HOUSE BILL REPORT

SSB 5581

BYSenate Committee on Governmental Operations (originally sponsored by Senators McCaslin, DeJarnatt and Rasmussen; by request of Office of Financial Management)

Establishing liability for state trust funds.

House Committe on State Government

Majority Report:  Do pass with amendments.  (9)

      Signed by Representatives R. Fisher, Chair; Anderson, Vice Chair; McLean, Ranking Republican Member; Hankins, R. King, Morris, O'Brien, Rector and Sayan.

House Staff:Barbara McLain (786-7135)

AS REPORTED BY COMMITTEE ON STATE GOVERNMENT MARCH 23, 1989

BACKGROUND:

Accounting within state government is decentralized, and agencies use separate systems and procedures to manage their individual accounts receivable based on guidelines developed by the Office of Financial Management (OFM).

A November, 1987 report of the Legislative Budget Committee (LBC) found in an audit of the state's financial statements that the total accounts receivable owed by non-governmental entities were worth $1.5 billion.  Receivables delinquent over 90 days were worth $225 million.  The LBC report included a number of recommendations designed to improve the management of accounts receivable.

State Trust Fund Accountability:  State trust funds are monies collected by a corporation on behalf of the state such as retail sales taxes and federal withholding taxes.  If a corporation fails, state law makes the person in control of the retail sales tax trust funds liable for any unpaid trust funds.

SUMMARY:

BILL AS AMENDED:  State trust funds are defined as all moneys collected from another on behalf of the state including the state's share of vehicle emission testing fees and the employee's share of workers' compensation contributions.

When a corporation responsible for a state trust fund fails, the person in charge of the trust fund is personally liable for the unpaid trust funds, if that person wilfully fails to pay the amounts due to the state.  If any law requires interest or penalties for the non-payment of state trust funds, the person liable for the funds is also liable for the interest or penalties.

A person is only liable for funds collected while he or she was responsible for such funds.  A person is not liable if non-payment is due to events beyond the person's control, and liability only applies if the agency trying to collect the trust fund determines there are no means of collecting directly from the corporation.

Collection procedures already established for each type of trust fund are to be used, but if there are no set procedures, the procedures used by the Department of Revenue for collecting retail sales tax may be used.  However, the liability provisions for general state trust funds do not extend to retail sales tax trust funds.

The liability provisions only apply to trust funds that become due on or after the effective date of the bill.

AMENDED BILL COMPARED TO SUBSTITUTE:  "State trust funds" are more clearly defined.  The liability provisions do not apply to retail sales tax trust funds or to funds that become due before the effective date of the bill.  Language is clarified throughout the amendment.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Bob Jacobs, Office of Financial Management.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The bill provides state agencies with a tool to aid in collecting past due accounts receivable that are trust funds owed the state.

House Committee - Testimony Against:      None Presented.