Analysis of the 2007-08 Budget Bill: Judicial and Criminal Justice

Judicial Branch (0250)

The California Constitution vests the state’s judicial power in the Supreme Court, the Courts of Appeal, and the trial courts. The Supreme Court, the six Courts of Appeal, and the Judicial Council of California, which is the administrative body of the judicial system, are entirely state-supported. The Trial Court Funding program provides state funds (above a fixed county share) for support of the trial courts. Chapter 850, Statutes of 1997 (AB 233, Escutia and Pringle), shifted fiscal responsibility for the trial courts from the counties to the state. California has 58 trial courts, one in each county.

The Judicial Branch consists of two components: (1) the judiciary program (the Supreme Court, Courts of Appeal, Judicial Council, and the Habeas Corpus Resource Center), and (2) the Trial Court Funding program, which funds local superior courts.

The 2005-06 Budget Act merged funding for the judiciary and Trial Court Funding programs under a single “Judicial Branch” budget item. It also shifted local assistance funding for a variety of programs, including the Child Support Commissioner program, the Drug Court Projects, and the Equal Access Fund from the Judicial Council budget to the Trial Court Funding budget.

Budget Proposal. The Judicial Branch budget proposes total appropriations from all fund sources of approximately $3.7 billion in 2007-08. This is an increase of $196 million, or 5.6 percent, above revised current-year expenditures. Total General Fund expenditures are proposed at $2.3 billion, an increase of about $244 million, or 12 percent, above current-year expenditures. Total expenditures from special funds and reimbursements are proposed at about $1.4 billion, a decrease of $47 million, or 4.8 percent. Approximately 89 percent of total Judicial Branch spending is for the Trial Court Funding program, and the remainder is for the judiciary program.

The overall net increase in the Judicial Branch budget is primarily due to annual adjustments for growth and inflation ($130 million), adjustments for the cost of new or expanded programs ($48 million), and increases for the cost of implementing recent legislation to increase oversight of conservators and guardians ($17 million). Most of this increase is for the Trial Court Funding program. Figure 1 shows the revenue sources for the entire Judicial Branch, while Figure 2 shows proposed expenditures for these two major program areas in the past, current, and budget years.

Courthouse Bond Proposal Deserves Close Scrutiny

We withhold recommendation on the Governor’s proposal to place a $2 billion bond issue on the ballot for courthouse construction pending our further review of this proposal. However, we recommend rejection of the proposed companion legislation to establish public-private partnerships because this specific proposal provides for inadequate legislative control and oversight to govern such arrangements.

Background

In 2002, the Legislature approved the Trial Court Facilities Act (TCFA) [Chapter 1082, Statutes of 2002 (SB 1732, Escutia)], which shifted the responsibility for providing court facilities from the counties to the state. Although the state has been responsible for funding trial court operations since 1998, the counties had remained responsible, until the enactment of TCFA, for providing and maintaining court facilities. The TCFA also required that all superior court facilities transfer to the state by June 30, 2007. Due to various issues that have created delays in this process, the transfer of buildings to the state has occurred at a very slow rate. According to the most recent information available at the time this analysis was prepared, only 17 of 451 county court facilities have transferred to the state.

In addition, the state is responsible for the construction of new court facilities. According to a five-year infrastructure plan developed by the Administrative Office of the Courts (AOC), the courts would require $9 billion in total funding to replace all courts that AOC deems inadequate. We should note, however, that the administration may have a different assessment of this replacement issue. Its five-year Infrastructure Plan will not be available to the Legislature until March 1, 2007. Please see the “Capital Outlay” section of this analysis for more information.

Governor’s Budget Proposal

As part of a new package of infrastructure improvement projects, the administration proposes that the state provide $2 billion in general obligation bond financing for the construction and renovation of courthouses. A bond issue would be placed on the November 2008 statewide ballot for voter consideration of these projects.

The administration also proposes statutory changes that would authorize the Judicial Council to use existing resources to leverage public-private partnerships for the construction of court facilities. According to administration estimates, these partnerships would provide $2 billion in additional resources for the courts.

The administration has cited examples of the types of partnerships that it might include in its plans. These examples are:

• Exchanging outdated court facilities located on expensive urban property for new court facilities on less expensive property.

• Providing revenue-generating commercial space—such as law offices—in newly constructed court buildings.

• “Design-build-operate” contracts in which the private sector constructs and operates a courthouse in exchange for lease payments.

The proposal also requires the Department of Finance (DOF) to approve all proposed projects and provides 30-day advance notice to the Joint Legislative Budget Committee of any projects to be pursued.

Both Components of Courthouse Package Raise Concerns

Proposal Provides Few Details on Public-Private Partnerships. Engaging in public-private partnerships could be an effective way for the state to attract additional capital that could be used to develop infrastructure projects and help offset the costs to the state over time of building and operating these facilities. However, the potential benefits of any public-private arrangement are dependent on the specific terms of the agreement established by the state and the private entity. The administration’s proposal does not explain which courthouse projects would be funded through public-private partnerships, nor does it detail how the state would “leverage” private capital for these projects. Further, it is unclear what specific criteria would be used to evaluate these potential agreements and determine whether they are preferable to other financing used by the state for capital outlay projects.

The proposal does not provide a full legislative framework that would govern such agreements. Instead, the proposal only provides the Legislature with a 30-day review period in which it could object to a public-private partnership arrangement that has been approved by DOF. In our view, this notice provision by itself provides insufficient legislative control and oversight of potentially complex contract arrangements. Because these types of details and terms could ultimately have a significant effect on the total state costs incurred for developing and operating court facilities, we believe they warrant careful consideration by the Legislature before such arrangements are authorized, rather than after the administration has reached agreement with a private party.

Transfer Issue Still Looms. In addition to the details of public-private partnerships, the Legislature may also wish to consider how any proposed new courthouse projects would fit with ongoing efforts to transfer court buildings from counties to the state. Because so few court facilities have transferred to the state, it is possible that proposals for new facilities could be made for counties where existing facilities have not been transferred to the state. Funding these types of projects from the new bond issue, however, would eliminate the incentive for counties to come to a transfer agreement with the state in a timely manner.

Therefore, if the Legislature does choose to approve such a bond issue, it is important that the state continue to fund only courthouse projects where responsibility for the facility has been transferred to the state. The bond legislation proposed by the administration does not limit the availability of this funding to improve or replace courthouses to those that have been transferred to the state.

Analyst’s Recommendations

We withhold recommendation at this time on the Governor’s legislative proposal to place a $2 billion bond issue on the ballot for courthouse construction. However, we recommend that the proposed companion legislation to establish public-private partnerships for courthouse expansion be rejected and AOC be directed to draft new legislative language that would provide a much more specific legislative framework to govern such arrangements if the administration plans to pursue this proposal.

General Obligation Bond Issue. Because of the lack of information in support of this proposal, we withhold recommendation at this time on the $2 billion general obligation bond issue. The proposal, which was submitted to the Legislature on February 1, 2007, warrants further review so that the Legislature can better understand which facilities (in combination with public-private financing) would be built or renovated with this funding and whether this level of expenditures is justified. We will continue to examine these issues and report our further recommendations on this matter at budget hearings.

If the Legislature does choose to approve such a bond issue, we recommend that its implementing legislation be amended to limit the availability of this funding to improving or replacing courthouses that have transferred to the state. As discussed above, allowing bond funds to be used in areas where courthouses have not been transferred to the state could provide a disincentive for counties to follow through on the transfer process.

Public-Private Partnerships. We further recommend that the companion legislation providing broad authorization for public-private partnerships for court facilities be rejected because it provides a weak model for legislative control and oversight of these major projects. For example, the current legislative proposal provides only a limited and vague description of the criteria that would be applied by the Judicial Council in deciding when to leverage private capital for a particular project. Moreover, the 30-day notice proposal when public-privatepartnerships would be implemented provides for only limited legislative participation.

New Commitment to Legal Aid Program Raises Concerns

We recommend rejection of a $5 million proposal to establish a new three-year pilot program to increase legal representation in civil proceedings because (1) the benefits of the new program are not clear, relative to other potentially less expensive approaches and (2) it would move the state in the direction of a major new funding commitment it could not easily afford. (Reduce Item 0250-111-0001 and Item 0250-101-0932 by $5,000,000.)

Background

Legal Representation for Low-Income Persons. Numerous nonprofit legal aid providers throughout the state assist the poor with various civil legal issues, such as domestic violence and landlord-tenant disputes. The legal aid provided by these programs includes direct legal representation of poor clients who could not otherwise afford an attorney.

In 2003, the most recent year for which complete data are available, California legal aid centers received $182 million from state, federal, and private sources. The state provides a relatively small portion of the overall funding for legal aid through the Equal Access Fund, which was created by the Legislature in 1999. The Governor’s 2007-08 budget plan would provide $16 million for the Equal Access Fund. These funds are distributed to legal aid agencies through the State Bar’s Legal Services Trust Fund Program and are overseen by the Judicial Council.

Assistance for Self-Represented Litigants. The state also operates several programs within the superior courts that do not provide legal representation, but do assist self-represented litigants in properly navigating through the court system. Through the Model Self-Help Program, numerous courts provide basic information about the legal process and help individuals properly fill out legal forms to process their court cases. The Family Law Facilitator and Family Law Information Center programs, which are also operated by the courts, provide assistance to self-represented litigants in divorce, child/spousal support, and custody cases. The budget provides $13 million in state and federal funds for these programs in 2007-08.

Proposal Would Expand State Role to Include Legal Representation. The Governor’s budget includes $5 million from the General Fund for the Trial Court Funding program to establish an Access to Justice Legal Representation pilot program in three superior courts. The funding would allow AOC, the staff for the Judicial Council, and the trial courts to develop criteria for determining which individuals seeking help in self-help centers are most in need of legal representation. The courts would then pay for the legal services of those individuals who have been determined to be most in need. Under the proposal, legal representation would be provided at state expense through legal aid agencies and private attorneys. This goes beyond the self-help programs now operated by the courts that we have described above.

Analyst’s Concerns

Based upon our review and discussions about several aspects of the pilot programs with AOC, we have several concerns about this proposal.

More Cost-Effective Approaches Available. Based upon our analysis, it is unclear how creating this new program would be preferable to other approaches to providing civil legal services to the poor. Under the proposed approach, a significant portion of the funds allocated for the pilot programs would be used to pay administrative costs associated with creating the new program. Specifically, AOC and the courts would use part of the funding to develop their own criteria to determine which individuals are most in need of legal services, then contract with legal aid agencies to provide representation for these individuals. However, given that legal aid agencies often operate with limited resources, they are likely to have already developed their own systems for prioritizing incoming workload.

If the Legislature determines that expansion of civil legal services to the poor is a priority, there are more efficient means to do so. Rather than creating a new program that would incur these administrative costs, we believe a better approach would be to directly provide funding to legal aid agencies. Less state funding would go to administrative costs and more would go directly to providing legal services for the poor.

Pilot Project Could Lead to Significant Future Costs. Our additional and larger concern is that this proposal moves the courts in the direction of providing legal services to unrepresented litigants in civil cases on a statewide basis. Funding affordable legal services for the poor, while a commendable goal, would ultimately be a very expensive new commitment for the state. The Commission on Access to Justice, a group of lawyers, judges, and community leaders appointed by the State Bar and other state agencies, estimated in a 2002 report that an additional $384 million annually would be needed to provide legal services for all the poor in California. (The cost undoubtedly would be significantly higher now.) This pilot program would move the state in the direction of incurring these additional costs at a time when the state continues to face a persistent structural budget problem.

Analyst’s Recommendation

Because it takes an approach that generates unnecessary administrative costs, and undertakes an expensive effort to provide legal services for the poor that could lead to significant future costs, we recommend that the Legislature reject this proposal and reduce General Fund support for Trial Court Funding program budget by $5 million.

Administrative Budget Issues

Inflationary Adjustments for Court Facility Maintenance Should Be Updated

We withhold recommendation on the proposal to provide inflationary cost adjustments for the cost of maintaining court facilities that have been transferred to the state. The request is based on the assumption that 68 additional court facilities will transfer to the state by June 30, 2007. We recommend that, as part of the May Revision, the Administrative Office of the Courts provide updated information on the number of trial court facilities that have transferred to the state as well as county contributions for the maintenance and operation of transferred facilities.

Background. As discussed in our earlier analysis of the Governor’s $2 billion courthouse bond proposal, TCFA provides for the transfer to the state from counties the responsibility for the operation of court facilities. In exchange for the state takeover of this obligation, the counties must provide the state with fixed payments, called county facility payments (CFPs), to help offset the cost of operating and maintaining court facilities. The CFP is based on a court facility’s operations and maintenance expenditures from 1995-96 through 1999-00, as adjusted for inflation up to the date of transfer. Any costs for operating and maintaining court facilities above the CFPs made by counties are the responsibility of the state. Statutory changes that were enacted as part of the 2006-07 budget plan provide for increases in state funding for operating and maintaining court facilities in the future. Specifically, beginning two years after the transfer of a facility, inflationary cost adjustments for operations and maintenance are provided in accordance with the State Appropriations Limit (SAL).

The TCFA requires that all court facilities transfer to the state by June 30, 2007. However, since the law was enacted in 2002, only 17 out of 451 facilities had transferred to the state at the time this analysis was prepared.

Budget Proposal. The administration proposes a $399,000 ongoing increase in General Fund spending for the AOC to offset the increased costs of operating and maintaining court facilities in excess of the CFPs received from counties. This proposal includes $165,000 to account for unfunded utility cost increases and $264,000 to account for other increases in facility maintenance and operating costs.

Analyst’s Concerns. We acknowledge that costs for the maintenance and operation of court facilities are likely to increase between the current and budget years. However, we have a technical concern with the specific way that inflationary adjustments for this purpose were calculated. The request assumes that 68 facilities will transfer to the state by June 30 in addition to the 17 that have already transferred. At this time, however, it is unclear how many of the 68 facilities will actually be transferred by that time.

Analyst’s Recommendation. Because of the difficulties that exist in creating transfer agreements between the counties and the state, we withhold recommendation on this funding request at this time. The Legislature should direct AOC to report at the time of the May Revision on the transfer status of the 68 projected transfers of facilities to the state. The AOC should also provide updated information on the CFPs expected to be received from counties in 2007-08. At that point, we recommend that the Legislature provide inflationary adjustments that take into account the number of facilities for which transfer agreements have been approved by a county board of supervisors before April 15 and the CFPs expected to be received from counties.

Technical Adjustment Recommended for State Appropriations Limit Increases

We recommend that the Legislature reduce the increase in the State Appropriations Limit adjustment provided to the Trial Court Funding program by $584,000 because the calculation of the adjustment uses old data. (Reduce Item 0250-111-0001 and Item 0250-101-0932 by $584,000.)

Background. According to state law, the Trial Court Funding program is to receive annual adjustments in funding concurrent with the annual increase in SAL. The trial courts receive SAL adjustments for their baseline operations, but these adjustments are to exclude funding provided for judicial officers.

Analyst’s Concerns. The Governor’s budget provides a $130 million increase to the trial courts for these SAL adjustments. However, in determining the annual increase, AOC did not exclude all salaries of judicial officers from the base as state law provides. Only part of the judicial officer salaries were excluded. As a result, SAL adjustment for the courts is overbudgeted by $584,000.

Analyst’s Recommendation. We recommend a reduction in the trial court budget of $584,000 to correct the technical error in the SAL computation discussed above.

Server Costs Not Justified

We withhold recommendation on the proposal to provide $1.1 million for the replacement of network servers because insufficient justification was provided to the Legislature regarding how the funding request was calculated.

Budget Proposal. The Governor’s 2007-08 budget plan provides $1.1 million in ongoing General Fund support to the Supreme Court and Courts of Appeal to establish a replacement schedule for network servers in 11 different facilities. The Courts of Appeal and Supreme Court currently do not have ongoing funding to replace network servers. At the time this analysis was prepared, AOC had not provided the Legislature with detailed justification as to how the $1.1 million requested in this proposal was calculated. Absent justification as to how the amount of proposed funding was calculated, we are unable to assess the appropriateness of the funding request. Therefore, we withhold recommendation on this amount pending additional information from AOC.

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