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HomeMy WebLinkAboutMINUTES - 08101993 - 1.7 (2) 7v 4 1 P GRAY DAVIS Controller of the�tatr of Talifornin . . SEGENED July 30, 1993UP CLERK BON RA OSTA CO ISORS CO Dear Supervisor, I want to inform you how you can increase county revenues without taking an extra penny in taxpayer money. On Tuesday I released a report, "Centralized Debt Collection: Turning Old Debt Into New Revenue," which estimated the total debt owed to each level of government in California, and surveyed the successful efforts of other states to increase their revenues through an improved debt collection system. One of the main findings of our report was the Franchise Tax Board (FTB) estimate that $7.725 billion in total debt is owed to all levels of government in California (state, county and city governments). Of that figure $4.255 billion was identified as potentially collectible county debt. As you know your county currently participates in the FTB intercept program where personal income tax returns and lottery winnings of taxpayers is offset against money they owe to the county. The program has a successful match rate of 22% and has offset over $423 million in the last five years. I am proposing with the cooperation of Senate President pro Tempore David Roberti to.amend a bill he is carrying, SB 805, to expand the scope and authority of this program to make it a more effective debt collection tool for county government. SB 805 will eliminate the current statutory restrictions on the types of debts that can be submitted to the FTB program. It will also allow the FTB to use all the collection tools and powerful information data bases it now uses to collect state income taxes. This means that in addition to tax refunds and lottery winnings, county debts will be offset against a variety of debtor assets such as employee wages, bank accounts, dividends, commissions and real property to name a few. The program is designed to be optional for local government. The cost of the program will be paid by the debtor through a small collection fee. FTB conservatively estimates, based on the success of other states, that assuming full participation, we could collect statewide an additional $150 to $550 million a year in new revenues once the system is fully operating. [:]SACRAMENTO P.O.Box 942850,Sacramento,CA 94250-5872 (916)445-2636 ❑LOS ANGELES 1964 Westwood Boulevard,Suite 310,Los Angeles,CA 90025 (310)446-8846 County Supervisor July 30, 1993 Page two One key to getting maximum revenues out of this system is obtaining the social security number of each debtor. This is the key item that drives the system. Our report discovered that collection of this information is often discretionary and inconsistent among the counties and within various departments. Such practices simply mean a loss of possible revenues. We also discovered from our survey of other states that truly centralized collection systems, especially those using modern computer software were most effective and paid back the initial investment many times over. Good debtor-identifying information, speed of collection and a modern automated system were the three key factors in effective debt collection systems. I believe the state can and should do its part in forming a new cooperative working relationship with county government to assist in their debt collection efforts. Our time is short. We need your support and help in Sacramento if we are to be successful and pass this legislation this year. Given the current fiscal crisis and the prospects of any state deficit next year, we have a golden opportunity to pass this bill and use the resources of the state to assist county collection efforts. SB 805 is set to be heard in the Assembly Ways & Means Committee on August 18. We need to quickly,convince the members of this committee, your representatives, the legislative leadership and the Governor that this program is an opportunity to prove that government can work smarter and more efficiently--without cost to the taxpayer. Sincerely, V L �r GRAY DA ;; Enclosure — f CC', ca rd ein-x°13 CAD - T H E CO EUREKA��• hr • O ILV• f t� o � jib � tP O F C P.% Centralized Debt.Collection: "Turning Old Debt Into New Revenue" A Report by California Controller Gray Davis & The Franchise Tax Board XIEKA News e aseTHE C4�o� ON's•O Cuff ice of the. State Controller - QMy Davis 0 4a 300 Capitol Mall, 18th Floor Sacramento, California 95814 0 A 0 Contact: Carol Thorp 916/445-1895 July 27, 1993 STATE CONTROLLER PROPOSES MAJOR NEW PLAN TO GENERATE REVENUE FOR STATE AND LOCAL GOVERNMENT SACRAMENTO State Controller Gray Davis today proposed a crackdown on deadbeat debtors that would. raise hundreds of millions of dollars for state and local government without raising one penny in taxes. "Deadbeat debtors owe, but they don't pay, " said Davis. "It's a bargain for them and a burden for taxpayers. We can make debtors pay up byreplAcing California's wasteful, inefficient debt collection systems with a centralized system that gets the job done. " Davis outlined his program for better debt collection in a report called "Centralized Debt Collection: Turning Old Debt Into New Revenue. " The report calls for a centralized debt collection system which-_would be mandatory for state agencies and voluntary for cities and counties. The program would be run by the ! Franchise Tax Board (FTB) which Davis chairs, and would use the FTB's powerful collection authority to assist governments in collecting delinquent debts. Davis' plan represents the most significant change in California's debt collection system in the last decade. "Good government is efficient government, " said Davis. "Government should collect what is owed to it and taxpayers should expect no less. " Currently, government debt collection in California is decentralized, according to the Controller's report, with various state; city and county agencies setting their own guidelines for collecting money owed to them. The result is often uncollected debts. The report estimates that the state and local governments are owed six billion dollars. Thirty-one states have budgets smaller than California's outstanding debt. -more- Eight states, Colorado, Montana, Oregon, Tennessee, Texas, Michigan, Maryland and New York, currently have centralized debt collection systems which have improved collections by as much as 25 percent. Even using the conservative estimate of a two and one-half to five percent increased collection rate contained in the Controller's report, centralized debt collection in California could increase state and local revenues by $150 to $300 million a year. The actual figure is likely to be much higher. . "The state and local governments are making drastic cuts in programs and services because of budget problems, " said Davis. "Centralized debt collection is a proven money raiser in other states and should be implemented immediately in California. " Davis' Centralized Debt Collection Program must be enacted by legislation. Senate President pro Tempore David Roberti has agreed to help carry the legislation. The Centralized Debt Collection Program expands the current Controller's Interagency Offset Program. The offset program, which is administered by the FTB, matches debts against tax refunds and lottery winnings only. The expanded program would allow the FTB to match debts against a wide range of assets including bank accounts and property. Ninety state agencies, 41 counties and 57 cities are participating in the Interagency Offset Program which has collected $423 million dollars over the past five years. The Centralized Debt Collection Program would be financed by debtors by adding a collection fee to debts. ct:93: 51 .. SAN FRANCISCO EXAMINER Wednesday JULY 28, 1993 AN %;ad bNwmat rs Arft 9 Arm d%obto �I NAM on W!! __ t ta 11111110M 11� $ 7 b I I I I n cities, counties and state agencies. The report also found that cities Plan to collect The state would have the power to are owed an estimated$103 million L deduct the debts from bank ac- and counties are owed an estimat- would di into Dahl{ counts, paychecks, tax refunds or ed$4.2 billion,mostly in court fines p lottery winnings. and fees that have gone unpaid. Accounts, tax refunds Under this proposal, which Davis noted that the amount would require legislative approval, owed nearly matches the$9 billion By Erin McCormick the state had to chop from its EXAMINER SACRAMENTO BUREAU a person who owed$200 in overdue p parking tickets might find that the spending plan .this year and ex- SACRAMENTO — At a time state had subtracted the money ceeds the combined budgets of 31 when financial shortages have from their earnings or their bank states• threatened to bring government to account. San Francisco is owed about$65 its knees, state and local agencies "We can make debtors pay up million by such debtors,while Los are losing as much as$7 billion by by replacing California's wasteful, Angeles is missing about$550 mil- failing to collect unpaid debts to inefficient debt-collection system lion, the report found. courts and agencies like the De- with a centralized system that gets To address this, Davis would partment of Motor Vehicles, ac- the job done,"Davis said."Govern- create a state collection system, cording to a report released Tues- ment should collect what is owed to similar to one used by eight other day by California Controller Gray it and taxpayers should expect no states, that could be used by all Davis. less." state and local agencies to put the The report estimated that, be- Davis' report, titled "Turning pressure on debtors. cause of decentralized collection Old Debt into New Revenue," Davis estimated that because systems,"deadbeat debtors"owing found that the state is owed $3.3 some debtors cannot be found or court fees, child support and stu- billion from delinquent payments made to pay, as little as 5 percent dent loans are finding it easy not to to the DMV, unpaid student loans to 10 percentof the debt might be pay their bills to state and local collected annually,bringing in$300 governments. and child-support payments.DaNis million to $600 million a year. "Deadbeat debtors owe, but fotind thattax debts are collected they don't pay," said Dads. "It's a "The state and local govern- bargain for thein and a %6s. " for most aggressin ely through a system ments are making drastic cuts in d(,veloperl by the state Franchise progmims and services because of taxpayers." '1':: Boiird. budget. prohlenis," said Davis. To deal with this problem, D11- "Centralized debt collection is a ,is proposed a collection system proven nionev-raiser in other that would track debts owed to shite~ and Should be imlb"nient:ed in nodi„ilch- in California.”