California Budget & Policy Center: Governor’s Debt Amnesty Proposal Ignores Disproportionate Impact on Low-Income Families

Original reporting from the California Budget & Policy Center.

By Selena Teji

Governor Brown’s 2015-16 proposed budget would establish an 18-month outstanding debt amnesty program to facilitate the recovery of overdue fines and penalties levied by courts for various traffic violations. However, this proposed amnesty approach doesn’t address a significant systemic barrier that stands in the way of payment among many low-income individuals with court-ordered fines, and therefore the proposal is unlikely to raise significant revenues.
Citations for traffic violations — such as having a broken taillight or making an unauthorized U-turn — carry fines and penalties that are levied by the court. These court-ordered fines provide revenue to state and local funds that support various criminal justice programs, including training for local law enforcement. However, due to diminished debt collection revenues, two special funds for this critical training are projected to become insolvent in 2015-16.
The Governor’s proposed amnesty program would address the impending insolvency of these two funds in the short term. The program would allow people who meet specific eligibility criteria and have outstanding fines related to traffic infractions and certain traffic misdemeanors that were due prior to January 1, 2013, to pay off the amount owed at a 50 percent reduction. The idea is that this will encourage people with delinquent fines to pay them off at the reduced rate, resulting in a temporary increase in debt collection for the 18-month period.
The effective collection of court-ordered fines is a longstanding challenge in California. In 2014, the Legislative Analyst’s Office (LAO) issued a report criticizing this collection process in general, noting that it collects only a fraction of the total outstanding fines owed — leaving an estimated $10.2 billion of fines uncollected at the end of 2011-12. The LAO recommended various strategies for improving the collection process, including financial incentives that would reward courts for effective debt collection.
However, neither the LAO’s recommendations nor the amnesty program included in the Governor’s proposed 2015-16 budget fully address some fundamental shortcomings of the court-ordered fines collection process. Most notably, neither reform proposal takes into account the underlying economic realities of the current system. Around the nation, low-income individuals are disproportionately affected by court-ordered fines and penalties.
When individuals fail to pay their court-ordered fines on time, the collection agency typically attaches an additional $300 fee to the original fine and notifies the Department of Motor Vehicles, which suspends the person’s driver license. However, given that access to driving is vital to finding and maintaining employment, the very tool used to enforce payment of court-ordered fines actually hinders the person’s ability to pay. If the debt remains outstanding, additional sanctions — such as wage garnishments or asset liens — can be applied, creating further financial burdens on an individual already struggling to pay the amount owed.
A new report by the Lawyers’ Committee for Civil Rights (LCCR) describes the nonsensical cycle that occurs as a result of the court-ordered fines collection system:

Frank was working part-time when he got a couple of traffic tickets five years ago. He was paying in installments but had to stop because he could no longer afford those payments on top of increasing basic living expenses. He currently owes $6,800 — $4,000 of which is penalty fees. He was offered a job, but the offer was contingent on getting a license, so he could not accept it. He remains unemployed and unable to pay off any of his debt.

There is no way to lift the driver license suspension until the debt has been paid in full. The LCCR report goes on to note that in at least one county it has been reported that even if the ticket were issued in error and a person wishes to contest it, they may only be granted a court hearing after they have paid the fine in full. In effect, this creates a system in which only those who have money can access justice.
This isn’t the first time California has tried a debt amnesty program that focuses more on increasing revenues than on addressing the larger barriers to payment that low-income communities face. In 2012, state policymakers implemented a six-month program, similar to the Governor’s proposal, that allowed people to make a lump-sum payment at a 50 percent reduction on certain court-ordered fines that were more than three years past due. However, it was severely underused: Of a reported 1.9 million eligible cases with a total combined debt amount of $1.86 billion, only 42,200 were resolved through the amnesty program, which raised just $12 million after accounting for the costs of operation, according to the Administrative Office of the Courts. In fact, in some counties the cost of operating this amnesty program exceeded the revenue it collected. In the end, 40 percent of all counties said the program did not help their collection efforts, a fact that casts serious doubt on the potential success of the current amnesty proposal.
The Brown Administration anticipates increased revenues of approximately $150 million through its proposed amnesty program, $12 million of which would be used to keep the two special funds at risk of insolvency afloat for now. As the LAO discusses in detail, this would require the program to collect almost 12 times more revenue than the last one did, which is highly unlikely. Even if the proposed amnesty program were successful, it would represent only a temporary solution. In the long term, state policymakers will have to find a more reliable source of funding to support training for local law enforcement.
And meanwhile, the proposed amnesty program would fail to address a larger problem of the collection system: imposing late fees and suspending driver licenses to enforce payment of delinquent court-ordered fines not only undercuts the system’s own collection efforts, but also contributes to increased economic hardship for many low-income individuals. Instead of suspending driver licenses, the state could provide payment plans based on income and reduce the excessive cost of late fees. Other options, such as community service in lieu of payment, could be made available for individuals who experience severe economic hardship.