BILL ANALYSIS
AB 2764
Page 1
Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2764 (Judiciary) - As Introduced: February 25, 2010
As Proposed to Be Amended - Minor Technical Amendment
SUBJECT : STATE BAR: ANNUAL AUTHORIZATION OF MEMBER DUES
KEY ISSUE : SHOULD THE LEGISLATURE AUTHORIZE THE STATE BAR TO
MAINTAIN MEMBERSHIP DUES AT 2009 LEVELS FOR 2011, KEEPING TOTAL
ACTIVE MEMBER DUES AT $410?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This annual Judiciary Committee bill currently authorizes the
State Bar of California (the Bar) to collect active membership
dues of up to $410 for the year 2011, keeping flat the active
member dues limit that has been in place since 2009. Consistent
with existing law, those dues would fund only mandatory programs
of the Bar, and members will continue to be able to deduct $5 if
they do not wish to support lobbying and other legislative
activities. There is no known opposition to the bill.
SUMMARY : Continues the State Bar's (Bar's) authority to assess
and collect dues from licensed attorneys in California, and
authorizes the Bar to continue to collect active membership dues
of up to $410 for the year 2011, maintaining 2009 dues levels.
EXISTING LAW :
1)Creates the State Bar of California as a public corporation.
Attorneys who wish to practice law in California generally
must be admitted and licensed in this state and must be a
member of the Bar. (Cal. Const. art. VI, Sec. 9.)
2)Provides that all property of the Bar is public property held
for public and governmental purposes in the judicial branch of
the government. (Bus. and Prof. Code Section 6140.3. All
further statutory references are to this Code.)
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3)Provides that the Bar shall be governed by a 23-member Board
of Governors (the Board), three quarters of which is currently
comprised of members of the profession. Specifically, the
current Board is comprised of 16 lawyers elected by Bar
members from nine specified districts for three-year staggered
terms, and six public non-lawyer members, 4 of which are
appointed by the governor and one which is appointed by the
Senate Rules Committee and one which is appointed by the
Speaker of the Assembly. The 23rd member of the Bar Board is
its president, who is elected by the other board members to
serve a fourth single year as the Bar's chief officer.
(Section 6010 et seq.)
4)Provides that the Board is charged with the executive function
of the Bar. (Section 6030.)
5)Generally provides that the Bar shall award no contract for
goods, services, or both, for an aggregate amount in excess of
fifty thousand dollars ($50,000) without complying with the
competitive bidding requirements set forth in the Public
Contract Code, although starting January of this year, the
competitive bidding threshold for information technology
goods, services, or both, was raised at the Bar's request to
one hundred thousand dollars ($100,000). (Section 6008.6.)
6)Authorizes the Bar to collect $315 in annual membership fees
from active members for a total annual dues bill of $410 for
the year 2010. (Section 6140.) The other $95 is pursuant to
statutory authorization to assess annually the following fees:
$40 for the Client Security Fund (Section 6140.55); $25 for
disciplinary activities (Section 6140.6); $10 to fund the
Lawyer Assistance Program (Section 6140.9); $10 special
assessment to fund information technology upgrades (expires
January 1, 2011) (Section 6140.35); and $10 for the Building
Fund (expires January 1, 2014.) (Section 6140.3.)
7)Authorizes the Bar to collect $75 in annual membership fees
from inactive members for a total annual dues bill of $125 for
the year 2009. (Section 6141.) The other $50 is pursuant to
statutory authorization to assess annually the following fees:
$10 for the Client Security Fund (Section 6140.55); $25 for
disciplinary activities (Section 6140.6); $5 to fund the
Lawyer Assistance Program (Section 6140.9); and $10 for the
Building Fund (expires January 1, 2014) (Section 6140.3).
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8)Allows members to deduct up to $10 from the mandatory dues if
the member does not wish to fund legislative activities and
non-Keller lobbying and activities with his or her dues.
(Section 6140.05, Keller v. Bar of California (1990) 496 U.S.
1.)
9)Provides that the Bar establish a State Bar Court for
appropriately disciplining and reinstating errant lawyers, and
shall appoint a Chief Trial Counsel to oversee the prosecution
of disciplinary cases. The Bar Court is charged with
exercising the powers and authority vested in the Board of
Governors for conducting disciplinary hearings of culpable
members, and may discipline members of the Bar by reproval, or
may recommend to the Supreme Court that members be placed on
probation, suspended or disbarred. (Sections 6077, 6079.5,
and 6086.5.)
10)Provides that the Board shall establish and administer an
Attorney Diversion and Assistance Program, and shall establish
a committee to oversee the operation of the program. The
program is charged with seeking ways and means to identify and
rehabilitate attorneys with impairment due to abuse of drugs
or alcohol, or due to mental illness, affecting competency so
that attorneys so afflicted may be treated and returned to the
practice of law in a manner that will not endanger the public
health and safety. (Sections 6230 and 6231.)
11)Requires the Board to appoint a chief trial counsel to
oversee its disciplinary function for a term of four years,
who may be reappointed for additional four-year periods in the
board's sole discretion. The appointment of the chief trial
counsel is subject to Senate confirmation. (Section 6079.5.)
COMMENTS : This Judiciary Committee bill authorizes the Bar to
collect annual membership fees, keeping with the typical
approach of an annual Judiciary Committee dues authorization
bill to provide appropriate legislative oversight of the Bar's
many important functions. Presently the bill solely authorizes
the Bar to continue to collect active membership dues of up to
$410 for the year 2011, maintaining dues at 2009 levels. As of
April 26, 2010, the Bar reported total Bar membership at 227,021
lawyers, comprised in part by 167,690 active members and 47,779
inactive members.
Flat Dues Bill Currently Being Proposed For This Year . As
AB 2764
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noted, this bill will maintain the current $410 annual
membership dues level for active members at 2009 levels.
Keller : Existing law prohibits the use by the Bar of mandatory
dues to fund political and ideological activities, as a
violation of a member's First Amendment freedom of speech
rights, where such expenditures are not necessarily or
reasonably incurred for the purpose of regulating the legal
profession or improving the quality of the legal services
available to the people of the state. (Keller v. Bar of
California (1990) 496 U.S. 1.) Current law also allows members
to deduct $5 from their current dues if they do not want their
dues used by the Bar to lobby on legislation outside the limits
of Keller, and limits the Bar's expenditures on non-Keller
lobbying and related activities to an amount raised by members
paying the "$5 voluntary dues," as specified by a formula.
Thus, consistent with existing law, the membership dues
authorized by this bill will fund only mandatory programs of the
Bar, and any member may deduct $5 from dues if the member does
not wish to fund "non-Keller" activities of the Bar.
Governor's Veto of Last Year's Initial Bar Dues Bill: Last
October 11, 2009, Governor Schwarzenegger vetoed SB 641
(Corbett), last year's initial dues authorization measure that
passed this Committee by a vote of 10-0 and had just one "no"
vote along its legislative journey. In his veto message, the
Governor stated:
In 1997, Governor Pete Wilson vetoed the annual Bar dues
bill, citing numerous concerns that the Bar had become
overly political, unresponsive to its membership, and
inefficient. Unfortunately, twelve years later,
inefficiencies remain unaddressed and questions about the
Bar's role in the evaluation of judicial nominees suggest
that the Bar's political agenda continues.
In July, the State Auditor released a report critical of
the Bar. Among the problems noted by the report: salaries
for staff have risen significantly over the past five
years; the costs of its disciplinary system have escalated
by $12 million from 2004 to 2008 while the number of
disciplinary inquiries opened has declined; and a lack of
internal controls allowed the embezzlement of nearly
$676,000 by a former employee. As the organization charged
with regulating the professional conduct of its members,
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the conduct of the Bar itself must be above reproach.
Regrettably, it is not.
In addition, recent actions by the Bar's Judicial Nominees
Evaluation Commission (JNE) also call into question the
Bar's impartiality in considering judicial appointments.
All JNE Commission proceedings are required by law to be
confidential and qualification ratings are not to be
released to the public prior to the Governor considering an
appointment. Unfortunately, recent events have required the
Bar to launch an official inquiry into the confidentiality
of such proceedings. Moreover, the Chief Justice of the
Supreme Court has recently questioned the reliability of
the Commission's recommendations by noting its failure to
follow statutory guidelines when considering judicial
nominees. By failing to follow the law, the JNE Commission
has damaged its reputation for impartiality and, in turn,
the Bar's.
There is no question the Bar has an essential role in the
state's justice system and must continue to oversee the
licensing, education, and discipline of California's
lawyers. However, I am returning this bill without my
signature because the Bar cannot continue with business as
usual. It must take the time to reexamine the problems
noted by the State Auditor and continue its investigation
into the JNE Commission. I urge the Bar to resolve these
issues as soon as possible so the Legislature can
reintroduce this measure early next year."
Following the veto, the current President of the Bar, Howard
Miller stated:
The Governor's veto of the State Bar dues bill is
regrettable, but we must take the Governor's concerns
seriously. Many of them are justified. There have been
serious management and financial issues at the State Bar,
starting with the embezzlement by a single employee over an
eight-year period of $675,000? The State Auditor, and
others, have also criticized with precision the management
of the Office of Chief Trial Counsel. We will look closely
at these and all other issues raised by the Governor.
Events such as his veto message can challenge the State Bar
to renew itself as an institution and its service to the
public and the legal profession. I am confident the Board
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of Governors is up to that challenge.
Thereafter, another bill was introduced by Senator Corbett to
authorize 2010 dues, SB 55, which was subsequently signed by the
Governor this past January 25, 2010.
The 2009 Embezzlement and the Bar's Response . On April 6, 2009,
the Attorney General filed embezzlement and tax evasion charges
against Sharon Pearl, the Bar's former Director of Real Property
(DRP). Pearl embezzled Bar funds over a period of eight years,
and estimates of the loss ranged from $655,000 to $675,820. In
response to the incident, Laura Chick, Chair of the Bar Board of
Governors' Audit Committee, submitted a six-page letter to the
Chairs and Vice Chairs of the Senate and Assembly Judiciary
Committees explaining how the embezzlement occurred and
describing the Bar's response to the incident. According to the
letter:
The [Bar's internal] investigation determined that the DRP
diverted tenants' payments for rent and fees to a non-Bar
account over which she had control, and hid the non-receipt
of those payments by manipulating information about
expected rent revenue and falsifying documentation
supporting rent credits for various tenant renovations or
service interruptions due to the Bar's seismic retrofit
project. . . . She used her position to become the single
point of contact between the Bar and its tenants; she
verified the rent payment schedules prepared by the Office
of Finance; and she was personally responsible for both
issuing invoices to tenants and collecting rent checks from
them?
After the incident came to light, the Bar hired a certified
public accounting firm specializing in local governments to
perform an independent forensic review and make recommendations
for improvements to the internal controls relating to rent
billing and collection procedures. As a result, according to
the letter, the Bar has taken a number of actions to improve
rent billing and collection procedures.
Bar General Fund Projections . A rather detailed snapshot of the
current health of the State Bar is available.
At the end of 2009, the Bar reportedly had a fund balance of $9
million in its General Fund. Based on current forecasts, the
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fund balance is projected by the Bar to decrease to $5.5 million
by the end of 2010, and to $4.1 million at the end of 2011 (see
chart below). The Bar also has another $6.4 million in the
"Public Protection Reserve Fund" which is designed as its
"rainy-day" fund to allow the Bar to continue operations should
its dues authority not be continued.
The following table outlines the Bar's General Fund Projections
provided to the Committee:
---------------------------------------------------
| |Amended |Projected|Projected|
| |Budget | 2011 | 2012 |
| |2010 | | |
|---------------------+---------+---------+---------|
|Revenues |$63.9 |$64.4 |$65.3 |
|---------------------+---------+---------+---------|
|Baseline |$67.4 |$65.8 |$66.2 |
|expenditures | | | |
|---------------------+---------+---------+---------|
|Gap (annual deficit) |($3.5) |$(1.4) |($0.9) |
|---------------------+---------+---------+---------|
|Ending retained |$5.5 |$4.1 |$3.2 |
|savings | | | |
---------------------------------------------------
*$ millions
The Bar has indicated to the Committee that the ending retained
savings amounts detailed in the chart above will be reduced to
address major maintenance at the Bar's 180 Howard Street
Building in San Francisco if various capital improvement
projects are undertaken. The Bar notes, however, that there is
some flexibility about when to undertake some of these projects.
At the end of 2009, the Bar's Public Protection Fund contained
$6.4 million. That amount represents 10 percent of 2009 General
Fund operating expenses, six percent of total agency-wide
operating expenses, and five percent of total agency-wide
operating revenues. These percentages are reportedly consistent
with the recommendations of the Government Finance Officers
Association which suggests a "minimum GF reserve of 5% to 15% of
operating revenues."
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Active member dues levels have increased slightly over the years
as follows: $250 (1999); $395 (2000); $345 (2001); $390 (2002);
$395 (2006); $400 (2007); and $410 (2009) (the 2009 amount
includes a $10 building fund assessment to be used for the
construction, purchase, or lease of a facility in southern
California).
Based on information provided to the Committee by the Bar, it
does not appear a dues increase is required this year, and this
bill does not provide for one. According to the Bar, assuming
there are no salary increases this year, the Bar's retained
savings will be sufficient to sustain operations at current
levels through mid-2013.
History of Bar General Fund Revenues and Expenditures .
Documents provided to Judiciary Committee counsel from the Bar
indicate the history of the Bar's General Fund activity. Over
the past few years, the Bar has generally taken in more money
than it has spent. As illustrated below, 2006 and 2007 revenues
were higher than expenditures. In 2008, however, expenditures
outpaced revenues. For 2009, revenues and expenditures were
basically breakeven.
------------------------------------------------------------------
| | Actual | Actual | Actual | Actual |AmendedBudg|
| | 2006 | 2007 | 2008 | 2009 | et |
| | | | | | 2010 |
|----------+----------+----------+----------+----------+-----------|
|Revenues | $58.0 | $61.0 | $61.5 | $62.7 | $63.9 |
|----------+----------+----------+----------+----------+-----------|
|Expenditur| $54.0 | $58.0 | $62.3 | $62.7 |$67.4 |
|es | | | | | |
------------------------------------------------------------------
$millions
Minor Technical Author's Amendment : The author has prudently
noted that there is a minor drafting error in the bill. He is
therefore correcting that error as follows:
On page 2, line 6, delete "for 2010"
Prior Related Legislation :
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SB 55 (Corbett) Chapter 2, Statutes of 2010.
SB 641 (Corbett) of 2009, Vetoed by Governor Schwarzenegger (see
above.)
AB 3049 (Judiciary), Chapter 165, Statutes of 2008.
SB 686 (Corbett), Chapter 474, Statutes of 2007.
AB 1529 (Jones), Chapter 341, Statutes of 2005.
SB 1490 (Judiciary), Chapter 384, Statutes of 2004.
AB 1708 (Judiciary), Chapter 334, Statutes of 2003.
SB 352 (Kuehl), Chapter 24, Statutes of 2001.
SB 1367 (Schiff), Chapter 118, Statutes of 2000.
SB 144 (Schiff), Chapter 342, Statutes of 1999.
AB 1669 (Hertzberg) of 1998 - Died on Senate Floor
SB 1145 (Burton) of 1997 - Vetoed by Governor Wilson
AB 1435 (W. Brown), Ch. 193, Stats. 1995.
SB 373 (Lockyer) Chapter 862, Statutes of 1993.
REGISTERED SUPPORT / OPPOSITION :
Support
State Bar of California
Opposition
None on file
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334