Finding a funding solution for the district courts

By Lisa Brody

What if there wasn’t a court to go to if you had to deal with a traffic ticket or a legal case. In the communities covered by the 48th District Court – Birmingham, Bloomfield Township, Bloomfield Hills, West Bloomfield, Sylvan Lake, Orchard Lake and Keego Harbor – it's not a farfetched consideration as the communities bicker over funding for the court and consider opting out of subsidizing it entirely, despite statutory requirements mandating financing the court.

A key provision lacking in the statute is it does not state how to finance the court, leaving it to local municipalities to figure it out themselves.

In Michigan, there is a dual court system, one run by the state; the other, a federal system. Most of the court cases the general public deals with on day-to-day basis is in the state court system, which functions from the district court to the circuit court, and then to the Michigan Appeals Court and the Michigan Supreme Court, which is the final determining spot.

District court is the first stop for most criminal cases, as well as for traffic tickets and misdemeanor cases. They're located in local jurisdictions. In Michigan, there are three different classes of district courts: first class, second class and third class district courts. They all serve the same function.

First class district courts serve the entire county where they are situated, and are paid for by the county. In 77 counties in Michigan, this is the way the community has a district court, Tom Boyd, Michigan State Supreme Court Administrator, and former district court judge in the city of Mason, in Ingham County, explained.

Second class district courts are county-funded courts that do not cover the whole county, such as the 52nd district courts in Oakland County, in Novi and Rochester.

“They only exist in six counties in Michigan – Wayne, Oakland, Macomb, Washtenaw, Ingham and Kent counties,” Boyd said.

Then there are third class district courts which cover specific local jurisdictions within a county and are funded by the local communities they cover. Oakland County's 48th District Court is a local example.

Boyd said that one of the reforms in the 1963 Michigan Constitution was the elimination of the justice of the peace system because it had become subject to corruption.

“They became paid for their signatures,” Boyd said.

The 1963 state Constitution directed the state legislature to create within five years a new system of limited jurisdiction courts, which in 1967-1968 became the district courts.

“The legislature in 1967 thought district courts were county entities,” Boyd said.

However, Wayne County, which he said had enormous clout at the time, with both a huge population as well as politicians with statewide influence, said, “no way,” as did Oakland County.

“Wayne County said if we can't have county courts, we'll have city courts,” Boyd said. “Wayne County is the only county in the state that has no second class courts – meaning no county courts at the district level.”

There is the 36th District Court, just for the city of Detroit, funded by the city of Detroit, within Wayne County, but it is a third class district court. It is the only court in the state that is just for one municipality. The rest of the county is served by hybrid third class district courts.

“There used to be 12 to 13 counties with second class district courts, but now there are only six,” Boyd said. “Genesee and Kalamazoo counties were the last two to convert (to first class courts). More have consolidated back to first class countywide courts. It's definitely the trend.”

“Michigan's system for funding its courts is byzantine,” pointed out Diane Hartmus, JD, associate professor for political science, Oakland University. “There are more than 165 methods in Michigan of funding courts. There have been challenges at the state level (to funding).”

Justin Long, associate professor, Wayne State University Law School, concurred. “It's a very strange funding system – not to say it's uncommon. They're state courts that perform a state function, but they're not funded by the state, which immediately creates a conflict because anytime you have a gap between a role or function of an institution and it's funding, it opens up a door for problems because it can create a conflict in who is funding and how.

“The state has its own priority of maintaining courts for its own purposes, such as regulating disputes between private parties, to enforce criminal laws passed by the state legislature, and to provide a forum for people with claims against their own government,” Long said. “Whereas the county and other local governments have their own priorities, like roads and sewers, that have nothing to do with courts. So for those funding units, it's always going to be a conflict between the state's goals, which are carried out through the courts, and the counties and local governments, which actually pay for it.”

Long said the mandate upon counties and local governments to fund the district and circuit courts is not the same thing as an unfunded mandate, “but it has the same political impact. Who bears the brunt of it is the people who need the courts to protect their rights.”

Boyd explained that every Michigan Constitution going back to 1835 mandates that penal fines go to libraries. It is largely how libraries in the state were funded. Yet, at some point in the World War II era, he said, some were determined to not be penal fines but local ordinances.

“Police could get money back because it's not a penal fine,” Boyd said. “District courts were designed to fix that, and they just haven't. Therefore, if it's a fine from a state law, it goes to the libraries. Otherwise, it stays local.”

In 1983, libraries in Saginaw sued the district courts in Saginaw County, asking where their money was, alleging the courts had created a work around. The courts lost. “It took 30 more years for a case to get to the Michigan Supreme Court in People v Cunningham, to say, 'what are you talking about? What are the costs?' The legislative response in 2017 was to create the authority for courts to charge for court costs.”

Local district courts handle all misdemeanors, traffic tickets, pretrial criminal actions and arraignments. “It's the first stop in the criminal court process,” Hartmus explained.

Circuit courts are the trial courts with the broadest power in Michigan. In general, the circuit court handles all civil cases with claims of more than $25,000 and all felony criminal cases, and where the accused, if found guilty, are sent to prison.

“We're not unique,” Hartmus noted. “Other states have crazy funding systems, but some states have simple funding methods. Michigan has a system where a lot of the money comes from traffic tickets. The assumption a lot of us have is that when there are funding shortfalls, the police need to go out and write more tickets.”

West Bloomfield Supervisor Steve Kaplan disavows that assumption, noting that it costs the township and police department to send officers to the court when a member of the public fights a ticket.

“It's illegal anyway,” Kaplan, a former prosecutor, said. “It's a violation of state law to have quotas.”

Boyd concurred, noting it is against all collective bargaining agreements.

Kaplan also said West Bloomfield loses money for every ticket it writes.

“It often gets marked down to a non-moving violation with no points if the person has a good record. The court will impose fines and costs of $200. What happens to the $200 – the money is disbursed to the state, the library fund, the county. West Bloomfield will get about $40 of that,” he said.

“We as a municipality have to send police officers to court, pay time-and-a-half with a two-hour minimum to that officer, and then it's one fewer officer on the road if it's on his shift.”

Hartmus said Michigan has a complex statute on how district courts are funded, going back to the 1963 Constitution, with the Michigan legislature then creating the three different classes of district courts. Subsequent legislation determined funding models, but not requirements for how to fund certain courts, including in Oakland County, the 48th District Court, which just required the seven local communities to fund it – but did not establish a specific system.

According to a 1988 document by Citizens Research Council, “Adoption of the 1963 Michigan Constitution mandated certain changes in the structure of the state judiciary. Specifically, Article VI, Section 26, of the 1963 Constitution required that the offices of circuit court commissioner and justice of the peace be abolished and a court or courts of limited jurisdiction be created by the Legislature before January 1, 1969. Prior to the 1963 Constitution, justices of the peace were elected township government officials with limited jurisdiction in both criminal and civil matters. Cities in Michigan maintained “municipal” or “police” courts which superseded the jurisdiction of the justice of the peace. In 1968, the Legislature implemented the 1963 constitutional mandate by creating a district court system in Michigan (P. A. 154 of 1968)… P. A. 154 of 1968 originally created a total of 99 district courts. Thirteen of these districts included an additional 16 election divisions, thereby potentially creating 115 autonomous district court units. The legislation abolished municipal courts and police courts; however, the governing body (or bodies) of any newly created third-class district could retain its municipal or police court by adopting a resolution within seven days after the effective date of the 1968 act. Several jurisdictions opted to retain their municipal courts rather than allow a new district court to be created… Of the 99 district courts originally created by the Legislature in 1968, 53 were to be funded by county governments.”

In Oakland County, the 52nd district court covered the county, exclusive of the cities of Madison Heights, Ferndale, Hazel Park, Royal Oak, Berkley, Huntington Woods, Oak Park, Pleasant Ridge, Southfield, Lathrup Village, Farmington, Sylvan Lake, Keego Harbor, Orchard Lake Village, Birmingham, Bloomfield Hills, Troy, Clawson, and Pontiac and Royal Oak, Southfield, Farmington, West Bloomfield, Bloomfield, and Waterford Townships, meaning those municipalities had to create local district courts and fund them.

The Citizens Research Council noted: “In every Michigan county except Oakland that operates a county-funded district court, the jurisdiction of the county-funded court is either countywide or includes only the rural townships and small cities within the county. In Oakland County, there are municipalities included in the county-funded court while other municipalities in the county are required to finance their own district courts.

“The current district court arrangement in Oakland County creates an inequitable situation because the 52nd District Court (county-funded court) is not a self-supporting enterprise. The county general fund is required to subsidize the operations of the court. As a result, taxpayers in the third-class (locally funded) district courts, in effect, are required to pay for the operation of two district courts. Their local tax dollars are used to finance the operation of the local district court and their county tax dollars are used to finance the operation of the county-funded district court. Taxpayers in the second-class district court, however, only pay for court services once. Their county taxes are used to finance the second-class district court.”

Boyd noted that “court funding is a patchwork quilt that puts judges in a bind because in a lot of places they're responsible for court funding, and that can cause at least the appearance of conflicts of interest. The judicial branch's currency is trust and public confidence, so it's important that people don't think we're just out for their money.”

In 2019, the state judiciary studied the funding issue after the legislature created the Trial Court Funding Commission in 2017, to review Michigan's trial court funding system, putting out “Trial Court Funding Commission Final Report,” of which Boyd was the chair.

“The commission has unanimously concluded that the existing system is broken, and it is imperative to create a stable and consistent funding source for Michigan trial courts that removes trial court judges from the role of raising money for the operation of the courts,” the report's summary states.

Among its key recommendations are to address the problems of: A real or perceived conflict of interest between a judge's impartiality and the obligation to use the courts to generate revenue; inadequate funding from all sources due to excessive dependence on local government funding; and unequal access to justice harming those who are most vulnerable and have the least access to financial resources.

The report notes the current system is dependent upon court assessments (fees, fines and costs) to generate substantial revenues to fund about one-third of court operations. The balance comes primarily from local operating funds.

“While a significant portion of the court assessments are sent to the state government, very little is ultimately appropriated from the state's general fund to actually fund the trial system. Tens of millions of dollars are transferred to other state functions that do not directly support courts,” the report states, while pointing out, “Local government units are the largest source of funding for trial courts.”

The recommendation from the report is that “the state must access responsibility and act to ensure adequate funding for trial courts with local government continuing to play a role in providing funding and support of the judiciary. A rebalanced state/local partnership is necessary to meet the fundamental duty that everyone has equal access to justice.”

This general recalibration is playing out on the local court level, as the municipalities which have historically funded the 48th District Court – are undergoing a re-examination of their long-term funding agreement, and it is even causing neighboring communities to turn on one another.

According to a 1985 funding unit agreement for the court, Birmingham, Bloomfield Township, Bloomfield Hills and West Bloomfield were the four municipalities funding the court, meaning they provided annual funding for court operations and maintenance in response to budget requests from the court based upon the percentage of their community's use of the court, in return for a two-thirds return of their receipts, while Sylvan Lake, Orchard Lake and Keego Harbor, considered too small to finance the court, submitted their tickets and court cases, and in return, received one-third of their revenue.

A disagreement about who should fund the court appears to have begun with funding balance shortfalls from the court during the Covid-19 pandemic. As with many businesses – and make no mistake, the court is a business – during the pandemic, the court was shut down for lengthy periods of time, staffers were laid off or worked remotely, court cases were postponed due to shutdowns, delaying fines and court costs, less police tickets were written – meaning there was a severe decline in revenues, and a sharp decrease in receipts returned to the funding communities. Yet the court still had to be funded.

In 2020 and 2021, former Bloomfield Hills Mayor Sarah McClure noted Bloomfield Hills was suddenly paying significantly more to the court than they had ever before, and felt it was disproportionate to the size of their municipality and the percentage of cases they were sending to the court.

“We had a $182,000 loss in 2020, and $144,000 loss in 2021,” to the 48th District Court, said Bloomfield Hills City Manager David Hendrickson. “Our overall annual budget is only about $11 million. The city commission wanted to make sure that however the court was funded, it was appropriate, and felt it should be examined.”

Hendrickson said they would typically have a nine to 10 percent caseload at 48th District Court.

“But in 2020, it went up to 15 percent, not because our caseload dropped, but because Birmingham's dropped 59 percent in 2020, Bloomfield Township's dropped 48 percent, and West Bloomfield dropped 37 percent,” Hendrickson said. “Ours only dropped 17 percent, so our case load percentage went up, meaning we had to fund it more, all due to Covid.”

Other municipal leaders said they had instructed their law enforcement officers to stop writing traffic tickets during Covid, when many drivers were not on the roads, while Bloomfield Hills did not, leading to the imbalance.

The Bloomfield Hills City Commission decided it no longer wanted to be a funding unit for the court, and while the agreement required a 12-month lead notice for pulling out of the agreement – which Hendrickson acknowledged – “We gave notice on October 13, 2021, we were leaving effective January 1, 2022. According to our attorney (Derk Beckerleg, also the attorney for Bloomfield Township and West Bloomfield), it was done appropriately per the contract.”

One local leader, who declined to be quoted, said Bloomfield Hills' response was no different than someone pulling their money from their 401K in a panic during a week when the stock market is down rather than waiting for the market to recover.

“Now we're not funding the (court) budget, and instead of receiving two-thirds back from the court, we'll receive one-third back,” Hendrickson said. “I'm not sure if we will come out net ahead. We will see, but I don't think we'll have big fluctuations.”

A question arises – what happens if the court recovers financially and Bloomfield Hills wants to recoup their money? Do they once again become a funding unit?

Hendrickson said when the city commission examined their case loads they were closer in number to the non-funding communities than to Birmingham, Bloomfield Township and Bloomfield Hills.

“We wanted to work as a team with the other communities and the court to figure out a more appropriate funding method, if there is one,” he said. “We owe it to our taxpayers.”

Of course, every community owes fiscal responsibility to its taxpayers. But the other three funding units were caught off-guard by Bloomfield Hills pull out, with each of them expressing shock and fury, both publicly and, especially, privately. As new agreements are put into place, anger and distrust are replacing careful and cautious management. The goal is to keep all of the local leaders from taking their toys from the sandbox and stomping home, leaving citizens with a bifurcated court – or seven small hyperlocal and potentially very expensive courts.

“The statute says we have to provide for a court. It does not say whether we have to provide for one or seven,” said one.

Birmingham City Attorney Mary Kucharek, of Beier Howlett, said the mess of the state statutes “leads to discrepancies of how to fund the court. When Covid hit and the numbers plummeted, all the funding units were funding the same because the court still has to operate. Any offset dropped because cases just plummeted.”

She noted that some communities previously were “actually making a profit.”

Tom Boyd, the Supreme Court administrator, said, “I am unaware of any acceptable explanation for a court whose total revenue exceeds its total expenditures. It's a broken concept that district courts are the cash cows of local government.”

With the withdrawal of Bloomfield Hills in late 2021, Birmingham, Bloomfield Township and West Bloomfield created a new agreement to jointly fund the court. As it was being agreed to, Birmingham City Manager Tom Markus felt it might not be in Birmingham's best interest to stay longer than 2022 in the agreement, and proposed in January to its city commission to leave as a funding unit as of January 2023. At this point, the city is remaining in the agreement.

“What upset the apple cart was not just Bloomfield Hills leaving, but the other two communities not following the agreement and letting them leave,” said Markus. He feels Bloomfield Township and West Bloomfield, in concert with Birmingham, should have enforced the one-year opt-out clause.

“I do not feel my partners exhausted all the remedies to keep Bloomfield Hills in,” Markus said. “We provided the argument that Bloomfield Hills did not provide the written requirement while we continued to work on it.”

Birmingham had questioned certain budget balance discrepancies, Kucharek said, with finance director Mark Gerber and Markus dissecting the court's financials and the financials of the 1985 agreement. However, West Bloomfield Supervisor Steve Kaplan said the court had rectified an accounting error, reduced staff, “and they are operating lean and mean. We don't have any qualms. We have to provide judicial services to our residents.”

In December 2021, Birmingham and Bloomfield Township approved budget requests from the 48th District Court for 2022. Bloomfield Township trustees unanimously approved the $4.7 million budget for 2022 presented by court administrator Patrick Dunn, of which Bloomfield Township is expected to fund 43 percent, or just over $2 million. West Bloomfield is projected to fund 23 percent of the budget, or $1.1 million.

Birmingham Finance Director Mark Gerber told commissioners at their meeting that the city paid about $828,620 to the court in 2021, and projects revenue to the city to total about $695,542, a shortfall of about $133,000. The city projects contributions to the court in 2022 to total about $1,584,892.81.

Repeated requests for comment from court administrator Patrick Dunn at the 48th District Court were not returned.

If Birmingham were to exit the agreement, Bloomfield Township Supervisor Dani Walsh said Bloomfield Township would also leave the agreement, even though the court is in their community. If that were to happen, Chief Judge Marc Barron has stated the court would immediately sue the communities.

“The statute does not say Bloomfield Township has to have the court for everyone, to bear the burden for every other community. Bloomfield Township residents should not be responsible for other communities' residents,” Walsh said. “We said to Birmingham, think this through. Birmingham would have to create their own court, and funding their own court would not be beneficial for anyone. We all have a responsibility for our own residents. We tried to point out this is no different than any other service that we share the costs – like the animal shelter or cable services. (Bloomfield Township has facilities for a local animal shelter and cable TV production, both of which Birmingham pays to use in cost-sharing arrangements.)”

Kaplan said that, from his reading of the agreement, none of the three remaining communities could opt out until January 1, 2024.

Supreme Court Administrator Tom Boyd makes another argument – local units of governments are not empowered to decide that they will not fund the court.

“They can't just walk away. The legislature decides what court exists, and courts are funded by the funding units,” he noted. “The statute says, 'All you can do is recoup costs.' If you are just recouping costs, that means you cannot have excessive revenue.”

Markus has a new proposal on the table, which was recently presented to the Birmingham City Commission but not acted on. Recognizing that opting out of the current three-party agreement could be a costly proposition, he suggested a possible solution “based on fairness and equity.”

In the proposal, all seven communities would be treated equally, and all seven, including Keego Harbor, Sylvan Lake and Orchard Lake, would be required to prefund the court based upon proportionate case load analysis – that way all seven communities would be considered funding units, and it would eliminate the two-thirds/one-thirds methodology.

“Tom's formula is a really good one – every community should give funding to the court quarterly in proportion to its case load and its usage of the court, and at the end of the year it would true up, determining the offset of any revenue received,” Kucharek said. “Maybe you make revenue, maybe you pay, but it's based on percentage of caseload. I don't think anyone would have a problem with paying for what you use versus a convoluted way previously.

“There's been a lot said that the 48th did not manage their budget well,” she continued. “They maintain they're good stewards of the public's money. This may be a good opportunity for everyone to get clarity about it. It would be good for communities to have quarterly meetings with them and on their finances.”

Markus has not yet introduced the concept to the other communities, but Walsh, for one, would be open to its presentation.

“Hopefully Tom will bring ideas to the table for all seven of us to look at, and if all seven of us agree, we would have an agreement,” Walsh said, while acknowledging that if even one community did not agree, it would put the kibosh on it.

“Ideally, it would be great to have full participation by all the communities,” she said.