BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2746|
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THIRD READING
Bill No: AB 2746
Author: Assembly Judiciary Committee
Amended: 7/1/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 6-1, 6/24/14
AYES: Jackson, Corbett, Lara, Leno, Monning, Vidak
NOES: Anderson
ASSEMBLY FLOOR : 76-0, 5/15/14 - See last page for vote
SUBJECT : Attorneys: annual membership fees
SOURCE : Author
DIGEST : This bill authorizes the State Bar of California
(State Bar) to collect active membership dues of up to $397 for
the year 2015, and increases the amount that members of the
State Bar may choose to contribute to free legal services for
those with limited means from $30 to $38. This bill also adds
$7 to the annual membership fees for active members to be
allocated only for the purpose of paying the administrative
costs of the programs of the State Bar, and, contingent on that
$7 remaining in force and effect, removes language authorizing
the State Bar to deduct administrative costs from funds received
in support of legal services.
ANALYSIS :
1. Existing law requires all attorneys who practice law in
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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 Trustees to
pay for discipline and other functions must be ratified by
the Legislature.
Existing law 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 2014. The other $75 is
pursuant to statutory authorization to assess annually the
following fees (a) $40 for the Client Security Fund; (b) $25
for disciplinary activities; and (c) $10 to fund the Lawyer
Assistance Program.
Existing law authorizes the State Bar to collect $75 in
annual membership fees from inactive members for a total
annual dues bill of $115 for the year 2014. The other $40 is
pursuant to statutory authorization to assess annually the
following fees (a) $10 for the Client Security Fund; (b) $25
for disciplinary activities; and (c) $5 to fund the Lawyer
Assistance Program.
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 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/her dues.
Existing law authorizes the State Bar to increase the annual
membership fees by an additional $30, to be allocated only
for purposes of providing voluntary support for nonprofit
organizations that provide free legal services to persons of
limited means. Members have the option of deducting the $30
from the annual membership fee if they elect not to have the
amount allocated for the purposes of legal services.
This bill authorizes the State Bar to collect active
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membership dues of up to $390 for the year 2014. This bill
also increases the amount that members can voluntarily
contribute to legal services from $30 to $38.
2. Existing law provides that the State Bar's Board of Trustees
may aid in all matters pertaining to advancement of the
science of jurisprudence or to the improvement of the
administration of justice, as specified.
This bill additionally provides that the State Bar's Board of
Trustees may collect reasonable charges authorized by statute
with respect to all matters incident to licensing,
regulation, and discipline, including, as specified, the
support and delivery of legal services to indigent persons,
including qualified nonprofit legal aid organizations and pro
bono, and the advancement of equal access.
3. Existing law provides that, notwithstanding any other law,
the State Bar is authorized to facilitate the professional
responsibilities of members by collecting voluntary financial
support for nonprofit organizations that provide legal
services to persons of limited means.
This bill provides that all funds received for programs
related to the above provision shall be devoted to the
support of qualified legal services projects without
deduction for administrative fees, costs, or expenses by the
State Bar.
4. Existing law states that it has been the tradition of those
learned in the law and licensed to practice law in this state
to provide voluntary pro bono legal services to those who
cannot afford the help of a lawyer.
This bill, instead, provides that it has been the
"traditional obligation" of those learned in the law and
licensed to practice law in this state to provide voluntary
pro bono legal services to those who cannot afford the help
of a lawyer.
5. Existing law requires the State Bar to distribute all moneys
received under the program for the provision of legal
services to indigent persons and permits the State Bar to pay
the administrative costs of the program and a reasonable
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reserve from those moneys.
This bill provides that $7 will be added to the annual
membership fees to be allocated only for the purpose of
paying the administrative costs of the programs of the State
Bar.
This bill strikes language authorizing the State Bar to pay
administrative costs from monies received for legal services,
and, instead, provides that if the above $7 authorization
ceases to be in force and effect, the State Bar may deduct
monies received to pay the reasonable administrative costs of
performing its obligations.
Background
The State Bar of California is a public corporation. 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 June
2014, the State Bar had 182,746 active members and 53,573
inactive members, which represents a slight annual increase in
both active members and inactive members. Total State Bar
membership is listed at 249,578, which includes 2,144 judge
members and 11,114 members who are "Not Eligible to Practice
Law."
The State Bar's programs are financed mostly by annual
membership dues paid by attorneys as well as other fees paid by
applicants seeking to practice law.
The Legal Services Trust Fund Program . The State Bar makes
grants to nonprofit organizations that provide free legal
services to indigent persons. In 2013, that program had total
revenues of $11.2 million, consisting of $4.98 million in IOLTA
revenue (interest earned on client trust accounts), $3.28
million from the Temporary Emergency Legal Services Voluntary
Assistance Option, $2 million from the Administration of Justice
Fund, $933,000 from the Justice Gap Fund, and $13,000 in
interest. Under existing law, after deducting administrative
costs, the State Bar is required to distribute 85% of those
funds to qualified legal services projects, and, 15% to
qualified support centers.
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The following information was reported to the Legislature in the
2013 Financial
Statement and Independent Auditor's Report of the State Bar of
California:
Assets . As of December 31, 2013, the State Bar's total assets
were $198.0 million, up slightly by $1.8 million, or 0.9%
compared to $196.2 million last year. Cash, investments, and
restricted cash consist of balances in demand deposit accounts,
money market accounts, the State Bar's share of California's
Local Agency Investment Fund, and investment securities. For
the year ended December 31, 2013, the combined cash and
investment balance was $85.5 million, down by $24.1 million or
21.9% from $109.6 million last year. The lower cash balance is
due primarily to the capital spending on the new facility in Los
Angeles. . . . Net capital assets balance as of December 31,
2013, is $102.2 million, a $26.5 million increase compared to
$75.7 million last year. The increase is due to additional
capital expenditures for the new facility in Los Angeles,
partially offset by the normal depreciation.
Liabilities . The State Bar's total liabilities consisted of
accounts payable to vendor accounts, unearned fees collected in
advance, grants payable, loans payable, and employee vacation
and sick leave accruals. As of December 31, 2013, the State
Bar's total liabilities were $67.1 million, up by $5.9 million,
or 9.6% compared to $61.2 million last year. The increase is
due to a combination of (1) a $3.4 million increase in accounts
payable to vendor due to the timing of payments for the Los
Angeles building construction costs; (2) a $3.3 million increase
in grant payable due to timing of grant disbursement; (3) a $0.4
million increase in unearned member dues collected in advance;
partially offset by (4) a $1.4 million reduction in loan payable
due to repayments made to the Los Angeles building mortgage loan
obligation.
Net Position . This component of net position consists of
restricted net position, net investments in capital assets, and
unrestricted net position. The State Bar's net position as of
December 31, 2013, was $130.9 million, slightly down by $4.1
million or 3.0% compared to $135.0 million in 2012.
Operating Revenues . For the fiscal year ended December 31,
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2013, the State Bar's total operating and non-operating revenues
were $137.4 million. Total operating revenues for all programs
for 2013 were $136.2 million, up by $3.8 million or 2.9%
compared to $132.4 million last year. The increase is due to a
combination of (1) a $2.1 million increase in membership
revenues as a result of the expiration of the one-time rebate of
$10 to members in 2012 and overall growth in the membership for
new admittees; (2) a $0.9 million increase in examination and
legal specialization fees due to increase of applicants; and (3)
a $0.7 million net increase in other programs, including grant
revenue, and seminar and workshop revenues. Total nonoperating
revenues were $1.3 million, down significantly by $24.2 million
or 94.9% from last year. The nonoperating revenues in 2012
consisted of a $24.5 million nonrecurrent revenue generated from
the gain on disposal of land.
Operating Expenses . For fiscal year 2013, the State Bar's total
operating expenses were $141.5 million, up by $11.2 million or
8.6% compared to $130.3 million last year. The increase is due
to a combination of (1) a $4.3 million increase in Client
Security Fund application payouts as a result of a State Bar's
Board of Trustees's decision to devote additional financial
resources to mitigate the pending application waiting time; and
(2) a $2.4 million increase in personnel costs due to the
resumption of step and merit increases for existing staff, and
filling of vacant positions; (3) a $1 million increase in
examination costs due to increase of exam applicants; and (4) a
$3.5 million increase in general and administration costs due
largely to the San Francisco building repair and maintenance
projects.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 7/1/14)
State Bar of California
ARGUMENTS IN SUPPORT : According to the author:
This bill re-authorizes the State Bar to continue
collecting annual dues from members licensed to practice
law in California. It also seeks to address the continuing
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crisis in the state's funding system for nonprofit legal
aid organizations that provide free legal services to the
poor by empowering the Bar to take additional steps
reflecting the Bar's longstanding commitment to addressing
this issue as part of its regulation of the profession.
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 now poses an unprecedented challenge to the premise
that legal aid programs can rely on IOLTA funding to help
maintain their essential mission. The collapse of bank
interest rates has caused IOLTA funding to drop over 75% to
a record low. The decimation of IOLTA funding would be bad
enough if the starting place had been equal access to
justice. But California has long suffered an overwhelming
"justice gap" in the availability of legal services,
compounded by the economic recession and significant
increases in poverty. Even in the best of times, legal aid
providers have been able to address only a fraction of the
demand for help. . . .
This bill would take modest steps towards staunching some
of the losses caused by the severe reductions in legal aid
funding.
This bill also allows legal aid programs to receive the
full benefit of IOLTA revenue that is currently used for
expenses of the State Bar, and provides for a modest $7 fee
increase for active members to cover increases in the
administrative costs of State Bar operations, largely due
to routine salary and benefit cost increases over time.
ASSEMBLY FLOOR : 76-0, 5/15/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Holden,
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Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. P�rez, V.
Manuel P�rez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
Weber, Wieckowski, Williams, Yamada, Atkins
NO VOTE RECORDED: Donnelly, Mansoor, Wilk, Vacancy
AL:d 7/2/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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