The State of Iowa’s outstanding court debt has reached $731.9 million at the end of fiscal year 2017, according to an Iowa Legislative Services Agency (ILSA) review issued this month. This equates to a 410.4 percent increase since recorded data in 1998, and a 4.7 percent increase ($32.7 million) since fiscal year 2016.
The Iowa Judicial Branch keeps records of debts owed to the court system (which includes unpaid fines, penalties, court costs, fees, forfeited bail, criminal surcharges under Iowa Code chapter 911, victim restitution, court-appointed attorney fees, or expenses for a public defender), not including debt such as restitution and other monies owed to counties, cities, or sheriffs. For the state’s current level of outstanding debt, the report states that a majority of the debt is tied up in fines and court costs. According to the report, Iowa’s outstanding court debt has been on a steady increase since first reported at $143.4 million in 1998.
The report does not provide an explanation for the steady increase in outstanding court debt over time, but it should be noted that court debt can carry over from year-to-year, in addition to new court debt being taken on. A more recent trend, however, shows that the percentage change from year-to-year has been held under 6.5 percent since fiscal year 2013. The ILSA was reached out to for comment on these trends but did not respond by press time.
While the measure of total debt accrued is calculated in the review, a total ratio of debt collected vs. total outstanding, was not calculated in the review. One possible difficulty in calculating an accurate ratio could be due to the state’s various forms of debt collection since 1996.
In 1996, the Centralized Collection Unit (CCU), part of the Department of Revenue, was responsible for collecting debt once the debt had reached 30 days delinquent. To offset administrative costs, CCU added a 10 percent service fee for debt collection to all outstanding debt payments. According to ILSA data, from 2005 through 2017, CCU collected a total of approximately $264 million out of an assigned approximate $1 billion (a collection rate of approximately 25 percent). Under this process, if the debt had still not been paid off after 60 days, a county attorney could apply to have the responsibility of outstanding debt given to the respective county. Effective in 2011, the process changed so that one year after transfer, if the debt had still neither been collected, nor was in a payment plan with the CCU, then a private entity would receive the responsibility for managing the debt.
This process changed drastically in 2015, when Senate File 510 was signed into law, stripping the CCU of its ability to collect outstanding debt, except for the amounts that the CCU was already responsible for. Instead, outstanding debt was sent directly to a private collector after being 30 days delinquent. Under the 2015 legislation, once an account reached 90 days delinquent, it was assigned to the corresponding county attorney.
Most recently, in 2017, the law collection process was changed again so that both the corresponding county attorney and a private firm could manage the debt.
Throughout the time a private collector was given responsibility for collecting outstanding debt, the state has only had one firm under contract. In 2010, a two year contract was signed with Linebarger, Goggan, Blair & Sampson LLP (Linebarger), a law firm in Kansas City, Missouri, with the option for three one-year extensions. Since June 2015, the state has been on a month-to-month contract with the firm. Since Linebarger’s first assignment of debt in July 2011, a total of $686.9 million has been assigned to the firm. It has collected a total of $49.4 million (5.6 percent of the debt) through June 30, 2017. According to the ILSA, the firm is allowed to add on up to 25 percent in fees for administrative costs that go to the firm for managing the debt. While the firm had been unable to collect more than $10 million of outstanding debt, annually, up through 2015, with the changing of the law, Linebarger was able to collect approximately $18.5 million in 2016, and approximately $13.3 million in 2017. The ILSA states that the reason for higher increases is because it’s easiest to collect money within two years of assessment.
In terms of the amount that county attorneys have been able to collect, from 2012 through 2017, a total of approximately $103.6 million out of $5.68 billion (with the new law in 2017, the counties took on over $2 billion in outstanding debt) was able to be collected.
While the state’s outstanding court debt is still over $700 million, according to the ILSA, from collections in fiscal year 2017 alone, $98.8 million was deposited within the state general fund and $16.3 million was deposited with the counties. The ILSA states that less debt was collected in fiscal year 2017 than in the two years prior, most likely due to the CCU still not collecting on new outstanding debt, and still managing old accounts.
While the most up-to-date number from this fiscal year isn’t currently available, the data trend over the last 20 years shows that Iowa’s outstanding court debt will continue to grow. The review does state that new strategies are being implemented on a law enforcement and county level to make prosecuting cases more efficient and less costly, as well as avoiding poverty traps, in which persons with consistently low incomes are repeatedly in debt for multiple violations. While counties can intervene with vehicle registration moratoriums and license application freezes, there still is the question of how to collect on the $731 million.
According to the ILSA, $248.3 million (34.0 percent) of the outstanding debt is more than 10 years old. The state forgives debt once it reaches 65 years in collections. The most recent debt forgiveness program was in 2010, in which debt issued prior to 2006 was eligible for amnesty. A total of 13,511 applicants in 25,442 cases took advantage of the program, bringing in $3.4 million to the state, and forgiving another $3.4 million. Because of this, the state general fund received a deposit of $2.8 million.
The state is approximately $34 million short on its fiscal 2018 budget. Senate recommendations to fill the hole include approximately $50 million in cuts, with over $4 million in cuts to the judicial branch.
Steve Davis, communications director for the Iowa Judicial Branch, said that the cuts wouldn’t impact the ability for court debt to be collected, even though there is discussion that the judicial cut could close courthouses. Davis said that individual counties fund the county attorneys, allowing them to continue to collect debt.
As to what can be done to collect more debt, and at a faster rate, Davis did not respond by press time.