LAO 2004-05 Budget Analysis: General Government

Analysis of the 2004-05 Budget Bill

Legislative Analyst's Office
February 2004

State Controller's Office (0840)

The State Controller is responsible for (1) the receipt and disbursement of public funds, (2) reporting on the financial condition of the state and local governments, (3) administering certain tax laws and collecting amounts due the state, and (4) enforcing unclaimed property laws. The Controller is also a member of various boards and commissions, including the Board of Equalization, the Franchise Tax Board, the Commission on State Mandates, the State Lands Commission, the Pooled Money Investment Board, and assorted bond finance committees.

The Governor's budget proposes expenditures of $107 million ($69 million from the General Fund) to support the activities of the State Controller's Office (SCO) in 2004-05. This amount is a decrease of about 4 percent from estimated current-year expenditures.

Fees Appropriate for the Unclaimed Property Program

We recommend that the Legislature adopt a fee to cover the costs of administering the unclaimed property program ($13.8 million annually). In the budget year, accounting for implementation time, this fee could generate $6.9 million in increased revenues.

Unclaimed Property Program. Since 1959, banks and other institutions have been required by law to remit unclaimed property to the state. The most common types of unclaimed property are bank accounts, safe deposit box contents, stocks, and the proceeds of insurance policies. Most property is deemed unclaimed when an account has remained dormant for three years and efforts by the institution holding the account to locate the owner have been unsuccessful. The unclaimed property is then transmitted to the Controller, who maintains records of all such property and attempts to identify the owners. Owners can then file with the SCO to claim their property. Current law requires the SCO to complete its review of all filed claims within 180 days. The SCO approves claims once the owner's identity is confirmed.

$3.4 Billion in Unclaimed Property Held by State. According to the SCO, the state currently holds in excess of $3.4 billion in unclaimed property belonging to over five million individuals and organizations. This amount tends to grow each year, as new revenues exceed claims paid out. As Figure 1 shows, in 2003-04, the state expects to receive over $750 million in unclaimed property revenues and return $140 million to approximately 170,000 individuals and organizations.

Figure 1

Abandoned Property Revenues

(In Millions)





Revenues Collected




Abandoned property




Chapter 304




Sale of securities




Penalty and interest collected








  Total claims paid




Net Revenues to General Fund




Recent Changes to the Program. Recently, there have been a number of changes in the unclaimed property program, which have the effect of increasing revenues to the fund:

Recommend Fee to Cover All Program Costs. Currently, the General Fund pays the costs for administering the program. The budget proposes $13.8 million for this purpose. We believe the assessment of a processing fee for this program is appropriate, as customers are receiving a service from the state. A fee would allow the offset of General Fund costs without affecting the level of service provided. A simple fee structure could approximate the administrative costs of processing different types of claims. We recommend that the Legislature implement a fee on all approved claims at a level sufficient to cover the program's administrative costs. The implementation of a fee could take as long as six months. Thus, a fee would result in about $6.9 million in revenues in 2004-05 and $13.8 million in future years (with equivalent General Fund benefits).

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