Calif. Pays Millions in Fees for Overdue Bills

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    If then-Gov. Arnold Schwarzenegger and the California legislature had passed the state budget on time, for instance, many penalties could have been avoided.

    If you've ever paid a bill or a traffic ticket after it was due, you are familiar with late payment fees.

    It turns out the state of California is familiar with them, too.

    The state paid more than $34.3 million in penalties for overdue bills from July 2004 through June 2011, according to new figures from California's Department of General Services, the state's business manager.

    The state accrued more than a third of those late fees – more than $11.7 million – in the 2010-11 fiscal year, according to figures provided by the department.

    Some of those fees could have been avoided if then-Gov. Arnold Schwarzenegger and the Legislature had agreed to a budget by July 1, 2010, as required by the state constitution, according to Eric Lamoureux, a spokesman for the Department of General Services. Lawmakers approved the budget 100 days after the start of the 2010-11 fiscal year, preventing some departments from paying their bills on time.

    "We cannot speak to all the reasons all these penalties were incurred by the previous administration, but historically, late budgets have left departments unable to pay their bills on time – especially when negotiations stretched through the summer and into the fall," Lamoureux said.

    Budget battles aren't the only cause of late payments. After a federal receiver took over the state’s inmate medical services in March 2006, overdue bills stacked up, largely because the department lacked sufficient accounting staff, said Nancy Kincaid, a spokeswoman for the Office of the Receiver for California Correctional Health Care Services.

    As a result, the state Department of Corrections and Rehabilitation paid a total of $2.5 million for 11,580 separate late payments in the 2008-09 fiscal year, according to General Services Department documents.

    “Yes, there have been mistakes in the past. It was a big, giant mess,” Kincaid said.

    But in the 2009-10 fiscal year, the health care services staff began using an electronic tracking system for invoices, which has helped cut down on overdue bills, Kincaid said.

    The state recently began work on a new automated accounting system, according to Lamoureux. The system will be phased in over the next five years.

    Under California's Prompt Payment Act, state agencies are required to pay invoices within 45 days. Late fees accrue at a rate of 0.0363 percent a day.

    Critics say the state has no excuse for failing to pay its bills on time.

    “We shouldn’t really ever be doing this, but particularly when we are in a fiscal crisis, it’s especially problematic,” said Jessica Levinson, an associate clinical professor at Loyola Law School in Los Angeles. “When you are using the taxpayers’ money, there is a responsibility to act with reasonable care. It is really inappropriate to be tardy in paying bills when it’s costing so much in late fees.”

    This story was produced by Bay Citizen, a member of the nonprofit Center for Investigative Reporting.