The Governor's budget proposes to shift some juvenile offenders from the state to the local level and enact a new state grant program to build county juvenile facilities. We find the juvenile institutional population shift proposed by the administration to be fundamentally sound policy, in part because the juvenile system is a generally a local responsibility. Accordingly, we recommend its approval by the Legislature with some technical modifications. However, our analysis indicates that the administration's proposal to provide $400 million in lease-revenue bond funding to build 5,000 new local juvenile beds is not justified given the current surplus of 4,000 such beds statewide.