Background: Legal Financial Obligations (LFOs). When a defendant is convicted of a crime, the court may impose LFOs as part of the judgment and sentence. LFOs include victim restitution; crime victims' compensation fees; costs associated with the offender's prosecution and sentence; fines; penalties; and assessments.

Interest on LFOs. Interest Rate. LFO judgments bear interest from the date of judgment at the same rate that applies to civil judgments. The rate of interest generally applicable to civil judgments is the greater of 12 percent or four points above the 26‑week treasury bill rate. As a result of low treasury bill rates, 12 percent has been the applicable interest rate on LFOs for over two decades. For cases in courts of limited jurisdiction, interest accrues on non-restitution financial obligations at the rate of 12 percent upon assignment to a collection agency.

Interest that accrues on the restitution portion of the LFO is paid to the victim of the offense. All other accrued interest is split between the state and the county as follows: 25 percent to the state general fund; 25 percent to the state Judicial Information System Account; and 50 percent to the county, 25 percent of which must be used to fund local courts.

Reduction or Waiver of Interest. An offender may petition a court to reduce or waive the interest on LFOs as an incentive for the offender to pay the principal. The court must waive interest on the portion of LFOs that accrued during the term of total confinement for the conviction giving rise to the LFOs if it creates a hardship for the offender or the defendant's family. The court may otherwise reduce interest on non-restitution LFOs if the offender has made a good faith effort to pay. Interest on restitution may not be waived, but may be reduced if the offender has paid the restitution principal in full.

Imposition and Collection of LFOs. Costs. Costs that may be imposed on a defendant include public defense costs, jury fee, criminal filing fee, bench warrant fee, deferred prosecution fee, pre-trial supervision fee, witness costs, incarceration costs, and other costs as ordered by the court.

A court may not order a defendant to pay costs unless the court finds that the defendant is or will be able to pay them. In determining the amount and method of payment of costs, the court must take account of the financial resources of the defendant and the nature of the burden that payment of costs will impose. A defendant not in default in the payment of costs may petition for remission of all or part of the costs owed if payment of the amount due will result in manifest hardship to the defendant or the defendant's family.

Priority of Payment. An offender's payments toward an LFO are applied first to restitution, and then proportionally to other monetary obligations after restitution has been satisfied. Costs of incarceration, if ordered, are paid last.

Failure to Pay LFOs. The requirement that an offender pay a monthly sum toward an LFO is a condition of the sentence and an offender is subject to penalties for noncompliance. Under the Sentencing Reform Act, sanctions for a willful failure to pay can include incarceration or other penalties such as work crew or community restitution. If the failure to pay is not willful, the court may modify the offender's LFOs.

Civil contempt sanctions may also apply to an offender who fails to pay financial obligations. If the court finds that the failure to pay was willful, the court may impose contempt sanctions including incarceration. If the court determines the failure to pay was not willful, the court may modify the terms of payment, or reduce or revoke the amount of the financial obligation.

DNA Database Fee. A biological sample must be collected for purposes of DNA identification analysis from every person convicted of a felony or certain other offenses, and the court must impose a $100 fee as part of the sentence for the offense. Eighty percent of the fee is deposited into the DNA Database Account and 20 percent of the fee is transmitted to the local agency that collected the biological sample.

Summary of Bill (Recommended Amendments): LFO Interest. Interest Rate. Interest accrual on an offender's LFO imposed in superior court or courts of limited jurisdiction is at the rate of 6 percent, instead of the greater of 12 percent or four points above the 26‑week treasury bill rate, as of the effective date of the act.

Imposition and Collection of LFOs. Priority of Payment. An offender's monthly LFO payment must be applied to the principal on restitution obligations in all cases within a jurisdiction prior to payment of any other monetary obligations. After restitution is satisfied, payment is distributed proportionally among all other fines, costs other than costs of incarceration, fees, penalties, and assessments imposed, unless otherwise ordered by the court. Costs of incarceration are paid after all other fines, costs, fees, penalties, and assessments are satisfied. After the principal on all LFOs is satisfied, payment is distributed to interest. The priority of payment applies to cases in courts of limited jurisdiction as well as superior court.

DNA Database Fee. The court is not required to impose the DNA database fee if the state has previously collected the offender's DNA as a result of a prior conviction.

Staff Summary of Public Testimony: Testimony From 2015 Regular Session on Bill as Heard in Committee. PRO: This is an effort to fix the broken LFO system. We are failing to collect LFOs. The striking amendment preserves current judicial discretion. Collecting 100 percent of of something is better than 100 percent of nothing. We need to get offenders off the treadmill of paying LFO interest. The current LFO system affects families of color and those with limited financial means. Restitution needs to be a priority. LFOs are imposed disproportionately on people of color. LFOs punish poverty. This properly recognizes the value of restitution while helping offenders reintegrate into society. Even a person trying to pay LFOs can fall behind because of the high interest rate.

CON: The striking amendment lessens the fiscal impact, but it is still significant. The current system is case based, so it would be difficult to apply the restitution priority without significant changes to the system or court clerk time. The technology is not currently available to do electronic transfers with the priorities in the bill. A fixed interest rate will be simpler.

OTHER: We need to know how this would effect net collections.

Persons Testifying: Persons Testifying From 2015 Regular Session. PRO: Representative Goodman, prime sponsor; Representative Holy; Judge Steve Warning, Superior Court Judges Assn.; Deborah Hawley; Gerald Hankerson, National Assn. for the Advancement of Colored People (NAACP) Seattle King County; Senait Brown, NAACP, Black Out WA; Shankar Nareyan; American Civil Liberties Union of WA; Leo Flor, NW Justice Project; Nick Allers, Columbia Legal Services; Bob Cooper, WA Defender Assn., WA Assn of Criminal Defense Lawyers; Judge Theresa Doyle, WA Minority and Justice Commission; Michele Dovres, Valorie Bodeau, citizens.

CON: Ruth Gordon, WA State Assn. of County Clerks (WSACC); Sonya Kraske, Snohomish County; Joel McAllister, WSACC, King County Clerk; Brian Enslow WA State Assn. of Counties.

OTHER: Greg Luhn, WA Collectors Assn.

Persons Signed In To Testify But Not Testifying: No one.