Louisiana is owed $1.4 billion by businesses, college students and many others and now Gov. Bobby Jindal's office wants to hire a private agency to advise the state on the best way to collect the debt.
Jindal backed legislation in 2010 to establish a debt recovery program within the state's Department of Revenue. The legislation died. Other ideas have surfaced since then, including selling a portion of the debt at a loss to clear it from state government’s accounting books and make collecting it someone else’s problem.
State Treasurer John Kennedy said Monday that Jindal needs to resurrect the proposal to create a centralized debt collection agency in state government. He favors allowing the state attorney general’s office to do the collections.
Jindal might again raise the idea of a centralized collection agency in next year’s legislative session, says Paul Rainwater, the state's Commissioner of Administration.
Rainwater, Jindal's top budget advisor, says more details on at least one possible plan will come when the state's Cash Management Review Board meets Friday. He also said that he does not know how much money it will cost to hire a company to provide advice on the state’s options and research what other states do.
The Cash Management Review Board includes Kennedy, Rainwater and the state's Legislative Auditor Daryl G. Purpera. The board previously heard suggestions that the state should sell the debt through online auctions or adopt an aggressive collections effort.
Kennedy expects to go to the Louisiana Legislature himself with a proposed solution if the Jindal administration fails to settle on an idea. Kennedy offered several suggestions, including: making a full listing of the debt and deciding what is uncollectable by state government; withholding tax refunds and vendor payments from individuals and businesses owing the state money; monitoring debts on a daily basis; and restricting businesses from getting new state contracts if they are behind on paying bills to the state.
Almost 90% of receivables considered to be uncollectable come from health care services provided to the poor and elderly, the state's Commissioner of Administration Paul Rainwater says. The list also includes college tuition installment payments, environmental quality monitoring and other expenses.
Last month, Nic Perkin, co-founder and president of The Receivables Exchange, told the cash management board that investors are looking for assets to buy.
"You probably couldn't have picked a better time than now to look at doing a program like this. There'd be a tremendous amount of appetite, in my opinion, of what you're contemplating here."
Perkin's company functions as an online broker that links buyers of delinquent accounts with the sellers.
Tom Brenan, president of Coface North America Inc., an accounts receivable management firm, recommended to the board that the state standardize its collection efforts and either boost in-house expertise or hire an outside firm.