BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SB 954 HEARING: 4/11/12 AUTHOR: Liu FISCAL: Yes VERSION: 3/1/12 TAX LEVY: No CONSULTANT: Phan CONTROLLER'S OFFSET PAYMENTS Allows the State Controller to offset debts owed to cities and counties against payments from the Unclaimed Property Program. Background and Existing Law If a person owes money to a city or county, the State Controller may withhold (offset) money from the person's state tax refunds and winnings from the California State Lottery to settle local debts. The Controller can withhold money only when the amount is a judgment, a court order, or a lien for delinquent unsecured property taxes, and must withhold money when the amount is a bench warrant for payment of a fine, penalty, or assessment (AB 6, Farr, 1992). Cities and counties give the Controller lists of debtors and amounts owed. The Controller matches those cities' and counties' lists against the names of people due state tax refunds and lottery payments. When there are matches, the Controller withholds the amount owed and pays the city or county. The Controller also runs the Unclaimed Property Program. California's Unclaimed Property Law requires corporations, businesses, associations, financial institutions, and insurance companies to refer accounts of property that have been inactive for a specified number of years (usually three) to the State Controller. Unclaimed property commonly includes: bank accounts, safe deposit box contents, stocks, mutual funds, bonds, dividends, cashier's checks, money orders, certificates of deposit, estates, SB 954 - 3/1/12 - Page 2 trust funds, and escrow accounts. Oftentimes, owners of these properties forget the account exists, move but do not leave a forwarding address, or die and the heirs have no knowledge of the property. The Controller safeguards all unclaimed property until its owner claims it. After receiving a claim, the Controller evaluates the validity of those claims and authorizes payments to the rightful owners. State law does not explicitly authorize the Controller to place an offset on the monies being returned through the Unclaimed Property Program to an owner who owes money to a city or county. Proposed Law Senate Bill 954 allows the State Controller to offset any amount a person or entity owes to a city or county against any amount owing the person or entity on a claim for payment of money from unclaimed property held by the state. State Revenue Impact No estimate. Comments Purpose of the bill . SB 954 expands an authority that the Controller already uses to recover debts. Existing law ensures that offset occurs only in cases where debtors have an outstanding judgment, court order, lien, or bench warrant. This bill would authorize the Controller to apply an unclaimed property payment towards an outstanding city or county debt only when that unclaimed property is claimed and matched with someone owing city or county debt. If the claimant feels he or she was wrongfully billed, he or she can appeal to the authority issuing the judgment, court order, lien, or bench warrant, and if successful, repossess the property. The Controller's office and the Franchise SB 954 - 3/1/12 - Page 3 Tax Board can recoup any costs associated with implementing this program. In a feasibility study, the Controller's Office found that had this bill been in place, it would have recovered $2.3 million for cities and counties in FY 2009-10 and $3.5 million in FY 2010-11. The Controller's assistance will help cities and counties save on the 50% collection fee that they would have had to pay to hire private collection agencies. With their current budget constraints, cities and counties need as much help as possible in recovering outstanding debts. Support and Opposition (4/5/11) Support : California State Controller's Office; California State Association of Counties (CSAC); League of California Cities. Opposition : Unknown.