Local Debt Recovery Program Allows School Districts To Collect Debts Through Withheld State Payments


[authors: Brian Crowley, Maria Mazza and Scott Metcalf]

The legislature recently adopted P.A. 97-632, which creates the Comptroller’s Offset System. The Offset System allows school districts and other public bodies to collect debts from individuals receiving State payments. If a person owes a debt to a school district or other public body participating in the program, and that person is entitled to a payment from the State, the amount of the debt can be withheld by the State from that person’s income tax refunds or other State payments and paid to the school district or other public body. Debts owed to a school district, for instance might include non-resident tuition, non-resident special education tuition, restitution/fines for intentional destruction or loss of school property, court judgments, facility use and lease payments, transportation charges (within 1.5 miles), or various other fees (such as fees for lunch, activity, graduation, senior portrait, parking, books, etc.). In order to participate in the program, a public body must enter into an intergovernmental agreement with the Comptroller.

The intergovernmental agreement with the Comptroller requires local public bodies to follow specific procedures in order to participate in the Offset System. Under the intergovernmental agreement, a process must be in place that allows the debtor to challenge the debt. The debtor must be provided with notice of the debt and an opportunity to be heard. After following these procedures, the debt can be submitted to the Comptroller’s Office. To establish compliance with the procedural requirements, public bodies must provide the Comptroller with a description of the notice it provided to the debtor and the type of opportunity to be heard that was afforded to the debtor. The Comptroller’s Office will also provide the debtor the opportunity to challenge the debt after it is submitted. If a protest is made, the payment, if any, would be made after the Comptroller’s Office adjudicates the legitimacy of the debt. If no protest is made, the amount of the debt is deducted from the State payment to the debtor and transferred to the public body.

While a public body would not be charged a fee for collecting the debt, the Comptroller will add a $15 administrative fee to the amount offset from the debtor’s payment.

Franczek Radelet has resources concerning the program, including a draft intergovernmental agreement with the Comptroller and a sample policy relating to the program.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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