Legislative Analyst's Office Analysis of the 2003-04 Budget Bill

Trial Court Funding (0450)

The Trial Court Funding item provides state funds for support of the state's trial courts. California has 58 trial courts, one in each county. Trial courts hear all criminal cases including felonies, misdemeanors, and traffic matters. They also have jurisdiction over all civil cases including family law, probate, juvenile, and general civil matters. About 8.1 million cases were filed in the trial courts, at some 400 court locations throughout the state during 2000-01 (most recent data available), and just over 13,000 trials were conducted. The Trial Court Trust Fund is the main funding source for trial court activities.

Chapter 850, Statutes of 1997 (AB 233, Escutia and Pringle)—the Lockyer-Isenberg Trial Court Funding Act of 1997—established the Trial Court Trust Fund to support the operation of the trial courts. This act shifted fiscal responsibility for support of the trial courts from the counties to the state. This measure resulted in a major new financial responsibility for the state's General Fund and provided general purpose fiscal relief to counties by capping their future financial obligations for court operations. Figure 1 (see next page) shows the sources of revenue for the Trial Court Trust Fund. 

Proposed Spending. The budget proposes total expenditures in 2003-04 of $2.2 billion for support of the Trial Court Funding program, a decrease of $5.2 million, or 0.2 percent, compared to estimated current-year expenditures. General Fund support would decrease by $301.3 million bringing the total proposed General Fund expenditures to $791.1 million. Figure 2 shows expenditures for the trial courts in past, current, and budget years.

Significant changes in the Governor's proposed budget for Trial Court Funding include the following which are discussed in greater detail later in this Analysis.

• Court Security—$300 Million. This proposal would shift $300 million in court security costs from the General Fund to a proposed sales tax revenue increase as part of the realignment proposal.
• Unallocated Reduction—$116 Million. The budget proposes an unallocated reduction of $116 million. Under this proposal, the Judicial Council would decide how these reductions are allocated to the courts.
• New and Increased Fees—$66.2 Million. This proposal would shift $66.2 million in trial court costs from the General Fund to various fees, including a new security fee of $20 imposed on all civil filings and criminal penalties ($34 million), and an increase in the trial motion fee from $23 to $33 ($1.2 million). In addition, the budget proposes to transfer various "undesignated fees" from the counties to the courts ($31 million).
• Electronic Recording—$36.5 Million. The budget proposes to save $36.5 million by implementing electronic recording of court proceedings ($31 million) and through court ownership of transcripts ($5.5 million).

Proposed Augmentations. The 2003-04 Governor's Budget proposes $75.2 million in augmentations, including $32.6 million for court security, $14.3 million for court staff health benefit costs, $19.9 million for court staff retirement, $4.5 million for court interpreter services, and $3.9 million for implementation of the Court Interpreter Employee and Labor Relation Act. 

Court Security "Realignment"

Background

Current law requires trial courts to contract with their local sheriff's department for court security. Courts have little opportunity to influence either the level of security to be provided or the salaries of those security officers, but are expected to pay the full amount of each. In most cases, the county sheriff determines the minimum level of security required in a court facility. In addition, the county board of supervisors negotiates the level of salaries and benefits with the sheriff.

Figure 3 (see next page) illustrates the growth in court security costs for the period 1999-00 through 2003-04. As the figure shows, court security costs have grown rapidly, going from $263 million in 1999-00 to an estimated $356 million in 2003-04. (The Governor's budget provides a lower amount of $334 million because of assumed savings resulting from the court security proposal.) It is important to note that the 2003-04 amount will increase as salary increases are negotiated throughout the year. According to Judicial Council staff, the growth in sheriff negotiated salary increases has primarily driven the increase in court security costs over this period. Assuming court security costs continue to grow at an average annual rate of about 8 percent, we estimate court security costs will reach $521 million by 2007-08, or 54 percent, above estimated budget-year expenditures.

The Budget Proposal. As part of the administration's realignment proposal, the budget proposes to (1) shift $300 million in court security costs from the General Fund to the new realignment revenues, and (2) allow the trial courts to contract with "various sworn law enforcement agencies for court security." Based on discussions with Department of Finance (DOF) staff, it is our understanding that the intent of the latter proposed change is to allow the courts to contract with the sheriff, local police departments, or the California Highway Patrol (CHP). The budget assumes this new flexibility will result in budget year savings of $22 million.

Concerns With Governor's Court Security Realignment Proposal

As part of a larger realignment of health and social services programs, the Governor's budget proposes to shift funding for court security from the General Fund to a portion of a new sales tax levy. The Governor's court security realignment proposal does not constitute a realignment of responsibilities and control over court security, rather, it is a funding source swap. Accordingly, we recommend that the Legislature exclude this component from the Governor's realignment proposal.

Court Security Proposal Is a Swap, Not Realignment. According to the administration, its court security realignment proposal is consistent with the principles of the 1991 State-Local Program Realignment. The basic idea of state-local realignment is to transfer program responsibility and control to the appropriate level of government along with adequate revenue sources. Such a realignment is intended to increase efficiencies, improve service delivery, and foster innovation.

Based on our review of the Governor's court security proposal, we do not believe that this proposal constitutes program realignment. Under the Governor's proposal, Trial Court Funding would remain a state program, and program responsibility and control is not being realigned from one level of government to another. Rather, the proposal is simply to substitute a new revenue source intended for local government (proceeds from a 1 percent increase in sales tax) for the current General Fund support for trial court security. In doing so, it blurs the lines of responsibility for Trial Court Funding and runs counter to the direction in which the Legislature was moving this program. Although the proposal attempts to increase cost efficiency by giving courts flexibility to contract with sworn law enforcement agencies, this could be done absent realignment or the proposed shift of court security costs from the General Fund to a new funding source.

In view of the above, we recommend that the Legislature reject this aspect of the Governor's realignment proposal. For further discussion of the entire realignment proposal, please see "Part V" of The 2003-04 Budget: Perspectives and Issues. 

Court Security Flexibility Proposal Has Merit, But Does Not Go Far Enough

While we agree with the need for increased court flexibility with regard to the management of court security, we do not think the Governor's proposal goes far enough. We recommend the Legislature amend the proposed trailer bill language to (1) require courts to contract for court security on a competitive bid basis, and (2) allow courts to contract with local sheriffs, police, California Highway Patrol, and private security.

The Governor's budget proposes trailer bill language that seeks to increase cost efficiency in the provision of court security by allowing courts to enter into contracts for court security based upon a competitive bid process. Based on discussions with the DOF, it is our understanding that the proposal would allow the courts to contract with local sheriffs departments, local police departments, or the CHP for court security services. The budget assumes General Fund savings of $22 million in 2003-04 because of this increased flexibility.

No Information on How Savings Were Estimated. Our analysis indicates this proposal could potentially result in savings if the courts are permitted to contract for security services on a competitive bid basis. However, at the time this analysiswas prepared, Judicial Council could not provide information as to how the $22 million savings was estimated.

State Could Save Millions More on Court Security. We believe that allowing courts to contract with private security companies, the CHP, as well as local law enforcement agencies would likely increase state savings. Figure 4 illustrates the potential savings under three scenarios using the Los Angeles Superior Court as an example. As the figure shows, the potential savings from using private security in this county could range from $15 million to $74 million depending on the level of contracting with private security. The savings reflect lower private security salaries as compared to sheriff salaries. 

Court Should Be Required to Use Competitive Bid Process. The Governor's budget proposes to allow courts to contract with local law enforcement agencies or the CHP to provide court security services. Because the state has assumed fiscal responsibility for Trial Court Funding, we think it is appropriate to require courts to contract for court security on a competitive bid basis. In addition, courts should be able to contract with private security when appropriate for court security. This would greatly improve the state's ability to contain costs in this fast growing component of the trial court budget.

Analyst's Recommendation. We recommend the Legislature amend the proposed trailer bill language to (1) require courts to contract for court security on a competitive basis, and (2) allow courts to contract with local law enforcement, the CHP, as well as private security. This would give the state a greater ability to contain court costs, and would likely result in greater savings in the budget year and beyond.

Other Trial Court Funding Issues

New Court Security Fee Raises Concerns

We recommend that the Judicial Council report at the time of budget hearings on how the court security fee will be implemented, and the potential impact this will have on access to the civil courts, as well as other state and local programs.

The Proposal. The budget proposes to establish a new court security fee of $20. According to the DOF, this new $20 fee will be levied on civil filings, as well as criminal fines. It is estimated that the court security fee will generate $34 million in 2003-04. We have several concerns with the proposal.

Not All Fee Payers Are Beneficiaries of Court Security Services. According to Judicial Council staff, the revenue from the court security fee would be used to cover court security costs that are not included within the Governor's realignment proposal. The security fee would be levied on criminal infractions, which are largely traffic tickets. Fees generated from criminal infractions make up most of the revenue in the Governor`s proposal. Most people pay these fines before a hearing. In fact, many individuals pay traffic tickets through the mail, and have no need to go to court. Under the Governor's proposal, these individuals would be charged a fee for a service they are not using.

New Fee May Reduce Civil Court Access for Some. Last year, as part of the 2002-03 Budget Act, the Governor and Legislature increased the civil filing fee by 10 percent, and criminal penalties by 20 percent. In our view, the proposed new "court security fee," equates to a second consecutive increase in the civil filing fee and criminal penalties, bringing the total increase over the two-year period to 20 percent for the civil filing fee, and up to 36 percent for criminal penalties. This is because, under the Governor's proposal, the court security fee would be collected at the same time as the civil filing fee, and as a supplement to criminal penalties (mainly traffic tickets). As regards the civil filing fee, the proposed increase, on top of the current-year fee increase, could make it difficult for some low-income Californians to access the courts.

New Fee Puts Other State and Local Programs At Risk. The state, counties, and the courts share criminal penalty revenues, with these revenues being disbursed first to the state, then to the counties, and finally to the courts. Based on discussions with Judicial Council, it is our understanding the new security fee would be taken "off the top" by the courts, thereby changing the current disbursement order established by the Legislature in the 2002-03 budget. This could put state and other local programs (including the courts) at risk for reduced funding to the extent that the higher fee results in fewer people paying traffic tickets, or results in more traffic tickets being challenged in courts and therefore reduced by the judge. The Legislature should consider the potential tradeoffs between court security and other programs when deciding whether or not to approve the proposed new fee.

At the state level, criminal penalty revenues support various programs including those funded by the Restitution Fund and State Penalty Fund, such as victim restitution, peace officer training, and corrections training. At the county level, these funds support a variety of county general fund programs and the maintenance of effort payment to the State Trial Court Trust Fund. Finally, a portion of the funds goes into the State Court Facilities Construction Fund for support of court facilities.

Analyst's Recommendation. We recommend that the Judicial Council report at the time of budget hearings on how the court security fee will be implemented, and the potential impact this will likely have on access to the civil courts and other state and local programs.

Undesignated Fees: Important Step Forward, But Risky Estimate

We agree in concept with the Governor's proposal to transfer undesignated fee revenue from the counties to the courts who incur the costs of providing the services for which the fee is paid. However, given the uncertainty of the $31 million estimate of transferred fee revenues, we recommend Judicial Council report at budget hearings on the potential impact to the courts if the revenue falls short of the estimated $31 million.

Governor's Proposal. The Governor proposes to transfer $31 million in undesignated fee revenue from the counties to the courts, and reduces the General Fund share of costs by the same amount.

Background. Chapter 850 shifted primary fiscal responsibility for support of the trial courts from the counties to the state. Chapter 850 and other recent trial court funding legislation made changes in the distribution and amount of court-related fees. An important part of the financing mechanism for the state's new fiscal responsibility for the trial courts was the requirement that local governments transfer a variety of court-related fees collected by trial courts and local governments to the state's trust fund.

However, Chapter 850 did not designate which entity—the state or local governments—would retain a number of court-related fees. Some of these undesignated court fees include fees paid for trial postponement, change of venue, and filing for Writ of Execution. The amount of each fee varies from $1 to as much as $1,000.

Working Group Seeks to Determine Where Fee Revenues Should Go. An informal 12-member working group, composed of court executives and county administrators, was formed to determine how much revenue these undesignated fees generate and whether the state or counties should be receiving the funds.

The group identified and catalogued, by statute, all court-related fees not addressed in Chapter 850. The fees were placed in one of four categories. Three of the categories include fees in which the disposition of the fees (either state or counties) is clearly laid out in statute. The fourth category consists of revenues where the use or disposition is not specified. About 47 percent of the fees not addressed by Chapter 850 fall into this last category. There was a lack of information about (1) where fees in the fourth category are currently being deposited, with the trial courts or the counties; and (2) the total amount of fee revenues in question.

Bureau of State Audits Report. In response to an issue we raised in the Analysis of the 2001-02 Budget Bill, the Joint Legislative Audit Committee requested that the Bureau of State Audits (BSA) review a sample of superior courts to determine how much revenue is undesignated, which entities collect these revenues, and how the courts distribute them. In February 2002, the BSA reported that the superior courts' accounting and collection procedures impeded a precise and comprehensive calculation of undesignated fee revenues. It recommended that the Administrative Office of the Courts direct each superior court to identify the entity in its jurisdiction that incurs the cost of providing the service for which the fee is paid and distribute these fees back accordingly.

Judicial Council Survey. In mid 2002, Judicial Council surveyed the trial courts to determine the entity providing the services related to the undesignated fees, and the amount of revenue generated by these fees.

Based on the survey results, Judicial Council determined that 20 of the 41 undesignated fees are related to services for which the courts uniformly incur the cost. Of the remaining 21 undesignated fees, 20 are assessed on services provided by either the courts or the county. (The 41^st fee is the small claims fee that is being addressed in separate legislation.) Accordingly, the Governor's budget proposes to transfer the revenue generated by the 20 undesignated fees, where the courts clearly incur the cost of providing the service, into the Trial Court Trust Fund. In addition, the proposal requires that the revenue generated from the remaining 20 fees be retained by either the county or the court, whomever incurs the cost of providing the service.

Concept Makes Sense, but Revenue Estimate Uncertain. We agree in concept with the Governor's proposal to transfer undesignated revenue from the counties to the courts, particularly where the court bears the cost of providing the service. However, our analysis indicates there is a high level of uncertainty in the estimate of $31 million. Based on the survey, the Council estimated $79 million in total revenue from undesignated fees. Of this amount, Judicial Council estimates there is $31 million that the counties currently retain which should be transferred to the courts because they incur the cost of providing the service. In recognition of these additional resources being available to the courts, the Governor's budget proposes to reduce the General Fund share by a corresponding amount.

We raise two potential concerns regarding the estimated revenues from the undesignated fees. First, because a number of courts were un able to report their revenue from undesignated fees, the Council was forced to estimate the amount generated by those courts. Second, some courts have informal agreements with counties regarding the use of undesignated fee revenue. The actual amount that would be transferred to the Trial Court Trust Fund under the Governor's proposal depends on whether, and to what extent, courts maintain the agreements. The Judicial Council staff attempted to factor this into their methodology for estimating the fiscal impact of the budget proposal. However, Judicial Council staff indicate there is a high level of uncertainty regarding this aspect of the estimate. To the extent the revenue from the undesignated fees does not materialize, the courts will have to either reduce their budgets or the General Fund will have to backfill the shortfall. Basically, it may result in an additional unallocated reduction to the courts. For these reasons, we recommend Judicial Council report at budget hearings on the potential impact to the courts if the revenue falls short of the estimated $31 million.

Electronic Reporting Has Merit, But More Detail Needed

We find that the Governor's proposal to implement electronic reporting in the trial courts has merit. However, there are a number of implementation issues which need to be addressed. We recommend that the Judicial Council report at budget hearings on key issues relating to how the plan would be implemented.

Background. Current law requires the use of stenographers to report and transcribe the official record of most court proceedings. The courts currently employ approximately 1,866 court reporters (1,623 are court employees and the remainder are contract employees). Typically, the court reporter is the sole owner of all the equipment necessary to perform his/her duties, including the stenotype machine, computer aided software for transcription, and all the elements involved in producing the transcript. Also, for the most part, the court reporter transcribes the record on his/her own time, outside of the eight hour work day. For these reasons, the transcripts are "owned" by the court reporter and must be purchased by the court. The average cost per page for a transcription is $2.34 for the first copy and $0.41 for copies. In 2001-02, the state spent approximately $173 million for court reporter salaries, and $25 million to purchase court transcripts.

Governor's Proposal. The Governor's budget proposes trailer bill language that would give the courts the authority to use electronic reporting. It assumes savings of $36.5 million in 2003-04, including $31 million from allowing courts the flexibility to use audio electronic reporting in courtrooms, and $5.5 million as a result of transferring ownership of the court record from the stenographic reporter to the courts. Electronic reporting involves the use of audio equipment to tape record court proceedings which are then transcribed to a transcript. "Transferring ownership" means that courts would no longer need to purchase transcripts from court reporters. The intent of these proposals is to give Judicial Council discretion in determining the method of taking down the verbatim record and producing the transcript.

Electronic Reporting Widely Used in Other States. Based on a survey by Judicial Council, 46 states currently take advantage of some form of electronic reporting. Most states use a combination of stenographic reporters and electronic reporting as opposed to exclusive use of electronic reporting. In conversations with four states (New Jersey, Indiana, Illinois, and Washington) that use electronic reporting, they all indicated that the transition was a gradual process initiated out of the desire to take advantage of a cost effective technology and/or the recognition of a shortage of reporters in their respective states. The State of Illinois allows judges the discretion in deciding how the record will be taken. The court representatives that we spoke to in these states indicated that the quality of the transcript is not compromised by the use of electronic reporting. We note that electronic reporting is also used in the federal court system, including the Federal District Court, Bankruptcy Court, and Court of Appeals.

Demonstration Project: Electronic Reporting Is Accurate and Cost-Effective. Chapter 373, Statutes of 1986 (AB 825, Harris), enacted a four-year demonstration project to assess the costs, benefits, and acceptability of using audio and video reporting of the record except in criminal or juvenile proceedings. This law also established an advisory committee and charged the committee, as well as Judicial Council, with reporting to the Legislature on their findings. Chapter 678, Statutes of 1989 (AB 1854, Speier), subsequently extended the project from 11 trial courts to 75 and extended the termination date three years, from January 1, 1991 to January 1, 1994.

Judicial Council submitted an evaluation report to the Legislature on the demonstration project concluding, "The use of electronic reporting as an alternative method to produce and preserve the verbatim court record has been successfully demonstrated in the current pilot project." The council found significant savings of $28,000 per courtroom per year in using audio reporting, and $42,000 per courtroom per year using video, as compared to using a court reporter. The savings are largely due to salary savings. Most important were the survey results from the users, judges, and attorneys. These surveys found that 98 percent of the users reported that the audio-tape was accurate, 97 percent reported that the transcript which emerged from the audio tape was delivered in a timely manner, and 92 percent reported that nothing of substance was omitted from the transcript. The advisory committee was divided on the use of electronic reporting, with half saying it was acceptable and should be used in all courtrooms and the other half saying its use should be limited to court hearings with no testimony.

Based on our review of other states and the demonstration project, we believe that electronic reporting is a reliable and cost-effective alternative to the system of court reporting currently used in California's trial courts. While we believe implementation of electronic reporting could result in savings, we are uncertain as to whether the Governor's proposal would result in savings in the budget year due to a lack of details as to how the proposal would be implemented.

Implementation Issues. At the time this analysis was prepared, Judicial Council staff had not worked out some of the details of how the Governor's proposal would be implemented. As regards the ownership of transcripts, we found that several important details of the proposal had not been worked out, including issues such as the type and amount of equipment and staff needed to take over production and management of the transcripts. Because the courts have not been responsible for the production or management of transcripts, it is important that they have an idea of the resources required to produce and deliver court transcripts in a timely manner.

Savings Uncertain. The Council staff were able to provide some information on the estimated savings, but it was incomplete. For example, the estimate did not include the cost of staff to monitor the electronic reporting equipment which we believe is important to the successful implementation of electronic reporting. The monitoring staff are responsible for setting up the equipment and making sure it is recording properly. In addition, Judicial Council staff could not provide information on several important aspects of the proposal, including the cost of transcribing electronic reporting, and whether or not the private sector could handle the transcription needs of the courts. We note that the proposed trailer bill language does not require the courts to implement electronic reporting, rather, it authorizes the Judicial Council to determine how the official record of the court will be taken down.

Analyst's Recommendation. While the electronic court reporting proposal in concept has merit, there are a number of uncertainties which the Judicial Council should address at budget hearings. Therefore, we recommend that Judicial Council report at budget hearings on whether the proposed rule of court would simply allow courts to implement electronic recording, or whether it would require courts to implement electronic reporting. Moreover, if the proposal is to allow courts to implement electronic reporting, the Council should report on how many courts have indicated an interest in doing so, and whether this number is consistent with the estimated level of savings. In addition, the council should advise the Legislature regarding the various implementation issues we have identified, including the amount of staff needed to implement and monitor the audio equipment, transcribe the tapes, and manage the transcripts.

Legislature Needs Plan for Unallocated Reductions

We recommend the Judicial Council report at budget hearings on the potential impact of the proposed 2003-04 unallocated reductions, its plan for allocating the reductions, and action that can be taken to minimize the negative impact on access to the courts.

Governor's Proposal. The 2003-04 Governor's Budget proposes an unallocated reduction of $116 million in the State Trial Court Funding budget. Although this reduction represents a relatively small percentage (5 percent) of the overall trial court budget, Judicial Council staff indicate the proposed expenditure reduction could limit access to the courts. Because criminal court cases are the highest priority for public safety reasons and must be adjudicated pursuant to timelines established in federal law, Judicial Council staff indicate that civil and family courts would be disproportionately impacted by the proposed reduction in trial court funding. In particular, civil courts may be forced in 2003-04 to lay off court clerks, reduce hours of operation, and discontinue programs intended to increase access to justice, such as self-help clinics. According to the Judicial Council staff, some courts have already begun to take such actions as a result of current-year reductions. These actions they argue could result in backlogs of civil and family court cases similar to those experienced in the early 1990s.

Analyst's Concerns and Recommendation. Our general concern with unallocated reductions is that it removes the Legislature from the decision-making process, leaving the Judicial Council free to make reductions based solely upon the Council's priorities rather than the Legislature's priorities. While we believe courts should have a certain degree of flexibility in making budgetary decisions, given the issues raised in relation to the proposed reduction, we think the Legislature should be informed of how the Administrative Office of the Courts (AOC) and the courts themselves plan to allocate the reductions. For this reason, we recommend that AOC report at budget hearings on their plan for reducing the court budget, as well as actions that may be taken to minimize the potential negative impact on access to the courts.