Act Fast -- or the State Will
Millions of Californians have made hefty contributions of cash, stocks, even antique jewelry, to state coffers without knowing it. That’s because lawmakers have been raiding the state’s unclaimed-property cache and using the proceeds to help balance the budget.
About $896 million in unclaimed property was turned over to the state for safekeeping last year under a 46-year-old program designed to protect forgotten or abandoned assets. Less than $239 million of that was eventually claimed; most of the rest was dumped into the state’s general fund.
State officials have been increasingly aggressive about taking control of the property. When the program began, property could go unclaimed for more than 15 years before it had to be turned over to California. Now, the state takes it after as little as a year.
Most unclaimed property is cash and securities; it comes from bank accounts, paychecks, utility company refunds and other sources. There are also valuables such as antique jewelry left in safe-deposit boxes.
Utilities, banks and other businesses are bound by law to give the state unclaimed property after a period that varies by type of property; they face stiff penalties if they fail to do so. Employers must surrender unclaimed employee paychecks after a year. Banks have three years to relinquish accounts and the contents of safe-deposit boxes that have been abandoned.
The state pays commissions to outside contractors to hunt down out-of-state money owed to Californians.
Many of the owners of unclaimed property would be relatively easy to find. For example, the state has absorbed $10,000 in payments issued to the Red Cross, which the organization has not claimed. Online records show that a $1,475.45 hospital payment to a David Geffen on Pacific Coast Highway in Malibu has not been claimed.
The state is holding a $64.63 Tiffany & Co. credit for a Michael Ovitz. And Los Angeles Mayor Antonio Villaraigosa has an $80 payment waiting for him from an insurance company.
They are among 7.6 million California businesses and individuals whose unclaimed property has totaled roughly $4.8 billion since the program started. The state spends $15,000 a year tracking them down. Last year, it used $630 million of their money to plug a hole in the budget.
Ron Roach, spokesman for the California Taxpayers Assn., said the system is “rigged” to keep the property in state coffers.
“Fifteen-thousand dollars to get back hundreds of millions of dollars?” he said. “Our state policymakers are more interested in balancing the budget with someone else’s money than they are in making a sincere effort to find people and get them their money.”
State Controller Steve Westly, who is charged with getting the money back to Californians, responded: “We don’t have a budget for this. We rely on [the] media to get the message out.”
On Wednesday, Westly held a news conference at First AME Renaissance Center to spread the word about the website www.searchthevault.com, where Californians can search for unclaimed property.
Westly and his staff handed out $33,000 worth of unclaimed-property checks and reported that an 88-carat blue star sapphire ring valued at $25,000 was recently claimed. A $1.2-million watch and a coin collection worth $250,000 were also claimed.
Reporters were shown video of a state vault filled with unclaimed jewelry, savings bond certificates and other valuables -- all slated for liquidation.
There is no deadline on claims. Even after property such as jewelry has been sold at auction by the state, Californians can still claim the cash, in perpetuity. The controller’s office maintains records of the price it gets for the unclaimed goods.
State budget writers estimate that at least 80% of it will never be claimed, and in the last two years they have put that amount into the general fund under the direction of the handful of lawmakers who serve on budget committees.
Some legislators were surprised to learn how much unclaimed wealth was in the general fund, and how little the state does to find its owners.
“We should be spending a little bit more time trying to find these people,” said Assembly Revenue and Taxation Committee Chairman John Klehs (D-San Leandro). “I wasn’t aware that much unclaimed property was going into the general fund.”
Senate Republican Leader Dick Ackerman of Irvine said he hadn’t realized how little effort is made to locate the owners. “This is something we should take a look at,” he said.
Administration officials said the Legislature put the $15,000 cap on outreach efforts more than a decade ago, amid concerns that money intended for informing the public was being spent for other purposes.
At that time, the state had far less unclaimed property than it has now. In fiscal 2002-03, its value was $432 million; the next year, it more than doubled to $879 million -- just as California’s finances were beginning to collapse and a budget shortfall of more than $30 billion was emerging.
“It was a classic case of making the best of a bad situation,” said Darrell Steinberg, a termed-out Sacramento Democrat who headed the Assembly Budget Committee in 2004.
Some property owners complain that the state has been too aggressive about using their assets.
The British owner of some Intel stock, which the state sold for $200,000 in 1992, said he hadn’t abandoned the stock. He said its value soared to $3.9 million after the state liquidated it, and he filed suit against California for that amount in 2001. The case is pending.
California is not alone in coveting the unclaimed cash and goods. In 2003, states collected $22.8 billion in unclaimed property, according to the National Assn. of Unclaimed Property Administrators. Only $916 million of that was returned to its owners.
“It is outrageous,” said Mark Tofal, author of Unclaimed Assets: Money the Government Owes You! “This was supposed to be a consumer protection program, designed to safeguard assets.”
Now, he says, the programs are regarded as cash cows. He said a few states use databases -- which cost little -- to hunt down property owners. But most don’t.
“In this day and age, with all the electronic tracking capabilities available, it would be a very easy matter,” he said.
(BEGIN TEXT OF INFOBOX)
California has accumulated more than $2 billion in unclaimed property in recent years. Only a fraction has been returned to its owners. The rest has been used to plug holes in the state budget.
*--* Fiscal Property Paid to Deposited in years revenues claimants general fund ’01-02 $458 $191 $288 ’02-03 432 167 258 ’03-04 879 177 669 ’04-05 896 239 631*
Note: Amounts paid to claimants and deposited in the general fund in one year may include proceeds from earlier years.
Sources: California Department of Finance, controller’s office