RD86 - Special Report: Recent Errors in the Sales Tax Allocation for Local School Divisions


Executive Summary:
JLARC staff reviewed the State's methodology for forecasting sales tax and for calculating the amounts distributed to school divisions, the Transportation Trust Fund, and the State's general fund.

JLARC staff reviewed information and data and met with personnel from several State agencies, including the Departments of Taxation and Planning and Budget. We conclude that careless errors were made in the calculation of sales tax distribution and that these errors led to an overstatement of the sales tax revenue in Item 135 of the Appropriation Act. These errors did not affect the forecast of sales tax revenue, nor the Transportation Trust Fund, but did impact the distribution of sales tax revenue to the State's Standards of Quality (SOQ) program.

Checks and balances to verify the calculations were not followed or were not in place. We recommend that the Commissioner of the Department of Taxation exercise greater oversight of the forecast function and establish additional internal reviews prior to any future release of data on the distribution of tax revenue. A panel of reviewers, including staff from other finance agencies and the Auditor of Public Accounts, could participate in such a review. The review would provide another level of verification that the final numbers issued by the department correctly incorporate statutory formulas and adjustments and that the calculations are correct for each fiscal year.