Potential Impacts of Recent State Asset Forfeiture Changes

Potential Impacts of Recent State Asset Forfeiture Changes GABRIEL PETEK LEGISLATIVE ANALYST JANUARY 2020 analysis full gutter AN LAO REPORT LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT Executive Summary Overview of Asset Forfeiture. Asset forfeiture refers to the seizure of cash or other items suspected of being tied to crime and the transfer of these items to government ownership. The asset forfeiture process generally involves three steps: (1) seizure of items; (2) adjudication proceedings—held at the federal or state level—to determine whether seizures were appropriate; and (3) distribution of proceeds to various agencies, typically for support of law enforcement activities. Federal and state laws as well as local policies apply to each step, meaning processes differ across the nation and within California. SB 443 Changed Asset Forfeiture and Required Data on Economic Impact. Chapter 831 of 2016 (SB 443, Mitchell) made various changes to the state’s asset forfeiture processes related to drugs. Specifically, it limited law enforcement’s ability to pursue certain types of asset forfeiture cases at the federal level and required criminal conviction for receipt of proceeds from certain cases pursued at the federal level. It also made changes to California’s asset forfeiture processes by requiring criminal convictions and increasing the burden of proof required for certain seizures. Finally, SB 443 requires our office to provide data to the Legislature about the economic impact of these changes on law enforcement budgets. This report responds to this requirement. Data Used for This Report. For this report, we analyzed asset forfeiture data submitted to the California Department of Justice (CA DOJ) as well as various other federal, state, and local data. However, we identified a number of challenges that make it difficult to determine the economic impact of SB 443. For example, the data reflect the impacts of various asset forfeiture-related changes at both the federal and state level. Additionally, the CA DOJ asset forfeiture data is incomplete and limited. This is compounded by challenges with the various other data sources used to supplement the CA DOJ data. Potential Reduction in Asset Forfeiture Distributions, but by Unknown Amount. Despite such challenges, certain trends and patterns can be observed in the data. Specifically, we identified the following trends: • California generally receives more than $100 million annually in asset forfeiture distributions. • State and federal asset forfeiture distributions have fluctuated in recent years. • California’s share of United States Department of Justice asset forfeiture distributions has significantly declined since 2017. • The number of cases initiated and adjudicated at the state level generally declined. • The value of assets seized and amount distributed in state cases increased until 2016. • Distributions to most agencies generally declined until 2018. • Distributions generally reflect a small share of agency budgets. While not solely attributable to SB 443, data suggest that it potentially reduced distributions received by California. However, it is not possible to estimate the size of this potential impact because of the challenges discussed above. As such, it is difficult to draw definitive conclusions from the data. Additionally, law enforcement is still adapting to SB 443 as well as to various changes in the federal asset forfeiture process. Accordingly, future data could provide a more accurate—and potentially different—picture of the impact of SB 443. www.lao.ca.gov 1 analysis full gutter AN LAO REPORT 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT INTRODUCTION Chapter 831 of 2016 (SB 443, Mitchell) made about the economic impact of these changes on various changes to the state’s asset forfeiture state and local law enforcement budgets. This processes related to drugs. These changes report responds to that requirement. In preparing generally make it more challenging for state and this report, we analyzed available federal, state, local law enforcement agencies to pursue certain and local data sources, as well as consulted asset forfeiture cases. Senate Bill 443 also requires with various stakeholders (such as local law our office to provide a report that contains data enforcement agencies). OVERVIEW OF ASSET FORFEITURE WHAT IS ASSET FORFEITURE? federal and state laws define the conditions and processes governing asset forfeiture for specific Seizure and Transfer of Certain Items to the items, for determining whether specific seized Government. Asset forfeiture refers to (1) the items can be kept, and for using forfeited items. seizure of cash, property, or other items that are Local policies often provide further details in each suspected of being tied to a criminal offense and of these areas. This results in asset forfeiture (2) the transfer of ownership of these items to the processes differing across the nation and within government. The proceeds from these seizures are California. generally used to support various state and local law enforcement activities. Seizure Seeks to Disrupt Criminal Activity, While Federal law, individual state laws, and local Ensuring Due Process. According to federal policies dictate the conditions under which law and state laws, one of the primary goals of asset enforcement may seize assets as well as the forfeiture is to punish, disrupt, and deter criminal specific processes and procedures that they must activity by seizing items used to facilitate the follow when seizures occur. activity or acquired through it. However, another Seizures Conducted by Law Enforcement. primary goal of federal and state laws is to ensure Federal and individual state laws authorize law due process to uphold individuals’ rights. To enforcement agencies to conduct asset forfeiture accomplish this, state and federal laws include seizures. These laws also can specify the different safe guards intended to prevent abuse. For conditions under which prosecutorial agencies example, under both federal and state laws, any must also be involved. For example, in California proceeds from asset forfeiture distributed to law cases, prosecutors are generally required to initiate enforcement agencies are generally only available drug-related asset forfeiture seizures. to supplement (not supplant) law enforcement Seizure Typically Tied to Suspicion That budgets. Criminal Offense Occurred. Federal and individual state laws authorize asset forfeiture for certain HOW DOES THE ASSET types of criminal offenses, such as drug-related FORFEITURE PROCESS WORK? offenses. For example, California law authorizes asset forfeiture of items related to individuals The asset forfeiture process generally involves suspected of selling certain types of drugs (such as three steps: (1) seizure, (2) adjudication, and cocaine or heroin). Seizure is also authorized under (3) distribution. Federal and individual state laws specified circumstances, such as if the seizure is apply to each step of the process. For example, related to a search warrant or if there is probable www.lao.ca.gov 3 analysis full gutter AN LAO REPORT cause to believe that the item was used to violate these proceedings can be held at the federal or state drug laws. As such, law enforcement officers state level. must have at least probable cause to believe that Asset Forfeiture Cases Can Be Adjudicated an eligible drug-related crime has occurred before Through Either Federal or State Proceedings. assets may be seized. (Probable cause is the State and local law enforcement agencies and/ lowest burden of proof, and is the level that must or prosecutors can sometimes choose whether be met for officers to make arrests.) to pursue an asset forfeiture case through federal Seizure of Items Must Have Statutorily or state proceedings. Federal asset forfeiture Authorized Justification. Federal and individual proceedings are pursued through either the state laws authorize the seizure of cash, property, United States Department of Justice (U.S. DOJ) and other items only under certain justifications. or the United States Department of Treasury In practice, these justifications are also known as Asset Forfeiture Programs. A variety of factors theories. The most common theories include: influence this choice, such as differences in how proceeds from state versus federal proceedings are • Contraband theory allows the forfeiture of distributed and how such distributions can be used. items deemed illegal under federal or state Cases are generally pursued through federal laws (such as illegal drugs). proceedings in one of the following two ways: • Exchange theory allows the forfeiture of items intended to be exchanged for illegal items • Joint Investigations. Asset forfeiture cases (such as cash exchanged for illegal drugs). that arise from joint investigations between • Proceeds theory allows the forfeiture of federal and state and/or local law enforcement items that can be traced back to a benefit can be pursued at the federal level. These that resulted from an illegal exchange. For joint investigations usually take place through example, items purchased legally using money taskforces. Taskforces generally involve deposited into a bank from the sale of illegal agencies agreeing to provide a certain number drugs would be eligible for forfeiture. of staff for a specified purpose (such as illegal drug investigations). While participating • Facilitation theory allows the forfeiture of agencies typically pay for certain costs (such items intended to be used to make it easier to as their officers’ salaries), the taskforce commit a criminal offense (such as a vehicle). typically pays for other costs (such as officers’ Additional Federal and State Limits Apply. overtime) using asset forfeiture proceeds Even if items are potentially eligible for seizure or other funds. Participating agencies under one of the statutorily authorized theories, generally sign agreements documenting their federal and state laws and local policies can include responsibilities and their share of any monies additional limitations on seizures. For example, (such as asset forfeiture proceeds) received by federal policies generally authorize the civil the taskforce. forfeiture of cash only if at least $5,000 is seized. • Adoptions. In cases not involving federal In California, for drug-related asset forfeiture, state law enforcement, state or local jurisdictions law prohibits the seizure of real property if it is can request the federal government “adopt” being used as a family residence or for other lawful the asset forfeiture case. Adoption generally purposes. requires that federal law (1) similarly deems the alleged criminal offense a crime and Adjudication (2) authorizes the theory of forfeiture used After seizure occurs, asset forfeiture proceedings to justify the seizure. (As we discuss below, are initiated to determine whether the assets federal adoptions are no longer allowed in were seized appropriately and can be kept for California.) subsequent distribution. As we discuss below, Cases that are not pursued through federal proceedings are instead pursued through state 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT proceedings. These include cases that state or for drug-related asset forfeiture, judicial local jurisdictions choose to not have adopted or proceedings are required when an individual are not eligible for adoption, as well as cases that files a claim contesting the seizure of cash joint investigations choose to pursue through state or property. Judicial proceedings can occur (rather than federal) proceedings. through criminal or civil proceedings. The Individuals Allowed to Contest Seizures burden of proof in criminal proceedings in Proceedings. Federal and individual state is generally much higher than in civil laws specify processes by which individuals can proceedings as all criminal convictions require challenge seizures. Individuals can contest seizures proof “beyond a reasonable doubt”—the for various reasons. For example, individuals highest burden of proof. While proof beyond a can claim that the seizure was inappropriate reasonable doubt is required for certain seized (such as not complying with statutorily mandated items in civil proceeding (such as vehicles and procedures). Individuals can also claim that they homes) in California, a lower burden of proof— had no knowledge of the suspected criminal known as “clear and convincing evidence”—is activity (such as an individual unknowingly loaning required for other items (such as cash above a vehicle to another person who uses it for illegal a certain threshold). An even lower burden purposes). Whether a seizure is contested typically of proof—known as “preponderance of the determines how asset forfeiture proceedings must evidence”—generally must be met in federal be adjudicated. civil proceedings. In California, verified claims contesting forfeiture in either criminal or civil Two Ways to Adjudicate Proceedings at Both proceedings are generally heard by a jury. Federal and State Level. Proceedings generally either end with an official order to (1) forfeit the items (allowing them to be kept and distributed) Distribution or (2) return the items to a specified party. Asset Federal and individual state laws generally forfeiture at both the federal and state level dictate how asset forfeiture proceeds will be can occur through one of the following types of distributed. (Noncash items in asset forfeiture proceedings: proceedings may be sold, destroyed, or kept for official law enforcement use.) Individual state and • Administrative Proceedings. Administrative local laws also dictate the conditions under which proceedings generally allow prosecutors or law enforcement and prosecutorial agencies can law enforcement agencies to issue an order to receive distributions from the federal government. forfeit seized items without court involvement under certain conditions. These proceedings Distributions From Federal Proceedings are generally authorized in cases involving Generally Based on Agency Workload. Federal specific items that fall below a certain value law allows for the deduction of certain costs threshold or where no one files a claim (such as victim compensation costs) prior to the contesting the forfeiture. For example, in distribution of any remaining proceeds—also known California, district attorneys are authorized to as net proceeds—to state and local agencies order forfeiture of seizures totaling less than who worked on the case. Currently, the amount $25,000 if appropriate notice is provided and of distribution each agency receives is generally no claim contesting the forfeiture is filed within based on the level of resources or work it invested. 30 days. However, the federal government generally abides by agreements signed by agencies participating in • Judicial Proceedings. Federal and state taskforces that specify distribution percentages. laws require judicial proceedings under certain circumstances—such as for certain Distributions From State Proceedings types of asset forfeiture, items that exceed Depends on Criminal Offense Type. Individual specific thresholds, or items that an state laws can also allow for the deduction of individual contests. For example, in California certain expenses prior to distribution of the net www.lao.ca.gov 5 analysis full gutter AN LAO REPORT proceeds. Distribution of remaining proceeds their proportionate contribution or distribution depends on the type of criminal offense. In percentages in signed task force agreements California, drug-related asset forfeitures (the (about $19.6 million in 2018). 15 percent is to subject of SB 443), are subject to the following be set aside for funding programs to combat distributions: drug abuse and divert gang activity. • 1 percent of net proceeds to a nonprofit Use of Funding Limited. Federal and individual organization of local prosecutors for training state laws generally dictate how asset forfeiture on asset forfeiture ($303,000 in 2018). proceeds can be used. For example, both federal • 10 percent to the prosecutorial agency that and California laws prohibit these proceeds processed the forfeiture (about $3.3 million in from being used to supplant any existing law 2018). enforcement funding. Examples of allowable uses include law enforcement equipment and training. • 24 percent to the state General Fund (about Federal law includes additional restrictions, such $7.3 million in 2018). as prohibiting transfers of monies to other law • 65 percent to law enforcement entities that enforcement agencies. participated in the seizure generally based on SB 443 MADE CHANGES TO ASSET FORFEITURE Senate Bill 443, which became effective in $40,000 unless there is a conviction in federal court January 2017, made several changes to the state’s for a criminal offense for which property is subject asset forfeiture processes related to drugs. In to forfeiture under state law. A criminal conviction, particular, it made changes to California’s forfeiture however, is not required for cases in which the processes and their interaction with the federal forfeited property is cash or negotiable instruments asset forfeiture processes. We discuss below the of $40,000 or more. major changes. Changes to California’s Asset Changes to California’s Interaction Forfeiture Processes With Federal Asset Forfeiture Increases Burden of Proof Required for Processes Seizures Between $25,000 and $40,000. Prior to Prohibits Federal Adoptions. Senate the implementation of SB 443, prosecutors were Bill 443 prohibits state and local law enforcement required to demonstrate beyond a reasonable agencies from requesting that the federal doubt that the forfeiture of certain items— government adopt cases in which federal law including vehicles, homes, and cash or negotiable enforcement has no involvement. (We note that instruments up to $25,000—met state requirements the federal government temporarily suspended for their seizure (such as being justified under an adoptions from January 2015 through July 2017— authorized forfeiture theory). Clear and convincing about six months after the implementation of evidence (a lower burden of proof) was required for SB 443.) However, SB 443 did not change the cash and negotiable instruments above $25,000. ability for state and local law enforcement agencies Senate Bill 443 increases the burden of proof to participate in joint investigations. required for cash and negotiable instruments between $25,000 to $40,000 to beyond a Requires Criminal Conviction for Receipt of reasonable doubt. Cash and negotiable instruments Proceeds From Federal Proceedings. Senate above $40,000 continue to require a lower burden Bill 443 prohibits state and local law enforcement of proof. agencies participating in federal joint investigations from receiving distributions from seizures under 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT Requires Criminal Conviction in Civil Judicial Other Provisions Proceedings for Seizures Between $25,000 Senate Bill 443 requires that our office provide and $40,000. For all seized items for which proof a report to the Legislature by December 31, beyond a reasonable doubt is required, the court 2019 containing data about the economic impact can only issue an order for asset forfeiture if: of the above changes on state and local law (1) a defendant is convicted in a related criminal enforcement budgets. We note that SB 443 made case, (2) the conviction is for an offense for which various other changes to the state’s asset forfeiture asset forfeiture is allowable under state law, and processes. For example, it increased the types of (3) the offense generally occurred within five years asset forfeiture-related information that state and of the initiation of the asset forfeiture process. local law enforcement agencies are required to With SB 443 requiring proof beyond a reasonable report to the California Department of Justice (CA doubt for cash or negotiable instruments between DOJ). However, SB 443 does not require our office $25,000 to $40,000, these three conditions must to evaluate the impact of these other changes. be met for these seizures as well. DIFFICULT TO DETERMINE ECONOMIC IMPACT OF SB 443 CHANGES In preparing this report, we analyzed the annual to California law enforcement. For example, asset forfeiture data submitted to and reported in recent years the federal government has no by CA DOJ. We also supplemented this data with longer distributed asset forfeiture proceeds various other federal, state, and local data. For directly to taskforces. Instead, proceeds are example, we used federal asset forfeiture data as only distributed to a fiduciary agency (an entity well as state and local law enforcement budget legally responsible for managing the assets for data. In analyzing the data, we identified a number another entity) or directly to taskforce participating of challenges with the data that make it difficult to entities. Additionally, law enforcement agencies isolate and determine the economic impact of the can no longer transfer federal asset forfeiture changes enacted by SB 443. proceeds between themselves. These changes potentially make it more administratively and legally Data Reflect Impacts of Changes burdensome for certain law enforcement agencies Outside of SB 443 to obtain forfeiture proceeds, particularly those agencies that only participate in asset forfeiture A number of other changes occurred regarding through taskforces. This burden could cause some asset forfeiture at both the federal and state level at agencies to limit their participation in taskforces, or around the same time SB 443 became effective thereby reducing the amount of asset forfeiture in January 2017. It is possible that some of these proceeds they receive. However, the data might not changes have increased distributions, while other fully reflect this as agencies could be in the process changes could have reduced distributions. This of still adapting to these changes. means that the data reflect the net effect of all State Changes That Impacted Asset of these changes (including SB 443), making it Forfeiture. At the same time, a number of changes difficult to separate the impact of SB 443 alone. to California law similarly could have impacted We discuss these other changes to asset forfeiture the amount state and local law enforcement processes below. agencies receive from asset forfeiture. For Federal Changes That Impacted Asset example, Proposition 64 (2016) legalized cannabis Forfeiture. The federal government made several and Proposition 47 (2014) reduced penalties for changes to federal asset forfeiture processes that collectively could have impacted distributions www.lao.ca.gov 7 analysis full gutter AN LAO REPORT nonviolent drug crimes. Both of these changes understate total state asset forfeiture proceeds— likely resulted in reduced asset forfeitures. particularly in 2011 and 2012. It also makes it Other Federal and State Actions. Other difficult to determine if changes in state asset federal and state actions could have impacted forfeiture proceeds are a result of changes in the asset forfeiture distributions. For example, due amount forfeited or simply changes in the amount to budget cuts in 2015, the federal government reported. For example, a significant factor in the delayed distributions from federal asset forfeiture increase in state forfeiture distributions reported in proceedings for at least a year. This delay in 2013 was likely due to more complete reporting. payments likely means that asset forfeiture data Amounts Provided to Certain Law following this period is skewed as the federal Enforcement Agencies Could Be Understated. government distributed more monies than it Data on state asset forfeiture cases included otherwise would have. Similarly, local budgetary distributions to taskforces. However, based on choices after the recession could have impacted certain taskforce agreements, some of these the level of law enforcement or prosecutorial distributions are subsequently allocated to the resources dedicated to asset forfeiture activities— local law enforcement agencies participating in and thereby the amount of asset forfeiture the taskforce. These subsequent distributions are proceeds distributed. not reflected in the state data, meaning that total Data Reported to CA Figure 1 DOJ Incomplete and 24 Counties Did Not Report State Asset Limited Forfeiture Data in at Least One of the Past Eight Years Data reported to CA DOJ, County 2011 2012 2013 2014 2015 2016 2017 2018 which have been used for this Alameda report, is incomplete and limited Alpine for various reasons we describe Amador below. This makes it even more Contra Costa difficult to determine the economic Del Norte Fresno impact of the changes enacted by Lassen SB 443. Los Angeles Reporting on State Cases Marin Sometimes Did Not Occur. State Mariposa law requires annual reporting Mendocino on asset forfeiture cases that Modoc are resolved through state Napa proceedings to the CA DOJ. Sacramento However, 41 percent of the state’s San Benito 58 counties did not report such San Francisco data in at least one of the past San Luis Obispo Santa Barbara eight years. Figure 1 lists the Santa Clara 24 counties that did not report Sierra at least once in the past eight Siskiyou years and indicates the year in Trinity which they did not report. For Yolo example, Los Angeles County did Yuba not report in 2011 and 2012 while Sacramento County did not report in 2012. As a result, state data 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT distributions to individual law enforcement agencies Other Challenges Make Comparisons that received them are understated. Difficult Law Enforcement Still Adapting to To evaluate the economic impact of SB 443, New Requirements to Report on Federal we analyzed data reported to CA DOJ. We also Distributions. Senate Bill 443 required reporting of supplemented that data with other federal, state, new data related to distributions from federal asset and local data. However, challenges with those forfeiture cases. However, it appears that the data data sources also make comparisons difficult. could be incomplete. This could be partially due Federal and State Annual Data Reports Begin to this being a new reporting responsibility for law in Different Months. The state and federal data enforcement agencies and future reports could be used cover different time periods. For example, more complete. According to the data, California the federal data are generally based on the federal law enforcement agencies received distributions fiscal year (which begins in October) while the state from federal cases totaling $13.6 million in 2017 data are based on the calendar year, or the state and $42.2 million in 2018. In comparison, the fiscal year (which beings in July). This can skew the federal government reported distributions to data and the patterns observed. California of $57 million in 2017 and $108.9 million in 2019. While this data cannot be readily Federal Data Include All Forfeitures. U.S. DOJ compared—as discussed in more detail later—it and the U.S. Department of Treasury both report suggests an underreporting of the state data. As data on total federal asset forfeiture distributions a result, the data related to federal asset forfeiture to individual states, including California. However, distributions presented later in this report relies on the data include asset forfeiture distributions for the data reported by the federal government. all criminal offenses—not just drug-related asset forfeitures that were affected by SB 443. While Less Than Two Years of Data Available After stakeholders believe that a significant portion of Implementation of SB 443. Data is generally these distributions are drug-related, the precise reported when cases are resolved and distribution portion is unknown. occurs—a process which can take months or years to complete. As a result, it is common for data Data on Distributions to Specific Agencies on asset forfeiture distributions to lag by at least Excludes Some Federal Distributions. Both one year. Since SB 443 went into effect in January U.S. DOJ and the U.S. Department of Treasury 2017, there is currently less than two years of report total federal asset forfeiture distributions complete data on its effects. This is insufficient to by state. However, unlike the U.S. DOJ, the draw meaningful conclusions from. For example, US Department of Treasury does not report the it is likely that law enforcement and prosecutorial amount it distributes to individual law enforcement agencies are still adapting to SB 443’s changes. agencies—including those in California. Thus, data As a result, the impact of the measure’s effects on on the total amount of asset forfeiture distributions these agencies’ behavior will not be fully captured each law enforcement agency receives from the by the existing data. federal government are not available. DATA RELATED TO POTENTIAL IMPACTS OF SB 443 Despite the challenges described above, certain • Before 2015. Data from this period reflect trends and patterns can be observed in the asset forfeiture distributions before any available data. While these trends and patterns components of SB 443 went into effect, cannot be solely attributed to SB 443, they including the prohibition of federal adoptions can provide a sense of its potential impacts. In which was implemented by the federal examining the data, we generally compared three government prior to the enactment of SB 443 time periods: (discussed below). www.lao.ca.gov 9 analysis full gutter AN LAO REPORT • 2015 to 2016. Data from this period begin $126.4 million to $90.7 million. This time period to reflect the impact of the prohibition of reflects the implementation of SB 443. In 2018, federal adoptions. By suspending adoptions distributions rebounded with a $48.4 million in January 2015, the federal government increase (or 53 percent) from 2017. As we discuss effectively implemented this aspect of SB 443. below, virtually all of this 2018 increase is tied to a • 2017 to Present. Data from this period begin single asset forfeiture case that is likely unrelated to to reflect the implementation of SB 443. SB 443. On net, the trends and patterns observed in the State and Federal Distributions data suggest that SB 443 potentially reduced the Fluctuated in Recent Years amount of asset forfeiture distributions received by Figure 3 provides a breakdown of distributions California. However, it is not possible to estimate from state and federal asset forfeiture cases. As the size of this potential impact due to the data shown, the amount of distributions from each challenges previously discussed. As such, the type of case has fluctuated in recent years. In conclusions we draw below represent our best most years, state asset forfeiture distributions sense of the potential impact of SB 443, but should represent less than 30 percent of total asset not be considered definitive. forfeiture proceeds. As discussed above, the California Generally Receives More federal government prohibited adoptions beginning Than $100 Million Annually in Asset in 2015 (a prohibition subsequently included in SB 443). Between 2015 and 2016, state asset Forfeiture Distributions forfeiture distributions increased by 30 percent As shown in Figure 2, California generally while federal asset forfeiture distributions declined receives more than $100 million annually in total by 11 percent. This could reflect law enforcement asset forfeiture distributions. Annual distributions choosing to pursue cases at the state level as a between 2013 and 2016 fluctuated slightly, but result of the prohibition on federal adoptions. were relatively stable. However, distributions In both 2017 and 2018, state asset forfeiture decreased significantly by $35.8 million (or distributions declined by about 10 percent. 28 percent) between 2016 and 2017—from Similarly, federal asset forfeiture distributions declined by 36 percent from Figure 2 2016 to 2017—from $88.5 million to $57 million. These declines Total Asset Forfeiture Distributions to California could reflect the impact of (In Millions) SB 443’s increased burden of $160 proof and conviction requirements SB 443 Not in Effect Adopt F io e n d s e r B a a l nneda SB 443 in Effect for state and federal cases, as 140 well as the continued impact 120 of the elimination of federal 100 adoptions. 80 As shown in Figure 3, federal distributions increased 60 by 91 percent in 2018—from 40 $57 million to $108.6 million. 20 However, as shown in Figure 4, this significant increase in 2011 2012 2013 2014 2015 2016 2017 2018 2018 is due to an unnaturally large increase in U.S. a While SB 443 was not in effect during this period, the federal government effectively implemented one of its major provisions by suspending federal adoptions in January 2015. Department of Treasury asset forfeiture cases. Specifically, 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT such distributions increased Figure 3 by $45 million (or 543 percent) Total State and Federal Asset between 2017 and 2018. This Forfeiture Distributions to California increase can be attributed (In Millions) to the distribution related to State Federal a single U.S. Department of Treasury case—likely unrelated $120 to SB 443—that involved a bank SB 443 Not in Effect Adopt F io e n d s e r B a a l nneda SB 443 in Effect accused of violating money 100 laundering laws. At the same time, distributions from U.S. DOJ 80 cases—which are more likely to be affected by SB 443 given that many involve drug crimes— 60 increased by 13 percent (or $6.5 million) in 2018. Given that 40 federal cases can only be pursued through joint investigations, 20 this increase could reflect law enforcement pursuing more cases federally through joint 2011 2012 2013 2014 2015 2016 2017 2018 investigations. a While SB 443 was not in effect during this period, the federal government effectively implemented one of its major provisions by suspending federal adoptions in January 2015. State Share of US DOJ Asset Forfeiture Distributions Has Figure 4 Significantly Declined Federal Asset Forfeiture Distributions to California Since 2017 (In Millions) U.S. DOJ Cases U.S. Department of Treasury Cases Federal data indicate that hundreds of millions of dollars $100 are collected and made available SB 443 Not in Effect Adopt F io e n d s e r B a a l nneda SB 443 in Effect 90 for distribution from U.S. DOJ asset forfeiture cases annually 80 in California. (Comparable 70 data are not available for U.S. Department of Treasury 60 cases.) However, only a portion 50 of this amount is distributed to agencies in the state, with 40 the remainder distributed to 30 various other purposes (such as federal law enforcement 20 agencies). For example, in 10 2016, $117.5 million was collected and made available 2011 2012 2013 2014 2015 2016 2017 2018 for distribution from U.S. DOJ a While SB 443 was not in effect during this period, the federal government effectively implemented cases in California while one of its major provisions by suspending federal adoptions in January 2015. U.S. DOJ = United States Department of Justice. www.lao.ca.gov 11 analysis full gutter AN LAO REPORT $77.6 million—66 percent—was distributed within Number of State Cases Initiated the state. As shown in Figure 5, this represented Declined Between 2014 and 2017 a major increase in the state’s share. It is As shown in Figure 6, the number of state possible that this increase was due to the federal asset forfeiture cases initiated declined by government delaying to 2016 some distributions 26.6 percent between 2014 and 2017. While that normally would have been allocated in 2015 the earlier declines are unrelated to SB 443, due to budget cuts, as mentioned previously. the decline in 2017 could be due to the pursuit Following implementation of SB 443 in of fewer cases given SB 443’s new burden 2017, the state’s share significantly declined to of proof and conviction requirements in state 12 percent and remained at this level in 2018, as cases. For example, it is possible that certain shown in Figure 5. This is potentially due in part law enforcement agencies began pursuing to SB 443. For example, SB 443’s prohibition fewer seizures of assets between $25,000 and on receiving certain federal distributions without $40,000. a conviction could have reduced the state’s In 2018, however, the number of state cases share for a couple of reasons. According to initiated increased. This could suggest a shift stakeholders, federal entities are potentially away from federal cases back to state cases, less likely to pursue convictions due to the high partially in response to the implementation burden of proof required. Stakeholders also of SB 443. For example, some stakeholders indicated that it was often difficult to obtain reported that the various changes to the federal information on whether a conviction occurred in asset forfeiture process described above as well federal cases, making agencies unable to receive as the inability to obtain information from the distributions in such circumstances. federal government on whether a conviction was obtained—which is required under SB 443—could make Figure 5 asset forfeiture through federal California's Share of U.S. DOJ Asset Forfeiture Distributions proceedings less attractive. SB 443 Not in Effect Federal SB 443 in Effect Value of Assets Seized Adoptions Banneda 70% and Amount Distributed in State Asset Forfeiture 60 Cases Increased Until 50 2016 Figure 7 shows the value 40 of assets seized as well as the amount distributed in state 30 asset forfeiture cases, which has fluctuated in recent years. As we 20 discuss below, this likely reflects how certain individual law 10 enforcement agencies may have changed in how they adapted to SB 433 during this time period. 2011 2012 2013 2014 2015 2016 2017 2018 As shown in Figure 7, both a While SB 443 was not in effect during this period, the federal government effectively implemented one of its major provisions by suspending federal adoptions in January 2015. the value of assets seized and U.S. DOJ = United States Department of Justice. the amount distributed generally increased until 2016, before 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT declining in 2017 (the year in which SB 443 was implemented). Figure 6 Specifically, the value of assets Number of State Asset Forfeiture Cases Initiated seized declined by 15 percent between 2016 and 2017 (from 4,000 $49.5 million to $42.3 million), SB 443 Not in Effect Adopt F io e n d s e B ra a l nneda SB 443 in Effect while the amount distributed 3,500 declined by 11 percent (from $37.9 million to $33.7 million). 3,000 This decrease could potentially reflect law enforcement 2,500 agencies’ initial reactions to SB 443. For example, fewer 2,000 asset forfeiture cases were potentially pursued in the short 1,500 run before agencies determined 1,000 how they would adapt their operations. Additionally, more 500 cases could have instead been pursued at the federal level through joint investigations given 2011 2012 2013 2014 2015 2016 2017 2018 the new burden of proof and a While SB 443 was not in effect during this period, the federal government effectively implemented conviction requirements for state one of its major provisions by suspending federal adoptions in January 2015. cases. However, the trend in the value of assets seized and the amount distributed diverged in Figure 7 2018. Value of Assets Seized and Amount Specifically, as shown in Distributed in State Asset Forfeiture Cases Figure 7, the value of assets (In Millions) seized in state cases increased $60 by 13 percent between 2017 Federal and 2018. This could reflect law SB 443 Not in Effect Adoptions Banneda SB 443 in Effect enforcement and prosecutorial 50 agencies beginning to adapt to SB 443 changes by identifying Value of Assets Seized 40 the most cost-effective ways to modify their behavior and operations on an ongoing basis. 30 For example, law enforcement agencies could be focusing 20 on higher-value seizures to avoid SB 443 thresholds Total Distributions 10 requiring conviction. Law enforcement agencies could also be choosing to pursue more cases at the state level, 2011 2012 2013 2014 2015 2016 2017 2018 instead of at the federal level. a While SB 443 was not in effect during this period, the federal government effectively implemented one of its major provisions by suspending federal adoptions in January 2015. This could be due to challenges www.lao.ca.gov 13 analysis full gutter AN LAO REPORT in obtaining information on federal convictions, or conviction standards required to keep seized which is required for law enforcement to receive assets. distributions for certain asset forfeiture cases At the same time, the amount distributed to under SB 443. taskforces has steadily increased since 2016 In contrast to the increase in the value of with taskforces receiving the most in distributions assets seized, the amount distributed declined beginning in 2017. This could potentially reflect by another 10 percent between 2017 and 2018. law enforcement agencies choosing to increase The decrease in the amount distributed despite their participation in taskforces as taskforces are the increase in the value of assets seized could potentially more effective at pursuing higher-value also reflect the impact of SB 443 changes. For cases not subject to SB 443 requirements. example, the burden of proof and conviction Additionally, this could reflect taskforces shifting requirements in state cases could result in more attention from federal asset forfeiture distributions not occurring despite assets being to state cases. This could be occurring given seized as convictions were not obtained and/or changes to federal asset forfeiture processes the higher burden of proof requirements were not (such as the restriction on transferring met. distributions between participants) that could make it more difficult for taskforces to receive Asset Forfeiture Distributions to distributions from federal proceedings. Most Agencies Generally Declined U.S. DOJ Distributions to Law Enforcement Until 2018 Agencies Generally Declined. As shown in Figure 9, police departments receive the State Asset Forfeiture Distributions to Law most U.S. DOJ distributions. (Comparable Enforcement Declined, Except for Taskforces. data from U.S. Department of Treasury cases A little more than 500 prosecutorial and law is unavailable.) In recent years, the amount enforcement agencies have received at least one distribution from state asset forfeiture Figure 8 dollars since 2011. As shown State Asset Forfeiture Distributions to Law Enforcement in Figure 8, police departments (In Millions) have typically received the $12 greatest share of state asset Federal forfeiture distributions. The SB 443 Not in Effect Adoptions Banneda SB 443 in Effect amount distributed to police 10 departments declined between 2016 and 2018, while the 8 amount distributed to sheriffs’ Police Departments offices declined between 2015 and 2018. The decline 6 in distributions to police Sheriffs’ Offices departments and sheriffs’ offices 4 could reflect the impact of Taskforces SB 443’s burden of proof and 2 conviction requirements for state Other cases. As mentioned above, law enforcement could be pursuing 2011 2012 2013 2014 2015 2016 2017 2018 fewer cases impacted by such requirements or might not be a While SB 443 was not in effect during this period, the federal government effectively implemented able to meet the burden of proof one of its major provisions by suspending federal adoptions in January 2015. 14 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT of these distributions to law Figure 9 enforcement agencies has generally declined—potentially U.S. DOJ Asset Forfeiture Distributions to Law Enforcement (In Millions) reflecting the impact of the prohibition on federal adoptions. $50 However, the magnitude of the SB 443 Not in Effect Adopt F io e n d s e r B a a l nneda SB 443 in Effect 45 decreases varied. Agencies that Police Departments relied more heavily on pursuing 40 asset forfeiture cases through 35 joint investigations would experience less of an impact, 30 as such investigations remain 25 permissible under SB 443. For Taskforces 20 example, certain taskforces have historically been comprised 15 Sheriffs’ Offices of federal, state, and local 10 partners participating in joint Other investigations. Such taskforces 5 would be impacted less by the prohibition on federal adoptions. 2011 2012 2013 2014 2015 2016 2017 2018 This could partly explain why a While SB 443 was not in effect during this period, the federal government effectively implemented the amount distributed to one of its major provisions by suspending federal adoptions in January 2015. U.S. DOJ = United States Department of Justice. taskforces did not decline as much compared to other law enforcement agencies prior to Asset Forfeiture Generally Reflects 2016. Additionally, the amount distributed to Small Share of Agency Budgets taskforces increased slightly between 2016 and 2017. This increase could reflect law enforcement Most Agencies Receive Less Than 1 Percent agencies reacting to SB 443’s burden of proof of Their Budget From Asset Forfeiture. Total and conviction requirements for both state and asset forfeiture distributions represent a small federal cases by choosing to pursue more asset share of total law enforcement and prosecutorial forfeiture cases through joint investigations. agencies’ budgets. (We would note, however, that Between 2017 and 2018, distributions to asset forfeiture dollars can represent a sizeable both sheriffs’ offices and police departments portion of the budget of taskforces, though data increased, while distributions to taskforces on taskforce budgets are not readily available.) In decreased. The increase to sheriffs’ offices recent years, asset forfeiture distributions made and police departments could indicate that up less than 1 percent of the budget for more than they are adapting to SB 443 by increasing their 80 percent of agencies. For example, for those participation in joint investigations. The decline in agencies with available data in 2018, 246 out of federal distributions to taskforces—along with the the 276 agencies that received distributions fell increase in state distributions to taskforces—is within this category. (For small agencies, a less consistent with taskforces shifting their attention than 1 percent share of the budget could represent away from federal cases to state cases in only hundreds of dollars, while for a large agency response to changes in federal processes that it could represent the low millions of dollars.) make receiving distributions more difficult, as Since 2016, the number of agencies for whom discussed above. asset forfeiture distributions represent more than 1 percent of their budgets has slightly declined, which could reflect certain agencies pursuing fewer www.lao.ca.gov 15 analysis full gutter AN LAO REPORT asset forfeiture cases or receiving Figure 10 fewer distributions due to SB 443. Percent of Total Asset Forfeiture Majority of Agencies Receive Distributions From Federal Proceedings Less Than 20 Percent of Asset Number of Agencies, 2018 Forfeiture Distributions From Federal Proceedings. As shown 200 in Figure 10, in 2018, 186 out 180 of 336 agencies (or slightly more than half) that received asset 160 forfeiture distributions reported 140 receiving less than 20 percent 120 of their distributions from federal cases. However, 104 agencies 100 reported receiving more than 80 80 percent of their distributions 60 from federal cases. This pattern has fluctuated slightly in past 40 years, but has generally remained 20 stable. As such, despite the changes enacted by SB 443, 0 - 20% 20.1 - 40% 40.1 - 60% 60.1-80% 80.1-100% a relatively consistent number of agencies continue to receive most of their asset forfeiture distributions from federal cases. CONCLUSION Senate Bill 443 implemented various changes to challenges with the available data. As such, it the state’s asset forfeiture processes and directed is difficult to draw definitive conclusions from our office to provide data about the economic the data. However, asset forfeiture distributions impact of these changes upon state and local generally reflect a small share of agency budgets. law enforcement budgets. While the trends and Additionally, we would note stakeholders indicated patterns observed in available data suggest that that they were still in the process of adapting to SB 443 potentially reduced the amount of asset SB 443 requirements as well as to the various forfeiture distributions received by California changes in the federal asset forfeiture process. agencies on net, it is not possible to estimate This means that data collected in future years the size of this potential impact due to a lack of could provide a more accurate—and potentially complete and accurate data as well as various different—picture of the impact of SB 443. 16 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT www.lao.ca.gov 17 analysis full gutter AN LAO REPORT LAO PUBLICATIONS This report was prepared by Anita Lee and reviewed by Drew Soderborg and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 18 LEGISLATIVE ANALYST’S OFFICE