Alliance Budget Analysis & The Consequences of Fiscal Mismanagement

Posted on March 22, 2012

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Happy honking seals being fed red herring by someone performing the Miss America wave. Don’t ask us how these things pop onto paper as having any relational value to current events because we don’t know. They just materialize and then we try to explain.

Be it a justice that doesn’t know shit about software development that leads committee (one of five) that is blowing smoke up your ass about the completeness of the CCMS V4 vaporware product….

….or another justice that doesn’t know shit about court construction leading a committee that will be doing you a big favor by blowing smoke up your ass by lowering the costs of court construction by an amount about equal to that being set aside for costs escalations….

….or another justice whose state of the judiciary speech pretty much skipped the state of the judiciary to discuss the state of herself, her dedicated followers and her vision of statewide administration and control over local courts…

It all comes back to that vision of happy honking seals without a care in the world outside of being fed that next fish. But as illustrated, the fish those seals are being fed are red herring. Meanwhile, in all of the prestige and pageantry of the office that she holds, Miss America is traveling in the motorcade doing the Miss America wave like there wasn’t a care in the world, like there was nothing wrong outside a lack of red herring.

And someone needed to go snap her back to the reality and the consequences of fiscal mismanagement…..

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March 21, 2012

Dear Members and Others:

The Alliance of California Judges offers this budget analysis for the benefit of our members and others.  We believe that every judge of the state must be fully aware of the very grim prospects for trial court operations in the coming fiscal year.  We present this analysis in consideration of the AOC budget evaluation and funding solutions.

Overview of Budget Reductions and Problems

We agree with the AOC that over the past four fiscal years the judicial branch has experienced a cumulative ongoing reduction of $653 million. The trial courts have suffered $606 million in cumulative reductions and there has been $47 million in reductions to the Supreme Court, Courts of Appeal, and the Judicial Council/Administrative Office of the Courts (AOC).

The problem for the coming fiscal year is that there are very few sources for mitigation. In the past, the Judicial Council has been able to mitigate some of the reductions to the trial courts through fund redirections and by creating and raising fines and fees. However, these re-directions were one-time solutions. While total fund balances appear stable, the amount of “uncommitted fund balances” available to temporarily finance ongoing reductions have been severely depleted and past money is now unavailable. Further, the increased fees were temporary in nature and are scheduled to sunset at the end of FY 2012-13, creating additional budgetary imbalances in out years. Certainly on-going solutions are more than elusive.

The failed CCMS project has depleted the Trial Court Trust Fund, the Improvement Fund, and the Modernization Fund of over $500 million.

In the 2011- 2012 FY, there were loans and sweeps to and by the General Fund (GF), including: $90 million loan from the SB 1407 courthouse construction funds—which is entirely derived from filing fee and fine increases; $350 million loan from the State Court Facilities Construction Fund which is also derived from filing fees and fines; and a $310 million sweep to the General Fund of the SB 1407 revenue generated from fees and fines.

 

Over the last four years, trial courts have been subject to a nearly 23% reduction in funding. The Supreme Court and Courts of Appeal were subject to a 9.7% cut in operations funding, and the Judicial Council and AOC were subject to a 12% cut in operations funding.

For the coming fiscal year, the AOC has proposed that each of these “branch entities” will take an equal 15.2% cut.

The AOC’s Illusory Solutions

The AOC has offered a six-part “solution” for the coming fiscal year and ongoing. Unfortunately, the AOC’s proposed solutions are simply illusory. It is imperative that judges and employees understand that the dissipation of available funds has left the branch with terrible choices for the immediate fiscal year.

Illusion No. 1. The AOC’s New Proposed New Baseline Budget Incorrectly Presumes That Courts Have Operationalized Prior Reductions

 

The AOC has proposed that FY 2011-12 is accepted as representing the minimal operation funding level the judicial branch requires to meet an appropriate level of services. That means the judicial branch will absorb approximately $350 million as operationalized reductions.

 

Unfortunately, this presumption does not account for the fact that most courts, out of a desire to maintain an acceptable level of services, have applied uncommitted fund balances to avoid this “operationalized reduction.” An “operationalized reduction” simply means that courts have permanently reduced their operations to a level that can be sustained within their new allocation levels. This means that courts must have planned to reduce their operations overall by approximately 20 per cent. Many courts have not yet achieved this drastic level of reduction. The Judicial Branch has used one-time funds and time limited revenues; and courts have used one-time savings (i.e. furloughs or closures) and/or uncommitted fund balances to avoid permanently transitioning to lower levels of funding and service and to provide a bridge to better funding in the future.  In spite of AOC assurances, however, additional funds did not materialize. In some cases the strategy of depleting uncommitted fund balances was pursued at the request of the AOC.

 

Moreover, this ignores the fact that trial courts have incurred millions of dollars in unfunded cost increases over the past four years, all of which adds to the deficits they are supposed to have operationalized.

 

This means that many courts will need to continue to cut staff and services even if new funding sources materialize. Therefore, no one should presume that a redirection of funding, even if any were found in this severe environment, will avoid a continuous serious reduction in services.

 

Illusion No. 2. General Fund Restoration

 

The AOC has stated that after absorbing a $350 million “operationalized reduction” the branch must find $300 million of “solutions” to sustain the 2011- 2012 FY level of funding. The AOC proposes that part of the $300 million ongoing solution would have the Legislature restore $150 million that was reduced from the branch budget in the final FY 2011-12 budget. The AOC proposes that restoration be made over the next three fiscal years: $100 million in 2012-13, another $25 million in 2013-14, and a further $25 million in 2014-15.

 

Unfortunately, the Alliance discussions with Legislators in Sacramento lead us to conclude that the Legislature has no intention of restoring these General Funds to the Judiciary budget. Justice Terence Bruniers as much acknowledged this fact in testimony before the Assembly Budget Subcommittees 4 and 5 on March 14, 2012 when he stated that the AOC did not expect any funding to be restored to the judicial branch.

 

Illusion No. 3. Additional and/or Increases in Various Civil Fees

 

The AOC proposes as it has before to work with “judicial branch stakeholders, including the bar,” to develop a range of user-fees as part of an ongoing portion of the $300 million solution. We understand that the AOC proposes to raise $50 million on top of the $70 million in fee increases that are scheduled to sunset in 2012- 2013. These even higher fees have yet to be negotiated with any group. We find it hard to believe that the civil bar will agree to further increased fees when the result will still mean closed civil courtrooms and severely reduced services, which cannot be avoided. Moreover, even higher fees for access to justice would likely result in fewer filings and lower overall collections.  The marginal net benefit of raising fees to increase collections is not at all clear.

 

Illusion No. 4. Trial Court Fund Balances

 

The AOC also proposes that part of their solution would include the trial courts using $100 million of the fund balances in 2012-13, $75 million in 2013-14, and $50 million in 2014-15. With this solution, the AOC contradicts itself, as it ignores the effect of the AOC’s first assumption– that the courts will operationalize a $350 million permanent reduction. There is no way to accomplish this proposed reduction without the depletion of fund balances. Thus, the AOC “solution” in effect counts trial court fund balances twice. Moreover, a combination of absorbing or operationalizing cuts and spending reserves creates a snowball effect where once trial court reserves are spent, replenishment will not be possible due to reduced budget baselines, and yet, other cuts will still have to be operationalized with the possibility of additional cuts in  the future.

 

Illusion No. 5. Improved Efficiencies in Court Operations and Changes in Unnecessary Statutory and Reporting Requirements

 

We agree that there are areas in which courts can become more efficient, and we also agree that unnecessary statutory and reporting requirements should be eliminated. However, it is not practical to presume that these changes will significantly mitigate the severe cuts to services that courts will be forced to implement.

 

Illusion No. 6. That $50 Million of Transfers and Redirections from other Court Funds is Sufficient

 

The AOC proposes that part of the solution would include a $50 million redirection from other funds.  It is illusory, in light of the other problems identified above, to assume that only $50 million will be sufficient.

 

Conclusion

The AOC plan for an “ongoing” $300 million funding solution and “operationalized reduction” of $350 million is not realistic.

It appears to us that there are truly only five basic sources of funding to sustain court operations, recognizing that even mitigation from these sources will still require severe ongoing reductions in services: (1) the Judicial Council/AOC budget ($139 million); (2) the Judicial Branch Facility Program ($233 million); (3) the State Court Facilities Construction Fund ($70 million fund balance); (4) the Immediate and Critical Needs Account ($375 million of revenue; $293 million of planned construction expenditures, in addition to $265 million from the Public Buildings Construction Fund); and (5) the elimination of planned spending on CCMS ($55 million, if accounted for in current planning).

Unfortunately all judges must recognize that the level of statewide administrative services we have enjoyed in more robust times must be severely curtailed and those resources devoted to court operations to the maximum extent possible. The AOC cannot be considered an “equal partner” with the courts when it comes to maintaining adjudicatory services.

We must maintain our courthouses, but the pace and the level of capital infrastructure development simply must be revised to devote these resources to operational needs for the foreseeable future. Certainly, the CCMS project must come to an end. The existing interim programs should be delivered to the courts using them, and those courts should be assisted to provide for management of the systems upon local servers (for those who do not have them) to be maintained in the future within those courts’ operating budgets.

We ask the Judicial Council to task the AOC with formulating a plan that preserves operations of the trial courts and appellate courts as the highest priority, targeting the AOC budget, capital funds, CCMS, and any other available statewide funds appropriated but not yet spent (even if encumbered by past policies) as the source of funding.

Finally, we continue to urge that the funding statutes be revised so that the full amount appropriated to the trial courts is required to be delivered to each court.

 

Posted in: Administrative Office of the Courts, AOC, Branch Boondoggles, Flapdoodles & Pravda Propaganda, Judicial Council of California