How Government Creates Poverty: Fines and Fees

Government is much better at creating poverty than at curing it.

Yesterday the General Assembly voted to end the practice of suspending driving licenses for non-payment of fines or restitution or both and ordered Department of Motor Vehicles to restore driving privileges for hundreds of thousands of Virginians. If you need to do business at a DMV office in July, get there early. Restoring 600,000 licenses may take a while.  

The General Assembly did nothing to eliminate the underlying debts that the various individuals cannot or will not pay (and often it is will not). Nobody really asked any questions about how high the fines have become, how many additional court and processing costs have been layered on to enrich government, and whether those should be rolled back. Some of the legislators did bring that up in debate, but it wasn’t a focus.

As with so many things in this world, this is all about the money. (Doubt me?  Read this.) Follow the money. How government creates poverty and profits off it may become a theme for future stories. This one is a good start, because nothing was fixed yesterday.

For several General Assembly sessions, I represented some of the law firms who collect these debts for Virginia’s court system as contractors working on a contingency fee basis.

I was first approached by one firm to research a small issue. During the previous session of the Assembly, in a typical undercover budget move, language was added to put yet another cost on the backs of these debtors, a 17% surcharge. If the debt had been $300, it suddenly became $351; if $1,000 it added another $170. Why? To cover the cost of collection, of course! Why 17 percent? Because that was the contingency fee being charged by the state Department of Taxation.

My dad, when he was a city manager, found a joke sign which he hung in his city hall office that announced new 6% tax to cover the cost of collecting taxes. As I explored this question for that Hampton Roads lawyer, that sign was then hanging in my office. The last step in the process for these debtors, if losing their license doesn’t bring them around, is assigning the case to somebody for collection. The state wanted the debtors themselves to cover the commission.

Another issue quickly developed, however, and suddenly real lobbying efforts commenced. It turned out there were turf wars underway over that collection process. The private law firms were in competition with a state agency that collected for most court systems, the Department of Taxation, and a growing number of local city and county treasurers were doing the collections. When the local agencies took the contract and kicked out the private firm, the contingency fee demanded and paid on the collections routinely went up. It was all about the money. This is a way to funnel state dollars to the local bank account.

I can’t discuss all the business of my paying clients, of course, but it’s no secret that eventually the legislature stemmed the local greed parade. It happened with (you guessed it) budget language, boilerplate which is in that annual bill to this day (see if you can find it).  That issue is not the point of this essay, but what I learned and observed while working on it, lessons I took away.

Nobody was interested in solving the problem by reducing the fines or taking off the extra charges, including that final 17% extraction. Oh no! Nobody was interested in creating a process for negotiation and settlement, like the process that exists if you have a tax debt. Many of these debtors have a problem in more than one jurisdiction, but no jurisdiction was interested in surrendering control of their claim on that person’s finances to a central process.

The whole system cried out for an intelligent redesign, which is still needed. One recent reform imposed by the Supreme Court did make it far easier for debtors to get on a payment plan, something many local courts were refusing to do. That reform was never given time to work.

If you examine the most recent report of the State Compensation Board on the fines collection process, here, you won’t find much data about the debtors, their average amount in arrears, how far behind they are. Just how much in such “receivables” is owed to the state and locality, accumulated over years, is never included in the report (which by the way is no longer easy to find on the agency website).

In 1998 about 68% of the $281 million in fines and costs assessed by the courts were collected directly by them, leaving 32%for future efforts. By 2018 the rate of immediate payment was down to 63% of $470 million assessed, leaving more than $170 million for others to chase and earn a contingency fee. Government paying itself a contingency fee to collect a government debt – a fee higher than the private sector would charge – well, that’s a great way to create poverty.

Not one dollar of that liability has been set aside by yesterday’s actions. The liabilities will continue to pile up with one less major collection tool available. The calculation has probably been made it is better to collect high dollars from those who can pay than to set reasonable fine and fee amounts that more could pay. What approach would actually reduce the behavior being punished? Not discussed.

When the government sets out to collect a debt, it has far more tools available than a private law firm and is exempt from the consumer protections that cover the debt collection industry.  The process for seizing somebody’s bank account or pay check or some other hard asset is far simpler for the Tax Man. If you think life is about to become a bed of roses for these debtors, you are mistaken.

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12 responses to “How Government Creates Poverty: Fines and Fees

  1. Really interesting and well-written. Once again I have learned a lot here which is just not readily available anywhere else.
    Keep up the good work. It is much appreciated.

  2. Weren’t predatory fines and fees in Ferguson, Missouri, deemed to be a major source of resentment and unrest by minorities?

    It would be interesting to break down the fines-and-fees obligations by jurisdiction here in Virginia to see where they are the most onerous.

    • Yes, the report on Ferguson caused some stir in Virginia and there are parallels. There is some local data in the back of that long state report I linked, but I’d have to do the ranking myself. A real look at this issue has been overshadowed by the concern about the lost license, a tool that I still think has validity for bad actors, but not for people with one big ticket they’ve neglected to pay. Yesterday’s action reeks of unintended consequences…but The Man still wants his money.

    • To get an idea of the magnitude of the money we’re talking about…. The City and County of Fairfax report the following numbers:

      Court assessments in 2018 of roughly $51 million.
      Court collections of roughly $36 million.
      Delinquent fines and fees of roughly $13 million.

      City of Richmond:
      Court assessments in 2018 of roughly $13 million.
      Court collections of roughly $5.5 million.
      Delinquent fines and fees of roughly $5 million.

      Given the fact that the population of Fairfax County is about five times that of Richmond, on a per capita basis, the city’s court assessments and fees in Richmond are staggeringly higher.

  3. So here we have a state government PREYING on its own citizens. And, along the way, we have state government PREYING on its most vulnerable citizens, jacking up illicit debt on the poor to pay themselves in government or their government’s private cronies.

    Then there are the Richmond public schools, and the building of them, and the teaching of poor kids in them, or is it the abusing of kids instead of teaching them, while somehow and at the same time losing millions of dollars in cost overruns in five months of building one school without any plausible explanation so far.

    Absolutely incrediable stories! Who would believe them? Virginia’s government on all levels is a total mess!

    Great reporting, Steve and Jim.

    • It seems that today our government increasingly focuses on how to impose ever more government taxes, fees, charges, and penalties on its citizens, and on the life and activities of its citizens. Every problem anyone in government dreams up today is now more than ever always solved by the government dreaming up yet another tax, or charge, or increase, on its citizens.

      More and more the governments intent behind these charges appear to be to drain the citizens’ wealth by pouring it into government coffers and/or redistributing it to those who vote for the government in power. And also to use that theft of wealth and redistribution to change and regulate, in ever more detail, the behavior of other citizens and their families, particularly those who do not support the government is power. These coercive government activities never end, or subside. They only get more intrusive, and abusive, of those who don’t support the government.

    • This post throws a great shining light on claims of racism by some of those victims caught up in this government racket that abuses it own citizens.

  4. It’s a patently discriminatory approach to violation of traffic laws. The fines mean nothing to those who make ample money. It’s an annoyance but beyond that it has no real effect on their lives. On low income people, it can be devastating… the loss of a job… the loss of a place to live, kids that don’t have enough food, etc.

    The “punishment” for the offense needs to apply EQUALLY to all who err.

    We have a system – a dumbass system where on one hand, we pay for things like TANF, and Medicaid and food stamps and housing then on the other hand – we push people teetering on the edge financially over the edge because they screw up driving their car.

    I’m NOT sympathetic to those of ANY income who make bad choices and/or are scofflaws but we need to have a system that treats people equally and one that does not create even more people in need of taxpayer-provided assistance.

    The current approach is so dumb that even those who support dumb laws that “punish” are convinced this is too dumb.

  5. Thank you. Might be something to mention to the city on a citizen comment night.

  6. Great post. I was not aware of the practice of adding in the collection contingency fee.

    What may not be clear is that the threat of license suspension upon nonpayment of fines, fees, costs, etc. applied to all criminal convictions, not just traffic violations. The total amount of fines, fees, etc. that an offender may face may surprise some people.

    First, someone convicted of a criminal conviction could be subject to a fine. For a misdemeanor conviction, the maximum fine is $500. For convictions of Class 5 and Class 6 felonies (the most common), the maximum fine is $2,500. Whether to impose a fine at all and in what amount is up to the discretion of the judge.

    Criminal offenders are also subject to mandatory fees over which the judge has no discretion. For a felony conviction, there is a “fixed” fee of $375. The revenue from this fee is divided among numerous funds that support the criminal justice system in some manner, as follows:

    Sentencing/supervision fee $176.44
    Forensic Science fund $38.75
    Court reporter fund $33.27
    Witness expenses/expert witness fund $2.00
    Virginia Crime Victim-Witness Fund $3.00
    Intensified Drug Enforcement Jurisdiction Fund $4.00
    Criminal Injuries Compensation Fund $30.00
    Commonwealth’s Attorney fund (state share) $20.00
    Commonwealth’s Attorney fund (local share) $20.00
    Regional Criminal Justice Academy Training Fund $1.00
    Warrant fee $12.00
    Courthouse construction/maintenance fund $2.00
    Clerk of the Circuit Court $32.54

    Of the fees listed above, the Sentencing/supervision fee, the Commonwealth’s Attorney Fund fee, and the Intensified Drug Enforcement Jurisdiction Fund fee end up in the state’s general fund. The revenue from the other fees go to localities or into special funds dedicated to specified functions.

    In addition to those fees, there is a $100 fee for anyone convicted of a DUI offense and a $100 fee for any offense requiring a computer forensic analysis. Finally, for each felony or misdemeanor offense, there is a fee of $15 that is deposited into the Internet Crimes against Children fund.

    For most misdemeanors and traffic infractions, there is a fixed fee of $61, except for misdemeanor drug offenses, for which the fee is $136. The revenue from these fees is prorated similar to the method used for the felony fixed fee.

    Keep in mind that these fees are assessed for each charge for which a person is convicted. Considering that many cases involve multiple charges, the fees can add up fast. Many people have been faced with sums that they could not afford to pay and subsequently lost their licenses. In the past, some judges would allow payment plans, but the practice was not uniform across the state. As Steve pointed out in his post, the Virginia Supreme Court stepped in a few years ago and adopted rules requiring courts to allow payment plans. There has not been enough time to determine how effective that program would have been.

  7. Then you add the 17 percent collection surcharge and start the interest clock. Starts to add up!

  8. Whine whine whine,,, let’s see,,, when’s the last time most honest law abiding citizens had to deal with fines and a license suspension,,,
    I’m 67 and I think I had a speeding ticket 25 years ago,,, btw,, I used to commute 100 miles per day to NN shipyard…
    The problem is priorities,,, most of these bad actors just don’t care. They live day to day, and as I mentioned in a previous post, they have beer and cigs for the weekend and the cable bill is paid so they can watch football and racing. We won’t mention how much they spend on drugs and lottery tickets.
    And yes I have one rental tenant that pretty much meets this picture, he lost his license ten years ago, missed court dates and pretty much doesn’t care,,, and has been rearrested two or three more time for driving suspended. Nice friendly guy, but just doesn’t care.
    And we hard working honest folk bear the burden of these folk, including their health problems caused by their irresponsibility (I was going to say decision making, but obviously they don’t make decisions the way you and I make decisions)!!!

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