State law should be amended to give the Comptroller's office greater flexibility in publicizing unclaimed property.
Background
Between 1984 and 1996, the State Treasury published an annual list of Texans with unclaimed property valued at $50 or more, as part of a larger effort to return these assets to their rightful owners.[1]
As defined in state law, unclaimed property is money or other assets that have been deemed to be abandoned while held by financial institutions, life insurance companies, and corporations. This property can consist of dormant bank accounts, stocks, bonds, dividends, items in abandoned safe deposit boxes, rental or utility deposits, unclaimed insurance benefits, corporate benefits, and other assets. Such assets are presumed abandoned after three or more years, depending on various applicable statutes. Holders of legally dormant assets are required to report and remit them to the Treasury by November 1 of each year.
While one might think that "giving away" money through the unclaimed property program would be a simple matter, the task of identifying claimants continues to be difficult because information reported by asset holders to the Treasury often consists of no more than a name and an out-of-date address, without other forms of identification such as Social Security or driver's license numbers. For example, rental deposits for apartments may not be connected to the renter's Social Security or driver's license number on the rental agreement because this information generally is not needed by the deposit holder.
Before becoming part of the Comptroller's office, the State Treasurer's Unclaimed Property Division attempted to identify unclaimed property by advertising the names of property owners and returning property to those who could verify ownership. The Treasury used several methods to identify legal owners, including toll-free telephone lines and electronic kiosks in shopping centers, but it relied primarily on a newspaper insert placed in newspapers across the state every March.
Advertisement cost elements
The principal costs to the state for the newspaper insert are for printing and insertion. Each year, the Treasury requested bids for printing the insert; almost 4 million copies of the 1996 version were printed. The Treasury also negotiated with 33 Texas newspapers to insert the list of names on the first Sunday in March. Insert rates are based on the number of inserts per thousand. In fiscal 1995, for instance, rates for inserts ranged from $15 to $91 per thousand. Due to economies of scale, insert rates tend to be lower in newspapers with larger circulation.
The number of names appearing in the insert has remained fairly constant since the Treasury began printing the list in 1984, at between 100,000 and 135,000 names each year. The March 1996 list of claimants contained about 130,000 names and consisted of 32 full-sized pages.
Rising costs
While the size of the insert has remained relatively stable, the cost of publishing it has risen dramatically. One reason for this trend is the skyrocketing cost of newsprint. Between January 1994 and March 1996, for example, the cost of newsprint rose by 80 percent in response to soaring timber costs.[2] Such price increases have been reflected in the state's cost to publish the insert; between fiscal 1994 and fiscal 1996, the state's cost rose from $364,000 to $573,000.[3] Moreover, insert fees charged by newspapers have risen steadily. In fiscal 1989, the state paid $82,000 in insert fees to newspapers, but by fiscal 1996 this figure had more than doubled, to $169,000.[4]
Transfer of authority
In 1995, the Legislature passed and the voters approved a measure to transfer the power and duties of the Treasury to the Comptroller's office.[5] The team working on the merger of the two agencies, comprising Comptroller and Treasury staff, recommended substantial changes in the unclaimed property function, including more aggressive attempts to identify claimants.[6]
The merger team considered moving the publication date from March to December, giving the Comptroller's office an additional eight months to locate claimants. This change could allow the agency to reduce the number of names printed in the insert and thus trim costs. Other steps can and should be taken, however, since printing and insertion costs may be subject to further steep hikes in the next few years.
Recommendation
State law should be amended to raise the asset threshold for publishing the names of unclaimed property owners from $50 to $100.
Over the last three years, claimants with assets of more than $50 but less than $100 represented about 38 percent of the total.
While it may seem that this strategy would lessen the Comptroller's ability to identify claimants, it should be noted that the success rate for the smallest claims has been unimpressive. Over the last three years, the Treasury identified only 16 percent of those claimants with between $50 and $100 in unclaimed property through the newspaper ad. By contrast, the ad led to the identification of almost 25 percent of those claimants with $100 or more in claims.[7] Moreover, the insert may not be the only method, or even the best method, to locate claimants. Electronic mail and Internet access may provide new forums for advertising abandoned assets.
Fiscal Impact
Reducing the number of claimants to be listed would lower printing costs but would have little impact on insert fees. The following estimate reflects a reduction in printing costs. To achieve these savings, general revenue appropriations to the Comptroller's office should be reduced accordingly.
Fiscal Year Savings to the
General Revenue Fund1998 $125,000 1999 125,000 2000 125,000 2001 125,000 2002 125,000
Footnotes
[1] V.T.C.A., Property Code SS 74.201(a).
[2] Texas Comptroller of Public Accounts, "Paper Chase," Fiscal Notes (Austin, Texas, June 1996), p. 5.
[3] Memorandum from Eleanor Roe, manager, Unclaimed Property Division, State Treasury, June 11, 1996.
[4] Memorandum from Eleanor Roe, June 11, 1996.
[5] Texas S.B. 20, 74th Leg., Reg. Sess. (1995).
[6] Interview with George Tamayo, executive assistant, Revenue Administration, Texas Comptroller of Public Accounts, Austin, Texas, May 22, 1996.
[7] Memorandum from Eleanor Roe, manager, Unclaimed Property Division, State Treasury, June 10, 1996.
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