Unclaimed Property As State Revenue: A Warning from North Carolina
We’ve spent more than a few posts here talking about the states’ use of unclaimed property as general revenue until such time as it is claimed by its rightful owner. More recently, we’ve seen Connecticut erase its deficits through increased unclaimed property collection, and Michigan change its unclaimed property laws in an attempt to balance the state budget. Of course, as any state administrator of unclaimed property will tell you (with varying degrees of honesty) unclaimed property does not belong to the state, it is simply held in trust for the rightful owner. That fact – that the property is subject to reclaim at any time – is one of the biggest drawbacks of the states’ increasing reliance on unclaimed property as state revenue.
A recent story from North Carolina underscores the problems that occur when the unclaimed property well starts to run dry. Pursuant to North Carolina law, the monies derived from investment of escheated property is used for need-based education grants for North Carolina students. This use of funds has a long pedigree, dating back to a 1789 constitutional provision providing for the transfer of escheated lands to the University of North Carolina. Now, however, according to a recent article from The Charlotte Observer, however, an increase the need for such grants is emptying the escheats fund. If more money is not found (through cost cutting or an increase in escheat-related revenue) cuts to the grant program could be forthcoming.
As states increasingly rely upon unclaimed property (as well as other non-certain sources of revenue) as part of the state budget, such cuts and shortfalls will continue to happen.