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Bail Bonds and the Common School Fund

Speaker of the House Brian Bosma raised the issue of K-12 education during his opening address last week for the upcoming session of the Indiana Legislature. School funding and consolidation are at issue.  Not surprisingly, there are only few people who realize increasing the using of bail bonds can have a direct impact on revenue deposited to the Common School Fund.

For those that are not aware, when someone is arrested in Indiana for a non-capital offense they are entitled bail.  In order to obtain release from jail a defendant can meet the bail obligation by posting full cash, real estate or a bail bond.  There is a fourth option; a judge can permit a defendant to post just 10 percent of bail amount in cash with no security required for the remaining 90 percent of the bail.   This is known as the "10 percent cash option" or as I like to call it, "the 90 percent discount."

Of all the bail options only the 10 percent cash option does not benefit the Common School Fund should a defendant fail to appear.  Interestingly, it has been the expanded use by Indiana courts of the 10 percent cash option that has derailed the revenue source Common School Fund derives from forfeited bail bonds and these courts have been very successful in keeping this quite.

The Common School fund was created by Article 8, Section 2 of the Indiana Constitution. The Common School Fund receives revenue, in part, from civil forfeitures; this includes forfeited bail bonds.  Bail agents who are unsuccessful in returning their client to court within the allotted time after an FTA must pay the entire bond amount if ordered by the court. Once paid, the forfeited portion equal to 20 percent of the bond is payable to the Indiana’s Common School Fund.

Regrettably, most of Indiana’s major cities (Evansville, Columbus, Gary, South Bend, W. Lafayette and Indianapolis) have moved to a the 10 percent cash option where criminal offenders pay just 10 percent of the bail amount ($1000 on a $10,000 bail) in cash to the court to obtain release from jail. The remaining 90% of the bail amount is unsecured.

When a criminal offender fails to appear for court the local court keeps the 10 percent cash deposit, the remaining 90% of the bail goes uncollected and the Indiana Common School Fund receives nothing. The County Extradition Fund and the Police Pension Fund are also deprived of funding.  With 10 percent cash bail, only the court benefit. This is by design.

A 2008 article posted on NewsandTribune.com said $5.3 million was collected in cash bail deposits by 31 Indiana Counties. The article went on to say 47 percent or $2.4 million was retained by the court.  If this sounds like a lot of money it is….for the court. Keep in mind this figure is only 10 percent of the 53 million that should have been collected had full security of the bonds been required by the court.

According to a 2007 study by the Department of Justice Bureau of Justice Statistics that reviewed felony releases in the country’s 75 largest counties over a 14 year period, 30 percent of defendant’s released on cash bonds failed to appear for court. The same report said defendant’s released on a bail bond failed to show for court just 18 percent of the time. The added benefit of a bail bond is the bail agent has an incentive and the resources to bring a fugitive back to custody whereas most county law enforcement agencies do not, so most of those 18 percent who fail to appear are eventually apprehended and returned to custody at no cost to taxpayers.

So here we have a situation controlled by the court. They should require the bail be secured by cash equal to 100 percent of the bail or a bail bond that carries a financial guarantee provided by a surety company.  Instead they say, "give us our 10 percent and the rest of you can fend for yourself." Gee, thanks.

The courts seemed to have forgotten the purpose of bail, to guarantee a defendant appears in court, not to secure the payment of fines and costs.  In their euphoric state of increased financial gains, they forget that someone has to locate and return those defendants who fail to appear for court.  Neglecting to do so has created a fugitive nightmare in this this state the courts would prefer did not become public. There are more than 100,000 outstanding warrants throughout Indiana; Marion County accounts for more than 35,000 outstanding warrants alone.  It’s a problem.

Bail agents have a financial incentive to return fugitives to court. If they don’t they must pay the bond, a portion of which goes to the Common School Fund.  Indiana courts using the 10 percent cash option have no such incentive and feel no obligation to clean up the mess they created.  They keep the cash which has become their overriding concern.

The Indiana House led by Speaker Bosma, will be looking at Indiana’s bail system during the upcoming session.  Positive changes to the law in Indiana could reduce the self-serving 10 percent cash option in favor of an increased use of private sector bail bonds which will have an immediate impact on decreasing the failure to appear rate and generate much needed revenue for the Common School Fund.