BILL ANALYSIS Ó
SB 163
Page 1
Date of Hearing: June 28, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 163 (Evans) - As Amended: May 27, 2011
As Proposed to Be Amended
SENATE VOTE : 39-0
SUBJECT : State Bar: GOVERNANCE and public protection
KEY ISSUE : SHOULD VARIOUS REFORMS BE MADE TO THE GOVERNANCE
STRUCTURE OF THE STATE BAR?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
According to the current president of the State Bar, who
supports this bill, this measure implements the most sweeping
changes to the governance structure of the State Bar in decades.
Among other reforms, the bill revises the composition and
reduces the size of the Bar's governance board, adding for the
first time a substantial component of attorney members selected
by the Supreme Court. The bill reduces the size of the board
from 23 to 19 members over a three-year period. The bill also,
consistent with other professional statutes, specifies for the
first time that the protection of the public is the highest
priority for the Bar and its board of trustees (the new name for
the members of the board). As proposed to be amended, the
measure also reduces member dues by $10 for 2012 by granting all
Bar members a $10 rebate next year due to a continuing
substantial surplus in the Bar's General Fund; increases from
the current $10 to $20 for the next two years the amount that
Bar members may voluntarily contribute to the Bar's "IOLTA" fund
to address the ongoing crisis in legal services for Californians
of lesser means, though any Bar member will be free to choose
not to have his or her dues used for this purpose; and
acknowledges that the Bar, working collaboratively with the
chairs of the two Judiciary Committees, has also committed to
transferring $2 million in 2012 and $2 million in 2013 from its
Insurance Affinity program account (non-mandatory dues monies)
to the Bar's "IOLTA" fund to similarly help address the
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decimated funds available to the state's legal services
programs. Through these collaborative actions between the Bar
and the Assembly and Senate Judiciary Committees, Bar members
will be receiving reduced dues in 2012, and California's
struggling legal service programs will be receiving a $10
million increase in Bar support for legal services over two
years--an anticipated $7 million in 2011-12, combined with $3
million resulting from actions taken last year, while at the
same time ensuring very ample surpluses remain in the Bar's
General Fund and its emergency "rainy day" fund. The measure,
as proposed to be amended, is supported by the Bar and the
Beverly Hills Bar Association. The San Diego County Bar
Association wrote the Committee to express some reservations
about the bill, and the Sacramento County Bar Association wrote
in opposition. The measure passed the Senate by a vote of 39-0.
SUMMARY : Implements major changes to the governance structure
of the State Bar to maximize the Bar's prioritization of public
protection in all of its activities and makes other reforms to
the Bar's governance structure. In addition, as proposed to be
amended, the measure provides a $10 reduction in dues for all
Bar members in 2012 and increases the amount Bar members may
voluntarily contribute to the Bar's "IOLTA" fund to address the
ongoing crisis in legal services for the next two years.
Specifically, this bill :
1)Provides that protection of the public shall be the highest
priority of the State Bar and the board of trustees (the new
name for the members of the Bar board) in exercising their
licensing, regulatory, and disciplinary functions, and
specifies that whenever the protection of the public is
inconsistent with other interests sought to be promoted, the
protection of the public shall be paramount.
2)Revises the composition and size of the board of trustees to
be made up of six public members appointed by the Governor and
the Legislature, as provided under existing law, and 13
attorney members consisting of the following: six attorney
members elected from newly created State Bar districts, based
on the six court of appeal districts in California; five new
attorney members appointed by the California Supreme Court
with specified diversity and other guideposts; and two new
attorney members appointed by the Senate Rules Committee and
the Speaker of the Assembly, for a reduced total number of 19
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board trustees.
3)Phases in the transition to the smaller board, requiring the
Bar to determine and ensure that the transition from 23
members to 19 members is achieved by October 31, 2014.
Requires the Bar to develop a plan for implementing that
transition by January 31, 2012, and to submit a written report
detailing this plan to the Senate and Assembly Judiciary
Committees by that date. The bill further requires the Bar to
report annually to those committees on its progress toward
appropriately implementing this transition.
4)Prohibits the Bar from changing, reducing, shortening,
lengthening, or abolishing a board member's term, or forcing
any board member to resign, in order to institute the new
19-member board in order to protect the existing terms of
current board members.
5)Specifies demographic criteria that the Supreme Court should
consider when making appointments to the board, as specified,
and provides that the Bar is responsible for carrying out the
administrative responsibilities related to the appointment
process.
6)Provides that attorney members elected or appointed by the
Supreme Court may be reelected or reappointed for one
additional term only.
7)Provides that the board elect a president, vice president, and
treasurer for the following year within 90 days, rather than
the current 270 days, preceding the next annual meeting, and
specifies that the president, vice president, and treasurer
may be elected from among all members of the board.
8)Provides that the term of the president shall be one year, but
he or she may be reelected to a second one-year term.
9)Requires the board to ensure that its open meeting
requirements are consistent with, and conform to, the
Bagley-Keene Open Meeting Act.
10)Requires the board to complete and implement a five-year
strategic plan, to be updated every two years, and requires
the board president to report annually to the Supreme Court,
Governor, and the Senate and Assembly Judiciary Committees on
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the steps that the board has undertaken to implement the
strategic plan, as well as indicate any measures that the
board intends to undertake in the upcoming years to address
the projected needs contained in the plan.
11)Revises and reduces the make-up of the Governance in the
Public Interest Task Force to be made up of only six members
of the board and the president, and specifies that the six
members of the Task Force shall be made up of two elected
attorneys who are selected by the elected attorney members,
two attorneys appointed by the Supreme Court who are selected
by the Supreme Court appointees, and two public members
selected by the public members.
12)Provides a $10 reduction in dues for all Bar members in 2012.
13)Increases from the current $10 to $20 for the next two years
the amount that Bar members may voluntarily (but need not)
choose to dedicate to the Bar's "IOLTA" fund to address the
ongoing crisis in legal services for Californians of lesser
means, unless any Bar member chooses not to support those
activities.
14)Acknowledges that the Bar has also voluntarily committed to
transferring $2 million in 2012 and $2 million in 2013 from
non-mandatory dues monies to the Bar's "IOLTA" fund to
similarly help address the state's decimated legal services
programs.
15)Clarifies that specified conflict of interest provisions
apply to new public members appointed to the board after the
enactment of this measure.
EXISTING LAW :
1)Requires all attorneys who practice law in California to be
members of the State Bar and establishes the Bar for the
purpose of regulating the legal profession. Pursuant to the
State Bar Act, the annual mandatory membership fee set by the
Bar's Board of Governors to pay for discipline and other
functions must be ratified by the Legislature. (Bus. & Prof.
Code Sec. 6000 et seq.)
2)Provides that the Bar shall be governed by a 23-member Board
of Governors (the Board), comprised of 16 lawyers elected by
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members of the Bar from nine specified districts for
three-year staggered terms, and six public non-lawyer members,
four of whom are appointed by the governor, one who is
appointed by the Senate Rules Committee, and one who 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. (Bus. & Prof.
Code Sec. 6010 et seq.)
3)Provides for the Governance in the Public Interest Task Force
in the Bar, and requires that task force to submit a report by
May 15, 2011, and every three years thereafter, to the Supreme
Court, the Governor, and the Senate and Assembly Judiciary
Committees containing recommendations for enhancing the
protection of the public, as specified. (Bus. & Prof. Code
Sec. 6001.2.)
4)Authorizes the Bar to collect $315 in annual membership fees
from active members for a total annual dues bill of $410 for
the year 2011. (Bus. & Prof. Code Sec. 6140.) The other $95
is pursuant to statutory authorization to assess annually the
following fees: $40 for the Client Security Fund (Bus. & Prof.
Code Sec. 6140.55); $25 for disciplinary activities (Bus. &
Prof. Code Sec. 6140.6); $10 to fund the Lawyer Assistance
Program ("LAP") (Bus. & Prof. Code Sec. 6140.9); $10 special
assessment to fund information technology upgrades (expires
January 1, 2014) (Bus. & Prof. Code Sec. 6140.35); and $10 for
the Building Fund (expires January 1, 2014) (Bus. & Prof. Code
Sec. 6140.3).
5)Authorizes the Bar to collect $75 in annual membership fees
from inactive members for a total annual dues bill of $125.
(Bus. & Prof. Code Sec. 6141.) The other $50 is pursuant to
statutory authorization to assess annually the following fees:
$10 for the Client Security Fund (Bus. & Prof. Code Sec.
6140.55); $25 for disciplinary activities (Bus. & Prof. Code
Sec. 6140.6); $5 to fund the Lawyer Assistance Program (Bus. &
Prof. Code Sec. 6140.9); and $10 for the Building Fund
(expires January 1, 2014) (Bus. & Prof. Code Sec. 6140.3).
6)Under case law, Keller v. State Bar of California (1990) 496
U.S. 1, prohibits the use by the Bar of mandatory dues,
without a member's consent, to fund political and ideological
activities, as a violation of a member's First Amendment
freedom of speech rights, where such expenditures are not
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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.
Existing law 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. (Bus. & Prof. Code Sec. 6140.05, Keller v. State
Bar of California (1990) 496 U.S. 1.)
COMMENTS : According to the current president of the State Bar,
who supports this bill, this measure implements the most
sweeping changes to the governance structure of the State Bar in
decades. Among other reforms, the bill revises the composition
and reduces the size of the Bar's governance board, adding for
the first time a substantial component of attorney members
selected by the Supreme Court. The bill reduces the size of the
board from 23 to 19 members over a three-year period. The bill
also, consistent with other professional statutes, specifies for
the first time that the protection of the public is the highest
priority for the Bar and its board of trustees (the new name for
the members of the board).
The measure also reduces member dues by $10 for 2012 by granting
all Bar members a $10 rebate next year due to a continuing
substantial surplus in the Bar's General Fund. In addition, the
measure increases from the current $10 to $20 for the next two
years the amount that Bar members may voluntarily contribute to
the Bar's "IOLTA" fund to address the ongoing crisis in legal
services for Californians of lesser means, though any Bar member
will be free to choose not to have his or her dues used for this
purpose.
The bill will also acknowledge that the Bar, working
collaboratively with the chairs of the two Judiciary Committees,
has also committed to transferring $2 million in 2012 and $2
million in 2013 from its Insurance Affinity program account
(non-mandatory dues monies) to the Bar's "IOLTA" fund to
similarly help address the decimated funds available to the
state's legal services programs. Through these collaborative
actions, Bar members will be receiving reduced dues in 2012, and
California's struggling legal service programs will be receiving
a $10 million increase in Bar support for legal services over
two years--an anticipated $7 million in 2011-12, combined with
$3 million resulting from actions taken last year, while at the
same time ensuring very ample surpluses remain in the Bar's
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General Fund and its emergency "rainy day" fund.
Background on the Bar: The State Bar of California is 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 State Bar. (Cal. Const. Art. VI, Sec. 9.)
The State Bar of California is the largest state bar in the
country. As of February 2011, the Bar had 170,986 active
members and 49,034 inactive members. The Bar's programs are
financed mostly by annual mandatory membership dues paid by
attorneys as well as other fees paid by applicants seeking to
practice law. The Bar has many committed and hard-working staff
who work diligently to ensure that the legal profession's
admissions system is properly administered to protect the
public, and its discipline system maximizes public protection.
The Governance in the Public Interest Task Force : Last year, AB
2764 (Assembly Committee on Judiciary, Chap. 476, Stats. 2010)
created within the Bar the Governance in the Public Interest
Task Force of 11 members appointed by the President of the Bar
as follows: seven attorney members; three public members; and
the president. AB 2764 required the Task Force, on or before
May 15, 2011, and every three years thereafter, to submit a
report to the Supreme Court, the Governor, and the Senate and
Assembly Judiciary Committees containing recommendations for
enhancing the protection of the public and ensuring that
protection of the public is the highest priority in the
licensing, regulation, and discipline of attorneys. This report
was to be reviewed by the Senate and Assembly Judiciary
Committees in their regular consideration of the annual bar dues
bill.
The Task Force was created in response to concerns that actions
by the State Bar Board of Governors did not sufficiently take
into account the protection of the public. Several examples
demonstrating the concern were included in committee analyses of
AB 2764, including the board's action to approve a scaled-back
online "Find a Lawyer" program that critics argued left out
important helpful consumer information in response to opposition
from local bar associations. The board decision not to
reappoint prior chief trial counsel was also highlighted in the
analysis which noted legal press at the time that described
allegations that Mr. Drexel was not reappointed potentially
because he aggressively pursued attorney misconduct, and
suggested that the board's decision may have been inordinately
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based on internal profession-protection politics and not
sufficiently on maximizing the public interest. The board also
nearly voted to oppose two important consumer protection
measures (SB 94 (Calderon, Chap. 630, Stats. 2009) and AB 764
(Nava, 2009)) which addressed attorney participation in
foreclosure-related scams. Finally, the malpractice insurance
disclosure rules ultimately approved by the board were felt by
many commentators at the time to be considerably scaled back for
professional reasons.
The Task Force began meeting in September 2010 and, after
regularly and diligently holding a number of meetings around the
state, the Task Force voted on May 5, 2011 to submit its reports
and recommendations to the Supreme Court, Governor, and
Legislature. AB 2764 provided that, if the task force did not
reach a consensus on all recommendations, the dissenting members
could appropriately prepare and submit a dissenting report. As
a result, on May 11, 2011, the Task Force presented its work
product to the Supreme Court, Governor, and Legislature in the
form of both a majority report, largely supported by the
attorney members of the task force, and a minority report,
largely supported by the public members of the task force.
The Legislature Responds to the Task Force's Majority and
Minority Report Recommendations for Bar Governance Reform by
Seeking A Middle Ground in This Reform Legislation : Drawing
from both the majority and minority reports, received by the
Legislature on May 11, 2011, the author amended this measure on
May 27, 2011, to benefit from the keen governance insights and
recommendations of both reports. The bill was amended to
include provisions renaming the board of governors as the board
of trustees, revising the composition and size of that board,
and specifying the transition to a smaller board. The
amendments also made revisions to the Governance in the Public
Interest Task Force, added the public protection charge, and
contained provisions relating to a strategic plan and the
Bagley-Keene Open Meeting Act.
The author writes in support of the bill:
Over the last nine months, the State Bar's Governance in
the Public Interest Task Force spent considerable time and
effort discussing its charge to make recommendations to
enhance the protection of the public. These efforts are
well reflected in the majority and minority reports issued
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by the Task Force Ýlast month.] SB 163 is a well-thought
out compromise proposal that draws from both of these
reports.
The bill will help to address the issues identified by the
Legislature in creating the Task Force while at the same
time implementing changes in a gradual phased-in manner.
In transitioning to a smaller board, no sitting board
member (including those elected this year) will be forced
to resign or have their term reduced or shortened. At the
same time, the changes proposed by this bill will
sufficiently revise the make-up of the board to allow for
appointments-in addition to elections-of lawyer members.
As a result, attorneys will have three different ways to
become members of the State Bar's board of trustees: they
can be elected, appointed by the Supreme Court, or
appointed by the Legislature. At the same time, the bill
ensures that the ratio of professional to public members is
more reasonable, and includes a public protection charge
ensuring that protection of the public is the highest
priority for the State Bar.
The bill also ensures that the diversity of the board is
maintained by specifying criteria that the Supreme Court
should consider when making appointments to the board.
This includes important criteria such as attorneys who
represent various categories, including legal services,
small firm or solo practitioners, and historically
underrepresented groups.
Public protection charge and renaming the board. Both the
majority and minority reports of the Governance in the Public
Interest Task Force suggested including a public protection
charge in the State Bar Act. This bill accordingly provides
that protection of the public shall be the highest priority for
the Bar, and the board of trustees in exercising their
licensing, regulatory, and disciplinary functions. Consistent
with the public protection charge contained in other licensing
statutes, this bill specifies that whenever the protection of
the public is inconsistent with other interests sought to be
promoted, the protection of the public shall be paramount. In
addition, as recommended by both the majority and minority
reports, this bill renames the board of governors as the board
of trustees.
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Composition and size of the board. With respect to the
composition and size of the board, this bill draws from both the
majority and minority reports and provides for a compromise
approach. This bill reduces the size of the board from 23
members to 19 members by providing that the board be made up of
six public members appointed by the Governor and the
Legislature-as provided under existing law-and 13 attorney
members consisting of the following: six attorney members
elected from new Bar districts based on the six court of appeal
districts, five attorney members appointed by the California
Supreme Court, and two new attorney members appointed by the
Senate Rules Committee and the Speaker of the Assembly.
In contrast, the minority report suggested eliminating elections
of attorneys entirely and instead providing for nine attorney
members to be appointed by the Supreme Court. This change,
combined with the existing six public members, would have
resulted in a smaller board of 15 members. The majority report,
on the other hand, recommended leaving the board at its current
size of 23 members and reconfigured its composition as follows:
12 attorney members elected from five electoral districts based
approximately on existing District Court of Appeal boundaries,
three attorney members appointed by the Supreme Court, one
attorney member from the California Young Lawyers Association,
six public members appointed pursuant to existing law, and one
president. Thus the measure represents a classic compromise
between the two recommended approaches.
In order to help ensure a diverse board, the bill provides that
the Supreme Court-when making appointments of attorney members
to the board-should consider appointing attorneys who represent
the following categories: legal services; small or solo
practitioners, historically underrepresented groups, including
consideration of race, ethnicity, gender, and sexual
orientation; and legal academics. The bill also provides that
the Supreme Court, in making appointments, should consider
geographic distribution, years of practice, particularly
attorneys who are within the first five years of practice or age
36 or under, and participation in voluntary local or state bar
activities.
Governance in the Public Interest Task Force. The bill revises
the make-up of the Governance in the Public Interest Task Force
so that it would be made up of six members of the board and the
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president. The bill specifies that the six members be made up
of two elected attorneys who are selected by the other elected
attorney members, two attorneys appointed by the Supreme Court
who are selected by the other Supreme Court appointees, and two
public members selected by the other public members.
Officers of the board. Existing law requires the board to elect
a president, vice president, and treasurer for the following
year within 270 days of the next annual meeting. In order to
better assure stability, this bill instead provides that those
officers be elected at a meeting 90 days before the next annual
meeting. This bill also provides that the officers of the board
include one vice president (rather than four, as under existing
law) who shall serve in the absence of the president to provide
for more continuity. The bill also specifies that the
president, vice president, and treasurer may be elected from
among all members of the board. Under the bill, the term of the
president shall be one year, but he or she may be reelected to a
second one-year term.
Bagley-Keene Open Meeting Act. The minority report recommended
that the board adopt a rule providing for substantially all of
the requirements of the Bagley-Keene Open Meeting Act to be
applied to the State Bar. Consistent with this recommendation,
the bill requires the board to ensure that its open meeting
requirements are consistent with, and conform to, the
Bagley-Keene Open Meeting Act. The board recently took action
in this area, sending out to public comment proposed revisions
of its rules incorporating some requirements of Bagley-Keene.
Strategic plan. The bill requires the board to complete and
implement a five-year strategic plan to be updated every two
years. This bill also requires the board president to report
annually-as part of existing annual reports-to the Supreme
Court, Governor, and Senate and Assembly Judiciary Committees on
the steps that the board has taken to implement that strategic
plan and indicate any measures that the board will need to take
in the upcoming years to address the projected needs contained
in the plan.
State Auditor's biennial report on State Bar's performance. The
State Auditor is required by law to conduct a performance audit
every two years of the State Bar's operations during the prior
fiscal year. The last audit was released on May 26, 2011. At
the request of the Senate Judiciary Committee, the audit
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reviewed the Lawyers Assistance Program (LAP) to better
understand whether LAP is meeting its mission and, importantly,
whether it is protecting clients and the public from
substance-abusing attorneys. The Auditor's report noted the
following about LAP:
It has poor monitoring procedures for ensuring case
managers appropriately send reports of participants'
noncompliance to disciplinary bodies.
It does not adequately ensure that case managers treat all
noncompliance issues consistently.
Although only 11 percent of its participants have
successfully completed the assistance program, the State Bar
believes that other factors are a better measure of the
program's effectiveness. However, it has not measured the
program's effectiveness using these other factors.
The Auditor made a number of recommendations, including that LAP
"should ensure that case managers are submitting to the
appropriate entity the required reports in a timely manner, as
required by its policies." The Auditor also recommended that
steps be taken to better evaluate the effectiveness of LAP and
noted "if the assistance program believes that the effectiveness
of the program is better measured through other means, it should
develop these alternative measures and assess the program's
effectiveness in meeting its stated goals." The Auditor's
report notes that the Bar agrees with its recommendations and
has indicated that it is already in the process of implementing
them. On this point, the Bar indicates that it has implemented
the first two recommendations and is working on the third.
In the next year, the Judiciary Committees may wish to consider
engaging in discussion with the Bar to better ensure that LAP is
meeting its mission and protecting clients and the public from
substance-abusing attorneys and, if need be, considering
additional legislation in this area.
State Bar's fiscal status : State Bar General Fund projection.
At the end of 2010, the State Bar had a surplus in its General
Fund of almost $12 million ($11.9 million). Prior to the
proposed amendments being adopted, the Bar was projecting even
more substantial structural surpluses through at least 2015 as
seen in the following Bar-provided chart:
----------------------------------------------------------------------
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| |Before Proposed Amendments |
----------------------------------------------------------------------
|----------------------------+--------+-------+-------+-------+-------|
| |Projecte|Project|Project|Project|Project|
| |d |ed |ed |ed |ed |
|----------------------------+--------+-------+-------+-------+-------|
|DESCRIPTION |2011 |2012 |2013 |2014 |2015 |
|----------------------------+--------+-------+-------+-------+-------|
|Revenues | $63.4 | | | | |
| | | | | | |
| | |$62.0 |$63.0 |$65.9 |$66.8 |
|----------------------------+--------+-------+-------+-------+-------|
|Baseline Operating | | | | | |
|Expenditures | | | | | |
| |$62.9 |$62.6 |$63.2 |$63.9 |$64.6 |
|----------------------------+--------+-------+-------+-------+-------|
|Surplus (Deficit) | | | | | |
| | | | | | |
| |$0.5 |$(0.6) |$(0.2) |$2.0 |$2.2 |
|----------------------------+--------+-------+-------+-------+-------|
|Ending Cumulative Surplus | | | |$ 13.6 | |
| | | | | | |
| |$12.4 |$11.8 |$11.6 | |$15.8 |
|----------------------------+--------+-------+-------+-------+-------|
| | | | | | |
---------------------------------------------------------------------
*$ millions
*Forecast updated to reflect May 2011 actual results.
*These surpluses do not include the $6 million plus of reserves
in the Bar's "rainy day" fund.
In addition to these substantial surpluses in its General Fund
for the foreseeable future, it is important to recall that 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, as occurred when Governor Wilson vetoed the Bar's
dues bill in 1997, and in 2009 when Governor Schwarzenegger
temporarily did the same.
The Bar's Public Protection Reserve Fund of $6.4 million
represents almost 11 percent (10.7 percent) of 2010 General Fund
operating expenses, 6.4 percent of total agency-wide operating
expenses, and 4.9 percent of total agency-wide operating
revenues.
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While the Bar states that these percentages are consistent with
the recommendations of the Government Finance Officers
Association (which suggests a "minimum GF reserve of 5% to 15%
of operating revenues"), new leadership at the Bar has wisely
stated that such surpluses are of course extraordinary compared
to other government agencies at this time in state history, and
they have worked very collaboratively with the chairs of the
Judiciary Committees to start to address this seeming structural
surplus in the General Fund through the proposed amendments
supported by the author and being considered by this Committee,
including the $10 rebate for Bar members next year, the
increases from the current $10 to $20 for the next two years
that Bar members may voluntarily (but need not) choose to
dedicate to the ongoing crisis in legal services, and the Bar's
voluntary decision to transfer $2 million in 2012 and $2 million
in 2013 from non-mandatory dues monies to the Bar's "IOLTA" fund
to similarly help address the state's decimated legal services
programs.
Even with these proposed changes being adopted, the Bar
continues to project very robust structural surpluses through at
least 2015, as seen in the following Bar-provided chart showing
the continuing surpluses after the proposed amendments:
-----------------------------------------------------------------------------
| |After Proposed Amendments | |
-----------------------------------------------------------------------------
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| |Projected |Projected |Projected |Projected |Projected | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|DESCRIPTION |2011 |2012 |2013 |2014 |2015 | |
--------------------------------------------------------------------------------------------------------
|----------------------------+--------+-------+-------+-------+-------+------|
|Revenues | | | | | | |
| | | | | | | |
| |$63.4 |$58.8 |$61.8 |$65.9 |$66.8 | |
|----------------------------+--------+-------+-------+-------+-------+------|
|Baseline Operating | | | | | | |
|Expenditures | | | | | | |
| |$62.9 |$62.6 |$63.2 |$63.9 |$64.6 | |
----------------------------------------------------------------------------
|Surplus (Deficit) | | | | | | |
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| | | | | | | |
| | $0.5 |$(3.8) |$(1.4) |$2.0 |$2.2 | |
----------------------------------------------------------------------------
|Ending Cumulative Surplus | | | | | | |
| | | | | | | |
| |$12.4 | $8.6 | $7.2 |$9.2 |$11.4 | |
|----------------------------+--------+-------+-------+-------+-------+------|
| | | | | | | |
----------------------------------------------------------------------------
----------------------------------------------------------------------------
|* $ millions |
|*Forecast updated to reflect May 2011 actual results. |
| |
----------------------------------------------------------------------------
*These surpluses do not include the $6 million plus of reserves
in the Bar's "rainy day" fund.
History of General Fund activity: Bar documents indicate the
history of the Bar's General Fund activity. Over the past
several years, the Bar has generally taken in substantially more
money from its members 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 essentially equal. In 2010, the General
Fund's actual expenditures were at their lowest level since
2007, partially because the Bar states that six of the Bar's
executive staff positions were vacant for all or a significant
part of the year. In total, actual expenditures for 2010 were
11% lower than the adopted budget.
The following chart provided by the State Bar compares the
budgeted annual expenses to actual annual expenses:
---------------------------------------------------
|Year |Budget |Actual |% Variance |
|------------+------------+------------+------------|
|2007 | $61.4* |$58.1 |5.4% |
|------------+------------+------------+------------|
|2008 | $65.2 |$62.3 |4.4% |
|------------+------------+------------+------------|
|2009 |$65.2 |$62.8 |3.6% |
|------------+------------+------------+------------|
|2010 |$67.4 |$59.8 |11.2% |
| | | | |
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---------------------------------------------------
*$ millions
The Bar indicates: "Typically, the State Bar's actual annual
expenses are between 4 percent and 5 percent lower than budget -
usually attributable to salary savings that occur due to staff
turnover. 2010 was an extraordinary year due to the delay in
passage of the 2010 fee bill and the transition to a new
executive director. The timing of filling several vacant
executive staff positions was affected by the October 2010 veto
and recruitments were put on hold." In addition, the Bar notes
that there has - as with most other state agencies -been a hold
on employee compensation increases since 2008.
Temporary Emergency Legal Services Voluntary Assistance Option:
Funding for nonprofit legal aid organizations that assist
indigent Californians with basic legal needs has never been
adequate to the task, generally addressing only about 20 percent
of legal needs. But this "justice gap" is believed to be
increasing now because of the hardships suffered by many poor
people in the current economic downturn combined with budget
cuts from both government and private sources. California
commits proportionally less public support for legal aid than
many other states, about $10-15 million through the Equal Access
Fund in the judicial branch budget. That small contribution is
slated to diminish by $1 million or more in the coming year as
the result of court budget reductions. Federal funding through
the Legal Services Corporation is also down significantly, and
private giving has decreased as well. Despite early hopes and
great efforts, the State Bar's voluntary "Justice Gap Fund"
campaign has seen donations decline to approximately $800,000,
averaging $4.73 per practicing lawyer according to a recent
report in the legal press.
California has traditionally relied principally on the Interest
On Lawyer Trust Accounts (IOLTA) program to fund legal aid
programs. Under that program, attorneys must deposit all client
deposits or funds that are nominal in amount or are on deposit
or invested for a short period of time into an IOLTA account.
These funds may be deposited or invested in a single
unsegregated account, and the interest and dividends earned are
required to be paid to the Bar to be used for programs that
provide civil legal services to indigent persons. Over the last
three years, however, revenues from the IOLTA program have
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decreased 75 percent from $20.1 million in 2007-2008 to
approximately $5 million in the current year 2010-2011 as
evidenced by the following chart provided by the Bar.
IOLTA revenues are expected to remain at this historic low
because interest rates are not predicted to increase for some
time. Moreover, the full impact of the plunge in IOLTA income
has been mitigated somewhat by the use of reserve funds over the
past few years. These reserves are now largely depleted,
leading the State Bar to forecast that IOLTA distributions in
the 2012-13 budget cycle will diminish by an additional 20
percent or more. Beyond that, it appears reserve funds will be
virtually nonexistent. The lack of reserve funds is
particularly troubling because IOLTA income will lag any rebound
in interest rates by at least one year according to historical
trends. Thus, even if interest rates were to improve
immediately (which is not predicted), California's primary
source of funding for legal aid organizations will remain anemic
for some time to come.
California is not alone in its reliance on IOLTA funding; most
states rely principally on IOLTA programs to support legal aid.
Nor is California unique in its suffering as the result of the
free-fall in interest rates. Virtually every state has faced
the same emergency. The dramatic failure of IOLTA programs has
caused alarum in many states, along with steps to intervene.
(See "Interest Rate Drop Has Dire Results for Legal Aid," New
York Times, January 19, 2009.) One of the most common and
successful approaches has been to raise attorney license fees
specifically for the purpose of funding legal aid programs. Ten
states now have such fees, ranging from a low of $20 to a high
of $75, with an average of $43. In many states these fees are
mandatory, without an opportunity to opt-out, reflecting the
special obligation members of the profession have to ensure that
fundamental access to the legal process and the rule of law does
not depend on income.
Because of this growing and continuing crisis in legal aid
funding, this measure takes two critically-important steps in
collaboration with the Bar to address the crisis. First, it
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increases from the current $10 to $20 for the next two years the
amount that Bar members voluntarily may allocate to the ongoing
crisis in legal services for Californians of lesser means,
though any Bar member may choose not to make this earmark to the
Bar's IOLTA fund to support legal aid activities. Second, the
Bar has joined with the chairs of the Judiciary Committees to
address the funding challenges facing over-stressed legal
service programs for the poor by committing to transfer $2
million in 2012 and $2 million in 2013 from non-mandatory dues
monies to the Bar's "IOLTA" fund to be distributed to legal aid
organizations according to long- established rules to further
assist the state's decimated legal services programs.
Through these targeted efforts California's struggling legal
service programs will receive an infusion of approximately $5
million in 2012 and an additional $5 million in 2013, while at
the same time ensuring very ample surpluses remain in both the
Bar's General Fund and its "rainy day" fund.
State Bar's annual discipline report : On April 30, 2011, the
Bar released its annual discipline report for the year ending
December 31, 2010. Required by Business and Professions Code
Section 6086.15, the report describes the "performance and
condition of Ýthe Bar's] attorney discipline system in the
previous calendar year." This year's report notes that the
figures show a significant rise in both the backlog and
caseload.
The Bar indicates that it made major changes in the format,
organization, and content of this year's report in part to
respond to recommendations from the State Auditor. As a result,
the Bar acknowledges that it is difficult to make meaningful
comparisons with reports from prior years. For example, some of
the numbers in this year's report are higher than in years' past
because they were previously excluded from prior counts - an
apparent reflection of the new Executive Director's stated
emphasis on maximizing transparency in reporting to the public
and the Legislature.
Despite this challenge, the audit noted that the overall backlog
at the end of 2010 is 4,193 cases, an increase of over 60
percent from the numbers for the previous year, under the
adjusted methodology used in the report. The report notes,
however, that these figures are substantially increased by the
inclusion of more than 2,000 cases, which are either held or in
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abeyance because of other pending criminal, civil, or State Bar
proceedings. Excluding these cases would yield a backlog of
1,901 complaints, an increase of over five percent from the
previous year.
ARGUMENTS IN SUPPORT : The Beverly Hills Bar Association wrote
the Committee stating in part that:
We were pleased to see that SB 163 adopts two core
provisions which are supported by the Beverly Hills Bar
Association. First, SB 163 retains a super-majority of
attorney members on the Board ? Second, SB 163 authorizes
the newly created Supreme Court nominating committee to
consider a number of diversity factors in making its
appointments, thus enhancing representation of solo and
small firm practitioners, newer lawyers, historically
underrepresented groups, etc. The Beverly Hills Bar
Association strongly supports this provision?
CONCERNS : Writing to express reservations about the measure,
the San Diego County Bar Association ("SDCBA") states in part
that:
ÝW]e believe the empirical evidence reflects the State
Bar's commitment to the protection of the public? the San
Diego County Bar Association is not persuaded that the
proposed changes, however well-meaning, will enhance the
protection of the public.
ARGUMENTS IN OPPOSITION : The Sacramento County Bar Association
wrote the Committee stating in opposition in part that:
ÝW]hile the public perspective in attorney governance is
invaluable, the rules under which we operate are often
technical and nuanced, and frequently require not only
attorney expertise, but expertise drawn from different
practice areas, to understand their impact on an attorney's
ability to represent his or her clients. Indeed the very
level of "zeal" with which we are duty-bound to advocate
differs depending upon whether we are a prosecutor or
defender, civil litigator or administrative attorney. These
distinctions are not intuitive to members of the public?
Bar Votes to Support This Measure As Proposed to Be Amended : On
June 18, 2011, at a special session, the current Bar Board voted
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to support the measure. And last Friday, June 24, 2011, the
Bar's Board Operations Committee, representing the full board at
those times when the full board is not in session, voted
unanimously to support this bill as it is now proposed to be
amended (minus the technical prospective conflict of interest
amendment being added as well).
REGISTERED SUPPORT / OPPOSITION :
Support
State Bar of California
Beverly Hills Bar Association
Opposition
Sacramento County Bar Association
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334