It does not make even procedural sense. The state is not entitled (at least subject to full return) until the whole appeals process is finished. Consider the opposite case to see how the state deals with money, if the IRS accepts your tax return but later finds fault with it, can you just say sorry? No you pay everything plus interest. You'd pay a penalty too if it was willfully wrong. Likewise, if the state took the money maliciously, they should even pay a penalty. In no case should they be entitled to clear the ledger like they did.