Posted Jan 11, 2010 01:07 pm CST
Planned budget cuts for Los Angeles courts over the next four years could trigger $30 billion in lost output for the local economy and result in 150,000 lost jobs, a new report says.
The study (PDF) by Micronomics Inc. says the loss for the legal services industry will be $13 billion, and the loss for businesses operating in uncertainty as their civil disputes remain unresolved will be about $15 billion, the Los Angeles Times reports. In addition, state and local governments will lose about $1.6 billion in tax revenue.
Roy Weinstein, one of the study’s authors, told the National Law Journal that the hit to the legal industry is based on fewer legal fees to law firms, which will result in reduced salaries for partners and staff, who will in turn spend less money.
Charles “Tim” McCoy, presiding judge of the Los Angeles County courts, has warned that four years of budget cuts could force him to shut down about 180 out of 600 courtrooms and cut 1,800 jobs. California courts are already closed one day a month to save money.
The study says the courtroom closures will increase delays in civil cases from the current average of about 16 months to more than 4½ years, according to the Los Angeles Business Journal (sub. req.).
McCoy advocates tapping bond revenue designated for courthouse construction to plug the budget gap. He has been discussing how budget cuts will affect the legal industry in talks with law firms and bar groups, according to the Business Journal and the Los Angeles Daily Journal (sub. req.).
“I have been talking about closures we are going to have to institute so they can begin to adjust their business models,” McCoy told the Business Journal. “They need to understand that their business is going to slow down and get hurt.”
Weinstein explained how businesses will be affected, in his interview with the NLJ. “Suppose you and I are involved in litigation,” he said. “You’re the plaintiff, and I’m the defendant. And you believe I have $100,000 that should belong to you. And I believe the $100,000 belongs to me. If it takes longer to resolve that litigation, it means that neither one of us … has access to that money. Neither of us can be totally sure until the thing is disposed of. That $100,000 is essentially frozen. You can’t use it, and I can’t use it.”
California legislators cut $100 million from the court budget in 2008 and are now seeking ways to cope with a $21 billion shortfall in state revenues, Reuters reported last month. The study assumes a 30 percent cut to state budgets.