The 2023-24 Budget: Judicial Branch Budget Proposals

2023-24 BUDGET The 2023-24 Budget: Judicial Branch Budget Proposals GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2023 SUMMARY Provides Assessment of Two Budget Proposals. This brief provides our findings and recommendations related to two judicial branch budget proposals. The first proposal is for $29.9 million General Fund in 2023-24 (increasing to $100 million annually in 2025-26) to support court-specific costs related to the implementation of the Community Assistance, Recovery, and Empowerment (CARE) Program. The second proposal seeks to address the solvency of the State Court Facilities Construction Fund (SCFCF) by (1) shifting $55.5 million in ongoing SCFCF support of trial court operations to the General Fund and (2) providing a $34 million General Fund backfill to the SCFCF in 2023-24 (increasing to $120 million annually in 2024-25). The proposal would also make $15 million in SCFCF funding for facility modification projects scheduled to expire ongoing. Recommend Only Providing Funding for CARE Program in 2023-24 and Require Reporting on Implementation. We find that the funding needs for the CARE Program are uncertain as the program has not been implemented. While it is reasonable to provide funding in 2023-24 based on assumptions, actual implementation data is important for determining appropriate future funding levels. Accordingly, we recommend the Legislature only provide the requested funding in 2023-24. We also recommend the Legislature require the courts scheduled to first begin CARE Program implementation report monthly on key metrics that directly impact the estimates for the level of implementation funding needed. Such information would help the Legislature ensure that appropriate levels of funding are provided in future years. Recommend Approving SCFCF Budget Proposal, Requiring Annual Reporting of SCFCF Condition, and Weighing Facility Modification Funding Extension Against Other Priorities. We find the Governor’s SCFCF proposals to be generally reasonable as they address the SCFCF’s insolvency on an ongoing basis. As such, we recommend the Legislature approve shifting support for trial court operations from the SCFCF to the General Fund. While we agree with the Governor’s proposal to provide a General Fund backfill to the SCFCF, the amount required will change over time. Thus, we recommend the Legislature direct Judicial Council to report annually on the SCFCF’s long-term fund condition to enable the Legislature to ensure that the budget is adjusted annually to include the appropriate General Fund backfill in future years. Finally, we recommend the Legislature weigh the proposal to make SCFCF facility modification funding ongoing against its other budget priorities, since it would result in additional General Fund cost pressures. Reducing or rejecting the proposed ongoing spending on facility modification projects would provide the Legislature with a budget solution to help address the projected out-year deficits that would occur under the Governor’s proposed budget. www.lao.ca.gov 1 2023-24 BUDGET OVERVIEW The judicial branch is responsible for the 60 percent in 2022-23. Since 2019-20, the majority interpretation of law, the protection of people’s of the judicial branch budget has been supported rights, the orderly settlement of all legal disputes, by the General Fund. This growth is generally due and the adjudication of accusations of legal to increased operational costs as well as the use of violations. The branch consists of statewide General Fund resources to backfill decreases in fine courts (the Supreme Court and Courts of Appeal), and fee revenue. trial courts in each of the state’s 58 counties, Governor Proposes $5.3 Billion in State and statewide entities of the branch (Judicial Funds for Judicial Branch. For 2023-24, the Council, the Judicial Council Facility Program, Governor’s budget includes nearly $5.5 billion from and the Habeas Corpus Resource Center). all fund sources in support for the judicial branch. The branch receives support from several This amount includes about $5.3 billion from all funding sources including the state General state funds (General Fund and special funds), a Fund, civil filing fees, criminal penalties and fines, decrease of $130 million (2.4 percent) below the county maintenance-of-effort payments, and revised amount for 2022-23, as shown in Figure 2. federal grants. (These totals do not include expenditures from local General Fund Becoming Greater Share of reserves or trial court reserves.) Of this amount, Judicial Branch Budget. As shown in Figure 1, about $3.2 billion (or 63 percent) is from the total operational funding for the judicial branch General Fund. This is a net decrease of $205 million has steadily increased from 2013-14 through (or 6 percent) from the 2022-23 General Fund 2022-23. The percent of total operational funding amount. This decrease is generally due to the from the General Fund has also steadily increased expiration of one-time General Fund support during this period, from 37 percent in 2013-14 to provided in 2022-23. Figure 1 Total Judicial Branch Fundingª (In Billions) $6 Local Revenues 5 State Special Funds General Fund 4 3 2 1 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 (estimated) (proposed) 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 2023-24 BUDGET Figure 2 Judicial Branch Budget Summary—All State Funds (Dollars in Millions) Change From 2022-23 2021-22 2022-23 2023-24 Actual Estimated Proposed Amount Percent State Trial Courts $3,517 $3,904 $3,973 $69 1.8% Supreme Court 51 57 54 -2 -4.2 Courts of Appeal 256 285 281 -4 -1.4 Judicial Council 224 387 394 7 1.9 Judicial Branch Facility Program 634 791 591 -200 -25.3 Habeas Corpus Resource Center 16 19 19 — -0.2 Totals $4,698 $5,443 $5,313 -$130 -2.4% CARE ACT COURT IMPLEMENTATION Background These plans consist of the provision of behavioral health care, stabilization medications, housing, and Overview of CARE Program. Chapter 319 other supportive services, which are expected to of 2022 (SB 1338, Umberg) created the CARE be delivered by the counties. CARE participants Program—a new civil court proceeding that will are entitled to government-paid legal counsel to allow specific people to seek assistance for represent them in all CARE-related proceedings certain adults with severe mental illness. Only and provide legal assistance throughout the people that meet certain criteria may be admitted process. Participants are also permitted to have a to the CARE Program. These criteria include “supporter,” an adult providing the participant with the person being over the age of 18 as well as decision-making and other assistance throughout currently experiencing both a severe mental the process. The court-ordered CARE plan lasts up illness and having a diagnosis of schizophrenia to one year, but may be extended one time for up to or other psychotic disorders. People in other one additional year under certain conditions. civil and criminal proceedings—specifically assisted outpatient treatment, conservatorship, or Senate Bill 1338 includes various other misdemeanor proceedings in which the person has requirements. For example, the California Health and been determined to be incompetent to stand trial— Human Services Agency (CalHHS) or Department of could also be referred by courts to the program. Health Care Services (DHCS) is generally required to contract with an independent, research-based The CARE process starts with a CARE Program entity to conduct an evaluation of the CARE petition seeking to admit a person to the program Program. A preliminary evaluation report is required being filed by certain people (such as a family to be provided to the Legislature three years after member, first responder, county behavioral implementation of SB 1338 and a final evaluation health provider, or a licensed behavioral health report is due five years after implementation. professional who has provided treatment to the Additionally, DHCS is required to collect data from person within the past 30 days). A person may courts and counties and report annually on the also file such a petition to seek to admit themself CARE Program and its impact—including statutorily to the program. The court then reviews the specified data and outcome measures. petition to assess whether the person meets the criteria for admission. If the court determines by Court-Related Responsibilities. clear and convincing evidence that the person The court-related responsibilities in the CARE does meet the criteria, the court oversees the process include: preparation, implementation, and compliance with an individualized plan for the person. www.lao.ca.gov 3 2023-24 BUDGET • Court Proceedings. State law specifies a included Glenn, Orange, Riverside, San Diego, particular legal process for CARE proceedings. San Francisco, Stanislaus, and Tuolumne For example, within 14 court days of Counties—are generally required to begin CARE determining from a cursory review of a CARE Program operations no later than October 1, 2023. Program petition that a person could be eligible All remaining counties (“Cohort 2”) are generally for the program, trial courts are generally required to begin CARE Program operations no required to either (1) schedule a hearing on later than December 1, 2024. In January 2023, the CARE Program petition or (2) order the Los Angeles County—a member of Cohort 2— county to investigate (if needed) and report in announced plans to implement the CARE Program writing on whether the person subject to the by December 1, 2023, a year earlier than required. petition meets the CARE eligibility criteria, the Additionally, in January 2023, a group of disability outcome of any efforts to engage the person, and civil rights advocates filed a lawsuit with and conclusions and recommendations on the California Supreme Court challenging the the person’s ability to voluntarily engage in constitutionality of SB 1338 and seeking to block services. Subsequent hearings are required its implementation. to adopt a CARE plan and to regularly monitor Initial Funding Provided in 2022-23. participant and county compliance with the The 2022-23 budget package provided a total of plan. At the one-year status hearing, the court $88.3 million General Fund in 2022-23 (decreasing will determine whether to allow the participant to $38.7 million annually beginning in 2023-24) to leave the program or continue in the CARE for the CARE Program. This amount included Program for up to an additional year. Judicial funding for: Council is required to adopt forms and rules • Judicial Branch. The budget provided to ensure statewide consistency in the CARE $5.9 million in 2022-23 (increasing to legal process, provide training and technical $37.7 million ongoing in 2023-24) for judicial assistance to judges, and assist with data branch preparation to implement the CARE collection from the trial courts. Program and $250,000 one-time in 2022-23 • Legal Representation. State law requires that for legal-aid planning and preparation. Of legal counsel be provided to any person who the amount provided to the judicial branch in is the subject of a CARE Program petition if it 2022-23, $2.8 million was allocated directly appears that the person may meet the eligibility to the trial courts in Cohort 1 to support their requirements. Such legal counsel is to be administrative and other costs related to provided by the government through a qualified planning for CARE Program implementation. legal services project (such as a legal-aid • DHCS. The budget allocated $77.2 million organization) or a county public defender if no in 2022-23 (declining to $1.1 million annually legal services project is available to accept in 2023-24) to DHCS for the implementation CARE cases. However, a person may choose of the CARE Program. Of this amount, to retain their own private counsel instead. $20.2 million in 2022-23 (declining to Counsel is required to represent the person $1.1 million annually beginning in 2023-24) is through all court proceedings (including for the department’s implementation costs, appeals) as well as in any matters related to such as preparing to meet its reporting the CARE plan. State law requires DHCS, in requirements. The remaining $57 million is for consultation with other state departments, to allocation to counties for the implementation provide training to counsel regarding the CARE of the CARE Program. process as well as the services and supports • CalHHS. The 2022-23 budget provided that can be included in court-ordered plans. $5 million to CalHHS for the implementation of CARE Program Implementation Plan and the CARE Program. Recent Developments. Senate Bill 1338 specified that one group of counties (“Cohort 1”)—which 4 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Governor’s Proposal • Court Operations. As previously mentioned, the 2022-23 budget package assumed a The Governor’s budget includes several funding level of $37.7 million annually beginning proposals related to the implementation of in 2023-24 to support CARE hearing and other the CARE Program. As shown in Figure 3, the court operations. The Governor’s budget administration proposes a total of $52.4 million proposes to adjust this planned funding level. General Fund in 2023-24—increasing to Specifically, the proposed budget includes $214.6 million annually beginning in 2025-26—to $23.8 million in 2023-24 (increasing to support state and local implementation costs. $50.6 million in 2024-25 and to $68.5 million Court-Specific Costs. Roughly half of the annually beginning in 2025-26). Figure 4 proposed total funding would be provided to the summarizes how the proposed funding for judicial branch to support court operations as well court operations would be allocated. as legal representation costs. Specifically, the • Legal Representation Costs. The Governor’s budget proposes General Fund support totaling budget proposes $6.1 million in 2023-24 $29.9 million in 2023-24, increasing to $100 million (increasing to $31.5 million annually beginning in 2025-26 and ongoing. in 2025-26) to provide legal representation in the CARE process. Figure 3 Summary of Total Proposed CARE Program Funding General Fund (In Millions) 2025-26 Entity Purpose 2022-23 2023-24 2024-25 and Ongoing Judicial Branch Judicial Branch Court Operations $5.9 $23.8 $50.6 $68.5 Judicial Branch Legal Representation 0.3 6.1 21.8 31.5 Totals, Judicial Branch $6.1 $29.9 $72.4 $100.0 Health Entities CalHHS Training $5.0 — — — DHCS Training, Data Collection, and Other Activities 20.2 $6.1 $6.1 $6.1 DHCS County Grants 57.0 16.5 66.5 108.5 Totals, Health Entities $82.2 $22.6 $72.6 $114.6 Total CARE Program Funding $88.3 $52.4 $144.9 $214.6 CARE = Community Assistance, Recovery, and Empowerment; CalHHS = California Health and Human Services Agency; and DHCS = Department of Health Care Services. Figure 4 Summary of Allocation of Proposed Court Operations CARE Program Funding (In Millions) Judicial Branch 2025-26 and Entity Purpose 2022-23 2023-24 2024-25 Ongoing Judicial Council Trial court support, training and resources, and $3.0 $3.2 $2.6 $2.6 data collection costs Trial Courts Hearings, self-help attorneys, and other 2.8 20.5 48.0 66.0 administrative costs Totals $5.9 $23.8 $50.6 $68.5 CARE = Community Assistance, Recovery, and Empowerment. www.lao.ca.gov 5 2023-24 BUDGET The above cost estimates assume that For example, it is not clear in which counties legal 18,000 CARE Program petitions would be received representation will be provided by qualified legal annually upon full implementation, resulting in services projects versus county public defenders. 12,000 participants. These estimates are adjusted Moreover, once implemented, operational for 2023-24 and 2024-25 based on Cohort 1’s processes may need to be adjusted to address and Cohort 2’s share of total state population and unintended challenges that emerge. In view of the the statutorily specified implementation dates. above, the underlying assumptions made by the For example, the seven counties of Cohort 1 administration in developing the budget request represent about 26 percent of the state’s population could end up overestimating or underestimating and will operate CARE Programs for nine months actual program costs. of the 2023-24 year (or 75 percent) assuming an For 2023-24, the administration’s assumptions implementation date of October 1, 2023. This results and requested resources appear reasonable for in 3,510 CARE Program petitions for review the initial implementation of the CARE Program. and 2,340 participants in 2023-24. For judicial However, the program costs in subsequent years branch operations, the administration assumes could be significantly different than assumed in that a certain amount of judicial and court staff the Governor’s budget. For example, upon full time and resources are needed to process each implementation, the Governor’s budget assumes CARE Program petition and case. This includes 18,000 CARE Program petitions will be filed an average of one hearing to review initial petitions annually resulting in 12,000 participants. We note and an average of nine hearings for each CARE that, at the time SB 1338 was being considered, participant. Similarly, for legal representation costs, however, county stakeholders raised concerns the administration assumes that an average of that the number of participants could be higher, 20 hours of representation would be needed per potentially by tens of thousands of people. If this CARE client. actually occurs, General Fund costs would be Other Costs. The other half of the proposed significantly higher. funding—$22.6 million in 2023-24, increasing to Actual Implementation Data Important for $114.6 million ongoing beginning in 2025-26— Determining Appropriate Funding Levels After would be provided to DHCS for data collection and 2023-24. When implementing a new program various other responsibilities, as well as for grants like the CARE Program, it can make sense to test to counties for behavioral health related costs for implementation on a small group first. This enables CARE participants. (Our analysis of these costs the state to monitor whether implementation and can be found in a separate report, The 2023-24 costs occur as expected or if there any unintended Budget: Analysis of the Governor’s Major Behavioral challenges or unanticipated impacts that could Health Proposals.) require legislative or operational changes. For example, actual implementation by Cohort 1 could Assessment show that more time is needed by judicial and court Funding Needs Uncertain as Program Has staff to process CARE Program petitions or by legal Not Been Implemented. The CARE process counsel to appropriately represent their clients. This is a new court process which is not anticipated additional time could be needed for various reasons, to be first implemented until October 1, 2023 including to ensure that all participants have the when the seven counties in Cohort 1 begin ability to be heard (which could simply require operations. Because the program has not more time and resources) or to address conflicting yet been implemented, the proposed funding interpretations or application of the language (which levels for 2023-24 and future years is uncertain. could be resolved legislatively or through statewide This is because state and local entities are Judicial Council guidance). Information collected on currently planning how this new program the implementation of Cohort 1, and any associated will be implemented—including working to changes, would then inform the estimated costs resolve some operational and funding details. needed to implement the program across the state. 6 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET As such, data collected from Cohort 1 should be assumptions underlying the Governor’s requested used to determine Cohort 1’s future year costs as resource are accurate. Major differences between well as the costs to expand the CARE Program such assumptions and actual data collected when statewide to ensure that the CARE process is being the program is implemented could significantly implemented as intended and that the appropriate change the level of resources needed in future level of resources is provided to do so. years. Providing funding for one year can ensure that Other Factors Can Also Impact Actual data is collected from Cohort 1 to inform legislative Funding Needs. Other factors—such as county deliberations to ensure that the appropriate level decisions and court rulings—can also impact of funding is being provided in future years as the actual level of funding needed to implement well as whether potential legislative changes are the CARE Program statewide. For example, as needed to ensure the CARE Program operates as noted above, Los Angeles County announced intended and/or to control the cost of the program. intentions to begin CARE Program implementation Additionally, given the budget pressure on the by December 1, 2023. If this occurs, it would result General Fund in 2023-24, the Legislature may in the need for additional General Fund support in want to consider whether to limit the number of 2023-24 above the amount currently proposed in the counties in Cohort 2 that begin implementation Governor’s budget. This is because the Governor’s prior to July 1, 2024. Such action would limit the budget assumes that only Cohort 1 (representing amount of additional General Fund resources about 26 percent of the state’s population) will needed in 2023-24 (and 2024-25) to support require resources in the budget year and that no the implementation of the CARE Program in other counties will begin implementation prior to such counties. July 1, 2024. Since Los Angeles County consists of Require Reporting From Cohort 1. Senate about 25 percent of the state’s population, additional Bill 1338 requires DHCS and Judicial Council to resources in the range of $10 million would be work with courts and counties to report annually on needed in 2023-24 to support the court-related key outcome and performance metrics, including costs. Similarly, additional resources would likely some (such as the number of petitions filed) be needed in 2024-25 as Los Angeles County will which could help inform calculations of the level require a full-year of General Fund support, rather of funding needed in future fiscal years. However, than only seven months which would be required such information would likely be reported after if implementation occurred on December 1, 2024. deliberations next year on the 2024-25 budget have Additionally, it is unclear whether any other counties concluded. As such, we recommend the Legislature have the intention of launching CARE Program require each court in Cohort 1 report monthly in implementation earlier than expected. Finally, as of 2023-24, beginning the month after the court begins the writing of this brief, it is unclear whether a court to operate the CARE Program. In these monthly ruling could delay or prevent implementation of the reports, we recommend the Legislature specify key CARE Program, such as if a court rules in favor of the metrics for courts to report on that directly impact group of disability and civil rights advocates seeking the estimates for the level of funding needed to to block implementation of SB 1338. implement the CARE Program. At minimum, such reports should include: (1) the number of CARE Recommendations Program petitions received and dismissed, (2) the Provide Only One-Year Funding. We number of people admitted to the CARE Program, recommend the Legislature only provide the (3) the number of court proceedings conducted and requested funding in 2023-24—meaning to not the amount of time needed for those hearings, (4) the commit to providing a specific amount of funding amount of judicial and staff time required to process beyond the budget year. We recognize that there cases, and (5) the amount of time spent by legal will be costs in subsequent years that require state counsel representing and working with CARE clients. funding. However, since the CARE Program has Such information would help provide the Legislature not been implemented, there is significant fiscal with key data to ensure that appropriate levels of uncertainty regarding the extent to which the funding are provided in future years. www.lao.ca.gov 7 2023-24 BUDGET STATE COURT FACILITIES CONSTRUCTION FUND SOLVENCY Background operations.) To support this level of spending, the judicial branch has been expending funds from Judicial Branch Facility Needs. The judicial the SCFCF fund balance. As a result, the SCFCF branch currently manages around 450 facilities faces insolvency in 2023-24. across all 58 counties. Its facility program is responsible for various activities including New Construction Supported by General maintaining these facilities, managing leases, and Fund. Given the insolvency of the SCFCF, the constructing new courthouses to replace outdated 2021-22 budget shifted support for the construction facilities. In a November 2019 assessment of its of any future courthouses to the General Fund. facilities, the judicial branch identified a need for a Accordingly, the 2021-22 and 2022-23 budgets total of 80 construction projects—56 new buildings included General Fund support to start the and 24 renovations—totaling $13.2 billion. These construction or renovation of nearly a dozen of projects were categorized into five groups— the highest ranked immediate need projects and ranked within each group—in the following identified in the judicial branch’s 2019 assessment descending priority order: 18 immediate need of facilities. projects ($2.3 billion), 29 critical need projects Additional Support for Ongoing Facility ($7.9 billion), 15 high need projects ($1.3 billion), Modification Provided in 2022-23. The annual 9 medium need projects ($1.6 billion), and budget typically provides the judicial branch with a 9 low need projects ($100 million). Additionally, specified amount of funding to support trial court in August 2022, the judicial branch identified facility modification projects that arise during the 22,042 deferred maintenance projects totaling year. This funding is used at Judicial Council’s around $4.5 billion. discretion to generally address the highest-priority SCFCF Insolvent. State law authorizes Judicial needs that arise. The 2022-23 budget provided Council to construct trial court facilities and $65 million from the SCFCF to support trial court established a special fund, the SCFCF, to support facility modification projects. This amount included the judicial branch’s court facility-related projects. $50 million in annual funding and $15 million in (A different construction account was consolidated temporary funding. The temporary funding of into the SCFCF as part of the 2021-22 budget.) $15 million annually for ten years was first provided Specifically, state law increased certain criminal and as part of the 2014-15 budget package, which civil fines and fees and deposited the revenues into means that it is scheduled to expire at the end the SCFCF to finance trial court construction and of 2023-24. other facility-related expenses. Existing state law Additionally, the 2022-23 budget included also allows funds to be transferred from the SCFCF $15.4 million in ongoing General Fund support to support trial court operations. Such transfers for trial court facility modification projects. In were initially implemented to mitigate the impacts combination, as shown in Figure 5, this increased of budget reductions on trial court operations. total support for trial court facility modification The amount of revenue deposited has steadily projects to $80.4 million annually in 2022-23 and declined over time, largely due to declining criminal 2023-24—before declining to $65.4 million annually fine and fee revenue. This has resulted in SCFCF beginning in 2024-25 due to the expiration of the expenditures—such as debt service and facility temporary SCFCF funding. The expiration of the modifications—routinely exceeding revenues. temporary funding would restore funding levels to (Currently, a total of $55.5 million is redirected the amount available annually between 2014-15 annually from the SCFCF to support trial court and 2021-22. 8 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Governor’s Proposal balance—thereby only requiring a $34 million General Fund backfill. However, the full backfill The Governor’s 2023-24 budget includes one amount of $120 million is needed on an proposal for ongoing SCFCF expenditures and two ongoing basis beginning in 2024-25. Budget proposals to provide a total of $89.5 million General bill language authorizes the Department Fund in 2023-24 (increasing to $175.5 million of Finance to increase the backfill amount annually beginning in 2024-25) to address the 30 days after notification to the Legislature if SCFCF insolvency. Specifically, the Governor’s SCFCF revenues are lower than expected. budget proposes to: • Make SCFCF Funding Scheduled to Expire Assessment Ongoing. The Governor’s budget proposes Proposal Generally Reasonable. We find to make permanent the $15 million to support the Governor’s SCFCF proposals to be generally trial court facility modification projects that reasonable as they address the SCFCF’s insolvency was previously approved for ten years— on an ongoing basis. Shifting ongoing support for permanently increasing the amount available trial court operations to the General Fund maintains to support trial court facility projects from existing operational levels. Additionally, committing $65.4 million to $80.4 million annually. We to an ongoing General Fund backfill of the SCFCF note, however, that this proposal would make ensures that, going forward, it is clear that the the condition of the SCFCF worse beginning General Fund will address any shortfall in the ability in 2024-25. of the SCFCF to meet its construction-related • Shift SCFCF Support of Trial Court obligations (such as debt service for previously Operations to General Fund. As noted constructed courthouses). This is important as it above, a total of $55.5 million is currently will ensure that these obligations are accounted redirected annually from the SCFCF to for and considered when evaluating the state’s support trial court operations. The Governor’s overall fiscal condition and determining General budget proposes to shift such support from Fund priorities. the SCFCF to the General Fund in order to address the insolvency of the SCFCF while maintaining trial Figure 5 court funding levels. Total Amount Available for Facility • Provide General Fund Modification Projects as of the 2022-23 Budget to Backfill Remaining Shortfall. Despite removing (In Millions) SCFCF support for trial court operations, the $90 SCFCF still faces insolvency. General Fund 80 SCFCF Revenues are estimated 70 to be $215 million, while expenditures are estimated 60 to be about $336 million. 50 This results in a $120 million 40 shortfall that the Governor proposes to backfill with 30 General Fund support on an 20 ongoing basis. In 2023-24, 10 a significant portion of this shortfall is addressed by 2021-22 2022-23 2023-24 2024-25 depleting the SCFCF’s fund and ongoing SCFCF = State Court Facilities Construction Fund. www.lao.ca.gov 9 2023-24 BUDGET General Fund Backfill Amount Will Change Recommendations Over Time. The backfill amount required by the Approve Proposed Shift of Trial Court SCFCF will change over time. Revenues could Operations Support to General Fund. We increase or decrease. For example, the number of recommend the Legislature approve shifting people required to pay criminal fines could differ $55.5 million in support for trial court operations by year for various reasons—including the number from the SCFCF to the General Fund. This action of tickets written by law enforcement. Additionally, would help maintain solvency of the SCFCF and expenditures will also change over time. Most existing trial court funding levels. notably, SCFCF debt service payments are Direct Judicial Council to Report Annually expected to decrease by about $40 million annually on Condition of SCFCF. We recommend the beginning in 2032-33 as six construction projects Legislature direct Judicial Council to report annually are fully paid off. Such debt service obligations will on the SCFCF’s long-term fund condition— continue to decrease over time as more projects including projected revenues, expenditures, and are fully paid off. For example, there will be a fund balance—as long as a General Fund backfill further decrease of about $50 million beginning is required to address the SCFCF’s insolvency. in 2038-39, and another of about $40 million This information will enable the Legislature to in 2039-40. ensure that the budget is adjusted annually to Making Facility Modification Funding include the appropriate level of General Fund Permanent Helps Address Facility Needs, resources. For example, as noted above, there but Results in Additional General Fund Cost is expected to be a significant decline in SCFCF Pressures. As discussed earlier, the judicial branch expenditures in 2032-33 due to decreased has identified significant facility needs that will debt service payments at that time. Such eventually need to be addressed. The Governor’s reporting would help ensure that the backfill was proposal to make the temporary SCFCF facility appropriately decreased—thereby making General modification funding permanent would be a step Fund available for other legislative priorities. forward in that direction on an ongoing basis. Similarly, if revenues are significantly lower (such as However, because the SCFCF is insolvent, the in response to a change in state law) than expected, proposal would effectively result in $15 million in the backfill could be appropriately increased to additional cost pressure on the state General Fund ensure that all SCFCF obligations are being met. to backfill the SCFCF. Weigh Proposed Facility Modification As we discuss in The 2023-24 Budget: Overview Funding Increase Against Other Budget of the Governor’s Budget, the Governor’s budget Priorities. The judicial branch has identified proposes various budget solutions which, taken significant unaddressed facility needs which could together, would enable the state to meet its merit additional support. However, the Legislature constitutional requirement to adopt a balanced will want to weigh what level of additional SCFCF budget in 2023-24. The proposed solutions, funding to provide, if any, as well as how long this however, are insufficient to keep the state budget increased funding should be provided against balanced in future years, with projected out-year its other budget priorities. Moreover, reducing or deficits in the $4 billion to $9 billion range. Allowing rejecting the proposed ongoing spending on facility the expiration of the temporary SCFCF funding modification projects would provide the Legislature would provide $15 million in General Fund relief in with a budget solution to help address the future years relative to the Governor’s budget. projected out-year deficits that would occur under the Governor’s proposed budget. 10 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET www.lao.ca.gov 11 2023-24 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. 12 LEGISLATIVE ANALYST’S OFFICE