Beebe Releases Emergency Funds For Courts As Root Of Problem Identified

Gov. Mike Beebe (D) released $40,000 from his emergency fund to stop the proposed January furlough of 120 trial court assistants across Arkansas — a furlough resulting in part from a significant decline in foreclosure filings.

Nearly two weeks ago, Arkansas Supreme Court Chief Justice Jim Hannah informed the state’s circuit and district judges that a problematic funding shortfall would require the furlough action.

In a Dec. 9 e-mail, Hannah said, “(W)e received updated information about collections for the Administration of Justice Fund and, unfortunately, the revenue has not improved and continues to further decline.”

Hannah proposed furloughing trial court assistants, who are paid from the fund, at the end of January 2012 for at least three days in an effort to save money.

“We sincerely hope through all of our collective activity to remedy the problem such that no furlough of employment will be necessary. In order to plan for ‘the worst,’ however, this action was taken,” he wrote.

Information from the Arkansas Department of Finance & Administration shows a dramatic decrease in filing fee collections beginning in July. The monthly average collections in the Administration of Justice Fund for the first six months of 2011 was $136,656. Between July 11 and Oct. 11, the monthly average fell to $34,925, with only $140 in the month of October through the 11th.

In releasing the funds today, Beebe spokesman Matt DeCample said the Governor felt progress was being made on identifying the root cause of the fund balance shortfall.

“The Governor said we’d look at this on a month-to-month basis and as long as he’s satisfied they’re working on a long-term solution he’d help,” DeCample said.

FORECLOSURE BOTTLENECKS
Foreclosures and foreclosure reform efforts are part of the problem leading to the low balance in the Administration of Justice Fund.

J.D. Gingerich, with the Administrative Office of the Courts, said his office does not have definitive information behind the loss, but has “pretty good information” that points to a decline in foreclosures as a contributor.

Irvine, Calif.-based RealtyTrac reported just 160 properties in Arkansas were placed in a foreclosure action in November 2011, down more than 90% compared to 1,621 during November 2010. Nationwide, properties in foreclosure fell just 14% compared to November 2010.

One of the causes of the Arkansas decline is a Chapter 13 bankruptcy case in the Eastern District of Arkansas, Jonesboro Division, Gingerich acknowledged. A decision resulting from the case has caused title companies in the state to halt or slow the foreclosure process to determine if properties were properly taken back by lenders.

“That has had an impact. … Again, I don’t have firsthand numbers on that, but what we hear points to that,” Gingerich said of the bankruptcy ruling being an issue.

Gingerich said another slowdown has been various foreclosure moratoriums put in place when massive problems — including the “robo-signing” scandal — began to appear among the large banks handling foreclosure paperwork.

Yet another possible cause for a decline in foreclosure actions are Acts 901 and 885. The new laws, approved in the 2011 General Assembly, essentially require more notice among all parties during the foreclosure process. Gingerich said he and his staff hear anecdotal reports that increased notices are slowing the process.

The good news is that the foreclosures will eventually cycle through the system, with a sizeable “pent-up portfolio” eventually driving revenue back into the court system, Gingerich explained.

Roby Brock with Talk Business and Michael Tilley with our content partner, The City Wire, are co-authors of this report.