Phil Beckman
Daily Egyptian
The State of Illinois will borrow $150 million to make up for a shortfall in revenue that has caused the state to be delinquent in paying tax refunds.
The slowdown in the economy, especially after Sept. 11, resulted in a decrease in revenue from sales and income taxes. At the same time, increases in the earned income tax credit, the education tax credit and the doubling of the personal exemption caused refunds to be greater than expected.
"The underlying reasons are economic," said Mike Klemens, spokesman for the Illinois Department of Revenue. "The average refund this year is up 20 percent to a year ago."
Revenue from income taxes was projected to grow this year, Klemens said, but instead it decreased.
"The final payments were way down," Klemens said, "and the refunds up."
The state had about $1 billion in unpaid bills at the end of the fiscal year on June 30, said Alan Henry, communications director for the Comptroller's Office. In order to pay these bills, the state decided to issue short-term bonds in the same amount that will mature on or before June 20, 2003. To cover the shortfall in the refund fund, $150 million will be earmarked to pay income tax refunds.
Klemens said he is anticipating that the money will be available Tuesday, July 23.
But Henry said it may take a couple of weeks to issue the bonds and transfer the money to the refund fund.
About 134,000 refunds were processed Monday night, Klemens said, leaving about 652,000 refunds, totaling $198 million, still to be paid.
So far, refunds have been sent out for returns filed by April 10. They have been processing returns in the order in which they were received, but, Klemens said, Monday they paid out some low-amount refunds in order to clear some of the backlog before the loan money becomes available.
Refunds are required to be mailed before July 15 or the state must pay 6 percent in interest. The interest covers the period from April 15 to July 15.
A percentage of the revenue from the individual income taxes is reserved by law for refunds and kept in the Income Tax Refund Fund. Last year, 7.6 percent of individual income taxes was diverted to pay refunds, but it was not enough. The amount reserved for refunds is based on estimated tax payments. This year, 8 percent is being held for next year's refunds.
The delay has also been caused by the time it takes to process paper tax returns. The paper returns are sent out to a private vendor who opens, sorts and enters the information into a database. This process takes four to six weeks, Klemens said. He said electronically filed refunds can be taken care of within a few days since the information is already in the system.
The next batch of refunds will be processed Thursday night. While the refunds will be late, they will be paid.
"This is a problem," Henry said, "and it's been dealt with."
Reporter Phil Beckman can be reached at
pbeckman@dailyegyptian.com
Published on 11/17/05; 12:24:44 PM
