Affordable housing advocates had a problem entering the 2019 session: No matter how large Colorado’s state budget became, they just couldn’t compete for dollars with the seemingly insatiable demands of schools, roads and health care.
So Claire Levy, a former state budget writer turned policy advocate, sought out money in a place few others bothered to look: the state’s “lost and found.”
The maneuver paid off for Levy, the former executive director of the Colorado Center on Law and Policy, to the tune of up to $30 million annually for grants over the next three years, one of two major infusions of cash secured for affordable housing this session. But it also signaled a potential new front in the annual fight for public dollars.
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The Unclaimed Property Trust Fund, a growing pot of $116 million once viewed as largely off limits to lawmakers, was suddenly in play. And late in the session, transportation advocates carved off their own slice of the pie, tapping the fund for $30 million to pay for a late bipartisan deal to boost spending on roads and transit.
The episode showed the extraordinary lengths lawmakers in both parties are willing to go to find money for their priorities in a state with some of the most restrictive spending limits in the country. It also was a cautionary tale for Democrats about the limits of the state budget; even in a year of record-setting revenues, lawmakers looked under every rock to pay for key parts of their agenda, rather than saving up for the next downturn.
To housing and transportation supporters, it represented a worthy use of money that is unlikely to be reunited with its rightful owner. Since the unclaimed property program was created in the 1980s, only about 40 percent of the assets are ever claimed. And other states allow their unclaimed assets to be spent as though it were government money.
“I think that we have a lot of pressing needs in Colorado, and those funds, I think, can be very safely, prudently used without jeopardizing anybody’s claims to repayments of those funds,” Levy said in an interview.
But to critics, tapping the trust fund represents a bridge too far.
“We are holding those assets in trust, and to be using them as if they’re our dollars, is, in my opinion, incorrect,” Sen. Paul Lundeen, a Republican from Monument, told The Colorado Sun. “It’s the perfect example of the overreach of government.
“ ‘Hey, here’s some money over here. It may be somebody else’s, but let’s spend it.’ ”
The lost and found is found by budget writers
Overseen by the Colorado state treasurer’s office, the unclaimed property program seeks to reunite Coloradans with long-lost assets that they may not have even realized were missing. It’s comprised of things like savings and checking accounts, stocks, legal settlements and refunded security deposits. And those are just the financial assets.
Tucked away in a conference room on the first floor of the state Capitol, there’s a vault filled with abandoned safety deposit boxes that are sent to the treasury by banks across the state. Sometimes their owners moved away and couldn’t be reached; other times, they died, bequeathing assorted valuables such as jewelry, coins and stocks to unaware heirs. (Eventually, the physical assets are sold on eBay to make room in the vault, but the state holds the proceeds in the trust.)
The treasury attempts to contact the rightful owners, but staffing and technological constraints limit how proactive the department can be. Often, people learn they’re owed money by looking up their name in the state’s online registry, known as the Great Colorado Payback.
When he was campaigning for office last year, Colorado Treasurer Dave Young said he connected a woman with legal restitution she was owed after being badly injured in a crash with a drunk driver years earlier. The woman had moved and the money never reached her.
“It’s that kind of story that you hear and you go, ‘Wow, this is a pretty amazing constellation of human life that feeds the fund here,’ ” said Young, a Democrat.
It’s also the kind of story that’s the exception, rather than the rule. According to treasury statistics, only about 40 percent of unclaimed property is reunited with its owner over a 20-year period.
That’s why Levy, who left the Colorado Center on Law and Policy this month to run for local office, believed the money could be put to use. And lawmakers in both parties agreed. Her idea was co-sponsored by the head of the Joint Budget Committee, Democratic Sen. Dominick Moreno, a key endorsement that helped ensure the bill’s safe passage through what could have been a thorny appropriations process.
As drafted, House Bill 1322 would have transferred $40 million annually for the next seven years, with stipulations to protect against budget cuts in years where Colorado exceeds the state revenue cap. It also had safeguards to prevent transfers if the trust fund didn’t have enough in reserve to pay out claims. The appropriation was later cut to $30 million for three years. In a side deal, lawmakers also allocated $30 million of the fund to balance the budget, and cover the cost of transportation projects that had been added late in the session.
Young, a former legislative budget writer, was neutral on the bill. But he cautioned against lawmakers making a habit of spending from the trust fund.
“This is individual people’s money and I think sometimes the legislature looks at it as ‘The People’s’ money,” Young told The Sun.
“A question of morality” when it comes to spending
The measure passed with bipartisan support and was later signed into law by Democratic Gov. Jared Polis, but not without controversy.
“I think it is a question of morality. Spending someone else’s money is immoral, without their permission,” said Lundeen, one of 12 Senate Republicans who voted against the bill.
Lundeen said he welcomed a broader policy discussion on what to do with the unspent balance, but until it was studied in more detail, he said, the legislature should keep its hands off the money.
At the same time lawmakers were looking to the fund for cash, the legislature also passed a bill aimed at giving more of it back to its rightful owners. Senate Bill 88 updated the program’s regulations for the first time since 1987, Young said, when paper mail was the only way to notify recipients. With the updates, treasury employees will be able to reach people by email, along with other modernizations.
Young campaigned on improving the fund’s claim rates and the department’s responsiveness, after widely publicized complaints that people were waiting months on end to receive assets they were owed. The improvements began before Young took office, with the hire of a new department director, Bianca Gardelli. Under Gardelli, Young said the backlog of claims has dropped from 12,600 to 2,400.
To Levy, these efforts shouldn’t deter the state from investing unclaimed funds in public services. (The state already does so in limited measure, using some of the interest it generates to fund Medicaid dental benefits. Lawmakers also tapped the fund to avoid spending cuts in the wake of the Great Recession.)
“I’m not the least bit concerned” about the fund running empty, said Levy, who also serves on a state commission that helped draft the update to the unclaimed property law. “Everything could improve exponentially, and maybe if you’re lucky half the funds would be reunited with their owners.”
Moreno, the budget chairman, believes more can be safely spent from the fund in the future without jeopardizing claim payouts. The fund is projected to grow to hundreds of millions of dollars in the coming years, and he plans to discuss the matter with the treasurer’s office to determine an ongoing amount to spend on public services.
“It’s something that the legislature isn’t eager to do,” said Moreno, a Commerce City Democrat. But, he added, “there’s plenty of unclaimed property in that fund that is never going to be claimed.”
Other states, from blue California to deep-red Kansas, don’t exercise Colorado’s same caution. California, for instance, transfers the vast majority of its unclaimed funds to the general fund, allowing them to be spent on virtually anything. On paper, California now has $7 billion in outstanding liabilities; but legislative analysts believe only $853 million of it will ever be claimed.
The system gives the state more money to spend on anything lawmakers want. But it’s not without flaws, analysts warn. In a 2015 report, the California Legislative Analyst’s Office noted that current practice creates a disincentive to return unclaimed property to its owners, because a higher success rate means less money for the state budget.
And in Colorado, which is particularly vulnerable to economic shocks, spending the money now could put the state at risk later. Young, who served in the state House until 2018, didn’t voice public opposition to using the trust fund but expressed caution about its use.
“If for some unknown reason — and this happens typically in a downturn in the economy — we had a large number of claims and we had overspent out of that fund, the legislature would be on the hook to have to dip into the general fund and help us pay those claims back,” Young said.
“It’s good times right now,” he added. “I’m not sure … that we want to put the general fund at risk during a recession.”