January – reflecting December revenue – wasn't credited to the proper accounts.

The mistake wasn't discovered until the end of March, he said.

"This is not a systems issue, but human oversight," Millett said. "The individual was probably overwhelmed by volume. It slipped and didn't get reconciled."

The additional revenue is $6.6 million in sales tax, $5.2 million in corporate income tax, $1.9 million in income tax withholding, and $600,000 in other tax revenue.

The news came late Tuesday as lawmakers continued negotiations on the supplemental budget proposed to take the state through June 30, 2013. While some work will continue on non-controversial items, but the Appropriation Committee will now have to wait until May to get firm revenue numbers.

Sen. Roger Katz, R-Augusta, asked whether there are proper checks to guard against theft.

"Let's say somebody had stolen $14 million," he said. "Could that have happened under this scenario?"

Maine Revenue Services Director Jerome Gerard said it's unlikely because the money is electronically transferred from taxpayers' bank accounts to the state's bank account. "The information that didn't get recorded was where the money was to be credited to," he said.

With revised figures that show stronger holiday sales, Maine Revenue Services economist Michael Allen said he feels better about the outlook for the state's economy.

"We thought Maine consumers were feeling mighty low," he said.

The accounting error casts doubt on state revenue projections, said Rep. David Webster, D-Freeport. Forecasters who based their three-year projections on January numbers that have been found faulty will meet again to revise their numbers.

Lawmakers are also awaiting figures from the Department of Health and Human Services regarding an estimated $100 million shortfall for the fiscal year that starts July 1. Those numbers have been delayed because the department recently disclosed that it continued to provide Medicaid health insurance to 19,000 people when they were no longer eligible.

Appropriations Committee House Chairman Patrick Flood, R-Winthrop, said the committee has made progress on the $38 million supplemental budget but has not voted on controversial items such as cuts to General Assistance for cities and towns and the elimination of state funding for the Maine Public Broadcasting Network.

"Once we get over our need to recalculate, (the additional money) will make our work a little easier," he said.


State House Writer Susan Cover can be contacted at 620-7015 or at: scover@mainetoday.com


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