Found another very helpful plugin for WordPress. It gives you a collapsible category list, so that at first you only see the top categories. Click one of those, and it shows you the subcategories beneath it.
This is ideal for sites with a handful of top categories and lots of subcategories. If you have a lot of top categories it won’t make much difference in the appearance of your sidebar.
You can also use this to give the appearance of separate blogs. You could give each writer on a community blog a top category, then they set up their desired subcategories under it.
The same effect can be achieved with CSS, but this plugin is much simpler.