Brown okays new way to bill state for legal services

On March 24, Gov. Jerry Brown gave a present to his replacement as attorney general, Kamala Harris: He signed into law a piece of legislation that could make state agencies more accountable for the money they spend on legal services.

The new law, SB 78, authored by the Senate Judiciary Committee, overhauls the way in which the state Department of Justice (DOJ) bills General Fund agencies for legal services through a revolving fund. The state attorney general serves as the state’s lawyer. The General Fund is the state’s main coffer, with income, sales, insurance and corporation taxes.

Under the new law, agencies will be billed directly for the money they spend — which they then control and, presumably, would ration to the most pressing legal needs.

The overhaul was first suggested by Brown when he was attorney general – he served from 2007 to 2011 – and fits in well with the realignment themes he has been sounding since January as governor. The key provision is on SB 78’s first page: “This bill would delete the prohibition that charges for legal services cannot be made against the General Fund.”

The new law also makes several technical changes to legal and judicial rules in California, slightly raising some court fees, adjusting how the state Judicial Council makes status reports to an oversight panel on its controversial California Case Management System, and redefining which employees of the Office of the Inspector General are considered “peace officers” for pension purposes.

The AG is the attorney of record for state agencies. Traditionally, the Justice Department has served these agencies on what basically amount to a first-come, first-served model. Money is paid into a Legal Services Revolving Fund, which then pays the DOJ for the hours of legal services consumed by state agencies.

The Legislative Analyst’s Office did a two-page analysis in February of a proposal along these lines from Brown. It noted that the Fund “has sometimes not been sufficient to accommodate all of the legal services requested by various state agencies.” In 2008, the DOJ authorized agencies to seek outside counsel “due to a lack of resources.” Outside attorneys, the report noted, generally cost about twice what DOJ attorneys bill: $170 an hour for an attorney, $140 an hour for a paralegal.

The LAO gave qualified support for the idea, noting the current system is “potentially inefficient.”

“State agencies would be likely to spend less money,” it states, and would “better utilize ‘in-house’ attorneys who work directly for state agencies. “In some cases, agencies might also find it more cost-effective to settle some cases early rather than using their limited resources to pay for expensive litigation.”

For an idea that has been kicking around for so long, SB 78 rocketed through the legislative process. The billing portions were amended into a placeholder trailer bill on March 14. It passed both houses on March 17, garnering a total of 22 “no” votes, all of them from Republicans.

It was signed by the governor a week later — without SB 78 ever passing through a committee. But the idea actually did pass through Budget and Fiscal Review and the Senate Rules Committee in February and March as AB 102, one of a plethora of budget trailer bills moved through recently when the legislature passed, and Brown signed, $11.2 billion in budget cuts.

The author was listed as the Senate Committee on Budget and Fiscal Review, chaired by Sen. Mark Leno, D-San Francisco.

“It seems rather logical to make this change,” Leno said, adding “It is completely consistent with the governor’s approach to greater efficiency in the delivery of services.”

This, of course, would involve moving some money around. While hard numbers don’t show up in SB 78, the LAO analysis notes that DOJ attorneys and paralegals billed over 425,000 hours to agencies during the 2009-10 fiscal year alone. About two-thirds of this total went to the Department of Corrections and Rehabilitation (CDCR). The 2010-11 budget provides $53.8 million to pay the AG’s offices for these services.

The proposal the administration submitted to the LAO would appear to cut the DOJ’s budget, while actually increasing the amount of money available to bill to DOJ attorneys by $5.5 million. It would take away $50.1 million in General Fund support from the DOJ itself while providing $55.6 million in new legal support to client agencies.

Of this money, $45.9 million would specifically be set aside for CDCR, according to the LAO report, though this funding level would still demand that Corrections reduce its consumption of legal services by 15 percent from 2008-09 levels. Corrections has been rocked by several lawsuits in recent years, such as a sex abuse case out of the Heman G. Stark Correctional Facility in Chino that has cost the state millions.

The other $9.7 million would be set aside for other General Fund agencies. It identified the Board of Equalization and the Franchise Tax Board as two of the main beneficiaries.

However, the report recommended reducing the money sent to CDCR by $5.5 million, noting that the $45.9 million figure was based on 2008-09 billable hours, a period when Corrections was involved in a larger-than–normal amount of litigation. Other agencies were budgeted at 2009-10 levels.

Many of these numbers showed up in the budget bill itself, SB 69, also by Leno. The Legal Services Revolving Fund is to pay the DOJ $175.7 million to fund its operations. The budget goes on to lay out allocations for many state agencies, with $1.5 million set aside for small agencies, for instance. Leno noted that the budget reduced the amount available to CDCR by $5.5 million, as recommended by the LAO.

Another portion of SB 78 references the 20,000-plus page State Administrative Manual for resolving billing disputes between DOJ and state agencies. This also appears to put the onus on agencies themselves to manage the money, because it limits any disputes to “45 calendar days following the date upon which an undisputed invoice is received by the State agency.”