Courts likely to be hit hard as California finances crater

The California court system and Department of Justice could be in for big cuts after the Department of Finance announced Thursday the coronavirus has punched a $54.3 billion hole in the budget.

"COVID-19 has caused a national recession, a precipitous decline in income, rapidly rising health and human services caseloads and substantial COVID-19-driven costs," the agency warned near the top of its fiscal update.

The deficit announcement was a preview of May 14, when Gov. Gavin Newsom is slated to release his revised budget plan. Those numbers will provide a far better view of how the crisis will affect specific agencies.

The crisis makes good on a prediction former Gov. Jerry Brown made for years after spending most of his last two terms in office guiding the state out of the last decade's recession. As his time in office came to a close, Brown repeatedly warned that his successor would need to stand up to Democrats in the Legislature who urged more spending.

Indeed, spending has gone up under Newsom, though not as much as some feared. His first budget grew by $5 billion, or 3.6%, over Brown's last one. His proposed 2020-21 budget was slated to rise another 2.2%, or $3.3 billion. But these numbers, taken together, amount to just 15% of the shortfall outlined by the finance department.

Martin Hoshino, the administrative director of the Judicial Council, called the news "sobering."

"All of state government is now in a vastly different world from the one we began the budget year with in January," Hoshino said in an emailed statement. "As more court services are restored, we expect to see a surge in filings and case work that has been suspended in the wake of the governor's emergency orders. We are facing a multi-year challenge but we can't lose sight of our primary duty of providing access to justice for all Californians."

Newsom began his daily lunchtime coronavirus news conference on Thursday with a brief description of how rosy the state's budget picture looked 90 days ago.

"We're projecting tens of billions of dollars of shortfall, all specifically related to COVID-19," Newsom said. "This is a global pandemic. There is not an economy around the world that has substantively been immune."

It was about 90 days ago when Newsom introduced a draft state spending plan that would have made Xavier Becerra the first state attorney general in history to control a $1.1 billion budget. It included almost 200 new staff and about $22 million in new spending. Less than one month ago, Becerra appeared at an Assembly budget subcommittee hearing to ask for more money, in particular to recruit more agents to seize guns from people on the armed and prohibited persons list.

California's court system was to receive about $37 million more and an additional 36 positions. Chief Justice Tani Cantil-Sakauye released a statement Jan. 10 saying she was "grateful for Governor Newsom's budget proposal" and called it "welcome news," in contrast to the years of cuts the branch suffered during the recovery.

The finance report said the state "began 2020 with a strong bill of financial health." This included very low unemployment, $21 billion in budget reserves and a $5.6 billion surplus in the 2020-21 budget. Even March revenues came in nearly $1.4 billion above projections.

Then the bottom dropped out, in the form of 4.2 million new jobless claims and other setbacks. The report goes on to project personal income to fall by 9% and personal, corporate and business use tax receipts to all drop by about a quarter.

Unemployment is projected to jump from under 4% to 18%. The state's peak unemployment rate during the recession in 2010 was just over 12%. Overall revenues are expected to fall $41.2 billion, while expenditures are likely to go up $13.1 billion, according to the finance memo, largely for programs to fight the virus and the economic fallout.

When specific cuts come next week, past budget crises suggest newer spending and not-yet-approved programs are likely to be among the first victims. This could be bad news for Becerra's bid to get more firearms agents, and for proposals to spend tens of millions to reduce the impact of fines and fees on low-income people.

Long-delayed court construction projects could also go back on hold. The Judicial Council was set to debate these proposals again at its March 24 meeting. But that meeting was canceled, then quickly followed by orders suspending trials and imposing emergency measures.

Then there's the matter of the 25 new judge positions, and $36.5 million in ongoing funding, approved as part of the budget approved last year. These came from the 48 remaining positions approved in AB 159 in 2007, on the eve of the last financial crisis.

These were originally contained in SB 16, a bill from Sen. Richard Roth, D-Riverside, though Roth dropped the bill as part of the budget negotiations.

"While access to justice remains an important issue, being mindful of the current circumstances, Senator Roth will not be pursuing legislation this year on this matter, but rather keeping a watchful eye on the implementation of the secured funding to see if further action should be taken in a future legislative session," Roth's staff said in an emailed statement on Thursday.

As he has in prior press conferences this week, Newsom used his appearance Thursday to tout the phased reopening process he has kicked off. This is to include assessments of what types of business and other activities are safer to open, he said, rather than just a consideration of what is essential.

He also repeatedly emphasized the need all states have for support from the federal government.

Consumer Attorneys of California President Micha Star Liberty also emphasized this point in a statement she released about the new budget figures.

"We urge the federal government to put aside politics and step up with financial assistance to states across the nation suffering under the yoke of the coronavirus pandemic," she said. "A swift and effective recovery depends on maintaining the operational vitality of states. Without it, the fiscal malaise will almost certainly outlast the viral threat."