BILL ANALYSIS �
AB 2746
Page 1
Date of Hearing: May 6, 2014
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 2746 (Judiciary) - As Introduced: March 4, 2014
As Proposed to be Amended
SUBJECT : Attorneys: annual membership fees
KEY ISSUE : SHOULD THE STATE bAR'S ANNUAL AUTHORITY TO COLLECT
LAWYER LICENSE FEES BE REAUTHORIZED BY THE LEGISLATURE AT THE
CURRENT MANDATORY RATE WITH THE OPTION FOR BAR MEMBERS TO
VOLUNTARILY INCREASE THEIR CONTRIBUTION TO SUPPORT NONPROFIT
LEGAL AID ORGANIZATIONS BY $8?
SYNOPSIS
This non-controversial bill would authorize the State Bar of
California to continue to collect active membership dues of up
to $390 for the year 2015 - unchanged from last year. The bill
makes only one modest change to existing law; it increases by $8
the suggested amount that members can voluntarily contribute to
support legal aid for poor Californians through the Emergency
Legal Services Voluntary Assistance Option if they so choose.
The bill has no known opposition.
SUMMARY : Reauthorized attorney license fees at the same level
as the current year. Specifically, this bill :
1)Reauthorizes the State Bar to collect active membership dues
of up to $390 for the year 2015.
2)Increases by a modest $8 the amount members of the State Bar
may choose to contribute voluntarily to the Emergency Legal
Aid Voluntary Assistance Option.
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, 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.
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Code Sec. 6000 et seq.)
2)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 2014. (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).
3)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 2014. (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).
4)Under 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.)
5)Until January 1, 2014, directs $30 of membership dues to legal
services purposes unless a member elects not to support those
activities. (Bus. & Prof. Code Sec. 6140.01.)
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
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COMMENTS : This non-controversial bill would reauthorize the
State Bar's authority to assess and collect dues from licensed
attorneys in California in order to support the Bar's regulatory
functions, including discipline. It holds these dues at current
levels, which will continue to be $390 for the year 2015 -
unchanged from last year.
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 2014, the State Bar had 181,169 active members and 53,768
inactive members, which represents a slight annual increase in
both active members and inactive members. Total State Bar
membership is listed at 248,271, which includes 2,147 judge
members and 11,186 members who are "Not Eligible to Practice
Law." The Bar's programs are financed almost exclusively by
annual membership dues paid by attorneys as well as other fees
paid by applicants seeking to practice law.
Bar Dues To Be Maintained At Current Rates, Following Last
Year's $20 Reduction, With Optional Increased Amount Permitted
For Those Bar Members Who Wish To Voluntarily Support Legal Aid:
This bill would authorize the State Bar to collect active
membership dues of up to $390 for the year 2015, in addition to
a $38 optional fee for members who voluntarily choose to
contribute to the support of nonprofit legal aid organizations
that make free legal services available to poor Californians.
The mandatory fee of $390 holds mandatory fees constant at the
same rate as last year, when the fee was reduced by $20. The
optional legal aid fee continues the existing mechanism by which
members who choose to do so can help defray the cost of ensuring
that legal services are available without regard to ability to
pay market rates, consistently with each lawyer's professional
responsibility. The amount allowed for those lawyers who wish
to contribute voluntarily would increase $8 from $30 to $38.
This Bill Offers the Potential for Modest Additional Assistance
To Legal Aid Organizations. As this Committee has frequently
discussed and sought to ameliorate, funding for legal aid
organizations that provide essential legal help for extremely
impoverished individuals has been decimated in recent years. As
predicted when the Committee last considered this issue in the
Bar dues reauthorization measure last year, state funding for
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legal aid has diminished even further this year, despite
significantly greater needs for legal services by those who
cannot afford them, and dramatically lower funding from other
sources. Last year's measure resulted in a funding decrease of
approximately $1 million annually because the Bar's contribution
to the support of legal aid from non-mandatory dues sources was
allowed to sunset. This bill seeks to recover just some of that
lost ground by allowing members of the Bar to voluntarily
contribute an additional $8 for the support of legal aid groups
if they wish to do so. Although the allowance for increased
voluntary contributions by members is not expected to fully
replace the end of the Bar's prior contributions through
non-mandatory sources available to it, it is expected that this
step will make up for at least some of those lost non-mandatory
contributions. The Bar's leadership has stated its commitment
to this Committee to find other non-mandatory sources of funds
as soon as possible to not just bridge this continuing crisis
but to try finally to overcome it.
The Collapse Of Bank Interest Rates Since Has Caused IOLTA
Funding To Drop Over 75% To A Record Low . As this Committee
knows well, for over 30 years, interest on lawyer trust accounts
(IOLTA) has been the primary mechanism on which the state has
relied to fund legal aid programs. It seems likely that when
the IOLTA program was instituted in 1981, no one anticipated
that bank interest rates would be virtually zero, as the federal
funds rate has been (.25%) since the 2009-10 IOLTA grant cycle.
The historic plunge in interest rates continues to pose an
unprecedented challenge to the premise that legal aid programs
can rely on IOLTA funding to help maintain their essential
mission. Absent a substantial increase in interest rates, that
is certainly undesirable in macro-economic terms, it has become
painfully clear that IOLTA alone will never adequately address
the needs of those less fortunate who require legal assistance.
California Continues To Suffer Under An Overwhelming "Justice
Gap" In the Availability of Legal Services, Compounded By the
Economic Recession And Significant Increases In Poverty . As
this Committee has highlighted for many years, there has long
been a dire need for civil legal services for poor Californians
- especially underserved groups, such as elderly, disabled,
children and people needing assistance with English. By many
measures, California suffers from an overwhelming "justice gap"
between the legal needs of low-income people and the legal help
they receive. It has been estimated that the cost of closing
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the gap would amount to $400 million. Even in the best of
times, legal aid providers have been able to address only a
fraction of the demand for help. Because of insufficient
resources, legal services programs can offer assistance in only
a few types of cases; many poor and moderate-income Californians
do not qualify for services; and most of those who meet the
strict eligibility limits and seek assistance regarding problems
for which a legal services office provides service are
nevertheless turned away, simply for lack of staff. Even those
who receive services are frequently under-served with brief
advice and consultation, rather than full and fair
representation.
Despite Repeated Calls For Substantial Additional Funding, The
Problem Has Gotten Far Worse - Further Diminishing Legal Aid
Services. Seven years ago the Access Commission of the State
Bar expressed alarm at the size of the" justice gap" resulting
from inadequate funding for legal aid and called for substantial
funding increases to address the needs. In its 2007 study, the
State Bar Access Commission reported that legal aid
organizations were able to meet only about one-quarter of the
legal needs of poor people who meet the rigid eligibility and
service criteria. The funding gap was estimated to be
approximately $400 million. At that time, revenue from the
IOTLA program - the principal source of state funding, generated
by interest on lawyer trust accounts - totaled $20 million.
Since then, the problem has only worsened.
According to its documents, the Bar plans to continue to take
approximately one-third of that revenue for administrative
purposes (mostly salaries), apparently leaving just $3.5 million
for legal aid organizations. If the Bar exhausts virtually all
remaining reserve funds, it predicts it can distribute $8.9
million to total legal aid funding next year. In other words,
rather than increasing since the Bar's 2007 report, legal aid
funding has fallen. Moreover, need has increased both as a
result of problems caused by the economic recession and because
of increased poverty. In light of the evident legal aid funding
crisis discussed below, the justice gap is growing at an
alarming rate.
Reflecting this continuing crisis, the Access Commission of the
State Bar recently reported the following highlights in a Legal
Services Funding Fact Sheet dated May 21, 2013:
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o At a time of increasing demand, funding is eroding.
o Total IOLTA grants were reduced by 30% in the last 6
years, while the number of eligible clients has increased
by nearly the same percentage since 2000. Some of the
revenue in the higher-income years was maintained in a
reserve fund to help cushion the leaner years, keeping
grants more stable - the total revenue from IOLTA dropped
over 75% since 2007-2008 while grants were reduced by 30%.
However, those reserve funds were depleted by 2011-2012.
o Eligible clients have increased 28% in California
between 2000 and 2011, from 6.3 million to 8.1 million.
With only approximately 961 legal aid attorneys for the 8.1
million eligible clients, there are over 8,430 clients per
legal aid attorney, and in some areas of the state, the
ratio is much higher.
o Sequestration has resulted in reductions in all federal
funding for legal services programs. This has meant a loss
of approximately $3.5 million this calendar year, and the
impact was made more difficult because it occurred part-way
through the year, making it a higher percentage of the
remaining grant.
o Since the number of eligible clients in other states has
increased at a higher percentage than in California, there
will be a significant drop in funding from the Legal
Services Corporation - see the details below.
o The lingering economic downturn continues to impact
IOLTA revenues and the Legal Services Trust Fund Program
faces a possible 40% reduction in IOLTA grants for
2014-2015.
o Other sources of legal aid funding such as foundation
funding, private giving, government grants and contracts
have all been negatively affected by the economic downturn.
o Overview of federal LSC Funding: The funding from the
Legal Services Corporation, traditionally the backbone of
funding for legal services in California, is as follows:
" 2012 LSC funding in California was
$41,835,226;
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" 2013 LSC funding is $39,876,156, with
sequestration and partial census adjustments;
" The net loss in LSC funding in CA is a loss of
nearly $2 Million.
" The 2014 funding will be dramatically lower
because of full census implementation.
o Staffing reductions. In the Bay Area alone, there was a
22% reduction of staff in legal services programs between
2009 and 2011, and there have been significant funding
reductions since that time which, in turn, led to more
layoffs. On a national basis, during last year alone,
there was an 8% loss of legal aid advocates across the
country.
o Service reductions. These staff reductions have a
direct impact on the level of legal services that can be
provided to the eligible low-income population. Even as
far back as 2005, when legal aid funding was at a much
higher level than it is now, a study by the Legal Services
Corporation indicated that over 50% of all those who seek
help from a legal aid office must be turned away due to
lack of resources.
A resolution adopted by the State Bar Board of Trustees on
February 28, 2013 states: Because of the recession, legal aid
advocates report that five to ten times more clients began
showing up at clinics. One hotline reported that their wait
time increased from 7 minutes to 45 minutes. And low-income
persons seeking help with visa applications can wait a year and
a half for assistance at free legal aid programs.
Legal aid funding levels underscoring the continuing crisis
since 2006-07 are shown in the table below. And of course this
table does not reflect federal funding cuts or the increased
needs brought about by the economic recession and higher poverty
rates.
---------------------------------------------------------------
|Reduced IOLTA Funds FY 2006-07 to FY 2014-15 |
| |
| |
|** 13/14 grant distribution projected based upon 10% decrease |
|from 12/13. Forecasted reserves/fund balances at July 1, 2013 |
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|are higher than originally projected due to State Bar |
|Temporary Emergency Fund contributions being $1.3 million |
|higher than forecast and unanticipated Cy Pres funds received. |
|---------------------------------------------------------------|
|*** 14/15 Revenue, distribution, and federal funds rates are |
|estimates. No specific distribution level has been |
|approved. |
---------------------------------------------------------------
The Lack of Legal Services Has Negative Consequences For The
Administration of Justice . As this Committee discussed last
year, the legal aid funding deficit is even more urgent in
relation to the ongoing court budget struggle because the two
problems are related. Legal aid programs help the courts manage
caseloads, both by assisting parties who would otherwise be
unrepresented and cause further drain on scarce court resources,
and by working to solve problems outside of court so that
disputes can be avoided.
Courts are facing an ever increasing number of parties who
appear without legal counsel, largely because they cannot afford
it. The unavailability of civil legal services not only
disadvantages people with legal problems, it also burdens the
system and impairs the administration of justice. Unrepresented
litigants typically are unfamiliar with court procedures and
forms as well as with their rights and obligations, which
impedes their proceedings and consumes significant court
resources. By requiring greater judicial resources,
unrepresented parties also exacerbate the shortage of court
personnel and judicial officers. Moreover, a lack of
representation detracts from public confidence in the justice
system when the financial situation of a party is more likely
than the merits of an issue to determine the outcome. Opinion
surveys show that public trust and confidence are negatively
affected by impressions of procedural unfairness, and that the
opportunity for people to be heard in a meaningful way is the
biggest impediment to improved sense of procedural fairness.
Disturbingly, opinion surveys show that more than two-thirds of
Californians believe low-income people usually receive worse
outcomes in court than others.
Legal aid programs are also particularly hurt by court budget
reductions. As the Committee heard at its February hearing on
court budget struggles, service reductions have been especially
dangerous for poor people - because the neediest are the most
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vulnerable to loss of their legal rights and most require the
courts' protection, and because the burden of court budget cuts
in some counties may fall most heavily on services that are
disproportionately used by low-income parties.
State Support For Legal Aid Is Even More Urgently Needed Because
of Sharp Declines in Federal Funding As The Result of Federal
Sequestration And Other Congressional Actions. The IOLTA
funding cuts are compounded by reductions in federal funding
from the Legal Services Corporation (LSC) which forms the bulk
of non-IOLTA funding for California legal aid as well as private
foundation and other charitable giving.
California has lost over $8.6 million in LSC funding since 2010,
yet the number of Californians needing legal assistance
continues to rise, causing ever-greater number of needy
individuals to be turned away due to a lack of resources.
Worse, California will lose an additional $2.9 million over the
next year due to census reallocation of federal poverty dollars.
Local programs supported by LSC funding provide civil legal
services to individuals at or below 125 percent of the federal
poverty guidelines. Approximately 2.3 million Americans are
assisted each year by LSC grantees; these include veterans
returning from war, domestic violence victims, individuals
undergoing foreclosure or other housing issues, those coping
with the after-effects of natural disasters, and families
involved in child custody disputes. Nearly one in six Americans
currently qualifies for civil legal assistance from the LSC
grantees. California has had a 28 percent increase in the
number of residents qualifying for legal aid since 2000.
Thus this plethora of evidence underscores the need for
multi-faceted efforts by the Bar and the Legislature to address
the crisis in legal aid support, a crisis the Bar's leadership
and Members of this Committee have committed to addressing as
quickly and forcefully as possible. This year's annual dues
reauthorization measure therefore currently takes a very modest
additional step in that collaborative effort by the Bar and the
Legislature by simply increasing by $8 the amount members of the
State Bar may choose to voluntarily contribute to the Emergency
Legal Aid Voluntary Assistance Option.
Author's Proposed Amendments. In order to allow Bar members who
wish to increase their voluntary contributions for the support
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of nonprofit legal aid organizations by $8, the author proposes
to amend the bill as follows:
Business and Professions Code Section 6140.03 is amended to
read:
(a) The board shall increase each of the annual membership fees
fixed by Sections 6140 and 6141 by an additional thirty- eight
dollars ($ 30 ) ($38), to be allocated only for the purposes
established pursuant to Section 6033, except to the extent that
a member elects not to support those activities.
(b) The invoice provided to members for payment of the annual
membership fee shall provide each member the option of deducting
thirty -eight dollars ($ 30 ) ($38) from the annual membership fee
if the member elects not to have this amount allocated for the
purposes established pursuant to Section 6033.
REGISTERED SUPPORT / OPPOSITION :
Support
State Bar of California
Opposition
None on file
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334