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Hard times are looming for the State Bar, with the release this week of a 2008 budget anticipating a $4 million operating deficit and a serious need to increase annual dues for the state’s lawyers. “Staff expects that the Bar will have sufficient cash reserves at the end of 2007 to absorb this shortfall,” Executive Director Judy Johnson wrote in a budget summary. “However,” she added, “the years beyond 2008 pose a challenge: The Bar may be forced to choose between increasing mandatory member dues and curtailing the services we provide to the membership and the public.” The State Bar Board of Governors’ Planning, Program Development and Budget Committee is likely to adopt the budget during a meeting next Wednesday. The full board is expected to act in July. State Bar officials have long anticipated growing deficits despite a dues increase of $5 in both 2006 and 2007. Active attorneys currently pay $400 a year in dues, far below the $478 charged in 1997, just before then-Gov. Pete Wilson vetoed the Bar’s fee bill out of anger at the organization’s bloated staffing and liberal political positions. About 48 percent of 2008 revenue will come from dues. Even though relations with Sacramento have improved over the years, the Senate Judiciary Committee in May still rejected a State Bar proposal to raise dues by $25 a year for the next three years. Legislators were upset to find out that the State Bar was charging members $10 a year for a new office building in Los Angeles, and had even threatened to order refunds. Legislators also weren’t pleased by an April state audit that criticized the Bar for a lack of strategic planning and warned that the organization could suffer a $12 million shortfall by 2010. The amended State Bar fee bill was passed by the Senate but hasn’t been adopted yet by the Assembly. Next year’s budget would be the second in a row with a deficit. The current budget is operating with a $3 million shortfall. “Surplus is eventually going to exhaust itself,” Deputy Executive Director Robert Hawley said Tuesday. “It’s like you have a savings account, but you are spending more money than you have in your paycheck, and that gets you through the year, but eventually the savings don’t grow.” The 2008 operating budget is projected to be about $141 million, about $8 million higher than 2007. Fifty-one percent of the money goes toward personnel costs � salaries, health insurance, retirement and other employee benefits. The single largest expenditure is nearly $39 million for the office of the chief trial counsel, which is responsible for prosecuting attorney discipline cases. That amounts to 24 percent of the total budget. In the budget summary, Johnson states that the State Bar’s best response to its financial woes “will be to ensure that the Bar’s resources are focused on its highest priorities, that those resources are employed efficiently and economically, and that all of our stakeholders � members, legislators and the state Supreme Court � can clearly perceive that this is the case.” But Hawley said the plain fact of the matter is that annual dues will have to be raised in the near future. “Our preference is to have minimal or reasonable increases averaged out over several years as opposed to keeping [the rate] flat and then having a huge spike,” he said. “At some point, you’ve got to deal with the fact that the money is going to run out.” Hawley said the State Bar has taken steps over the years to work with the Legislature, the state’s lawyers and the public. For example, the Bar has about 550 employees, compared with the nearly 800 at the time of Wilson’s veto. The controversial Conference of Delegates � a group that takes stances on touchy political issues � is now a separate, private entity. And annual fees have remained fairly flat for a decade. The State Bar, Hawley said, is “a pretty demonstrably efficient model.” He doesn’t foresee layoffs anytime soon, but admits they’re always a possibility. Last year, about 30 employees took advantage of an employment separation plan. “There is no game plan for layoffs,” Hawley said. “But at some point, you look at the numbers and re-establish priorities.”

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