Business Update with Mark Lacter

More money for state coffers doesn't mean some services in California will return

KPCC's business analyst Mark Lacter explains why the state's financial picture getting better won't help some public services.

Steve Julian: California's state budget outlook is improving, but at a cost.  Mark, what is that cost?

Mark Lacter: It's not just the tax increases that voters approved through Proposition 30.  Part of the reason why California's budget situation is improving is because the state has come off several years of massive cost cutting – and these are not temporary cuts.  That money is basically gone.  A good example is the L.A. courts system, which has already seen several rounds of  sharp cuts since the recession, and which still faces an $80-million deficit next year.  This latest round will result in the closure of 10 courthouses in L.A. County.  They include West L.A., Beverly Hills, South L.A., Whittier, and Pomona.  And make make no mistake: this is going to cause all kinds of delays and dislocation for everybody.

Julian: It'll turn judges into jugglers?

Lacter: That’s right.  At any one time, judges will be handling thousands of cases.  So, if you have a personal injury dispute, or if you want to sue your boss, or if you're a business owner and haven't been paid by one of your big customers - in other words, if you have any business or personal matter that you want to see resolved in court, and you can't afford the cost of an outside mediator - well, just get in line.  Small claims cases, which are now heard in 26 courtrooms, will be heard in only six.  Any sort of landlord-tenant dispute will  be handled in five courtrooms, down from 26.

Julian: …And layoffs?

Lacter: And layoffs.  Even before these upcoming cuts, L.A. Superior Court had lost around 900 positions.  As to why it's gotten this bad, there are several explanations, starting with the recession and also a botched effort to centralize the state court system.  But a big problem is structural: the legislative branch holds the purse strings to the supposedly independent judicial branch.  When different interest groups are all competing for the same limited bundle of cash (and we're talking about welfare and health programs, the schools, and law enforcement, and Caltrans, and everything else), the court system is well down the list of priorities.  Until Sacramento figures out a better way of funding them, then they will remain susceptible to these massive budget cuts.

Julian: Mark, let's look at another side of justice: More questions for Federal Judge Manuel Real...

Lacter: Steve, the news organization California Watch reports that Judge Real issued favorable rulings for Microsoft, Verizon, and the big biotech company, Amgen – and he happened to own stock in all three companies.  Now as a matter of course, judges are supposed to step aside whenever there's a financial conflict, no matter how small.  That's according to  the Code of Conduct for U.S. Judges.  It's just that Judge Real, who is 88 and was nominated in 1966 by President Lyndon Johnson, chose to ignore those requirements.  And he might very well get away with it -

Julian: There's no one to step in?

Lacter: Well, sanctions against federal judges are extremely rare, and just the process of obtaining financial disclosures and then pairing them with court rulings can be difficult,  especially when judges are lax in reporting what stock they own.  That is the case here.  Actually, Judge Real has a long history of misconduct investigations.  In 2006, he faced impeachment by Congress over allegations that he showed favoritism in a bankruptcy case.  That never reached the impeachment stage, but the Judicial Council of the 9th Circuit Court of Appeals did reprimand him, and his cases have been pretty closely scrutinized over the years.

Julian: So why didn’t someone object to his involvement in these cases?

Lacter: Good question.  Real isn't talking, but clearly the system isn't working all that well.  And by the way, the stock price of all three companies went up after the judge’s rulings.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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