BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 134 (Hertzberg) - State Bar of California: voluntary fee collection: loan repayment program ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: May 13, 2015 |Policy Vote: JUD. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 26, 2015 |Consultant: Jolie Onodera | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 134 would authorize the State Bar to collect voluntary fees on behalf of, and for the purpose of funding, the Public Interest Attorney Loan Repayment Program. This bill would repeal the limit on the number of warrants the Student Aid Commission (Commission) may issue each fiscal year, which is currently restricted to the number authorized in the annual Budget Act. Fiscal Impact: Potentially significant one-time and ongoing state costs of about $200,000 (General Fund) for the Commission to establish and administer the program. To date, the program has not been funded, and therefore, no resources have been dedicated for program activities. The loan repayment awards would be funded with the voluntary fee revenue, but the mechanism by which the Commission would access the funds and whether the funds are intended to support the Commission's workload as well SB 134 (Hertzberg) Page 1 of ? as the awards, are unclear. Further, as the number of warrants issued would no longer be restricted by the number authorized in the annual Budget Act, to the extent the Commission chooses to issue a number of warrants that require funding in excess of the amount collected by the State Bar, additional costs from the General Fund could be required. Background: Existing law provides for the Public Interest Attorney Loan Repayment Program, established for licensed attorneys who practice or agree to practice in public interest areas of the law in this State. Existing law specifies that the program is to be administered by the Student Aid Commission. (Education Code (EC) § 69741.) Existing law specifies that participants are eligible for a maximum of $11,000 in loan assistance for four years: $2,000 in loan repayment assistance for the first year, and $3,000 in loan repayment assistance for each of the second, third, and fourth years. Under existing law, in any fiscal year, the Commission is limited to awarding no more than the number of warrants that are authorized in the annual Budget Act for that fiscal year for the assumption of loans. (EC § 69741.5.) Under existing law, the Commission is required to establish eligibility criteria for participation in the Program based upon need and merit. Further, the Commission is required to adopt initial regulations for the Program within one year of the effective date of the initial appropriation funding the Program. Existing law provides that the Commission may use the funds appropriated for the Program for the purpose of loan repayments and to defray reasonable administrative costs. Existing law additionally requires the Commission to annually establish the total amount of funding to be awarded for loan repayments, and requires the Commission to submit an annual written report to the Legislature, as specified. (EC §§ 69742-69746.5.), In 2001, AB 935 (Hertzberg) Chapter 881/2001 created the Public Interest Attorney Loan Repayment. Initial regulations were to be adopted within one year of the effective date of the initial SB 134 (Hertzberg) Page 2 of ? appropriation funding the program. While the program was never funded, the Legislative Analyst's Office (LAO) analysis of the 2007-08 Budget noted the following: The Legislature also authorized 100 warrants for the Public Interest Attorney Loan Repayment Program. While it was created several years ago, no warrants have ever been authorized for this program. The Governor vetoed the language authorizing these warrants, as well as the $100,000 the Legislature had appropriated for administrative costs. (LAO, California Spending Plan 2007-08, The Budget Act and Related Legislation, October 2007) Proposed Law: This bill would expressly authorize the State Bar to collect voluntary fees on behalf of, and for the purpose of funding, the Public Interest Attorney Loan Repayment Program, which provides loan assistance to licensed attorneys who practice or agree to practice in public interest areas of the law in this state. Additionally, this bill deletes the existing provision of law restricting the Commission to awarding no more than the number of warrants that are authorized in the annual Budget Act for that fiscal year for the assumption of loans. Prior Legislation: AB 935 (Hertzberg) Chapter 881/2001 created the Public Interest Attorney Loan Repayment Program. Staff Comments: The Commission has indicated the provisions of this bill will result in new workload that cannot be absorbed within existing resources. First-year and ongoing costs of $207,000 representing two positions for development and administration of the program are estimated. In the absence of other specified provisions, the Commission has indicated the administrative costs would be funded out of the General Fund. While the loan repayment awards are intended to be funded with the voluntary fee revenue, the mechanism by which the Commission would access the funds from the State Bar, and whether the funds are intended to support the Commission's workload as well as the awards, are SB 134 (Hertzberg) Page 3 of ? unclear. Staff notes that in addition to mandatory membership dues, the State Bar annual fee statement includes various optional donations that allow individuals to contribute to, among other things, legal services, the California Bar Foundation, and the California Supreme Court Historical Society. While the number and amount of donations that the program would receive from its 184,000 active members through this collection method is unknown, the additional option could result in either a net increase in donations or potentially an offsetting decrease in donations to other existing options. Recommended Amendments: To contain potential costs, staff recommends an amendment to reinsert the language deleted in EC § 69741.5(b). Additionally, to the extent the intent of the author is to fund Commission workload with the voluntary fee revenues collected, staff recommends an amendment to specify fee revenues collected are for the purposes of supporting both the administration of the program and the provision of loan assistance. -- END --