Over the past two years, states have generated higher-than-anticipated tax revenues and have received an infusion of federal aid from COVID-19 relief. Many are spending these funds on new state programs and tax reductions.

In a new interactive data feature, we show what it would take for states to use their surpluses to reduce local reliance on criminal legal fees and fines instead. Increasing state support in this targeted way could not only help reform criminal legal processes and advance racial equity, but also help reverse a decline in state aid to local governments over the last 20 years.

Why fines and fees exist

Fines and fees, which include traffic tickets and court costs, are financial penalties imposed for violations of the law. Fines are meant to penalize and deter certain behaviors, and fees are meant to recover some administrative costs. Unlike other revenue sources (like income and property taxes), amounts of fines and fees charged don’t vary with people’s income or wealth and are typically not subject to state constitutional limits on how much revenue can be raised from them.

Over time, most states have expanded the range of criminal and civil court fees levied at the state or local level by charging defendants for services previously paid for with general tax revenues, such as public defense lawyers and jail or prison room and board.

Localities that face fiscal restrictions from state governments can come to rely especially on nontax revenue sources like fines and fees for funding local services, which can fuel revenue-motivated policing and sentencing practices. Most states don’t authorize their localities to levy income taxes while limiting sales tax rates and imposing stringent tax revenue and expenditure limits. Some state legislatures additionally “preempt” and disallow local governments from instituting new, small taxes.

Though fines and fees comprise less than 1 percent of total state and local revenues annually, some small counties, cities, and towns have come to rely on them. Research shows this can have devastating consequences for some residents, especially for Black, Latine (PDF), and Native American households.

Fines and fees have long been closely intertwined with racial inequities. Financial penalties for people who come into contact with the criminal legal system have been used historically as a tool to discriminate and enable indentured servitude. And research shows neighborhood composition influences racial and ethnic disparities in arrests, disproportionately bringing Black and Latine people into contact with the criminal legal system.

These disparities continue throughout the criminal legal system, with each stage carrying a range of fines and fees. And failing to pay fines and fees can still come with serious consequences in some places, including surcharge fees, license suspensions, loss of voting rights, and incarceration.

Fines and fees aren’t the best way to fund local governments

Case studies show court-imposed fines and fees are inefficient: some counties spend up to $1.17 in court hearing and jail costs for every $1 they ultimately collect. They are also an unreliable revenue source because most judges aren’t mandated to consider whether defendants have the means to pay what they are charged with—leading to tens of billions of dollars in uncollected debt.

Regardless, many states and local governments fund key government operations with fines and fees they collect. Nearly every state distributes a portion of speeding ticket revenues to courts or law enforcement, with some even funding special highway or health care programs.

For example, the $117.50 speeding ticket (PDF) South Dakota issues on interstate highways comes with a $39 fine that funds the school district in the county where the violation occurs, with the other $78.50 of fees paying for, among other things, law enforcement training, court automation, 911 telecommunicator training, court-appointed attorneys, and public defenders.

Abolishing fines and fees without changing any other funding mechanisms could spell financial trouble for these programs. Pairing the suspension of certain local fines and fees with an infusion of state funds could help ensure local government services aren’t disrupted. A temporary backfill of fines and fees with state funds could be a step toward permanent reforms, such as funding all public safety services through legislative processes or authorizing alternative local revenue sources.

How states can use their surpluses to reduce local reliance on fines and fees

Many states have leveraged billions of dollars in revenue surpluses to enact tax cuts, in part to alleviate the pandemic’s economic effects. But data show some of these tax cuts may not be well targeted: Arizona’s and Ohio’s 2021 income tax rate cuts disproportionately benefit households with higher incomes.

Instead, states could use some of their fiscal resources to reduce local reliance on criminal legal fines and fees, which could more effectively target relief for residents. Our feature shows how much money it would take for each state to suspend total local fines and fees collections and backfill those revenues with state funds. Some states are already moving in this direction.

For example, California permanently repealed 40 local administrative fees, backfilled $65 million in lost local revenues with a state appropriation, and discharged an estimated $16 billion in fee debt considered largely uncollectible. The state’s actions followed local government reforms. Back in July 2018, San Francisco became the first county in the country to eliminate all its local criminal legal administrative fees, followed by similar changes in Alameda, Contra Costa, and Los Angeles Counties in 2019 and 2020. (We show the US Census Bureau’s 2017 data for individual localities, which may not account for recent reforms.)

Many states’ current surpluses present an opportunity to reform local reliance on fines and fees. Doing so can help improve fiscal management while advancing racial equity.