Graduating Economic Sanctions According to Ability to Pay

• Author: Beth A. Colgan
• Position: Assistant Professor of Law, UCLA School of Law
• Pages: 53-112

Graduating Economic Sanctions According to Ability to Pay Beth A. Colgan  ABSTRACT: There is growing recognition that economic sanctions—fines, surcharges, fees, and restitution—are routinely imposed at rates many people have no meaningful ability to pay, which can exacerbate financial instability and lead to the perception that economic sanctions are unfairly punitive to people of limited means. Concerns triggered primarily by highly punitive tactics, including incarceration and long-term probation of low-income debtors for the failure to pay, have led to increasing calls for reform. While much attention is now being paid to the back-end of the system, and particularly limitations on punitive responses for the failure to pay due to poverty, this Article considers the problem from the front-end. In particular, this Article focuses on a potential reform with increasing bipartisan support: the graduation of economic sanctions according to a person’s financial circumstances. To that end, this Article explores several key considerations essential to designing a system of graduation, relying heavily on a largely-forgotten experiment in seven geographically, demographically, and politically diverse jurisdictions in the United States with the “day-fine.” A day-fine is calculated using a penalty unit assigned based on the seriousness of the offense of conviction. The penalty unit is then multiplied by the defendant’s adjusted daily income to determine the day-fine amount. The result is an economic sanction adjusted to offense seriousness and simultaneously graduated to the defendant’s financial condition. This Article mines the historical record of the American day-fines experiments—complemented by recent interviews with people involved in the design and implementation of the projects and experiences with means-adjustment in the consumer bankruptcy, tax, and  Assistant Professor of Law, UCLA School of Law. This work was made possible by the generous support of the Laura and John Arnold Foundation. I wish to thank E. Tendayi Achiume, Daniel J. Bussel, Gabriel J. Chin, Sharon Dolovich, Kristen Eichensehr, Carissa Byrnes Hessick, Allison Hoffman, Emily Hughes, Máximo Langer, Kaiponanea Matsumura, Eric Miller, Richard M. Re, Joanna C. Schwartz, Kirk J. Stark, Patrice Sulton, Jonathan P. Witmer-Rich, Jordan Blair Woods, and Noah D. Zatz for their insight and comments, and Vincent Beyer, Gianfranco DeGirolamo, Matthew Delibridge, Jay Factor, Jacob Glicker, Emily Moore, and Michael Romeo for invaluable research assistance. 54 IOWA LAW REVIEW [Vol. 103:53 public benefits contexts—for lessons on the design of graduating economic sanctions. What emerges from this review is promising evidence that a properly designed and implemented system for graduation is consistent with efficient court administration, revenue generation, and equality in sentencing. I. INTRODUCTION ............................................................................... 54 II. OVERCOMING KEY CONCERNS REGARDING GRADUATION .............. 61 A. C APTURING AND E MPLOYING V ALID F INANCIAL D ATA ................. 61 B. M AINTAINING OR I MPROVING F ISCAL O UTCOMES ........................ 65 1. Revenue Generation ....................................................... 65 2. Expenditures ................................................................... 69 III. DESIGNING GRADUATION SYSTEMS ................................................. 73 A. A BILITY TO P AY D ETERMINATIONS ............................................. 74 1. Avoiding Artificial Inflation ............................................ 78 i. The Oregon Example .................................................... 78 ii. Eliminating Speculation .............................................. 81 iii. Ensuring Flexibility ...................................................... 86 iv. Applying Graduation Broadly ...................................... 88 2. Consideration of Income Sources .................................. 89 i. Family Resources .......................................................... 90 ii. Unreported Income ....................................................... 93 B. S TATUTORY M AXIMUM C APS ..................................................... 96 IV. CONCLUSION ................................................................................ 101 APPENDIX: DAY-FINES PROJECT OVERVIEWS ............................................. 104 A. S TATEN I SLAND , N EW Y ORK ..................................................... 104 B. M ARICOPA C OUNTY , A RIZONA ................................................. 105 C. B RIDGEPORT , C ONNECTICUT .................................................... 106 D. P OLK C OUNTY , I OWA ............................................................... 107 E. C OOS , J OSEPHINE , M ALHEUR , AND M ARION C OUNTIES , O REGON ................................................................................. 109 F. M ILWAUKEE , W ISCONSIN ......................................................... 110 G. V ENTURA C OUNTY , C ALIFORNIA ............................................... 111 I. INTRODUCTION Mounting evidence shows that criminal justice systems are widely employing myriad forms of economic sanctions—fines, surcharges, fees, and restitution—often assessing unmanageable sanctions on people who have no meaningful ability to pay and then imposing further punishment for the 2017] GRADUATING ECONOMIC SANCTIONS 55 failure to do so. 1 As the national scope of these practices has come to light, 2 an increasing and bipartisan array of constituents have called for a possible reform: the graduation of economic sanctions according to a defendant’s ability to pay. 3 Graduation would constitute a major shift in jurisdictions where there is no mechanism to consider a defendant’s financial condition, 4 as well as in jurisdictions where judges may consider capacity to pay but are afforded little guidance on how to do so. 5 Neither the problems created by highly punitive practices related to economic sanctions nor the prospect of graduation according to ability to pay as a remedy are new. Tariff-fines, which are set at a specified amount or range for each offense, have long served as the primary form of economic sanction used in the United States. 6 Tariff-fines are inherently regressive, having a greater effect on the financial condition of a person of limited means than on a person of wealth. 7 Concerns that the use of tariff-fines were unfairly punitive for people with financial instability, similar to those expressed today, 8 garnered attention in the late 1980s when the ripple effect of tough-on-crime legislation left jurisdictions across the United States with a burgeoning mass incarceration and mass probation crisis. 9 In that landscape, a push began for the development of intermediate sanctions that would reside between prison on one end of the punitive spectrum and simple probation on the other. 10 Economic sanctions, understood as being “unambiguously punitive,” could serve that intermediate role. 11 The tariff-fine design, however, contributed to 1 . See Beth A. Colgan, The Excessive Fines Clause: Challenging the Modern Debtors’ Prison , 65 UCLA L. REV. nn.1–38 and accompanying text (forthcoming 2018). 2 . See infra notes 44–45 and accompanying text. 3 . See infra note 46 and accompanying text. 4 . See Beth A. Colgan, Reviving the Excessive Fines Clause , 102 CALIF. L. REV. 277, 285–89 (2014) (describing current practices related to the imposition of economic sanctions, including restrictions on judicial discretion). 5 . See , e.g. , MO. ANN. STAT. § 558.004(1) (West 2017) (“In determining the amount and method of payment of a fine, the court shall, insofar as practicable, proportion the fine to the burden that payment will impose in view of the financial resources of an individual.”). 6. UNITED STATES DEP’T OF JUSTICE, HOW TO USE STRUCTURED FINES (DAY FINES) AS AN INTERMEDIATE SANCTION 1 (1996), https://www.ncjrs.gov/pdffiles/156242.pdf. 7 . See id. (“When tariffs are set at low levels, the fines have little punitive or deterrent effect on more affluent offenders. When they are set at higher levels, collecting the fine amount from poor defendants is difficult or impossible, and, in many cases, these defendants are eventually given jail sentences.”). 8 . See SUSAN TURNER & JOAN PETERSILIA, DAY FINES IN FOUR U.S. JURISDICTIONS 1–2 (1996) (describing judicial concerns about the use of economic sanctions as including the risk of “unduly penalizing the poor”). 9. Michael Tonry & Mary Lynch, Intermediate Sanctions , 20 CRIME & JUST. 99, 99–100 (1996). 10. TURNER & PETERSILIA, supra note 8, at 1. 11. Douglas C. McDonald, Introduction: The Day Fine As a Means of Expanding Judges’ Sentencing Options , in DAY FINES IN AMERICAN COURTS: THE STATEN ISLAND AND MILWAUKEE EXPERIMENTS 1, 1 (Douglas McDonald ed., 1992); see also Judith A. Greene, Structuring Criminal Fines: Making an 56 IOWA LAW REVIEW [Vol. 103:53 the problem of mass incarceration in two ways. First, many judges imposed fines for all defendants, regardless of financial condition, at the low-end of the sentencing range to ensure a greater number of defendants would have some capacity to pay. By depressing the amount of tariff-fines overall, it “constrict[ed] the range of offenses for which judges view[ed] a fine as an appropriate sanction,” thereby pushing judges to select incarceration at sentencing for a wider array of offenses. 12 Second, in cases where either tariff-fines or other forms of punishment were available, the perception that a given defendant had a limited ability to pay could push judges to opt for a sentence of incarceration or probation. 13 Researchers and lawmakers in the late 1980s looked to the use of “day-fines,” an economic sanction mechanism used in several European and Latin American countries, 14 as a possible solution to both the need for an intermediate sanction and to problems...