Collection effort intensifies; should distribution effort, too?
The state of Minnesota has a potential pool of revenue at its disposal that many lawmakers may not know about.
Over the last decade, the value of assets held by the state as unclaimed personal property has more than tripled. As of January 2013, a unit of Minnesota’s Department of Commerce was sitting on over $550 million in cash and property belonging to private citizens. It was all turned over to the state by entities such as banks, brokerages, insurance companies and consumer retailers.
That figure — enough to eliminate roughly half of the state’s current $1.1 billion budget deficit — is three times greater than the $184 million the state held in 2004.
The rightful owners are welcome to the unclaimed property sitting in the state’s vault. Theoretically the money and goods are entrusted to the state so that it can reunite the proper owners with their misplaced property. But practically speaking, that happens in only about a third of all cases. In fiscal year 2012, for instance, the state took in $61.5 million in unclaimed assets and disbursed $19 million — a return rate of 30 percent.
That lack of success in locating individuals with unclaimed assets has prompted some observers to question how vigorous an effort the Department of Commerce is making. The suspicion is heightened by the fact that unclaimed property proceeds sit available for use in the state’s general fund until they are claimed. And while owners can come forward to ask for their assets at any time — the right of their owners, or their owners’ heirs, to claim them never expires — the state can use that cash for the budget or other needs in the meantime.
In fiscal years 2009 through 2011, for example, more than $110 million in revenue from unclaimed assets was spent through the general fund, according to state budget records.
“The numbers on unclaimed property should be going down, not up,” said Rep. Greg Davids, R-Preston, who sits on the Commerce Committee. “That doesn’t smell right. Somebody’s not doing their job at Commerce if that number is going up. Have they ever heard of Google?”
Among the individuals listed in the Commerce Department’s database are at least a dozen state legislators. Macalester College, for instance, turned over to the state more than $100 that it believes properly belongs to Rep. Carlos Mariani, DFL-St. Paul, who graduated from the liberal arts college.
Mariani says he heard about the unclaimed asset many years ago, but was unsuccessful in his efforts to retrieve it. He eventually decided it wasn’t worth the bother. “If a state legislator couldn’t figure out how to go about doing it, imagine some person whose language is other than English,” Mariani said. “I think it begs the question of just how transparent and powerfully informative that process is, and can it be better?”
The length of time an asset must have been abandoned prior to the state taking custody ranges from six months to 15 years. For utility deposits, the period is one year; checking and savings accounts are confiscated after three years; money orders are turned over to the state after seven years. The contents of safe-deposit boxes are taken by the state after 10 years.
Outreach efforts limited
The Commerce Department is required by state law to spend at least 15 percent of the money allocated for operations of the Unclaimed Property Division on efforts to alert individuals whose property has been seized. And 15 percent is precisely what it does spend in that effort. In fiscal year 2012, that amounted to just $75,000. More than two-thirds of that sum went toward maintaining a searchable database where individuals can check for unclaimed assets. The remainder was spent on a pair of public outreach efforts.
Anne O’Connor, spokeswoman for the Department of Commerce, says the agency is making a vigorous effort to locate individuals with unclaimed property. “Over two years what we’ve tried to do is modernize the program. We’ve installed [a] new missing money website,” O’Connor said. “We also have done extensive outreach at the State Fair. We’ve had two computers there, and staff to work with Minnesotans and consumers to find their money. And last July we were at the Mall of American letting people know that there’s money out there for them.” The event at the mall was featured on Good Morning America.
But it appears the money spent on outreach is a fraction of the sum spent on finding and claiming more abandoned financial assets for the state. In 2011 the Legislature appropriated money for the department to hire four additional staffers — all of them devoted to the effort to “ensure financial institutions are complying with the state’s unclaimed property laws,” in the words of a press release from Commerce.
“It seems to me they should just reverse the order,” Davids said. “They should be spending less money on pulling money into the state and more money on sending it out to the people. They should be cleaning that half a billion dollars out of there and getting it back to Minnesotans.”
The statute dealing with unclaimed property, first drafted in 1969, was changed in 2005 to eliminate a requirement that a list of the rightful owners of lost items had to be published annually in newspapers across the state. Reed Anfinson, editor and publisher of the Swift County Monitor News, argues that more people were aware of the state’s unclaimed property fund under the old system. He points out that newspapers frequently ran feature stories about local residents with unclaimed assets and word would spread among friends and neighbors.
Anfinson, who also chairs the legislative committee of the Minnesota Newspaper Association (MNA), is unimpressed by the outreach events that the state conducted in 2012. “My big concern as a rural Minnesota publisher is none of those efforts target rural Minnesota,” he said. “We believe that this is money that is due the Minnesota citizens.” (St. Paul Capitol Report is a member of the MNA and holds the public notice contract for Ramsey County.)
The MNA would like to see the newspaper publishing requirement reinstated. The group has held one meeting with the Department of Commerce to express concerns that they aren’t doing enough to let the public know they have money or property sitting at the department. “Our view is that if you publish it in the newspaper, you’d get more claims,” MNA lobbyist Mark Anfinson said. (Reed and Mark are brothers.) They suggested the state use a small portion of the unclaimed funds to pay for public notice, thus eliminating the need for the Legislature to allocate money. “We are trying to persuade the department to join us in a common goal,” Anfinson said.
Reed Anfinson further points out that he got the strong impression that the agency wasn’t particularly interested in increasing disbursements. “They can’t handle it,” he said. “They’re not staffed for it. They’d be overwhelmed if, all of a sudden, everybody started making a lot of requests.”
But O’Connor points out that the percentage of assets returned to individuals has actually increased in the years since the newspaper publication requirement was eliminated. “We’ve seriously stepped up both sides of the equation — really working with companies to turn money back over to the state so we can find the rightful owners, and our efforts to connect those Minnesotans who have lost money,” she said. “But if there are suggestions or opportunities to work with any partners to maximize our effectiveness and our outreach, we would be happy to do that.”
Another point of contention between the department and the MNA is the length of time the state is required to hold on to safe-deposit boxes it receives. Reed Anfinson said MNA members were told during their meeting with commerce officials that there is talk of reducing that window from 10 years to just one year. He describes it as an “absolutely outrageous” proposal. “If somebody takes grandma’s wedding ring out of the safe-deposit box, you can’t ever recover that,” Anfinson said. O’Connor said only that the department is looking into possibly holding safe-deposit box auctions more frequently than every ten years, but nothing final has been decided.
Under the law, the contents of these boxes are to be sold in a public auction at least once every 10 years. Back in 2003, the state sold a 1795 half-dollar coin for $27,500 and a baseball autographed by Lou Gehrig and other star players of the period for $7,500. The state is due to hold another auction this year, and O’Connor says one is planned for the spring or early summer. In 2012 alone, the department collected more than 500 safe-deposit boxes that will be up for auction. Money earned from such auctions is added to the pool of unclaimed cash that can be tapped by the state.
$41.7 billion nationwide
Minnesota isn’t the only state sitting on a lot of unclaimed property. All 50 states have some kind of program to find owners of forgotten assets, and the National Association of Unclaimed Property Administrators estimates there is still $41.7 billion sitting in these programs around the country.
Neighboring Wisconsin is sitting on more than $400 million in unclaimed property. In Delaware, unclaimed property is the third-largest generator of state revenue after corporate franchise and income taxes. The state pulled in about $500 million from unclaimed property in 2009 alone.
Last year a federal judge tossed out an 11-year-old lawsuit that challenged how California’s state controller runs the unclaimed property program there. In the suit, lawyers said the state had collected $5.1 billion worth of property belonging to millions of Californians, and that the state controller was violating the Constitution by not doing enough to locate the rightful owners. The suit alleged that the unclaimed assets generated millions each year that the state could then use to help address chronic budget deficits.
Despite the eventual dismissal of the lawsuit, the 2007 California Legislature overhauled its unclaimed property laws to fix some of the flaws in the program cited by an appellate court.
Rep. Jim Davnie, DFL-Minneapolis, is another legislator on the list of individuals with unclaimed property being held by the state. Davnie believes the money is roughly $400 and is related to a past campaign. He can’t recall any significant effort to recoup the funds.
Davnie found out that the state had control of his assets through a phone call from a private citizen who spent some of her time digging into the list and contacting people on it.
By contrast, he can’t recall ever being contacted by the Commerce Department about the unclaimed property. But despite the tripling in size of the unclaimed property fund over the last decade, Davnie is unwilling to jump to the conclusion that the state agency isn’t making a good-faith effort to return the cash and property of state residents.
“I would need to understand what’s at the root of the growth. Is it related to the economy having gone south?” Davnie wondered. “Certainly the question ‘is Commerce doing enough?’ is totally fair. But what else is going on that’s driving up the value of that account?”