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2014

Other Budget Issues

Further Detail

Background. In recognition that trial courts (1) continue to address ongoing budget reductions from prior years and (2) possess fewer resources to help address such reductions, the Governor proposed an ongoing General Fund augmentation of $100 million to support trial court operations in January. The administration proposed to allocate this funding to individual trial courts using the Workload Allocation Funding Methodology (WAFM), a new method for allocating funds generally based on workload, but did not propose any restrictions on the allowable use of the funds. (Our publication, The 2014-15 Budget: Governor’s Criminal Justice Proposals, provides further detail and analysis on the trial court operations funding.)

Governor’s May Revision Proposal. The administration proposes to replace the January proposal with a $160 million General Fund augmentation to support trial court operations. This augmentation consists of three pieces. First, the administration proposes $86.3 million to reflect a 5 percent increase in funding for trial court operations. (An additional augmentation—$90.6 million—is also proposed for 2015-16.) Second, the administration proposes $42.8 million to fund increased trial court health and retirement benefits costs. The administration has also indicated that future funding for such costs will be provided if the trial courts make sufficient progress in complying with the Public Employees’ Pension Reform Act (PEPRA), such as by increasing the amount some trial court employees contribute towards their retirement costs. Third, the administration proposes providing up to $30.9 million in additional General Fund dollars if the amount of fine and fee revenue collected to support trial court operations is lower than expected. Because this portion of the proposed General Fund augmentation backfills a corresponding loss in other funding sources that support trial court operations, this portion of the General Fund augmentation does not increase the total amount of funding appropriated for trial courts. Accordingly, the total augmentation will only result in a $129.1 million increase in the funding provided to trial courts.

Governor’s Proposal Minimizes Incentive to Control Cost and Legislative Oversight. Trial courts have differed in the operational choices they have made over the past few years to address their ongoing reductions and increased costs. As such, some trial courts may have been better at controlling their benefit cost increases than others. Simply providing funds specifically for benefit cost increases would reward courts that have not effectively controlled these costs. Moreover, because the administration has indicated it would fund future benefit cost increases if courts make progress in complying with PEPRA, courts would have little incentive to control such cost increases once they have achieved that benchmark. Finally, the administration has not proposed setting priorities or requiring reporting on the use of the funds. This makes it difficult for the Legislature to ensure these funds are used to meet state priorities and to conduct oversight of the use of these funds.

Proposed Budget Language Unclear. To allocate funding to trial courts in the event the amount of fine and fee revenue collected to support trial court operations is lower than expected, the administration has proposed provisional budget bill language. The current language authorizes such a transfer if “revenues in the Trial Court Trust Fund are insufficient to support trial court operations.” This language may be potentially unclear and subject to interpretation.

LAO Recommendation. To address these concerns, we recommend modifying the Governor’s proposal in several ways. First, we recommend that the Legislature direct the judicial branch to (1) allocate the total augmentation to trial court operations based on WAFM, (2) set its priorities for the use of the funds (including benefit cost increases as one such priority), and (3) require courts to report on the expected use of these funds prior to allocation and on the actual use of such funds at the end of the fiscal year. Allocation of the augmented funds by workload under WAFM will provide courts with greater incentive to effectively control their cost increases in order to free up more of their funds for other purposes (such as increasing public access to court services). Second, we recommend that the Legislature modify the provisional language authorizing the Department of Finance to provide a General Fund backfill if the amount of fine and fee revenue collected to support trial court operations is lower than expected. For greater clarity, we recommend more specific language authorizing such a transfer if “revenues in the Trial Court Trust Fund are insufficient to support the amount appropriated in Schedule 1 of 0250-101-0932.”