THE COST OF COLLECTION: Rethinking Criminal Justice Fees and Fines as a Revenue Source.

• Author: Eichenthal, David R.

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 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. (1) The imposition of fines as a punishment has a much longer history. Fines are referenced in the Bible and were common in colonial America.

Given this historic backdrop, 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.

An 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 levels.

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. In fact, 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...