The state has a reduced incentive to track down the owners of unclaimed bank accounts, insurance policies and other financial valuables because those assets provide $400 million in annual revenue for the state budget, according to the nonpartisan Legislative Analyst’s Office.
The current policy has “created tension” between the state’s efforts to return the unclaimed property and financial benefit it receives from those lost or abandoned assets, the analyst’s report found.
The proceeds from unclaimed property have become the fifth-largest revenue source for the state’s general fund budget. Since the 1950s, the state has taken over 28.4 million unclaimed assets worth an estimated $7.2 billion. The unclaimed property program is run by the state controller’s office.
To help alleviate that conflict, state lawmakers should make reunifying the property with the rightful owners a higher state priority, the report stated. California should streamline the process for filing a claim, increase advertising about the program and make a more concerted effort to contact owners, the report said.
Controller Betty Yee, who took office in January, praised the analyst’s report. She said the state Legislature should devote more resources to the program to ensure that a greater amount of unclaimed property can be returned — regardless of the effect on the state’s general fund.
“Frankly, our job is really to focus on doing right by the consumers,” Yee said.
On Tuesday, the controller’s office announced an agreement with the brokerage firm Charles Schwab & Co. to give the state access to account information on lost or abandoned accounts that belong to Californians.
Under state law, banks, insurance companies, financial firms, businesses and local governments holding unclaimed property of customers or other individuals must attempt to notify the owner of the account, if the owner can be located. If efforts are unsuccessful over a certain period of time, those accounts are to be turned over to the controller’s office. Along with bank accounts and insurance policies, those assets can include utility refunds, unused gift certificates, stocks, the contents of safe deposit boxes and other financial holdings.
Yee said most entities are cooperative. She described Schwab as a “holdout.”
Every month, the state transfers all but $50,000 in the unclaimed property fund to the state’s general fund budget. According to the governor’s proposed spending plan, those revenues will add up to $442 million in revenue in the next budget year, the analyst’s report stated.
Still, the state is required to pay every valid claim filed for property housed by the controller.
California’s potential liability for unclaimed property currently exceeds $7 billion. However, state officials estimate the actual liability is around $850 million because some of the assets are untraceable or because the owners may have died or moved to another state, reducing the likelihood of a claim being filed, the report stated.