In March of this year, state universities received a letter from the Kentucky Department of Revenue stating that it is no longer has the resources to collect student debt on their behalf.

Today, representatives from the Revenue Department spoke to the Budget Committee in Frankfort.

Our Mackenzie Spink tells us how this is affecting universities and how the committee reacted that in tonight's legislative update.

By law, the Kentucky Department of Revenue order has the authority to collect a debt on behalf of state institutions like public universities.

The door has more flexibility to place leads on a debtor than a third party collector.

The chief financial officer of Northern Kentucky University says they recover 54% of debts with the donor, and only about 12% with third party collectors.

He says another benefit is the intimidation factor that comes with your debt going to the state.

We get a significant response rate just upon notifying our debtors that they're going to be placed with the state, so not reflected in these numbers are the amount that we collect before it even goes to that, that stage.

However, also by statute, the Revenue Department can determine whether a debt collection agreement is workable due to short staffing.

The donor has chosen to stop collections for universities to focus on collecting taxed, at, which they say is more cost effective.

Collecting student debt is discretionary.

Collecting taxes is mandatory, and is the core mission of the Department of Revenue for the Commonwealth of Kentucky.

As you can see, it's the best interests in the Commonwealth to collect taxes, versus student debt.

The Commonwealth, kind of generates, 39 times more revenue by collecting, texts instead of university debt.

The Revenue Department says that since 2020, it's gotten harder to attract and keep collection staff because of the stress of the position.

Some state lawmakers suggested changing the current laws to allow third party entities or attorneys to partner with the Da and relieve the staffing pressure, but the department had reservations.

Would you be opposed to a statutory opportunity to work with a third party on behalf of the universities and utilize the tools you have to do the work of the Commonwealth?

I would like to see that in.

Complete form.

In theory, could a third party do what we do?

I don't think they could do it as effectively.

I'm also somewhat concerned about the legality of it.

The Revenue Department may not have a choice in the matter, given this from Senator Givens.

Respectfully, again, you're getting ready to have something run over you in the next session in the form of statute telling you to do this.

That's what this panel is here to do.

Put your thinking cap on between now and the start of session, and decide if you'd rather have us tell you to do it via statutory directive, or whether you'd like to have the latitude of a third party assisting you in doing it, and just come back to us with a recommendation.

Northern Kentucky University says it gains roughly $1 million a year from the dollars debt collection.

For Kentucky Edition, I'm Mackenzie Spink.

Thank you.

Mackenzie.

By current law, the Department of Revenue cannot currently hire third party contractors to do collections work.

A law would have to be passed next legislative session to change that statute.