La. seeks ways to collect $1 billion
Financial experts gave a variety of ideas Wednesday ranging from online auctions to persistent phone calls for the best way to collect more than $1 billion owed to state government.
The experts, from three different financial firms, told members of the Cash Management Review Board to be transparent and realistic about the masses of bills municipalities, college students and others are not paying.
With the money due to state government adding up to more than $1.5 billion on March 31, the state is looking for alternative ways to collect it. The ideas include selling a portion of it and letting someone else collect from companies, students, insurance companies and others.
“We’ve got nowhere to go but up,” state Treasurer John Kennedy said.
The Jindal administration is scheduled to unveil its approach to the problem in a week or two.
Meanwhile, the board listened to experts, who offered to sell, sift and scare up the debt for the state.
Nicolas Perkin with the Receivables Exchange said low interest rates are generating lots of available cash for freeing states like Louisiana from the burden of collecting debt. He said Louisiana could sell fresh debt for 98 cents on the dollar to buyers who then would chase the debtors for the full amount owed.
“There would be a tremendous amount of appetite, in my opinion, for what you guys are contemplating,” he said.
However, Perkin said, no one is going to pay top price for the millions of dollars in debt that is more than three years old.
Perkin’s firm acts as the middle man facilitating electronic transactions involving what are known as receivables, or long-term delinquent accounts. He compared his company to eBay, the online auction site that facilitates sales between sellers and bidders.
He did not offer a price at the testimony table for what his firm would charge the state.
But Perkin assured state officials that technology is the only new twist to what his company does.
“People have been buying and selling receivables for hundreds of years,” he said.
Shawn Romero, with the business analytics software company SAS, offered to catalog the state’s debt and decide which accounts should be sold.
He said his firm would determine how many of the businesses in those accounts still exist, how their finances look and how many have reopened under new names.
“Businesses commonly run from debt,” Romero said.
He said the state should start with an analysis of the debt.
Tom Brenan, president of Coface North America in Kenner, said personal contact with debtors is needed where warranted. Coface is a collections company.
Brenan said the state should not have a policy of writing off debts after three years.
“This is really grunt work,” he said. “It’s blue collar work.”
The collection rate for extremely past due debts would be 10 to 30 percent, Brenan said.
CHRISTUS Health in Shreveport emerged during the meeting as the poster child of the state’s debt collection efforts.
The company, which runs a prominent hospital in north Louisiana, ended up on the state Department of Environmental Quality’s bad debtors’ list when a $9,754 bill for X-ray equipment registration fell more than 200 days past due.
“We’ve made them an interest-free loan,” Kennedy complained.
He said the state could not only eliminate debts but increase cash flow by selling receivables.
Kennedy suggested sending a bill on a Tuesday and listing it for sale on a Wednesday for 99 cents on the dollar.
Jindal administration budget adviser Ray Stockstill raised a concern that Louisiana would get far less than 99 cents on the dollar.
He said the city of Los Angeles tried to sell debt and got 4 cents on the dollar.
Perkin said California is different because it’s been rocked by financial insolvency.