BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2746|
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THIRD READING
Bill No: AB 2746
Author: Assembly Judiciary Committee
Amended: 8/22/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 6-1, 6/24/14
AYES: Jackson, Corbett, Lara, Leno, Monning, Vidak
NOES: Anderson
ASSEMBLY FLOOR : 76-0, 5/15/14 - See last page for vote
SUBJECT : Attorneys: annual membership fees
SOURCE : Author
DIGEST : This bill, until January 1, 2016, requires the State
Bar Board of Trustees (Board) to charge the annual membership
fee, of up to $390, for active members for 2015. This bill, if
the president is elected from among those members of the Board
whose terms on the Board expire that year and has not been
reelected or reappointed to another term, as provided, requires
the president to serve as a 20th member of the Board during
his/her one-year term and authorizes him/her to vote. This bill
increases the optional, additional amount that can be
contributed to pay for free legal services to people of limited
means to $40, and requires that all funds received for these
programs be distributed, as specified. This bill also requires
that the net proceeds from the sale or lease of property, if
any, be held by the State Bar without expenditure or commitment
for any purpose until approved by the Legislature by statute.
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Senate Floor Amendments of 8/22/14 remove and revise provisions
relating to legal services, clarify language related to the
Board, and the proceeds from the sale or lease of real property.
ANALYSIS :
1. Existing law requires all attorneys who practice law in
California to be members of the State Bar and establishes the
State Bar for the purpose of regulating the legal profession.
Pursuant to the State Bar Act, the annual mandatory
membership fee set by the Board to pay for discipline and
other functions must be ratified by the Legislature.
Existing law authorizes the State Bar to collect $315 in
annual membership fees from active members for a total annual
dues bill of $390 for the year 2014. The other $75 is
pursuant to statutory authorization to assess annually the
following fees (a) $40 for the Client Security Fund; (b) $25
for disciplinary activities; and (c) $10 to fund the Lawyer
Assistance Program.
Existing law authorizes the State Bar to collect $75 in
annual membership fees from inactive members for a total
annual dues bill of $115 for the year 2014. The other $40 is
pursuant to statutory authorization to assess annually the
following fees (a) $10 for the Client Security Fund; (b) $25
for disciplinary activities; and (c) $5 to fund the Lawyer
Assistance Program.
Existing case law, Keller v. State Bar of California (1990)
496 U.S. 1, prohibits the use by the State 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. Existing law allows
members to deduct up to $5 from the mandatory dues if the
member does not wish to fund legislative activities and
non-Keller lobbying and activities with his/her dues.
Existing law authorizes the State Bar to increase the annual
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membership fees by an additional $30, to be allocated only
for purposes of providing voluntary support for nonprofit
organizations that provide free legal services to persons of
limited means. Members have the option of deducting the $30
from the annual membership fee if they elect not to have the
amount allocated for the purposes of legal services.
This bill authorizes the State Bar to collect active
membership dues of up to $390 for the year 2014. This bill
also increases the amount that members can voluntarily
contribute to legal services from $30 to $40.
2. Existing law provides that, notwithstanding any other law,
the State Bar is authorized to facilitate the professional
responsibilities of members by collecting voluntary financial
support for nonprofit organizations that provide legal
services to persons of limited means.
This bill requires that all funds received for these programs
be distributed to qualified legal services projects and
support centers without deduction for administrative fees,
costs, or expenses by the State Bar, and requires that fees,
costs, or expenses associated with administering these
provisions be absorbed within the costs allowed by and paid
from specified funds.
3. Existing law states that it has been the tradition of those
learned in the law and licensed to practice law in this state
to provide voluntary pro bono legal services to those who
cannot afford the help of a lawyer. Existing law also
requires the State Bar to distribute all monies received
under the program for the provision of legal services to
indigent persons and permits the State Bar to pay the
administrative costs of the program and a reasonable reserve
from those monies.
This bill also requires that the net proceeds from the sale
or lease of real property, if any, be held by the State Bar
without expenditure or commitment for any purpose until
approved by the Legislature by statute.
Background
The State Bar of California is a public corporation. Attorneys
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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 June
2014, the State Bar had 182,746 active members and 53,573
inactive members, which represents a slight annual increase in
both active members and inactive members. Total State Bar
membership is listed at 249,578, which includes 2,144 judge
members and 11,114 members who are "Not Eligible to Practice
Law."
The State Bar's programs are financed mostly by annual
membership dues paid by attorneys as well as other fees paid by
applicants seeking to practice law.
The Legal Services Trust Fund Program . The State Bar makes
grants to nonprofit organizations that provide free legal
services to indigent persons. In 2013, that program had total
revenues of $11.2 million, consisting of $4.98 million in IOLTA
revenue (interest earned on trust accounts), $3.28 million from
the Temporary Emergency Legal Services Voluntary Assistance
Option, $2 million from the Administration of Justice Fund,
$933,000 from the Justice Gap Fund, and $13,000 in interest.
Under existing law, after deducting administrative costs, the
State Bar is required to distribute 85% of those funds to
qualified legal services projects, and, 15% to qualified support
centers.
The following information was reported to the Legislature in the
2013 Financial
Statement and Independent Auditor's Report of the State Bar of
California:
Assets . As of December 31, 2013, the State Bar's total assets
were $198.0 million, up slightly by $1.8 million, or 0.9%
compared to $196.2 million last year. Cash, investments, and
restricted cash consist of balances in demand deposit accounts,
money market accounts, the State Bar's share of California's
Local Agency Investment Fund, and investment securities. For
the year ended December 31, 2013, the combined cash and
investment balance was $85.5 million, down by $24.1 million or
21.9% from $109.6 million last year. The lower cash balance is
due primarily to the capital spending on the new facility in Los
Angeles. . . . Net capital assets balance as of December 31,
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2013, is $102.2 million, a $26.5 million increase compared to
$75.7 million last year. The increase is due to additional
capital expenditures for the new facility in Los Angeles,
partially offset by the normal depreciation.
Liabilities . The State Bar's total liabilities consisted of
accounts payable to vendor accounts, unearned fees collected in
advance, grants payable, loans payable, and employee vacation
and sick leave accruals. As of December 31, 2013, the State
Bar's total liabilities were $67.1 million, up by $5.9 million,
or 9.6% compared to $61.2 million last year. The increase is
due to a combination of (1) a $3.4 million increase in accounts
payable to vendor due to the timing of payments for the Los
Angeles building construction costs; (2) a $3.3 million increase
in grant payable due to timing of grant disbursement; (3) a $0.4
million increase in unearned member dues collected in advance;
partially offset by (4) a $1.4 million reduction in loan payable
due to repayments made to the Los Angeles building mortgage loan
obligation.
Net Position . This component of net position consists of
restricted net position, net investments in capital assets, and
unrestricted net position. The State Bar's net position as of
December 31, 2013, was $130.9 million, slightly down by $4.1
million or 3.0% compared to $135.0 million in 2012.
Operating Revenues . For the fiscal year ended December 31,
2013, the State Bar's total operating and non-operating revenues
were $137.4 million. Total operating revenues for all programs
for 2013 were $136.2 million, up by $3.8 million or 2.9%
compared to $132.4 million last year. The increase is due to a
combination of (1) a $2.1 million increase in membership
revenues as a result of the expiration of the one-time rebate of
$10 to members in 2012 and overall growth in the membership for
new admittees; (2) a $0.9 million increase in examination and
legal specialization fees due to increase of applicants; and (3)
a $0.7 million net increase in other programs, including grant
revenue, and seminar and workshop revenues. Total nonoperating
revenues were $1.3 million, down significantly by $24.2 million
or 94.9% from last year. The nonoperating revenues in 2012
consisted of a $24.5 million nonrecurrent revenue generated from
the gain on disposal of land.
Operating Expenses . For fiscal year 2013, the State Bar's total
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operating expenses were $141.5 million, up by $11.2 million or
8.6% compared to $130.3 million last year. The increase is due
to a combination of (1) a $4.3 million increase in Client
Security Fund application payouts as a result of a State Bar's
Board of Trustees's decision to devote additional financial
resources to mitigate the pending application waiting time; and
(2) a $2.4 million increase in personnel costs due to the
resumption of step and merit increases for existing staff, and
filling of vacant positions; (3) a $1 million increase in
examination costs due to increase of exam applicants; and (4) a
$3.5 million increase in general and administration costs due
largely to the San Francisco building repair and maintenance
projects.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 8/25/14)
State Bar of California
ARGUMENTS IN SUPPORT : According to the author:
This bill re-authorizes the State Bar to continue
collecting annual dues from members licensed to practice
law in California. It also seeks to address the continuing
crisis in the state's funding system for nonprofit legal
aid organizations that provide free legal services to the
poor by empowering the Bar to take additional steps
reflecting the Bar's longstanding commitment to addressing
this issue as part of its regulation of the profession.
For over 30 years, interest on lawyer trust accounts
(IOLTA) has been the primary mechanism on which the state
has relied to fund legal aid programs. It seems likely
that when the IOLTA program was instituted in 1981, no one
anticipated that bank interest rates would be virtually
zero, as the federal funds rate has been (.25%) since the
2009-10 IOLTA grant cycle. The historic plunge in interest
rates now poses an unprecedented challenge to the premise
that legal aid programs can rely on IOLTA funding to help
maintain their essential mission. The collapse of bank
interest rates has caused IOLTA funding to drop over 75% to
a record low. The decimation of IOLTA funding would be bad
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enough if the starting place had been equal access to
justice. But California has long suffered an overwhelming
"justice gap" in the availability of legal services,
compounded by the economic recession and significant
increases in poverty. Even in the best of times, legal aid
providers have been able to address only a fraction of the
demand for help. . . .
This bill would take modest steps towards staunching some
of the losses caused by the severe reductions in legal aid
funding.
ASSEMBLY FLOOR : 76-0, 5/15/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden,
Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V.
Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
Weber, Wieckowski, Williams, Yamada, Atkins
NO VOTE RECORDED: Donnelly, Mansoor, Wilk, Vacancy
AL:d 8/25/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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