BILL ANALYSIS Ó AB 2458 Page 1 Date of Hearing: April 20, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2458 (Obernolte) - As Amended April 7, 2016 ----------------------------------------------------------------- |Policy |Judiciary |Vote:|10 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill: 1)Repeals provisions limiting a trial court's carryover reserves to one percent of the trial court's prior-year budget. 2)Repeals provisions requiring the Judicial Council to set aside AB 2458 Page 2 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. FISCAL EFFECT: The trial courts and the Judicial Council should realize minor administrative cost savings from eliminating the reserve restrictions. There should be no additional trial court costs, though allowing unrestricted reserves will likely shift some portion of court spending to future fiscal years. (In 2013, both the Assembly and Senate Budget Committees voted to raise the one percent reserve limit to 12 percent, though this action was ultimately removed during Budget Conference Committee.) COMMENTS: 1)Background. The Lockyer-Eisenberg Trial Court Funding Act of 1997, among other things, shifted the responsibility of funding trial court operations from the counties to the State. 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. AB 2458 Page 3 Legislation adopted as part of the 2012-13 budget stipulated that, beginning in 2014-15, each trial court may only retain reserves of up to one percent of its prior-year operating budget. The 2012-13 budget also established a statewide court reserves requiring the Judicial Council to set aside two percent of the total funds appropriated for trial court operations in a given year (approximately $27.8 million 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. In 2013-14, the Legislature modified the reserves policy to exempt certain amounts, such as funds set aside to establish and maintain a children's waiting room, from being calculated as part of the one percent reserve limit. Additionally, the 2013-14 budget utilized $385 million of existing trial court reserves to offset General Fund reductions to the courts. 2)Purpose. According to the author, repealing the current court reserve policies, "[w]ill 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." Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081 AB 2458 Page 4