TALLAHASSEE — A dramatic drop in mortgage foreclosures being filed in Florida has plunged the state's courts into a financial emergency that could jeopardize operations in every courtroom.
Supreme Court Chief Justice Charles T. Canady, in letters to Gov. Rick Scott and legislative budget leaders, has asked to borrow $72.3 million from other state funds to keep courts operating through the current budget year that ends June 30.
The problem arises just as lawmakers work to fill a $3.7 billion deficit in next year's budget and amid some of the worst relations ever between the three branches of state government.
The revenue shortage surfaced last month as court budget estimators took a look at mortgage foreclosure filings, which started dropping in late 2010 because of a moratorium that several lenders imposed on themselves. The state collects filing fees for each foreclosure claim that vary from $400 to $1,905, depending on the amount involved, and the numbers have dropped by close to 20,000 each month.
"This is an enormous chunk of money out of the budget we have for the remainder of the year,'' Canady said Monday. "We are conserving money and will be able to reduce our expenditures, but those kind of steps won't be enough to get us through this crisis.''
Canady already has established a hiring and budget freeze and late last week sent letters to Scott and lawmakers urging action as quickly as possible.
By the end of March, the court is facing an immediate $8 million shortfall and Florida law does not allow deficit spending. Without help, the courts will be forced to start cutting personnel and services. Because about 85 percent of the court system's budget goes to personnel, Canady says unpaid furloughs will occur.
Canady, who wants to transfer $14 million from two small court-related trust funds and borrow $28 million from other state funds, said he has met with House and Senate budget leaders and is "hopeful'' the situation can be resolved. But he does not know what the governor will do and a representative for the governor did not respond to questions Monday.
The Senate on Monday included money in next year's proposed budget to repay $50 million the courts would have to borrow, said Sen. Mike Fasano, R-Port Richey, chairman of the subcommittee that controls judicial appropriations.
But the court still has to gain approval from the governor and the House.
"It's an unfortunate circumstance caused by events no one anticipated,'' Canady said.
Funding for the courts is heavily dependent on the number of lawsuits filed. About $370 million of the $462 million court system budget comes from a State Courts Revenue Trust Fund. Some $293 million of the total raised by filing fees was projected to come from mortgage foreclosures this year.
Canady said he is working with legislators to reduce the court system's reliance on foreclosure fees to avoid future problems. Until 2009, the state courts were financed primarily with general revenue dollars, but state lawmakers shifted the funding source to a trust fund in an effort to make those using the court system pay for it.
During most of 2008 and 2009, foreclosure suits were being filed at a rate of more than 30,000 a month, peaking at 39,114 in March 2009. The dropoff began in late 2010 as the number of foreclosure suits fell to 8,942 in November and 9,761 in December.
The slowdown continued in January with 9,168 suits and February saw the number drop to 8,205, the lowest level since late 2006.
The court's budget estimating staff believes filings will pick up in the next fiscal year as banks and other lenders unravel some of the problems that postponed filings.
Complicating the budget emergency? The deterioration of relationships between state lawmakers and the court over the past year after the Supreme Court removed constitutional amendments proposed by the Legislature from the 2010 ballot and questions arose over the construction of a new 1st District Court of Appeal that critics are calling a "Taj Mahal.'' The Tallahassee appellate court spent more than $50 million to build the courthouse after slipping a $35 million bond issue into a transportation bill on the last day of the 2007 legislative session.
Lawmakers are looking at a number of measures that would change the way the courts function, including splitting the Supreme Court into two — one for criminal cases and another for civil cases. Lawmakers also want to move the Supreme Court into the new building now occupied by the 1st DCA.
In addition, some lawmakers want to open up the files of the Judicial Qualifications Commission, the agency that investigates complaints against judges; force appellate court judges to get 60 percent approval when they face merit retention votes; and require appointed judges to face Senate confirmation.
by the numbers
$462 million Florida court system's budget
$293 million Amount that had been expected from foreclosure filing fees
$72.3 million Deficit blamed on a shortfall in filing fees after foreclosure cases dramatically declined
39,114 Foreclosure suits filed in March 2009
8,205 Foreclosure suits filed in February, the lowest level since late 2006