Watchdog Advises Tight Legislative Rein on State Bar of California

(CN) – The Legislature should keep a closer watch on the State Bar of California’s budget, the nonpartisan Legislative Analyst’s Office said in a report released Wednesday on the bar’s operating deficit and proposed $100 ongoing membership fee increase.

The LAO reviewed only the portion of the fee that supports the agency’s main operations. “Through this review, we found elements of the State Bar’s proposed one‑time and ongoing increases to this fee to be reasonable while others to be premature, unjustified, or otherwise problematic,” the analyst said in its report.

Citing labor costs and inflation, the State Bar recently sought to increase its yearly membership dues for the first time in 20 years to a whopping $813 a year, starting in 2020.

The enormous fee hike was scrutinized by State Auditor Elaine Howle, who said the attorney-discipline agency could get by with yearly fees of $525 if it hires fewer new employees, cuts back on expensive IT projects and raises rents on buildings it currently leases at below-market rates – parts of which remain vacant.

The fee hike proposal was eventually cut to $535 by the state Senate.

The State Bar estimated its spending exceeded its revenues by $5.3 million in 2018. The deficit is expected to swell due to salary increases and rising pension costs, and could obliterate the bar’s reserves before 2021.

The legislative analyst said the $100 fee increase is reasonable to address the ongoing deficit, and agreed State Bar employees should get raises to bring their salaries in line with other state employees.

But it questioned whether the agency needs $30 of the proposed $100 fee hike to continue providing generous health care packages to executive-level staff at a time when “most governments in California – including the state – are seeking to reduce unfunded liabilities associated with retiree health benefits.”

Executives make up about 10 percent of the State Bar’s employees.

The State Bar currently pays 80% of health care premiums for executive employees who retire after 15 years of work. That’s roughly $570 to $1000 a month per executive, according to the analyst’s report, which notes the state requires its employees to work 25 years to receive the same benefit.

The State Bar has said it wants to equalize the benefits between executives and “rank-and-file” staff. The legislative analyst suggested the state bar consider providing everyone with benefits comparable with those earned by state employees.

The analyst also suggested the Legislature step up its oversight of the bar’s spending, as the agency is not currently required to go through an annual budget process. It suggested the Assembly and state Senate judiciary committees retain policy oversight over the State Bar “similar to how the Legislature’s Business and Professions Committees retain jurisdiction over certain other state licensing departments.”

It also suggested lawmakers require the State Bar to seek legislative approval before launching any big projects over a certain cost threshold.

“Regardless of how much funding is ultimately approved, our review of the State Bar indicates that increased legislative oversight could be beneficial to ensure that fee revenues are assessed appropriately to support expenditures that are consistent with legislative expectations and priorities. Increased oversight also would help ensure that funds are used in an accountable and transparent manner,” the analyst said.

Leah Wilson, executive director of the State Bar, said in an emailed statement that she prefers the state auditor’s recommendations, specifically a multiyear funding cycle.

“While we are pleased that the LAO, which has never reviewed State Bar funding before, agrees that the licensing fee needs to be increased, we are concerned that the lowest options they outline seem to ignore what the state auditor, who is well-versed in State Bar operations, determined are critical elements of adequate funding to ensure public protection,” Wilson said. “We agreed with the state auditor’s call for a multiyear funding cycle, which would infuse predictability into State Bar finances, and we look forward to discussing and resolving those issues.”

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