School District Participation In Local Debt Recovery Program Put On Hold

We have learned from several clients that debt collection efforts for school districts by the Illinois Office of the Comptroller under the Local Debt Recovery Program (LDRP) have been put on hold indefinitely. In a notice sent to districts seeking to participate in the LDRP, the Comptroller’s Office cited the need for more information about the nature of the debts.

As discussed in our August 23, 2012 FR Alert, P.A. 97-632 created a program in which the Comptroller’s Office can enter into intergovernmental agreements with public bodies, including school districts, to collect unpaid debts. Under the program, if a person who owes a debt to a public body is entitled to a payment from the State of Illinois, such as an income tax refund, then the Comptroller’s Office may deduct the amount owed to the public body from that payment and transfer that money to the public body.

News of the LDRP generated interest and participation by many school districts. However, earlier this week, the Comptrollers’ Office notified several school districts seeking to participate in the program that collection efforts would not go forward at this time. The Comptroller’s Office indicated that numerous processing issues still need to be addressed. The sticking point appears to be legal issues concerning the nature of debts owed to school districts. Because the program requires a process by which a person can appeal the debt before it is collected, the Comptroller’s Office is seeking a more complete understanding of the billing and past due notification policies used by school districts. 

While this delay is unfortunate, the notice from the Comptroller’s Office stated that it anticipates reaching out to school districts in the next several months to obtain the information it needs to allow school districts to participate in the LDRP. Although we were unable to reach anyone at the Comptroller’s Office to discuss this matter, we will continue to monitor the administration of the LDRP and notify you of important developments. 

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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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