AMERICAN JUDGES ASSOCIATIONLAHAINA, HAWAIISEPTEMBER 2008

RICHARD VAN DUIZENDPRINCIPAL COURT MANAGEMENT CONSULTANT

NATIONAL CENTER FOR STATE COURTS

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Court Funding: Lessons From the Last Recession

Questions to Consider

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How bad were court budget deficits in the last recession?

How did budget cutbacks affect judicial services to the public?

What are the budget forecasts through 2010?

What did we learn from the last recession that might help courts develop strategies be to address this next round of budget shortages?

Where Did Increased State Spending Occur in the 1990’s?

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Category Percent Change

Total General Expenditure 28.2%Elementary & Secondary Education 30.7%

Medicaid 78.8%Higher Education 17.9%Judicial 49.0%Corrections 39.0%

Growth in State Government Spending in 1990's

Source: Donald J. Boyd, Nelson A. Rockefeller Institute of Government

Note: This is measured per capita. Figures are adjusted for inflation and population growth

What did the financial picture look like from FY 2001-2004?

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26 states had less revenue than estimated in 2003

45 states expected budget deficits in 200439 states exceeded budget spending

levels for FY 2003Most states had budget deficits equivalent

to 11 percent of total expenditures

Council of State Governments, State Fiscal Crisis: Critical information for State Decision Makers, April 2003

What caused the fiscal crisis in the last recession?

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Spending Increases Occurred at the Same Time as Tax Cuts Were Enacted

How could states cut taxes while increasing spending and still maintain balanced budgets? Sales taxes increased as consumer spending increased State income taxes increased as people’s incomes

increased

States enacted permanent tax decreasesStock Market lossesSeptember 11Per capita increase in state spendingCouncil of State Governments, State Fiscal Crisis: Critical information for State Decision Makers, April 2003

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Adequacy of State Judicial Branch Current Appropriations, As Rated by Court

Administrators

FY 2001

28.9%

39.5%

26.3%

5.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Inadequate Adequate Good Very Good

Note: N = 38.

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Adequacy of State Judicial Branch Current

Appropriations, As Rated by Court Administrators

FY 2003

52%

20%

12% 12%

0%

10%

20%

30%

40%

50%

60%

Inadequate Adequate Good Very Good

(Note: N = 32)

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Actions taken (35)No actions taken (includes DC) (6)Not participating (10)

92% of These States Took Actions to Curb Spending Because of Funding Restrictions During 2003.

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budget restriction from previous year (20)other (31)

Nearly half of the responding states reported budget restrictions for FY 2003

Virtually every state reported significant public impact from the crisis.

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Alabama: 475 court positions cut in 2004California: early release of prisoners—47,000

from Los Angeles aloneNew Hampshire: suspended jury trials for a

monthOregon: closed courts to the public on FridaysMinnesota cut funding to crisis centers meaning

less help to victims of domestic violenceNew York: cuts to Rochester Public Interest

Laws Office meant 200 people would receive no legal help

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WHAT IS IN STORE FOR STATE BUDGETS THROUGH 2010?

WWW.NCSCONLINE.ORG 12

Source: Pew Center on the States

14 State Courts Systems Face 0 to 10% Budget Reduction in FY 2008-09.

NCSC survey of State Court Administrators, May 2008, forty-two states

responding WWW.NCSCONLINE.ORG

What's Causing State Budget Woes This Time?

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Bursting of the housing market Sales tax revenues decline Property tax revenues, Local governments will be looking to states for

relief

Past policies have left states vulnerable Unaffordable past tax reductions Tax cuts being phased in over next few years Structural budget imbalance Use of one-time revenue and budget gimmicks Inadequate rainy-day funds

What Tactics and Strategies Did State Courts Implement Last

Time?

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State Strategies

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State Strategies (n=32)

94%

59%

88%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cut spending Increase revenue Enhanced efficiency

Most Frequent Short-Term Actions to Curtail Court Expenses (2003)

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1. Hiring delay or freeze (27 states)2. Permanent layoff’s (7)3. Delay pay raises (10)4. Reduce training (18)5. Travel restrictions – out state (24)6. More use of electronic communications (22)7. Reduce capital expenditures (28)8. Cut funding to problem solving courts (10)9. Enhancement of revenue streams (14)10. Invest in automation (12)

Things May Be Worse This Time

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Property taxes, sales taxes and income tax could all be hit

Many states filled the budget shortfall last time by raising fees; there is little room left for new increases

May need to radically redesign services to continue to provide adequate access to the public

Examples of Service Redesign

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Court Services—prioritization, consolidation and elimination of services

Process Efficiencies—centralize and streamline services

Technology—redesign services around IT

State Courts Systems Considering Steps to Adjust Expenditures in FY 2008-09

NCSC survey of State Court Administrators, May 2008, forty-two states

responding WWW.NCSCONLINE.ORG

What Is NCSC Doing?

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Templates for re-designing servicesSurvey the depth of the cuts Track solutionsBudget Resource CenterToolkit