The Cost of Collection
Rethinking Criminal Justice Fines & Fees as a Revenue Source
Local government budget officials need to rethink their reliance on fees and fines from the criminal justice system as a revenue source. There are strong practical and fiscal policy reasons for a re-examination.
It is a well-established financial best practice to impose fees as a means of funding government programs and services where specific individuals or businesses benefit.
At the local level, governments have used fees for building permits as a means of funding code enforcement, and local transit systems are supported in part by fares paid by users. Even basic services such as sanitation are sometimes funded in whole or in part by fees rather than taxes. Fees have also been used to help fund the criminal justice system in the United States since at least the 1840s, when the State of Michigan created a statutory basis for requiring individuals going to prison to pay a fee for medical care.
Given this history, it is not surprising that states and local governments have increasingly turned to criminal justice fees and fines in more recent years as an alternative source of revenue. But political changes are now causing an increasing number of state and local governments to revise their approach. While often concerned about the fiscal impact of losing any source of revenue, finance professionals should welcome reform in this area.
Area of Growth.
The criminal justice system has undergone a dramatic expansion in the last 30 years. State and local spending on police, corrections, and courts has far outpaced overall spending growth at the state and local level.
During this period of growth, finance and budget directors turned to individuals “using” criminal justice services — criminal defendants and inmates — to pay for some of the cost. As the numbers of individuals being arrested continued to grow, fees from the criminal justice system appeared to be a reliable source of revenue.
The growing reliance on fee and fine revenue from criminal offenders was also consistent with efforts to “get tough” on crime. In the 1980s, 1990s, and well into the 2000s, there was public support for longer and more punitive criminal sentences: Few were opposed to also imposing certain costs on offenders.
Moreover, state and local finance and budget directors often had little choice. As criminal justice costs were growing, so was perceived sentiment in opposition to increased taxation. Beginning with the California tax revolt in the 1970s that led to the adoption of Proposition 13, proposed increases in taxes were widely perceived as potentially untenable politically: At the national level, George H.W. Bush was famously elected president on a vow of “no new taxes,” only to be defeated after breaking that pledge. The reality, of course, was that there were differences in public opinion over taxation. Yet, fundamentally, the political risk associated with increasing tax rates was real and viewed as difficult to overcome.
At the local level, even if there was support for increases in taxes, statewide tax revolts had the effect of greatly limiting the ability to impose new taxes or increase tax rates. While local taxation in most states has always been subject to legislative approval, anti-tax state laws frequently resulted in capping even natural growth in tax revenue. This trend continues to this day.
Thus, criminal justice fees and fines were a politically palatable alternative source of revenue.
“Criminal justice fines and fees are particularly regressive because of what we know about the significant differences in income and wealth between criminal offenders and the population as a whole.”
Changing Picture.
Today, politics are pushing the debate over criminal justice fees and fines in a different direction. In the aftermath of the fatal shooting of Michael Brown by a Ferguson, Missouri, police officer, a federal Department of Justice (DOJ) investigation found that the city’s reliance on fees and fines as a source of revenue was at the heart of tensions between police and community. DOJ investigators concluded that in Ferguson, “law enforcement practices are shaped by the city’s focus on revenue rather than by public safety needs.”
Ferguson has helped change the political landscape when it comes to criminal justice reform, more generally, and specifically when it comes to criminal justice fees and fines.
Several states have commissioned panels to examine the use of fees and fines as a source of revenue. Two California local jurisdictions — San Francisco and Alameda County — have moved to eliminate all criminal justice fees under their authority. Contra Costa County has imposed a moratorium on criminal justice fees.
Other local governments have taken steps in this direction. In Dallas County, Texas, magistrates in the Unified Truancy Courts have assessed only the minimum fine allowable under state law. In the City of Nashville, Tennessee, in 2018, Metro Council eliminated a $44 per day fee imposed on misdemeanant inmates housed in the jail. And in 2017, Ramsey County, Minnesota, eliminated a $25 booking fee for its pre-trial facility.
This political shift with regard to criminal justice fees and fines is consistent with an increased focus on issues related to equity in local government budgeting. In King County, Washington, local government has adopted an Equity and Social Justice Budget. As part of the county’s proposed 2019 to 2020 budget, the executive called for investments “that promote the county’s commitment to lead with racial justice, tackle structural racism, and address root causes of inequities…” Among other spending proposals, the proposed budget includes new dollars for improving access to public transportation, funding infrastructure in historically underinvested communities, increasing family wage jobs through public works construction projects, and increasing resiliency and capacity building of native Americans and people of color in King County’s workforce.
Regressive Revenue Source.
While King County — and other local governments — have focused on equitable investments, the push to eliminate criminal justice fees and fines is really just the revenue side of the same equity coin. That’s because criminal justice fees and fines are an especially regressive revenue source.
By definition, any source of revenue that does not attempt to factor in the wealth or income of the payer can be regressive. Criminal justice fees and fines are particularly regressive because of what we know about the significant differences in income and wealth between criminal offenders and the population as a whole.
While there is no comprehensive data on the wealth and income of individuals in the criminal justice system, there are several indicia that suggest that they are simply poorer. A 2018 Brookings Institution study found that among individuals aged 18 to 64 who were sentenced to at least 1 year in prison, approximately 80 percent were unemployed in the year before incarceration.
Even factoring in labor force participation rate, incarcerated individuals were at least twice as likely to be unemployed as the population overall.
A 2000 DOJ study — the most recent national analysis — found that more than 80 percent of all felony defendants in the 75 largest counties were indigent and represented by appointed counsel. While there is no national standard for indigence, it generally requires a finding that the individual simply cannot pay for their own defense. In some cases, that means a defendant may be homeless, eligible for public assistance, or have an income at or near the poverty level. By comparison, the 2018 national poverty rate for all adults (18 to 65 years old) was 10.7 percent — suggesting that individuals in the criminal justice system were more than seven times more likely to be living in poverty than the adult population as a whole.
The new focus on equity as a political priority therefore makes it almost inevitable that more and more critical attention will turn to the reliance on criminal justice fees and fines as a regressive source of revenue for state and local government.
High Pain, Low Gain.
Budget and financial professionals should embrace the opportunity for reform. Beyond politics or concerns about justice, reliance on criminal justice fees and fines as a revenue source fails as fiscal policy.
The cost of collecting fee and fine revenue is high and the return is low. Some have characterized this as a “high pain, low gain” revenue strategy that is simply unsustainable.
56%
The percent of incarcerated individuals who made zero income during the two years before entering prison
Source: Brookings Institution
$0.41
The average cost to collect every $1 charged in criminal justice fees and fines.
Source: Brennan Center for Justice
Broad-based tax strategies yield relatively high rates of collection. Property tax collection rates are typically near 100 percent; most income tax revenue is collected through withholding; and sales tax is generally collected at the time of transaction.
Other types of fee revenue yield relatively high rates of collection as well. If you want to board a bus or subway, you must pay your fare, and if you want to build an addition to your house, you have to pull and pay for a permit.
Clearly, tax and other fee payers do avoid payment — but more often than not, they avoid the tax or fee from being assessed, not at the point of collection.
Collection of criminal justice fee and fine revenue is far more complicated. Fees and fines are assessed but frequently go uncollected at the time of assessment. State and local governments turn to a range of collection strategies, sometimes with their own staff and sometimes with outside contractors. Courts may ultimately waive fees and fines. But in many cases, debt remains outstanding — limiting economic opportunity for offenders without producing revenue for state or local government.
To the extent that criminal justice fees and fines are collected, it is at a considerable cost. Some collection agencies operate on the equivalent of a commission basis, but local government resources continue to be devoted to collecting these debts.
“Individuals in the criminals justice system are more than seven times more likely to be living in poverty than the adult population as a whole”
— Brennan Center for Justice
Indirect Costs.
There are often indirect costs as well — largely in incarceration.
A 2019 Brennan Center study found that in Bernalillo County, New Mexico, the costs of collection were actually greater than the revenue from fines. In 2016, total fee and fine revenue collected was $1.862 million. But the county expended an estimated $2.1 million on incarceration costs. Under New Mexico law, individuals with outstanding criminal justice debt can “pay it off” with days in jail. Rather than generating revenue, this practice adds costs related to incarceration.
Non-payment of fees and fines can result in extended periods of probation — increasing caseloads and making it more likely for technical violations to occur that result in high-cost incarceration in local jails. The existence of outstanding debt may also make it more likely that offenders will commit new crimes. While there is no definitive analysis to date on the impact of adult offender debt on recidivism, early research has demonstrated a clear impact on re-offending by juveniles.
To the extent that criminal justice fees and fines lead to direct costs for collection and indirect costs related to incarceration and other criminal justice expenses, this spending can offset or exceed revenue.
The flow of fee and fine revenue to special revenue funds has raised concerns about conflict of interest: judges, sheriffs and prosecutors may have an interest in imposing excessive fees and fines if those revenues are dedicated to their operating budgets.
Budget and finance professionals should be concerned as well. In addition to the potential for conflict of interest, the dedication of any revenue to special revenue funds can create opportunities for abuse or just inefficient outcomes.
Special revenue funds frequently do not get the same scrutiny as general fund spending. And this is especially true when those paying the fees and fines generally lack a voice in the political process. The result is often a questionable budgetary outcome.
Minnesota state law provides for the creation of public law libraries in every county, with funding from fees imposed on civil litigation and a surcharge levied against convicted criminal defendants. Ramsey County has a public law library and collects approximately $600,000 annually from criminal defendants who are required to pay a $10 surcharge at conviction — more than three times the surcharge imposed in Hennepin County, its more populous neighbor. Since increasing the surcharge, the library has routinely collected more revenue than it has spent annually, giving it a $1.8 million fund balance — more than double the cost of annual operation. Most of the annual operation cost is for books. If the law library were dependent on tax revenue, it seems unlikely that this practice would have continued over the years.
Window on Reform.
Finally, by pursuing fee and fine reform, budget and finance professionals may gain a window into the larger criminal justice system. Even in those cases where revenues go into the general fund rather than special revenue funds, following the money may shine the light on the need for reform.
In many jurisdictions, one of the largest single fees imposed in the criminal justice system is for probation. In Nashville, Tennessee, General Sessions Court probationers pay a fee of $33 per month for supervision, with fees funding the Probation budget. Since 2012, Probation caseloads have declined by more than 50 percent, and the number of full-time employees has increased. Again, if Probation depended on tax revenue, this allocation of resources likely would have prompted serious questions about efficiency.
Conclusions.
Criminal justice fees and fines are not new. But political shifts in the 1980s and 1990s led local governments to increasingly rely on these sources of revenue. Political winds are now changing and local governments across the nation are looking hard at reducing criminal justice fees and fines. Local government budget and financial professionals need to embrace this shift. It affords them the opportunity to examine the need for alternative revenue sources that may have fewer direct and indirect costs. At the same time, it may encourage more oversight of how dedicated revenues are used and at larger questions related to the efficiency of spending on criminal justice.
This report was originally published in Government Finance Review magazine, April 2020.
Notes
Dale Parent, “Recovering Correctional Costs Through Offender Fees,” National Institute of Justice, Department of Justice, 1990).
“Investigation of the Ferguson Police Department,” U.S. Department of Justice, Civil Rights Division, 2015.
Adam Looney and Nicholas Turner, “Work and opportunity before and after incarceration,” Brookings Institution, 2018.
Caroline Wolf Harlow, “Defense Counsel in Criminal Cases,” U.S. Department of Justice, Bureau of Justice Statistics, 2000.
Matthew Menendez, Michael Crowley, Lauren-Brooke Eisen, Noah Atchison, “The Steep Costs of Criminal Justice Fees and Fines,” Brennan Center for Justice, 2019.