Facing budget shortfall, CA Bar says it's 'stretched impossibly thin'

REUTERS/Guadalupe Pardo
  • Investigations, data breach, bar exam costs add to money woes
  • The bar plans to seek an attorney member fee increase in 2024

(Reuters) - The State Bar of California is facing a significant budget shortfall due to rising inflation, cost-of-living increases for staff, fewer lawyers seeking admission and growing costs to administer the bar exam.

The California Bar, the country's largest mandatory state bar association, said on Friday that it plans to dip into its reserves to bridge the projected 2023 budget gap and will ask state lawmakers to approve higher annual fees for the more than 250,000 lawyers in the state in 2024.

“With only one fee increase in nearly 25 years, we find ourselves stretched impossibly thin, even as we do all we can to fulfill our mandated obligation to protect the public from bad-actor lawyers,” said bar Board of Trustees Chairman Ruben Duran in a statement.

The state bar's projected expenses were $257 million in 2022. It has yet to finalize its 2023 budget, but expects to draw at least $3.3 million and as much as $8.1 million from its reserves to cover this year's projected shortfall.

The bar’s financial woes come as the organization is under public scrutiny for its handling of attorney discipline cases—initiated by the downfall of high-profile plaintiff’s attorney Thomas Girardi. Girardi was a founder of law firm Girardi Keese, which dissolved in early 2021 amid allegations that he stole more than $2 million in client settlement funds.

The bar launched an investigation of its handling of Girardi and reported in November that he was the subject of 205 attorney ethics complaints between 1982 and when he was disbarred in June, more than half accusing him of mishandling client funds.

Girardi has not responded to the allegations and did not participate in the disciplinary proceedings with the state bar, but bar leaders said they have stepped up their attorney oversight efforts in the wake of the scandal.

The cost of disciplinary case audits and investigations added to the bar’s 2022 budget shortfall, as did a February breach that exposed confidential data on 260,000 attorney discipline cases online, it said.

San Francisco’s declining commercial real estate market has also dealt a financial blow. The bar put its 200,000-square-foot building up for sale in December for an undisclosed amount but noted that its appraised value fell 15 to 20% over the past year. The building has not sold.

The bar’s lawyer admissions arm has been a financial drain in recent years, with revenue generated by the bar exam and admissions fees declining 30% since 2018, it said. That decline is due in part to fewer lawyers seeking admission and taking the bar exam, which has also become more expensive to administer in recent years.

California-licensed lawyers currently pay a $510 annual fee, which includes a $71 increase adopted in 2020. At least 18 states have higher annual fees, including places like Idaho and Tennessee that have a lower cost of living, the bar noted.

It did not disclose the amount of the fee increase it plans to seek for 2024.

Read more:

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California bar hires 'public trust liaison' after lawyer ethics scandals

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Karen Sloan reports on law firms, law schools, and the business of law. Reach her at karen.sloan@thomsonreuters.com