BILL ANALYSIS Ó
SB 134
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Date of Hearing: August 26, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 134
(Hertzberg) - As Amended August 19, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill directs unclaimed property that escheats to the state
from Interest on Lawyers' Trust Accounts (IOLTA accounts) to
fund an existing but never-funded college loan repayment program
for lawyers working in public interest occupations.
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Specifically, this bill:
1)Directs funds in IOLTA accounts that escheat to the state,
pursuant to current law, into the newly-established Abandoned
IOLTA Property Account.
2)Requires the State Controller to determine an amount in the
Abandoned IOLTA Property Account to be placed in an IOLTA
Claims Reserve Account, which, upon appropriation by the
Legislature, is to be used to be paid any unclaimed property
claims for escheated IOLTA funds.
3)Requires that the balance of funds from (2) be transferred
into the newly-established Public Interest Attorney Loan
Repayment Account, for use by the California Student Aid
Commission (CSAC) to fund loan repayment assistance and
program administrative costs.
4)Requires the Controller, prior to making the transfer in (3),
to record the name and last known address of each person
appearing on the holders' report and thus entitled to the
escheated property.
FISCAL EFFECT:
The State Controller's Office (SCO) has identified a total of
$255,000 in 263 IOLTA accounts that have escheated to the state
over the last 10 to 20 years, or an average of about $12,000 to
$25,000 annually. This level of revenue would be sufficient to
provide loan repayment assistance for only a handful of lawyers
each year, and would not cover any of CSAC's administrative
costs, which are estimated at $100,000 annually for one
position. Since the escheated monies, less any amount set aside
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to pay unclaimed property claims, would otherwise go to the
General Fund, all of the program and administrative costs are
essentially a General Fund cost.
[The author's believes that the small amount of escheat revenue
identified by the SCO is in part because banks and other holders
of unclaimed property accounts do not consistently identify
inactive accounts specifically as IOLTA accounts, and no
mechanism to do so is currently required in the bill. As a
comparison, a program in Oregon that funds legal aid services
from escheated IOLTA funds has generated about $105,000 annually
on average since its inception in 2010. If the program in
California under SB 134 was to generate a proportionate amount
of revenue, there could be up to $1 million annually for this
program. At this level of funding, CSAC would require additional
administrative positions at a cost of up to $300,000 annually.]
COMMENTS:
1)Purpose. This bill is intended to address the high cost of a
legal education and to encourage law students and new
attorneys to pursue careers in public service. According to
the author, "Public interest law offices must retain talented
attorneys to ensure that their clientele consistently receive
an acceptable level of service and equal access to justice.
However, the increasingly high levels of debt accrued while
obtaining a law degree, make it difficult for attorneys to
serve in public interest areas of law since the average pay is
lower than it is in private practice."
As an example of the costs faced by law students, tuition,
housing, and other expenses for such students at USC are
estimated to be $82,300 in 2015-16. The estimated costs to
attend UC Berkeley's Boalt Hall are not much less, at $75,900
for California residents and $79,800 for residents of other
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states.
2)Legislative History. AB 935 (Hertzberg)/Chapter 881, Statutes
of 2001, created the Public Interest Attorney Loan Repayment
Program to help repay educational loans for participating
California attorneys who practice, or agree to practice, in
public interest areas of law. Participants in the program are
eligible for a maximum of $11,000 in loan assistance over four
years. CSAC, which was charged with administering the program,
was required to establish eligibility criteria for the program
based upon need and merit. Initial regulations were to be
adopted within one year of the effective date of the initial
appropriation funding the program. The program has never been
funded, however.
3)IOLTA. Current law requires attorneys to place their clients'
funds (advances for attorney expenses, etc.) in a special
IOLTA account on which interest earnings are remitted to the
California State Bar in order to fund indigent legal services.
The state's Unclaimed Property Law (UPL) also provides that if
there is no activity for a specified time (generally three
years) on an account held by a bank or financial institution,
the property in the account escheats to the state and the bank
or financial institution (or "holder") is required to
relinquish any unclaimed property in the account to the SCO.
The Controller deposits all unclaimed funds, including funds
from abandoned IOLTA accounts, into the Abandoned Property
Account in the Unclaimed Property Fund, which is continuously
appropriated as needed to the state's General Fund. However,
an owner of the escheated funds, or even the owner's heirs,
can always make a claim for the funds. When a claim is
approved by the Controller, the state issues a check to the
claimant.
This bill, in effect, creates an exception to the UPL for
IOLTA funds that escheat to the state. Instead of being
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deposited in the Abandoned Property Account for use by the
state's General Fund until and unless the owners file claims
for their return, abandoned IOLTA funds would instead be
deposited into the Public Interest Attorney Loan Repayment
Account for the purpose of providing, upon appropriation by
the Legislature, additional funding for the Public Interest
Attorney Loan Repayment Program and administering the program.
Analysis Prepared by:Chuck Nicol / APPR. / (916)
319-2081