| Last Updated: | 5/24/2013 |
| Budget Issue: | Cash management trailer bill language |
| Program: | Judiciary |
| Finding or Recommendation: | Modify administration's proposal to assist trial courts more easily manage cash under the recently enacted 1 percent reserves policy by (1) adding a sunset clause, (2) clarifying how funds in excess of the reserves limit will be distributed, and (3) expanding the list of costs to be exempted from counting against a court's reserves limit. |
While we generally agree with the administration’s proposal designed to allow trial courts to more easily manage cash under the recently enacted 1 percent reserves policy, we recommend three modifications to the proposed trailer bill language. First, we recommend the Legislature impose a three-year sunset for the proposed cash management language. Based on our conversations with administration and judicial branch officials, there remains significant uncertainty regarding the degree to which the primary components of the proposal—(1) loans from court special funds and (2) exempting statutorily-restricted funds from counting towards a court’s 1 percent reserves cap—will work as intended, particularly given uncertainties about what changes to financial and operational practices trial courts will make to implement the 1 percent reserves policy. A sunset clause will provide the Legislature and administration with an opportunity to evaluate these cash management policies and determine whether changes may be needed based on actual trial court experiences.
Second, we recommend that the Legislature specify how any funds remaining at the end of a fiscal year in excess of a court’s 1 percent reserve cap can be expended. Current law and the proposed language are silent on whether, for example, those funds are to be redistributed among the 58 trial courts or retained in the Trial Court Trust Fund for other purposes. Third, we recommend that, in addition to the proposal to exempt statutorily-restricted funds, the Legislature also exempt three other categories of funds. Specifically, we find that failure to exempt the following funds could make it unnecessarily difficult for courts to manage their cash once the reserves limit is in place in 2014-15: (1) funds restricted by existing contracts, (2) funds required to be kept by a court’s payroll processor at all times, and (3) any funds loaned from judicial branch special funds to a trial court for cash flow purposes.
Finally, we note that the administration’s proposed language does not address a concern we raised previously. Specifically, it does not provide a process for the authorization, funding, and oversight of projects traditionally funded from reserves, such as technology. We recommend that the Legislature require the Department of Finance, in consultation with the judicial branch, to develop a plan that can be considered in next year’s budget hearings.