Senate looks to recoup delinquent debt

DES MOINES – The Iowa Senate approved a bill Wednesday that would establish a debt coordinator whose job would be to recoup money from scofflaws owing unpaid court fines, back taxes or other delinquent payments.

Senate File 2383, which passed on a 43-7 vote, would set up a coordinated debt collection effort that would include the creation of separate debt settlement and debt amnesty programs to encourage people to pay at least a share of the money they owe the state.

“It's a step in the right direction,” said Sen. Bob Dvorsky, D-Coralville, the bill's floor manager. “We're trying to give the debt coordinator some teeth to collect this debt. I think this is a good bill to move us forward.”

As a starting point, lawmakers want to establish a state debt coordinator who would be hired by the governor and confirmed by the Senate for a four-year term. The person must have expert knowledge in the field of debt collection and understand the workings of state government.

Among the provisions, the bill would require the judicial branch to contract with a private agency to collect court debts 120 days after the debt is deemed delinquent, if a county attorney is not collecting the debt. The private agency would be allowed to impose an additional fee of up to 25 percent for its collection activities. Another bill provision requires that all fines imposed by the court be paid on the day the fine is imposed.

A fiscal note prepared by the Legislative Services Agency indicated Iowa currently has $533 million in outstanding debt – with $216 million of that total more than four years old. Initial projections indicated the proposed legislation would generate $5.6 million in fiscal 2011 and $4.5 million the following year – but Dvorsky called those estimates “quite low.”

A consultant hired by Gov. Chet Culver last year to recommend ways to streamline, reform and improve state functions said a reasonable goal for collecting outstanding court debt was $111 million over the next five years.

The debt coordinator would review collection practices of each branch of state government – excluding delinquent child support obligations – coordinate their collection efforts, manage a debt settlement program and make recommendations to lawmakers on how to improve and increase collection efficiencies and practices.

The debt settlement program is to be in place no later than next Jan. 1 and would apply to all court debt obligations except debt that is less than four years old, victim restitution, civil penalties for certain drivers' violations, and jail fees. The program has a variety of eligibility guidelines and would not allow the coordinator to forgive more than 50 percent of all eligible debt due.

A separate debt amnesty program within the state Department of Revenue was proposed to run from July 1 through Dec. 31 that would authorize the agency to forgive up to  50 percent of the eligible debt obligation. The program would not be available to a person in jail, prison or under supervision.

Also Wednesday, the Senate voted 46-4 to approve a three-year pilot project with the Iowa Hospital Association using existing patient revenue to draw down more federal matching Medicaid money.

The proposed fee assessement involving 34 primary urban hospitals would generate $40 million that could be used to draw down an extra $37 million in state benefits, according to Sen. Joe Bolkcom, D-Iowa City.

Senate File 2388 would create a new trust fund and an advisory council with extra federal proceeds being used to increase reimbursements to hospitals and help fund state programs. Bolkcom was optimistic the proposal could make it through the Legislature and to Culver's desk before this week's adjournment, he added.

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