BILL ANALYSIS Ó SB 387 Page 1 SENATE THIRD READING SB 387 (Jackson) As Amended September 4, 2015 Majority vote SENATE VOTE: 38-0 -------------------------------------------------------------------- |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+-----------------------+---------------------| |Judiciary |10-0 |Mark Stone, Weber, | | | | |Wagner, Alejo, Chau, | | | | |Chiu, Gallagher, | | | | |Cristina Garcia, | | | | |Maienschein, Thurmond | | | | | | | |----------------+-----+-----------------------+---------------------| |Appropriations |17-0 |Gomez, Bigelow, Bloom, | | | | |Bonta, Calderon, | | | | |Chang, Nazarian, | | | | |Eggman, Gallagher, | | | | | | | | | | | | | | |Eduardo Garcia, | | | | |Holden, Jones, Quirk, | | | | |Rendon, Wagner, Weber, | | | | |Wood | | SB 387 Page 2 | | | | | | | | | | -------------------------------------------------------------------- SUMMARY: Reauthorizes attorney license fees at the same level as the current year and improves transparency and accountability of the State Bar and makes the State Bar subject to the Public Records Act and the Bagley-Keene Open Meeting Act. Specifically, this bill: 1)Reauthorizes the State Bar to collect up to $390 for active membership dues for the year 2016. 2)Clarifies that information contained in the State Bar's Annual Discipline Report must include all matters affecting public protection, including specified discipline cases and both average and median case processing times. 3)Requires the State Bar to develop and implement a workplace plan for its discipline system and conduct a public sector compensation and benefits study, including a recommendation for an appropriate backlog goal and an assessment of staffing needed to achieve that goal. Requires the State Bar to conduct a thorough analysis of its operating costs and develop a spending plan to determine a reasonable amount for its annual dues. Requires that the workforce plan and the spending plan be submitted to the Legislature by May 15, 2016, and be implemented by December 31, 2016. 4)Requires the State Bar's Board of Trustees (Board) to contract with the California State Auditor to conduct a financial audit of the State Bar, including an audit of its financial statement, internal controls and practices, and requires that the audit be submitted to the Board, the Chief Justice of the California Supreme Court, and the Assembly and Senate Judiciary Committees by May 15, 2015. Requires the audit to SB 387 Page 3 examine revenues, expenditures, reserves and fund transfers. 5)Subjects the State Bar to the Public Records Act, with specified exceptions. Provides that identifying information submitted by applicants to the State Bar for admission to practice law and State Bar admissions records, as specified, are confidential and may not be disclosed pursuant to any state law including the Public Records Act. 6)Effective April 1, 2016, subjects the State Bar to the Bagley-Keene Open Meeting Act, as provided, with exemptions for the Judicial Nominees Evaluation Commission and the Committee of Bar Examiners. 7)Contains chaptering out language. EXISTING LAW: 1)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, requires the annual mandatory membership fee set by the State Bar's Board to pay for discipline and other functions to be ratified by the Legislature. 2)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 2015. Provides that the other $75 is pursuant to statutory authorization to assess annually the following fees: $40 for the Client Security Fund; $25 for the disciplinary system; and $10 for the Lawyer Assistance Program. 3)Authorizes the State Bar to collect $75 in annual membership fees from inactive members for a total annual dues bill of $115. Provides that the other $40 is pursuant to statutory SB 387 Page 4 authorization to assess annually the following fees: $10 for the Client Security Fund; $25 for the disciplinary system; and $5 for the Lawyer Assistance Program. 4)Directs $40 of membership dues to legal services purposes unless a member elects not to support those activities. 5)Requires the State Bar to annually report on the performance and condition of its discipline system, including the backlog of discipline cases that are six months old and case processing times, as provided. 6)Requires the State Bar to contract with an independent national or regional public accounting firm to conduct an annual financial audit of the State Bar, as provided, and requires that a copy of the audit and the financial statement be submitted, with 120 days of the close of the fiscal year, to the Board, the Chief Justice of the California Supreme Court and the Assembly and Senate Judiciary Committees. 7)Requires the State Auditor to conduct a performance audit of the operations of the State Bar on a biannual basis and requires a copy of the audit be submitted, with 120 days of the close of the fiscal year, to the Board, the Chief Justice of the California Supreme Court and the Assembly and Senate Judiciary Committees. 8)Provides, under the California Public Records Act, that all records maintained by local and state governmental agencies are open to public inspection unless specifically exempt and the exemptions include the Judicial Branch. Requires the State Bar to provide to the public, if requested, specified information on employee compensation and benefits. 9)Requires, under the Bagley-Keene Open Meeting Act, that all meetings of a state body be open and public, but excludes the Judicial Branch from the Act. Requires the Board to ensure that its meetings are consistent with, and conform to, the SB 387 Page 5 Bagley-Keene Act. FISCAL EFFECT: According to the Assembly Appropriations Committee, the State Auditor will incur one-time costs of around $275,000 for the audit, to be reimbursed by the State Bar. COMMENTS: 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. California, like 30 other states including Florida, Texas, and Washington, has a unified bar, which means that the State Bar is both the regulatory arm of the state, as well as an attorney trade association. Attorneys who wish to practice law in this state must join the State Bar and their dues cover both the regulatory arm and the trade association. This bill authorizes the State Bar to collect active membership dues of up to $390 for the year 2016. The mandatory fee of $390 holds mandatory fees constant at the same rate as this year. As required by statute, the State Auditor completes a performance audit of the State Bar every two years. This year, the State Auditor chose to review the Bar's discipline process, in particular its backlog of discipline cases, and the State Bar's recent $75 million purchase and renovation of a building in Los Angeles. The audit, released this past June, uncovered significant, questionable decisions made by the Bar in the handling of both matters. Auditor Finds That the Bar Underreported its Backlog and, When Seeking to Eliminate the Backlog, Made Choices That Did Not Put Public Protection First. The State Bar operates a discipline process to protect the public from unscrupulous attorneys, with possible disciplinary actions ranging from letters of warning and private reprovals to disbarment. To operate effectively and maximize public protection, the State Bar must minimize its backlog (cases not processed within six months), which otherwise might allow wayward attorneys to continue to practice law, SB 387 Page 6 without review, for too long. Understanding of the importance of the disciplinary function and the need to reduce its backlog, the State Bar is required to report annually to the Legislature, the Governor and the Chief Justice on the discipline process and any backlog. Unfortunately, the State Auditor discovered that the State Bar did not fully and consistently report the backlog or its case processing times, and, when taking steps to reduce the backlog, did not protect the public sufficiently. First, the audit uncovered that the State Bar did not fully or consistently report its discipline caseload backlog or its case processing times. More importantly, the Auditor determined that in order to reduce its backlog of discipline cases, the Bar made questionable choices, causing "significant risk to the public." (California State Auditor, State Bar of California: It Has Not Consistently Protected the Public Through its Attorney Discipline Process and Lacks Accountability 1 (June 2015).) This bill addresses both those issues by requiring that the State Bar fully reports its backlog and reports both its average and its median case processing times. The bill also requires the State Bar to engage in workforce planning for its discipline system and to conduct a public sector compensation and benefits study to reassess the staff required to oversee its discipline program. This should help ensure that the State Bar has the right quality and quantity of staff conducting its most important mission - protecting the public from unscrupulous attorneys. In 2012, the State Bar purchased a building in Los Angeles; however, according to the State Auditor, the State Bar did not perform a cost-benefit analysis to determine if the purchase was appropriate and warranted before receiving approval from its Board to purchase the building, did not fully inform the Legislature of its plans, and potentially risked public safety by doing so and not prioritizing other areas, such as attorney discipline. The State Bar spent $76.6 million on the purchase and renovation of the building, which the Legislature had been SB 387 Page 7 told would cost just one-third of that price - $26 million. The Auditor found that the decision to purchase the Los Angles building jeopardized the State Bar's core function to protect public safety: "Rather than using its financial resources to improve its attorney discipline system, the State Bar dedicated a significant portion of its funds to purchase and renovate a building in Los Angeles in 2012." (Id. at 43) Even more troubling, the State Bar chose to secure the additional funding for the Los Angeles building, in part, through a loan that required the State Bar to use $4.6 million of its Public Protection Fund as collateral for the loan. The sole purpose of the Public Protection Fund, which the State Bar itself established in 2001, is to protect the public in the event of a financial emergency - and that emergency is generally regarded as a veto of the State Bar's annual dues bill, which has happened twice in the last 20 years: once in 1997 and most recently in 2009. [SB 1145 (Burton) of 1997; SB 641 (Corbett) of 2009.] However, without any notification to its members or the Legislature, the State Bar chose, unilaterally, to tie up over 70% of its Public Protection Fund - $4.6 million of the $6.5 million fund - for the 15-year life of the loan. The use of the Public Protection Fund to secure the loan on the Los Angeles building is, according to the State Auditor, part of a larger pattern in which the State Bar has been transferring money between its various funds and using the money on unrelated items. The Auditor found that, from 2009 through 2012, the State Bar made 50 transfers between funds involving a total of $64.2 million. (Id. at 13.) While many of these may have been justified and appropriate, the Legislature may want more oversight, at least in the foreseeable future, to ensure that the State Bar and its Board are making decisions that are truly in the public's best interest. Given the concerns raised by the Auditor about the State Bar's SB 387 Page 8 lack of transparency and accountability, and the given the resulting potential risk to public protection, this bill rightly requires the Auditor do an in-depth financial audit of the State Bar, including a review of the State Bar's internal controls and relevant practices. The in-depth audit is limited in time - just one year - in the hope that during that time, the State Bar's Board can improve its own oversight of the Bar and ensure that, once again, public protection is the State Bar's paramount priority. Bill Requires Greater Transparency and Accountability for the State Bar. Unlike other state licensing agencies that operate under the executive branch of government, the State Bar is located within the judicial branch. As a result, the State Bar has not yet been subject to some of the state's important consumer protection and openness laws which seek to ensure the integrity, transparency, and accountability of state government operations, such as the Public Records Act and the Public Contract rules, and has not been required to fully and completely comply with the Bagley-Keene Open Meeting Act. This bill requires the State Bar to comply with both the Public Records Act (PRA) and, effective April 1, 2016, the Bagley-Keene Open Meeting Act (BKA), with appropriate exceptions to protect privacy. In particular, the bill provides that identifying information submitted by applicants to the State Bar for admission to practice law and State Bar admissions records are confidential and not subject to disclosure under the PRA. This helps protect the legitimate privacy expectations of State Bar applicants. This bill also exempts the Committee of Bar Examiners and the Commission on Judicial Nominees Evaluation from the requirements of the BKA. Analysis Prepared by: Leora Gershenzon / JUD. / (916) 319-2334 FN: 0002210 SB 387 Page 9