Oregon Senator Doug Whitsett Newsletter, R-Klamath, District 28 1/8/13

Oregon has a long history of less than competent collection of outstanding debt. Its latest report on Delinquent and Liquidated Accounts Receivable was released last month. The news is not good.

The amount of money owed to the state of Oregon, but that has not been collected, increased by more than $500 million during the last fiscal year. The total amount of unpaid accounts owed to the State now exceeds three billion dollars.

A delinquent account is an account for which payment has not been received by the due date. A liquidated account is a delinquent account where the exact past due amount is known and the debtor has been properly notified by a tax delinquency notice, a judgment, or an administrative proceeding that establishes the amount of the debt owed.

Unpaid accounts are owed to more than fifty state agencies. However, about ninety nine percent of all the outstanding debt is owed to only nine state agencies and the Judicial Branch of government. More than eighty eight percent of the debt is owed to just three state entities, the Judicial Branch, the Department of Justice and the Department of Revenue.

Oregon law requires that most accounts receivable be turned over for collection to either the Department of Revenue or a private collection agency within 90 days of becoming past due. During the past fiscal year, more than $625 million was referred for collection. It appears that less than $50 million in past due accounts was actually collected.

The outstanding debt owed to the State of Oregon increased by more than twenty three percent during that single year. It seems apparent that Oregon needs to improve the management of its three billion dollars in accounts receivable.

Many of the debts are difficult to collect due to a variety of circumstances.

Some of the unpaid balances are due to failure to pay loans issued or guaranteed by the State. The business entities that received these state backed loans may have failed or may have been liquidated.

However, the State generally does not select those who owe it money.

Most of the money owed is the result of unpaid taxes, fines, fees, charges, and payments for restitution or support. The debtor may be unemployed and have limited capacity to pay. The debtor may be incarcerated. The debtor may have experienced bankruptcy. The debt may be owed by an entity that is no longer doing business or that may have moved out of Oregon.

A good deal of the total debt has been owed to the State for a long period of time and is unlikely to ever be collected. In fact, the private sector is allowed to depreciate outstanding accounts receivable on a scale primarily determined by the age of the debt. Much of the debt owed to the state should be similarly discounted.

However, the growth of new and more recent debt should be pursued much more aggressively. Our current methods appear to be collecting less than ten percent of the delinquent accounts that are turned over for collection each year. Improving that performance to only fifty percent would produce nearly $300 million per year in additional revenue, without raising current taxes, fees and charges.

This is an area that I hope our Ways and Means subcommittee on General Government is able to address in the upcoming legislative session. I believe that significantly better management of our State’s accounts receivable can be achieved by implementing appropriate changes in our methods of debt collection.

To put it into perspective, collecting an additional $500 million in accounts receivable per two-year budget cycle would pay for more than 3,500 fully loaded teaching positions.

The money in question is already owed to the State. We just need to be a lot better at collecting it!

Please remember, if we do not stand up for rural Oregon no one will.

Best Regards,

Doug

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