Judicial Council girds for cuts

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In the face of a COVID-19 recession that could be worse than the 2008 economic collapse, the state’s judiciary is girding itself for freezes on hiring and overtime, voluntary separations and judgeships left mandatorily vacant for four months at a stretch.

Though budget cuts are likely, staff layoffs would be a last resort, according budget principles tentatively adopted by the state’s Judicial Council.

Still, some workers might be shared or pooled as the judiciary works to pare back duplicative work. And outside contractors could become a rare sight.

Those ideas were among a long list of budget principles and guidelines discussed by the Judicial Council at its remotely held April 16 meeting. Those adopted are in effect for 60 days.

“I think we see the handwriting on the wall for 2022-23, obviously—and maybe even 2021,” Dan Ostdiek, the Judicial Branch’s finance director, told council members. “So I thought we’d better start talking about it now.”

The two items not immediately adopted—a hiring freeze and reintroduction of a recession-era policy of holding judge vacancies open for at least four months—need further discussion, members decided. They will be revisited during an emergency Judicial Council meeting, scheduled for 9 a.m. on Friday, April 24.

Making the adopted items effective for just two months gives the council time to react to a revised economic forecast, which Minnesota Management and Budget (MMB) office is expected to produce by mid-May. That unusually timed forecast will assess how badly the COVID-19 outbreak might curtail the state’s tax revenues.

Faint outlines of the outbreak’s impact already are visible. MMB has projected that, should the COVID recession prove just as bad as the Great Recession of 2008, state revenue losses could reach $3 billion. That would wipe out the state’s projected $1.5 billion surplus for fiscal years 2020-21 and leave Minnesota with just a $547 million “rainy day” reserve.

That’s if the recession is equally bad. But the state’s economic consultant, IHS Markit, expects it to be worse. In March, IHS Markit projected a 5.5% decline in gross domestic product over the next three quarters. The Great Recession saw a 4.3% decline in GDP over three comparable quarters.

IHS, however, also projects a rapid recovery from January through March 2021.

To that, Ostdiek reacted skeptically. “It is a big spike—I think they said it was going to be about 6.4 percent, which seems unrealistic to me,” he said. “But I am here and they are the economists, so that’s what they’re saying.”

The federal government is expected to send Minnesota about $1.87 billion as part of the recent congressional stimulus package. But all in all, it’s not enough to convince judicial leaders that budget cuts aren’t coming—not just in the next biennium, but in the current one.

“I would not assume that we’re going to be able to spend the money that has been budgeted for us already through next June,” said state Supreme Court Associate Justice G. Barry Anderson, a Judicial Council appointee.

In flux

The branch is currently operating on a $372 million budget for 2020-21. The governor has proposed a $913 million increase for the rest of the current biennium, of which $4.5 million would go to the courts for building security and cybersecurity.

Asked if it’s realistic to expect the supplemental-budget money to come through, state Supreme Court Chief Justice Lorie Gildea expressed doubt.

“I would say no, but it’s tough to say at this point,” Gildea said during the council meeting. “I guess I would say I don’t know. It’s certainly not an ordinary year.”

With so much in flux, Gildea took the unusual step of presenting a list of budget principles and guidelines and putting them to a vote with just one day’s notice. The group had to waive rules to make that happen.

“But these are unusual times,” she said, “so I am hopeful that we can get some support from the council for both the principles and the guidelines.”

Gildea had hoped to get the group immediately onboard with the hiring freeze—a proposal that came paired with a loosely defined “exception process.”

But that was a hard sell, particularly for 10th District Judge John Hoffman, who said he was unprepared to vote for it without knowing whether a hiring-freeze exception would, for example, apply to judges needing to replace law clerks who leave their jobs.

“I don’t understand what the exceptions are,” Hoffman said. “I don’t think our chief has decided what the exceptions are. So I would think we should know that before we vote on something like that.”

Hennepin County District Court Chief Judge Ivy Bernhardson expressed “significant concern” about re-instituting the four-month vacancy requirement for judges. Her county’s courts already are short three or four judges, she said, at a time when—not counting the current COVID-19 court lull—felony case filings have been spiking.

“Our significant need is to get judges in here in order to manage our caseloads,” she said.

Both the hiring freeze and the vacancy policy were held back from immediate votes. They were expected to be hammered into shape by the council’s executive committee on Tuesday, then returned for Friday’s emergency Judicial Council session for adoption.

The rest of the principles and guidelines were approved. They include:

Principles. What whatever else is done, the council agreed by unanimous vote, the branch will employ strategies that minimize staff cuts. In the years immediately after the 2008 recession hit, the branch was forced to cut about 250 positions.

Its other new budget principles include continuously moving funds to where they are needed and exploring areas of “consolidation, reinvention and specialization.”

Guidelines. Of the 12 budget guidelines discussed, 10 were immediately adopted—albeit for 60 days. They include:

• A possible freeze on overtime, with an exception process.
• Reducing the number of temporary employees where feasible.
• Considering voluntary separation incentive programs.
• Considering voluntary unpaid salary-savings leave.
• Restricting out-of-state travel. This is already in place, but Ostdiek said the council should consider how long it might be extended.
• Restricting in-person meetings. For instance, Ostdiek said, all future Judicial Council meetings could be held remotely.
• Reducing use of outside contractors.
• Limiting in-person training unless an exception is granted.
• Restricting discretionary spending on things like office-space reconfigurations or furniture replacements.
• Renting fewer spaces. This could mean long-term work-at-home status for some.

Strategic investments in cost-saving measures like adding technologies for remote hearings or increasing remote interpreter services could also help, Ostdiek said, but those were not put to a vote.

Although she didn’t get everything she pressed for—notably the hiring freeze—Gildea impressed upon council members the importance of acting quickly. She noted that the executive branch has already instituted a hiring freeze and she hoped to follow suit.

“I think we need to take some action here to prove that we are being a partner with other parts of state government in trying to get a handle on the cost implications of the pandemic,” Gildea said.

Justice Anderson agreed, particularly in light of possible cuts to the branch’s current, allotted budget. “The advantage of adopting a hiring freeze now,” he said, “is we might be in position to not have to make some unplanned, meat-ax kinds of cuts when some of those problems arise.”

The April 16 discussion was the first of what likely will be many difficult talks between now and October, when the branch must submit its formal budget recommendations to MMB. If Gov. Tim Walz accepts them, they would end up in his 2022-23 biennial budget proposal in January.

The Judicial Council is the branch’s policymaking authority. Its 25 members include 19 judges, the state’s district and appellate court chief judges among them.