BILL ANALYSIS
AB 273
Page 1
Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 273 (Anderson) - As Introduced: February 12, 2009
SUBJECT : COLLECTIONS: MANDATED REFERRAL OF COURT FINES AND
ORDERS TO THE FTB
KEY ISSUES :
1)SHOULD THE SUPERIOR COURT REFER ALL DELINQUENT FINES, STATE OR
LOCAL PENALTIES, FORFEITURES, RESTITUTION FINES AND ORDERS,
AND ANY OTHER ORDERS IMPOSED BY A SUPERIOR COURT UPON A PERSON
OR ENTITY FOR CRIMINAL OFFENSES TO THE FRANCHISE TAX BOARD FOR
COLLECTION, REGARDLESS OF THE AMOUNT?
2)SHOULD THE COMMITTEE WAIT UNTIL DECEMBER FOR THE JUDICIAL
COUNCIL'S RECOMMENDATIONS REQUIRED IN AB 367 (DE LEON) BEFORE
MAKING THE POLICY DETERMINATION REQUIRED IN THIS MEASURE?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
This bill, sponsored by the author, would require superior
courts to refer all delinquent fines, state and local penalties,
forfeitures, restitution fines and orders, regardless of amount
to the FTB for collection. The bill also would permit the FTB
to collect the actual and reasonable costs of such collection.
The author contends that more referrals to the FTB will increase
the efficiency and effectiveness of collecting court-ordered
debt. The Judicial Council states in strong opposition that
eliminating the court's discretion in collection referrals
disrupts the current drive toward a uniform and comprehensive
court-ordered debt collection system. The California State
Association of Counties also opposes the bill. This proposal
also appears to be potentially disruptive of the AB 367 (De
Leon) process, which was unanimously approved by this Committee
in 2007. AB 367 established a task force to evaluate the
Court-Ordered Debt (COD) collection program which is scheduled
to make recommendations about collections this coming December.
This measure would thus appear to prejudge the task force's
findings, which may or may not concur with the collection
approach mandated by this bill.
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SUMMARY : Seeks to require courts to refer for collection all
fines and orders to the Franchise Tax Board. Specifically, this
bill :
1)Eliminates the superior court's current discretion to
determine when and when not to refer fines and orders
exceeding the minimum amount of $100 to the FTB, instead
requiring the superior court to refer all delinquent fines,
state and local penalties, forfeitures, restitution fines and
orders, regardless of amount, to the FTB for collection.
2)Authorizes the FTB to collect the actual and reasonable costs
of collection.
EXISTING LAW :
1)Allows a court to refer all fines, state or local penalties,
forfeitures, restitution fines, restitution orders, or any
other amounts imposed by a superior or municipal court upon a
person or entity that is due and payable in an amount over
$100, in the aggregate for criminal offenses, including
Vehicle Code violations, to the FTB for collection as
specified. (Revenue and Taxation Code Section 19280.)
2)Limits referrals to the FTB to amounts in excess of $100 and
any interest accrued prior to the date of referral. (Revenue
and Taxation Code Section 19280.)
3)Authorizes the FTB to collect the referred restitution orders
in the same manner as authorized for collection of a
delinquent personal income tax liability. (Revenue and
Taxation Code Section 19280.)
COMMENTS : This bill, sponsored by the author and opposed by the
Judicial Council and the California State Association of
Counties, would require superior courts to refer all delinquent
fines, state and local penalties, forfeitures, restitution fines
and orders, regardless of amount, to the FTB for collection.
The bill also would permit the FTB to collect the actual and
reasonable costs of such collection.
The author states that this bill would improve the ability of
California's courts to collect on the many unpaid fines and fees
owed to the state. Outlining the current system, the author
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states:
When a defendant is ordered to pay a pecuniary order and he
or she does not pay, the courts' sole remedy is to revoke
probation and issue a warrant for an arrest. Regrettably,
though, California jails and prisons already suffer from
overcrowding, with many outstanding warrants to be served.
In contrast, the FTB may use administrative collection tools to
collect delinquent tax and non-tax debt liabilities. Rather
than imposing warrants for arrests, the FTB accomplishes non-tax
debt collection actions primarily through bank account levies
and garnishing wages. According to the author, the FTB clearly
has more effective tools than the courts to collect these debts.
The FTB should therefore be used at all times to collect
court-ordered debts, regardless of size or assumed ability to
collect.
BACKDROP : Under existing law, unpaid court-ordered fines,
penalties, and restitution in an amount of $100 or more
currently may be referred to the FTB for collection after being
delinquent for 90 days. The FTB reimburses its costs through
the amount it collects for the program. The legislative intent
language of the Court-Ordered Debt (COD) collection program
limits FTB reimbursement to 15% of the amounts collected. After
receiving its costs, the FTB gives the remaining net collection
proceeds to the county or state fund originally owed the debt.
This bill seeks to eliminate the threshold requirement for FTB
referrals, and instead require the court to refer all
court-ordered fines, penalties, and restitution to the FTB after
being delinquent for 90 days. Additionally, the bill authorizes
the FTB to collect the "actual and reasonable costs of
collection" in addition to the amounts referred and accrued
interest.
According to the FTB, the FTB currently collects restitution
orders referred from courts of 43 counties and maintains an
inventory of approximately 1.1 million cases. The FTB has
expanded the Court Ordered Debt Expansion project to handle
approximately 8 million cases from potentially 190 different
courts. The FTB reports that it currently collects debts of
$100 or more for 28 of the 58 superior courts.
AB 367 (De Leon) : This proposal may be inadvertently disruptive
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of the AB 367 (De Leon) process, which was unanimously approved
by this Committee in 2007. AB 367 established a task force to
evaluate the COD collection program and which is scheduled to
make recommendations about best practices this coming December.
This measure would, according to the Judicial Council, appear to
prejudge the task force's findings, which may or may not concur
with the collection approach mandated by the bill.
FTB Money and Process Issues : While taking no position on this
measure, the FTB states that the bill would require an
additional 20 superior courts to refer their debts to the FTB
for collection. The FTB would be required to initiate a
memorandum of understanding and establish a secure data
transmission protocol with each court. The FTB would phase each
new court into the program as the details are worked out with
the court. The bill does not specifically provide for an
expansion of the FTB's operations or computer system. Instead,
the bill allows the FTB to collect on "the actual and reasonable
costs of collection." The statutory language does not further
clarify whether these are the actual and reasonable costs
incurred by the FTB, a private vendor, the counties, or the
courts. Since the FTB's cost reimbursement is provided under a
different Revenue and Taxation Code section, the FTB states that
it "interprets this to mean the collection costs incurred by the
courts and not the statutorily prescribed reimbursement for
FTB's costs."
ARGUMENTS IN SUPPORT : The Chief Probation Officers of
California (CPOC) has expressed support of this bill if it is
amended to include probation costs in the collection process.
In CPOC's words, adding probation costs "would be beneficial to
community corrections on many spectrums of the scale, such as
applying collection costs to helping victims and enhancing
programs in order to assist in the reduction of recidivism."
Retired Judge and former State Senator Lawrence Stirling has
also stated his support of the bill. According to Retired Judge
Stirling, the Franchise Tax Board is "already skilled at
collecting money" and should thus undertake the initial
collection effort.
ARGUMENTS IN OPPOSITION : As noted above, the Judicial Council
(JC) opposes this bill, since it eliminates the discretion of
courts in referring collections of court-imposed fines and
orders to the FTB. According to the JC, this measure would run
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counter to three previous bills that have established a
comprehensive and uniform debt-collection system:
In 2003, the council sponsored SB 940 (Stats. 2003, ch.
275), which required the council to form the Collaborative
Court-County Working Group to assist the council in the
adoption of guidelines for a comprehensive collection
program. SB 940 also authorized courts and counties to
create collaborative collection programs to implement the
council's guidelines. The council built upon SB 940 by
sponsoring SB 246 (Stats. 2004, ch. 380) authorizing a
superior court to submit claims to the Franchise Tax Board
and revising the components of county-court comprehensive
programs to collect court-ordered debt. Lastly, the
council sponsored AB 367 (Stats 2007, ch. 132) which, among
other things, required the development of performance
measures and benchmarks to review the effectiveness of the
cooperative superior court and county collection programs.
According to the JC, this measure would "create separate
standards and requirements for court collection programs and
county collection programs." The measure still allows counties
to retain discretion to refer such fines to the FTB.
Additionally, many counties collect court-ordered debt for
courts, but these counties would not be required to refer such
cases to the FTB.
The FTB has stated that the provisions of this bill would not
impact state income tax revenue, and the total amount of
collections that may be generated by the FTB on debts less than
$100 is unknown.
The JC also states that this would "reduce the effectiveness of
the Franchise Tax Board's court-ordered debt program" as the
"re-focus ? on minimal amounts is an ineffective use of existing
state resources."
Writing in opposition to this measure, California State
Association of Counties (CSAC) and the Regional Council of Rural
Counties, similarly argue that this measure could affect revenue
distribution and increase costs. The organizational structure
of COD collection varies from jurisdiction to jurisdiction. In
some counties, the court undertakes the collections
responsibility on behalf of both the court and county; in
others, the county assumes responsibility. Some jurisdictions
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share the responsibility, with the local court and county
dividing their responsibilities based on the type of debt or on
the age of the account. As CSAC explains, this measure would
upset these various models by requiring the FTB to handle all
COD accounts:
To the extent that a court has some level of collection
responsibility in a jurisdiction, the provisions of AB 273
could substantially affect a county's revenue distribution.
If the FTB were to receive all delinquent accounts, its
administrative costs would be deducted from the revenue
collected - costs that would not be applicable had the debt
been successfully settled prior to referral, as permitted
under current law.
Furthermore, CSAC states that this measure undermines the
flexibility and efficiency of the current system:
Our experience has been that collections operate optimally
on a tiered basis, with the local entity being most
effective at making early contact to capture the least
problematic accounts and subsequently using the FTB or
outside vendors for the older and harder-to-collect
accounts. The structure of AB 273, as introduced, appears
to take away needed tools and flexibility that, under
current law, permit local entities to determine and pursue
the collection methods that best meet their needs. While
the FTB-COD program is a key element that should continue
to play a role in the overall effort to collect, we do not
believe it is necessary or advisable to unilaterally
transfer the primary collections responsibility as
contemplated in this measure.
The San Bernardino County Treasurer-Tax Collector also states
that the FTB-COD program has "limited effectiveness." For
instance, in FY 2006-2007, San Bernardino County referred $1.6
million to FTB-COD, of which they recovered $30,113 or 1.9% of
collections. In comparison, San Bernardino Central Collections
performed at a 49% recovery rate, totaling $19 million in
collections.
Prior Related Legislation. SB 556 of 2009, a companion bill
introduced by the Senate Committee on Judiciary, does not
require the court to refer accounts to FTB-COD. It simply
states that the court "may" refer them. AB 367 (De Leon) of
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2007 established a task force to evaluate the COD system, and
lowered the minimum amount that may be referred to the FTB for
collection of restitution fines or orders from $250 to $100. It
passed with unanimous votes in both the Assembly and the Senate.
SB 246 (Escutia) of 2004 permanently extended the provisions
authorizing a county to refer delinquent debts to the FTB for
collection, thereby requiring the FTB and the courts to expand
the collection of court-ordered debts to all 58 California
Counties. In 2003, SB 940 (Escutia) required the JC to form the
Collaborative Court-County Working Group to assist the council
in the adoption of guidelines for a comprehensive collection
program. SB 940 also authorized courts and counties to create
collaborative collection programs to implement the JC's
guidelines. It passed with unanimous votes in both the Assembly
and the Senate.
REGISTERED SUPPORT / OPPOSITION :
Support
Chief Probation Officers of California (CPOC) (if amended)
Peace Officers Research Association of California
Retired Judge and Former State Senator Lawrence Stirling
Opposition
Board of Supervisors of Sacramento County
California Public Defenders Association
California State Association of Counties (CSAC)
Judicial Council of California
Regional Council of Rural Counties
San Bernardino Treasurer-Tax Collector
Analysis Prepared by : Drew Liebert and Edward Ahn / JUD. /
(916) 319-2334