[java] Best Practice: Initialize JUnit class fields in setUp() or at declaration?

I prefer readability first which most often does not use the setup method. I make an exception when a basic setup operation takes a long time and is repeated within each test.
At that point I move that functionality into a setup method using the @BeforeClass annotation (optimize later).

Example of optimization using the @BeforeClass setup method: I use dbunit for some database functional tests. The setup method is responsible for putting the database in a known state (very slow... 30 seconds - 2 minutes depending on amount of data). I load this data in the setup method annotated with @BeforeClass and then run 10-20 tests against the same set of data as opposed to re-loading/initializing the database inside each test.

Using Junit 3.8 (extending TestCase as shown in your example) requires writing a little more code than just adding an annotation, but the "run once before class setup" is still possible.