The 2022-23 Budget: Judicial Branch Proposals

2022-23 BUDGET The 2022-23 Budget: Judicial Branch Proposals Summary In this brief, we provide an overview of the total amount of funding in the Governor’s proposed 2022-23 budget for the judicial branch as well as assess and make recommendations on four specific budget proposals. Trial Court Equity Funding. The Governor’s budget proposes a $100 million ongoing General Fund increase to promote fiscal equity among the trial courts. We find that it is currently unclear how the funding would be allocated, there are different ways to promote fiscal equity, and other priorities—such as funding to address COVID-19 backlogs—could also be considered. We recommend the Legislature ensure the amount of funding provided, as well as how the funding is allocated, reflects its funding priorities for trial court operations. Improvement and Modernization Fund (IMF). The IMF is a state special fund that has struggled to remain solvent in recent years. The Governor’s budget proposes provisional budget language authorizing the transfer of General Fund to the IMF if revenues are lower than expected. While the proposal helps prevent IMF insolvency in 2022-23, insolvency is possible in 2023-24. We recommend the Legislature approve the Governor’s proposal to maintain existing service levels in the budget year, but also take steps to permanently address the fund’s insolvency. Branchwide Information Technology Modernization. The Governor’s budget proposes $34.7 million General Fund in 2022-23 (increasing to $40.3 million annually beginning in 2025-26) for technology modernization projects. We recommend the Legislature approve—as proposed by the Governor—$3.7 million for a new judicial branch information security office and $7.3 million for allocation to the state courts and trial courts to fund local modernization projects as these proposals seem reasonable. To the extent that providing $23.5 million in discretionary funding for branchwide modernization projects allocated at Judicial Council’s discretion is a legislative priority, we recommend modifying the proposal to increase legislative oversight. Facility Modification and Construction. The State Court Facilities Construction Fund (SCFCF) is an insolvent special fund that supports the judicial branch’s court facility-related projects. The Governor’s budget proposes: (1) $40 million one-time General Fund to backfill the SCFCF and authority for additional funding if needed, (2) $15.4 million ongoing General Fund for facility modification projects, and (3) $263 million one-time General Fund and lease revenue bond authority for eight trial court construction projects. To permanently address the SCFCF insolvency, we recommend the Legislature shift full responsibility for trial court construction to the General Fund and appropriate funding for facility-related projects based on its General Fund priorities. If a priority, the Legislature could consider additional one-time funding for court facility projects such as for facility modification or deferred maintenance. GABRIEL PETEK | LEGISLATIVE ANALYST FEBRUARY 2022 www.lao.ca.gov 1 2022-23 BUDGET OVERVIEW The judicial branch is responsible for the proposes about $5.3 billion in support in 2022-23. interpretation of law, the protection of individuals’ Between 2012-13 and 2022-23, the percent of total rights, the orderly settlement of all legal disputes, operational funding from the General Fund has and the adjudication of accusations of legal steadily increased from 25 percent in 2012-13 to violations. The branch consists of statewide 55 percent in 2022-23. This growth is generally due courts (the Supreme Court and Courts of Appeal), to increased operational costs as well as decreases trial courts in each of the state’s 58 counties, in fine and fee revenue. and statewide entities of the branch (Judicial Governor Proposes $5.1 Billion in State Funds Council, the Judicial Council Facility Program, for Judicial Branch. As shown in Figure 2, the and the Habeas Corpus Resource Center). Governor’s budget proposes about $5.1 billion from The branch receives support from several all state funds (General Fund and special funds) funding sources including the state General to support the operations of the judicial branch Fund, civil filing fees, criminal penalties and fines, in 2022-23, an increase of $52 million (1 percent) county maintenance-of-effort payments, and above the revised amount for 2021-22. (These totals federal grants. do not include expenditures from local reserves or General Fund Becoming Greater Share of trial court reserves.) Of this amount, about $3 billion Judicial Branch Budget. Figure 1 shows total (or 61 percent) is from the General Fund. This is a operational funding for the judicial branch from net increase of $65 million (or 2 percent) from the 2012-13 to 2022-23. Total funding for the judicial 2021-22 amount. branch has steadily increased and the Governor Figure 1 Total Judicial Branch Funding (In Billions) $6 Local Revenues State Special Funds General Fund 5 4 3 2 1 - 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 (estimated) (projected) a State law requires excess property tax revenues collected by county offices of education beyond their annual funding allotment be used to offset state General Fund support of trial courts. This chart reflects these revenues as state special funds. 2 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Figure 2 Judicial Branch Budget Summary—All State Funds (Dollars in Millions) Change From 2021-22 2020-21 2021-22 2022-23 Actual Estimated Proposed Amount Percent State Trial Courts $2,987 $3,686 $3,797 $111 3.0% Supreme Court 49 54 55 1 1.4 Courts of Appeal 243 268 279 11 4.2 Judicial Council 180 231 295 64 27.7 Judicial Branch Facility Program 473 763 627 -135 -17.7 Habeas Corpus Resource Center 16 19 19 — 0.6 Totals $3,948 $5,021 $5,072 $52 1.0% TRIAL COURT EQUITY FUNDING Background Workload Formula. Since 2013, the judicial branch has used a formula—known as the Funding Trial Court Operations. The state’s “workload formula”—to calculate how much funding annual budget typically designates the total each individual trial court should receive based amount of funding available to fund trial court on its workload as measured by various factors, operations. While a portion of this funding is including the number and type of filings each provided for specific programs or purposes (such court receives. This amount is known as a court’s as court interpreters), a significant portion of workload formula identified need. The formula the funding is provided on a discretionary basis then calculates the level of funding each trial court with little to no restrictions on its use. Judicial actually received as a percentage of its workload Council—the policymaking and governing body of formula identified need. This amount is known as the judicial branch—is responsible for allocating the court’s funding ratio. At the end of 2021-22, the discretionary funding to individual trial courts. individual trial court funding ratios are estimated Upon receiving its allocation, each individual trial to range from 73 percent to over 100 percent court has significant flexibility in determining how of their workload formula identified need— its share of discretionary funding from the state is with the statewide average funding ratio being used. This can result in significant differences in about 80 percent. the programs or services offered and the level of service provided across trial courts. For example, Judicial Council has adopted certain rules some trial courts may choose to use a greater related to the workload formula to determine how to proportion of their funding to provide increases in allocate discretionary funding increases provided employee compensation than other courts. in the annual state budget. While these rules have changed over the years, since 2018-19, increased In recent years, increased funding for trial court discretionary funding provided in the state budget operations has generally been provided through is first allocated to the 15 smallest trial courts to the approval of (1) budget requests for specific ensure they receive 100 percent of their workload priorities (such as increased funding to implement formula identified needs. Up to 50 percent of the enacted legislation and funding to promote fiscal remaining funding is then allocated to courts below equity), (2) discretionary (or unallocated) funding the statewide average funding ratio. The remaining increases, and (3) funding to support cost increases amount is then allocated to all trial courts generally to maintain existing service levels (such as based on workload. funding for increased trial court health benefit and retirement costs). www.lao.ca.gov 3 2022-23 BUDGET State and Judicial Branch Took Various Actions Different Ways to Promote Fiscal Equity to Address Pandemic-Related Impacts. Since the Among Individual Trial Courts. We note that start of the COVID-19 pandemic, the state and the promoting fiscal equity is a goal with merit as it judicial branch have taken various actions to protect promotes equal access to justice across the state. the health of court staff, stakeholders, and members To accomplish this, there are different ways to do of the public, as well as to address pandemic-related so depending on the specific equity-related goals impacts on trial court operations. Some of these the Legislature has (for example, narrowing the gap actions included restricting physical access to court in funding between the trial courts with the highest facilities, temporarily suspending court activities, and and lowest trial court funding ratios or bringing authorizing remote proceedings to allow cases to all courts up to a minimum funding ratio) and how move forward. quickly that goal is to be reached. These decisions, The actions taken to respond to the pandemic in turn, dictate how much funding is needed as well have generally had three major impacts on trial as the number of courts that will receive funding court operations: (1) reduced service levels; (2) case and the specific amount of funding each court will backlogs and delays; and (3) increased one-time receive. One example is to specify an equity goal, and ongoing costs, such as from changing business separate from the workload formula allocation rules practices to implement technology for remote discussed above. For example, the Legislature proceedings. These impacts on individual trial courts could specify that the funding be used to bring all differ due to various factors, including the specific courts up to the statewide average funding ratio actions taken during the pandemic. For example, (similar to how a $47.8 million ongoing General some courts may have larger backlogs or increased Fund augmentation was allocated in the 2018-19 costs due to a lack of space to conduct jury trials budget package). This would require funding less while appropriately socially distancing. The state than the $100 million proposed by the Governor. and the judicial branch have taken various actions Alternatively, the Legislature could require the to address such impacts. For example, the 2021-22 funding be used to ensure that no courts have a budget included $90 million one-time General Fund to funding ratio below a certain level. For example, the address case backlogs—with $30 million specifically $100 million could be sufficient to bring all courts for certain criminal case backlogs and $60 million for up to an estimated 84.5 percent of their workload backlogs across all case types. formula identified need. Under these approaches, only a subset of trial courts would receive funding Governor’s Proposal but there would be greater improvements in fiscal The Governor’s 2022-23 budget proposes a equity as the range of funding differences between $100 million ongoing General Fund increase to trial courts would be narrowed more quickly. promote fiscal equity among the trial courts. While the Another example would be to allocate the funds would be used to promote fiscal equity, Judicial funding using workload formula allocation rules. Council would have discretion in the allocation of While up to half of the funding would be allocated to the funds. courts below the statewide average funding ratio, all courts would receive some portion of the funding. Assessment Under this approach, all courts would benefit Unclear How Judicial Council Would from additional funding, though courts below the Allocate Funding. At the time of this analysis, it is statewide average funding ratio would receive unclear how the proposed augmentation would be a greater share of the funding. Since all courts allocated to the trial courts. This is because while the would be receiving some funding, this approach Governor’s proposal requires the funding be used to would slow improvements in fiscal equity among address fiscal equity, it would give Judicial Council the trial courts. discretion in allocating these funds and it is unclear how they would do so at this time. This makes it very difficult for the Legislature to assess how the funds will promote fiscal equity among the trial courts and if it is consistent with legislative priorities. 4 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Other Priorities Could Be Considered. Recommendation The Legislature could also determine that other Ensure Funding Reflects Legislative funding priorities are more important. In particular, Priorities. We recommend the Legislature ensure to the extent the pandemic continues to impact the amount of funding provided, as well as how court operations and delay court proceedings, it the funding is allocated, reflects its funding may want to prioritize funding to address backlogs priorities for trial court operations. This can and delays in the short term in order to minimize include specifying how funding must be allocated impacts on court users. For example, social to improve fiscal equity among trial courts (as distancing guidelines could mean that selecting proposed by the Governor) or addressing other and maintaining a jury for jury trials requires more priorities. In particular, the Legislature could provide in-person space, staff, and resources, which in turn some, or all, of the requested funding to address could result in fewer jury trials moving forward at pandemic-related impacts in 2022-23 in order to any given time, resulting in backlogs. Funding could minimize impacts (such as backlogs or delays) on be targeted to address such impacts—such as courts users statewide. This could help address leasing space or hiring temporary staff. Examples of equity in terms of public access to the courts and other priorities outside the pandemic could include how quickly cases can be resolved. To provide prioritizing funding for technology modernization assistance with this, the Legislature could direct as well as physical or remote infrastructure the judicial branch to report in budget hearings to help ensure that individuals have similar on pandemic-related impacts on court operations access—physical, remote, or electronic—across and identify where the greatest needs are. In future all trial courts. years, the funding could be allocated to ensure that all trial courts have at least 84.5 percent of their workload formula identified need. While this would mean that only a subset of trial courts received funding, it would narrow the fiscal inequity among trial courts more quickly. IMPROVEMENT AND MODERNIZATION FUND (IMF) Background • Trial Court Improvement Fund. The purpose of this fund was to support various projects Originally Two Separate Judicial Branch approved by Judicial Council. The fund Funds. In 1997, the state established two special received monies from (1) criminal fine and funds to benefit trial courts. fee revenues and (2) a transfer of 1 percent • Judicial Administration Efficiency and of the amount appropriate to support court Modernization Fund. The purpose of this operations from the Trial Court Trust Fund fund was to promote projects designed to (TCTF). (The TCTF provides most of the increase access, efficiency, and effectiveness funding to support trial court operations.) of the trial courts. Such projects included While Judicial Council had significant flexibility judicial or court staff education programs, regarding the expenditures of monies in the technological improvements, incentives to fund, some of the monies were restricted for retain experienced judges, and improvements specified uses. For example, a portion of the in legal research. The fund received monies fine and fee revenues had to be used for the primarily from a General Fund transfer to the development of automated administrative judicial branch. We note that some of these systems. State law also required that some of funds were redirected to help offset reductions the monies in this fund be redirected back for to the trial courts in 2010-11 and 2011-12. allocations to trial court operations. www.lao.ca.gov 5 2022-23 BUDGET While the Legislature would appropriate a currently apply to the IMF. The judicial branch set amount of funding from the two funds each is required to provide an annual report to the year in the annual budget, Judicial Council was Legislature on the expenditures from the IMF. responsible for approving and allocating monies to IMF Struggles to Remain Solvent specific programs and systems. Accordingly, the Legislature’s role in determining how the funds were Declines in Revenues. When partial payments used was limited. are collected from an individual for criminal fines and fees levied by the courts, state law specifies the Two Funds Merged Into IMF. Chapter 41 of order in which partial payments are to be allocated 2012 (SB 102, Committee on Budget and Fiscal to various state and local funds. In cases where full Review) merged the Judicial Administration payment is not made, funds that are a lower priority Efficiency and Modernization Fund and the Trial pursuant to state law (such as the IMF) receive less Court Improvement Fund into the new IMF. The IMF revenue than those funds that are a higher priority retained all sources of revenues as well as all (such as victim restitution or reimbursement for transfers of monies associated with the two prior certain collection activities). funds. While the Legislature appropriates a total amount of funding from the IMF in the annual As shown in Figure 3, fine and fee revenues state budget, Judicial Council generally has more deposited into the IMF and its predecessors have discretion in how the funds are allocated to specific steadily declined from nearly $88 million in 2006-07 projects and activities than previously. Except for to an estimated $14.6 million in 2021-22—a drop a couple of requirements (such as the requirement of 83 percent. The specific causes of this decline that a certain portion of fine and fee revenues may be due to various reasons. For example, there be used for the development of automated may have been a reduction in collected criminal administration systems), none of the statutory fine and fee revenues allocated to the IMF—such as purposes that applied to the previous two funds from fewer tickets being written for traffic violations Figure 3 Steady Decline in Fine and Fee Revenue to the IMF (In Millions) $100 90 80 70 60 50 40 30 20 10 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13a 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 (estimated) a Improvement and Modernization Fund (IMF) created in 2012-13. 6 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET and/or more fines and fees being waived by the in 2015-16 to expand the judicial branch’s Local court which then reduces the amount available Area Network/Wide Area Network (LAN/WAN) for collection. Even if the total amount of criminal telecommunications network infrastructure fine and fee collections had remained the same, program to include the final four courts that did not state and local funds that are a higher priority in participate in the network. The IMF continues to the distribution of fine and fee payments may have support this program today. been receiving an increased share of the revenue Governor’s Proposal compared to the IMF. The Governor’s budget proposes provisional Judicial Council Previously Authorized budget language authorizing the Director of the More Expenditures Than Available Revenues. Department of Finance to transfer additional As discussed above, state law authorizes Judicial General Fund support to the IMF if revenues are Council to allocate funds from the IMF, as well lower than expected. The transfer can only occur as its predecessor funds, to specific programs 30 days after written notification to the Legislature. and systems with very little legislative oversight. Once annual revenue into the IMF began declining, Assessment Judicial Council struggled to reduce expenditures Proposal Helps Prevent IMF Insolvency to match the amount of available resources. in 2022-23. Based on current projections, the IMF Although the council took some steps to address fund balance will effectively be zero at the end these operational shortfalls by eliminating of 2022-23. This is generally due to the ongoing or reducing certain expenditures, or shifting decline in criminal fine and fee revenue, which expenditures to other fund sources, it continued to has been even greater during the pandemic for authorize funding from the IMF for programs and various reasons, such as the temporary suspension systems in excess of available resources in many of the collection of criminal fines and fees by years. However, in more recent years, Judicial certain trial courts. As such, it is possible that Council has kept expenditures and revenues actual revenues will be even lower than currently more closely aligned. projected. Accordingly, the proposed budget Various Actions Taken to language would ensure that the IMF has sufficient Address Operational Shortfalls funds in 2022-23 to avoid the need for Judicial Council to make midyear expenditure reductions. The persistent operational shortfalls facing the But Insolvency Possible in 2023-24. IMF also led to the state taking various actions However, absent any additional actions, the IMF will beginning in 2015-16. The Legislature increased likely face insolvency in future years. Specifically, revenue available in the IMF in 2015-16 by if revenues and expenditures are similar to the terminating an ongoing $20 million transfer from amounts projected in 2022-23, the IMF would the IMF to the TCTF. Additionally, various budget become insolvent in 2023-24. We estimate up to proposals have been approved to help shift some $18 million could be necessary to backfill the IMF or all funding for certain programs and systems unless steps are taken to reduce expenditures from from the IMF to the General Fund. In addition, the the fund or revenues are greater than anticipated. Legislature provided General Fund support to pay for the expansion of some programs and systems Increased Legislative Oversight Over that otherwise would have been paid by the IMF if Current IMF Programs and Systems Needed. sufficient resources were available. For example, The Legislature generally lacks oversight of IMF the 2019-20 budget included $4.5 million programs and systems as they are informed only General Fund to upgrade a financial and human after expenditures are made. This makes it difficult resources system used by the trial courts and for the Legislature to ensure that its priorities $3.2 million General Fund to replace IMF support are funded and how much funding is provided. for the system. In another example, $5.5 million For example, the Legislature may determine that in ongoing General Fund support was provided certain programs are less important and should www.lao.ca.gov 7 2022-23 BUDGET bear a larger share of any reductions to maintain the IMF that it prioritizes to the General Fund and IMF solvency. The Legislature could also determine eliminate funding for any remaining programs or that certain programs need to be maintained and systems as part of the 2023-24 budget process. should be supported from other fund sources. Specifically, we recommend the Legislature evaluate the need for each program and system Recommendations and its cost-effectiveness relative to all other state Approve Proposed Budget Bill Language. programs currently supported by the General We recommend the Legislature approve the Fund and determine what level of funding, if any, Governor’s proposed provisional budget language is appropriate to provide these programs and as it helps ensure the IMF has sufficient funds to systems. This would greatly increase legislative maintain anticipated expenditure levels. oversight over these programs and systems. Deposit IMF Revenues Into the General Our recommendation to deposit all IMF revenues Fund and Eliminate IMF Next Year. While the into the General Fund and eliminate the IMF would Governor’s proposal would address potential offset the additional General Fund costs of the IMF insolvency in 2022-23, it does not provide a shifted programs and systems. long-term solution to address the IMF’s potential Taking this approach will have three major insolvency which could occur as early as 2023-24. benefits. First, the amount of funding supporting In order to permanently address the IMF’s solvency, IMF programs and systems prioritized by the as well as increase legislative oversight over the Legislature would no longer be dependent on the programs and systems currently funded from the amount of such revenue collected. This allows the IMF, we recommend the Legislature deposit IMF judicial branch and administration to determine revenues into the General Fund and eliminate the the level of support necessary for each program IMF next year. or system based on their operational needs rather To accomplish this, we recommend that than the amount of available IMF revenue. Second, Legislature first direct the judicial branch to provide this allows the Legislature to determine how much a report by December 1, 2022 on each of the funding to appropriate from the General Fund to programs and systems currently supported by the support these programs and systems based on IMF, including information on past expenditures and its overall priorities. Finally, given that the IMF is the benefits achieved. Based on its review of this likely going to struggle to maintain solvency, this report, we recommend that the Legislature shift approach would permanently address the issue in a the programs and systems currently supported by comprehensive, rather than piecemeal, manner. BRANCHWIDE INFORMATION TECHNOLOGY MODERNIZATION Background • Governance and Funding Model. This document provides broad guidance on Judicial Council Uses Key Documents to the judicial branch’s vision and principles Guide Selection and Oversight of Information related to technology and lays out the process Technology (IT) Modernization Projects. Over the for the approval and oversight of projects. past decade, Judicial Council has developed four Specifically, this includes specifying criteria key technology planning documents to guide its for assessing statewide versus local projects; identification, approval, and oversight of IT projects the roles and responsibilities of all key that the judicial branch will pursue. These key stakeholders (such as specific Judicial Council documents include: committees, as well as individual courts); and processes by which projects are identified, justified, approved, and monitored. 8 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET • Strategic Plan. This document provides the Using the above documents in concert with one judicial branch’s strategic goals, objectives, another helps Judicial Council identify and prioritize and metrics to measure success of the judicial branch’s technology needs. It also helps technology projects over a four-year period. Judicial Council identify those specific projects The 2019-22 Strategic Plan identifies three where funding needs to be requested through the guiding principles: access, reliability, and annual state budget process. Finally, following its innovation. Based on these principles, the approval of projects, Judicial Council generally plan specifies four key goals: (1) promoting receives regular updates to monitor the use of the digital court, (2) innovating through funding and ensure that the intended outcomes the technology community, (3) advancing are reached. technology security and infrastructure, and Various Approaches Used to Fund (4) promoting rule and legislative changes Technology Modernization Projects. Over the that impact the use of technology. Each years, a variety of approaches have been used goal has prioritized objectives. For example, to fund judicial branch technology modernization ensuring secure, reliable, and sufficient data projects, with varying levels of legislative network connectivity throughout the judicial involvement in allocating funds to specific branch is the first of six objectives to meet projects. The primary approaches used in recent the goal of advancing technology security years include: and infrastructure. • Ongoing IMF Funding Allocated by • Tactical Plan. This document provides the Judicial Council. As noted earlier in the “IMF” individual steps or areas of focus identified by section of this brief, the IMF is a special fund the judicial branch to achieve Strategic Plan with several dedicated revenue sources that goals over a two-year period. The 2021-22 is used to support various judicial branch Tactical Plan lays out 18 specific areas of activities, including technology modernization focus tied to the goals in the Strategic Plan. projects. Judicial Council determines the For example, case management system specific projects funded by the IMF and the migration and deployment is one area of focus amount of support each receives without to address the goal of promoting the digital legislative oversight. Tens of millions of court. The Tactical Plan then lays out specific dollars have been spent on technology from goals and objectives within each area of focus. the IMF annually—with annual expenditures For example, an identified goal and objective generally under $50 million in the most related to the case management system recent years. Examples of IMF-supported migration and deployment area of focus is to technology projects include the LAN/WAN continue implementation of new systems for telecommunications network infrastructure all case types across the branch. program, data center support, and case • California Courts Connected Framework. management systems. Projects are supported This document provides a framework to help from the IMF both on an ongoing and individual courts assess their progress in limited-term basis. meeting the goals identified in the Strategic • Funding Allocated by Legislature to Plan and the Tactical Plan. This allows Specific Projects. In more recent years, courts to identify their existing technology the judicial branch has regularly submitted capacities as well as potential areas of need. proposals requesting limited-term or ongoing According to the judicial branch, a July 2021 funding—usually from the General Fund— inventory assessing court needs using this for specific technology modernization framework resulted in the identification of projects through the annual state budget 201 projects—totaling to $43.6 million— process. For example, several budgets in across 20 technology categories (such as recent years have included a combined technology infrastructure). total of $63 million one-time General Fund www.lao.ca.gov 9 2022-23 BUDGET support to replace case management Information Security Office. This office would systems in 23 courts. We also note that monitor judicial branch assets statewide, assists the 2019-20 budget included $7.8 million courts in addressing any incidents (such as hacking one-time General Fund, to be spent over two or phishing incidences), and educate staff on years, to pilot and evaluate four technology this topic. projects with a plan to ultimately expand Allocations for State Courts and Trial them statewide. These projects included data Courts to Fund Local Priorities ($7.3 Million). analytics and business intelligence using The Governor’s budget proposes $7.3 million in identity access management, intelligent chat, 2022-23, decreasing to $7.2 million in 2023-24 video remote hearings, and voice-to-text and ongoing, for the state courts and trial courts translation services. for technology modernization efforts. Of this • Limited-Term Funding Provided by amount, $3.2 million would go to support new state Legislature to Judicial Council For trial court technology staff and program costs. Discretionary Allocation. The 2020-21 The remaining $4.2 million would be allocated to budget included $25 million one-time General trial courts for technology modernization efforts Fund annually in 2020-21 and 2021-22 for to be identified by the individual courts. According projects to modernize trial court operations to Judicial Council, annual allocations would that would be selected by Judicial Council. depend on court size, with 15 courts each receiving Judicial Council employed its Strategic $50,000, 35 courts each receiving $75,000, and and Tactical plans to identify and approve 8 courts each receiving $100,000. The intent of branchwide and court-specific projects this funding is to provide courts with the necessary across 14 different categories—such as staff and funding to conduct local technology remote technology appearance and data modernization projects based on local priorities. governance—to allocate these funds. The Judicial Branch Modernization Program allocations also reflected Judicial Council’s to Fund Branchwide Priorities ($23.5 Million). prioritization of projects—such as remote The Governor’s budget proposes $23.5 million appearance technology—that would in 2022-23 (growing to $26.6 million annually enable courts to provide services during beginning in 2024-25) to establish a Judicial the pandemic. Each trial court received at Branch Modernization Program that would provide least $40,000 for modernization projects annual support for technology modernization in 2020-21. Judicial Council subsequently projects. Of this amount, $3 million—growing received regular status reports and made to $6.1 million in 2024-25—would go to support adjustments based on court needs, such as by Judicial Council staff to manage projects funded authorizing requests to redirect funding to the by the program. The remaining $20.5 million would immediate replacement of failing equipment fund modernization projects selected by Judicial used to support remote appearances. Council based on its priorities specified in its key technology planning documents, with $8 million of Governor’s Proposals this amount dedicated to branchwide projects and The Governor’s budget proposes a total of $12.5 million for court-specific projects. 27 positions and $34.7 million General Fund Assessment in 2022-23 (increasing to 50 positions and $40.3 million annually beginning in 2025-26) for Two Proposals Appear Reasonable. Two of technology modernization projects. the Governor’s proposals appear reasonable. First, the proposal for a new Judicial Branch Information New Judicial Branch Information Security Security Office seems reasonable. Court operations Office ($3.7 Million). The Governor’s budget are increasingly reliant on technology to operate proposes $3.7 million in 2022-23, growing to effectively. Additionally, the courts receive, access, $6.2 million annually beginning in 2025-26, to and process information that can be confidential or support the creation of a new Judicial Branch 10 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET private. Accordingly, it is reasonable for the judicial As proposed by the Governor, this level of branch to have an office dedicated to addressing oversight would not occur over the projects that information security issues across the state, would be funded through the proposed Judicial particularly since this minimizes the need for such Branch Modernization program. This is because expertise at each individual court. Judicial Council would have full discretion to Second, the proposal requesting direct allocate funding to branchwide projects and allocations to and related staffing for the state court-specific projects based on its priorities. courts and trial courts seems reasonable. The While Judicial Council has developed a fairly robust requested funding would provide individual courts process for identifying, approving, and conducting with a small amount of annual resources that oversight of technology projects, those processes could help address more routine and/or smaller do not generally allow for legislative oversight modernization efforts. These allocations recognize or input unless the request is submitted for that each court’s modernization needs may not consideration through the budget process. We note be the same. Additionally, the funding provides that the level of annual funding proposed by the a certain amount of flexibility to individual courts Governor for the new program would likely result in to adjust to address the most immediate needs most of the funded projects being smaller in scope. as they arise (such as sudden equipment failure). However, because this funding is ongoing, it could The staffing would also provide the state courts enable the funding of multiyear projects—including with sufficient capacity and expertise to oversee the projects whose total costs could reach into the effective completion of modernization projects. millions of dollars. Judicial Branch Modernization Program While the specific structure of the Governor’s Reduces Legislative Oversight, but Could proposal raises concerns, we acknowledge that Have Some Benefits as Well. The proposed there are a few advantages to providing some Judicial Branch Modernization Program reduces amount of discretionary funding for branchwide legislative oversight of technology projects. This is modernization projects selected by Judicial Council because it lacks the same oversight mechanisms during the course of a fiscal year. For example, that exist when funding is allocated by the such an approach would give Judicial Council Legislature to specific projects through the annual the flexibility to respond quickly as needs arise budget process. Allocating funding through the across the branch. We note that the discretion budget process to specific projects or providing provided to Judicial Council to allocate $25 million limited-term funding for specified purposes allows in modernization funding in 2020-21 likely helped the Legislature to ensure that funded projects are courts more rapidly change their business practices of high priority and reflect statewide policies and to operate during the pandemic. Additionally, such priorities for court processes and procedures. an approach could eliminate the need for the This approach also allows the Legislature to assess Legislature to consider budget requests each year whether each budget request accurately identifies for relatively small technology projects. a problem or need and presents a cost-effective Recommendations solution, clear outcome expectations, complete and Approve Proposals for New Judicial Branch accurate costs, a comprehensive and reasonable Information Security Office ($3.7 Million) implementation plan, and clear metrics to monitor and Direct Allocations to State and Trial the implementation of the solution. In addition, this Courts ($7.3 Million). We recommend the approach allows the Legislature to take certain Legislature approve the proposals for the new steps—such as requiring a project be piloted Judicial Branch Information Security Office as first, approving only partial funding, or requiring well as the direct allocations to the state and trial the reporting of certain information on a regular courts. As discussed above, the Judicial Branch basis—to ensure it has sufficient oversight of Information Security Office would address an projects. Such steps can be tailored specifically to important judicial branch information security need individual projects. www.lao.ca.gov 11 2022-23 BUDGET while the direct allocations to the state and trial set a total per-project cost limit on projects that courts would provide a small amount of ongoing, can be funded. This would limit the number or flexible funding for technology modernization efforts types of projects that could be pursued without at each individual court based on their needs. legislative oversight through the annual state Modify Proposed Judicial Branch budget process. We also recommend requiring Modernization Program to Ensure Appropriate annual reporting from Judicial Council on what Legislative Oversight ($23.5 Million). To the projects are expected to receive funding through extent that providing some discretionary funding the program each year and how program funds for branchwide modernization projects to be were actually used in the prior year. This would selected by Judicial Council is a legislative priority, allow the Legislature to conduct regular oversight we recommend that the Legislature modify the of the program, provide input prior to allocation of proposed Judicial Branch Modernization Program program funds, and identify areas where legislative to increase legislative oversight. Specifically, action could be merited. Depending on the specific we recommend the Legislature specify limits modifications made to the Governor’s proposal, on the types of projects that can be funded or the Legislature will want to adjust the amount of funding accordingly. FACILITY MODIFICATION AND CONSTRUCTION Background was consolidated into the SCFCF as part of the 2021-22 budget.) Specifically, state law increased Judicial Branch Facility Needs. The judicial certain criminal and civil fines and fees and branch currently manages around 450 facilities deposited the revenues into the SCFCF to finance across all 58 counties. Its facility program is trial court construction and other facility-related responsible for various activities including expenses. The amount of revenue deposited has maintaining these facilities, managing leases, steadily declined over time, largely due to declining and constructing new courthouses to replace criminal fine and fee revenue. This has resulted outdated facilities. In a November 2019 in SCFCF expenditures—including debt service, assessment of its facilities, the judicial branch facility modifications, and trial court operations— identified a need for a total of 80 construction routinely exceeding revenues. (Currently, a total of projects—56 new buildings and 24 renovations— $55.5 million is redirected annually from the SCFCF totaling $13.2 billion. These projects were to support trial court operations. Such transfers categorized into five groups—and ranked within were initially implemented to mitigate the impacts each group—in the following descending priority of budget reductions on trial court operations.) order: 18 immediate need projects ($2.3 billion), To support this level of spending, the judicial branch 29 critical need projects ($7.9 billion), 15 high need has been expending funds from the SCFCF fund projects ($1.3 billion), 9 medium need projects balance. As a result, the SCFCF faces insolvency ($1.6 billion), and 9 low need projects ($100 million). in 2022-23. Additionally, in August 2021, the judicial branch identified 22,743 deferred maintenance projects New Construction Supported by totaling $5 billion. General Fund. Given the insolvency of the SCFCF, the 2021-22 budget shifted support for Construction Account Insolvent. State law the construction of any future courthouses to the authorizes Judicial Council to construct trial court General Fund. The 2021-22 budget also included facilities and established a special fund, the State funding to start the construction or renovation of Court Facilities Construction Fund (SCFCF), to six of the highest ranked immediate need projects support the judicial branch’s court facility-related identified in Judicial Council’s 2019 reassessment projects. (We note a second construction account of facilities. 12 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Governor’s Proposals proposes an additional $3.9 million General Fund and $127.2 million in lease revenue bond The Governor’s budget for 2022-23 includes authority—with debt service being repaid over several proposals related to court facilities. time by the General Fund—for the continuation They include the following: of three previously approved projects. • SCFCF Backfill ($40 Million). The Governor’s budget proposes a $40 million one-time General Fund transfer to the SCFCF to help prevent Figure 4 its insolvency in 2022-23. Total Amount Available for Facility Modification Projects The budget also includes provisional budget language (In Millions) authorizing the Director of the Department of Finance to $90 General Fund transfer additional General Fund 80 if revenues deposited into the SCFCF 70 SCFCF are lower than expected. The transfer could only occur 60 30 days after written notification 50 to the Legislature. 40 • Facility Modification 30 ($19.4 Million). The Governor’s 20 budget proposes $15.4 million ongoing General Fund and 10 $4 million in ongoing SCFCF 2021-22 2022-23 2023-24 2024-25 2025-26 reimbursement authority and ongoing (for county repayment of their share of facility costs) for trial SCFCF = State Court Facilities Construction Fund. court facility modification projects. As shown in Figure 4, Figure 5 this proposal would temporarily increase the total amount of $263 Million Proposed by Governor for funding for facility modification Trial Court Construction Projects to $80.4 million in 2022-23 (In Millions) and 2023-24. However, due to the expiration of limited-term Lease Revenue Construction Project General Fund Bond Authority funding previously authorized, total funding would decline to New Projects New Santa Clarita Courthouse $53.1 — $65.4 million annually beginning New San Luis Obispo Courthouse 29.2 — in 2024-25—effectively the New Solano Hall of Justice 21.4 — same level of funding in the New Fresno Courthouse 21.2 — current year. New Quincy Courthouse 7.1 — Subtotals ($131.8) (—) • Construction Projects Previously Approved Projects ($263 Million). As shown in New Ukiah Courthouse — $127.2 Figure 5, the Governor’s budget Butte Juvenile Hall Addition and Renovation $3.2 — proposes a total of $132 million San Bernardino Juvenile Dependency 0.7 — in General Fund support to start Courthouse Addition and Renovation five new trial court construction Subtotals ($3.9) ($127.2) projects. The budget also Totals $135.8 $127.2 www.lao.ca.gov 13 2022-23 BUDGET Assessment Recommendations Insolvency Requires Ongoing General Shift Full Responsibility for Trial Court Fund Resources. As noted above, the SCFCF faces Construction to the General Fund. In order insolvency in 2022-23. The Governor’s proposed to permanently address the insolvency of the one-time SCFCF backfill would only address the SCFCF, we recommend the Legislature shift insolvency in the budget year—effectively leaving the full responsibility for trial court construction to SCFCF with a zero fund balance. SCFCF revenues are the General Fund. This includes (1) shifting all estimated to be around $200 million and expenditures financing obligations for completed projects to to be around $425 million in 2022-23. While both the General Fund, (2) appropriating $160 million amounts are estimated to decline slightly in the future, General Fund annually (declining to $145 million in this trend continues into future years—which means 2024-25) to support all non-construction-related that ongoing General Fund resources will be needed expenditures currently supported by the SCFCF, to backfill the difference in revenues in order for the and (3) depositing all SCFCF revenues into state to meet financing payments for completed the General Fund to partially offset the shifted projects as well as other obligations. As shown costs. This approach would ensure that all in Figure 6, absent any changes in expenditures, construction-related obligations are fully accounted this could mean that at least $200 million would be for and considered when evaluating the state’s needed annually for nearly a decade. The amount overall fiscal condition and determining General would then decline as the state ends debt service Fund priorities. It would also maintain existing payments on completed construction projects. levels of support for all non-construction-related Proposal Provides Ongoing General Fund expenditures—such as facility modification projects Support for Facility Modification for the and trial court operations. Finally, it allows the First Time. Trial court facility modification projects are Legislature to fund future trial court construction currently supported by $65 million annually from the projects based on its priorities. SCFCF. While the Governor’s proposal maintains this level of annual funding in 2024-25, almost one-fourth of facility modification spending would be supported by the General Fund. Figure 6 Estimated State Court Facilities Construction Fund Shortfalls (In Millions) $250 200 150 100 50 2021-22 22-23 23-24 24-25 25-26 26-27 27-28 28-29 29-30 30-31 31-32 32-33 33-34 34-35 35-36 36-37 37-38 14 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Appropriate Funding for Facility Modification deferred maintenance. We note that such spending and Construction Based on General Fund is excludable under the state appropriations limit Priorities. Regardless of whether the Legislature (SAL). (The California Constitution imposes a limit adopts the recommendation to shift full on the amount of revenue the state can appropriate responsibility for trial court construction to the each year. The state can exclude certain General Fund, we recommend the Legislature spending—such as on capital outlay projects, as appropriate funding for facility modification well as for certain kinds of emergency spending— projects and construction based on its General from the SAL calculation.) As we discuss in our Fund priorities. While the Governor’s proposals recent report, The 2022-23 Budget: Overview of are generally reasonable, the judicial branch has the Governor’s Budget, the SAL will continue to identified significant facility needs. If a priority, the constrain the Legislature’s choices in the upcoming Legislature could consider additional one-time budget process. funding—such as for facility modification projects or www.lao.ca.gov 15 2022-23 BUDGET 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, California 95814. 16 LEGISLATIVE ANALYST’S OFFICE