When this case originally came up out in California it sounded almost too bad to be true… that is unless you’re talking about the state government, in which case it’s probably just a day ending in a Y. Like most places in the nation, Californians somehow manage to “lose” money in a variety of accounts such as bank savings, retirement funds, pensions, etc. It can add up to quite a bit.. in California’s case, more than $8B. The unusual part of the story in the Golden State is that Sacramento helps itself to hundreds of millions of dollars each year to shore up their budget. They were taken to court over this practice, but the courts in California sided with the state. And now the Supreme Court has taken a pass on hearing the appeal. (LA Times)
California’s system of seizing and spending “unclaimed” cash from banks, mutual funds and defunct businesses has survived a Supreme Court challenge.
The state says it is now holding $8 billion in lost assets. And from this fund, it takes about $450 million a year to add to the state budget.
After considering an appeal for four months, the justices said Monday they would not hear a long-running lawsuit that contends the state does not do enough to notify the rightful owners before seizing their assets.
At first glance this may sound suspiciously similar to the practice of asset forfeiture, which we’ve written about here before. That’s a fairly horrible policy which is widely open to abuse, but this California scheme really ups the ante significantly. In the case of assets seized in drug busts or tax liens, there’s at least the pretense of the person having done something wrong and the assets being somehow “tainted” and deserving of seizure. This California situation deals with money which they freely admit they owe to someone (or that person’s heirs if they are deceased) but are unable to deliver because they can’t find them. When money is undoubtedly the property of somebody else and you take it and spend it for your own needs, there’s another name for that: stealing.
It’s worth remembering that other states might view the results of this case and start getting ideas. It’s true that the Supreme Court mentioned the question of whether or not the state should do more to locate the owners before seizing it, but that’s rather cold comfort. Keep in mind that the total amount of money we’re talking about could cover the budget of many states and there are hundreds of millions collecting dust just in unclaimed pension accounts, as noted in a CNN Money piece a few years ago.
More than $300 million in pension benefits is currently owed to some 38,000 people, according to the Pension Benefit Guaranty Corp. The unclaimed benefits currently range from 12 cents to a whopping $704,621, with an average benefit of $9,100. Benefits may go unclaimed because an employee is unaware they had accrued retirement benefits at a previous employer, the agency said.
So the bottom line is whether or not the state or the institutions holding the money is doing enough to try to find the rightful owners. Does that sound strange to anyone else? You know, if you owed money to the IRS it seems like they could track you down pretty easily with just the basic information available from a bank account or other financial services instrument. But somehow when the money is owed to you it requires Sherlock Holmes.
And what problem is being solved by seizing the funds? Is it really a chore to leave some money hanging around in accounts? We’re talking about a few lines in a database here. It’s not as if they have it all stuffed in a warehouse and have to post armed guards around it. If California was interested in a truly equitable solution they could pass a law saying that after some period of time has passed and reasonable attempts have been made, the case could be turned over to a private investigator with the cost of that service deducted from the funds owed. There will be virtually no cases where an active taxpayer can’t be found or a lost or deceased person’s next of kin identified. This California policy should be not only disallowed but declared illegal. But sadly, in the era of big government this decision isn’t surprising at all.