LAO
The California State Bar: Considerations for a Fee Increase
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The California State Bar:
Considerations for a Fee Increase
GABRIEL PETEK
LEGISLATIVE ANALYST
JUNE 26, 2019
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Table of Contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
State Bar Request for Fee Increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Assessment of State Bar Budgeting Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Assessment of Request for Fee Increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Alternative Fee Increase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Other Issue for Legislative Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Appendix A—
Examples of Base Licensing Fees for Active Members of Selected Professions . . . . . . . . . . . . . 25
Appendix B—
Summary of Major State Auditor Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Appendix C—
A Comparison of Disciplinary Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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Executive Summary
This report presents our assessment of the State Bar as required by Business and Professions
Code Section 6145. Specifically, our analysis focuses on evaluating the portion of the annual
licensing fee charged to attorneys that is deposited into the State Bar’s General Fund and the
State Bar’s request for a fee increase in 2020.
State Bar Licenses Attorneys and Regulates Their Professional Conduct. The State Bar
functions as the administrative arm of the Supreme Court for the purpose of admitting individuals
to practice law in California as well as regulating the professional conduct of attorneys by
adopting rules of professional conduct and enforcing them through the administration of its own
disciplinary system. As of June 2019, there are more than 270,000 members of the State Bar—of
which about 190,000 (70 percent) are active members able to practice law in California.
State Bar Assesses Fees to Support Its Activities. State Bar activities generally are funded
by various fees paid by attorneys for deposit into specific funds to benefit specific programs.
In 2019, the total maximum annual fee paid by active members is $430. Of this amount, $333
supports the General Fund, which is used to fund most of the State Bar’s operations. In 2019
(the State Bar operates on a January through December fiscal year), the State Bar budget
assumes that the portion of the licensing fee deposited into the General Fund will generate
$67 million (about 84 percent of total General Fund revenues).
State Bar Request for Fee Increase. The State Bar seeks an ongoing $100 fee increase and
a one-time $250 assessment from its active members beginning January 1, 2020. The State Bar
seeks these increases to address the following:
• Proposed Ongoing Fee Increase. The $100 ongoing fee increase includes: (1) $30 to
address an operating deficit in which estimated expenditures exceed estimated revenues,
(2) $30 to support the extension of retiree health benefits currently available only to
executive employees to all State Bar employees and a salary increase for represented
employees, and (3) $40 to support the hiring of 58 additional staff to improve disciplinary
case processing times. The State Bar also requests the authority to adjust the entire
renewal fee and the existing $25 disciplinary fee annually to account for inflation.
• Proposed One-Time Fee Increase. The one-time $250 assessment seeks to cover five
years of project costs and includes: (1) $134 to support building improvement costs for five
years, (2) $82 to support technology project costs for five years, and (3) $34 to restore the
State Bar’s budget reserve level back to 17 percent.
Assessment of State Bar Request. Our review of the State Bar focuses on three major areas.
• State Bar Budgeting Process. The State Bar’s existing budgeting process generally limits
legislative oversight as it is not required to go through the state’s annual budget process.
This gives the State Bar more flexibility in its budgeting practices than other similar state
licensing agencies. Additionally, the Legislature is not directly involved in major policy
decisions that may have long-term cost implications. Finally, the State Bar consistently
approves budgets where its General Fund expenditures exceed its revenues.
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• Proposed Ongoing Fee Increase. Portions of the proposed ongoing fee increase seem
reasonable, while others raise concerns. Specifically, providing an ongoing fee increase to
address (1) an operating deficit and (2) a salary increase for represented employees seems
reasonable. In contrast, the State Bar’s proposed extension of retiree health benefits is a
policy decision that is out of step with other public employers. Additionally, the request for
additional disciplinary staff may be premature. Finally, the request for an annual inflationary
adjustment lacks justification and could limit legislative oversight.
• Proposed One-Time Fee Increase. While the projects that would be addressed by the
one-time assessment merit consideration, there is a lack of justification for providing five
years of costs in 2020. Additionally, it is not clear why certain costs are considered one time
instead of ongoing.
Alternative Fee Increase Options. We provide various alternative fee increase options for
legislative consideration. The Legislature can select from these options, or others (such as those
offered by the California State Auditor) to calculate the total ongoing and one-time fee increase
that best reflects legislative priorities.
Consider Appropriate Level of Legislative Oversight. Regardless of what fee level ultimately
is approved by the Legislature, our review of the State Bar indicates that increased legislative
oversight could be beneficial to ensure (1) that fee revenues are assessed appropriately to
support expenditures that are consistent with legislative expectations and priorities and (2) that
funds are used in an accountable and transparent manner. Such oversight can occur in various
ways—such as including the State Bar in the annual budgeting process and/or requiring reporting
on various performance or outcome measures.
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INTRODUCTION
Section 6145 of the Business and Professions charged to attorneys. (The nearby box shows the
Code, as amended by AB 3249 (Chapter 659 of fees we examine compared with those examined
2018, Committee on Judiciary), requires two by the State Auditor.) In this report, we first provide
assessments of the State Bar of California—one background on the State Bar and its operations.
assessment from the California State Auditor’s We then assess the State Bar’s proposal to
Office (State Auditor) and one from our office. The increase the fees paid by attorneys in 2020. Finally,
State Auditor released its report on April 30, 2019. we provide the Legislature with alternative fee
This report presents our assessment pursuant to increase options as well as some other issues
this section of law. related to State Bar budgeting for legislative
Our analysis focuses on evaluating the State consideration.
Bar’s General Fund portion of the annual fee
LAO Analysis
Comparison of Active Licensee Fees Examined by the
Focuses on
State Auditor and in This Report
Subset of Total
2019 2020 Examined Examined
State Bar Fees Fee State Bar by the in This
Fee Amount Proposal State Auditor Report
Examined by the
Mandatory Ongoing Fee
State Auditor
Licensing $308a $408b x x
The State Auditor
Discipline 25 25 x x
report examined all State
Client Security Fund 40 40 x
Bar mandatory fees as
Lawyer Assistance Program 10 10 x
well as the State Bar’s
Subtotals ($383) ($483)
proposal for an increase
Mandatory One-Time Fee
to mandatory State Bar
fees. In comparison, our Client Security Fund — $80 x
report focuses on the Building Improvements — 134 x x
General Fund portion Technology Projects — 82 x x
of the mandatory fee Rebuilding Reserve — 34 x x
Subtotals (—) ($330)
charged to attorneys.
The figure highlights the Voluntary Fees
specific subset of fees Legal Services Trust Fund $40 $40
examined by our report Legislative Activitya,b 5 5
relative to those examined Elimination of Bias Programsa,b 2 2
by the State Auditor. Subtotals ($47) ($47)
Total Fees That May Be Charged $430 $860
a
State law authorizes a $315 annual license fee for active licensees. Existing law allows active licensees to deduct
$7 from this amount—$5 if they do not want to fund State Bar legislative activity and $2 if they do not want to fund
elimination of bias programs in the legal profession and justice system.
b
Similar to the 2019 fee amount, $7 may be deducted.
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BACKGROUND
WHAT IS THE STATE BAR? one-half of the State Bar’s revenue. The General
Fund is used to support most of the State Bar’s
Licenses Attorneys and Regulates the operations—for example, the General Fund
Profession and Practice of Law in California. supports 85 percent of the State Bar’s personnel
The California Constitution requires attorneys expenditures. In addition to the General Fund, the
to be members of the State Bar to practice law State Bar has various special funds that support
in the state. The California Supreme Court has specific programs administered by the State Bar.
the power to regulate the practice of law in the (For example, the fee collected for the Client
state—including establishing criteria for admission Security Fund is used to provide reimbursements
to the State Bar and disbarment. The State Bar of to clients who suffer financial losses due to
California functions as the administrative arm of attorney misconduct.) The State Bar approved a
the Supreme Court for the purpose of admitting 2019 calendar year budget estimating revenues of
individuals to practice law in California and $168 million ($77 million to the State Bar’s General
regulating the professional conduct of attorneys Fund) and expenditures of $189 million ($87 million
by adopting and enforcing rules of professional from the General Fund). The approved 2019 budget
conduct. The State Bar is established by the would require the State Bar to use $10 million of
California Constitution as a public corporation. The the estimated $22 million reserves it carried into
State Bar currently is governed by a 13-member 2019.
board of trustees (the board). As of June 2019,
there are more than 270,000 members of the State
HOW DOES THE STATE BAR
Bar—of which about 190,000 (70 percent) are
OVERSEE ATTORNEY CONDUCT?
active members able to practice law in California.
Assesses Fees to Support Activities. State California Attorneys Required to Meet
Bar activities generally are funded by fees paid Various Professional and Ethical Requirements.
by attorneys. As Figure 1 shows, the State Bar’s California—similar to other states—has various
General Fund—primarily supported by the annual professional and ethical requirements for attorneys
mandatory licensing fee—constitutes nearly practicing law in the state. Examples of such
requirements include: providing competent service
Figure 1 to existing and former clients, prohibiting false or
misleading communication or advertising of legal
General Fund Constitutes
services, and keeping certain information provided
Nearly One-Half of State Bar Revenue
by clients confidential. These requirements are
outlined in state law, California Rules of Court, rules
approved by the board, and the California Rules
of Professional Conduct. Claims of misconduct by
attorneys are adjudicated by the State Bar.
Overview of Process and Workload
General Fund
Other Funds
Overview of State Bar Disciplinary Process.
The State Bar administers its own disciplinary
system primarily through its Office of the Chief Trial
Counsel (OCTC) and the State Bar Court (SBC).
The OCTC—consisting of teams of attorneys,
investigators, and other legal administrative staff—
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receives, investigates, and prosecutes cases in writing of their intent to file formal charges
against attorneys. The SBC—consisting of judges, with SBC. The attorney and OCTC may
attorneys, and other legal and administrative staff— then try to resolve the case by negotiating a
adjudicates these cases. Various other State Bar settlement agreement.
departments—such as the Probation Department • Hearing Stage. If the case is not settled, the
that supervises attorneys who are required to Hearing Stage begins with the formal filing
comply with certain conditions by the State Bar of disciplinary charges with the SBC. The
Court or the Supreme Court—also support the SBC’s Hearing Department adjudicates the
disciplinary system. case and imposes the appropriate level of
As shown in Figure 2, the disciplinary system discipline—which can include case dismissal,
consists of four stages. We describe each of these public or private reprovals, probation,
stages in greater detail below. suspension, and disbarment. (The SBC also
reviews settlement terms reached at the end
• Intake Stage. The Intake Stage—also referred
of the pre-filing stage.) For cases where the
to as the Inquiry Stage—generally begins with
proposed discipline involves the suspension
a written complaint filed with OCTC. The State
or disbarment of the attorney, the California
Bar also may initiate its own investigations
Supreme Court reviews the SBC’s findings
against attorneys. After an initial review, OCTC
and recommended disciplinary action and
will either close the complaint (for example,
issues a final order.
notifying the complainant that no action is
to be taken or issuing a warning letter to Cost of Disciplinary System. The State
the accused attorney) or refer the case for Bar reports it cost $70 million from its General
investigation. Fund to operate its entire disciplinary system in
• Investigation Stage. The Investigation Stage 2018—approximately 84 percent of the total 2018
consists of OCTC investigators, under the State Bar General Fund expenditures. Of this
guidance and supervision of OCTC attorneys, amount, $45.4 million (or 65 percent) supported
analyzing the case through interviews, about 250 positions in OCTC and $12 million (or
document review, and other activities 17 percent) supported about 43 positions in SBC.
to determine whether there is clear and The remaining 18 percent supported various other
convincing evidence that attorney misconduct departments involved with the disciplinary system.
has occurred or if the case should be closed Disciplinary System Workload. As shown in
(for example, notifying the complainant that no Figure 3 (see next page), the number of cases
action is to be taken or reaching an agreement received and closed annually by OCTC has
in lieu of discipline for low
level violations).
Figure 2
• Pre-Filing Stage. The
Pre-Filing Stage begins Overview of State Bar Disciplinary Process
with OCTC evaluating the
evidence collected in the
investigation stage as well
Intake Investigation Pre-Filinga Hearing
as internally documenting
potential charges and
appropriate levels of 180 Day Statutory Time Frame for Completion
discipline to seek. If OCTC
determines there is sufficient
evidence to file charges a The State Bar Court reviews settlement terms reached at the end of the pre-filing stage.
against an accused attorney,
OCTC will notify the attorney
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stages of the disciplinary process
Figure 3
(shown in Figure 2)—specifically
Summary of OCTC Workload
for OCTC to dismiss a complaint,
Number of Cases admonish an attorney, or file
formal charges against an
17,500
attorney—within six months (or
180 days) after receipt of a written
15,000 complaint. (State law extends
this statutory requirement to
12 months for those complaints
12,500 designated as “complicated” by
the Chief Trial Counsel. However,
the State Bar indicates it does not
10,000
make use of this extended time
frame as state law encourages
7,500 adherence to the six month time
frame.)
Cases Filed in SBC
As shown in Figure 5 (see
5,000 Cases Closed by OCTC
page 8), OCTC had 5,803 cases
New Cases Received by OCTC
pending at the end of 2018—an
increase of about 14 percent
2,500
from 2017. Of this amount,
1,759 cases (about 30 percent)
were backlogged cases—a
2014 2015 2016 2017 2018 decrease of 5 percent from 2017.
Backlogged cases are cases that
OCTC = Office of the Chief Trial Counsel and SBC = State Bar Court. exceed the 180 day statutory time
frame as of December 31.
fluctuated slightly in recent years. Specifically, Recent Changes to
OCTC received a total of 15,973 cases in 2018
Improve Process and Workload
and closed 14,855 cases in 2018. Of the total
number of cases closed, 13,168 cases (or nearly Various Changes to Improve Case
89 percent) were closed without OCTC taking Processing Times. To help improve disciplinary
any action on the case. Additionally, OCTC filed case processing times and reduce the number
649 cases in the SBC. of backlogged cases, the State Bar recently
As shown in Figure 4, the number of cases implemented various changes. We discuss the
received and closed annually by SBC has declined major changes below.
in recent years. Specifically, SBC received a total of
• New OCTC Team Structure. In April 2017,
649 cases in 2018—a decline of 36 percent from
the State Bar completed a significant
2014. At the same time, the SBC closed 562 cases
restructuring of OCTC. Prior to this date,
in 2018—a decline of 52 percent from 2014. Of this
OCTC enforcement teams of attorneys
amount, about 77 percent were closed with SBC
and investigators specialized in processing
imposing disciplinary action. Finally, SBC had a
specific types of complaints. The management
total of 899 pending cases at the end of 2018—a
structure, however, did not reflect this
decline of about 46 percent from 2014.
specialization-based system. This old
Case Processing Time Frame Established by
structure resulted in some challenges—such
Statute for OCTC Workload. State law currently
as disproportional staff caseloads, conflicting
requires the State Bar to complete the first three
instructions, and a lack of clear supervisorial
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direction—that the State
Figure 4
Bar believed made case
Summary of SBC Workload
processing less efficient and
timely. The new structure Number of Cases
involves most enforcement
teams becoming generalist
1,800
teams capable of processing
Cases Filed in SBC
nearly all complaint
1,600 Cases Closed by SBC
types. Additionally, each
Cases Pending at SBC at Year End
enforcement team now
consists of attorneys, 1,400
investigators, and support
staff that report to a single
1,200
supervising attorney. The
State Bar hopes that this
1,000
new structure will improve
case processing times by
streamlining the disciplinary 800
process, providing a clear
and simplified supervisory
600
structure, and cross-training
staff to handle a greater
range of workload. 400
• New Case Prioritization
Methodology. In May 200
2018, the State Bar began
implementing a new case
prioritization methodology. 2014 2015 2016 2017 2018
Rather than focusing on
the oldest cases first, the SBC = State Bar Court.
new methodology prioritizes
cases with the greatest
of mainly Priority Three cases that will be
potential impact on members of the public.
processed in order of receipt.
Specifically, the State Bar established three
• New Case Management System. The State
priority categories. Priority One matters
Bar completed the implementation of a new
involve serious misconduct or other behavior
case management information technology (IT)
with the potential for significant or ongoing
system for the disciplinary process in February
harm to members of the public. Priority Two
2019. The State Bar expects this modern
matters involve cases that are easily resolved
case management system to help improve
or identified as needing quick (or “expedited”)
case processing times by automating and
investigation to determine if significant
standardizing processes to enable staff to be
harm could occur. According to the State
redirected to other case processing tasks.
Bar, Priority Two cases will be expedited by
Additionally, the new system is expected to
eliminating certain OCTC tasks. Priority Three
improve data sharing within the State Bar and
cases consist of all other cases. The State Bar
its stakeholders, increase public access to
expects that all Priority One and Two cases
information, and improve the collection and
will be completed within the 180 day statutory
reporting of data on key metrics.
time frame, while the backlog will consist
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to close a case (disposition time).
Figure 5
From this analysis, the State Bar
Summary of Cases Pending at OCTC
determined that each additional
Number of Cases
filled investigator position is
associated with a decrease of
7,000
Non-Backlog Cases 3.6 days in the median case
disposition time. The State Bar
Backlog Cases
used this relationship to calculate
6,000
that 15 additional investigator
positions would be needed to
5,000 meet the 180 day time frame.
They then calculated the number
of other OCTC staff needed
4,000 based on staffing ratios (such as
a staffing ratio of 1.4 attorneys for
every investigator). In total, the
3,000 workload study determined OCTC
required 58 additional positions
(above the 2018 budget positions)
2,000
to meet the 180 day time frame
for most cases.
1,000
HOW ARE STATE BAR
ACTIVITIES FUNDED?
2014 2015 2016 2017 2018 State Bar Revenues
Determined Through Legislative
OCTC = Office of the Chief Trial Counsel.
Process, but Budget Is Not.
Each year, the judiciary policy
Workload Study Implemented and Used to committees of the Legislature
Identify Staffing Need. In September 2018, the set the license fees charged to members of the
State Bar implemented a workload study to identify State Bar for the coming year through the annual
the staffing needs for its disciplinary system. For “fee bill.” In addition, the California Supreme Court
OCTC, the State Bar used a random moment has authority to set the license fees when a fee
time-study methodology—similar to one used by bill is not enacted into law. Under current law,
the judicial branch—to identify all staff activities either the Legislature or the Supreme Court must
required to process a case as well as the amount approve these fees each year or else the State
of staff time associated with these activities. The Bar does not have authority to levy the fees on
State Bar then used these data to calculate “case its members. In contrast, the State Bar’s budget
weights” that represent the average amount of is approved by the board and is not considered
staff time each component of a case is expected by the Legislature’s budget committees through
to take. For example, the State Bar calculated that the annual state budget process. This is different
intake activities average 110 minutes per case while than nearly all other state licensing entities that
enforcement activities average 3,332 minutes per regulate other professions. In most cases, these
case. entities have their fee structure (such as fee levels)
as well as proposed expenditure levels approved
The State Bar then examined historical data to
by the Legislature and the Governor. These entities
identify patterns between the number of filled OCTC
generally need to provide written budgetary
positions and the median amount of time required
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justification for any substantive changes to existing State Bar operates on a January through December
budget levels (such as to cover increased costs fiscal year), the State Bar budget assumes that the
of operations or to support new activities) as well General Fund portion of the mandatory license fee
as explain why increased revenues are needed to generates $67 million (about 84 percent of the total
support these costs. General Fund revenues).
Mandatory License Fee Is Largest General State Bar Projections of Mandatory License
Fund Revenue Source. In 2019, the total Fee Revenue Based on Number of Lawyers It
maximum annual fee paid by active members is Anticipates. Fee revenues are a function of (1) the
$430 (attorneys with an inactive status pay $155). fees charged and (2) the number of licensees
This total consists of different fees that benefit paying the fees. In the past, the State Bar projected
specific funds operated by the State Bar for its revenues by simply applying a growth factor
specific programs. Of total fees paid by attorneys, to the total fee revenues received in the past. The
$333 supports the General Fund ($93 for inactive State Bar recently changed its methodology so
status attorneys). The largest fee is the base that it now projects fee revenues by first projecting
licensing fee—also referred to as the mandatory the number of licensees it expects will pay fees
licensing fee—of $315, all of which goes to the in the future. Based on these projections, absent
General Fund. Members may deduct $7 from a fee increase, the State Bar projects that its
this fee if they do not want to support State Bar fee revenues will increase by roughly one-half of
legislative activities or elimination of bias activities. 1 percent each year.
(For context, Appendix A provides a comparison of State Bar Has Had Operating Surplus In
this base licensing fee for attorneys to a selection Recent Years . . . As Figure 6 shows, the State
of other professions in California.) In 2019 (the Bar has had an operating surplus in six of the
Figure 6
State Bar Had Operating Surplus in Most Recent Years
(In Millions)
$8
6
4
2
2010 2011 2012 2013 2014 2015 2016 2017
-2
-4
-6
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eight years between 2010 and 2017. These WHAT ARE THE MAJOR COST
surpluses were the result of (1) actual revenues
DRIVERS FOR STATE BAR?
being, on average, 1.5 percent higher than the
board-approved budgets assumed and (2) actual
Employee Compensation
expenditures being, on average, 13 percent lower
than the budgets assumed. In 2013, the State Bar Largest Category of Spending Is Employee
incurred significant costs related to the new Los Compensation. As is the case with most state
Angeles building, resulting in a significant operating departments, the largest category of expenditure
deficit and use of reserves in that year. in the State Bar General Fund budget pays for
. . . Resulting in Strong Reserve Levels employee compensation. Specifically, of the
in Recent Years. The board has a policy that $87 million of expenditures approved in the 2019
the State Bar maintain a minimum reserve State Bar budget, $73 million—or 84 percent—is
equaling at least 17 percent of its expenditures— assumed to go towards employee compensation
this constitutes about two months’ worth of costs. These costs include costs for employee
expenditures. With most of the recent years ending salaries, active and retiree health benefits, and
with operating surpluses, the State Bar’s reserves pension benefits. By 2024, the State Bar projects
have grown in most years. As Figure 7 shows, a that its employee compensation costs will increase
notable exception to the State Bar having stable or by about 40 percent to $103 million. As we will
growing reserves is in 2013 when reserves declined discuss in greater detail later, these increased
from $39 million to $15 million when State Bar costs are in part due to the State Bar’s request that
resources were used to purchase its new building the Legislature increase its annual fees to pay for
in Los Angeles. Between 2010 and 2017, the 58 new positions.
State Bar maintained a reserve above the minimum
17 percent in each year except
2014. Figure 7
Beginning in 2018, State Bar
Reserves Quickly Recovered
Identifies Structural Deficit. The
After Large Depletion of Assets in 2013
State Bar estimates that it closed
(In Millions)
2018 with a deficit of $5.3 million.
The State Bar indicates that this $45
deficit is structural and will be
40
ongoing—resulting in the reserves
being entirely depleted before
35
2021 without a change in policy.
The primary cause of the structural 30
deficit appears to be rising
25
employee compensation costs.
Specifically, as we will discuss in
20
greater detail in the next section
of this report, the current labor 15
agreements provide employees
10
pay increases in 2018 and 2020.
By 2020—after the pay increases
5
are implemented—the State Bar
indicates that its structural deficit
will have increased to nearly 2010 2011 2012 2013 2014 2015 2016 2017
$11 million, leaving less than
$1 million in reserve.
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Major Components of Employee The current labor agreements are in effect from
Compensation. As Figure 8 illustrates, the major January 1, 2018 through December 31, 2019. The
components of employee compensation costs in agreements provided employees a 3.6 percent pay
2019 at the State Bar include salary, employer increase effective January 1, 2018. In addition, the
contributions towards CalPERS health premiums agreements provide employees a 3.5 percent pay
for active employees, employer contributions to increase on January 1, 2020 potentially conditional
pension benefits administered by the California on the approval of the fee bill. We discuss the
Public Employees’ Retirement System (CalPERS), connection between the fee bill and this pay
federal payroll taxes towards the Social increase in the box on page 15.
Security and Medicare programs, and employer Pension Contributions Expected to Grow.
contributions towards retiree health benefits. Some CalPERS administers pension benefits for state
of these costs—those associated with pensions, employees and employees of local governments
Social Security, and Medicare—are “salary-driven” that contract with the pension system. The State
costs, meaning that these costs increase when Bar pension benefit is separate from that provided
salary increases. In contrast, active and retiree to state employees—the State Bar contracts with
health costs are driven by the growth in health CalPERS to administer pension benefits similar
premiums and the number of people receiving the to how many local governments contract with
benefit. CalPERS. The State Bar’s contribution rates to
Labor Agreements Provide Pay Increases to CalPERS to fund employee pension benefits are
Rank-and-File Employees. Similar to the state, expected to nearly double between 2017-18
rank-and-file employee (generally, employees who and 2024-25 from 12.3 percent of payroll to
are not executives or managers) compensation 21.6 percent of payroll. Employer contributions
at the State Bar is established through collective to CalPERS are based on a variety of actuarial
bargaining. Unlike other state
departments, however, the
Figure 8
Legislature does not play a direct
Major Components of State Bar Employee Compensation
role in the ratification of these
labor agreements. Instead, State
Bar staff negotiate and the board Retiree Health
Social Security and Medicare
approves labor agreements. (In
contrast, for state employees,
the California Department of
Human Resources represents
Pension
the Governor in negotiations
with labor unions. Before the
labor agreement goes into effect,
it must first be ratified by the
Active Health
Legislature.)
State Bar rank-and-file
Salary
employees are organized into two
bargaining units—one represents
attorneys and the other represents
other rank-and-file employees.
The rank-and-file employees are
represented at the bargaining
table by Service Employees
International, Local 1000—the
largest state employee union.
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assumptions. Similar to the projected increases in meetings materials, the issue of providing retiree
the state’s pension contributions for its employees, health benefits to rank-and-file employees has been
the projected increases in the State Bar’s a matter of discussion at the collective bargaining
contributions to CalPERS primarily are due to the table on occasion for the past two decades. The
amortization of unfunded liabilities resulting from 2017 actuarial analysis discussed above also
CalPERS adopting new actuarial assumptions. determined that the State Bar could significantly
State Bar Began Contracting With CalPERS reduce its annual premium costs by contracting
for Health Benefits in 2018 . . . Prior to 2018, the with CalPERS to administer health benefits even
State Bar used a broker to contract directly with though contracting with CalPERS would require the
health care providers to provide health insurance State Bar to provide its rank-and-file employees a
to State Bar employees. In 2017, the board new retiree health benefit.
relied on an actuarial analysis to determine that Current State Bar Retiree Health Benefit
the State Bar could reduce costs by contracting Design. Under the current retiree health benefit
with CalPERS to administer the health plans design, the State Bar pays (1) the PEMHCA
available to its employees. At the time, the State minimum for retired rank-and-file employees,
Bar estimated that contracting with CalPERS for retired executive employees who worked fewer
health benefit administration could save it $1 million than 15 years, and surviving spouses of retired
per year in lower health premiums. Although the employees and (2) 80 percent of premiums paid
decision to contract with CalPERS likely reduced for retired executive employees who worked at
State Bar costs, health care will continue to be a least 15 years of service with the State Bar. For
cost pressure as health premiums nationally have comparison, the retiree health benefit structure for
increased at a pace faster than inflation for the new state employees provides them 40 percent of
past couple of decades. Similarly, CalPERS health an average premium cost if they retire with 15 years
premiums grow each year. Over the past decade, of service and 80 percent of an average premium
CalPERS health premiums paid by the state have cost if they retire with 25 years of service. The state
increased on average 5 percent each year (ranging continues providing this level of benefit to surviving
from between 2 percent and 10 percent in any spouses.
year). Using 2018 CalPERS Bay Area single-party
. . . Which Required State Bar to Provide coverage, Figure 9 compares the cost of the
Retiree Health Benefits to Rank-and-File retiree health benefit received by a retiree with
Employees. Under state law—the Public 15 years of service as an executive at the State
Employees’ Medical and Hospital Care Act Bar, a rank-and-file employee at the State Bar, and
(PEMHCA)—entities that contract with CalPERS as an employee of the state. As the figure shows,
to administer health benefits must provide at least the benefit currently provided to new executive
a minimum level of retiree health benefits to all employees who retire with 15 years of service
employees who retire with at least five years of is much higher than the benefit provided to an
service. This minimum benefit level
is referred to as the “PEMHCA
Figure 9
minimum” and was $133 per month
Retired Executive State Bar Employees Receive
in 2018 (the PEHMCA minimum
Generous Health Benefits
increases each year). Before 2018,
the State Bar provided retiree Type of Employee Individual Retires as Monthly Employer Contribution
health benefits to executive staff After 15 Years of Service Towards Single-Party
(Assuming 2018 Hire) CalPERS Health Premiuma
only and provided no benefit
to rank-and-file employees. Executive Employee at the State Bar $570 - $1000
(Executive employees account for Employee of the State of California About $290
roughly 10 percent of State Bar Non-Executive Employee at the State Bar $133
a
employees.) According to board Uses 2018 CalPERS premiums for illustration.
12 LEGISLATIVE ANALYST’S OFFICE
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equivalent state employee—potentially more than as shown in Figure 10, whereas the State Bar
three times as generous, depending on the health projects personnel costs will grow by 40 percent
plan a retiree chooses. over the five year period—from $73 million in
State Bar Plans to Enhance New Retiree 2019 to $103 million in 2024—it projects that
Health Benefit for Rank-and-File Employees . . . non-personnel costs will more than double from
The State Bar—both in conversations with us and $14 million in 2019 to $31 million in 2024. The
in board meeting materials—indicates that it has a non-personnel portion of the budget includes
long-term goal of providing rank-and-file employees routine costs such as general operations costs (for
the same benefit it currently provides executive example, postage, utilities, or travel) that any state
employees. Specifically, the State Bar would pay department pays. Because the State Bar owns
80 percent of health premiums paid for a retired the two buildings it occupies, this portion of the
employee with at least 15 years of service and budget also includes day-to-day operational costs
his or her spouse for the retiree’s lifetime and the associated with maintaining a building (for example,
PEHMCA minimum for retired employees with fewer building security, insurance, and repairs). It also
than 15 years of service and surviving spouses. includes a number of large one-time or less regular
cyclical expenditures (for example, 2024 costs to
. . . Which Would Significantly Increase Costs.
repair the façade of the San Francisco building) and
The 2017 actuarial analysis indicated that providing
IT project-related costs.
rank-and-file employees the same level of retiree
health benefit as executive employees would be . . . Largely Due to Decisions to Defer Costs
much more expensive than providing rank-and-file in the Past . . . The State Bar has chosen to
employees the PEHMCA minimum. Specifically, defer maintenance costs in the past. Across the
the analysis estimated that providing the PEHMCA six years between 2019 and 2024, the State Bar
minimum to rank-and file employees would have projects that it will spend nearly $30 million on
an annual required contribution cost of $838,000, capital improvements to the buildings it owns. Not
whereas providing retired rank-and-file employees accounting for inflationary cost increases, these
the same benefit as retired
executive employees would have
Figure 10
an annual required contribution
Projected Costs by Expenditure Category
cost of $4.5 million—more than
five times the annual cost of (In Millions)
the current policy. Based on the
$120
2017 actuarial analysis, the State
Bar determined that it could not
extend the more generous retiree 100
health benefits to rank-and-file
employees without a fee increase. 80
Non-Personnel Employee Compensation
60
Expenditures OE&E
State Bar Projects 40
Non-Personnel Costs to be
Fastest Growing Portion of
20
Budget . . . The State Bar
projects the 16 percent of the
budget that is not related to
2018 2019 2020 2021 2022 2023 2024
employee compensation will
grow faster than employee
OE&E = operating expenses and equipment.
compensation costs. Specifically,
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projects include $12.5 million for façade work in compensation costs also are due to the State Bar’s
2024; $2.9 million for maintenance to heating, decision to take on new projects. For example,
ventilation, and air conditioning (HVAC) systems; between 2019 and 2024, the State Bar expects to
$2.5 million related to work on elevators; and spend $16.7 million on IT projects. The State Bar
$1.2 million to address fire and life safety. The also plans to replace IT hardware more frequently
State Bar indicates that all of these projects were than it has in the past. For example, while the
deferred in the past. last time the State Bar replaced its desktops
. . . And to Take on New Projects in the agencywide was in 2013, the State Bar plans to
Future. The increased costs in non-employee replace (or “refresh”) its desktops every three to five
years going forward.
STATE BAR REQUEST FOR FEE INCREASE
Proposed Ongoing Fee
Figure 11
Increase. The State Bar seeks to
Summary of State Bar Request for a Fee Increase
cover $19.8 million in increased
ongoing costs by proposing a Total Amount Fee Increase
$100 ongoing mandatory increase Needed for Active
Purpose (In Millions) Members
to the renewal fee for its active
State Bar members beginning Ongoing Fee Increase
January 1, 2020. (The proposed Operating Deficit $5.8 $30
fee increase for inactive members Employee Compensation Costs
would be $28.) As shown in Extending retiree health benefits 3.2 17
Figure 11, this fee increase Salary increase for represented employees 2.7 13
includes: (1) $30 to address Subtotals ($5.9) ($30)
an operating deficit in which Additional Disciplinary Staff $8.0 $40
estimated expenditures exceed Totals $19.8 $100
estimated revenues, (2) $30 to One-Time Assessmenta
support the extension of retiree
Building Improvements
health benefits currently available
Building façade repair $14.5 $71
only to executive employees to HVAC 3.0 15
all State Bar employees and a Fire and life safety projects 1.3 6
salary increase (discussed in Elevators, generators, and energy management 4.3 21
the nearby box) for represented Structural and other infrastructure projects 2.6 13
Data center HVAC and electrical 1.6 8
employees, and (3) $40 to support
Subtotals ($27.4) ($134)
the hiring of 58 additional staff
Technology Projects
for OCTC to improve disciplinary
New systems and one-time projects $8.7 $43
case processing times. The State
Hardware upgrades and refresh 7.3 36
Bar also requests the authority to
Routine special projects 0.6 3
adjust the entire renewal fee and
Subtotals ($16.7) ($82)
the existing $25 disciplinary fee
Maintaining a 17 Percent Budgetary Reserve $6.9 $34
annually to account for inflation.
Totals $50.9 $250
Proposed One-Time Fee a
Excludes request for $80 assessment for the Client Security Fund as it is outside the scope of this analysis.
Increase. The State Bar seeks to HVAC = heating, ventilation, and air conditioning.
cover $50.9 million in additional
one-time costs by proposing a
14 LEGISLATIVE ANALYST’S OFFICE
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Labor Agreements Seem to Set Expectations That
Employees Support Total Fee Increases
The labor agreements with the two State Bar bargaining units provide employees pay
increases in 2020. In the same sections of the labor agreements that provide employees the
2020 pay increase, the agreements specify that “the union and the State Bar commit to working
in good faith and to the extent reasonably possible to achieve in the bill authorizing the State
Bar’s 2020 licensing fees, an increase in the individual licensing fees assessed on California
attorneys that is both meaningful and sustainable and that ensures that the State Bar will be able
to carry out its public protection mission and appropriately invest in its workforce.” The inclusion
of this language suggests that the State Bar expects the bargaining units to support the State
Bar’s efforts to achieve the total requested fee increase. That being said, the language does
not appear to make the 2020 pay increase contingent on a 2020 fee increase approved by the
Legislature.
one-time $250 assessment for its active members. this fee increase includes: (1) $134 to support
(The proposed one-time fee increase for inactive building improvement costs for five years, (2) $82 to
members would be $70.) While this would be a support technology project costs for five years, and
one-time assessment in 2020, it would cover five (3) $34 to restore the State Bar’s budget reserve
years of projected costs. As shown in Figure 11, level back to 17 percent.
ASSESSMENT OF STATE BAR BUDGETING PROCESS
Current Process Generally Limits Legislative the State Bar is not required to seek legislative
Oversight. Most of the state’s licensing and approval for any changes in the total number of
regulatory departments undergo regular review employees and/or their position classifications. This
through the policy process as well as the budget can make it more difficult to evaluate any proposed
process. This allows the policy committees with revenue or expenditure changes and ensure that
expertise in the licensed profession as well as funding is used consistent with legislative priorities
the budget committees with expertise in fiscal and expectations.
oversight to comprehensively assess these state Legislature Not Directly Involved in Major
departments. While the State Bar must go through Policy Decisions With Cost Implications. In the
the policy process to receive legislative approval past, the State Bar has made large policy decisions
for its annual fee bill, it is not required to go with cost implications—for example, purchasing
through the budget process. This generally limits the Los Angeles building or approving major IT
legislative oversight as the State Bar has significant systems—without consulting the Legislature. State
flexibility in its budgeting practices—for example, Bar policies that are established at the bargaining
operating on a calendar year basis rather than a table can have long-term cost implications and can
fiscal year basis and making budgetary decisions be agreed to before the Legislature has authorized
with little legislative input. The State Bar also is not a fee increase. This has the potential of putting
required to provide the same level of budgetary the Legislature in a difficult situation if the State
documentation or justification required by other Bar cannot afford service contracts or collective
departments seeking changes to their budgets. bargaining agreement provisions without a fee
Furthermore, unlike most other state departments, increase.
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State Bar Consistently
Figure 12
Approves Budgets With
State Bar Consistently Adopts Budget
General Fund Expenditures
That Assumes Expenditures Exceed Revenues
Exceeding Revenues. A budget
(In Millions)
is a planning document used
to determine and express an
$120
organization’s priorities and to
Total Revenues
ensure that the organization has
sufficient resources on hand to Total Expenditures
100
realize those priorities. Figure 12
shows that the board consistently
approves budgets that assume
80
expenditures will exceed
revenues. Actual costs end up
being lower than the budgeted
60
amounts—resulting in the
operational surpluses discussed
earlier—through a combination
40
of lower-than-assumed costs
resulting from (1) vacant positions
and (2) operational decisions
20
to defer priorities (like routine
maintenance or technology
replacement) that might have
been approved in the budget.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
By consistently assuming that
its priorities will cost more than
the resources it has on hand,
the State Bar’s budget has not
the long term. For example, deferring routine
been an effective planning tool.
maintenance could result in higher one-time costs
Moreover, the State Bar’s operational decisions
in the future, like replacing a system sooner than
to delay some costs could increase its costs in
otherwise would be needed.
ASSESSMENT OF REQUEST FOR FEE INCREASE
PROPOSED ONGOING operational deficit has been avoided though some
combination of lower-than-assumed costs and
FEE INCREASE
higher-than-assumed revenues. At first glance, the
fact that past State Bar budgets have assumed
Increase to Address Structural Deficit
deficits that never occurred weakens the State
There Likely Is a Structural Deficit Beginning Bar’s argument for an increased fee to pay for a
in 2018. As discussed above, the board has projected deficit. That being said, the State Bar
approved budgets in the past that assume the estimates that its actual expenditures exceeded
State Bar will end a fiscal year with a deficit. revenues in 2018 by $5.3 million. With rising
In most of the past years, the forecasted salaries and pension costs expected to occur
16 LEGISLATIVE ANALYST’S OFFICE
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under current policy, we believe that the deficit contribute each year to fully prefund the benefit)
experienced in 2018 may be structural in nature. would increase from $0 to more than $3 million
Accordingly, an increase to the ongoing fee for the (based on the June 30, 2018 actuarial valuation).
purpose of addressing a structural deficit seems The State Bar has expressed a long-term goal
reasonable. of equalizing retiree health benefits for executive
and non-executive retirees. The State Bar
Increase to Address
indicated that it did not consider establishing a
Employee Compensation
lower retiree health benefit for all employees that
allowed the agency to not take on the burden of an
Salary Increase Seems Reasonable. The
unfunded liability. For example, if future executives
3 percent salary increases provided by the
received the PEHMCA minimum similar to current
current labor agreements seems reasonable. It is
rank-and-file employees, the State Bar’s retiree
comparable to the level of pay increases received
health benefit would be more than 100 percent
by similar state employees.
funded and no additional contributions (or an
Enhancing Retiree Health Benefits Out
associated fee increase) would be needed in the
of Step With Other Public Employers. Most
near term.
governments in California—including the state—are
seeking to reduce unfunded liabilities associated
Increase for
with retiree health benefits through some
Additional Disciplinary Staff
combination of (1) reducing the benefits earned
by future employees or (2) increasing the amount Request May Be Premature Given Recently
of money set aside to prefund the benefit. Most Implemented Changes. The State Bar recently
governmental employers historically did not prefund implemented various changes to improve its case
the benefit and have very few assets on hand to processing times, including a new OCTC team
pay for the benefit. This has created a problem structure, a new case prioritization methodology,
in recent years as (1) reporting requirements now and a new case management system. Given
require governments to report their retiree health that these changes have just been adopted, the
liabilities in their annual financial statements and full effect of these changes likely have yet to be
(2) retiree health costs have grown substantially realized. For example, new processes or systems
as the Baby Boom Generation retires and health typically require time to adapt before they are
premiums continue to rise faster than inflation. operating at their full potential. Consequently,
The State Bar is in a relatively unique situation whether these changes will actually improve case
where—under the current benefit design where processing times and the extent to which they do
executive employees receive a more generous so is unclear. For example, the State Bar’s 2018
benefit and rank-and-file employees receive the Annual Discipline Report suggests that these
PEHMCA minimum—it has more assets on hand changes could have a positive impact as the total
than the liability created by the benefit. This means number of backlog cases declined slightly. As such,
that the State Bar currently has no unfunded the request for additional staffing resources may be
liability associated with its retiree health benefits. premature.
According to the most recent actuarial valuation— Workload Study May Not Accurately Identify
as of January 1, 2018—the State Bar has Staffing Need. The State Bar’s workload study may
$25.4 million in assets for a liability of $17.4 million. not accurately identify staffing needs; consequently,
If the State Bar were to extend to all employees the fee request to support 58 additional staff may
the retiree health benefit currently only earned by not be justified. We believe there are two issues
executive staff, actuaries estimate that the liability with the workload study. First, the State Bar’s
would immediately grow to $38.5 million—resulting methodology consists of case weights that capture
in a $13.1 million unfunded liability. Being only the average amount of time it takes for OCTC to
66 percent funded, the State Bar’s actuarially process a case with existing staffing levels. The
determined contribution (the amount it needs to case weights currently do not reflect the amount
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of time that would be needed to process cases disposition time for cases closed in the Pre-Filing
within the 180 day time frame. Because of this, Stage (455 days in 2018) has regularly exceeded
the case weights cannot be used to calculate the this time frame for years. As such, the existing
total number of staff needed to process all cases statutory time frame does not appear to provide
within the 180 day time frame. If used correctly, a meaningful measure for processing cases.
similar to the judicial branch’s use of case weights, Consequently, alternative statutory time frames—
the difference between the calculated and existing like ones based on either the specific stage in
staffing levels would reflect the number of additional which cases are closed, the severity of complaints,
staff needed. Instead, the State Bar calculates or specific complaint types—could provide more
its OCTC staffing need based on a relationship meaningful metrics measuring State Bar activities
it identified in historical data. It is not clear if this while also potentially requiring fewer additional staff.
correlation accurately predicts the effect additional Fee Increase for Additional Disciplinary
staff would have on case disposition time. Staff Likely Premature. Overall, the fee increase
Second, different case weights may be needed request for additional disciplinary staff likely is
for different complaint types or priority categories premature. Not only does the State Bar need more
to the extent they require different levels or time to see the effects of recent changes, but also
combinations of disciplinary tasks. Rather than just the methodology for determining the number of
using one set of case weights for all case types additional staff needed needs revision. Moreover,
as the State Bar currently does, differentiating should the Legislature wish to change the statutory
between the processes for
specific complaint types or priority
Figure 13
cases can help more accurately
identify workload need. For Median Disposition Times for
example, under the new case Cases Closed in Each Disciplinary Stage by Year
prioritization methodology, State In Days
Bar Priority Two cases should take
700
less time on average to process
Intake
than other cases because certain
Investigation
disciplinary tasks are excluded. 600
Pre-Filing
This approach would be similar to
Statutory Time Frame
the judicial branch’s methodology
that uses different case weights 500
for its case types—such as felony
cases and traffic misdemeanors.
400
A Different Statutory Time
Frame Could Require Fewer
Staff. The State Bar’s workload 300
study was premised on meeting
the 180-day statutory time
200
frame for completing the first
three stages of the disciplinary
process. As shown in Figure 13, 100
the median disposition times for
cases closed in either the Intake
Stage (36 days in 2018) or the
2011 2012 2013 2014 2015 2016 2017 2018
Investigation Stage (177 days
in 2018) fall under this statutory
time frame. However, the median
18 LEGISLATIVE ANALYST’S OFFICE
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time frame, the staffing requirements to meet those PROPOSED ONE-TIME
changes would be different than currently estimated.
FEE INCREASE
Request for
Lack of Justification for Five Years of Costs.
Annual Inflationary Adjustment We find that the request for a one-time assessment
to cover five years of costs lacks justification. First,
Lacks Justification. We find that the request for
this request would increase the total licensing fee
an annual inflationary adjustment for the renewal
for attorneys significantly. Moreover, this increase
and disciplinary fee lacks justification. Many
would be paid only by those who are currently
other licensing bodies must periodically request
members but would provide benefit to a much
adjustments for increases in general costs of
broader group of attorneys—like those becoming
doing business. There does not appear to be any
members after 2020. Second, the Legislature
obstacle that prevents the State Bar from seeking
has chosen to require the State Bar to justify its
a fee increase and demonstrating to the Legislature
budget and operations every year by requiring
why it is needed. Additionally, the Legislature
an annual fee bill. There is little justification for
enacted state law in 2009 that prohibits automatic
why an exception should be provided for these
increases—except as provided in the budget act and
particular proposed activities. Third, a number of
implementing statutes—from being provided to the
the projects—such as HVAC costs or technology
University of California, the California State University,
projects—could have significant one-time and
the state courts, or to state agency operations. This
ongoing costs. As we discuss later, the Legislature
includes annual price increases to state departments
may want to impose greater oversight over these
and agencies. The State Bar has not provided
types of expenditures to ensure that the funds are
sufficient justification for why it should be treated
used efficiently and that their use is consistent with
differently from a number of other state departments
legislative priorities and expectations.
and agencies, including the state trial courts.
Not Clear Why Certain Costs Are Considered
Request Could Limit Legislative Oversight. We
One Time. Certain costs the State Bar hopes to
note that this request could severely limit legislative
fund using the proposed one-time fee increase
oversight over State Bar operations. To the extent
should be considered ongoing costs. For example,
that State Bar expenditures do not exceed the
cyclical replacements of technological hardware
inflationary adjustment, the State Bar would have
(such as computers) should be scheduled fairly
significant flexibility in the use of any excess
equally over multiple years to minimize the risk of
funding. This could result in the commitment of
universal equipment failure and reduce the amount
funds to projects or activities that are not aligned
of funding needed annually. Similarly, certain
with legislative priorities, not sufficiently justified,
building improvements are ongoing and predictable
or could have significant out-year costs. To the
obligations that should be planned for accordingly.
extent that the State Bar seeks fee increases
As these costs are routine and ongoing, including
intermittently, it could be difficult for the Legislature
them in a one-time assessment may not be
to evaluate the request and undo commitments
appropriate.
that may have been made that do not conform to
legislative priorities or expectations.
ALTERNATIVE FEE INCREASE OPTIONS
In light of these concerns, we provide various one-time fee increase that best reflects legislative
alternative fee increase options for legislative priorities. (Please see Appendix B for a summary of
consideration. The Legislature can select from the recommendations made by the State Auditor.)
these options to calculate the total ongoing and We discuss these options in more detail below.
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OPTIONS TO ADDRESS example, providing a benefit that is comparable to
that earned by state employees. The specific fee
PROPOSED ONGOING
level would depend on the structure of the lower
FEE INCREASE
benefit and the amount of money that actuaries
determine would be necessary to ensure the benefit
Option to Address the Operating Deficit. The
is fully funded.
Legislature could authorize a $21 fee increase
to address the operating deficit. This option is Options to Address Request for Additional
$9 less than the State Bar request because it Disciplinary Staff. As discussed above, we
excludes costs to scan old disciplinary files that question whether the request for additional
currently are included in the State Bar’s budget. resources is premature given the recent
While this project would improve the efficiency of implementation of various disciplinary system
the State Bar’s new case management system changes as well as whether the State Bar’s new
and reduce State Bar storage costs for storing workload methodology accurately identifies
attorney records, the project is generally one time workload need. The Legislature could consider
in nature and should not be considered an ongoing fee options to provide some additional resources
cost. Additionally, rather than scanning all files, that could help address the backlog of disciplinary
we believe selectively scanning old documents cases or to help improve processing times. This
or files—such as scanning old files related to an would then allow the State Bar to measure the
attorney for which a new complaint is received— actual effect of these additional positions as well
would be more efficient. as to allow the recent disciplinary system initiatives
to take full effect. This data also could be used to
Options to Address Employee Compensation
refine the State Bar’s workload study methodology
Costs. We generally have no concerns with the
and could help the Legislature determine the
State Bar’s request for a $13 fee increase to
appropriate level of resources needed to meet
provide salary increases to State Bar represented
legislative expectations. Specifically, as shown
employees as it is generally comparable to the
in Figure 15, the Legislature could consider
increases received by similar state employees.
authorizing an $11 fee increase to provide
However, as discussed above, the State Bar seeks
one additional enforcement team consisting of
to provide more generous retiree health benefits
16 attorneys, investigators, and other associated
to its employees than the state provides to its
staff or a $4 fee increase to provide two sets
employees. Specifically, state employees must
of attorneys, investigators, and associated
work 25 years to receive roughly the same benefit
administrative staff.
that State Bar executive employees receive with
15 years of service. As shown in Figure 14, the The Legislature also could consider providing no
Legislature could consider authorizing a lower fee fee increase at this time. Instead, the Legislature
increase than requested by the State Bar—for could direct the State Bar to monitor the impact of
the recently enacted changes to
the disciplinary system and refine
Figure 14
its workload study methodology.
Alternative Options for Employee Compensation Costs As noted previously, the State Bar
regularly exceeded its statutory
Total Amount Fee Increase
Needed for Active time frames in prior years. The
Purpose (In Millions) Members Legislature could consider whether
Salary increase for represented employees as requested $2.7 $13 the 180 day statutory time frame
by the State Bar is appropriate. For example, some
Providing retiree health benefits similar to other state Less than $3.2 Less than $17 other state licensing entities have
and local departmentsa
a 270 day target time frame from
a
State benefit based on vesting schedule whereby employees must work 15 years with the state to receive one-half of
receiving a complaint through
the retiree health benefits and 25 years to receive the full benefit. The amount needed and corresponding fee increase
should be determined by an actuary. completing investigations for cases
20 LEGISLATIVE ANALYST’S OFFICE
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not transmitted to the Attorney
Figure 15
General for formal disciplinary
Alternative Options for Additional Disciplinary Staff Request
proceedings. To the extent the
Legislature decides to change Total Amount Fee Increase
these time frames, fewer positions Needed for Active
Purpose (In Millions) Members
(if any) may be needed. (For
context, Appendix C provides a One additional enforcement team (16 positions) $2.1 $11
comparison of the State Bar’s Two sets of attorney-investigator pairs (6 positions) 0.8 4
disciplinary process with those of Monitoring impact of recently enacted disciplinary — —
a handful of other state licensing system changes
departments.) Adjusting time frames — —
Options for Annualizing
Certain One-Time Costs. The OPTIONS TO ADDRESS
Legislature could consider whether certain State
PROPOSED ONE-TIME FEE
Bar costs should be annualized (or distributed
INCREASE
evenly over a certain number of years) and
considered as part of the ongoing fee rather
Options to Address Building Improvements.
than as part of a one-time special assessment.
One approach is for the Legislature to authorize a
As shown in Figure 16, the Legislature could
one-time fee to cover the portion of project costs
consider authorizing a $7 fee increase to account
the State Bar would like to incur specifically in
for routine ongoing IT costs (such as regularly
2020. As shown in Figure 17 (see next page), this
replacing computer equipment on a five-year
could mean a one-time fee of $39 for all projects
cycle). Additionally, the Legislature could consider
proposed by the State Bar or $27 for only those
whether to authorize fee increases to annualize
projects recommended by the State Auditor.
building improvement costs. Annualizing over five
An alternative approach is for the Legislature to
years could result in a fee increase of $27 for all
require the State Bar to distribute all project costs
requested projects or $9 for only those projects
equitably over a certain period of time. Assuming
recommended by the State Auditor. Annualizing
total building improvement costs are annualized
over ten years could decrease this fee increase to
over five years, the Legislature could consider
$13 for all requested projects or $4 for only those
authorizing a fee of $27 for all projects proposed
projects recommended by the State Auditor.
by the State Bar or $9 for only those projects
recommended by the State Auditor
Figure 16 for five years.
Options to Address
Alternative Options for Annualizing Certain One-Time Costs
Technology Projects. Similar
Total Amount Fee Increase to our approach for building
Needed for Active
improvement costs, our options
Purpose (In Millions) Members
here provide the State Bar with
Routine or cyclical ongoing technology costs $1.37 $7
only 2020 costs for those projects
(State Auditor recommended projects)a
we see as truly one time in nature.
Five-year annualized building improvement costs 5.47 27
As shown in Figure 18 (see next
(all requested projects)
Five-year annualized building improvement costs 1.83 9 page), the Legislature could
(State Auditor recommended projects only) consider authorizing a one-time
Ten-year annualized building improvement costs 2.74 13 fee of $7 for all projects or $4 for
(all requested projects)
only those projects recommended
Ten-year annualized building improvement costs 0.92 4
by the State Auditor to cover
(State Auditor recommended projects only)
a the portion of project costs the
For information technology equipment, we assume a five-year replacement cycle.
State Bar would like to incur
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AN LAO REPORT
Options to Restore the
Figure 17
Budget Reserve to 17 Percent.
Alternative Options for One-Time Building Improvement Costs
The Legislature could determine
Total Amount Fee Increase what level of resources to provide
Needed for Active in 2020 based on the total fee
Purpose (In Millions) Members
level it is comfortable providing.
2020 costs (all projects) $8.0 $39 The Legislature could provide $3
2020 costs (State Auditor recommended projects only) 5.6 27 as recommended by the State
2020 costs assuming five-year annualization (all projects) 5.5 27 Auditor to provide the equivalent
2020 costs assuming five-year annualization 1.8 9
of a 1 percent increase in order
(State Auditor recommended projects only)
to slowly rebuild the State Bar’s
budget reserve level over time.
Figure 18
Alternatively, the Legislature could
Alternative Options for One-Time Information Technology Costs provide more or less depending on
how quickly it would like to rebuild
Total Amount Fee Increase
Needed for Active the reserve.
Purpose (In Millions) Members
2020 costs for new systems or one-time projects $1.4 $7 SUMMARY OF
(all projects)
ALTERNATIVE FEE
2020 costs for new systems or one-time projects 0.7 4
(State Auditor recommended projects only) OPTIONS
2020 costs assuming five-year annualization for new 1.7 9
systems or one-time projects (all projects) The Legislature can select from
2020 costs assuming five-year annualization for 1.0 5 the various provided options, or
new systems or one-time projects (State Auditor
others (such as those offered by
recommended projects only)
the State Auditor), to calculate
Full cost for scanning old disciplinary files (five years) 9.4 46
the total ongoing and one-time
2020 cost for scanning old disciplinary files 1.9 9
assessment it would like to
authorize. Figure 19 provides
specifically in 2020. Alternatively, assuming total three examples of how the
new system or one-time project
costs are annualized over five
Figure 19
years, the Legislature could
Examples of Range of Fee Alternatives Available
consider authorizing a fee of
$9 for all projects or $5 for only Assessment Low Medium High
those projects recommended by Ongoing Assessment
the State Auditor for five years.
Addressing the ongoing deficit $21 $21 $21
Additionally, to the extent that
Salary increase for represented employees 13 13 13
the Legislature is interested in
Expanding retiree benefits — — 17
the State Bar’s proposed project Additional disciplinary system employees — 4 11
to scan old disciplinary files, the Routine or cyclical information technology (IT) costs — 7 7
Legislature could authorize a Totals $34 $45 $69
$46 fee to cover the full costs
One-Time Assessment
associated with this project or a
Building improvement costs $9 $27 $39
$9 fee to cover the 2020 costs
New system, nonroutine, and noncyclical IT costs 4 7 9
associated with this project. This
Scanning old disciplinary files — 9 9
project likely will be limited term in
Restoring a 17 percent budget reserve — 3 6
nature, so a one-time assessment Totals $13 $46 $63
could be appropriate.
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assessments could differ based on choices improvement costs. The “medium” example
made by the Legislature. The “low” example demonstrates an assessment that provides some
demonstrates a “bare-bones” assessment to additional resources, such as support for additional
cover the most immediate and necessary costs— disciplinary system employees. Finally, the “high”
such as addressing the ongoing deficit, providing example demonstrates an assessment that
a salary increase for represented employees, provides some level of resources across every area
and providing some funding for IT or building identified by the State Bar.
OTHER ISSUE FOR LEGISLATIVE CONSIDERATION
Consider Appropriate Level of Additionally, requiring the State Bar to submit
budgetary information in a manner similar to other
Legislative Oversight
state departments would enable easier comparison
Regardless of how much funding is ultimately to ensure standardized or similar treatment across
approved, our review of the State Bar indicates the various departments responsible for licensing
that increased legislative oversight could be professions.
beneficial to ensure that fee revenues are assessed
Consider Appropriate Fee Structure. The
appropriately to support expenditures that are
Legislature could consider whether the existing
consistent with legislative expectations and
fee structure ensures that funding is used in a
priorities. Increased oversight also would help
particular manner. For example, the Legislature
ensure that funds are used in an accountable and
could consider whether to approve separate fees
transparent manner. Such oversight can occur in
for various specific operational purposes (such as
various ways—such as including the State Bar
a fee to support the disciplinary system or a fee
in the annual budgeting process, revising the
to support IT costs) in order to ensure the State
fee structure, requiring legislative approval for
Bar uses funding for specific legislatively desired
proposed expenditures with significant one-time
purposes.
or ongoing fiscal impacts, providing employee
Consider Requiring Legislative Approval for
compensation guidelines, and requiring reporting
Certain Proposed Expenditures. The Legislature
on various performance or outcome measures. We
could consider requiring additional oversight in
discuss each of these options in more detail below.
certain situations, such as requiring the State Bar to
Consider Including State Bar in Annual State
seek legislative approval before beginning projects
Budget Process. The Legislature could consider
that cost above a certain threshold or implementing
including the State Bar as part of the annual state
major policy changes with budgetary implications.
budget process. This would require the State Bar
This could help ensure that proposed projects are
to shift its budgeting and financial processes from
thoroughly evaluated before committing the state
a calendar year basis to the state fiscal year basis.
to future cost pressures and that funding is used
The Legislature’s Judiciary Committees would
consistently with legislative expectations.
retain policy oversight over the State Bar, similar
Consider Employee Compensation
to how the Legislature’s Business and Professions
Guidelines. Although the Legislature plays no role
Committees retain jurisdiction over certain other
in the collective bargaining process at the State
state licensing departments. At the same time,
Bar, the Legislature could incorporate guidelines
State Bar budget oversight would be conducted
for the State Bar to follow as a condition of the fee
by the Legislature’s budget committees. Taking
established in a fee bill or—if the State Bar were
this action could increase legislative oversight
incorporated into the state budget—as provisional
by leveraging the expertise of the budgetary
language in the budget act. For example, the
committees to evaluate State Bar funding requests
Legislature could specify that no more than a
in a manner similar to other state departments.
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AN LAO REPORT
certain amount of the fee could be used to pay for measures that reflect the Legislature’s intended
retiree health benefits. expectations for any funding provided. This will help
Consider Performance and Outcome the Legislature monitor how the funding is used
Measures for Any New Resources Provided. The and any effect the new funding has upon State
Legislature currently receives reports on certain Bar operations (such as the effect any new OCTC
State Bar activities. For example, the State Bar is positions has upon disciplinary disposition times).
required to provide an annual discipline report that This would also help the Legislature evaluate
provides key outcome measures for disciplinary whether legislative expectations were actually
workload. The Legislature could consider met, determine whether future policy changes
modifying these established requirements as well are needed, and make decisions on appropriate
as implementing new outcome and performance funding and service levels in the future.
CONCLUSION
We reviewed the State Bar’s operations and options for legislative consideration. The Legislature
its use of the General Fund portion of the annual can select from these options to calculate the total
fee charged to attorneys. Through this review, fee increase it believes best reflects its legislative
we found elements of the State Bar’s proposed priorities. In addition, we identified concerns
one-time and ongoing increases to this fee to with the State Bar’s overall budgeting process.
be reasonable while others to be premature, To address these concerns, we provide options
unjustified, or otherwise problematic. In this report, for legislative consideration that would enhance
we provide a menu of alternative fee increase legislative oversight of the State Bar’s budget.
24 LEGISLATIVE ANALYST’S OFFICE
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APPENDIX A—
EXAMPLES OF BASE LICENSING FEES FOR
ACTIVE MEMBERS OF SELECTED PROFESSIONS
Appendix A, Figure 1
Examples of Base Licensing Fees for Active Members of Selected Professions
Annualized
Profession Regulating Agency Base Feea
Fiduciary Professional Fiduciaries Bureau $700
Doctor of Podiatric Medicine Board of Podiatric Medicine 450
Naturopathic Doctor Naturopathic Medicine Committee 400
Physician or Surgeon Medical Board of California 392
Dentist Dental Board of California 325
Attorney State Bar of California 315
Contractor Contractors State License Board 200
Clinical Counselor Board of Behavioral Services 200
Psychologist California Board of Psychology 200
Architect California Architects Board 150
Certified Public Accountant California Board of Accountancy 125
Real Estate Broker California Department of Real Estate 75
Professional Engineer Board for Professional Engineers, Land 58
Surveyors, and Geologists
a
Base fees for multiyear time periods annualized (or distributed equally across the covered time period) for comparison
purposes.
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APPENDIX B—
SUMMARY OF MAJOR STATE AUDITOR
RECOMMENDATIONS
As required by Chapter 659 of 2018 (AB 3249, Lawyer Assistance Program ($10 Less
Committee on Judiciary), the State Auditor released Than State Bar Request). The State Auditor
a report on April 30, 2019 evaluating the State recommends suspending the $10 Lawyer
Bar’s budget, its proposed 2020 fee increase, and Assistance Program Fee in 2020 in light of the
other objectives. We provide a summary of the program’s high reserve and low expenditures.
major State Auditor recommendations below.
Mandatory One-Time Fee
PROPOSED 2020 FEE INCREASE The State Auditor recommends a
mandatory one-time fee of $81 from active
The State Bar proposed to increase the
members—$249 less than requested by the State
$383 mandatory active member fee by $100 on
Bar. We summarize the reason for this difference
an ongoing basis and $330 on a one-time basis
below.
in 2020—resulting in a total mandatory fee of
Building Improvements ($118 Less Than State
$813 in 2020. In its evaluation, the State Auditor
Bar Request). The State Auditor recommends a
recommends a total mandatory active member
one-time fee of $16 for active members in 2020,
fee of $525 based on various findings, which we
instead of the $134 fee requested by the State Bar
discuss in more detail below.
to cover five years of costs. This reduction in the
Mandatory Ongoing Fee fee is due to the State Auditor (1) determining that
only eight of the proposed 11 building improvement
The State Auditor recommends a
projects are necessary to comply with current
mandatory ongoing fee of $444 from active
building codes or to sustain or improve current
members—$39 less than requested by the State
lease rates, (2) reducing the estimated costs for
Bar. This represents a $61 increase over the
certain projects based on the expertise of their
2019 mandatory ongoing fee. We summarize the
appraiser, and (3) providing only the amount
reasons for this difference below.
necessary in 2020 as the fee could be spread over
Licensing Fee ($29 Less Than State Bar five years.
Request). The State Auditor recommends
Technology Projects ($60 Less Than State
increasing the $308 mandatory license fee for
Bar Request). The State Auditor recommends a
active members by only $71 (instead of the $100
one-time fee of $22 for active members in 2020,
fee increase requested by the State Bar), resulting
instead of the $82 fee requested by the State Bar
in a total 2020 mandatory licensing fee of $379.
to cover five years of costs. This reduction in the
The reduction in the fee is due to the State Auditor
fee is due to the State Auditor (1) determining that
determining that the request for 58 additional
only six of the proposed 11 technology projects
disciplinary staff was premature and that only
merit funding as they represent timely critical needs
funding for 19 new hires be provided to staff one
for the State Bar and (2) providing only the amount
enforcement team. The State Auditor found that
necessary in 2020 as the fee could be spread over
gradually increasing staff would allow the State
five years.
Bar to quantify the effects of implementing its new
Rebuilding Reserve ($31 Less Than State
process and of adding an enforcement team so that
Bar Request). The State Auditor recommends a
it can evaluate and justify any future needs for new
one-time fee of $3 for active members in 2020,
staff and the associated fee increases.
instead of the $34 fee requested by the State
Bar to immediately restore its budget reserve to
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17 percent. While the State Auditor agrees that also would enable the Legislature to simplify the
the State Bar should restore its budget reserve, fee-setting process by amending state law to
the reduction in the fee is due to providing only the merge the $25 discipline fee with the licensing
equivalent of a 1 percent budget reserve increase fee. The State Auditor found these changes would
in order to mitigate the significant effect a one-time have multiple benefits including better planning
assessment would have on the fee that attorneys for long-term revenue needs and supplementing
must pay. existing legislative oversight.
Client Security Fund ($40 Less Than State Maximize Revenue From San Francisco
Bar Request). The State Auditor recommends Building. The State Auditor recommends the
setting the mandatory Client Security Fee at $80 State Bar maximizes the revenue it receives from
for active members in 2020. This is a $40 increase its San Francisco building by leasing all available
over the mandatory ongoing amount that is space, ensuring that its leases reflect market
currently charged. This is also $40 less than the rates, and reducing its space allocations when
$80 one-time assessment requested by the State practical to more closely match industry standards
Bar. This reduction in the fee is due to the State to avoid adding space in the event of any future
Auditor recommending providing only the amount staff growth. The State Auditor found that these
necessary to pay for those claims that will be recommendations would address various findings,
eligible for payment in 2020 rather than the amount such as the loss of revenue from below market
needed to pay for all pending claims as requested lease rates and the loss of potential revenue due to
by the State Bar. This is because pending claims leaving portions of the building unleased for long
may not be paid out for several years. Additionally, periods.
the State Auditor offered a couple of policy Further Improvements to Address Backlog of
recommendations for legislative consideration that Discipline Cases. The State Auditor recommends
could impact the fee level needed in the future. the State Bar further improve its ability to operate
more efficiently and reduce the backlog of discipline
OTHER RECOMMENDATIONS cases by: (1) developing benchmarks to delineate
the duration of each step in its investigation
Multiyear Licensing Fee Cycle. By the time the
process, (2) ensuring consistency in the policy
Legislature determines the licensing fee for 2021,
and guidance documents its staff follow when
the State Auditor recommends the Legislature
performing investigations work, and (3) using its
adopt a multiyear licensing fee-approval cycle that
performance measures and collected data going
should include three components: (1) a multiyear
forward to evaluate its case processing goals and
budget, fee justifications, and related performance
work with the Legislature to revise the 180-day
data submitted by the State Bar; (2) a fee cap
statutory goal if necessary. The State Auditor found
for the multiyear period set by the Legislature;
that these recommendations would help the State
and (3) the authority for the State Bar to adjust
Bar identify areas for targeted improvement, help
the fee each year up to the maximum amount. All
ensure staff stay on schedule, and make more
mandatory fees would be part of this cycle, which
informed estimates for staff resource needs.
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APPENDIX C—
A COMPARISON OF DISCIPLINARY PROCESSES
As discussed in the report, a large portion of the well as initiates its own investigations. These
State Bar’s requested increase to the ongoing fee complaints or investigations can include allegations
focuses on supporting additional staff to process of negligence or incompetence, failing to
discipline cases in a more timely and efficient provide services in accordance with professional
manner. Our analysis focused on evaluating the standards, and not complying with license renewal
justification for the requested positions, but did not requirements. After determining whether CBA has
assess the structure of the discipline system itself. the authority to investigate a particular complaint,
For example, we did not evaluate the disciplinary CBA’s enforcement staff review and prioritize cases
process itself to determine whether certain tasks or into three categories: (1) high-priority cases where
activities were unnecessary or could be completed CBA believes there is the potential for ongoing
in a more cost-effective manner. However, as consumer harm, (2) standard-priority cases in which
discussed above, we raised questions about the immediate threat of public harm is not expected,
meaningfulness of existing statutory time frames for and (3) actionable cases which involve complaints
State Bar discipline cases—which raises questions where minimal investigation and disciplinary action
about the overall disciplinary process. is expected.
In this section, we provide some context Investigation. Received complaints are assigned
for how the State Bar’s disciplinary process to nontechnical enforcement analysts who handle
compares to other state entities with licensing and less complex cases (such as administrative
disciplinary functions. This information could help violations) and to technical investigative certified
the Legislature determine whether it would like to public accountants who handle more complex
assess and consider changes to the structure of cases (such as gross negligence or failing to meet
the State Bar’s disciplinary system. Specifically, we professional standards). If needed, outside experts
provide a comparison of the State Bar’s disciplinary or the Department of Consumer Affairs’ Division of
process with the disciplinary processes for five Investigation will be asked to provide assistance.
other state entities that license other professions When the investigation stage is completed, the
in the state. These other entities were selected case will be closed with no action, closed through
based on certain similarities with the State Bar— the issuance of a citation and fine, or referred
such as overseeing similar numbers of licensees, to the Attorney General for formal disciplinary
operating similar types of disciplinary systems, or proceedings.
facing similar disciplinary disposition time frames. Formal Discipline. If the case is referred to
Appendix C, Figure 1 provides a snapshot the Attorney General’s Office, the licensee will first
comparing key metrics. A brief summary of the receive notification that a formal accusation will
disciplinary processes for each of the five other be filed. The Attorney General’s Office then will
state departments reflected in the table are also file a formal accusation. Cases may be resolved
provided below. by reaching a default decision when a licensee
essentially waives their right to a hearing by failing
California Board of Accountancy
to file a notice of defense, when a settlement is
(CBA)
reached, or when the case is heard before an
Administrative Law Judge. The CBA Board must
Intake. The CBA receives complaints from
approve all final formal discipline that is imposed
members of the public, professional organizations,
(such as probation or license revocation).
and state and local governmental agencies as
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Contractors State License Board multivariable matrix to prioritize complaints based
(CSLB) on those expected to have the most immediate
threat to the public and who files the complaints.
Intake. The CSLB receives complaints from
CSLB has two Intake and Mediation Centers that
members of the public, licensees, professional
review all filed complaints and are tasked with
organizations, and state and local governmental
closing the complaint by taking no action, issuing
agencies as well as initiates its own investigations.
an advisory notice for technical violations, reaching
These complaints or investigations can include
settlements on nonserious complaints, and
allegations of elder abuse or predatory acts, health
preparing certain complaints for field investigations.
and safety code violations, unlicensed practice,
Approximately 40 percent of complaints are settled
workmanship complaints, and advertising or
at this point.
other administrative violations. The CSLB uses a
Appendix C, Figure 1
Comparison of the State Bar’s Disciplinary System With Some Other State Licensing Departmentsa
State Bar CBA CLSB DBC BPELSG DRE
Overview of Disciplinary System
Number of Licenses or Registrations 266,246 105,381 306,516 184,540 171,745 444,602
Overseen by a Board Yes Yes Yes Yes Yes No
In-house Disciplinary System Yes No No No No Yes
Estimated Number of Staff Involved in 300 40 216 46 12 173
the Disciplinary Systemb
Estimated Cost of Disciplinary System $72 $5.2 $34.8 $6.7 $2.6 $23.2
(in millions)
Disciplinary Workload
Number of Complaints Received 15,175 2,435 19,687 3,552 416 6,197
Pending Investigations at the End of the 5,095 1,172 4,638 2,082 254 1,475
Fiscal Year
Cases Referred to the Attorney General NA 81 524 197 29 NA
Pending Cases at the Attorney General’s NA 69 590 262 44 NA
Office at the End of the Fiscal Year
Disciplinary Disposition Time Framesc
Goals (in days)
Intake NA 10 3 10 10 10
Investigation 180d 180 180 270 360 360
Formal Discipline 300e 540 540 540 540 540
Actual Averages (in days)
Intake 29 2 1 11 14 28
Investigation 184 and 682f 193 84 395 234 217
Formal Discipline 501e 865 764 626 825 303
a
Calendar Year 2017 for the State Bar and Fiscal Year 2017-18 for all other departments.
b
Staff supporting the disciplinary system from other department sections (such as billing or administration) may not be fully represented.
c
Intake is measured from complaint receipt to complaint closure or assignment to an investigator. Investigation is measured from complaint receipt to the completion of entire discipline
cases for those that are not transmitted to the Attorney General for the filing of formal disciplinary charges (includes intake). Formal discipline is measured from complaint receipt through
the completion of the entire disciplinary process for cases that are forwarded to the Attorney General for disciplinary proceedings (includes intake and investigation).
d
For the State Bar, 180 days is the statutory goal for closing cases in the intake, investigation, or pre-filing stage or filing a complaint against an attorney.
e
Some State Bar pre-filing stage activities could be considered formal discipline activities for some of the other state departments. This number only provides the average time for the State
Bar Court to adjudicate a case and does not include pre-filing stage activities.
f
The State Bar averaged closing cases at the investigation stage in 184 days and averaged closing cases at the pre-filing stage in 682 days. Some State Bar pre-filing stage activities could
be considered formal discipline activities for some of the other state departments.
CBA = California Board of Accountancy; CLSB = Contractors State License Board; DBC = Dental Board of California; BPELSG = Board for Professional Engineers, Land Surveyors, and
Geologists, and DRE = California Department of Real Estate.
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Investigation. CSLB operates 12 investigative categories: (1) urgent-priority cases where imminent
facilities across the state to investigate complaints. bodily public harm is expected (such as allegations
In the investigation process, CSLB may consult of death or substance abuse), (2) high-priority
with licensees to provide expert opinions on cases in which immediate threat of public harm is
workmanship and estimates on the value of work not expected (such as allegations of negligence and
and financial damages. CSLB also administers incompetence), and (3) routine cases which involve
two arbitration programs to facilitate settlement of all other cases (such as allegations of billing fraud
cases. Contract disputes worth $15,000 or less or patient abandonment).
and meet arbitration criteria are referred to the Investigation. Urgent- and high-priority cases
mandatory program, while those worth $15,000 to generally are assigned to investigators, while
$50,000 can be referred to the voluntary program. routine cases also may be assigned to enforcement
Arbitration settlements are binding. When the analysts. Inspectors also may be used to inspect
investigation stage is complete, the case will be allegations of unsafe or unsanitary dental office
closed with no action, closed with the imposition conditions. When the investigation stage is
of nonformal disciplinary enforcement tools (such completed, the case will be closed with no action,
as an advisory notice, a letter of admonishment, closed through nonformal disciplinary actions (such
or a citation), or referred to the Attorney General as an advisory letter of the issuance of a citation
for formal disciplinary proceedings. Similar to the and fine), or referred to the Attorney General for
State Bar, state law establishes a goal for CSLB formal disciplinary proceedings.
to complete the investigation of cases within 180
Formal Discipline. If the case is referred to the
days of the receipt of the complaint. The goal for
Attorney General’s Office, the office will determine
complex fraud or contractual cases increases to
whether to file a formal accusation. Cases may be
365 days.
resolved when a settlement is reached or when the
Formal Discipline. If the case is referred to the case is heard before an Administrative Law Judge.
Attorney General’s Office, the office will determine The DBC Board must approve all final formal
whether to file a formal accusation. Cases may be discipline that is imposed (such as case dismissal,
resolved when a settlement is reached or when the probation, or license revocation).
case is heard before an Administrative Law Judge.
The CSLB Board must approve recommendations Board for Professional Engineers,
for formal discipline that are proposed to be Land Surveyors, and Geologists
imposed (such as probation, restitution, or license (BPELSG)
revocation).
Intake. The BPELSG receives complaints
Dental Board of California (DBC) from members of the public, licensees, and state
and local agencies as well as initiates its own
Intake. The DBC receives complaints from
investigations. These complaints or investigations
members of the public and other entities as well as
can include allegations of negligence, quality of
initiates its own investigations. These complaints
service, fraud, contractual violations, unlicensed
or investigations can include allegations of
practice, and violations of the Code of Professional
unprofessional conduct (such as sexual abuse or
Conduct. Cases generally are processed in the
advertising violations), incompetence, negligence,
order they are received as cases that have the
or fraud. After determining whether DBC has the
potential for imminent threat generally are not filed
authority to investigate a particular complaint, DBC
frequently. To the extent that such cases are filed
staff will request records and any other relevant
or multiple complaints are filed against the same
information related to the complaint. The received
individual, they will be prioritized. Complaints may
records will be forwarded to an independent dental
be closed or referred for investigation.
consultant for their assessment to determine
Investigation. BPELSG’s Enforcement Unit
whether the complaints can be substantiated.
consisting of analysts and profession specialists
Additionally, cases are prioritized into three
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investigate these cases. Complaints related to and (3) routine cases (such as complaints of
allegations of negligence or poor quality of service advertising violations and violating standards of
typically must be referred to an independent practice). Complaints may be closed or referred for
technical expert to review all collected evidence investigation.
and offer an opinion on whether the complaint Investigation. DRE operates five investigative
is substantiated. If needed, the Department of offices across the state to investigate complaints.
Consumer Affairs’ Division of Investigation also Minor or simple complaints (such as small monetary
may be engaged to provide assistance. When the disputes and an inability to receive copies of
investigation stage is completed, the case will be documents) may be referred to the Complaint
closed with no action, closed through nonformal Resolution Program to avoid opening formal
disciplinary actions (such as the issuance of a investigations. DRE investigative staff generally
citation), or referred to the Attorney General for serve as facilitators to resolve these complaints.
formal disciplinary proceedings. When the investigation stage is completed, the
Formal Discipline. If the case is referred to the case will be closed with no action, closed through
Attorney General’s Office, the office will determine nonformal disciplinary actions (such as a corrective
whether to file a formal accusation. Cases may be action letter or the issuance of a citation), or
resolved when a settlement is reached or when the referred to DRE’s Legal Division to begin formal
case is heard before an Administrative Law Judge. disciplinary proceedings.
The BPELSG Board must approve all final formal Formal Discipline. If the case is referred
discipline that is imposed (such as case dismissal, to the Legal Division, the office will determine
probation, or license revocation). whether to file a formal accusation. Cases may
be resolved when a settlement is reached or
Department of Real Estate (DRE)
when the case is heard before an Administrative
Intake. The DRE receives complaints from Law Judge. The Real Estate Commissioner—a
members of the public, licensees, and state gubernatorial appointee who serves as the head of
and local agencies as well as initiates its own the DRE—must approve all final formal discipline
investigations. These complaints or investigations that is imposed (such as license suspension
can include allegations of misrepresentation, or revocation). Similar to the State Bar, DRE’s
mismanagement of trust funds, unlicensed activity, disciplinary system generally is handled within the
or predatory criminal activities. Cases generally agency as it does not refer disciplinary cases to the
are prioritized into three categories based on Attorney General’s Office. Unlike the State Bar who
the potential for harm to members of the public: operates its own court to hear cases, DRE—similar
(1) urgent cases (such as complaints of predatory to other licensing departments—has cases heard
criminal activities and elder abuse), (2) priority before Administrative Law Judges who are not
cases (such as complaints of unlicensed activity, employed by DRE.
fraud, and mismanagement of trust funds),
www.lao.ca.gov 31
analysis full
gutter
AN LAO REPORT
LAO PUBLICATIONS
This report was prepared by Anita Lee and Nick Schroeder and reviewed by Carolyn Chu. The Legislative Analyst’s
Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature.
To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are
available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento,
CA 95814.
32 LEGISLATIVE ANALYST’S OFFICE