New debt collection push eyed

DES MOINES – Iowa lawmakers are looking to hire a debt coordinator to oversee a process of trying to recoup hundreds of millions of dollars owed to the state for unpaid court charges, back taxes or other delinquent payments.

The Senate Appropriations Committee gave initial approval Thursday to proceed with a coordinated debt collection effort that would include the creation of separate debt settlement and debt amnesty programs to encourage scofflaws to pay up.

“It's a work in progress,” said Sen. Bob Dvorsky, D-Iowa City, committee chairman and manager of Senate Study Bill 3253.

“We know there's a huge amount of debt out there and we're trying to work through that,” he added. “The problem is there are so many moving parts” given that the debt is spread among two branches of state government, county officials, and various state agencies and functions.

As a starting point, lawmakers want to establish a state debt coordinator who is 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.

“This is a major work in progress – with emphasis on the word major. I remain unconvinced,” said Sen. Steve Kettering, R-Lake View, ranking Republican on the Senate Appropriations Committee. “This will take some major effort to go and actually collect and settle and get done. I would see little impact to 2011 budget year. You might begin to see a little bit in 2012 but even that's fast.”

The proposed legislation also requires 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.

According to judicial branch officials, outstanding debt owed to the state's court system for items like unpaid criminal judgments, civil fines or past-due parking tickets grew from $143.4 million in 1998 to more than $521.4 million near the end of 2009 – with a large share being old, uncollected debt.

The largest category was past-due debt in criminal cases, which totaled $373.9 million followed by $122.6 million in unpaid traffic fines. Court debt is deemed delinquent if it is not paid within 30 days after the date it is assessed.

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.

Dvorsky said he expected the program would get started with some initial seed money, maybe up to $200,000, and after that the coordinator's activities would be self supporting using a share of the delinquent debt that gets recouped.

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rod.boshart@gazcomm.com