News
Martz kills phase 2 of tax computer system
The Martz administration is abandoning the second phase of the state’s error-plagued tax-tracking computer system that already has cost the state $12 million, Revenue Director Kurt Alme said Tuesday.
By CHARLES S. JOHNSON
Gazette State Bureau
If the state hadn’t junked the system, known as POINTS, Alme said it would have to spend an already-budgeted $2.5 million more on the second phase and have to ask the 2003 Legislature, facing a $250 million general-fund deficit, for up to $3.3 million in new funds to complete the work. That is hard to justify, Alme said.
What’s more, the second phase of POINTS, which was set to be put in place by Aug. 31, 2003, likely would have been delayed into 2004 and into another tax cycle.
"We do not believe it’s in the best interests of the state to go forward with Phase II," Alme said during a press conference. "This is both a budget and a program decision."
He added, "I think it’s fair to say this is disappointing."
Martz’s office, her budget director, the state’s chief information officer and the project’s external software engineering consultant were involved in the decision along with Revenue Department officials.
"It is unfortunate that the POINTS project cannot proceed in its entirety, but we will draw what we can from Phase II efforts to date and use it to improve Phase I and the remaining legacy (older) systems," Alme said.
He said the department has spent the past 16 months establishing project controls, performance measurements and a new project plan that calls for stabilization of POINTS Phase I by Dec. 31.
The Legislative Audit Committee had recommended in March that the Revenue Department drop the second phase of POINTS, but Alme chose to continue working on it.
"This has not been an easy or quick decision," Alme said. "However, this is a business and budget decision based on current information after performing due diligence."
Alme, who became revenue director in January 2001, inherited the troubled computer system from the Racicot administration which got legislative permission to issue $16 million in bonds in 1997 and another $16 million in 1999 to pay for the integrated tax system.
Such a system was supposed to allow the Revenue Department to handle a variety of taxes on one computer software system, instead of various systems, so that when someone calls a customer service representative, the Revenue Department employee could look up income, property, corporate and other taxes collected by the department using POINTS instead of having to switch to separate, older systems for each tax.
The system, purchased from Unisys, was plagued by problems from the start when installation began in May 1998. The state agreed to accept the system in December 1999 and believed it could fix the problems.
Although portions of the software worked fine, the department found problems with other aspects that delayed its full implementation. Among the flaws were delayed issuance of income tax refunds to taxpayers, double payment of refunds and mixed up statements of taxpayers’ accounts. Teams of consultants were called in to try and fix the problems, but as they fixed one set of problems, they found bugs elsewhere.
By the time the 2001 Legislature convened, legislators from both parties, tipped off by Revenue Department employees, began asking hard questions about POINTS.
The two leading legislative critics of POINTS said Tuesday they weren’t surprised by the administration’s decision to abandon the second phase, but were disappointed it had continued spending money trying to fix it.
"We’ve wasted whatever millions we have," said Rep. Dave Wanzenried, D-Missoula, the first to criticize POINTS. "Had it (the department) been more forthcoming about the problems and the magnitude of the problems with POINTS I and the development of POINTS II, the Legislature would have cut it off earlier."
House Majority Whip Cory Stapleton, R-Billings, said he was encouraged that Gov. Judy Martz "at least has made a decision to back down from the stance they’ve had."
Stapleton charged that Martz and Alme haven’t been privy to the some of the real facts about POINTS because the "second- and third-tier managers" covered up some of the problems and kept it from them.
He said the state may have lost $25 million in Revenue Department audits because auditors were dispatched to work on POINTS rather than audit taxpayers. Alme disputed the figure but agreed that some auditors weren’t allowed to audit, but he said that problem has been corrected.
Stapleton is sponsoring legislation for the Legislature to scrap POINTS altogether. Then he wants an independent audit of the Revenue Department to re-establish baseline data for individual and corporate tax history.
Alme said the state already has spent $28.5 million of the $32 million in bond issues approved by the Legislature.
The Revenue Department has considered litigation against Unisys, Alme said, but "the advice to us is there has been no legal issue to which we’re aware of at this time." However, Alme said, it will withhold $200,000 in payments to Unisys, which already had been paid $11.3 million by the state, as part of an agreement with the software company.
Alme said he is confident the state revenue estimates relied on by the governor and legislators to set appropriations are accurate because they are based on cash reserves, which are "very solid."
There potentially could be an issue with the department’s account’s receivable or money owed to the state, although Alme said he believes that the totals are correct.
Alme said department officials have reported about POINTS to three legislative committees, a subcommittee and an executive committee consisting of officials from the executive and legislative branches.
Copyright © The Billings Gazette, a division of Lee Enterprises.
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