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Debts and Pandemic Combine to Present Bleak Outlook for California Court Funds

Two reports from the independent Legislative Analyst show insolvent construction funds and the Covid-19 pandemic’s long-term effect on court operations.

(CN) — Funds used for building California's courthouses are headed toward insolvency, the state Legislative Analyst warned in a report on the health of the judiciary’s construction coffers.

The agency said the two construction funds will need a substantial bailout in the immediate future from the state’s general fund, specifically $175 million in 2023-24 and $160 million every fiscal year thereafter through 2032-33. After that, the needed amount would continue to decline.

Funding for new court construction projects comes from two funds — the State Court Facilities Construction Fund and the Immediate and Critical Needs Account. Revenue in both accounts has declined over time, the Legislative Analyst said, mostly due to a reduction in criminal fines and fees used to support the funds.

The Legislature also raided both accounts during the Great Recession to alleviate pressure on the state’s general fund. After years of indefinite delays, the Judicial Council restarted its construction program in earnest in 2019.

As it stands now, both funds have more debts than money coming in, including a yearly service fee of $61 million owed to a developer of the Governor George Deukmejian Courthouse in Long Beach, built in 2013 via a public-private partnership.

The report from Legislative Analyst Gabriel Petek says both funds have a total of $400 million in annual expenditure obligations, but only $220 combined annual revenues.

“Both funds have been relying on their fund balances to spend beyond their annual revenues. Absent any action, SCFCF faces insolvency in 2021-22. However, due to its larger fund balance, ICNA would not become insolvent until 2024-25. As such, the accounts will shortly lack sufficient funds to support current obligations, much less any new ones (such as new construction projects),” the report says.

Governor Gavin Newsom’s proposed 2021-22 budget package does not directly address the funds’ looming insolvency, the legislative analyst notes, though he does suggest consolidating the two funds to prevent SCFCF from being wiped out this year.

“This delays the need to address the insolvency until the combined account becomes insolvent and is unable to meet its current obligations,” Petek's report says.

It adds that Newsom doesn’t intend to cut back on spending from the consolidated account, but intends to spend $65 million on courthouse modification projects for 2021-22. He also proposed to build four new courthouses in Lake County, Mendocino County, Nevada County, and Los Angeles County with $8.3 million from the general fund, and plans to request 12 more projects over the next four years.

The analyst said Newsom’s proposal to support future trial court construction with general fund dollars rather than two insolvent funds “is a reasonable approach as both construction accounts are unable to support existing obligations, much less new ones.” In addition, Petek recommends moving non-construction related spending for things like facility personnel and operating costs to the general fund.

The analyst also said lawmakers may want to reconsider which new courthouse projects should get funding priority, noting their preferences may differ from a wish list of projects the Judicial Council submitted in 2019 at the Legislature’s request.

“We recommend the Legislature determine which specific construction projects to fund based on its priorities, which may or may not include any of the projects currently proposed by the governor or the judicial branch,” the analyst’s report says.

Petek also took an overall look at the state’s trial court finances in a separate report that will help the Legislature decide how much funding to provide the courts in the budget it passes every summer.

It found the Covid-19 pandemic and ensuing case backlog won’t be completely ameliorated by new money Newsom proposed for the courts in his January budget package. His proposal, the report says, probably won’t amount to a significant increase in services.

The analyst’s report said courts will probably be plagued by persistent backlogs and increased costs even after the pandemic ends, as social distancing guidelines will continue to push back jury trials. Many courts have used technology to maintain public access to the courts— using phone lines and video chat to conduct cases remotely, but those come with their own costs. Furloughing staff, closing courtrooms and cutting operating hours, are likely to exacerbate the pandemic-related delays and backlogs, the analyst says.

Newsom’s proposed 2021-22 budget includes $72.2 million in discretionary funding for trial court operations, the analyst says, but courts will still need to cut costs by at least $50 million in 2021-22. “Accordingly, a large portion of the proposed $72.2 million would be used to avoid further reductions in service levels,” Petek found.

The analyst also probed a handful of initiatives Newsom touted in his budget package — specifically self-help center funding and money to expand a program that helps low-income people reduce their fines and fees for traffic citations and other infractions.

Newsom proposed $12.3 million in ongoing funding for the program called MyCitations, which launched in a handful of counties in 2018 as a platform for Californians to request a reduction in their fines and fees based on their ability to pay.

The analyst’s report however, discourages statewide expansion of the program as it could end up increasing overall court costs “if its convenience results in more people contesting violations or seeking fine and fee reductions.”

Petek recommended that the Legislature only fund the program expansion for 10 additional courts this year until it receives a required evaluation of its effect on the courts in 2022.

“This action would avoid delay in providing more lower-income individuals with financial relief and promoting increased equity while the currently required evaluation is being completed,” the report says. “Moreover, providing funding only for the budget year would prevent the program from automatically continuing to expand in subsequent years before the Legislature has the opportunity to determine what changes, if any, need to be made after receiving the evaluation.”

Newsom also proposed $19.1 million in ongoing funding for self-help services for unrepresented litigants, but the analyst suggested the Legislature provide funding for two years, and consider prioritizing that money for remote self-help services during the pandemic.

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