The Iowa Senate approved a bill this week to hire a debt collection coordinator with "expert knowledge" of collections and an understanding of the workings of state government. The coordinator would be hired by the governor and confirmed by the Senate for a four-year term.

The coordinator would review collection practices of each branch of state government - excluding delinquent child support obligations - coordinate their collection efforts, manage a debt settlement program and make recommendations to lawmakers on how to improve and increase collections.

The bill, which passed 43-7, also would create a collection program that would include forming separate debt settlement and amnesty programs to encourage people to pay at least a share of the money they owe the state.

The bill's provisions also require the judicial branch to contract with a private agency to collect court debts 120 days after the debt is deemed delinquent, if a county attorney is not collecting the debt. The private agency would be allowed to impose an additional fee of up to 25% for its collection activities. Another bill provision requires that all fines imposed by the court be paid on the day the fine is imposed.

Iowa has $533 million in outstanding debt - with $216 million of that total more than four years old. Initial projections indicated the proposed legislation would generate $5.6 million in fiscal 2011 and $4.5 million the following year. Sen. Bob Dvorsky, D-Coralville, the bill’s floor manager, called those estimates "quite low."

A consultant hired by Gov. Chet Culver last year to recommend ways to streamline, reform and improve state functions said a reasonable goal for collecting outstanding court debt was $111 million over the next five years.

The debt settlement program would be in place no later than Jan. 1, 2011 and would apply to all court debt obligations except debt that is less than four years old, victim restitution, civil penalties for certain drivers’ violations and jail fees. The program has a variety of eligibility guidelines and would not enable the coordinator to forgive more than 50% of all eligible debt due.

A separate debt amnesty program within the state Department of Revenue was proposed to run from July 1 through Dec. 31 that would authorize the agency to forgive up to 50% of the eligible debt obligation.

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