BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 2458 (Obernolte)
Version: April 7, 2016
Hearing Date: June 28, 2016
Fiscal: Yes
Urgency: No
ME
SUBJECT
Courts: unexpended funds
DESCRIPTION
Under existing law, trial courts may carry over unexpended funds
in an amount not to exceed 1 percent of the court's operating
budget from the prior fiscal year. Additionally, the Judicial
Council may set aside 2 percent of appropriated funds into the
Trial Court Trust Fund for trial courts to utilize for
emergencies. This bill would repeal the 1 percent limitation
and allow the Judicial Council to authorize a trial court to
carry unexpended funds over from one fiscal year to the next.
This bill would also remove the 2 percent emergency fund.
BACKGROUND
Prior to the most recent Great Recession, the Judicial Council
of California could authorize trial courts to carry over any
unspent operating funds from one year to the next. During the
Great Recession, trial courts had varying amounts of funds in
reserves. These reserves helped some courts weather the earlier
parts of the economic downturn. As part of the 2012-2013 State
Budget, the Governor and Legislature agreed to statutorily
obligate the trial courts to spend their reserves down to 1
percent of expenditures over the course of two years. (SB 1021
(Budget Committee, Ch. 41, Stats. 2012).) SB 1021 also
contained a provision that allowed the Judicial Council to set
aside 2 percent of appropriated funds in the Trial Court Trust
Fund for trial courts to utilize as an emergency source of
funding.
Over the last four years, some trial courts have suffered from
cash flow problems and have been unable to replace failing
equipment or engage in long-term planning, arguably due to the
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reserve cap. According to the Judicial Council, 11 trial courts
have required a total of 18 emergency loans to avoid missing
payroll and other obligations. In an effort to allow trial
courts to better manage their budgets and invest in technology
that can improve efficiency, this bill would allow trial courts
to hold reserves if the Judicial Council authorizes them to
carry unexpended funds over from one fiscal year to the next.
This bill would also remove the provision whereby the Judicial
Council can set aside 2 percent of appropriated funds in the
Trial Court Trust Fund for emergency use by trial courts.
CHANGES TO EXISTING LAW
Existing law 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. (Gov. Code Sec. 77202.)
Existing law requires the Judicial Council to report to the
Legislature all approved allocations and reimbursements to the
trial courts in each fiscal year, as specified, and requires the
report to include a statement of the intended purpose for which
each allocation or reimbursement was made, and the policy
governing trial court reserves. (Gov. Code Sec. 77202.5.)
Existing law 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.
Existing law also requires the Judicial Council to summarize
this information and report this to the Legislature. (Gov. Code
Sec. 77202.5.)
Existing law provides that the Judicial Council retains 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. (Gov. Code Sec. 68502.5.)
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Existing law 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. (Gov. Code Sec.
77203.)
Existing law provides that, commencing June 30, 2014, a trial
court may carry over unexpended funds in an amount not to exceed
1 percent, of the court's operating budget from the prior fiscal
year. Existing law provides that the 1 percent authorized to be
carried over by trial courts shall not include certain funds as
specified. (Gov. Code Sec. 77203.)
Existing law requires the Judicial Council to:
set aside 2 percent of the total funds appropriated to the
Trial Court Trust Fund;
allocate those funds for unforeseen emergencies, unanticipated
expenses for existing programs, or unavoidable funding
shortfalls;
distribute unexpended funds to the trial courts on a prorated
basis; and
report to the Legislature and to the Department of Finance all
requests and allocations made pursuant to the 2 percent
set-aside. (Gov. Code Sec. 68502.5.)
This bill authorizes the Judicial Council to allow a trial court
to carry unexpended funds over from one fiscal year to the next,
and repeals the above provisions that limit the carryover amount
currently to 1 percent of the trial court's prior year budget.
This bill repeals the above provisions that require the Judicial
Council to set aside 2 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.
This bill repeals the requirements that the Judicial Council
report to the Legislature and Department of Finance regarding
the 2 percent set aside.
This bill makes technical and other conforming changes.
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COMMENT
1. Stated need for bill
According to the author:
In 1997, the Lockyer-Eisenberg Trial Court Funding Act was
established and was the touchstone for a statewide,
state-funded judiciary in California. Under that act,
Judicial Council of California had the ability to
authorize trial courts to carry over any unspent operating
funds from one year to the next. In 2013, however, the
Legislature approved legislation to cap the amount of
reserves that could be retained by individual trial courts
at 1 [percent] of their prior-year operating budget and
instead required Judicial Council to set aside 2 [percent]
of appropriated funds in the Trial Court Trust Fund for
courts to use as an emergency source of funding.
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 [percent] 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
services.
Prior to the cap on reserves in 2014, trial courts used
fund balances to help them avoid cash-flow issues, address
budget reductions, cover unanticipated cost increases, and
plan for future projects. Reserves also provided
individual courts with an incentive to operate more
efficiently, since they could keep any savings and use
those funds for other purposes in the future.
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. Furthermore, many courts
use their reserves to implement technology or efficiency
upgrades. These advancements play a crucial role in making
court operations more cost-effective and improving
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customer service.
The current cap on 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 [percent] cap on reserves and
the 2 [percent] set-aside that was implemented in 2014 and
authorize individual trial courts to carry unexpended
funds over from one fiscal year to the next. This will
give them the ability to better manage ongoing budget
shortfalls and invest in technology that will improve
efficiency.
2. Trial court reserves
The Judicial Council of California, in support of this bill,
explains that the ability of trial courts to carry over local
reserves was "an innovative 'good government' provision
contained in the Lockyer-Eisenberg Trial Court Funding Act
(Act) (AB 233 Escutia and Pringle, Ch. 850, Stats. 1997) to
avoid the specter of end-of fiscal-year spending, and to
encourage adequate trial court reserves."
The Act moved the responsibility of trial court operations
funding from the counties to the State. The intent was to
create a uniform and equitable judicial system with the goal of
increasing access to justice for all in California. The Act
specifically authorized the Judicial Council to allow trial
courts to hold reserves by allowing trial courts to carry
unexpended funds from one fiscal year to the next and did not
cap the amount of reserves a trial court could maintain. At the
end of the 2011-2012 fiscal year, the trial courts held $531
million as reserves.
Governor Jerry Brown expressed that during "a time of declining
resources, the accumulation of large individual local reserves
is inconsistent with the [Lockyer-Eisenberg Trial Court Funding]
Act's goal of a state-funded system where the Judicial Council
provides statewide oversight." (Governor's Budget Summary,
2014-15,
[as of June 18, 2016].) The Governor pointed out that
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"[p]rior to the change in the reserve policy, some trial courts
were maintaining and even increasing their reserves." (Id.)
However, as stated by the Judicial Council, "[u]nlike state
agencies and departments that are protected by the general fund
reserve, trial courts do need to have cash on hand?for payroll,
contracts, bills, and other cash flow needs, as well as the
replacement/upgrade of systems and equipment, and long-term
planning."
Support : California Judges Association; Judicial Council of
California; Judicial Council of California
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
SB 1021 (Budget Committee, Ch. 41, Stats. 2012) See Background.
AB 233 (Escutia and Pringle, Ch. 850, Stats. 1997) See Comment
2.
Prior Vote :
Assembly Floor (Ayes 76, Noes 0)
Assembly Appropriations Committee (Ayes 16, Noes 0)
Assembly Judiciary Committee (Ayes 10, Noes 0)
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