Indiana to Release $212M in Overdue Payments to Localities

CHICAGO - With revenue collections running ahead of recent projections, Indiana Gov. Mitch Daniels announced Friday the state would release $212 million in overdue payments to local governments by the end of May in a move that should help offset the dramatic drop expected in local revenues due to newly enacted property tax reforms.

"As the only state in the Midwest that is in the black fiscally, we're being extremely careful about every dollar. But very strong March and April revenues strengthen our confidence that we will register a fourth straight surplus this year," Daniels said in a statement. "With this year's property tax cuts, we've entered a new era of taxpayer protection. We know there will be an adjustment period for local taxing units and want to do all we can to help."

The $212 million is the final installment on a $761 million debt the state has owed since 2002 when it began delaying payments under tight budgets. The delayed payments are owed to local governments, K-12 school districts, and higher education institutions. The state began to make payments in January 2006, and has so far repaid $518 million. This month's $212 million payment is up from the original $106 million scheduled payment.

The money will be spread across all 92 counties, with most counties receiving less than $5 million. Economically struggling Lake County, however, is scheduled to receive $22.1 million, and Marion County, which includes Indianapolis, will receive $30.5 million.

The state's April revenue report showed that total collections are $133 million above recent forecast - in part due to higher gas prices, as Indiana is one of a handful of states that attaches a sales tax to gas sales. Sales tax collections at gas stations were up more than 30% for the first half of fiscal 2008, according to the state. The state's fiscal year begins July 1.

The General Assembly this year passed massive property tax reform legislation that could cut local property tax revenue by one-third. To compensate for the shortfall, lawmakers increased the state sales tax by 1% and enabled local governments to raise their income taxes by another 1.25%.

 

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