Attack the debt by collecting money owed
One way Louisiana can reduce the $2 billion to $3 billion budget deficit next fiscal year is by doing a better job of collecting money owed the state.
Currently, $1.52 billion is owed Louisiana citizens in the form of accounts receivable, spread across state government agencies. This amount is fairly consistent over time, and rarely falls below $1 billion.
The debts include delinquent taxes, unpaid fees, fines, medical bills and bad checks. Over half of this $1.52 billion, or 58 percent, is over six months past due.
The National Association of State Auditors, Comptrollers and Treasurers (NASACT) recently conducted a study to identify the strategies states use to collect more of their debts. NASACT identified several steps taken by states that are serious about collecting money owed them and their citizens:
1. Automating Collections and Modernizing Case Management.
This provides the infrastructure to automatically assign cases to the most cost-effective treatment. It uses automated correspondence generation, data collection and payment agreements to collect more, faster and at a lower cost.
2. Centralizing Collections.
It allows for increased automation, consistent collections practices, enhanced collections tools (such as better supervision of outside collection agencies), and a greater focus on collecting debts. It requires a state to view delinquent debt management as a core function of government rather than a lower-priority activity. Michigan, Ohio, California and Colorado are leaders in centralized debt collection, and have the extra money to prove it.
3. Using Offsets.
States can collect more of their debts by offsetting tax refunds and vendor payments owed the debtor and by withholding future services. Liens, levees, garnishments and license holds have also proven successful.
4. Providing Current Information.
Louisiana’s most recent Receivables Report is 10 months old. States that have been successful in collecting more of their debts insist upon receiving current information from their agencies and monitor debts on a monthly basis.
By adopting proven debt collection practices used effectively by other states, Louisiana should strive to reduce its uncollected receivables by 20 percent, which would yield an extra $300 million.
Louisiana doesn’t need to raise taxes. We just need to manage our money better.