Scathing Catalog of Judiciary Overspending by CA Auditor
(CN) - California's judicial bureaucracy wasted millions on overpaid employees and "questionable business practices," as Judicial Council supervisors turned a blind eye, according to an exhaustive investigation by the state auditor published Wednesday.
The auditor's blistering, 96-page report noted that nine of the AOC's office directors are paid more than the governor, and also pointed to a series of other indulgences that have eroded confidence in the bureaucracy and diminished resources that would have otherwise gone to the trial courts.
"The level of the Judicial Council's involvement in the AOC's budget process and expenditure decisions appears to have been more ministerial than substantive. In the absence of adequate oversight, the AOC engaged in questionable compensation and business practices, and failed to adequately disclose its expenditures to stakeholders and the public," Auditor Elaine Howle wrote.
Shortly after the report's release, the reform group Alliance of California Judges issued a statement saying, "The Judicial Council has lost touch with its primary mission of advising the courts, and has instead morphed into an over-bloated bureaucracy that places its own interests ahead of those of the trial courts it was created to serve."
The group of roughly 500 judges that has hammered the central bureaucracy of the courts over spending habits, size and perceived arrogance, added, "We have never contended that we have all of the answers to the problems facing our court system, but we persist in one unwavering belief -- money could not have been so tragically misdirected if the process whereby funds are allocated to the courts had been an open and democratic one."
Former Alliance director and retired judge Charles Horan of Los Angeles said, "Once again, what we've been saying has been verified by an independent source. What the AOC and the chief justice have denied over and over and tried to minimize has been laid out for everybody to see."
In her report, Howle offered an unprecedented solution, based on a survey conducted by her office that found each trial court in the state used an average of 55 percent of the AOC's services.
"Given the lapses in the Judicial Council's oversight and the AOC's decision making that we identify in this report, we believe significant change is necessary to ensure that the State's courts receive the critical funding they require to provide access to justice to all Californians," she wrote. "One change could come in the form of a fee-for-service delivery structure for the AOC, which would redirect some of the funding that it currently receives to the courts and empower them to use that funding to pay for only those AOC services that they need."
She added, "An expanded fee-for-service system could also lead to a right-sized AOC. If such a system was established, the AOC would derive part of its funding from the trial courts' payments for services. Under the current system of service delivery, courts can use as many AOC services as they wish at no direct cost to the requesting court."
Judicial Council leadership did not respond to a request for comment on the audit through its press office, but the council recently scheduled a closed session meeting for Wednesday afternoon, to discuss "personnel and other confidential matters."
But Assembly member Reginald Jones-Sawyer (D-Los Angeles), who headed the effort to obtain the audit, said in an interview that he agreed with the auditor's recommendations.
"My goal is to provide access to justice for everyone," he said. "That requires that courtrooms are open and staffed. We must ensure that funding meant for the judicial branch gets to the trial courts. This audit shows that mismanagement has impeded our efforts to provide over $200 million in efficiencies. The audit recommends possible changes, including re-engineering of the services provided by the AOC, and possibly the alternative use of a fee-for-services funding structure and requiring an annual independent financial audit of the AOC."
He added, "I support them all. Every last one of them."
Among the highlights of the auditor's report were the generous salaries and compensation packages for employees of the Administrative Office of the Courts, which has recently undergone a name change to "Judicial Council staff," and its employment of at least 70 high-cost contractors and temporary employees.
"We identified about $30 million in questionable compensation and business practices over a four-year period, plus the additional estimated annual savings of more than $5 million that would result if the AOC were to consolidate its operations in one location. For example, the Judicial Council allowed the AOC to provide its staff with salaries and benefits that significantly exceed those that executive branch employees receive, without sufficient justification," Howle wrote.
"Moreover, the AOC made questionable -- and costly -- business decisions, such as maintaining multiple office locations and hiring an excessive number of consultants, contractors, and temporary workers," she added. "In light of the significant funding cuts to the judicial branch, it is difficult to understand why these practices have continued. Had the AOC discontinued some or all of the questionable business practices, additional funds might have been available for redirection to the trial courts."
According to the auditor's report, in fiscal year 2012-13, the AOC spent $63 million on salaries. The average AOC salary is $82,000, while executive branch employees make $62,000 on average, and employees of four of the state's biggest trial courts make around $71,000.
It also pays eight of its nine high-level directors more than $179,000 per year, "more than the governor and other high-ranking state officials receive, yet those officials have much broader responsibilities," Howle wrote. "In fact, 88 of the AOC's employees earn over $130,000 per year, which exceeds the salary level of the executive branch's highest career executive assignment."
Assembly member Jones-Sawyer called the salaries "very shocking," adding, "as other people were denied raises and laid off, as resources were choked out of the local levels, it does not look like the people at the AOC upper level were sharing the burden."
In the audit released Wednesday, Howle also noted the AOC's practice of paying some executive employees' shares of their retirement contributions "at a total cost of more than $858,000 over a four-year period."
While state law does permit this benefit for employees who were hired before January 1, 2013, "the fact that the AOC continues to provide this benefit to its executives during a time when budget cuts are severely affecting the courts indicates that it is not taking all reasonable steps available to reduce its costs," the audit said.
The Judicial Council, a 21-member rule-making body that oversees the AOC, is chaired by Chief Justice Tani Cantil-Sakauye, who chooses the bulk of its voting members. The AOC's administrative director also reports to Cantil-Sakauye, who last approved staff salaries in October 2012. In September 2014, the council hired Martin Hoshino as its new administrative director.
In a letter to the auditor sent on Dec. 16, Hoshino said he welcomed the auditor's input and agreed with many of the report's recommendations. However, he added, "A number of the recommendations have already been implemented or are in the process of being reviewed."
Howle replied with skepticism, saying, "We are concerned that the AOC's assertion that it will review its current policies or bring our recommendation to the attention of the Chief Justice and/or the Judicial Council -- without proposing a specific plan -- suggests that meaningful change will not occur."
In addition to lavish salaries and benefits, the auditor said the AOC also picks up the tab for its executives' parking, unjustifiably maintains a fleet of 66 vehicles for employee use, spends excessive amounts on catering and maintains three locations in Los Angeles, Sacramento and San Francisco.
According to the audit, had the council done better job of supervising the staff, it might have caught the AOC's dubious spending. It may have even identified ways to direct more money to the state's trial courts from the AOC's own budget.
But, she wrote, "The lack of Judicial Council involvement in the budgeting process resulted, in some cases, in the AOC having sole autonomy in deciding how to spend certain judicial branch funds."
Howle also expressed the same concern that many trial judges have vocalized over the years- that the Judicial Council and its bureaucracy will champion reform publicly, without making any actual changes. "We are concerned that without significant changes, the Judicial Council and AOC will continue to publicly embrace addressing the weaknesses that we and others have identified but fail to take the steps necessary to actually repair those weaknesses in a meaningful and transparent way," Howle wrote.
Reacting to the report, Cantil-Sakauye sent an email to judicial officers Wednesday morning saying, "In 2015, we will continue to move forward on many important priorities for the branch. This audit, while confined in scope, gives us another useful tool to help us make progress."
Jones-Sawyer said, "The auditor was very fair. And the scope was almost exactly what was agreed upon by both the Judicial Council and our office. Now I think theis may be the tip of the ice berg. There could be some more inefficiencies that we could find and ferret out and make the department run smoother. This is about top management right now, and right now top management, according to the audit, needs to do more to ensure that every penny is spent appropriately and that funding gets down to where it's most needed."
For four years, lawmakers have expressed frustration with the bureaucracy over controversial financial policies, such as a pension system that rewarded the top 30 employees with another 22% in pension contributions from public funds on top of their salaries, and a pay raise for most of the staff of 3.5 percent in 2010 and another 3.5 percent in 2013, in the heart of California's financial crisis.
The AOC was also heavily criticized over its mismanagement of a statewide computer project called the Court Case Management System. The software project was scrapped in 2012, but not before it had already spent at least $500 million. Howle also audited the project in 2011, finding that AOC bureaucrats had disguised its true cost to taxpayers.
"The AOC has a tumultuous history with various stakeholders including the public, the trial courts, and the Legislature," the audit noted. "In fact, the evaluation committee's report noted that the AOC does not consistently seek input from stakeholders, present information that would allow stakeholders to be informed, or retain evidence of analyses it conducted to support certain decisions. Although the AOC has taken steps in recent years to improve its processes, these steps have coincided with amplified scrutiny and thus may not have been a proactive effort."
Such scrutiny culminated in Cantil-Sakauye's appointment of the Strategic Evaluation Committee, a 14-judge committee charged with reviewing the AOC. Its resulting report in May 2012 contained 124 recommendations for reform of the AOC's bloated staff, overspending and lack of communication and strong leadership within its divisions. The council accepted the report, re-writing the recommendations into "directives," of which it claims 109 of the 145 are complete. But according to the auditor, only 51 recommendations have been completed.
"The AOC has not been transparent or accurate in its reporting on the status of implementing the recommendations from the evaluation committee's 2012 report," Howle's audit said.
Cantil-Sakauye's Wednesday email nevertheless referred to the SEC report in saying the auditor's concerns are already being addressed. "I believe every organization should constantly re-assess and continuously improve itself. I am, therefore, pleased to see that a number of the recommendations have been in process since 2012, when the Judicial Council accepted the recommendations of the Strategic Evaluation Committee (SEC)," she said.
Horan called the chief's message "insulting," saying, "I found it so disheartening and predictable, her statement that she released to every judge, pointing to the SEC report which the auditor made clear they have not complied with."
In the audit, Howle included a caveat to ensure the council's cooperation. "If the Judicial Council does not undertake sufficient and timely action in response to our recommendations, it may be desirable to amend the provisions of the California Constitution that prescribe the powers of the Judicial Council so that the reforms we recommend can be implemented," Howle said in her audit.
Horan said Howle is right to be concerned. "She indicated she was afraid that without legislative intervention they'd do what they've always done, falsely claim to be making progress. Once again, despite their promises, we've seen four more years of the same nonsense from this bunch that's in power. I agree 100 percent with the auditor, nothing good will come from that bunch. It will have to come from legislative fixes and may be a constitutional amendment."
Jones-Sawyer said his budget committee will hold a hearing on the audit, where the Judicial Council's staff will be asked to testify. "We will ask the courts to explain approximately $200 million in efficiencies that I beleive this audit identified," he said. "It will be difficult for the legislature to increase their budget by once cent until they can prove they are managing their budget efficiently."