Incentives Matter

The primary responsibilities of the legal system are to promote public safety and to ensure justice. Pressure to raise revenue at best undermines and, at worst, directly conflicts with those responsibilities. When incentives are misaligned, police departments and court systems can become more concerned with taxation by citation than with carrying out their core functions. Such conflicts of interest can undermine public safety and compromise the legitimacy of the criminal justice system.

Consider the case of traffic enforcement, a common policing activity that generates a large portion of fines and forfeitures revenue in many jurisdictions. A city experiencing a tax revenue shortfall may lean on its police department to increase speeding citation revenue. The police department, whose budget and other resources are managed by city leadership, may be inclined to comply with such a request by diverting resources into traffic enforcement and away from community policing or investigation activities. This is precisely the dynamic uncovered by the U.S. Department of Justice’s investigation into the city of Ferguson, Mo., following the officer-involved shooting of Michael Brown Jr. in 2014:

In an email from March 2010, the Finance Director wrote to Chief Jackson that "unless ticket writing ramps up significantly before the end of the year, it will be hard to significantly raise collections next year. What are your thoughts? Given that we are looking at a substantial sales tax shortfall, it’s not an insignificant issue." Chief Jackson responded that the City would see an increase in fines once more officers were hired and that he could target the $1.5 million forecast. Significantly, Chief Jackson stated that he was also "looking at different shift schedules which will place more officers on the street, which in turn will increase traffic enforcement per shift." Shortly thereafter, FPD switched to the 12-hour shift schedule for its patrol officers … Law enforcement experience has shown that this schedule makes community policing more difficult—a concern that we have also heard directly from FPD officers.¹

Ferguson is a particularly stark example of a problem that exists in jurisdictions across the country. Reporters for AL.com won a Pulitzer prize in 2023 for their reporting on similar abuses in the city of Brookside, Alabama.² In Georgia, the Atlanta-Journal Constitution and Atlanta News First have both published extensive investigative reports illuminating that several local governments routinely rely on speeding tickets to balance their budgets.³ Taken together, these cases illustrate how deeply some jurisdictions have come to rely on fines and forfeitures revenue. Additional examples of local governments’ exploitative use of fines and forfeitures are well documented and routinely covered by state and local media.

Beyond these anecdotal examples, peer-reviewed research has broadly supported the assertion that traffic enforcement activities and their resulting revenues are responsive to fiscal incentives and budget pressures. In a 2009 study examining county governments in North Carolina from 1990 to 2003, researchers found that, in the year following a revenue decline, counties issued significantly more traffic tickets.⁴ On average, a 10 percent decrease in revenue growth resulted in a 6.4 percent increase in traffic tickets issued. Importantly, the study found no evidence that counties reduced ticket issuance following revenue increases, suggesting that traffic tickets function as a revenue tool to offset fiscal stress rather than as a mechanism to stabilize budgets during both good and bad times.⁵ A subsequent study published in 2020 examined California counties between 2004 and 2015 and reached similar conclusions, finding that counties increased traffic fines following revenue losses but did not reduce them following revenue gains.⁶

These studies suggest that traffic ticketing is used not only to promote public safety, but also as a revenue extraction tool, raising an important question: If local governments divert law enforcement resources toward revenue-generating activities during periods of fiscal stress, what are the consequences for public safety?

2.1 Resource Allocation and Tradeoffs

Absent an increase in police department resources, ramping up enforcement activities that generate revenue—such as traffic enforcement—necessitates some shifting of resources away from other activities. Precisely how such a shifting of resources manifests could vary considerably depending on contextual factors like the size of police agencies, overall resourcing levels, and existing workloads, among many others.

An analysis of 5,935 cities and townships between 2007 and 2012 found that cities collecting a higher percentage of their own-source revenue from fines and forfeitures had lower violent and property crime clearance rates, on average, after controlling for other relevant factors.⁷ In other words, when police shift resources toward traffic enforcement, they may solve fewer crimes. Notably, these findings were driven by relatively small jurisdictions with populations under 28,000 residents, where police officers are more likely to be generalists who can be easily reassigned compared to officers in larger cities, who are more likely to be organized into specialized units.⁸ Research on other forms of revenue-generating enforcement, such as civil asset forfeiture, has produced more mixed results. Another study, which only examined relatively large police agencies with over 100 officers, found negligible effects on clearance rates.⁹

Importantly, these studies examine the average effects of marginal increases in revenue-generating enforcement across many jurisdictions. They do not directly assess the more extreme distortions that may occur when local governments become highly dependent on law enforcement revenue. In jurisdictions where fines and forfeitures are a major source of revenue, police activities may become structured primarily around revenue generation at the expense of public safety.

2.2 State-Level Institutional Factors

Recent research underscores the importance of institutional factors that may shape the incentives and ability of local governments to engage in revenue-oriented policing. Most importantly, states vary in terms of how much revenue local governments retain from fines, fees, forfeitures, and court costs.

The distribution of fines and forfeitures revenues is largely determined by state-level laws and the structure of local court systems. A 2022 Urban Institute report found that the flow of citation revenue varies widely across states.¹⁰ Some states send all speeding fine revenue to state general funds, while others allocate revenues to local governments or to dedicated court and law enforcement funds. In at least 43 states, some portion of speeding ticket revenue flows directly to court or law enforcement budgets.¹¹

A critical institutional feature is whether a city operates its own municipal court. Twenty-eight states allow municipalities to establish these local courts, which handle minor offenses such as traffic violations and local ordinance violations.¹² The presence or absence of a municipal court can affect how much money flows back to city governments. When cities do not have their own courts, tickets written by local police must be filed in county courts. The resulting revenues are typically divided among various state, county, and municipal funds, with cities generally receiving only a small fraction. When cities operate their own municipal courts, however, the vast majority of fine revenues flow directly into city budgets to fund general government operations.

In addition to altering the flow of fine revenue, municipal courts may also generate revenue through fees, surcharges, or other court costs. In Indiana, for example, cities without a municipal court keep only 3% of the court costs fee from a typical traffic ticket.¹³ Cities with their own courts, by contrast, retain 25% of that same fee.¹⁴ Some municipalities have created programs that allow them to capture even more revenue. For example, some jurisdictions offer deferral programs in which drivers can pay a fee to keep the ticket off their record, and the city retains the entire amount, typically around $200 per ticket.¹⁵

Research suggests that revenue retention may significantly affect the volume of enforcement activity. One study examining unexpected property tax revenue losses in Indiana found that cities experiencing revenue shortfalls only increase traffic enforcement if they have a municipal court that allows them to keep the money.¹⁶ Another study examining 7,609 cities across 43 states found that cities with municipal courts collect between 62% and 98% more in fines and forfeitures revenues than similar cities without municipal courts.¹⁷ In cities with fewer than 7,000 residents, municipal courts more than double fines and forfeitures revenues. In larger cities with populations over 38,000, the increase is smaller but still substantial at around 38%.¹⁸

The relationship between municipal courts and fines and forfeitures revenue depends on other available revenue sources. Cities that collect more property tax revenue rely less on fines and forfeitures, but this relationship only exists in cities that have municipal courts.¹⁹ When property tax revenues are high, having a municipal court makes little difference to fines and forfeitures collections. When property tax revenues are constrained, however, municipal courts become an attractive way to raise money. This suggests that cities use their courts as an alternative revenue source when they face limits on traditional revenue sources such as property taxes.

The fiscal pressures that drive revenue-oriented policing are compounded by the way courts themselves are often funded. Many lower courts depend at least in part on the fines and fees they collect to cover their own operating costs, including in some cases the salaries of judges and court personnel. A survey conducted by Brennan Center for Justice and NPR found that between 2008 and 2014, 48 states increased criminal and civil court fees or added new ones, with many states directing a portion of that fee revenue toward their judicial budgets.²⁰

Municipal courts tend to provide the most acute examples of this dynamic. As legal scholar Alexandra Natapoff documented in a comprehensive analysis of municipal courts published in the Harvard Law Review, municipal courts are created, funded, and controlled by the same local governments that depend on their revenue, meaning that officials responsible for a municipality’s finances have a direct institutional interest in the volume of fines their courts generate.²¹ The U.S. Supreme Court recognized the due process implications of such arrangements as early as 1927, holding in Tumey v. Ohio that a judge with a pecuniary interest in case outcomes violates defendants’ constitutional rights, a principle federal courts have since extended to arrangements where court funding more broadly depends on the volume of fines collected.²²

Changing revenue retention rules and reforming how courts are funded could reduce revenue-oriented policing. If cities do not benefit financially from tickets their officers write, they have reduced incentive to pressure police departments to ramp up enforcement during budget shortfalls. The Conference of State Court Administrators has long maintained that courts should be substantially funded from general governmental revenues rather than from fines and fees, a position echoed by the National Task Force on Fines, Fees and Pretrial Practices.²³

While there is widespread agreement that reform is necessary to address the conflicts of interest that encourage revenue-oriented policing, limited data on local government finances has been a persistent and major barrier to effective policy change. Policymakers seeking to understand the scope of the problem in their own states often lack basic information about how much revenue local governments collect from fines and forfeitures, which jurisdictions are most reliant on these revenues, and how reliance has changed over time. In the absence of national data, it has been difficult to determine whether existing reforms are working, to identify jurisdictions that may warrant further scrutiny, or to design new policies that appropriately balance legitimate law enforcement needs with concerns about exploitation.

Parts 3 and 4 of this report aim to address this gap by presenting national and state-level estimates of fines and forfeitures revenue drawn from Census Bureau data alongside original local government-level analysis based on audited financial statements from more than 10,000 cities and counties. These data tools offer policymakers, researchers, and other stakeholders a clearer picture than was previously available of the scale and distribution of fines and forfeitures revenues and provide a baseline against which future reforms can be measured.