Governor and courts reach budget accord

California court officials breathed a sigh of relief last month when Gov. Schwarzenegger announced he wants to restore more than $99 million to the trial courts in the next budget, although the reaction was tempered by the knowledge of continued shortfalls in some areas.

“While the funding proposal isn’t likely to provide relief in the year ahead to problems such as reduced hours of operation and disparate levels of justice from court to court, this agreement does represent a significant step toward protecting our justice system,” wrote Chief Justice Ronald George in a summary sent to the state’s presiding judges.

And despite the good news, the courts quickly backed off the governor’s announcement that in exchange for the increased funding, the judicial branch had agreed that the state would assume responsibility for labor negotiations for court employees. “This is not correct,” said court spokeswoman Lynn Holton.

Instead, she said, the Administrative Office of the Courts proposed creating a working group to review trial court collective bargaining issues and to make recommendations to the governor and the legislature.

Courts have been reeling under the burden of unfunded mandates, skyrocketing security and salary costs and general funding reductions imposed as a result of California’s budget crisis. When the newly inaugurated governor presented the 2004-05 budget in January, it included a nearly $70 million reduction for the court system.

George and other court officials have worked with Schwarzenegger and the Department of Finance since then to restore some funding and have attributed the original proposal to the unfamiliarity of a new administration with the courts’ needs.

The governor’s original proposal for the judiciary included a net reduction of $9.8 million; the so-called May revise proposes an increase of $4.3 million, which will fund increases in judges’ salaries and benefits, employee salaries and increases in the costs of contract security services.

For the trial courts, the May revise proposes an increase of $99.1 million, including:

• $28.8 million for security contracts with sheriffs.
• $23.1 million in court staff retirement costs.
• $27.6 million for the Judges Retirement System.
• $1.5 million for county charges to provide various services to the courts, such as janitorial, communications systems and human resources.

The governor’s proposal also envisions reducing operational costs by about $9.8 million by:

• Phasing in electronic reporting through attrition ($6.4 million).
• Eliminating the governmental exemption from civil court filing fees ($312,000).
• Reducing the number of peremptory challenges in all case types ($372,000).
• Reducing jury panels to 35. Currently there are 68 jurors on felony panels, 53 on misdemeanor panels and 57 on civil panels. The proposal is expected to save $241,000.
• Decreasing the number of jurors in limited civil cases, where the amount in controversy does not exceed $25,000, from 12 to eight ($173,000).
• Eliminating juror pay for government employees ($2.3 million).

The AOC also tiptoed around the electronic recording and jury reform proposals, saying that both are under study. Electronic reporting in particular has been a hot-button issue in Sacramento, where the court reporters union has been successful in protecting its members.

But it was the collective bargaining announcement that caused the biggest controversy. A press release from the governor’s office announcing a “new budget plan for trial court funding” said that as part of the agreement, “the administration will propose legislative language to reform the collective bargaining process between the courts and court employee union by creating a process to allow for state-level participation.”

Currently each local court negotiates with the local employee unions to determine court employee salaries and benefits. Even though the funding becomes the responsibility of the state, the state is not included in the negotiations.

Although court administrators were pleased with the announcement because they believe it would mean more money for their operations, labor representatives immediately registered their outrage and began contacting their allies in the Capitol. It took only two days for the courts to announce the AOC wants to create a group to “review trial court collective bargaining issues” and to make recommendations to the governor and the legislature that will both increase accountability for the funds and “ensure fair treatment of trial court employees and adequate funding for salary and benefits of trial court employees.”

The Senate and Assembly budget subcommittees rejected or deferred action on several proposals that will go to conference committee, including the $99 million increase for trial courts. Some proposals were DOA in the legislature, including the reduction in peremptory challenges and decreased size of jury panels.

Schwarzenegger also included a surprise for the trial lawyers when he announced his full budget later in the month and proposed allowing the state to take 75 percent of all punitive damage awards. The remaining 25 percent would go to plaintiffs and for attorney’s fees. Under the proposal, only one award of punitive damages could be recovered in cases involving product liability.

Split-award statutes, which the governor said are in effect in eight other states, would add an estimated $450 million to the state’s general fund annually, the governor said.

A Public Benefit Trust Fund administered by the State Controller would be created to pay for “state programs and purposes consistent with the award,” according to the proposal. “The award of punitive damages, as intended to punish the defendant and set an example, should more appropriately be awarded to the state where it can be used for public good purposes that are consistent with the nature of the award,” the proposal suggested.

Not surprisingly, tort reformers welcomed the suggestion and plaintiffs lawyers didn’t.

Legislative analyst Elizabeth Hill said the governor’s proposal overestimated the potential revenue and suggested a more realistic estimate would be $200 million.

Hill also said some proposals, such as jury reform, should be considered as possible policy changes that should be studied by the legislature rather than enacted through the budget process. In addition, she said some of the savings estimates from court proposals “may be overstated.”