To the State Bar Board of Directors:
This memorandum is my response to the
December 4, 2003, request of the Board's Committee on Legal Services
to the Poor in Civil Matters for a transfer of $1,350,000 from the
State Bar's funds, specifically the Reserve Fund, to the Texas Equal
Access to Justice Foundation for the benefit of the three Texas Legal
Services ("LS") organizations, consisting of Legal Aid of NorthWest
Texas, Lone Star Legal Aid, and Texas Rural Legal Aid (now called
Texas Rio Grande Legal Aid), which I will refer to as "the Big 3."
This is allegedly to bridge a claimed "shortfall" of $2.7 million in
the combined budgets of the Big 3 LS organizations. This is a
follow-up to a similar memorandum I submitted on January 22, just
before the January 23, 2004 Board meeting and has been updated by the
information I have learned since then.
For the reasons I put forth below, I am opposed to the request and I
would remain opposed even if the LS organizations reduced their
request due to obtaining other funds (as appears to be the case since
the demand was originally issued).
I have reviewed a variety of materials, including:
In addition I attended by phone conference two of the meetings of the Work Group appointed by the Board to report on this issue.
In the body of my comments I will refer to these materials and, where possible, will quote or display relevant portions of the the various documents, on the assumption that complete sets of the documents have already been made available to the Board from other sources.
The reasons for my opposition to this request are these:
1. The request is misleading.
The resources available to all Texas legal services organizations is less than they received in 2003 but more than in prior years. This has been characterized as a "shortfall" which results in a funding "crisis" and an "emergency." It is none of those things.
First, according to this chart submitted to the Board at its January 23, 2004 meeting, the LS organizations are getting more money than they have ever gotten except for 2003. Further, their combined resources are significantly greater than the State Bar's budget and have been for several years.
(Note that the Big 3 LS
organizations' own numbers for the last five years are somewhat
different, showing that their combined revenue for this year is
slightly less than the two preceding years.)
Second, it is not the first time nor even the first time in a long
time that legal services have faced budget constraints. According to
the comments of the Big 3 LS personnel who attended a February 19,
2004 meeting of the Work Group, they had a cutback requiring layoffs
in 1997, so dealing with reduced allocations is not
unprecedented.
Third, the personnel layoffs of the Big 3 are due in significant measure to Federally mandated consolidation. On February 19, the heads of the Big 3 LS organizations talked about how Legal Services Corporation, the Federal funding agency for legal aid nationwide, directed that nine Texas legal services organizations consolidate into three. According to their presentation, the layoffs have taken place, not over the last few months, but over the last two years. Perhaps as many as one-half the layoffs were due to the requirements of the consolidation, including specifically the problems faced by some of the organizations with salary equalization or parity among the employees of the consolidated entities. One specific example was presented by Texas Rio Grand Legal Aid: it lost 23 of its 48 total layoffs in order to free $1,000,000 for salary equalization. (That, by the way, is an average salary of over $43,000.) The LS organizations claim they have lost a total of about 100 of their personnel. Of those fewer than 30 are lawyers. With some of those organizations the number of lawyers has increased at the expense of other staff over time as shown in this chart prepared by one of the Work Force members from LS data:
Workforce Data -- Staffing
Source -- Legal Services Corporation website for Grantee &
Program Profiles
Prepared by Joette Furlough on March 23, 2004
|
Legal Aid of NorthWest Texas |
|
1999 |
2000 |
2001 |
2002 |
2003 |
|
|
Attorneys |
39 |
42 |
46 |
75 |
78 |
|
|
Paralegals |
3 |
1 |
2 |
6 |
6 |
|
|
Other Staff |
48 |
49 |
51 |
83 |
81 |
|
|
Total Staff |
90 |
92 |
99 |
164 |
165 |
|
|
|
|
|
|
|
|
|
Lone Star Legal Aid |
|
1999 |
2000 |
2001 |
2002 |
2003 |
|
|
Attorneys |
33 |
39 |
41 |
74 |
68 |
|
|
Paralegals |
4 |
4 |
5 |
19 |
11 |
|
|
Other Staff |
23 |
27 |
28 |
74 |
57 |
|
|
Total Staff |
60 |
70 |
74 |
167 |
136 |
|
|
|
|
|
|
|
|
|
Texas RioGrande Legal Aid |
|
1999 |
2000 |
2001 |
2002* |
2003 |
|
|
Attorneys |
38 |
40 |
48 |
105 |
109 |
|
|
Paralegals |
26 |
25 |
26 |
58 |
50 |
|
|
Other Staff |
44 |
41 |
43 |
101 |
88 |
|
|
Total Staff |
108 |
106 |
117 |
264 |
247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*On the 2004 updated LSC website's Grantee/Program Profile the 2002 numbers were changed to: |
|
|
|
|
|
|
|
|
|
Attorneys |
118 |
|
|
|
|
|
|
Paralegals |
67 |
|
|
|
|
|
|
Other Staff |
135 |
|
|
|
|
|
|
Total Staff |
320 |
|
|
|
Fourth, if you examine the causes for the "shortfall" claimed in the Legal Services Committee Chair's letter of December 4, 2003, you find these: decreased interest rates on IOLTA funds and reduced federal funding. Because of consolidation, these are not the only or perhaps even the most significant causes, but even if they were, these are exactly the arguments used to raise filing fees on litigants with the 1997 filing fee add-on legislation. If fact, we have heard these same arguments since at least 1993 to justify various schemes to raise additional money. These are old issues -- not emergencies or crises. More importantly, these decreases in funds and funding sources have been all but predictable for almost a decade. The predictable decrease is even noted in this excerpt of John Jones's August 15, 2003 Access to Justice Commission report to the Texas Supreme Court:
2. The Legal Services organizations have not budgeted responsibly.As indicated the Big 3 LS organizations by themselves collectively have a budget larger than the State Bar. Examine these numbers which they presented to the Work Group on February 19:
In spite of these substantial resources, their budgeting has two major flaws:
(a) They have run deficits for the last three years and carry a budgeted deficit for this year. By their figures, the last time they stayed within their means was 2000.
(b) I found no indication that the LS organizations provide for budgeted reserves of their own as the State Bar must. The comment of one of the LS directors to the Work Group on February 19 was that they spend all they get. If you examine just the total expenditures of the Big 3 LS organizations (above) you see that over the last five years they range from $37 million to more than $41 million. The State Bar's auditor, Lester Sprouse says the usual reserve criteria for an organization of the size of the Bar is two to four months of expenditures. The following clip is from his March 4, 2004 memo to Michelle Hunter:
This is in addition to funds that are needed for fixed asset replacement and construction and the development of new programs.
By that criterion and limiting our examination to just the expenditures of the Big 3, they should have been carrying combined reserves of not less than $6,000,000 and as much as $13,300,000. If they had reserves, there would be no need for their request/demand on us.
If, in fact, these organizations carry no reserves in light of their resources, I see no justification for these organization's claim that it is proper to ask for the Bar's reserves. Moreover, without some more diligent budgeting by the LS organizations and a change in the attitude that they spend all they get, I have little confidence that these organizations will not be back in the same position in 2005 or later, even after they receive their largesse from the Pro Bono Tax.
A similar attitude seems to carry over into the area of accountability. When asked directly on February 19 what the LS organizations would do about paying the Bar back for this "bridge," it was quite clear they had no intention of doing so.
Finally, one of the members of the Work Group, Joette Furlough, has found by studying Legal Services Corporation figures that the Texas LS organizations are notably less efficient than their counterparts in other states in dealing with their caseloads. The three Texas LS organizations spend more per case and close few cases per 10,000 poverty population than the national average. A chart showing these figures has been submitted to the Board to be included with this memorandum.
The unfortunate fact is that these organizations have either failed to budget appropriately to their means or just don't wish to. All of the other public and semi public organs of the State -- not to mention most practicing lawyers -- have had to live with tightened or reduced budgets the last couple of years. It is impractical as well as unfair to subordinate the already squeezed budget of the State Bar or give short shrift to its long-term needs to feed organizations who do not wish to wait until next fall for the Pro Bono Tax.
3. The State Bar cannot afford to dissipate its Reserve Fund in this way.
We may not have as much as we think. A five year study of the Bar's surplus funds was presented to the Work Group in the form of an Excel spreadsheet, which is attached. It shows that the budget surplus at the end of each fiscal year -- that is, the money which would increase the Reserve Fund -- has typically been spent by year end. The Reserve Fund currently stands at approximately $5.5 million. The budget surplus which was originally projected to raise the Reserve at the end of this fiscal year is now projected to be zero, leaving no change in the current Reserve Fund.
Our current reserve is already inadequate. The State Bar's auditors established the current minimum Reserve of $4.6 million several years ago. As indicated above, the State Bar's auditor says the usual formula for reserves for organizations like the State Bar are 2-4 months of operational expenses. Under that criterion, the State Bar's current reserve fund should be $5.2 - $10.4 million as noted by this excerpt from Michelle Hunter's memo of March 10, 2004:
We already have an inadequate reserve -- and that is only if there were no looming emergencies for the State Bar, but there are. For example: according to a study being prepared by the Board's own facilities committee, the amount allocated to the repair and renovation needs of the State Bar's own building will fall short of the building fund by $1.4 - $1.6 million as noted in this additional excerpt from Michelle Hunter's memo:
As another example: the Bar's technology program started over four years ago is in need of serious update.
It would be irresponsible for the Board to spend money it may not have on a cause whose legitimacy is in doubt when our own facilities are in such dire need.
4. Granting this demand is unfair to the lawyers of this State.
Members deserve a real hearing on this issue and they have not gotten it. The money requested by these three organizations belongs to the members of the State Bar. The request has been made that funds come out of the Reserve Fund which, as most lawyers understand it, is being held for capital expenditures, upgrades to the facilities of the State Bar, and emergencies of the State Bar. The members of the Bar -- who have no option about whether to be members or to pay all of the dues and fees which fund the Bar's activities, including specifically the Reserve Fund -- have almost no knowledge of this issue. Only a handful of the Bar's members outside the Board have any knowledge, much less a full context of knowledge on which and by which to express to their representatives an opinion as to whether this request constitutes a reasonable or appropriate demand on their resources. Until they have reasonable notice and an opportunity to examine the various points of view and express it to their representatives, no such allocation is appropriate.
The timing of the request bypasses member input. The State Bar's budget is adopted at the April meeting of the Board of Directors, but that follows months of careful and probably stressful work by members of the Board. The last chance to review the budget in a public forum before the adoption in April, has typically been the January meeting. The decrease in funding to Legal Services Organizations has been developing for a long time. There is no reason why this issue could not have gotten considerably more lead-time and dissemination to the membership. Presenting it as a demand to the Board under threat of litigation in January subverts the budgeting process and guarantees that the constituency of the State Bar cannot be reasonably informed about the issue. The belligerence of Mr. Harrington's January 15 and February 2 letters are prompts to hasty action and ill considered acquiescence.
We already pay an extra tax. Lawyers already pay an involuntary assessment for the benefit of Legal Services. The last legislature, in renewing the State Bar Act, amended it to impose what has become appropriately known at the "Pro Bono Tax." This is the additional mandatory fee of $65 from each nonexempt lawyer which is paid directly to TEAJF. The largest beneficiary of TEAJF is the LS organizations.
The imposition of this tax on only our profession is not all that is wrong. The Pro Bono Tax originated with Texas Rural Legal Aid, one of the proposed beneficiaries of this funding demand. The tax has been the explicit legislative goal of the LS organizations since at least January 2001 when they set it as a goal in a presentation to the Texas Supreme Court. Moreover, their legislation exempts them, as employees of 501(c)(3) organizations from paying the tax. The LS organizations working through the Texas Legal Services Center spent between $60,000 and $110,000 paying lobbyists to pass the legislation. The following lobbying information for Texas Legal Services Center for its lobbying expenses in the last legislature is taken from this website:http://www.ethics.state.tx.us/tedd/conlob2003d.htm
Bluntly, these organizations want the Bar's money to cover their budget desires, after they targeted us in the last Legislature for their benefit. These are the same organizations that have overspent their own budgets since 2001.
We already have emergencies. The Reserve Fund is already subject to the true emergency and capital needs of the State Bar mentioned above. On top of that, there is a current potential for the Reserve Fund to be tapped for such things as the legal costs incurred by the Texas Supreme Court's Unauthorized Practice of Law Committee in prosecuting insurance company staff attorneys for the unauthorized practice of law. If the demands of the Legal Services Organizations were added to the existing list to further deplete the Reserve Fund, it would merely hasten the day when the Board of Directors calls for a dues increase. It would be beyond unfair, if lawyers, who have already been taxed because of these organizations and had their resources called into jeopardy by these organizations, have to anticipate a dues increase because the organizations were given precedence over the Bar's needs and goals.
It is political. It cannot be ignored that funding this request may be a Keller violation. The motive, the goal and the operational timing and intent of the Legal Services organizations is patently political and, at least potentially, overwhelmingly divisive.
5. As a matter of principle, the Bar should not set this precedent.
Despite the maudlin terms in which this request is couched, this request is fundamentally about the funding of organizations, not the dispensing of charity. The unspoken premise of the request is that the end justifies the means. It ought to obvious that the request, its timing and the difficult questions that are ignored or subverted would, if granted, establish a precedent that the Bar and its resources would and should stand liable for the goals of organizations serving their own ends. It is equally wrong that some of the advocates of the request also demand that the Bar develop a long-term plan to cover the "emergencies" of these outside organizations as though they had no responsibility to fund their own reserves. This is a virtual Pandora's box of potential requests and demands from any organization that, seeing that the State Bar does not refuse requests of this kind in principle, will come pleading and demanding the merit of its constituency rather than merit of its actions -- that its ends justifies our means. That would make the State Bar the de facto financial subsidiary of these organizations.
The funding of Legal Services organizations, if it is an obligation of anyone at all, is an obligation of society at large, and should be left to legislative bodies to determine the extent of the burden on society as a whole for these enterprises. It is inappropriate for the Board to attempt to ameliorate the budgetary discomfort -- or irrationality -- of these organizations and thereby set a precedent for future "emergency" funding demands or set the stage for the Bar and its members' needs to be subservient to the "emergency" funding of these and other organizations.
I respectfully suggest that, even
though the lawyers of this state have not been adequately informed
about this issue or given an adequate opportunity to be heard on it,
the legal services organization have been given a more than fair
hearing. Their case is wanting and their request is imprudent and
inappropriate. I request that the their demand and the recommendation
of the Legal Services Committee be rejected.
Respectfully submitted,
Charles Awalt
5412 West Plano Parkway, Suite 100
Plano, Texas 75093