Important Information About
Your 1997 Membership Fee

The State Bar of California is a unified bar, in which membership and fees are compelled by State law as a condition of practicing law. Annual membership fees are used to finance the State Bar's broad statutory mission to advance the science of jurisprudence and to promote the administration of justice. The bulk of the State Bar's activities are related to admission, discipline, and regulation of attorneys and to other programs that enhance lawyer ethics and competence or improve the quality of legal service and the justice system. The State Bar has engaged in such functions as administering the bar examination, formulating rules of professional conduct, disciplining members for misconduct, administering mandated continuing legal education requirements, conducting a variety of education programs for members and the public, studying and recommending changes in legislation, cooperating with the Judicial Council, providing various member services and facilitating relations among national, regional and local voluntary bar associations. Pursuant to statute, the State Bar also administers the Client Security Fund, the Legal Services Trust Fund and the Commission on Judicial Nominees Evaluation and assists the California Law Revision Commission and other governmental agencies.

The constitutionality of a unified bar was first upheld in Lathrop v. Donohue (1961) 367 U.S. 820 [81 S. Ct. 1826, 6 L.Ed.2d] and affirmed in Keller v. State Bar of California (1990) 496 U.S. 1 [110 S.Ct. 2228, 110 L.Ed.2d 1]. In Keller, the U.S. Supreme Court addressed the unanswered question in Lathrop of whether mandatory bar membership fees may be used to support those activities which are political or ideological and with which a member disagrees. The Supreme Court held that the State Bar may constitutionally use mandatory fees for expenditures that are necessarily or reasonably incurred for the purpose of regulating the legal profession or improving the quality of legal service available to the people of the state, including those with "political or ideological coloration" (such expenditures are hereinafter referred to as "chargeable"). However, objecting members may not be compelled to pay for the expenses of activities having "political or ideological coloration" which are not reasonably related to the advancement of such goals (such expenditures are hereinafter referred to as "nonchargeable").

The Supreme Court indicated that the procedures outlined in its decision in Teachers v. Hudson (1986) 475 U.S.292 [106 S.Ct. 1066, 89 L.Ed.2d 232] would accommodate objecting members. The procedures, which have been adopted by the Board of Governors of the State Bar and described below, follow the due process requirements set forth in Hudson for the collection of compulsory fees: (1) adequate explanation of the basis of the fee; (2) reasonably prompt opportunity to object and have objections heard before an impartial decisionmaker; and (3) escrow of amounts reasonably in dispute pending adjudication of the challenge. A member may obtain a copy of the rules in which these procedures are contained by writing to the Office of the Secretary of the State Bar at the State Bar's main office at 555 Franklin Street, San Francisco, California 94102-4498. Of course, as the Supreme Court noted, alternate procedures may likewise accommodate objecting members. Accordingly in the future, the Board of Governors may amend these procedures in a manner which it determines to be appropriate or which developing case law may suggest.

Availability of "Hudson Deduction"
in 1997 Membership Fee

Pursuant to its Hudson procedures, the Board of Governors has determined the categories and amounts of both the chargeable and the nonchargeable expenditures for the 1997 membership fee. The amounts were calculated by the State Bar on the basis of its audited expenses for 1995, the most recent fiscal period for which completed figures were available. A member who objects to nonchargeable activities is given an opportunity to reduce his or her 1997 membership fee by the amount of the allotted portion of the nonchargeable expenditures (this reduction is hereinafter referred to as the "Hudson deduction"). The 1997 Hudson deduction is $1.00.

All but a small proportion of State Bar expenditures are necessarily or reasonably related to the regulation of the legal profession or improving the quality of legal service, and therefore are chargeable to all members. A listing and description of the major categories of these chargeable activities, together with the nonchargeable activities to which the Hudson deduction applies, appears in the State Bar's Statement of Chargeable and Nonchargeable Expenses for 1995 ("Statement"). In accordance with Hudson, the accounting firm of Deloitte & Touche Tohmatsu, Intl. has audited the statement and the explanatory notes accompanying it. A copy of the statement, the notes, and the Independent Auditors' Report are included in the pages following this notice.

A member who does not wish to support the nonchargeable activities may elect to pay the reduced fee amount and should refer to the instructions in Part C of the notice of 1997 membership fee statement. The election must be marked and signed by the member on his or her fee statement and the remittance copy returned together with the payment of membership fee, less only the Hudson deduction, postmarked on or before the deadline date as it appears on the 1997 membership fee statement, or delivered in person to the State Bar's San Francisco office by 5 p.m. on or before the deadline date as it appears on the fee statement. For more information about how to take the Hudson deduction, contact Membership Services at 415/561-8360.

Challenges to Chargeable Expenses
and Their Calculation

Members are also given an opportunity to dispute the accuracy of any of the categories of chargeable expenses in the Statement of Chargeable and Nonchargeable Expenses on the grounds that a challenged category has political or ideological coloration and is not reasonably related to the State Bar's purpose of regulating the profession or improving the quality of legal service to justify the use of mandatory fees or that the amount calculated for the category was erroneous. (A member who wishes to make such a challenge is hereinafter referred to as "challenger"). A challenger must make his or her challenge individually and in writing. The written challenge must include the challenger's name, address, telephone number and bar membership number and should identify the challenged category. A challenger must sign the challenge and submit it along with payment of the 1997 membership fee less only the Hudson deduction, postmarked on or before the deadline date as it appears on the 1997 membership fee statement, or delivered in person to the State Bar's San Francisco office by 5 p.m. on or before the deadline date as it appears on the fee statement.

ANY WRITTEN CHALLENGE, TOGETHER WITH THE REMITTANCE PORTION OF THE 1997 MEMBERSHIP FEE NOTICE AND FULL PAYMENT OF THE 1997 MEMBERSHIP FEE LESS ONLY THE HUDSON DEDUCTION, MUST BE MAILED OR DELIVERED BY THE DEADLINE TO:

SECRETARY
THE STATE BAR OF CALIFORNIA
555 FRANKLIN STREET
SAN FRANCISCO, CALIFORNIA 94102-4498

CAVEAT: PLEASE USE THE ADDRESS ABOVE. DO NOT USE THE ADDRESS ON THE BACK OF THE MEMBERSHIP FEE STATEMENT. FAILURE TO COMPLY TIMELY WITH THESE REQUIREMENTS AND TO SUBMIT THE FULL 1997 MEMBERSHIP FEE PAYMENT WITH THE WRITTEN CHALLENGE, LESS ONLY THE HUDSON DEDUCTION, TO THE STATE BAR'S SAN FRANCISCO OFFICE WILL CONSTITUTE A WAIVER OF THE RIGHT TO CHALLENGE THE DETERMINATION OF CHARGEABLE AMOUNTS. IN ADDITION TO WAIVER, A REDUCTION OF MORE THAN THE AUTHORIZED HUDSON DEDUCTION MAY RESULT IN A LATE PAYMENT PENALTY. THERE ARE NO EXTENSIONS BEYOND THE DEADLINE DATE AS IT APPEARS ON YOUR 1997 MEMBERSHIP FEE STATEMENT.

Upon receipt of a properly submitted and timely challenge, the State Bar shall place the disputed amount of the challenger's fee in an interest-bearing escrow account.

At its next regularly scheduled meeting following the deadline or as soon thereafter as the matter may be considered, the Board of Governors shall decide whether to give a pro rata refund to the challenger or to submit the dispute for expeditious arbitration before an impartial arbitrator.

If the dispute is submitted for arbitration, the Board in its discretion may consolidate all challenges. The challenger(s) and the State Bar may select a mutually agreeable, impartial arbitrator. In consolidated challenges, the arbitrator may be selected by an agreement between the State Bar and 75% of the challengers. If there is no agreement on an impartial arbitrator within 30 days following the decision to arbitrate, an impartial arbitrator will be appointed by the American Arbitration Association. The State Bar may extend the time to select the arbitrator, not exceeding an additional 30 days. The arbitration shall be heard at the San Francisco or Los Angeles office of the State Bar, as determined by the State Bar. The proceedings shall be informal in nature, and the State Bar shall have the burden to show that the disputed matters are within the scope of permissible activities for which mandatory fees may be used under the constitutional standard in Keller. The challenger(s) will be given an opportunity to present their own evidence and to present written arguments in support of their challenge(s). The arbitrator will issue a written decision and award.

Example.

Smith's 1997 membership fee is $458. Smith elects to take the Hudson deduction for 1997. Smith wishes to join a section; the fee is $45. In addition, Smith decides to contribute $25 to the State Bar Foundation and $25 to Legal Services. When Smith fills in the amounts due on the billing form on the 1997 membership fee statement, it should look like this:

1997 MEMBERSHIP FEE	$458
A. FOUNDATION DONATION	25
B. LEGAL SERVICES DONATION	25
C. SECTION ADDITIONS	45
D. HUDSON DEDUCTION	(1)
E. SCALED FEES	0
F. NEW TOTAL	$552

Smith must write in the amounts for the Foundation donation, Legal Services donation, Section addition, Hudson deduction, and the new total on the billing form.

Smith also decides to challenge the calculation listed in one of the categories of the chargeable expenses of the Statement of Chargeable and Nonchargeable Expenses. Smith's written challenge, together with the remittance copy of the fee statement and payment in full of $552, addressed to the Secretary of the State Bar of California, 555 Franklin Street, San Francisco, California 94102-4498, must be postmarked on or before the deadline date as it appears on the 1997 membership fee statement, or delivered in person to the State Bar's San Francisco office by 5 p.m. on or before the deadline date as it appears on the fee statement.

The State Bar of California

INDEPENDENT AUDITORS' REPORT

The Board of Governors
The State Bar of California:

We have audited, in accordance with generally accepted auditing standards, the financial statements of The State Bar of California (the "State Bar") as of and for the year ended December 31, 1995, and have issued our report thereon dated May 10, 1996. We have also audited the accompanying Statement of Chargeable and Nonchargeable Expenses (the "Statement") of the State Bar for the year ended December 31, 1995. This Statement is the responsibility of the State Bar's management. Our responsibility is to express an opinion on the Statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that our audit provides a reasonable basis for our opinion.

The accompanying Statement was prepared for the purpose of showing the allocation of certain expenses into chargeable and nonchargeable categories as described in Note 2 and is not intended to be a complete presentation of the State Bar's assets, liabilities, revenues and expenses in conformity with generally accepted accounting principles.

In our opinion, such Statement presents fairly, in all material respects, the chargeable and nonchargeable expenses of The State Bar of California for the year ended December 31, 1995 in accordance with the basis of presentation described in Note 2.

October 12, 1996

STATEMENT OF CHARGEABLE AND NONCHARGEABLE EXPENSES
YEAR ENDED DECEMBER 31, 1995

See notes to statement.

NOTES TO STATEMENT OF CHARGEABLE
AND NONCHARGEABLE EXPENSES

YEAR ENDED DECEMBER 31, 1995

1. SIGNIFICANT ACCOUNTING POLICIES

Description of Entity -- The State Bar of California (the "State Bar") is a constitutional agency established on November 8, 1966 as a public corporation in the judicial branch of government. The State Bar was formed as a result of the State Bar Act, which was approved by the California State Legislature on July 29, 1927. Membership in the State Bar is required in order to practice law in the State of California.

Basis of Accounting -- To ensure observance of limitations and restrictions placed on the use of resources available to the State Bar, the accounts of the State Bar are maintained in accordance with the principles of fund accounting. This is the procedure by which resources for various purposes are classified for accounting and reporting purposes into funds established according to their nature and purpose.

The assets, liabilities, revenues, expenses and fund balances of the State Bar are reported in ten funds as follows: general fund, admissions fund, building fund, client security fund, grants fund, legal services trust fund, sections fund, legal specialization fund, lawyers' education and development fund, and the fixed assets fund.

Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. Actual results could differ from those estimates. These estimates and assumptions affect the reported amounts of chargeable and nonchargeable expenses during the reporting period.

2. BASIS OF PRESENTATION

A member of the State Bar is required to pay that part of the annual membership fee used to fund activity germane to the State Bar's purpose of regulating the legal profession or improving the quality of legal service available to the people of the State of California. The State Bar may use the annual membership fees for expenses that are normally or reasonably incurred to implement the aforementioned purposes. A member of the State Bar who objects to political or ideological activities that are not reasonably related to the advancement to the State Bar's purposes is not required to support such activities. Calculation of the portions of the annual membership fee that are chargeable and nonchargeable to a member as mandatory dues in a coming year is based on the prior year's actual expenses.

The purpose of the Statement of Chargeable and Nonchargeable Expenses (the "Statement") is to provide members of the State Bar with a statement that identifies the major categories of expenses of the State Bar attributed to the annual membership fee, and includes amounts for activities which are germane to the advancement of the State Bar's regulatory functions and improvement of legal service (chargeable) as well as that portion of expenses considered not to be reasonably related to the advancement of activities germane to the State Bar's purpose (nonchargeable). The categories and amounts determined to be chargeable are subject to challenge before an independent decisionmaker. Accordingly, the classification of some activities could change in the future as a result of such challenges and any related judicial review.

Expenses included in the Statement are derived from expenses included in the unrestricted general fund, the building fund and client security fund. Program revenue represents registration fees for law corporations, limited liability partnerships, and other certification programs; convention income; continuing legal education fees; California Bar Journal revenues; and other program revenues that are used to fund the related program expenses.

The following is a listing of the major expenses that the State Bar has categorized as chargeable or nonchargeable, including a description of the specific programs or activities performed by category. Determining which State Bar programs and activities are chargeable or nonchargeable requires that judgments be made by the State Bar based on the application of legal standards established in Keller v. State Bar, 496 (1990), and related cases. In calculating the chargeable and nonchargeable expenses, absolute precision is not expected nor required pursuant to Chicago Teachers v. Hudson, 475 U.S. 292, 308 (1986).

Description of Categories -- Chargeable Programs

Discipline and Adjudication -- The purpose of the Discipline and Adjudication program is to protect the public by regulating the conduct of California lawyers.

Receive, review and analyze incoming communications which relate to disciplinary inquiries and complaints against attorneys. Categorize complaints by type for appropriate actions by way of referral to investigation and prosecution; mediation; or referral to other entities (Bus. & Prof. Code §§6043, 6044, 6044.5, 6049, 6092.5 subd. (f) et seq.).

Investigate allegations of unethical and unprofessional conduct against attorneys who may have violated provisions of the State Bar Act, Rules of Professional Conduct or other standards of professional conduct. Provide disciplinary enforcement staff with investigative support (Bus. & Prof. Code §§6043, 6044, 6049, 6092.5 subd. (f) et seq.).

Prosecute attorneys in formal disciplinary hearings in the State Bar Court for violation of the State Bar Act or Rules of Professional Conduct. Activities include, as appropriate, the preparation of formal disciplinary pleadings, conduct of formal and informal discovery, and representation of the State Bar as Trial Examiners in the actual hearings and subsequent review proceedings (Bus. & Prof. Code §§6077, 6078 et seq.).

Adjudicate formal disciplinary matters resulting in the final imposition of discipline or, in certain instances involving suspension or disbarment, the recommendation of discipline to the California Supreme Court (Bus. & Prof. Code §§6086.5, 6086.6; Cal. Rules of Court, rules 952, 953, 954).

Operation of the Complainants' Grievance Panel, which reviews closed disciplinary complaints at the request of the complainant and conducts random audits of other closed complaints. The Complaint Audit and Review staff provides legal, administrative, investigative and clerical support to the Panel (Bus. & Prof. Code §6086.11).

Receive, evaluate and process applications made to the Fund by persons who have suffered monetary losses due to dishonest conduct of lawyers and authorize recovery to eligible clients out of funds collected for this purpose (Bus. & Prof. Code §6140.5).

Administer a statewide program for arbitrating fee and cost disputes, and arbitrate those disputes that are not within the jurisdiction of an approved local bar association program (Bus. & Prof. Code §6200).

Foster the development of client relations education programs and materials directed to the membership and consumers of legal services in order to enhance the client-lawyer relationship, reduce client complaints, and renew public confidence in the legal profession.

_______________

Administration of Justice -- The purposes of the Administration of Justice program are: (1) to administer the work of the Commission on Judicial Nominees Evaluation as mandated by Government Code §12011.5; (2) to improve the quality and delivery of legal services available to the people of the State; and (3) to aid in the advancement of the science of jurisprudence and improvement of the administration of justice. This program provides specialized professional advice, analysis, studies and information to the judicial, legislative and executive branches of government.

Provide technical assistance to legislators, legislative staff and committees, testify at hearings, and forward or draft letters of support/opposition on certain bills. Monitor bills by reviewing legislative measures and amendments and forwarding to sections/committees for study and appropriate comment (Bus. & Prof. Code §6031).

Provide assistance to State Bar efforts to improve court rules, procedures, structures and staffing and to coordinate these efforts with the Judicial Council, Administrative Office of the Courts, California Judges Association, California Law Revision Commission and other entities involved in court improvements. Provide staff support for Standing Committees on Administration of Justice, Appellate Courts, Federal Courts, and Rules and Procedures of Court (Cal. Const. Art. VI §6, Bus. & Prof. Code §§6031, 6033, Gov. Code §8287).

Serve as liaison to the Governor's Office and administer the work of the Commission which evaluates the qualifications of judicial candidates whose names are submitted by the Governor (Gov. Code §12011.5).

Coordinate the work of voluntary local and specialty bar associations with one another and with the State Bar and conduct the annual three-day meeting of the Conference of Delegates where approximately 1,000 representatives of its member associations consider resolutions on issues affecting lawyers and the administration of justice (Bus. & Prof. Code §6031).

_______________

Legal Education and Competence -- The purposes of the Legal Education and Competence program are: (1) to provide and promote statewide competence education programs; (2) to assist others in providing and promoting statewide competence education programs; (3) to protect the public through the operation of certification programs; and (4) to maintain and improve the professional ethics and standards of the legal profession.

Establish effective, affordable and accessible Minimum Continuing Legal Education ("MCLE") programs for California lawyers and develop and implement a comprehensive program to assist others in establishing effective, affordable and accessible MCLE programs for California lawyers (Bus. & Prof. Code §6070, Cal. Rule of Court, rule 958).

Legal education expenses include those for staff support of State Bar sections, coordinating meetings, assisting in publication and dissemination of section education and program materials, and arranging speaker engagements at section seminars. State Bar sections represent various segments of the profession by areas of practice or concerns. Sections are principally self-funded by voluntary section dues, and the primary purpose of a section is to further knowledge and education in the section's field of practice. In addition, sections may propose sponsorship of legislation and may provide expert and technical comments on pending bills. Section comments may express a position of support or opposition to a measure and may suggest appropriate amendments. Section legislative activity is supported wholly by voluntary dues. Section administration staff do not participate in any of the legislative discussions or activities of the sections; instead, their role is to support the educational activities of the sections. Accordingly, the entire cost of sections administration is fully chargeable.

Maintain and improve the standards of the legal profession to enhance attorney competence through: (1) promulgating and strengthening professional standards to protect the public; (2) assisting members to comply voluntarily with such standards (e.g., Ethics Hotline, California Compendium on Professional Responsibility, Lawyers Personal Assistance Program); and (3) planning and development of programs to enhance attorney competence (Bus. & Prof. Code §§6076, 6077).

Develop standards for certification programs (e.g., Law Corporations, Limited Liability Partnerships, Practical Training of Law Students, Foreign Legal Consultants, MCLE, Legal Specialist) and efficiently administer such programs (Bus. & Prof. Code §6070, Cal. Rule of Court, rules 958, 983, 988).

_______________

Legal Services Delivery -- The purpose of the Legal Services Delivery program is to provide assistance in the delivery of civil and criminal legal services to the public.

Provide technical assistance and support to bar associations and legal services programs to develop or expand the availability of legal services to low- and middle-income people in the State. Program development activity focuses on promoting pro bono publico efforts, lawyer referral services ("LRS") and dispute resolution programs and includes administration of the LRS certification process (Bus. & Prof. Code §§6068 subd. (h), 6155).

Provide assistance in matters related to improving access to and delivery of legal services to the public and to coordinate meetings of the Legal Services section, the purpose of which is to examine issues related to delivery of quality legal services to low- and middle-income people in the State. Among its activities in its area of concern or expertise, the section may consider, draft and recommend legislation. However, Legal Services section administrators do not participate in any of the legislative activities of the section. Legal Services Administration also provides administrative support to the Volunteers in Parole program ("VIP"), which is funded by the California Department of Corrections ("CDC") and California Youth Authority ("CYA"). VIP supplements the rehabilitation services of CDC and CYA by recruiting attorneys to volunteer and engage in one-to-one or group relationships with young parolees. The volunteer attorneys serve as role models to impart a better understanding to the parolees of the relationship of the individual, law and society. Therefore, the entire cost of Legal Services Administration is fully chargeable.

_______________

Bar Relations -- The purpose of the Office of Bar Relations is to afford program support and technical assistance to local, minority and specialty lawyer organizations to promote the access and participation of all lawyers, especially women, minority and young lawyers, in the administration and governance of the State Bar and in its programs and activities.

Provide administrative support to the Board of Governors for Board appointments to State Bar and other legal entities. This includes drafting recruitment articles, receiving and processing applications and notifying applicants and committee members (Bus. & Prof. Code §6029).

Foster a greater understanding of, and encourage interest among, recently admitted and young lawyers in the programs and activities of the State Bar. Provide a forum for the exchange of ideas in order to assist the State Bar in its programs (Bus. & Prof. Code §§6013, 6013.4).

Foster communication between and among the State's voluntary local bar associations and the State Bar. Work to increase participation of women and minority attorneys, which includes groups such as ethnic minorities, gays and lesbians who have been underrepresented, in the administration and governance of the State Bar and in its programs and activities.

Coordinate and supervise the activities and projects within the Bar Relations program.

Coordinate the work of locally based voluntary bar associations with one another and with the State Bar. In addition to its year-round outreach program, the Executive Committee, composed of volunteers, conducts the two-day Bar Leaders Conference in February where representatives of California's bar associations are invited to participate in leadership workshops on bar programs and administration.

_______________

Communications -- The purpose of the Communications program is to provide information to the public and membership about the State Bar, law, lawyers and the legal system. The objectives within the communications function are: (1) to promote increased public awareness and understanding of the law; (2) to provide ongoing information to the news media about the State Bar, law, lawyers and the justice system; and (3) to publish newsletters, brochures and other materials offering timely information about the State Bar, its activities and programs, educational opportunities, topical legal issues and general developments in the practice of law or law-related activities and organizations (Bus. & Prof. Code §6092.5 subd. (h)).

_______________

Allocated Administrative Overhead -- General and administrative expenses are incurred to provide staff and operational support to all programs and activities of the State Bar in the following areas: human resources; finance; financial planning and analysis; data processing operations and development; printing; word processing; purchasing; membership records and certification; member billing and elections; building management; law library and archives; mail; legal counsel and advice; and the formulation, implementation and administration of policies through the Board of Governors and Executive Offices.

General and administrative expenses are allocated based upon the ratio of the program's expenditures to total program expenditures paid by mandatory dues.

1. Executive Offices	$ 1,850,750
2. General Counsel	3,133,771
3. Office of Finance and Financial Planning	1,173,399
4. Office of Human Resources	1,096,773
5. Office of Administrative Support - Los Angeles	1,414,891
6. Office of Support Services - San Francisco	5,335,120
7. Office of Real Property (includes lease space cost)	4,172,040
8. Overhead/Interfund allocation	(2,690,119)
9. Client Security Fund Administration	738,026
10. Building Fund	39,608  覧覧覧
Total allocated administrative overhead	$16,264,259  ===========

Description of Categories - Nonchargeable Programs

The State Bar considers the following activities and undertakings to be nonchargeable:

Administration of Justice

The Conference of Delegates ("Conference") gives California's local voluntary bar associations an opportunity to propose, analyze and adopt their own resolutions for proposed legislation or rules of court dealing with the administration of justice, regulation of the legal profession, and the role and activities of the State Bar and its Board of Governors. Some of the Conference's resolutions include matters that are political or ideological and may not be germane to the State Bar's purpose.

The 1995 operating expenses of the Conference, which constitute approximately 19 percent of the operating expenses of the Office of Bar Relations and allocated general and administrative expenses, represent the direct and some indirect costs of the Conference's activities. This percentage of operating expenses of the Office of Bar Relations is based upon relationships of program expenses that the Office oversees.

The legislative function of the Conference has been determined to be approximately 67 percent of its total activities. Thus, the cost of the legislative activities would be approximately 67 percent of the total cost of the Conference's activities.

The legislative cost represents all legislative activities of the Conference. To obtain an average cost of a resolution filed for consideration by the Conference, the number of resolutions filed in 1995 is divided into the cost of legislative activities. The number of resolutions filed in 1995 was 160, of which 24 have been determined by the State Bar to be nongermane or potentially nongermane. Thus, according to the State Bar's management, the cost of the nongermane legislative activities would be the average cost of a resolution filed multiplied by the number of actual or potential nongermane resolutions filed for consideration by the Conference.

The Conference received nonmandatory fees from the delegates of $58,089. This revenue was earmarked by the Board of Governors to first fund nonchargeable legislative activities of the Conference and then chargeable activities of the Conference. Thus, the cost of nonchargeable legislative activities of the Conference of $58,898 is offset by revenue of $58,089.·

The Office of Governmental Affairs reviews, monitors and lobbies legislation related to the practice of law and the administration of justice. These bills may include legislation that was proposed by the State Bar's sections or committees or by the Conference of Delegates representing local, minority and specialty bar associations. Costs are allocated on the basis of the pro rata percentage of chargeable or nonchargeable bills to total bills proposed. Of the 233 bills sponsored or commented on by the State Bar, 2 were found by the State Bar to be nonchargeable. Thus, according to the State Bar, the cost of the nongermane legislative activities would be the average cost of a bill proposed or commented on by the State Bar through its Office of Governmental Affairs multiplied by the number of actual or potential nongermane bills proposed or commented on.

Administrative Overhead

The Foundation of the State Bar of California (the "Foundation") was formed to obtain grants, bequests and contributions to carry out charitable, educational and other public benefits. The General Fund received reimbursements from the Foundation for salary, benefits, payroll taxes, rent, services from the Office of Finance and other direct operating expenses of the Foundation's executive director.

The Office of Financial Planning served as liaison to the Foundation and provided some bookkeeping services to the Foundation. The Office of Financial Planning has determined that it spent approximately one percent of its budget in this capacity. Thus, the nonchargeable cost to support the Foundation is determined to be one percent of the total cost of the Office of Financial Planning.

The Office of General Counsel provided support to the Foundation. General Counsel spent .06 percent of its budget supporting the Foundation. The nonchargeable cost to support the Foundation is, thus, determined to be .06 percent of the total cost of the Office of General Counsel.·

General and administrative expenses are incurred to provide staffing and operational support to all programs and activities of the State Bar. General and administrative expenses are allocated based upon the ratio of the nonchargeable expenses to total chargeable and nonchargeable expenses.

All expenses not considered nonchargeable are chargeable and include the following:

• Regulation of the legal profession.
• Improving the quality of legal services through the admissions process, attorney discipline, education and development of codes of conduct.
• Evaluating judicial candidates.
• Advising the legislature on pending bills with legal ramifications.
• Lobbying of the State Bar fee bill.
• Publications to inform members about the State Bar activities to the extent that ideological and political activities are not discussed.
• Annual meeting and de minimis social activities that promote harmonious working relationships.
• Litigation related to germane activities of the State Bar.
• Providing legal services and education to promote competence and enhance the availability and quality of legal services.

3. OPTIONAL DEDUCTIBLE AMOUNT

The State Bar has determined that $1.00 (one dollar) may be deducted from the 1997 membership fees for those who may object to political or ideological activities that are not reasonably related to the State Bar's aforementioned purposes. This amount has been calculated by the State Bar as follows: the quotient of net actual and potential nonchargeable expenses divided by total net chargeable and nonchargeable expenses (approximately .033 percent) multiplied by the highest tier of the 1997 membership fee ($458). This results in an optional deductible amount of $.15 which has been rounded up to $1.00 for this purpose.