Davis Urges State to Consolidate Debt Collection

Controller Gray Davis on Tuesday proposed giving the state Franchise Tax Board more power to collect the $6 billion owed to state and local agencies.

Davis said at a news conference that consolidating debt collection under the board, of which he is chairman, could mean an extra $500 million a year for local government.

Nearly 2,000 state and local agencies are responsible for collecting debts, including building fees, court fines, student loans, property taxes, parking tickets, child support and Department of Motor Vehicle fees.

Davis said that duplication often occurs and that emphasis on debt collection varies from agency to agency.

Pursuit of debtors has been consolidated in eight other states, where debt collections have risen by 5% to 10%, Davis said. California’s $6 billion in debt--$4.2 billion of which is owed to county governments--surpasses the budgets of 31 other states, he said.

About $1.3 billion in debts is owed to state agencies, he said.

“If we don’t vigorously attempt to collect the money that’s owed to the people of California, we really are subsidizing the deadbeat debtors,” he said.

Under the plan, the Franchise Tax Board’s current power to withhold tax refunds and lottery winnings from those indebted to the state would be expanded. The board could also collect any debts owed to state or local agencies directly from bank accounts or wages and through seizure and sale of property and other assets. Those collection powers now may be used only to collect back taxes.

Cities and counties could submit all debts to the board for collection, not just those where court judgments and bench warrants have been issued. The service, the Centralized Debt Collection Program, would be mandatory for state agencies and voluntary for local and county governments. It would cost $5 million to $10 million a year to operate and would be paid for by fees on debtors, Davis said.