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SB 59: State Debt Collection Office Could Garnish Wages, Seize Bank Assets

Last updated on 2015.01.26

Boy, if the Mugwumps are concerned about letting the Department of Health give them orders, wait until they see the Department of Revenue's plan to grab their paychecks and bank accounts.

Senate Bill 59 is the Department of Revenue's proposal to create a state debt collection office. Louisiana created such an office last year, and it may generate $10 million in new revenue for that state.

Well, "new" revenue probably isn't the right term. A state debt collection office recoups revenue the state should be getting but doesn't, because someone tries to skip out on a payment to a state agency, constitutional office, the Board of Regents, or the courts.

To get that money, Senate Bill 59 would empower the Department of Revenue to garnish wages. Suppose you take a Critical Needs Teaching Scholarship, get the state to pay for your last two years of college, but then get financially rational and go to work as a network technician instead of as a teacher in South Dakota. You need to pay the state back for all that free tuition, but you think, "Ah, they'll never notice."

They'll notice, and SB 59 will allow them (the Board of Regents, the Governor, whoever's watching the books) to refer your debt to the state debt collection office. SB 59 will empower that office to...

  1. contact your employer and require that your employer withhold your debt from your paycheck and send it straight to Pierre (Section 25);
  2. authorize your employer to hit you with a $25 fee for processing the "administrative wage assessment" (Section 28);
  3. contact your bank and take money out of your accounts (Sections 42–58);
  4. authorize your bank to charge you $25 for processing the "administrative bank levy" (Section 53);
  5. block issuance or renewal of your driver's license, teaching certificate, bar certification, hunting license, fishing license, or pretty much any other license the state might issue until you've paid your debt to the state or at least set up a payment plan (Section 62);
  6. charge you a cost receovery fee equal to 20% of the amount you owe the state, which fee will help fund operations of the state debt collection office (Section 6).

Add all that up, try to stiff the state for $16,000 in tuition, and you could end up paying $19,250.

I have a call in to the Department of Revenue; once I've visited with state officials, I plan to write a follow-up to explain just how much state debt is out there and how much a state debt collection agency could collect.

A state debt collection agency could be useful. When the Banking Commission realize Joop Bollen owes the state $2.4 million in bank franchise tax, they could just send some letters, hit a few buttons, and take that money right out of Bollen's bank accounts. If the state felt generous, it could expand SB 59 to include county agencies and use the bank and wage garnishments to collect all those delinquent property taxes right away.

And think about this: Senate Bill 59 would empower the Department of Revenue to reach out to any employer in the state and withhold money from any paycheck. SB 59's withholdings could serve as a test run for the mechanism we'd need to collect a state income tax. Nothing in the bill says that... but oh, we creative minds can think of some useful implications down the road.

Senate Bill 59 goes to Senate Commerce and Energy for its first hearing soon. Let's see if any conservatives come to the hearing feeling queasy about empowering the state to grab deadbeats' paycheks and bank accounts.

Update 2015.01.26 05:25 CST: Bob Mercer gets some more details on the proposed state debt collection office:

  • The state currently contracts with The Affiliated Group of Minnesota to collect debts. That company gets 15% to 22.5% for its services.
  • The Department of Revenue has paid CGI of Farifax, Virginia, $49,000 so far to analyze South Dakota's unpaid-debt situation. SB 59 comes from CGI's recommendations.


  1. mike from iowa 2015.01.22

    Send them the name of Benda and Bollen and tell them tyo have at it.

  2. grudznick 2015.01.22

    Mr. Howie and the Howites are not going to like this law. It would be swell if Mr. Sibby went to Pierre and shared his analysis.

  3. jerry 2015.01.22

    When republicans rule, this is the kind of anti-citizen you get. They blather all the time about states rights but it is only for the state to steal from you. Putin's Russia is much the same as Vladimir Daugaard's South Dakota kingdom. All you have to do is file a claim on someone and start the collection. A hospital bill, no problem, the state will seize your assets even if you dispute the claim. Payday loans, yikes baby, your screwed man. Chucky rules.

  4. 96Tears 2015.01.22

    If you're a deadbeat but you put your name on the ballot, or announced that you may put your name on the ballot, does that mean the state will leave you alone until after the election ... or if you win, until after you leave office????

  5. grudznick 2015.01.22

    And that, Mr. jerry, is why people shouldn't take out pay-day loans to buy lottery tickets and beer on their way to the welfare office.

  6. bearcreekbat 2015.01.22

    This proposal should be killed. State law already provides the garnishment remedy, provided the state follows due process and gives the debtor his day in court. After that, the ability collect is limited to the actual assets or earnings of the debtor. State exemption laws and federal bankruptcy laws are designed to assure no one loses everything they have. This will likely cost substantially more to administrate than it will raise any revenue. If you have doubts just check with your county auditor to learn whether each county is able to collect on the poor relief, medical, and other liens it obtains against indigents. If revenue is the issue, it would make more sense to impose some sort of income tax of the people with substantial earnings in this state. At least that would be collectible and would not push anyone on to welfare programs.

  7. caheidelberger Post author | 2015.01.22

    Hang on, Jerry! SB 59 doesn't authorize the Department of Revenue to freelance as a debt collector for private entities. Only state agencies may refer their debts to the new state debt collection agency.

  8. caheidelberger Post author | 2015.01.22

    I was wondering about that, BCB. Does the state have wage garnishment power right now? Does that only apply to child support?

  9. bearcreekbat 2015.01.22

    Cory, yes I see no impediment to the State garnishing wages once they obtain a final judgment against the debtor. Child support laws are much more draconian. The non-supporting parent faces criminal penalties once he or she falls far enough behind, and the reasons for falling behind do not seem to be of much importance in criminal prosecutions.

  10. jerry 2015.01.22

    Collection agencies are already doing that. It is only a matter of time before we see that on a much bigger scale involving the state and the power it welds. Once the toothpaste is out of the tube, you loose your bite. This bill is starts the further erosion of individual rights and puts us all back on the road to indentured servitude.

  11. jerry 2015.01.22

    Good luck in filing bankruptcy as well.

  12. jerry 2015.01.22

    Mr. grudznick, thanks for pointing out that getting welfare is not enough to survive and that you may have to stop at a pawn shop to have enough to eat for the week. Beer and lottery are not in the equation as 99.99% of welfare recipients do not use either. However, there is the one guy that you apparently see through your windscreen that is kind of a happy go lucky feller that chaffs your behind with his whimsical attitude. We do not like him either.

  13. grudznick 2015.01.22

    Mr. jerry, do you see the right to stiff your debtors and the right to cry bankruptcy as another way to stiff your debtors as individual rights and what keeps you free from indentured servitude?

    Pay your bills. Don't be like Mr. Howie.

  14. Douglas Wiken 2015.01.22

    Republicans can make small government worse than big government.

  15. John 2015.01.22

    hahahaaha, what a pack of hypocrites whom instead of getting government out of our lives are piling it on. Wait about a New York minute for them to "privatize" this debt collection as they did with unemployment insurance, and other functions. These clowns act corrupt 24/7. They don't dare begin with Bollen and Benda's estate. Let's reopen debtors prisons while we are at it.

  16. caheidelberger Post author | 2015.01.22

    John, check out Section 4, item 15: the debt collection office will be able to "Contract with collection agencies for the collection of debt on behalf of the office...."

  17. caheidelberger Post author | 2015.01.22

    Section 65 elaborates: "Section 65. If the office is unable to collect the debt referred to it, the office, with the approval of the referring entity, may forward the debt to a collection agency or agencies for collection. The debt collection agency shall be permitted to add a collection charge to the debt forwarded to the collection agency as payment for its collection services."

    If I'm reading Section 65 right, the state debt collection agency has to take a swing at collecting first; only if they can't get the money can they contract with a private agency.

  18. Roger Cornelius 2015.01.22

    The Republicans will start adding exemptions to the SB 59 and will realize that some aspects of the law affect them, family members, and cronies and will have to kill the bill.

  19. jerry 2015.01.22

    My concern is not about paying the bills mr. grudznick, it is about paying a disputed bill. As this bill does not address that at this time, it is the gateway to the beginning of the process. Once the state gets its big foot in the door, it is only a matter of time before they force the rest of the door open.

    In bankruptcy, most of the bills are supposed to be discharged if they are presented to the court. In reality, these discharges are being discarded and garnishments along with raids on your bank accounts are back to being accepted ways of doing business. This is not supposed to be the way the law was put into place.

  20. Anne Beal 2015.01.23

    Garnishing wages can get complex if the debtor is not left with enough money to pay his child support, or if a family's cash flow is reduced to the point where they qualify for food stamps. That gets messy.

    People who don't want the state garnishing their wages could always try the apparently novel and unthought of approach of paying off their debts by working out a repayment plan with whichever agency they owe money to. You know, Republicans have funny ideas about paying off debts. Democrats prefer to ignore them and hope they'll go away.

  21. JeniW 2015.01.23

    Anne, that is such an immature statement. No doubt that there are some Democrats and Republicans who do not own up to their responsibilities. But that does not mean all Democrats and Republicans do not live up to their obligations.

  22. caheidelberger Post author | 2015.01.23

    I'm with JeniW: I'm not seeing a partisan aspect to this bill. I can see the desire for fiscal responsibility butting up against concerns about growing government power and reducing due process.

    Anne, SB 59 does take child support into consideration. Check out Section 25:

    "...The employer may not withhold more than twenty-five percent of the compensation due to any employee for any one pay period, except if the employee leaves the employ of the employer or gives notice of his or her intention to do so, or is discharged for any reason. The employer shall withhold the entire amount otherwise payable to such employee or so much thereof as may be necessary to equal the unwithheld balance of the amount shown in the notice. The compensation due to any employee for purposes of determining the twenty-five percent maximum withholding for any one pay period shall include all wages, salaries, and fees constituting income, including compensation paid for future services, when paid to an employee, less any amount payable pursuant to any garnishment action served prior to the notice of administrative wage assignment and any amount covered by any irrevocable and previously effective assignment of wages."

    The part I bold means child support comes first, right?

    As for Anne's concern that the state's "administrative wage assessment" might drop someone onto food stamps, I doubt it. Income is still income, even if the state takes a chunk to pay a debt the taxpayer owes. The IRS will still expect all of that money to appear on the 1040 line for wages. The calculation for food stamps and other public benefits will still look at that total income, not income minus expenses... or at least I think that would be the case. Am I correct?

  23. Jane 2015.01.23

    People like Bollen redirect over $100 million of state revenue, and get away and even protected. Whilst Average joe better pay up else deal with the state collection agency garnishing their pay. Talk about biting the hand that fed you. Did these voters think that policies and procedures are selective by party?

  24. mike from iowa 2015.01.23

    bcb @ 20:03-you are so right about child support collection and the state( iowa) doesn't accept any reason for failure to pay.

  25. jerry 2015.01.23

    How would the loss of income to pay a debt affect the gross adjusted income of the mark? If the mark is forced to have those adjustments and if they then fall below the income threshold of the ACA, then they could be without health coverage. South Dakota further punishes them by their failure to allow the Medicaid Expansion. Another death panel.

  26. caheidelberger Post author | 2015.01.26

    Bob Mercer posts on SB 59 with a couple more details; see my update at the bottom of the post.

  27. caheidelberger Post author | 2015.01.26

    Jerry, I don't think wage garnishment has any impact on gross adjusted income. Whether you pay it honestly or under state duress, that debt is just another expense, not like groceries. Even if we're talking about collecting state taxes, those go on Schedule A, for itemized deductions, and they come off after the gross adjusted income line, thus not affecting the ACA or other benefits calculations.

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