Fee bill goes in the mail November 15

By the end of this month, all California lawyers — active and inactive — will receive their annual fee invoice from the State Bar. This year’s statement contains a number of important changes from years past, among them:

• The fee for active attorneys for 2006 has been increased to $395 in order to maintain the solvency of the Client Security Fund.
• The fee for inactive attorneys has been increased to $115, the first increase since 1986. 
• The ability to scale fees will be limited to low-income attorneys, rather than high-income individuals practicing law on a limited basis, as was the case in prior years. 
• Lawyers and retired judges who work as ADR neutrals must pay the full fee charged to active members.

The first three changes are the result of legislation (AB 1529 by Assembly Judiciary Committee Chair Dave Jones, D-Sacramento) adopted by the legislature this year and signed into law by Gov. Schwarzenegger on Sept. 22. The bipartisan measure, which was co-authored by both Senate Judiciary Chair Joe Dunn (D-Garden Grove) and Assembly Judiciary Committee Vice Chair Tom Harman (R-Huntington Beach), and enjoyed the strong support of Senate Republican Leader Dick Ackerman (R-Tustin), also extended the bar’s funding authorization for two years for the first time since 2001. 

Bar leaders sought a two-year authorization in order to have the ability to undertake long-range planning and to take advantage of the financial stability such planning affords. Under the bill, dues for active members will increase to $400 in 2007, and inactive dues to $125.

“The bill recognizes that all California attorneys pay the collective costs of the State Bar’s regulatory and disciplinary operations without any cost whatsoever to the state’s taxpayers,” said bar President Jim Heiting. “In 1997, bar dues were $478. Nine years later, they are $83 less, even with the increase.”

The $5 increase in the assessment for the Client Security Fund (CSF), which reimburses clients who have been bilked by their lawyers, restores that fee to the level it occupied from the early 1990s until 2001. The fee was reduced that year to $35 to bleed down a surplus in the fund that occurred because the precipitous drop-off in the bar’s lawyer discipline operation following the 1997 veto of the bar’s fee bill produced a corresponding decline in CSF claims. Since discipline activities were restored in 2000, the number of claims against errant lawyers has increased, and the fund’s balance has declined to the point that it was facing a deficit if the assessment were not increased.

In 2006, inactive members for the first time also will be assessed $10 to support the Client Security Fund. The first increase in inactive fees in 20 years also includes a $25 discipline special assessment and a $5 contribution to the Lawyer Assistance Program, a service for lawyers with substance abuse or mental health problems. That program has been available to inactive attorneys since 2002, and many have taken advantage of it.

The $115 fee is at the midpoint of what other mandatory bars charge their inactive members and will help distribute the cost of the discipline system among the entire membership. “Only five states have lower inactive fees,” said Executive Director Judy Johnson, “and the national average is $113. Inactive members receive most of the same benefits as active members, except the ability to hold themselves out as practicing law.

“On the other hand, they are subject to many of the same obligations, and occasionally wind up as respondents in disciplinary actions or participants in our Lawyer Assistance Program.”

The change in the fee scaling standard was prompted by a state audit last year that showed that many lawyers with gross incomes well above the $40,000 threshold were eligible for scaling under the standard then in effect, even though the program originally was intended to provide assistance to low-income attorneys. “Hundreds of law corporations and LLPs (limited liability partnerships) applied and qualified for scaling under the old statute,” said Starr Babcock, senior executive for member services. The revised law provides for a 25 percent reduction in bar fees for attorneys whose gross income (no longer “income from the practice of law”) is $40,000 or less. The law looks to IRS regulations to determine gross income.

“We think about half of the 20,000 attorneys currently scaling will no longer be eligible to do so,” Babcock said. He noted that scaling, originally designed to be revenue-neutral, reduced revenue for the bar’s general fund by about $2 million last year.

The bar sent a letter Nov. 1 to every attorney who scaled last year, explaining the changes and outlining IRS regulations that determine gross income.

The simplified fee statement will be mailed Nov. 15, and lawyers have until Feb. 1 to pay their fees.

As usual, members have the option to join one of the bar’s 16 sections and make donations to three organizations: the Foundation of the State Bar, the California Supreme Court Historical Society and the Conference of Delegates of California Bar Associations. In addition, lawyers may contribute to the bar’s legislative affairs and elimination of bias efforts by opting not to take a $5 credit in each of these areas.

Directions for completing the statement are on the back side.

The bar strongly encourages online payments as well as online MCLE compliance. Attorneys who have not yet done so may enroll in the My State Bar Profile option on the home page — calbar.ca.gov — using an access code provided on the fee statement to the right of the member’s name, just under the State Bar seal.

By paying a $5 bank charge, down from $9.50 last year, members may take advantage of the convenience offered by online payment.

All members of MCLE Group 2 (last names beginning H-M) must submit a declaration of compliance, also by Feb. 1. Online compliance with MCLE is free and available through My State Bar Profile as well.

The bar will post details of the statement and answers to potential questions on a special online page, calbar.ca.gov/feestatement. If answers cannot be found there, attorneys may call the bar’s Member Services Center at 888-800-3400 or e-mail questions to msc@calbar.ca.gov.