Legal Intern, Manhattan Institute's Center for Legal Policy
Last week we discussed the curious story of Gold Bar, Washington and its crushing legal bills. According to data from researchers at Rockefeller College, local governments dealing with soaring legal costs are not merely west coast phenomena:
Localities in the state [of New York] spend at least $1 billion a year on judgments and other costs of lawsuits, according to preliminary data from Rockefeller College.
Taxpayers in Albany, Schenectady and Troy have been stuck paying hefty settlements in cases ranging from a death during a police pursuit, criminal conduct by a school manager and violation of First Amendment rights. [Timesunion.com]
A full report on these findings has been commissioned by the Lawsuit Reform Alliance of NY and is scheduled to be released this fall. Until now, a state-wide report on the legal costs New York municipalities face has not been attempted given the difficulties in aggregating the relevant data. In a preliminary report, the researchers describe the adverse consequences unanticipated legal bills can have on small communities:
While judgment costs were generally low in proportion to total expenditures, in some cases individual municipalities and counties experienced higher costs on a sustained or intermittent basis. This can be quite a fiscal shock for a small local government. In 2007, the Town of Haverstraw in Rockland County incurred judgment costs of nearly $27 million, or 47% of the entire town budget that year. The town budget virtually doubled as a result of judgment and claims payments. The previous year (2006), the Village of Broadalbin in Fulton County incurred judgment costs equaling 17% of overall expenditures, approximately $175,000 in a village with a budget of just over $1 million.
The report clarifies that cases like Haverstraw and Broadalbin are "outliers," but goes on to note that "a number of other local governments" have faced more modest - yet still substantial - "spikes" in lawsuit costs (comprising around 5% to 6% of total expenditures).
Outsized legal costs are not unique to small municipalities, either. Earlier this year, Ted Frank discussed the $560 million New York City spent on lawsuit payouts in 2011.