State quits flawed tax-tracking computer system

The Montana Department of Revenue and Martz administration agreed Wednesday to pull the plug on its costly, trouble-plagued integrated tax-tracking computer software system.

By CHARLES S. JOHNSON
Gazette State Bureau

Director Kurt Alme told the Senate Taxation Committee that the agency wouldn’t oppose Senate Bill 271, by Sen. Corey Stapleton, R-Billings, that calls for replacement of the first phase of the department’s Process Oriented Integrated System or POINTS I. Stapleton said the data from POINTS I remain "hopelessly corrupted."

"We recognize that POINTS needs to be replaced, and we’re going to need your help to do that," Alme said.

In November, the Martz administration abandoned the second phase of the troubled software system, or POINTS II, largely for financial reasons. The administration was unwilling to commit another $5.8 million to the system.

Alme said later Wednesday that once the department decided not to go forward with POINTS II, "that was done with the assurance that POINTS wasn’t going to be the long-term integrated solution for the department." He said POINTS would have to be replaced.

The state has spent $32 million through bond issues in 1997 and 1999 on the troubled software system from Unisys, plus $4 million trying to make the system deliver accurate data. In addition, Stapleton said the department wasn’t able to collect $25 million in revenue from tax audits because so many staff members were working on the POINTS mess. Stapleton estimated the total cost of POINTS, counting the foregone audit money, at $61 million so far. A new software system will be costly but is necessary, he said.

Alme’s position Wednesday represented a change of heart by the Martz administration, which had been pushing to make POINTS I work. Staples termed these efforts "an escalation of commitment to a failing course of action."

The Revenue Department under Gov. Marc Racicot agreed to accept POINTS I in December 1999, despite flaws in the software since installation began in May 1998. The Revenue Department director under Racicot, Mary Bryson, signed a release letter to Unisys with some mutually agreed upon conditions in April 2000. Alme took over as revenue director under Martz in January 2001.

Alme said the state has not sued Unisys, although it took part in a now-completed dispute resolution process on POINTS II, but not POINTS I.

Pressed if the state had any legal remedy against Unisys, Alme, a Harvard law school graduate, said, "At this point, I don’t believe it would be prudent to pursue any legal remedy against Unisys."

Despite extensive efforts, consultants and reviews, POINTS still does not deliver accurate information, Stapleton said.

One of the goals of POINTS was to consolidate tax collections by having the Revenue Department send out and collect from employers income tax withholdings and unemployment insurance payments instead of having the two agencies collect the data separately.

However, state Labor Commissioner Wendy Keating said at the meeting that POINTS isn’t meeting the Labor Department’s needs or that of the federal government with unemployment insurance.

"The federal group is very unhappy with this program," she said. "We are out of compliance. We have the responsibility for the program. We have no control."

Keating said the performance under POINTS "has continually gone downhill." Montana once was in the top 10 nationally in how it handled the accounting for unemployment insurance but it is failing today because of POINTS, which affects the state agency’s credibility with the federal government.

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