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Fewer Foreclosures' Downside: Courts Low on Cash

March 2, 2011 - 6:00pm

The remarkable drop off in foreclosures at the first of the year, as lenders dealt with allegations of irregularities, may have been a welcome relief for underwater homeowners.

But it has an enormous downside for the courts that could have some stunning effects.

The money has dried up, State Courts Administrator Lisa Goodner said Wednesday.

Every foreclosure came with a filing fee that was deposited in the State Courts Revenue Trust Fund.

No foreclosures, no filing fees.

And to make matters worse, the money was pouring in so fast during the period when foreclosures were rampant that lawmakers shifted the way the judicial branch is paid for to take advantage of the heavy cash flow.

Lawmakers created the State Courts Revenue Trust Fund in 2009 specifically to fund the courts, and cut drastically the amount of general revenue going to the judicial system.

Last year, it was a very robust trust fund, Goodner said.

Now, this money is funding 90 percent of our budget, Goodner said, referring to the trust fund paid into by filing fees.

Goodner said that the system has a shortfall of $72 million and still has to operate on the current budget until July 1. She told a House committee last week that without some solution, furloughs of staff may be necessary.

Goodner told the News Service on Wednesday, however, that Supreme Court Justice Charles Canady is working on proposed solutions and that talks about what to do were occurring between the courts, the House and Senate, and the governors office.

One option is likely some sort of loan; another is moving money around in the system. There are cash reserves in some other court-related trust funds, but the courts would need legislative approval to shift the funds. Goodner said there was broad agreement that something would be done.

Still, the situation is pressing.

If we were not able to secure a way to make sure we had funding through the end of the (fiscal) year, it would have a serious impact on the citizens of this state, Goodner said. We would simply not be able to keep the doors open.

Goodner also said lawmakers had anticipated that a slow-down in foreclosures would eventually force the state to look again at court funding, though the current lack of cases wasnt expected.

Everybody has known that this cant go on forever, Goodner said. She said there had been an expectation that the trust fund would remain in the black through next year, but that then the systems general revenue budget would be restored. Now, lawmakers may be under pressure to look at that in the coming year.

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