State Court Funds Are Drying Up

Posted on April 20, 2015

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Brace yourselves for another round of budget cuts.

Our trial courts get their money from a patchwork of funds and accounts, each of which is designated for certain often vaguely defined purposes, and each of which has its own set of revenue sources. Two of these funds are in big trouble—and so are we.

At last Friday’s meeting, the Judicial Council got an update on the State Trial Court Improvement and Modernization Fund (IMF). IMF money helps pay for a host of services, among them: self-help centers; judicial education; the Complex Civil Litigation Program; various ongoing technology projects, including Sustain, Phoenix, Oracle, and the California Courts Technology Center; private counsel for judicial branch litigation; and trial court security.

It’s hard to get a fix on the health of the IMF prior to this year. According to the AOC’s last annual report to the Legislature, the IMF was $26 million in the black. But at a Council meeting almost exactly one year ago, the AOC predicted a deficit in the IMF of $13.1 million for Fiscal Year 2014-2015. Now the news is unequivocally grim: Given current levels of spending and the latest revenue projections, the IMF will run a $16 million deficit by the end of Fiscal Year 2015-2016.

The AOC and the Trial Court Budget Advisory Committee are recommending “serious program adjustments” in order to bridge the gap. More specifically, they’re proposing a raft of cuts totaling $10.8 million, including the elimination of $4 million in funding for the Complex Civil Litigation Program. In addition, the committee is recommending that expenditures for several programs—including $1.2 million in courthouse security grants—be shifted to other funds. The IMF will no longer transfer $20 million each year to the Trial Court Trust Fund, which means that the trial courts will have to get the money from someplace else. Even with all those cuts and shifts, the IMF will still be running a “structural deficit” of $13 million. If you want to burrow into the numbers, you can find them among the hundreds of pages of materials submitted to the Council at this link. You can hear the presentation on the IMF here. Maria Dinzeo’s article in Courthouse News on the crisis in the IMF is reprinted below.

The IMF is being haunted by the ghost of CCMS, the troubled technology program that cost the branch over half a billion dollars before it ran aground. IMF money has been supporting those courts that are still running the remnants of CCMS. Now the Council wants to shift those costs to those local courts that were unfortunate enough to have trusted the AOC to meet their IT needs.

The IMF is also plagued by the drop in revenue coming from the criminal fines and fees. Based on the estimates for 2014-2015, the annual revenue stream from fines and fees—more than half of the IMF’s total revenue—will have shrunk by over $10 million since the end of Fiscal Year 2012-2013.

But the IMF isn’t the only fund in trouble. The Immediate and Critical Needs Account (ICNA) of the State Court Facilities Construction Fund is hemorrhaging money too.

In 2008, when his influence was at its height, then-Chief Justice Ronald George prevailed upon the Legislature to pass Senate Bill 1407. This ambitious bill authorized the issuance of $5 billion in bonds to finance courthouse construction. The money to back all these bonds is supposed to come primarily from criminal assessments and penalties: the $30 fines we are authorized to impose for each misdemeanor or felony conviction and the $35 we can impose on traffic tickets. That money goes into the ICNA. (Gov. Code, § 70371.5.)

We’re now learning that once again, the AOC underestimated revenues from fines and fees. The Immediate and Critical Needs Account is running on empty.

Last December, AOC staff gave a presentation to the members of the Court Facilities Advisory Committee. You can find the minutes of the meeting, approved last March, at this link. The presenters painted a bleak picture of the ICNA’s future.

For starters, a big chunk of ICNA revenues are going to pay the annual service charge for the extravagant Long Beach Courthouse, which will average $61 million each year for the next 35 years. The AOC grossly underestimated the tab for Long Beach, then wrongly assumed that the Legislature would pick it up. Then another $50 million is being redirected to the General Fund. And we’ve had to raid the ICNA repeatedly to support trial court operations.

And now, as with the IMF, we’re finding that income from court fees is once again falling below expectations–$20 million below. On March 24, 2015, the Court Facilities Advisory Committee and the Courthouse Cost Reduction Subcommittee held a joint meeting. You can find the materials at this link. Apparently, revenues are 22 percent off their peak in Fiscal Year 2010-2011—and we haven’t hit bottom yet.

So what are we going to get for our $5 billion? A handful of opulent palaces such as Long Beach and San Diego, some of which we can’t afford to staff, while older buildings crumble.

No matter how you slice it, the AOC looks terrible. Their revenue estimates were wildly off base. Their political calculations were worse. Their judgment in prioritizing, planning, and financing courthouse construction projects is, to say the least, questionable.

The SB 1407 bond money needs to be audited. The entire construction program needs to be audited. An audit of the AOC’s non-construction operations—just a “bucket of water in Lake Tahoe,” according to one Judicial Council member—uncovered tens of millions in waste. Just imagine what an audit of a $5 billion AOC-run program might turn up.

Directors, Alliance of California Judges

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Courthouse News Service

4/17/2015
Courts’ Improvement Fund Broke, Cuts Coming Judicial Council Says
By MARIA DINZEO

(CN) – With a crucial judiciary coffer running at a deficit, California’s Judicial Council met Friday to deliver a painful blow of funding cuts to trial court security, technology, court-appointed counsel for juveniles and complex civil litigation.

The Improvement and Modernization Fund, for years a source of funding for court technology projects, interpreters, court security, judicial education, subscriptions to publications, jury management, self-help centers and a host of other projects and programs, is $11 million in the hole.

“There is no money in the IMF,” Judge Laurie Earl of Sacramento gravely told the council. “Any action you do today needs to be based on there’s no money in the IMF. This fund runs at a deficit. It has a structural imbalance and we need to act now or we’ll be forced off the cliff that is looming. The cliff is here and we are standing at the edge of it.”
Earl chairs the council’s trial court budget advisory committee, and is co-chair of its revenue and expenditure subcommittee.

On Friday, Earl’s committee recommended that the council approve about $10.8 million in cuts, which will eliminate funding for nine programs, including publication subscriptions, trial court security grants, alternative dispute resolution centers and the complex civil litigation program, which funds complex civil litigation staff in the superior courts of Alameda, Contra Costa, Los Angeles, Orange, San Francisco, and Santa Clara County.
The elimination of complex civil litigation funding from the IMF will save $4 million, the committee estimated. Future funding will be based on workload need.

The recommendations were a last-ditch effort to save the fund from insolvency, but the notion of de-funding programs like trial court security and complex civil litigation did not sit well with many council members.

Attorney Debra Pole said she spent Thursday dealing with a deluge of phone calls and emails from complex civil litigation attorneys who asked that the issue be tabled for further study.

“I cannot repeat in this open forum some of the statements that I got regarding these recommendations from people who do this every day,” she said. “People feel very, very, very strongly about this issue,” Pole said.

Judge Emily Elias, a judge in the Los Angeles Superior Court’s complex civil litigation department said, “I got off an airplane yesterday morning and a lawyer said to me, ‘We hear that you are eliminating complex and why are you all doing that?’ ”

Judge Brian McCabe of Merced said he wasn’t pleased with slashing of $1.2 million from security. He said extra security funding was crucial, since he and 150 others recently witnessed the fatal shooting in his courtroom of a man who “assaulted the court with two 10-inch blades.”

“In essence, we are choosing between whether we cut off our left hand or right hand, but either choice is not going to be pleasant and it is going to hurt,” McCabe said.

He added: “Notwithstanding, taking that local hat off and putting the statewide one on, I get it. I get that we have a deficit and we have to address it. I get that there is going to be some painful decisions here and that this is meant as a temporary stop-gap until we can figure out some either funding solutions or better mechanisms.”

The council also voted to cut five courts loose from IMF support to maintain remnants of the now-defunct software project called the Court Case Management System, at about $7 million a year. San Diego, Orange County, Ventura County and Sacramento signed on early to the project, which was intended to unite the state’s 58 trial courts under one case-tracking software system.

The project was terminated in 2012 amidst damning criticism from legislators, trial judges, court employees and union leaders as a costly and technologically unwieldy boondoggle. The courts that are currently using V3, the latest version of the system that the Legislature allowed the Judicial Council to support with the IMF, are all looking to replace their systems with software from vendors like Tyler Technologies and Thomson Reuters.

The plan is to incrementally wean the courts off the funding over four years, but the question remains as to how these courts will pay for their new systems.

Ventura County is particularly concerned, Second Appellate District Court Judge Judith Ashmann-Gerst told the council. Ashmann-Gerst, the council’s liaison to the Ventura court, said the court is interested in a deal with Tyler, but has no way to pay for it. “The court feels it stuck its neck out when they signed up for V3 and now they need $3.5 million to go on to Tyler,” she said.

Ventura Presiding Judge Brian Back said the court has been in talks with Tyler for at least six months, but “we have no funds.”

The council unanimously voted to withdraw funding for V3 in 2016 and its tech committee will begin looking for alternate funding sources for the next three years.

Council members also voted to change the method of allocating funding for court-appointed attorneys for juveniles to be based on caseloads, but will revisit the issue next year.