BILL ANALYSIS Ó
AB 2458
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Date of Hearing: April 5, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
AB 2458
(Obernolte) - As Amended March 29, 2016
PROPOSED CONSENT (As Proposed to be Amended)
SUBJECT: TRIAL COURT RESERVES
KEY ISSUE: IN ORDER TO ALLOW TRIAL COURTS TO BUILD UP THEIR
RESERVES TO FUND PROJECTS OR PROGRAMS THAT PROVIDE THE PUBLIC
WITH GREATER ACCESS TO COURT SERVICES aND JUSTICE, SHOULD THE
LOCAL ONE PERCENT RESERVES LIMIT AND THE STATEWIDE TWO PERCENT
SET-ASIDE BE ELIMINATED?
SYNOPSIS
The Lockyer-Eisenberg Trial Court Funding Act established by AB
233 (Escutia and Pringle, Chap. 850, Stats. 1997) shifted the
responsibility of funding trial court operations from the
counties to the state. The goal was to create a more uniform
and equitable court system in order to increase access to
justice for all Californians.
Under the Lockyer-Eisenberg Act, the Judicial Council was
authorized to allow trial courts to carry unexpended funds over
from one fiscal year to the next. The Act did not limit the
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amount of reserves that each court could maintain, nor did the
Act proscribe how those reserves could be used. In 2012-13 in
the midst of unprecedented cuts to the courts as the result of
the recession, the Legislature changed this policy and limited
trial courts reserves to up to one percent of its prior-year
operating budget. In order to fund specific unforeseen
emergencies, unanticipated expenses, and unavoidable shortfalls
of the trial courts, the Legislature also required Judicial
Council to set aside two percent of the Trial Court Trust Fund
annually to help fund those emergencies.
This bill essentially repeals that one percent reserves policy
and reverts to the reserves policy prior to 2012, which allowed
individual trial courts to maintain their own reserves year to
year. As proposed to be amended, this bill also repeals the two
percent set-aside. This bill has no opposition.
SUMMARY: Eliminates the limit on the amount a trial court may
hold in reserve, and repeals the two percent set-aside within
the Trial Court Trust Fund. Specifically, this bill:
1)Authorizes the Judicial Council to allow a trial court to
carry unexpended funds over from one fiscal year to the next,
and repeals the provisions that limit the carryover amount
currently to one percent of the trial court's prior-year
budget.
2)Repeals the provisions that require the Judicial Council to
set aside two percent of the total funds appropriated for
trial court operations to be used for specific trial court
allocations, including unforeseen emergencies, unanticipated
expenses for existing programs, and unavoidable funding
shortfalls.
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3)Repeals the Judicial Council's reporting requirement to the
Legislature and the Department of Finance on the two percent
set-aside.
4)Makes technical and other conforming changes.
EXISTING LAW:
1)Establishes that the state shall assume sole responsibility
for the funding of court operations. (Government Code Section
77200 et seq. Unless stated otherwise, all further statutory
references are to the Government Code.)
2)States that while it is the intent of the Legislature to
transfer all fiscal responsibility for the support of the
trial courts from the counties to the State, it is imperative
that the activities of the State, the counties, and the trial
courts be maintained in a manner that ensures that services to
the people of California are not disrupted. (Section 77212.)
3)Provides that the Legislature shall make an annual
appropriation to the Judicial Council for general trial court
operations based on the request of the Judicial Council, as
provided. (Section 77202.)
4)Requires the Judicial Council to report to the Legislature all
approved allocations and reimbursements to the trial courts in
each fiscal year, as specified. The report shall include a
statement of the intended purpose for which each allocation or
reimbursement was made, and the policy governing trial court
reserves. (Section 77202.5.)
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5)Requires trial courts to report to the Judicial Council all
court revenues, expenditures, reserves, and fund balances from
the prior fiscal year from all fund sources. The Judicial
Council shall summarize this information and report this to
the Legislature. (Section 77202.5.)
6)Provides that the Judicial Council shall retain the ultimate
responsibility to adopt a budget and allocate funding for the
trial courts and perform other activities, as specified, that
best assure the trial courts' ability to carry out their
functions, promote implementation of statewide policies, and
promote the immediate implementation of efficiencies and cost
saving measures in court operations, in order to guarantee
equal access to the courts. (Section 68502.5.)
7)Provides that, prior to June 30, 2014, a trial court may carry
over all unexpended funds from the courts operating budget
from the prior fiscal year. (Section 77203.)
8)Provides that, commencing June 30, 2014, a trial court may
carry over unexpended funds in an amount not to exceed one
percent of the court's operating budget from the prior fiscal
year. The calculation of the one percent authorized to be
carried over from the previous fiscal year shall not include
certain funds as specified. (Id.)
9)Requires the Judicial Council to set aside two percent of the
total funds appropriated to Trial Court Trust Fund and to
allocate those funds for unforeseen emergencies, unanticipated
expenses for existing programs, or unavoidable funding
shortfalls. Provides that any unexpended funds shall be
distributed to the trial courts on a prorated basis. (Section
68502.5.)
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10)Requires the Judicial Council to report to the Legislature
and to the Department of Finance all requests and allocations
made pursuant to the two percent set-aside. (Id.)
FISCAL EFFECT: As currently in print, this bill is keyed
non-fiscal. As proposed to be amended, this bill will be keyed
fiscal.
COMMENTS: The Lockyer-Eisenberg Trial Court Funding Act (the
Act) was established by AB 233 (Escutia and Pringle, Chap. 850,
Stats. 1997), and, among other things, shifted the
responsibility of funding trial court operations from the
counties to the State. This significant structural improvement
was intended to create a more uniform and equitable court system
in order to increase access to justice for all Californians.
Under the Act, the Judicial Council was authorized to allow
trial courts to carry unexpended funds over from one fiscal year
to the next. The Act did not limit the amount of reserves that
each court could maintain, nor did the Act proscribe how those
reserves could be used. According to the Judicial Council,
trial courts used their reserves funds to avoid cash-flow
problems, address budget reductions, cover unanticipated cost
increases, and plan for future projects. At the end of the
2011-12 fiscal year, trial courts had amassed $531 million in
reserves statewide.
New Reserves Policy Enacted in 2012-13 Budget. As part of the
2012-13 budget package under Senate Bill 1021 (Budget, Chap. 41,
Stats. 2012), the Legislature approved legislation to change
that liberal reserves policy. Beginning in 2014-15, each trial
court may only retain reserves of up to one percent of its
prior-year operating budget. If a trial court retains any
amount above that one percent, current law requires the Judicial
Council to subtract (or offset) that above-reserves-amount from
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that trial court's annual budget allocation the next year.
The 2012-13 budget also established a statewide court reserves
that is managed by the Judicial Council. This statewide court
reserves policy requires Judicial Council to set aside two
percent of the total funds appropriated for trial court
operations in a given year (approximately $27.8 in 2012-13 and
$37.2 million in 2014-15). Trial courts can petition the
Judicial Council for an allocation from this statewide court
reserves to address unforeseen emergencies, unanticipated
expenses for existing programs, or unavoidable funding
shortfalls. Any unexpended funds in the statewide court
reserves are to be distributed to the trial courts on a prorated
basis at the end of each fiscal year.
Changes to the Reserves Policy in 2013-14 Budget. In 2013-14,
the Legislature modified the reserves policy to address concerns
raised by various stakeholders. Among the changes, the
Legislature specifically exempted certain amounts from being
calculated as part of the one percent reserve limit. For
example, funds set aside to establish and maintain a children's
waiting room are now exempt from a trial court's one percent
limit. Additionally, the 2013-14 Budget utilized $385 million
of the trial court reserves to offset ongoing General Fund
reductions.
In support of the bill, the author writes:
Trial courts across California continue to struggle due to
a lack of resources and insufficient state funding. In San
Bernardino County, for example, local courts face an
ongoing judicial officer shortage of over 60% and are
unable to reduce caseloads without the funds necessary to
open additional courtrooms. This severely limits access to
justice for over two million people who rely on those
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services.
Unlike state departments, courts need to have cash on hand
to meet payroll, fulfill contractual obligations, pay
bills, and manage other cash flow needs, many of which are
outside a trial court's control. The current cap on court
reserves restricts the ability of trial courts to make
these adjustments and pay for upgrades, which has a
dramatic impact on access to justice in California.
AB 2458 would repeal the 1% cap on reserves and the 2%
set-aside that was implemented in 2014 and authorize
Judicial Council to allow individual trial courts to carry
unexpended funds over from one fiscal year to the next.
This will give trial courts the ability to better manage
ongoing budget shortfalls and invest in technology that
will improve efficiency. These technology advancements
make court operations more cost-effective and improve
customer service. Additionally, eliminating the cap
provides trial courts an incentive to operate more
efficiently because court savings could be used for future
purposes.
This bill would repeal the one percent cap reserves policy, and
as proposed to be amended, repeal the two percent set-aside.
Essentially, the bill as proposed to be amended would revert to
the reserves policy that was in place before Senate Bill 1021
(Budget, Chap. 41, Stats. 2012).
According to the LAO, Reserves Policy Continues to Present
Unintended Challenges. In its analysis of the 2012-13 Budget's
reserves policy, the LAO stated the following:
The Legislature enacted the new reserves policy to ensure
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greater consistency with state departments and agencies,
which generally are not authorized to retain reserves.
However, the ability to retain unlimited reserves provided
trial courts with a great deal of financial autonomy in the
past. Thus, the limitation of reserves to 1 percent of
prior-year operating budgets, as well as the withholding of
trial court operation funding to create a two percent
statewide reserves, presents a number of unintended
challenges which require new judicial branch policies and
procedures. (Legislative Analyst Office, 2013-14 Budget:
Governor's Criminal Justice Proposals, p. 20 (Feb. 15,
2013) [emphasis added].)
Indeed, the LAO suggested that the one percent reserves policy
and two percent set-aside could lead to cash shortfalls, create
difficulties with employee payroll, limit the ability for courts
to plan for future projects, and reduce incentives and the
ability of individual trial courts to implement efficiencies.
By eliminating these reserves policies, this bill would appear
to mitigate the concerns raised above.
By Authorizing Judicial Council to Allow Trial Courts to Build
Up Reserves, This Bill Would Appear to Promote Access to
Justice. Historically, trial courts built up their reserves to
fund projects or programs that: (1) provide the public with
greater access to court services-such as document management,
collections, electronic filing, and electronic access
technologies; (2) support additional workload; or (3) help
improve efficiency. By eliminating the one percent reserves
limit (and repealing the two percent set-aside), this bill would
allow trial courts the ability to fund those projects and
programs that promote access to justice.
Of course, trial courts should not be cutting access to services
and programs in order to advantageously re-build trial court
reserves. However, to the extent that courts are able to
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simultaneously maintain access to justice and increase their
reserves, this bill could improve access to our courts, and
create investments in long-term projects, programs, and services
that benefit Californians.
In Addition to Repealing the One Percent Reserves Cap, the
Author Has Also Proposed to Eliminate the Statewide Two Percent
Set-Aside. Although the current two percent set-aside does
allow additional funds to trial courts, the funds in the two
percent set-aside can only be used to address unforeseen
emergencies, unanticipated expenses for existing programs, or
unavoidable funding shortfalls. Although this funding may
assist state courts for certain instances, the specific
parameters around these funds probably make it difficult for
courts to invest in long-term projects that promote programming
innovation that increases access to justice. Given that this
bill eliminates the one percent reserve, it seems logical for
this bill to also eliminate the two percent set-aside, which is
specifically earmarked for trial courts.
This Bill Goes Farther Than What The Legislature Has
Historically Supported. In 2013, both the Assembly and Senate
Budget Committees voted to raise the one percent reserves limit
to 12 percent. While this action was ultimately taken out of
the budget during Budget Conference Committee, the goal of
allowing trial courts the opportunity to maintain more reserves
for long-term projects is consistent with this bill and prior
legislative action.
REGISTERED SUPPORT / OPPOSITION:
Support
AB 2458
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None on file
Opposition
None on file
Analysis Prepared by:Eric Dang / JUD. / (916) 319-2334