REGULARS

The bar’s surplus is largely the result of salary savings which accrued as the bar began the process of re-building following Gov. Pete Wilson’s 1997 veto of its dues authorization and the subsequent layoff of more than 500 employees. Johnson said that many laid-off emp-loyees did not return to their old jobs, so the bar filled many positions at entry-level salaries. In addition, an extremely tight labor market and the bar’s financial instability discouraged potential employees. About 30 percent of the authorized positions remain unfilled.

New board member Anthony Capozzi of Fresno pointed out the efficiencies of the new budget. In 1997, he said, when the dues bill was vetoed, 681 employees were running the bar with a general fund of $69.7 million. Now, the bar has 524 employees and a general fund of $49.4 million.

Also contributing to the surplus was the generosity of attorneys who paid the full authorized amount of dues during the bar’s financial crisis and did not seek a refund or credit. The bar also budgeted a bigger loss than actually occurred from the fee scaling option offered to lower-earning lawyers.

Ron Albers of San Francisco, chair of the board administration and finance committee, noted that the bar, following its years of financial woes, has “established a long-term financial plan. We have numbers that are clear. This is an ethical and prudent budget proposal.”

Added Jim Otto of Los Angeles, immediately after the vote to lower dues: “It’s all downhill from here.”

Johnson said the bar’s executive team, which is half the size it was in 1997, now exercises tight control over staffing. “Those of us who are still here who survived the ‘ark’ have learned the hard lessons of fiscal prudence,” she said.

At the same time the bar lowers its dues, it will spend about $8 million in the coming year to build out offices it can rent at its 180 Howard St. building in San Francisco. It also will consolidate its Los Angeles staff and sublet unneeded space in the Transamer-ica building there.

By using the surplus to pay for construction, the bar avoids taking out a loan and thus can pay off the mortgage on the Howard Street building in three to four years.

Both Madden and Johnson recalled that the bar came under heavy criticism when it bought the so-called “marble palace” in San Francisco, a building Madden said contains no marble, and entered into a 25-year lease with favorable rates in the Transamerica building, located in an underdeveloped part of downtown Los Angeles. That neighborhood is now home to the Staples Pavilion and the Los Angeles Convention Center, and the bar leases its parking lot for events such as last summer’s Democratic convention.

The San Francisco headquarters, acquired in 1995, is now worth significantly more than the original purchase price of $22.5 million. Johnson noted the value of the real property as a potential source of revenue to assist in keeping dues down.

As part of the 2001 budget, Johnson also proposed the creation of a 2 percent contingency reserve of $1.5 million. The bar sometimes faces legislative mandates which are not accompanied by state funds, and it needs to set aside money to meet the requirements. For example, new legislation orders the bar to conduct a study to determine if the discipline system disproportionately affects sole practitioners.

“We must come up with a plan and recommendations,” she said. “But we don’t know the problems or the solutions, so we can’t budget for it.”

Johnson also wants to spend about $1 million to bring the bar’s inadequate technology up to speed. She said she hopes to place fee statements on the web and allow bar members to pay their dues online, as well as effect other efficiencies which will permit the bar to keep staff numbers at a minimum.

The 2001 budget, which totals $49.4 million, authorizes staffing in the discipline system at the same levels approved by special master Elwood Lui, appointed in 1998 by the Supreme Court to oversee the bar’s discipline budget. Johnson said she will try in the coming year to fill the 30 percent of jobs which are vacant.

The budget, she said, “insures the programmatic integrity of bar services. The staff has been reduced significantly, but with the reforms we implemented, the bar can effectively address complaints about unethical attorneys and perform its other regulatory duties.”

Although most active lawyers will pay $345 in dues, lawyers who earn less than $25,000 from the practice of law this year are entitled to a 50 percent reduction in dues and those who make under $40,000 can receive a 25 percent break. Inactive lawyers must pay $50 in annual fees.

The board also reduced the 50 percent penalty it has traditionally levied against lawyers who pay their dues after the Feb. 1 deadline.

Now, lawyers who pay after March 15 will be assessed a 10 percent penalty, and those who pay after April 15 will be hit with a 25 percent penalty.

The new policy should result in more money for the bar, better cash flow and happier members, said Otto, who has pushed for the change for more than a year.

“This is a step in the right direction,” he said. “Can you imagine how you’d feel if you had a credit card bill of $5,000 and you got hit with a late fee of $2,500? Well,that’s how our members felt.”