If Wyoming won’t aggressively go after millions of dollars owed to the state, how can it ask taxpayers to pay more?
That’s a fundamental question members of the Joint Revenue Interim Committee pondered during a recent meeting in Saratoga. It’s an issue one legislator, Rep. Don Burkhart (R, HD-15, Rawlins) has been trying to resolve the past few years without success.
Unless Burkhart is able to get the Revenue Committee on board with some of his more controversial ideas, it’s a significant problem that won’t be fixed in 2018, either. Some lawmakers may balk at proposed statutory changes to get businesses to cough up what they owe the state, but few seem to disagree with his basic premise.
“It’s not fair to the people not to collect this money,” said Burkhart, who added it’s difficult for officials to estimate but it’s believed the state is owed between $70 million and $84 million any given year. This includes unpaid workers’ compensation premiums, unemployment insurance premiums, sales and use taxes and OSHA fines.
“Right now we’re in a budget crunch,” he said. “We’ve all heard comments about losing services … at the same time we’re rewarding those poor performers who are ignoring their obligations at the expense of good companies that pay their obligations.”
Co-chairman Rep. Mike Madden (R, HD-40, Buffalo) said many companies in debt to the state find a remarkably easy way to avoid paying their bills that must be stopped. “I know there is a reputation around the state that if you get into financial problems the easiest one to deal with is the financial obligations owed to the state,” he said. “They move, open a new business and they’re off to the races again.”
Burkhart said the state auditor’s office used to be in charge of debt collection, but the operation wasn’t adequately funded and only had one employee devoted to the task. He explained the job was turned over to the individual state departments and agencies to get the money owed to them. They make their own arrangements with private collection agencies, which Burkhart said charge between 18 percent and 50 percent.
If it’s the latter rate, a state agency would only receive half the money it is owed. Burkhart sponsored a bill to limit a collection agency to receiving up to 20 percent, which would be added onto the amount owed. If a business owed $100,000, it would have to pay $120,000 to settle the debt so the state would be able to recover all of its money.
It was a reasonable approach that didn’t make it out of committee to be considered by the entire House. Burkhart said a business in debt shouldn’t be allowed to treat the state like a bank, because it can go to lending institutions and borrow the money it needs.
Currently the state attorney general’s office is limited to writing letters to companies asking them to pay up, Burkhart said. “They’ve had limited success, but not a lot,” he told the committee, which isn’t surprising. “Last year the state only collected $15 million of those obligations.”
One of the reasons more money isn’t collected is a lack of state penalties for not paying. “It has to have some teeth in it,” the Rawlins representative said. “There are very few consequences for not paying [a company’s] obligations.”
In 2016 he sponsored an unsuccessful bill that would have allowed courts to punish people who own at least 20 percent of a company that’s in arrears. The bill would have taken away state drivers licenses, occupational and business licenses, and recreational licenses.
“The [loss of] hunting and fishing licenses got people’s attention,” Burkhart said. I bet it did in a state where the right of residents to hunt and fish is considered almost sacred. If that’s offered as a serious reason to oppose the bill when it returns, voters should remind opponents that if business owners value recreational licenses so much, the deadbeats need to pony up and pay the state.
But there were other controversial provisions in Burkhart’s bill that he admits were probably too complex to deal with in the 2016 budget session. “Probably one of the things that made it unpalatable was a $1.7 million appropriation to set up the program [in the auditor’s office],” he said. “It’s not a good thing to ask for in today’s economy. It’s a stretch.”
But if a startup appropriation will help the state collect many times that amount in unpaid debt, what’s the problem?
Sen. Cale Case (R, SD-25, Lander) said he is concerned that “government as a creditor is treated above all else.”
“If I’m a creditor of a company and they commit fraud by transferring assets to a new company, I can pursue it [in court],” Case said. “But why is government always at the front of the line? There are other creditors that are out there too.”
Burkhart said he doesn’t think his bill puts state government at the head of the line. “It sets up a process of settling obligations,” he said. “It’s not superior to other liens, especially banks’.”
“It seems to me that Wyoming just does a lousy job of collecting taxes,” Case said.
Sen. Dave Kinskey, (R, SD-22, Sheridan), tried to downplay the amount of debt businesses owe the state. “I’d love to have a business where the bad debt is less than 1 percent,” he said. Kinskey added that the debts of companies to the state aren’t just from a single year; they’re likely to have been compiled “over a decade of neglect.”
But his argument doesn’t strengthen his case that these debts aren’t worth pursuing. In fact, they make it more convincing that the state needs to considerably improve its efforts to collect what it is owed by using a system that is uniform, court-based and much more aggressive.
Burkhart said the Revenue Department has opposed his collection bills because it believes it has a good rate of recovery “even though it’s still owed a quite a bit of money.” On the other hand, he said the Department of Workforce Services is anxious to develop a pilot program that would allow it to better track uncollected debts by tapping into another computer system already used by the state.
Kinskey tried to dismiss that idea as well. “I think we need to go into this wide-eyed, and understand how much authority [DWS] has now if they’re looking for more.”
Co-chairman Sen. Ray Peterson (R, SD-19, Cowley) pointed out the politics of the problem the state has collecting more of the money it’s owed in tough economic times. “How do I explain to my constituents that we’re going to raise taxes but not do something like this?” he asked. “To me it’s just a matter of due diligence. …We can take care of some of these concerns [about Burkhart’s bills] but we’ve got to do something; we’ve got to take a swing at the ball. Once it gets out that we’re owed this money and we can’t collect it, that’s one more thing against us.”
Well, senator, people do know about it. And you’re right, they expect you to do something about it and not just protect businesses by writing their bad debts off. Burkhart pointed out that under the Wyoming Constitution a bad debt to the state remains on the books forever. That’s what should happen. The state has an obligation to close the loopholes for companies that want to change names, run, hide and stick Wyoming taxpayers with paying their bills.