At its meeting March 21–22, the State Bar of California Board of Trustees approved a request for an increase in the 2025 mandatory licensing fee of $125 per active licensee. The request is articulated in one of three statutorily required reports—drafts of which were reviewed and approved by the Board—before their submission to the Legislature on April 1. The Legislature will review the reports as it considers the 2025 fee bill.
“Nearly a year ago, the State Auditor highlighted the State Bar’s unsustainable financial position and called for a fee increase,” said Board Chair Brandon Stallings. “The need has only grown since then and will continue to grow. The State Bar has raised fees and used millions of dollars in building sale proceeds to delay the inevitable. We believe the reports approved today lay out the need in thorough, clear terms, and the Board is committed to working with our partners in the Legislature to ensure that the State Bar has the fiscal means to meet its public protection mission.”
The reports outline the State Bar’s need for $95 per active licensee, or $20 million, to sustain current operations and meet existing obligations, including:
- Lease obligations resulting from the sale of the San Francisco headquarters building;
- Contractual obligations related to merit increases, cost of living adjustments, and information technology (IT) infrastructure; and
- Personnel costs for actual, versus artificially deflated, staffing levels. Personnel costs comprise 88.4 percent of the General Fund.
- Reflected a continued 15 percent vacancy rate and hiring freeze included in the 2023 budget to cut costs. Understaffing was noted in the audit as a concern, affecting the ability of the State Bar to meet key performance metrics. The current proposal reflects a lower vacancy rate of 8 percent.
- Omitted entirely any costs associated with the State Bar’s San Francisco location.
- Increasing staff in the Office of Chief Trial Counsel (OCTC) to improve case processing times and reduce backlogs;
- Funding a Diversion Program to more efficiently and fairly handle low-level matters, allowing OCTC to focus on more serious cases;
- Adding resources to the Complaint Review Unit to reduce its growing backlog and shorten processing time; and
- Fulfilling the planned expansion of the Client Trust Account Protection Program to include compliance reviews and audits.
The proposal also calls on the Legislature to include in future years an automatic adjustment based on the California Consumer Price Index.
Finally, the reports outline options for the Legislature’s consideration to restructure the way in which licensing fees are assessed. Currently, fees are assessed on a predominantly flat basis. The report recommends adoption of a new approach based on attorney practice sector. Under the proposed model, attorneys would experience increases in 2025 from 0 to 97 percent based on their reported practice sector.
The State Bar’s annual attorney licensing fee is set by the Legislature and has increased only once since 1998. The State Bar General Fund, which funds the discipline system and most other operations, has been running a structural deficit, closed in 2024 with proceeds from the sale of the San Francisco headquarters building in late 2023. Without a fee increase in 2025, the General Fund will become insolvent, as all remaining reserves will be depleted.
In other actions at its March meeting, the Board:
- Approved an increase in the annual fees charged to California Accredited Law Schools (CALS). The State Bar has long subsidized the costs of its law school accreditation function by assessing law school fees significantly below costs. As part of an effort to close the deficit in the Admissions Fund, the Board previously approved fee increases for applicants. The increase approved today for the CALS annual fee, to be renamed the Registration Services Fee, will be assessed based on each school’s enrollment numbers. The plan is expected to increase annual revenue by approximately $275,000.
- Approved to circulate for public comment amendments to the State Bar Rules intended to permit the greater exercise of judicial discretion with regard to progressive discipline for attorney misconduct. These changes implement recommendations of the Ad Hoc Commission on the Discipline System.
- Heard a progress report on the second year of the Client Trust Account Protection Program (CTAPP). Here are some highlights:
- Approximately 203,600 California attorneys were required to complete CTAPP reporting.
- By the compliance deadline of February 1, 86 percent had complied, compared to 94 percent in the first year.
- The number of reported accounts increased markedly this year, but the State Bar believes these accounts are still under-reported.
- The two types of trust accounts, Interest on Lawyers’ Trust Accounts (IOLTA), and non-IOLTA trust accounts, hold a combined total of approximately $10.9 billion, according to average daily balances reported by banks and attorneys.
- Because banks do not report information about non-IOLTA accounts, the State Bar has no way to determine when such accounts go unreported by attorneys.
- Analysis of CTAPP data extends beyond dollars and reconciliation. Key risk-related findings so far include the fact that attorneys with two or more IOLTA accounts are likely to receive more complaints and more bank reportable actions (i.e., overdrafts).
- Related to this, the Board approved as a legislative priority pursuing statutory authority for the State Bar to be able to access a complete set of client trust account records pursuant to a CTAPP compliance review or audit. As noted earlier, the State Bar is requesting funding to expand CTAPP to include compliance reviews and audits.