BILL ANALYSIS Ó
SB 163
Page 1
SENATE THIRD READING
SB 163 (Evans)
As Amended September 1, 2011
Majority vote
SENATE VOTE :39-0
JUDICIARY 8-1
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|Ayes:|Feuer, Wagner, Atkins, | | |
| |Dickinson, Beth Gaines, | | |
| |Huber, Monning, | | |
| |Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Jones | | |
| | | | |
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SUMMARY : Implements major changes to the governance structure
of the State Bar (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, the
measure provides a $10 reduction in dues for all Bar members in
2012 and increases the amount Bar members may voluntarily choose
to contribute to help address the ongoing crisis in legal
services for the next two years only. Specifically, this bill ,
among other things:
1)Provides a $10 reduction in dues for all Bar members in 2012
only.
2)Provides that protection of the public shall be the highest
priority of the Bar.
3)Revises the composition and size of the board of trustees.
4)Phases in the transition to the smaller board.
5)Requires the board to ensure that its open meeting
requirements are consistent with, and conform to, the
Bagley-Keene Open Meeting Act.
6)Requires the board to complete and implement a five-year
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strategic plan.
7)Increases from the current $10 to $20 for the next two years
the amount that Bar members may voluntarily (but need not)
choose to allocate to address the ongoing crisis in legal
services for Californians of lesser means, unless any Bar
member chooses not to support those activities.
8)Acknowledges that the Bar has also voluntarily committed to
transferring $2 million in 2012 and $2 million in 2013 (unless
the bar finds in 2013 that its general fund faces overriding
extraordinary circumstances) from non-mandatory dues monies to
nonprofit legal services organizations regulated by the Bar to
similarly help ensure that all Californians have equal access
to justice.
9)Clarifies that specified conflict of interest provisions apply
to new public members appointed to the board after the
enactment of this measure.
FISCAL EFFECT : None
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).
Last year, AB 2764 (Assembly Judiciary Committee), Chapter 476,
Statutes of 2010, created within the Bar the Governance in the
Public Interest Task Force (Task Force). 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. 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
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Task Force. This bill reflects provisions discussed in those
reports to improve the Board's governance and other Bar
programs.
At the end of 2010, the State Bar had a surplus in its General
Fund of almost $12 million ($11.9 million). That figure is
understood to have grown since then. In addition to this
substantial surplus in its General Fund, the Bar also has
another $6.4 million in a "Public Protection Reserve Fund" it
created which is designed to use as a "rainy-day" fund to allow
the Bar to continue operations should its dues authority not be
continued for a period of time. The Bar's Public Protection
Reserve Fund of $6.4 million represents almost 11% (10.7%) of
2010 General Fund operating expenses, 6.4% of total agency-wide
operating expenses, and 4.9% of total agency-wide operating
revenues.
While the Bar's representatives have stated that these
percentages are consistent with the recommendations of the
Government Finance Officers Association, they have acknowledged
such surpluses are extraordinary compared to other government
agencies at this time in state history, and they have worked
with the chairs of the Judiciary Committees to start to address
this seeming structural surplus in the General Fund through the
approaches in this measure, 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" (Interest On Lawyer Trust Accounts) fund to
similarly help address the state's decimated legal services
programs.
Even with these proposed changes being adopted, the Bar
continues to project surpluses through at least 2015, as seen in
the following Bar-provided chart showing the continuing
surpluses with this bill:
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| |If This Measure Is Enacted Into Law | |
SB 163
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| | | |
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|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| |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 | |
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|Surplus (Deficit) | | | | | | |
| | | | | | | |
| | $0.5 |$(3.8) |$(1.4) |$2.0 |$2.2 | |
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|Ending Cumulative Surplus | | | | | | |
| | | | | | | |
| |$12.4 | $8.6 | $7.2 |$9.2 |$11.4 | |
|----------------------------+--------+-------+-------+-------+-------+------|
| | | | | | | |
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|* $ millions |
|* Forecast updated to reflect May 2011 actual results. |
| |
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*The Bar states that these surpluses do not reflect some
Bar-anticipated expenditures pertaining to deferred maintenance,
personnel costs, and other items.
* Nor do these surpluses reflect the $6 million plus of
additional monies kept by the Bar for its "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. The following chart
provided by the Bar compares the budgeted annual expenses to
actual annual expenses:
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SB 163
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|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 |$59.8 |11.2% |
| | | | |
---------------------------------------------------
*$ millions
The Bar indicates it is working to ensure that this history of
substantial variance between its projected expenses and actual
expenses - leading to potentially higher annual dues assessments
than were needed - is halted.
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% of
legal needs. But this gap is increasing 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, and this support
has diminished as the result of state budget cuts. Federal
funding through the Legal Services Corporation is also down
significantly, and private giving has decreased as well.
California has traditionally relied principally on the Interest
On Lawyer Trust Accounts program to fund legal aid programs.
Over the last three years, however, revenues from the trust fund
program have decreased 75% from $20.1 million in 2007-2008 to
approximately $5 million in the current year.
These revenues are expected to remain at this historic low
because interest rates are not predicted to increase for some
time. Virtually every state has faced the same emergency. 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
SB 163
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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. However
the approach taken in this measure is purely voluntary, giving
each Bar member the option of deciding whether they wish to have
$20 allocated in the next two years to help address California's
struggling legal service programs, consistently with established
practice, the professional obligations of lawyers, the purposes
and mission for which the Bar has been established, and the
rights of members that arise only with respect to compulsory
support of ideological activities that are not germane to the
association. (See Keller v. State Bar, 496 U.S. 1 (1990);
Chicago Teachers Union v. Hudson, 475 U.S 292 (1986); Abood v.
Detroit Bd. of Ed., 431 U.S. 209 (1977).) Members who so wish
will have their fees allocated to the Bar's other regulatory
purposes.
On April 30, 2011, the Bar released its annual discipline report
for the year ending December 31, 2010. The audit noted that the
overall backlog at the end of 2010 is 4,193 cases, an increase
of over 60% from the numbers for the previous year, under the
adjusted methodology used in the report. The Bar indicates it
is working hard to take critically-needed steps to improve this
unacceptable professional discipline record.
On June 18, 2011, at a special session, the current Bar board
voted to support the measure. And on 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.
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334
FN: 0002553