BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2764|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 2764
Author: Assembly Judiciary Committee
Amended: 8/2/10 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 4-0, 6/29/10
AYES: Corbett, Harman, Hancock, Leno
NO VOTE RECORDED: Walters
ASSEMBLY FLOOR : 71-1, 5/13/10 - See last page for vote
SUBJECT : State Bar Act: fees
SOURCE : State Bar of California
DIGEST : This bill authorizes the State Bar of California
to collect active membership dues of up to $410 for the
year 2011, which would continue the current active dues
amount of $410. 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.
ANALYSIS : 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
CONTINUED
AB 2764
Page
2
Board of Governors (Board) to pay for discipline and other
functions must be ratified by the Legislature. (Section
6000 et seq. of the Business and Professions Code [BPC])
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 2010. (BPC Section
6140) The other $95 is pursuant to statutory authorization
to assess annually the following fees:
$40 for the Client Security Fund (BPC Section 6140.55).
$25 for disciplinary activities (BPC Section 6140.6).
$10 to fund the Lawyer Assistance Program (BPC Section
6140.9).
$10 special assessment to fund information technology
upgrades (expires January 1, 2011) (BPC Section 6140.35).
$10 for the Building Fund (expires January 1, 2014) (BPC
Section 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 2010. (BPC Section
6141) The other $50 is pursuant to statutory authorization
to assess annually the following fees:
$10 for the Client Security Fund (BPC Section 6140.55).
$25 for disciplinary activities (BPC Section 6140.6).
$5 to fund the Lawyer Assistance Program (BPC Section
6140.9).
$10 for the Building Fund (expires January 1, 2014) (BPC
Section 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 were 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
AB 2764
Page
3
members to deduct up to $10 from the mandatory dues if the
member does not wish to fund legislative activities and
non- Keller lobbying and activities with his/her dues. (BPC
Section 6140.05, Keller v. State Bar of California (1990)
496 U.S. 1)
This bill authorizes the State Bar to collect active
membership dues of up to $410 for the year 2011.
Existing law provides that the Board may increase the
annual membership fee fixed by Section 6140 by an
additional amount not exceeding $10. This additional
amount may be used only for the costs of upgrading the
board's information technology system, including purchasing
and maintenance costs and both computer hardware and
software. This special assessment for information
technology upgrades shall be separately listed and
described in the annual membership fee invoice, which shall
include notice of the repeal of this section on January 1,
2011.
This bill extends that sunset until January 1, 2014, and,
as of that date, is repealed.
Existing law requires the Board to report to the Assembly
Judiciary Committee and the Senate Judiciary Committee on
or before April 1, 2009, and on or before April 1 of the
succeeding two years, on the use of the funds authorized
pursuant to Section 6140.35.
This bill extends that date until 2011, and extends the
sunset date from January 1, 2012, until January 1, 2014.
Background
Recent embezzlement and Bar's response . On April 6, 2009,
the Attorney General filed embezzlement and tax evasion
charges against Sharon Pearl, the Bar's former Director of
Real Property (DRP). Pearl embezzled Bar funds over a
period of eight years, and estimates of the loss ranged
from $655,000 to $675,820. In response to the incident,
Laura Chick, Chair of the State Bar Board of Governors'
Audit Committee, submitted a six-page letter to the Chairs
and Vice Chairs of the Senate and Assembly Judiciary
AB 2764
Page
4
Committees explaining how the embezzlement occurred and
describing the Bar's response to the incident. According
to the letter:
The [Bar's internal] investigation determined that the
DRP diverted tenants' payments for rent and fees to a
non-State Bar account over which she had control, and hid
the non-receipt of those payments by manipulating
information about expected rent revenue and falsifying
documentation supporting rent credits for various tenant
renovations or service interruptions due to the Bar's
seismic retrofit project. . . . She used her position
to become the single point of contact between the State
Bar and its tenants; she verified the rent payment
schedules prepared by the Office of Finance; and she was
personally responsible for both issuing invoices to
tenants and collecting rent checks from them. This,
ultimately, was the point of failure in the internal
controls over rent billing and collection, as the DRP was
able to divert rent payments while providing plausible
explanations for their absence to the Office of Finance,
and to the Bar's independent auditors (Deloitte & Touche)
during the annual financial audit.
After the incident came to light, the State Bar hired a
certified public accounting firm specializing in local
governments to perform an independent forensic review and
make recommendations for improvements to the internal
controls relating to rent billing and collection
procedures. As a result, according to the letter, the Bar
has taken a number of actions to improve rent billing and
collection procedures including:
1. The Office of General Counsel prepared a lease profile
for each tenant, clearly outlining all lease terms and
conditions.
2. The Office of Operations prepared a rent income schedule
for each tenant, listing the expected rent, by month,
for the entire term of the lease.
3. Leases, lease profiles, rent income schedules, and all
relevant supporting documents related to tenants have
been jointly verified and signed-off by the State Bar's
AB 2764
Page
5
Offices of Operations, Finance, and General Counsel and
are jointly accessible to all three in a secure location
on the State Bar's network. This change ensures
appropriate checks and balances, as no single department
or individual employee has a monopoly on information;
lease terms and expected revenues are verifiable and any
deviations are transparent.
4. The Office of Finance now invoices tenants directly,
based on the rent schedules that have been loaded into
the accounting system. Tenants have been instructed to
mail rent checks directly to the Office of Finance. The
Bar is also exploring the possibility of collecting rent
payments via electronic funds transfer from tenants.
5. The State Bar will explore the possibility of engaging a
professional property management company.
Prior legislation . SB 641 (Corbett), 2009-10 Session,
which would have authorized annual State Bar membership
dues for 2010, passed the Senate (39-0) on May 26, 2009,
but was vetoed. In his veto message, the Governor stated:
"I am returning Senate Bill 641 without my signature.
This bill would, among other provisions, authorize the
State Bar to collect annual bar dues from its members for
2010.
"In 1997, Governor Pete Wilson vetoed the annual State
Bar dues bill, citing numerous concerns that the State
Bar had become overly political, unresponsive to its
membership, and inefficient. Unfortunately, twelve years
later, inefficiencies remain unaddressed and questions
about the State Bar's role in the evaluation of judicial
nominees suggest that the State Bar's political agenda
continues.
"In July, the State Auditor released a report critical of
the State Bar. Among the problems noted by the report:
salaries for staff have risen significantly over the past
five years; the costs of its disciplinary system have
escalated by $12 million from 2004 to 2008 while the
number of disciplinary inquiries opened has declined; and
AB 2764
Page
6
a lack of internal controls allowed the embezzlement of
nearly $676,000 by a former employee. As the
organization charged with regulating the professional
conduct of its members, the conduct of the State Bar
itself must be above reproach. Regrettably, it is not.
"In addition, recent actions by the State Bar's Judicial
Nominees Evaluation Commission (JNE) also call into
question the State Bar's impartiality in considering
judicial appointments. All JNE Commission proceedings
are required by law to be confidential and qualification
ratings are not to be released to the public prior to the
Governor considering an appointment. Unfortunately,
recent events have required the State Bar to launch an
official inquiry into the confidentiality of such
proceedings. Moreover, the Chief Justice of the Supreme
Court has recently questioned the reliability of the
Commission's recommendations by noting its failure to
follow statutory guidelines when considering judicial
nominees. By failing to follow the law, the JNE
Commission has damaged its reputation for impartiality
and, in turn, the State Bar's.
"There is no question the State Bar has an essential role
in the state's justice system and must continue to
oversee the licensing, education, and discipline of
California's lawyers. However, I am returning this bill
without my signature because the State Bar cannot
continue with business as usual. It must take the time
to reexamine the problems noted by the State Auditor and
continue its investigation into the JNE Commission. I
urge the State Bar to resolve these issues as soon as
possible so the Legislature can reintroduce this measure
early next year."
In response to the veto, State Bar President Howard Miller
stated, "The Governor's veto of the State Bar dues bill is
regrettable, but we must take the Governor's concerns
seriously. Many of them are justified. There have been
serious management and financial issues at the State Bar,
starting with the embezzlement by a single employee over an
eight-year period of $675,000. The State Auditor, and
others, have also criticized with precision the management
of the Office of Chief Trial Counsel. We will look closely
AB 2764
Page
7
at these and all other issues raised by the Governor.
Events such as his veto message can challenge the State Bar
to renew itself as an institution and its service to the
public and the legal profession. I am confident the Board
of Governors is up to that challenge."
In January 2010, the Legislature passed and the Governor
signed SB 55 (Corbett), Chapter 2, Statutes of 2010,
authorizing the State Bar to collect annual membership dues
for 2010.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 7/8/10)
State Bar of California (source)
ARGUMENTS IN SUPPORT : According to the California State
Bar, this bill continues the State Bar's authority to
assess and collect dues from licensed attorneys in
California in order to support the Bar's operations,
including discipline. This bill authorizes the Bar to
continue to collect active membership dues of up to $410
for the year 2011, maintaining 2010 dues levels. The
author's office notes that, consistent with existing law,
those dues would fund only mandatory programs of the Bar,
and members will continue to be able to deduct $5 if they
do not wish to support lobbying and other legislative
activities. This bill also extends the sunset on the $10
special assessment to fund information technology upgrades
which expires January 1, 2011.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Arambula, Bass, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Bradford, Brownley, Buchanan, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,
Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal,
AB 2764
Page
8
Ma, Mendoza, Monning, Nava, Nestande, Niello, Norby, V.
Manuel Perez, Portantino, Ruskin, Salas, Saldana, Smyth,
Solorio, Audra Strickland, Swanson, Torlakson, Torres,
Torrico, Tran, Villines, Yamada, John A. Perez
NOES: Anderson
NO VOTE RECORDED: Caballero, DeVore, Hagman, Miller,
Nielsen, Silva, Skinner, Vacancy
RJG:mw 7/9/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****