BILL ANALYSIS Ó
SB 163
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Date of Hearing: September 6, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 163 (Evans) - As Amended: September 2, 2011
SENATE VOTE : 39-0
SUBJECT : STATE BAR: board of trustees: GOVERNANCE REFORMS
KEY ISSUE : SHOULD major REFORMS to the governance structure of
the State Bar BE MADE to STRENGTHEN THE BOARD OF TRUSTEES AND
maximize the Bar's prioritization of public protection in all of
its activities?
SYNOPSIS
According to the current president of the State Bar, who
supports this bill, this measure implements the most sweeping
changes to the governance structure of the State Bar in decades.
Among other reforms, the bill revises the composition and
reduces the size of the Bar's governance board, adding for the
first time a substantial component of attorney members selected
by the Supreme Court. The bill reduces the size of the board
from 23 to 19 members over a three-year phased-in period. The
bill also, consistent with other professional statutes,
specifies for the first time that the protection of the public
is the highest priority for the Bar and its board of trustees
(the new name for the members of the board). The measure also
reduces member dues by $10 for 2012 by granting all Bar members
a $10 rebate next year due to a continuing surplus in the Bar's
General Fund; and increases from the current $10 to $20 for the
next two years the amount that Bar members may voluntarily
contribute to the Bar's "IOLTA" fund to address the ongoing
crisis in legal services for Californians of lesser means,
though any Bar member will be free to choose not to have his or
her dues used for this purpose (in which case the monies will be
returned to the member in reduced dues). The bill also
acknowledges that the Bar, working collaboratively with the
chairs of the two Judiciary Committees, has also committed to
transferring $2 million in 2012 and $2 million in 2013 (unless
in 2013 the Bar's General Fund faces overriding extraordinary
circumstances) from its Insurance Affinity program account
(non-mandatory dues monies) to the Bar's "IOLTA" fund to
similarly help address the decimated funds available to the
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state's legal services programs. Through these collaborative
actions between the Bar and the Assembly and Senate Judiciary
Committees, Bar members will be receiving reduced dues in 2012,
and California's struggling legal service programs will be
receiving up to a possible $10 million increase in Bar support
for legal services over two years, while at the same time
ensuring surpluses remain in the Bar's General Fund and its
emergency "rainy day" fund. The measure is supported by the Bar
and the Beverly Hills Bar Association. The San Diego County Bar
Association wrote the Committee earlier this year to express
some reservations about the governance reforms in the bill, and
the Sacramento County Bar Association wrote in opposition. The
measure passed the Senate by a vote of 39-0. As recently
amended, the bill clarifies that in the event members elect not
to allocate $20 to address the crisis in legal services, these
monies shall be returned to them as a reduction in their dues.
The amendments also place a one year "pause" on the governance
reform task force.
SUMMARY : Implements major changes to the governance structure
of the State Bar (Bar) to maximize the Bar's prioritization of
public protection in all of its activities and makes other
reforms to the Bar's governance structure. In addition, the
measure provides a $10 reduction in dues for all Bar members in
2012 and increases the amount Bar members may voluntarily choose
to contribute to help address the ongoing crisis in legal
services for the next two years only. Specifically, this bill ,
among other things:
1)Provides a $10 reduction in dues for all Bar members in 2012
only.
2)Provides that protection of the public shall be the highest
priority of the Bar.
3)Revises the composition and size of the board of trustees.
4)Phases in the transition to the smaller board.
5)Requires the board to ensure that its open meeting
requirements are consistent with, and conform to, the
Bagley-Keene Open Meeting Act.
6)Requires the board to complete and implement a five-year
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strategic plan.
7)Increases from the current $10 to $20 for the next two years
the amount that Bar members may voluntarily (but need not)
choose to allocate to address the ongoing crisis in legal
services for Californians of lesser means, unless any Bar
member chooses not to support those activities, in which case
the member shall receive a commensurate reduction of that
amount in their membership dues.
8)Acknowledges that the Bar has also voluntarily committed to
transferring $2 million in 2012 and $2 million in 2013 (unless
the bar finds in 2013 that its general fund faces overriding
extraordinary circumstances) from non-mandatory dues monies to
nonprofit legal services organizations regulated by the Bar to
similarly help ensure that all Californians have equal access
to justice.
9)Places a one-year "pause" on the Governance in the Public
Interest Task Force next year to await the new trustee
appointments to be made the following year.
10)Clarifies that specified conflict of interest provisions
apply to new public members appointed to the board after the
enactment of this measure.
FISCAL EFFECT : None
COMMENTS : According to the current president of the State Bar,
who supports this bill, this measure implements the most
sweeping changes to the governance structure of the State Bar in
decades. Among other reforms, the bill revises the composition
and reduces the size of the Bar's governance board, adding for
the first time a substantial component of attorney members
selected by the Supreme Court. The bill reduces the size of the
board from 23 to 19 members over a three-year period. The bill
also, consistent with other professional statutes, specifies for
the first time that the protection of the public is the highest
priority for the Bar and its board of trustees (the new name for
the members of the board).
Last year, AB 2764 (Assembly Judiciary Committee), Chapter 476,
Statutes of 2010, created within the Bar the Governance in the
Public Interest Task Force (Task Force). The Task Force was
created in response to concerns that actions by the State Bar
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Board of Governors did not sufficiently take into account the
protection of the public. On May 11, 2011, the Task Force
presented its work product to the Supreme Court, Governor, and
Legislature in the form of both a majority report, largely
supported by the attorney members of the Task Force, and a
minority report, largely supported by the public members of the
Task Force. This bill reflects provisions discussed in those
reports to improve the Board's governance and other Bar
programs.
At the end of 2010, the State Bar had a surplus in its General
Fund of almost $12 million ($11.9 million). That figure is
understood to have grown since then. In addition to this
substantial surplus in its General Fund, the Bar also has
another $6.4 million in a "Public Protection Reserve Fund" it
created which is designed to use as a "rainy-day" fund to allow
the Bar to continue operations should its dues authority not be
continued for a period of time. The Bar's Public Protection
Reserve Fund of $6.4 million represents almost 11% (10.7%) of
2010 General Fund operating expenses, 6.4% of total agency-wide
operating expenses, and 4.9% of total agency-wide operating
revenues.
While the Bar's representatives have stated that these
percentages are consistent with the recommendations of the
Government Finance Officers Association, they have acknowledged
such surpluses are extraordinary compared to other government
agencies at this time in state history, and they have worked
with the chairs of the Judiciary Committees to start to address
this continuing surplus in the General Fund through the
approaches in this measure, including the $10 rebate for Bar
members next year, the increases from the current $10 to $20 for
the next two years that Bar members may voluntarily (but need
not) choose to dedicate to the ongoing crisis in legal services,
and the Bar's voluntary decision to transfer $2 million in 2012
and $2 million in 2013 from non-mandatory dues monies to the
Bar's "IOLTA" (Interest On Lawyer Trust Accounts) fund to
similarly help address the state's decimated legal services
programs.
Even with the bill's proposed changes, the Bar continues to
project substantial surpluses through at least 2015 (a $12.4
million surplus this year, an $8.6 million surplus in 2012, a
$7.2 million surplus in 2013, a $9.2 million surplus in 2014,
and an $11.4 million surplus in 2015.) The Bar states that
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these surpluses do not reflect some anticipated expenditures
pertaining to deferred maintenance, personnel costs, and other
items. Nor do they reflect the $6 million plus of additional
monies kept by the Bar for its "rainy day" fund.
Over the past several years, the Bar has generally taken in
substantially more money from its members than it has spent.
The Bar indicates it is working to ensure that this tradition of
substantial variance between its projected expenses and actual
expenses - leading to potentially higher annual dues assessments
than have been needed - is halted. The Bar notes that
provisions in this legislation which provide Bar members with a
reduction in their membership dues will help reduce the
continuing surpluses that the Bar has traditionally been
running.
As this Committee knows well, funding for nonprofit legal aid
organizations that assist indigent Californians with basic legal
needs has never been adequate to the task, generally addressing
only about 20% of legal needs. Sadly this gap is increasing
because of the hardships suffered by many poor people in the
current economic downturn combined with budget cuts from both
government and private sources. California commits
proportionally less public support for legal aid than many other
states, and this support has diminished as the result of state
budget cuts. Federal funding through the Legal Services
Corporation is also down significantly, and private giving has
decreased as well.
California has traditionally relied principally on the Interest
On Lawyer Trust Accounts program to fund legal aid programs.
Over the last three years, however, revenues from the trust fund
program have decreased 75% from $20.1 million in 2007-2008 to
approximately $5 million in the current year.
These revenues are expected to remain at this historic low
because interest rates are not predicted to increase for some
time. Virtually every state has faced the same emergency. One
of the most common and successful approaches has been to raise
attorney license fees specifically for the purpose of funding
legal aid programs. Ten states now have such fees, ranging from
a low of $20 to a high of $75, with an average of $43. In many
states these fees are actually mandatory, without an opportunity
to opt-out, reflecting the special obligation members of the
profession have to ensure that fundamental access to the legal
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process and the rule of law does not depend on income. However
the approach taken in this measure is purely voluntary, giving
each Bar member the option of deciding whether they wish to have
$20 allocated in the next two years to help address California's
struggling legal service programs, consistently with established
practice, the professional obligations of lawyers, the broad
mission for which the Bar has been established, and the careful
guidance of pertinent case law. (See Keller v. State Bar, 496
U.S. 1 (1990); Chicago Teachers Union v. Hudson, 475 U.S 292
(1986); Abood v. Detroit Bd. of Ed., 431 U.S. 209 (1977).) In
the event that any Bar member chooses not to support those
activities, the member shall receive a commensurate reduction of
that amount in their membership dues.
On April 30, 2011, the Bar released its annual discipline report
for the year ending December 31, 2010. The audit noted that the
overall backlog at the end of 2010 is 4,193 cases, an increase
of over 60% from the numbers for the previous year, under the
adjusted methodology used in the report. The Bar indicates it
is working hard to take critically-needed steps to improve this
unacceptable professional discipline record.
On June 18, 2011, at a special session, the current Bar board
voted to support the measure. And on Friday, June 24, 2011, the
Bar's Board Operations Committee, representing the full board at
those times when the full board is not in session, voted
unanimously to support this bill.
REGISTERED SUPPORT / OPPOSITION :
Support
The State Bar
The Beverly Hills Bar Association
Opposition
The Sacramento County Bar Association
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334
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