California seeks new ways to recover unpaid taxes By Aurelio Rojas Sacramento Bee March 22, 2008 As California struggles to bridge an estimated $8 billion budget deficit, it just so happens that's about the same amount the Legislative Analyst's Office estimates the state loses annually in uncollected taxes. No one is suggesting that much money could be recovered, but state officials are exploring new methods to crack down on tax cheats, including hiring more private tax collectors. The Board of Equalization – which collects sales and use taxes in the state – on Wednesday approved a task force to consider hiring outside tax collectors and other options. Reaching outside the civil service ranks to rein in tax scofflaws is adamantly opposed by the Service Employees International Union, which represents the BOE's 400 collectors. SEIU officials say collecting unpaid taxes could go a long way to solving the state's budget woes but believe new technical equipment and training that civil servant collectors recently received should be given an opportunity to show improvement. "Just during the past year in our collection section we (received) Internet search tools to help us locate taxpayers that have more or less disappeared from our radar, owing the board money," Bobbie Smith, a union representative and collector, told the panel. Randie Henry, deputy director of the BOE, told the board that private companies have expressed "significant interest" in contracting with the state. Among the speakers who lined up to address the Board of Equalization for a chance to collect the roughly $95 million the BOE writes off as uncollectible each year was Johan Klehs, who was a member of the board from 1994 to 2002. Representing the Los Angeles law firm of Linebarger Goggan Blair & Sampson, Klehs said the firm has collected about $1.5 billion for more than 1,800 public agencies in the country. "We want to share our knowledge with the board for what works and doesn't work in utilizing a private collection vendor on a partnership basis," Klehs told the panel. The BOE has authority to contract with vendors for out-of-state collections, but legislation is required to allow private collectors to operate within the state. While SEIU has vowed to fight such a proposal, the Franchise Tax Board, which collects personal income and corporate tax in California, has had statutory authority to hire private collectors since 1988. The legislative analyst estimates about $6.5 billion goes uncollected each year. Theresa Gray, a spokeswoman for the board, said it has contracts with three firms to augment its staff of 750 collectors. Although Gov. Arnold Schwarzenegger has proposed 10 percent across-the-board cuts for most state agencies, his budget calls for hiring 500 employees for investigations and tax collections. Aurelio Rojas - arojas@sacbee.com Copyright 1999-2008, California Coastal Coalition Phone: (760) 944-3564