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Lawmakers line up plans to collect billions owed to state

SALEM — Two months after Oregon lawmakers wrapped up the 2016 legislative session, some are already working to revive a proposal next year that would make it easier to track down debtors who together owe the state more than $3 billion.

EO MEDIA GROUPA bill that would have forced banks to help the state locate the accounts of people who are delinquent on taxes and other debt died in early March. Now, state Rep. Kathleen Taylor, D-Milwaukie, is working with banks to bring the bill back in 2017.

“This was something that was supported by the Governor’s Office and Department of Justice and credit unions, and we had bipartisan support,” said Taylor, a chief sponsor of the 2016 bill. “But we’re going to do it next session. The positive note is the (Oregon) Bankers Association has agreed to work on this in the interim.”

The bill would have brought the state an estimated $18 million from 2017 through 2021 by increasing the state’s debt collection rate, according to the Legislative Revenue Office. It’s a small amount relative to the $19.5 billion in total revenues expected under the current two-year budget, but lawmakers might be looking for any additional money they can get in 2017.

Sen. Richard Devlin, R-Tualatin, said in a recent interview that in the 2017-19 budget, lawmakers could face “potentially up to a $1.3 billion deficit even to fund what we would consider continuing services.”

Devlin is one of the co-chairs of the budget writing Joint Committee on Ways and Means. Looming costs range from the anticipated bill for the state’s Medicaid expansion, to minimum wage increases and the unfunded public employee pension liability.

'A terrible precedent'

The 2016 debt collection bill was based on the recommendations in a 2015 audit report produced by the secretary of state’s office, which found debt owed to the state — everything from delinquent taxes and pension over-payments, child support and court fines — had nearly doubled since 2008 as state agencies failed to implement collection strategies that worked in other states.

“When it comes to bank garnishments and levies, all but one of Oregon’s largest debtor agencies have to guess where a debtor might be banking,” auditors wrote in the report. The Department of Justice’s child support program can match debtors to bank accounts, a requirement under federal law. Meanwhile, banks have worked with the government to match accounts for other types of debtors in states such as California and Wisconsin, according to Oregon auditors.

Under the Oregon bill, each quarter the Department of Revenue would have sent banks a list of debtors’ names and social security numbers, and banks would notify the state if they had accounts that matched the data.

Banks could have charged the state reasonable fees to cover the costs matching accounts and debtors, and the state could have passed that fee along to the debtors. The bill would also have allowed the Department of Revenue to track down debtors using a Department of Justice child support database of newly hired employees and issue writs of garnishments to banks operating in Oregon for out-of-state accounts.

That last provision was among the problems cited by banks during hearings earlier this year.

“That is not consumer friendly,” Ken Sherman, a lawyer for the Oregon Bankers Association, said during a hearing in February. “That is a terrible precedent for this state, which has been very much in the forefront in leading on consumer protection, to make.”

Taylor, the bill’s sponsor, said banks have repeatedly asked for more time to prepare to expand the data match program beyond child support. “They have always said, ‘Oh yeah, we’re willing participants,’” Taylor said.

The Capital Bureau is a collaboration between EO Media Group and Pamplin Media Group. Hillary Borrud can be reached at 503-364-4431 or hborrud@eomediagroup.com.