EFFICIENCY PROJECT DELIVERS RESULTS:
STATE RECEIVABLES DECLINE $22.1 MILLION
"(A) stronger FOIA has the potential to save Arkansas taxpayers millions of dollars ... Records we obtained ... show outstanding tax liens .... while taxes are raised and counties aren't fully reimbursed for housing state inmates in county jails." Watchdog.org,1 March 20, 2015
(December 2017) One year after the Efficiency Project recommended reducing more than $300 million in outstanding state receivables a Department of Finance and Administration (DFA) pilot program has raised $22.1 million. The action occurred after Gov. Asa Hutchinson announced in late 2015 that the Policy Foundation would work to identify efficiencies.
The receivables are liens assessed for "any debt currently due the state for taxes."2 A 2016 Efficiency Project report noted tax "assessment and collection processes have resulted in significant backlog of taxes for the State. The State has approximately $1.434B in uncollected tax debts, of which $321M has been deemed collectable by the State."3 The report noted other categories:
· "Resulting from estimated assessments issued because taxpayer failed to file tax return" ($628 million)
· "Not currently ready for collection activities" ($124 million)
· "Under protest" ($17 million)
· "Uncollectable" ($353 million)
PricewaterhouseCoopers LLP, an international consulting firm hired by the Policy Foundation with private funds recommended DFA "conduct a deep dive on financial controls;" "re-evaluate assessment, adjudication, and collection processes in order to prevent future tax collection issues;" and develop "an outreach plan and public effort to increase tax collection efforts to target outstanding tax debts. Consider amnesty program."
DFA Addresses Problem
DFA responded to the Project's recommendations with a pilot program to contact taxpayers after regular work hours, described in records as "extended hours staff." DFA briefed the Transformation Advisory Board4 in July. DFA noted in October its collection of receivables increased $15.5 million.5 DFA noted earlier this month that its calendar year collections total $124,079,406, an increase of $22,170,760 since last November.6
Implications for Citizenship
The Policy Foundation's mission statement includes a charge to encourage citizenship. The episode is a textbook example of how a small group of citizens can work with proactive elected officials to advance good government.
The Project proceeded along the following timeline:
· (Early 2015) Policy Foundation becomes aware of receivables problem from public records obtained under the Freedom of Information Act.
· (January 26, 2015) Policy Foundation memo notes FOIA records show outstanding tax liens total $735 million.7 Memo explains liens process.
· (Marc 2015) Investigative group, Watchdog.org, publishes article.
· (September 2015) Policy Foundation proposes Efficiency Project.
· (December 2015) Gov. Hutchinson announces Project.
· (October 2016) Project delivers two reports to Gov. Hutchinson after nine-month review of Arkansas state agencies.
· (Late 2016-Early 2017) Gov. Hutchinson appoints Amy Fecher as chief transformation officer, and creates Transformation Advisory Board.
Implications for Law-Abiding Taxpayers
Fiscal reform critics argue tax cut proponents must identify spending cuts to pay for lost revenues. This problem is solved by earmarking Efficiency Project savings to reforms needed to make Arkansas competitive with other states.
1 "Open Government Under Assault In Arkansas," Watchdog.org, March 20, 2015
2 Taxpayers have multiple opportunities to pay and may appeal the lien or enter into an agreement with DFA.
3 PricewaterhouseCoopers LLP, Efficiency Review of Arkansas State Government, July 2016, p. 23. The report notes, "Possibly as a result of uncollected taxes, the State’s Tax ROI is among the lowest in the nation Staffing of collections staff is inadequate to collect against the current backlog of tax debts. Existing collection vacancies represent taxes uncollected, resulting in lost revenue to the State.
4 The 15-member Board was established by Hutchinson in early 2017 to review Efficiency Project recommendations.
5 DFA, October 11, 2017. A second Project report proposed reducing receivables by 5%, or $15.5 million.
6 DFA, December 18, 2017
7 Policy Foundation research memo, "Documents: Outstanding Tax Liens Total $735 Million."