Litigation Costs, Budget Impacts, and Cost Containment Strategies: Evidence from California Cities

Abstract

Litigation costs are straining many municipalities' budgets and creating more uncertainty and flux in their annual budgetary processes. A 1996 mail survey of California cities conducted by the League of California Cities, to which 210 cities (45 percent) responded, shows that the level of litigation‐driven budgetary strain is intensifying. The budgetary impacts of litigation have been quite substantial, no matter whether measured in terms of overall impact, percent increase, frequency and magnitude of budget amendments, actual dollar costs, or the tendency to settle cases just to save money. Population size makes a lot of difference in the level and type of impact as well as the cost containment strategies implemented by a city. Generally, the larger the city (and the more diverse), the greater the strain litigation costs have put on the budget. A higher percentage of big cities (over 100,000) than smaller ones blame rising costs on police liability, personal injury, civil rights, tort, Americans With Disabilities Act, Fourteenth Amendment and Fourth Amendment claims. Frivolous cases are a problem for cities of all sizes. So, too, are the rising incidences of rights‐related cases being filed against cities by their own employees as well as private individuals. This trend will likely increase as the nation's population ages and diversifies ethnically and racially.