The U.S. District Court for the Northern District of Illinois has been preparing for a financial storm. In the past several months, the court has stopped filling open clerk’s office jobs, dropped maintenance contracts, stopped some routine purchases and even drafted plans for shuttering the district’s two courthouses.
The outstanding question for that district and others around the country, as well as U.S. attorney’s offices, legal services groups and all types of federal contractors is this: How big of a financial tempest could strike on March 1, when $85 billion in automatic and arbitrary congressional budget cuts are set to kick in?
"We don’t know the severity," said Thomas Bruton, the clerk of the Illinois district. "If I have to close our doors, that impacts every citizen in our district. We have chosen to spend all our dollars to keep the doors open."
As politicians in Washington continue to blame each other for the looming mandatory budget cuts, called sequestration, agencies from the U.S. Department of Justice (DOJ) to the Administrative Office of the U.S. Courts (A.O.) have been crafting plans to operate with substantially smaller budgets, including layoffs and furloughs.
The agencies have revealed broad options in letters to Congress and employees. But finer details of those plans are being kept secret from staffs and the public for now, with the hope for a solution from Congress — or at least a partial solution — this week.
That means that federal district and circuit courts are crafting numerous plans for how to handle the cuts. Those courts, and DOJ, have been communicating with employees about what the possible sequestration might mean — including the possibility of layoffs or furloughs.
And companies with government contracts are deciding whether to do the same, dreading inevitable employment lawsuits they will face if they need to make layoffs.
Some court officials are making dire predictions. Numerous district courts are facing the possibility that they might have to close courthouses for some days, if the worst cuts happen, Bruton said. The A.O. says that up to 10 percent of the current court staff positions could be lost or, alternatively, the equivalent of 16 furlough days for court staff could be required.
President Barack Obama stood in front of numerous first-responders at the White House last week and warned Congress to take action or risk putting the nation’s economy and safety at risk. "Federal prosecutors will have to close cases and let criminals go," Obama said.
All eyes are on Capitol Hill, where only a few legislative days remain to avert sequestration. Congress set up the cuts to be so odious that they would compromise on better ways to cut the federal budget. They avoided the "fiscal cliff" on January 1 with a last-­minute plan that delayed the automatic cuts until March 1. But in that time, Congress has still not passed a plan to avoid sequestration.
The Senate has agreed to have either Majority Leader Harry Reid (D-Nev.) or Minority Leader Mitch McConnell (R-Ky.) introduce a bill February 25 or February 26 to replace the sequester under the Budget Control Act. For now, there is no clear legislative path.
FEWER CASES PURSUED
Attorney General Eric Holder Jr., in a February 1 letter to Senator Barbara Mikulski (D-Md.), outlined the $1.6 billion cuts from the DOJ’s current funding level the agency could face under a sequestration. Holder estimated the department would lose more than 1,000 federal agents to combat violent crime, pursue financial crimes and help ensure national security, as well as 1,300 correctional officers in federal prisons.
The $100 million that would be cut from U.S. attorney office budgets would mean 2,600 fewer cases would be pursued than last fiscal year, including 1,600 fewer civil cases and 1,000 fewer criminal cases, Holder wrote.
Holder then wrote a letter to employees February 7, saying they would be given appropriate notice if the DOJ had to place them on temporary furlough. He also said department heads would soon be following up on how the plans will affect the DOJ’s day-to-day operations.
"We are closely examining contracts, grants, and other forms of expenditures across the Department to determine where we can reduce costs," Holder wrote. "In many cases, this could mean making cuts to vital programs or curtailing spending on contracts. We will also take steps, wherever possible, to cut operational or administrative costs in areas such as travel, training, facilities, and supplies."
The A.O. and the Judicial Conference of the United States have made plans for as much as $555 million in cuts in the run-up to the first sequester deadline, January 1. The federal court system is highly decentralized, giving individual circuits and districts broad latitude on specific spending decisions, A.O. spokesman Charles Hall said.
But the postponement of sequestration meant that the final funding plans were never forwarded to courts or made public. In a December letter to the nation’s chief federal judges, then-chairman of the judicial conference, Judge David Sentelle of the U.S. Court of Appeals for the D.C. Circuit, wrote that the national plan does not include nationally mandated furloughs or court closures, "but instead leaves local decision makers to implement such measures as needed."
OTHER COURT WOES
For the nation’s providers of civil legal assistance for the poor, the sequestration could mean another 5 percent cut on top of the previous two years of steep budget cuts, said Jim Sandman, president of Legal Services Corp.
That translates to a $16.3 million cut to grants to the nation’s legal aid providers, and would first affect payments in April. Since the LSC is well into the budget year already, the monthly checks would be reduced 7.4 percent.
LSC, the largest source of funding nationwide for civil legal aid, conducted a webinar with agencies last week detailing the potential for cuts. States have different ways to add other funding to their programs, so each of the 134 agencies relying on LSC grants would be affected with differing levels of severity by the cuts from Congress.
At Statewide Legal Services of Con­necticut Inc., which depends on LSC for about 80 percent of its budget, the cuts would mean a reduction of $600,000, executive director Janice Chiaretto said. Already reeling from an 18.8 percent funding reduction from 2010, more layoffs and fewer cases could be in its future.
But there’s not much the agency can do in terms of preparation, Chiaretto said. "We hope it doesn’t happen," she said.
For government contractors, the decision about whether to notify employees of the possibility of layoffs from the sequestration under federal law is a loser no matter what happens. "Employers are being second-guessed no matter what they do," said Thomas Gies, a founding member of Crowell & Moring’s labor and employment law group.
"If you’re minding your business, you’re going to be in close contact with your contract officer" to see how they intend to apply any cuts from sequestration, Gies said. "Every contractor I know of is in the dark today, because none of the contracting agencies have gotten to that specificity."And there’s more uncertainty when it comes to battling potential lawsuits. "There’s an open question here about whether or not the costs of litigating and settling would be reimbursed," Gies said.
In the Northern District of Illinois, Bruton said his staff has already been cut to the bone to save as much money as possible to keep the courthouses open. He called the situation "dire."
But he is also keeping his eye on another budgetary deadline: March 27. That’s when a continuing resolution to fund the federal government expires.
"If there is no budget passed in Washington, there are no funds to operate," Bruton said. "That hasn’t even been discussed yet."
Todd Ruger can be reached at email@example.com.