Vol. 36, Number 2—February 2004

"Mother May I" No Longer in
Courts' Vocabulary

Decentralization Aids Flexibility, Saves Money

In May 2003, a tornado caused extensive structural damage to the courthouse in Jackson, Tennessee. The bankruptcy court clerk used local funds to immediately lease space and relocate court files, equipment and staff. The court was open for business at its new location in 5 business days.

Following the September 11, 2001, terrorists attacks on the World Trade Center, phone and computer networks were knocked out in Manhattan. The Southern District of New York used local funds to purchase cell phones and emergency radios for staff, and to re-rout all case processing to divisional offices outside the metropolitan areas.

These are two dramatic events in which court managers have had the flexibility to react quickly to local needs. And it was thanks largely to budget and management decentralization that they were able to control their own resources. For that reason, daily, in courts across the country, management decentralization has earned the unequivocal support of judges and court managers. In the assessment of KPMG, the international accounting firm, the Judiciary's decentralization program is "a financial management program that has served the Judiciary well. Other government agencies might profit from an examination of this highly successful program."

By 1994, the Administrative Office had fully decentralized the Judiciary's funding to support court operations, giving courts the authority—and the flexibility—to made local spending decisions and to reprogram funds to meet changing needs. Court managers now could make personnel compensation and job qualification determinations, procure products and services, fund courtroom technology, and dispose of surplus property.

It was a break from an era in which court funds were centrally administered by the AO and monies were doled out for specific expenses, when reprogramming was not possible and written requests were required to obtain additional funding in any category.

When he spearheaded decentralization for the courts, Administrative Office Director Leonidas Ralph Mecham said, "we expect modest savings or other benefits may be achieved in those categories of funds which are decentralized."

Mecham's expectation proved too modest. KPMG found that the Judiciary saved approximately $1.3 billion in the Salaries and Expenses appropriation account between fiscal years 1994 and 2002. Of this amount, the courts were responsible for voluntarily returning $128 million in funds for which they did not have planned uses and allowed $160 million to lapse back into the national financial plan. Over $1 billion was saved by the AO in centrally managed accounts.

KPMG's evaluation was conducted from November 2002 through August 2003, and included a review of certain court unit financial data from fiscal years 1994 to 2002, policy and procedural guidance, and training materials. KPMG also surveyed 92 chief judges, unit executives, and senior AO staff.

When asked what characteristics of budget decentralization were the most valuable, judges and unit executives stated that the ability to manage their own budgets was the most positive aspect.

Previously a court unit's current-year funding was based on its previous year's expenditures. A court was unable to make any financial plans for a fiscal year and did not have the ability to react locally to funding emergencies that might arise. According to the report, "Under decentralization, courts' budgets moved day-to-day financial decision-making to those court executives who are best positioned to respond to changing funding priorities and emergencies."

Currently about $2 billion each year are managed by the courts that were controlled by the Administrative Office prior to 1994. A vital corollary of decentralization has been the development of top flight management and stewardship at the local court level.

"The courts acquired considerable latitude in deciding how their allotted funds are spent," said Chief Judge John Heyburn (W. D. Ky.), chair of the Judicial Conference Budget Committee. "They also acquired a considerable responsibility to manage those funds wisely throughout the fiscal year."

KPMG cited examples of court unit executives reprogramming savings to invest heavily in the automation infrastructure of the courts, so they were positioned to implement national automation systems such as FAS4T, the financial accounting system, the Case Management/Electronic Case Files System, and the Jury Management System. In another example of financial planning not possible prior to decentralization, court units within a district can join together to share an administrative unit that manages such services as automation, telephones and bulk purchasing. Under this relationship, court units reprogram funds at the beginning of the fiscal year to the "managing unit" to support operations.

The KPMG report also cites the supplemental funds and staffing provided to the hard-pressed southwest border courts as an excellent example of decentralization's built-in flexibility. While approximately 95 percent of court allotments are determined by formula, there is a provision under budget decentralization for the remaining 5 percent to be allotted to courts to fund unique, event-driven circumstances and emergencies. In fiscal year 2000, authorization was provided for $4.8 million for 148 additional work units in the border courts to increase court staff.

"The old centralized system was sometimes referred to as the 'Mother May I' system," recounts Mecham. "That's in the past. The courts have told us that decentralization is a success. Now KPMG's positive assessment of management decentralization as a financial management program is affirmation that courts work smarter and control costs better under the new system."

The overwhelming view of interviewees in the KPMG survey was that budget decentralization was a successful and worthwhile initiative. KPMG has determined that all 10 of the original objectives of budget decentralization, listed below, were achieved:

1. Reduce operating costs by 5 percent;


2. Create the ability to prioritize expenditures;


3. Provide a means to respond to unique local needs;


4. Offer incentives for good management at the local level;


5. Provide better capability for long-term planning at all levels;


6. Allow more flexibility to absorb reductions in funding caused by legislative action;


7. Reduce paperwork at all levels


8. Allow for better monitoring of expenditure patterns by the AO;


9. Create a greater capacity to avoid excessive year-end spending; and


10. Delegate responsibility for financial management to the operational level.