In her view, the program is a blunt instrument that does not take into account the disproportionate economic impacts of Chicago’s fines and fees system or provide opportunities for relief.
“Individuals are given no opportunity to explain to a court why they are unable to pay, and the state never has to prove before a court that the amounts they claim are owed are in fact owed,” said Mitali Nagrecha, director of the National Criminal Justice Debt Initiative at Harvard Law School.
Lisa Foster, co-director of the Fines & Fees Justice Center, a New York-based nonprofit organization that advocates for fines and fees reform, agrees that the system is too heavy-handed when it comes to putting the city’s desire to fill its coffers above the needs of its residents.
“Many people need their tax refund to provide basic necessities for themselves or their families,” Foster said. “To withhold them for fines and fees — whether imposed by a municipality or the state itself — is wrong, unless a court has determined that the individual has the actual ability to pay.”
The Illinois-based Woodstock Institute, whose research has played a large role in the fines and fees debate in Illinois, has also raised concerns about the intercept debt collection program.
Reforming a regressive system
Despite these criticisms, the program has been popular not just in Chicago, but across the state. Between 2013 and 2018, Illinois municipalities outside Chicago used the program to intercept $45 million. In 2018 alone, 217 municipalities across the state took advantage of the program, according to data provided by the state comptroller’s office. For each debt it collects, the state adds a $20 processing fee, which comes out of the debtor’s pocket. Comptroller data shows the state made $3.8 million from these fees in 2018. Similar laws have also passed in nearly a dozen other states across the country where municipal courts and local governments have struggled to raise revenue, including Alabama, Georgia, Indiana, Iowa, Kansas, Maryland, Minnesota, Mississippi, North Carolina, Ohio, and West Virginia.
90% of intercepted refunds were intended for residents of predominantly non-white neighborhoods.
Now, however, Illinois is beginning to look into reforming the program. “The concentration of unpaid fine collections in poor and minority communities concerns us,” Illinois Comptroller Susana Mendoza told The Chicago Reporter and Type Investigations.
In February, Mendoza’s office stopped assisting municipalities in collecting unpaid red light camera debts, a program that Mendoza called “clearly broken,” and “unfair to low-income Illinoisans.” The policy change came amidst a corruption probe into the relationship between state and local officials and private red light camera company SafeSpeed. Mendoza similarly ended her office’s collaboration with Chicago’s red light camera program amid worries that the program “was about revenue not safety,” and not “a legitimate program to collect debt for,” according to Abdon Pallasch, Mendoza’s director of communications.
In response to the findings by The Chicago Reporter and Type Investigations, Mendoza suggested that further reforms to the tax-refund intercept program might be warranted. “Our office will continue examining our collections and researching whether they are fairly applied,” she said. “The city should consider alternative methods of debt settlement for lower-income people to pay some of these fines, such as more flexible payment plans or other creative options.”
The Lightfoot administration says it is continuing to evaluate the city’s fines and fees systems. The mayor “is committed to addressing the city’s historically burdensome and regressive fines and fees structures and to moving forward with policies that will promote economic inclusion for all Chicagoans,” Cabanban said.
In October, the city launched an amnesty program for city sticker debt. Other progressive reforms include utility bill debt forgiveness for an estimated 20,000 qualifying homeowners. However, advocates for more progressive revenue sources have been disappointed by the mayor’s refusal to reinstate a city corporate head tax.
Of the $13,471,081 collected by Chicago in 2018, one-third of the money was collected from ten ZIP codes where 92% of residents are black and Latino.
Some change has come from the state level, however. Mendoza’s reform to end the comptroller’s participation in red light camera debt collection followed the introduction of the License to Work Act — which Governor J.B. Pritzker recently signed into law — that ends the practice of suspending driver licenses for failure to pay fines and fees from most non-driving related offenses.
In June, Pritzker also signed a bill that places a graduated income tax on the 2020 ballot — a change that could help address Chicago’s financial woes and decrease its appetite for debt collection. Since 1970, Illinois has had a flat tax, and state law prevents municipalities from enacting their own income tax policies. Simultaneously, since 2011, the state has also reduced local governments’ share of state income tax revenue.
If the ballot initiative passes, the state will share a larger amount of tax revenue with local governments, though at a rate below historic levels. “Voters will have the power to say yes to a fair tax system that will improve the trajectory of our state’s finances forever,” Pritzker said.
The governor’s office did not respond to a request for comment about the use of the tax-refund intercept program. With the COVID-19 pandemic, municipal and state budget issues have been dramatically exacerbated across the nation. How governments respond is at the forefront of peoples’ minds, including in Chicago and Illinois.
For now, at least, Chicago and Illinois continue to stand by their practice of collecting fines and fees from people’s tax refunds — a policy that may still affect thousands of city taxpayers this tax season.
Correction: An earlier version of this post understated the amount that Chicago has raised from the tax-refund intercept program between 2013 and 2018. The color palette on the scatterplot graphic “Chicago residents in the most non-white, lowest income ZIP codes are intercepted the most” has been updated to diverge at Chicago’s median household income.
This article was reported in partnership with Type Investigations. David Eads contributed analysis to this investigation.
About the reporter
Simon Davis-Cohen
Simon Davis-Cohen is a writer and filmmaker. He can be reached via Twitter @SimonDavisCohen.
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