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Local governments accidentally overpaid millions

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Illinois

At a time when Chicago Public Schools has been desperately seeking financial help from Springfield to avoid insolvency, it instead has received something else: a bill for $23.5 million.

The Illinois Department of Revenue also says the almost-as-strapped city of Chicago owes it $19.4 million in alleged overpayments, Cook County $6.5 million, and dozens of area school districts and communities lesser amounts, as much as a half-million dollars each. […]

Other city units that got too much include City Colleges of Chicago, a reported $1.7 million.

Suburban units that allegedly received too much include the Niles Township high school district, $577,000; the city of Aurora, $533,000; and the Bloom Township high school district, $397,000. Among other governments in the millionaires club were the city of Rockford, $2.8 million, and the Granite City school district near St. Louis, $1 million.

* More…

The error, announced Tuesday by the Illinois Department of Revenue, is part of a misallocation of $168 million that had been distributed by the state to local governments since 2014.

The error affects about 6,500 taxing districts throughout Illinois, the agency said, and overpayment amounts are less than $10,000 for most of them. Just 10 taxing districts were overpaid by more than $1 million, including the city of Chicago, which was overpaid $19.4 million, and Cook County, which was overpaid $6.5 million.

The Chicago Park District received $5.6 million more than it should have, and the Metropolitan Water Reclamation District was overpaid $5 million. […]

The revenue department said the misallocation was the result of a paperwork error and was discovered as the agency was implementing a new ledger system.

* Department of Revenue press release…

A recent tax system modernization initiative at the Illinois Department of Revenue (IDOR) has uncovered a misallocation to the Personal Property Replacement Tax (PPRT) Fund that began under the Quinn administration. The error has resulted in overpayment of an estimated $168 million to the taxing districts that receive PPRT disbursements. The over allocation was identified during IDOR’s implementation of a new general ledger system, designed to enhance accuracy and efficiency at the Department.

Approximately 6,500 districts are impacted by the misallocation that began in 2014. For 5,291 Illinois taxing districts, the individual taxing district’s total overpayment amounts to less than $10,000. For 10 taxing districts, however, the overpayment totaled $1 million or more. In 2014, the total amount of PPRT distributed to taxing districts was $1.37 billion, and in 2015 the amount was $1.43 billion.

“We are certainly sensitive to the impact recouping these funds will have on some of our taxing districts,” said Connie Beard, IDOR Director. “We will be working with the impacted taxing districts to establish a plan to recapture the funds over an extended period of time. The Auditor General’s regularly scheduled Financial and Compliance Audit of the Department began today, and we have fully disclosed the calculation error to the auditors for appropriate review.”

The miscalculation occurred under the prior administration following the passage of Public Act 098-0478. The statutory change resulted in the discontinuation of Form IL-1000 and revisions to Forms IL-1065 and IL-1120-ST, which caused calculation errors associated with the payments for these forms.

Personal property replacement taxes (PPRT) are revenues collected by the State of Illinois and paid to local governments to replace money that was lost by local governments when their powers to impose personal property taxes on corporations, partnerships, and other business entities was abolished in the 1970 Constitution.

The full list can be viewed by clicking here.

posted by Rich Miller
Wednesday, Apr 20, 16 @ 9:09 am

Comments

This also impacts the General State Aid for school districts as CPPRT dollars are part of the formula to determine Local Available Resources that then determine the amount the State owes school districts to get them up to the foundation level. They will owe schools back state aid at a time when they are already not funding to the full amount due to their proration.
In the words of Van Morrison:
Don’t want to discuss it
I think it’s time for a change
You may get disgusted
Start thinkin’ that I’m strange
In that case I’ll go underground (or in my case-retire)
Get some heavy rest
Never have to worry
About what is worst and what is best (get it)

Comment by nobody Wednesday, Apr 20, 16 @ 9:16 am
A few million here, a few hundred million there, pretty soon you’re talking about real money. All this from one piece of legislation. Additional waste from the NVRI being found yesterday. No wonder the state is broke.

Comment by Anonymous Wednesday, Apr 20, 16 @ 9:17 am
Someone gets fired for this, right? I mean, a “paperwork error” coming from a department that only does paperwork, resulting in $168 million dollar error? C’mon!

Comment by Boooooooo Wednesday, Apr 20, 16 @ 9:22 am
“Hello? Yes, this is Local Governments. Hi Dept. of Revenue. What’s that? Too much? That’s funny, remember all those months you weren’t sending anything, when we were hostages?

Yeah, we’ll get right on looking into that after some other time later probably maybe. Until then, if the phone don’t ring, you’ll know it’s us.”–

Comment by wordslinger Wednesday, Apr 20, 16 @ 9:23 am
First, the good new - the modernization implementation discovered costly errors.

The bad news - struggling local governments have to pay back money they do not have. If I was one of them, I’d seek legislation that would help find a way of avoiding catastrophe during any payback period.

It was an honest mistake. Mistakes happen. Kudos to IDOT for uncovering it!

Comment by VanillaMan Wednesday, Apr 20, 16 @ 9:28 am
Surprising to me that no accountants on the receiving end, especially the ones with the larger overpayments, didn’t catch this.

Comment by Cubs in '16 Wednesday, Apr 20, 16 @ 9:30 am
I agree with Cubs in ‘16. Unbelievable that the locals accepted this much money. Every payment is vouchered and tracked down to the penny. The State doesn’t just send free money.

Comment by Anonymous Wednesday, Apr 20, 16 @ 9:33 am
Wait a sec. 6,500 taxing bodies out of less than 7,000 had their state payments screwed up? Geez Louise.

Comment by hisgirlfriday Wednesday, Apr 20, 16 @ 9:37 am
Check out the CPPRT formula to see how it is distributed. Typically, you get an amount, you are given a dollar amount from the Dept of Revenue. You complain if your number goes down and are happy if it goes up.
http://www.revenue.state.il.us/localgovernment/overview/howdisbursed/replacement.htm

Comment by nobody Wednesday, Apr 20, 16 @ 9:40 am
This discovery reminds me of a tactic that we used on our parents when we were kids. They had an agreement that we would get paid a nickel for every book we read. Sometimes, when we’d see the milk delivery van roll up the drive (he also sold pastries), we would “suddenly remember” that we had read a book that week.

Comment by morningstar Wednesday, Apr 20, 16 @ 9:48 am
Well, at least the new ledger system works well. I have a lot of sympathy for this kind of stuff. We do quicken in my household and last year we had what our culture is a “come to Jesus” meeting about where our finances were going. Let’s just say many new policies came out of that. IDOR I’m sure had more than a few “come to Jesus” meetings on this.

Comment by Honeybear Wednesday, Apr 20, 16 @ 9:55 am
Fiscal Implications for Chicago proper…..City + Park District +School District + City College = over $50 million There’s also Water Rec at 4.9 mil Larger budgets can absorb hits more easily, but these are some very high amounts.

looking at the entire list also gives one pause to again believe that it’s time to work on lowering the number of local governments. Township plan in the works. do it now.

Comment by Amalia Wednesday, Apr 20, 16 @ 10:00 am
Did anyone get UNDERPAID?

Comment by DuPage Wednesday, Apr 20, 16 @ 10:07 am
Me-”Hello?”

IDOR- Yes this is Jim McFixit from the IDOR and by our figures you owe us $47,000 in overpayment”

Me- “You are from where? IDOR? Uh huh, we owe you how much?

IDOR- “$47,000″

Me- “Hmmm, well the state owes us $3.4 million so why don’t I just take that off of your tab?”

IDOR- Well that s from a different agency so we can’t do that”

Me- “Oh, okay. Well I will just voucher that for you in our payment system.”

IDOR-”What does that mean?”

Me- “Same thing it does when the Comptroller does it. Have a Great Day!” End Call….

IDOR- “Hello?”

Comment by JS Mill Wednesday, Apr 20, 16 @ 10:26 am
==that began under the Quinn administration==

No one noticed this on any of the local ends either? Approximately 6,500 districts, and not a single one noticed the misallocation of their funds?

Scary.

Comment by Formerly Known As... Wednesday, Apr 20, 16 @ 10:52 am
Sorry, but as a representative of a recipient of PPRT money (which is local tax money, not a gift from the state), we get an estimate in the summer (late) of how much we should get during the year and then we get checks. The amounts vary and we have no way of tracking what we should have gotten compared to what we do get.

Comment by Mike Wednesday, Apr 20, 16 @ 10:53 am
Because…. Quinn

Bradley should hold sham hearings on the subject and invite Goldberg to testify

Comment by Langhorne Wednesday, Apr 20, 16 @ 11:01 am
JS Mill +10

Comment by TwoFeetThick Wednesday, Apr 20, 16 @ 11:03 am
If you were he CPS CFO would you give back the money if you suspected you got too much?

Comment by Rod Wednesday, Apr 20, 16 @ 11:09 am
Superstars!

Comment by DgD Wednesday, Apr 20, 16 @ 11:16 am
@ JS Mill

Love it! Made my day!

Comment by Union Leader Wednesday, Apr 20, 16 @ 11:22 am
What is a Personal property replacement tax and why aren’t local governments collecting their own property taxes….why would they want the state involved to mess up the payments?

Comment by Simple Mind Wednesday, Apr 20, 16 @ 11:31 am
=What is a Personal property replacement tax and why aren’t local governments collecting their own property taxes….why would they want the state involved to mess up the payments? =

This started back in the 1970’s before my time in education. As I understand it back then the we taxed corporations on their “personal” property machinery as well as “real” property like buildings. CPPRT is a make up for those lost dollars. We would rather the state stay out of everything all together as “they” are largely inept.

@FKA- As another poster stated earlier- we do not get a list of supporting data for the CPPRT numbers so we have no way of knowing what we should or should not receive. I asked for the info once and could here the chuckling on the other end of the phone.

Scary is actually understanding what is really happening.

Comment by JS Mill Wednesday, Apr 20, 16 @ 11:36 am
Having worked at IDOR my only explanation of how this could have happened is that a lot of seasoned professionals have either left or retired in the last few years. To Mike’s point, normally there would be a way to monitor PPRT receipts and examine if they move in the same way as corporate income tax receipts. If there is a discrepancy that could raise a red flag. However, because of the recent tax rate changes in CIT this historic relationship has not been valid over the last few years. This relationship should once again stabilize shortly. However, I am unaware of a formal process/mechanism whereby local governments could request that IDOR investigate any concerns they have. Perhaps this is something that can be explored.

Comment by Natalie Wednesday, Apr 20, 16 @ 11:41 am
Personal property taxes originated in agrarian times. You were taxed on livestock, machinery, etc. Over time admin became highly uneven and unfair. The 1970 constitution set a deadline for its elimination and replacement. In typical GA fashion, the GA put it off, and even proposed a CA to eliminate the provision. (”Vote yes to maintain unfair status quo.”) it failed, and the GA finally came up w the pers property replacement tax(es).

Comment by Langhorne Wednesday, Apr 20, 16 @ 11:50 am
I think there’s more to the story than an error. It may be that someone recently started to disagree with how it’s been traditionally been calculated.

Comment by NoGifts Wednesday, Apr 20, 16 @ 12:12 pm
Sure I have that money right here. I’ll send it over as soon as you send me that motor fuel tax money you owe me!!

Comment by what the Wednesday, Apr 20, 16 @ 12:14 pm
So they have to pay the extra money back.

PLUS the money they were told they would receive (early in the summer)was wrong.

So these cities/villages/municipalities are going to get hit twice. Loss of revenue they thought they would get PLUS the money they have to re-pay. Can you say tax increase???

Comment by BBG Wednesday, Apr 20, 16 @ 12:21 pm
so who got underpaid? where did the money come from that is overpayed…..

Comment by Ghost Wednesday, Apr 20, 16 @ 12:27 pm
The $168 million figure was bothering. Do some Google searches of News using “rauner $168 million”.

Comes out to exactly what was requested for MAP and to pay on vendor bill backlogs.

Comment by Anon221 Wednesday, Apr 20, 16 @ 12:29 pm
Would a business liability package that had an errors and omissions clause be an option for these over-paid folks?

I would read the fine print and get AIG (or similar) to pay the bill, if possible.

Comment by cdog Wednesday, Apr 20, 16 @ 12:30 pm
Interesting-gonna have to repay some money. Finally figured out that the list is in alphabetical order by County. Scroll down to county, then taxing districts will be grouped by type.
As to telling the state they were overpaying us, how it would we know? It comes at random intervals (8 times a year, I believe) and for totally varying amounts. Road District gets money, then has to pay City a share of that; good luck getting the City’s share back. Unfunded mandate to act as bill collectors? Gets better and better…

Comment by downstate commissioner Wednesday, Apr 20, 16 @ 12:30 pm
Amalia @ 10:00: What does this list have to do with the number of local governments? Townships didn’t make this mistake- a “big government” department did- so bigger is better? Don’t understand your logic…

Comment by Anonymous Wednesday, Apr 20, 16 @ 12:42 pm
= The statutory change resulted in the discontinuation of Form IL-1000 and revisions to Forms IL-1065 and IL-1120-ST, which caused calculation errors associated with the payments for these forms. =

Strange wording. This implies the forms caused the errors?!? I don’t pretend to know their internal operations but IMHO IDOR needs to review their entire oversight process for fund verification and disbursement, especially with change implementation. Time for a six sigma approach? It may actually save $$.

Comment by Res Melius Wednesday, Apr 20, 16 @ 12:43 pm
Also, I agree with JS Mill. I was on a school board for a district with significant CPPRT receipts. We never knew the amount we would receive each year until it started showing up and we never received an explanation of why/how when we pursued an explanation.

Comment by Res Melius Wednesday, Apr 20, 16 @ 12:48 pm
The local school I work for received exactly what the allocation stated for these years. If we had received extra we would have noticed it. The appropriations must have been wrong on the worksheet they distributed with totals. I am assuming that the total allocation amounts for those years are incorrect as well because there allocation amounts on the spreadsheet total the total distribution amount from what I can figure.

Comment by Anon Wednesday, Apr 20, 16 @ 1:23 pm
This list is a powerful reminder that there are too many local governments. but if you want to see why townships are a problem, google Maine Township and General Assistance and you can find an entire article about townships that spend more money paying Admin costs than they do helping the needy. it’s time to consolidate.

Comment by Amalia Wednesday, Apr 20, 16 @ 2:44 pm
It sounds like IDOR is short of staff.

Comment by Mama Wednesday, Apr 20, 16 @ 3:28 pm
Honestly, are these just coinkydinks on the number front? If it’s a true overpayment issue, fine, but could this be a SuperStar “fix” on “budgeting”? If it’s “tin foil hat” time for me, I can take that lump:)

http://www.fox32chicago.com/politics/70570422-story MAP grants amount

http://www.washingtontimes.com/news/2016/mar/16/illinois-human-services-agency-owes-168m-in-back-p/

Comment by Anon221 Wednesday, Apr 20, 16 @ 3:52 pm
Interesting.

There seems to be a hole in the entire story.

My question would be as follows:

Is all this money (excess payments) a direct result of the State of Illinois incorrectly calculating/overbilling the business sector an excess amount due to using an incorrect calculation method all these years?

Is this money that needs to go back to businesses that were overcharged originally by the State of Illinois?

Comment by Anon Downstate Wednesday, Apr 20, 16 @ 4:55 pm
The press release does a lousy job of reporting what happened. Prior to 2014, the IL-1065 and IL-1120-ST were used to report only personal property replacement tax, so every dollar that came in with the filings was sent to the fund to be distributed to the locals. Since 2014, those returns also include regular income tax paid on behalf of partners and shareholders, but the IDOR continued to send all the payments to the locals. No overtaxing anyone, or allocating too little to some locals — they just put funds from the wrong tax into the pot in addition to the funds that did belong there.

Comment by Anon. Wednesday, Apr 20, 16 @ 6:02 pm
Better do another dozen audits,I’m sure they will come out different each time,, most likely over charged real estate taxes from property owners to begin with, then double check the alleged over payments also, te State may owe each district more, Rauner is scarfing for every dollar

Comment by Tax Payer Wednesday, Apr 20, 16 @ 6:31 pm
“Since 2014, those returns also include regular income tax paid on behalf of partners and shareholders, but the IDOR continued to send all the payments to the locals. No overtaxing anyone, or allocating too little to some locals — they just put funds from the wrong tax into the pot in addition to the funds that did belong there.”
——————

So, in effect, the State over distributed to the units of local government. Didn’t anybody think to do any form of due diligence to (a) compare current year to previous year distributions. If they had, they would have seen a substantial increase and any thinking person (ok, “Pat Quinn administration”….say no more) would have said “What’s going on here…..”.

I mean, every single County government that does RE tax extension every year has to do this prior year/current year comparison to the nth degree for every single tax district. And provide all the mind numbing detail to each tax district every single year.

And the State of Illinois is incapable of applying and following their own rules and procedures which they have absolutely no problem torturing everybody else with?

IMO, there’s some holdovers (if they are still there) at IL DOR who need to be fired over this screwup.

Comment by Anon Downstate Wednesday, Apr 20, 16 @ 9:59 pm
IMO, there’s some holdovers (if they are still there) at IL DOR who need to be fired over this screwup.
—————————————-
I attribute a large percentage of destructive dysfunction to the Rutan hiring system in executive branch agencies.

Comment by The young gov Wednesday, Apr 20, 16 @ 11:46 pm