BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
SB 345 (Evans)
As Introduced
Hearing Date: May 7, 2013
Fiscal: No
Urgency: No
BCP
SUBJECT
Attorneys: Annual Membership Fees
DESCRIPTION
This bill would authorize the State Bar of California (State Bar
or the Bar) to collect active membership dues of up to $390 for
the year 2014. Consistent with existing law, those dues would
fund only mandatory programs of the State Bar, and members can
deduct $5 if they did not wish to support lobbying and other
legislative activities. Members can also deduct an additional
$5 if they did not wish to fund access and elimination of bias
programs.
BACKGROUND
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 May
2013, the State Bar had 178,050 active members and 51,985
inactive members, which represents a slight annual increase in
both active members and inactive members. Total State Bar
membership is listed at 242,738, which includes 2,122 judge
members and 10,580 members who are "Not Eligible to Practice
Law."
The 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.
(more)
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CHANGES TO EXISTING LAW
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 State 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.)
Existing law authorizes the State Bar to collect $315 in annual
membership fees from active members for a total annual dues bill
of $410 for the year 2013. (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 (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).
Existing law authorizes the State Bar to collect $75 in annual
membership fees from inactive members for a total annual dues
bill of $125 for the year 2013. (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).
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 or
her dues. (Bus. & Prof. Code Sec. 6140.05; Keller v. State Bar
of California (1990) 496 U.S. 1.)
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Existing law , until January 1, 2014, directs $20 of membership
dues to legal services purposes unless a member elects not to
support those activities. (Bus. & Prof. Code Sec. 6140.01.)
This bill would authorize the State Bar to collect active
membership dues of up to $390 for the year 2014.
COMMENT
1. Stated need for the bill
In support of the bill, the author notes that "[l]egislative
authorization is required and this is part of the Senate and
Assembly Judiciary Committees' annual oversight responsibilities
of the Bar."
2. State Bar's Five-Year Strategic Plan
Two years ago, the Legislature passed and the Governor signed SB
163 (Evans, Chapter 417, Statutes of 2011), which contained
substantial and extensive changes to the State Bar's governance
structure. In particular, the bill renamed the State Bar's
Board of Governors as the Board of Trustees and revised the
composition and size of that board to be made up of six public
members appointed by the Governor and the Legislature, as
provided under existing law, and 13 attorney members.
Under SB 163, the Board of Trustees was also required to
complete and implement a five-year strategic plan, to be updated
every two years. The bill required the president of the State
Bar to report to the Supreme Court, the Governor, and the Senate
and Assembly Judiciary Committees on the measures the board has
taken to implement the strategic plan and the measures the board
will need to take in the remaining years of the strategic plan
to address the projected needs contained in the plan. SB 163
required that information to be submitted in conjunction with
the submission of the board's proposed final budget, which is
required under existing law to be submitted by February 15th.
(Bus. & Prof. Code Sec. 6140.1.) The State Bar submitted this
plan on February 5, 2012, and submitted a report on measures
taken to implement that plan on February 15, 2013.
The five-year strategic plan indicated that the Bar's strategy
for the next five years is to "re-tool the organization for
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sustainable, lasting improvement by re-making key aspects of its
organizational culture. The essence of the State Bar's strategy
for achieving this is to insist upon change throughout the
organization." The plan then described the three major
operational initiatives that the Bar is "undertaking to carry
out this strategy." Those three initiatives are: (1)
information technology modernization and enhancement; (2)
modernization and improvement of physical facilities; and (3)
operational process re-engineering. The State Bar provided the
following updates to each of the three initiatives in its
February 15, 2013 report:
Information Technology Initiative
1. After a competitive RFP [(request for proposal)] process,
the State Bar selected and purchased a modern, commercial
off-the-shelf case management system for the Office of Chief
Trial Counsel. The system implementation process was launched
in November.
2. The State Bar issued an RFP for a case management system
for the State Bar Court as well, and the evaluation process is
now underway.
3. The State Bar also began the process of gathering
requirements and preparing an RFP for the replacement of the
systems used by the Office of Admissions.
Physical Facilities Initiative
1. The State Bar has purchased the office building at 845 S.
Figueroa in Los Angeles and is currently preparing it for
occupancy. The building will house the State Bar's Los
Angeles operations after the expiration of its lease at the
AT&T Center.
2. The State Bar has engaged a property management firm to
manage operations and capital improvement projects at its 180
Howard Street headquarters in San Francisco. This was an
important step toward long-needed maintenance and improvement
projects at the 180 Howard building.
3. The State Bar has reviewed its operations in Los Angeles
to determine whether any activities should be relocated to San
Francisco to reduce costs or improve efficiency. As a result,
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the bar has consolidated the Admissions Moral Character unit
in San Francisco, relocating two positions. The review also
concluded that the costs and risks associated with relocating
the Admissions Operations unit, which is responsible for the
logistics of the bar exam, would outweigh the benefits by a
significant margin. Similarly, it concluded that shifting
discipline system staff to San Francisco would not be
beneficial.
Process Re-Engineering
1. In 2012, the Office of Chief Trial Counsel restructured
its entire approach to prosecuting cases so that, today, each
case is handled by a single team from beginning to end. This
has eliminated timeconsuming hand-offs and provided clear
accountability for the handling of each case.
2. The Office of Admissions, in collaboration with the Office
of Budget and Performance Analysis, has undertaken a
comprehensive project to document and review all of the major
business processes in the Admissions area. This project is
now in its final phases.
3. The Office of Information Technology has reorganized
itself into an industry-standard three-part structure, with
units for Operations, Applications, and Project Management.
The February 15, 2013 report further noted that the Board
expects to do the following to fully implement the strategic
plan: (1) complete the implementation of the case management
system in the Office of Chief Trial Counsel; (2) select and
implement a case management system for the State Bar Court; (3)
select and implement a new system or platform for admissions;
(4) select and implement a new member records and billing
system; (5) complete tenant improvements at the 845 S. Figueroa
building and move in; (6) update the physical layout of the
Bar's offices in San Francisco to facilitate collaboration and
eliminate outdated "silos;" (7) complete the process review in
admissions and implement any process improvements which may be
feasible prior to the implementation of the new admissions
system; and (8) extend the process review effort to encompass
the discipline system beyond the Office Chief Trial Counsel, as
specified.
3. Bar dues amount affected by the sunset of various fees and
transfers
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This bill would authorize the State Bar to collect active
membership dues of up to $390 for the year 2014. That amount is
reduced by $20 from last year due to the sunset of both a $10
assessment to fund information technology upgrades and a $10
assessment for the Building Fund. Furthermore, an optional
provision relating to legal services organizations also sunsets
at the end of this year.
a. Sunset of assessment to fund information technology
upgrades
In 2007, SB 686 (Corbett, Chapter 474, Statutes of 2007)
authorized the State Bar to collect a special assessment of up
to $10 per year from active members in order to fund upgrades
to the Bar's information technology system, including
purchasing and maintenance costs of both computer hardware and
software. The assessment, which originally would have sunset
on January 1, 2011, was extended to January 1, 2014 by AB 2764
(Committee on Judiciary, Chapter 476, Statutes of 2010). In
extending the sunset, this Committee's analysis noted:
Because the costs for improving IT [(information
technology)] are ongoing, the author has agreed to . . .
extend the sunset for another three years and to provide
that the annual report provided to the Legislature
contain detailed information concerning a review of how
any upgrades have modernized the State Bar's data
collection system and improved the tracking of
disciplinary cases:
The State Bar's April 1, 2013 report on Information
Technology-Technology Improvement Update notes that: "From
2008 through 2012, the State Bar has expended a total of $4.1
million for upgrades to its personal computers, desk top
software, servers, printers, network infrastructure, and
telecommunications. Additionally, the State Bar has improved
its web hosting and begun the process of replacing its legacy
prosecutorial case management, State Bar Court case management
and Admissions systems. For 2013 through 2015, $6.5 million
is budgeted to pay for the total costs of the Bar's legacy
system replacements identified above as well as the cost of
replacing the Member Records and Billing system. Initiation of
the Member Records and Billing is scheduled for 2014 with a
planned completion date of 2015." The report further notes
that the assessment has generated an average of $1.6 million
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per year (thus, over a six year period, the total amount
generated appears to be around $10 million).
Accordingly, the current $10 assessment for information
technology will sunset on January 1, 2014, thus, reducing the
dues for active members by $10 next year.
b. Sunset of assessment for building fund
Under existing law, the Board may collect an additional $10
from members to be used for: (1) the costs of financing,
constructing, purchasing, or leasing facilities to house State
Bar staff; and (2) major capital improvement projects related
to facilities owned by the Bar. (Bus. & Prof. Code Sec.
6140.3.) The authority to assess that fee sunsets on January
1, 2014, thus, absent reauthorization, the maximum bar dues
amount will be reduced by another $10 next year (compared to
2013).
With respect to the $10 building fund fee, this Committee's
analysis of AB 3049 (Assembly Committee on Judiciary, Chapter
165, Statutes of 2008) noted that:
AB 3049 would restore the $10 building fund fee for five
years and earmark revenues from that fee solely for the
construction, purchase, or lease of a facility in
southern California to house State Bar operations upon
the expiration of the State Bar's existing lease in Los
Angeles in January 2014. With 160,000 current active
members, a number that generally grows around 5,000 to
6,000 annually, restoration of the building fund fee
should yield around $1.65 million in 2009 and perhaps
around $1.85 to $1.9 million in 2013, for a total fund of
possibly around $10.2 million in January 2014, when
accrued interest is included. This amassed sum, the
State Bar asserts, could then be used as part of a
significant down payment on a purchase.
It should be noted that the State Bar did, in fact, purchase a
building in Los Angeles in November of 2012. The required
yearly independent audit of the State Bar noted that: "In
November 2012, the State Bar purchased a building located at
845 South Figueroa Street in Los Angeles to house its Southern
California operations upon expiration of the State Bar's
current lease in 2014. The purchase price of the five-story
building was $50 million. Tenant improvements, moving costs,
broker's commissions and interim debt service are estimated at
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$20 million. Funding sources for the total project costs are:
$28 million from the sale of the State Bar's Los Angeles
parking lot; $25.5 million in loan proceeds from Bank of
America; $10.2 million from the $10 dedicated building fee;
and approximately $6.3 million from available fund balances
and interfund loans." (2012 Financial Statement and
Independent Auditor's Report of the State Bar of California
(Apr. 30, 2013) State Bar [as of May 5, 2013] at pg. 9.)
Accordingly, the current $10 assessment for the building will
sunset on January 1, 2014, thus, reducing the dues for active
members by another $10 next year.
c. Legal services
In 2010, AB 2764 (Committee on Judiciary, Chapter 476,
Statutes of 2010) created the Temporary Emergency Legal
Services Voluntary Assistance Option, directing, until January
1, 2014, $10 of membership dues to legal services purposes
unless a member elected not to support those activities. SB
163 (Evans, Chapter 417, Statutes of 2011) increased that
amount to $20 in order to address the ongoing crisis in
funding for legal services for lower-income Californians. SB
163 also provided that in fiscal years 2012 and 2013, $2
million of non-mandatory dues would be transferred to the
Bar's legal services fund to further bolster funding for legal
services programs. Accordingly, as of January 1, 2014, there
will no longer be a direction of $20 of membership dues to
legal services (and no transfer of funds) - given the ongoing
crisis with regard to funding of legal services, the sponsor
and all interested parties should continue to evaluate the
various options that may be available to increase funding for
legal services in California.
It should be noted that the State Bar's Board of Trustees
approved a resolution in March to sponsor legislation to fund
legal services through a surcharge to be added to the annual
membership statement (bar dues bill), and, authorized Bar
staff to develop a proposal implementing that resolution.
That resolution noted that the existing $20 redirection of
membership dues, and prior transfers of $2 million, could not
be extended because they were underwritten by a one-time fund
balance.
4. Fiscal condition of the State Bar
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The following information was reported to the Legislature in the
2012 Financial Statement and Independent Auditor's Report of the
State Bar of California:
Assets - As of December 31, 2012, the State Bar's total
assets were $196.2 million, up by $49.8 million, or 34.0
[percent] compared to $146.4 million last year. The
increase is due to a combination of (1) a net $44 million
increase in capital assets due to the Los Angeles building
acquisition and the sale of the Los Angeles parking lot,
partially offset by normal depreciation, (2) an $11.3
million increase in cash and investments, and (3) a $5.5
million decrease in other assets and grant receivables.
Liabilities - The 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, 2012, State Bar's total liabilities were $61.2 million,
up by $22.1 million, or 51 [percent] compared to last year.
The increase is mainly due to a combination of (1) a $25.4
million mortgage loan obligation obtained for the Los
Angeles building acquisition, (2) a $3.2 million increase
in accounts payable to vendors due to the timing of
payments, (3) a $0.8 million increase in unearned member
dues collected in advance, and (4) offset by a $7.3 million
net decrease in grants payables due to the timing of
quarterly grant distribution to grantees.
Net Position - The State Bar's net position as of
December 31, 2012, was $135.0 million, which is up by $27.7
million, or 25.8 [percent] compared to 2011. The increase
in net position is due largely to the $24.6 million gain
generated from the disposal of a parking lot in Los
Angeles.
Operating Revenues - For the fiscal year ended December
31, 2012, the State Bar's total operating and non-operating
revenues were $158.1 million.
Operating Expenses - For fiscal year 2012, the State
Bar's total operating expenses were $130.4 million, which
were down by $7.0 million or 5.1 [percent] compared to
$137.4 million last year. The decrease is a result of cost
savings from operations and lower personnel costs. (2012
Financial Statement and Independent Auditor's Report of the
State Bar of California (Apr. 30, 2013) State Bar
[as of May
5, 2013] at pp. 4-7.)
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Support : None Known
Opposition : None Known
HISTORY
Source : State Bar of California
Related Pending Legislation : None Known
Prior Legislation :
AB 2685 (Judiciary, Chapter 348, Statutes of 2012)
SB 163 (Evans, Chapter 417, Statutes of 2011) See Comments 2 and
3c.
AB 2764 (Judiciary, Chapter 476, Statutes of 2010) See Comment
3a, c.
SB 55 (Corbett, Chapter 2, Statutes of 2010)
SB 641 (Corbett, 2009) was vetoed by the Governor.
AB 3049 (Judiciary, Chapter 165, Statutes of 2008) See Comment
3b.
SB 686 (Corbett, Chapter 474, Statutes of 2007) See Comment 3a.
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)
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