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Maryland not collecting enough of $1.6 billion debts, audit finds

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Local,Maryland,Rachel Baye

Maryland is owed $1.6 billion in unpaid debt, but the agency responsible for recovering the funds has not been doing enough to collect, according to a state audit released Thursday.

The debt accumulates from all money owed to any state agency, except for taxes and child support, which are collected separately, said state auditor Bruce Myers. For example, if a student neglects to pay tuition to the University of Maryland, or if someone owes Motor Vehicle Administration fees, eventually the university or the MVA will refer the debt to the state Department of Budget and Management's Central Collection Unit.

One way to collect is to dip into debtors' wages and take what is owed directly out of their paychecks. However, the CCU did not employ this tool as much as it should have, according to the audit.

Outstanding debts
Fiscal year Debtors Cumulative debt owed Amount collected
2008 1,350,481 $1,271,599,187 $129,235,773
2009 1,422,833 $1,397,532,057 $136,806,956
2010 1,490,604 $1,627,404,256 $131,651,220
2011 1,692,285 $1,637,330,152 $135,024,904
Source: Md. Office of Legislative Audits      

The auditors found about 40,600 debtors, owing a cumulative $111.4 million, who earned wages in the first quarter of 2011 and could have been paying off their debt through wage garnishments. When auditors tested a sample of 15 debtors, 14 were eligible to have their debts repaid through their wages, but the CCU had not collected.

But collecting debts through people's wages is not always ideal, Budget and Management Secretary T. Eloise Foster wrote in a response to the audit.

"Wage garnishment is a complex and labor intensive process that does not always lead to additional collections," she wrote. The process requires the CCU to file legal complaints, wait for a court ruling, set up the garnishment with the debtor's employer and give the debtor one last chance to pay up.

The state can also recover unpaid debt by intercepting tax refunds, but 141 accounts with balances totaling $9.1 million were mistakenly labeled as "inactive," meaning the CCU simply wasn't taking the tax refunds.

In her response, Foster said the CCU would check for errors like these on a quarterly basis.

Still, it's unlikely that the state will ever collect it all.

"By the time it gets to the collection unit, it's already been tried to be collected multiple times, so the probability [that it gets collected] has decreased significantly at that point," state spokeswoman Raquel Guillory said. "Of course we would like to collect more debt, but there's only so much you can do."

The CCU collected just over $135 million from debtors last fiscal year. But people, businesses and organizations owed an additional $1.64 billion.

The debt is also growing at a rapid pace. In fiscal 2008, the state was owed $1.27 billion.

"It would be a miracle if all that got collected," Myers said. "Some of these people are deceased. Some are gone. Some of them are poor. Some are in prison."

rbaye@washingtonexaminer.com

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