July 2008

Growing Pains: The Cost of Doing Business

by WSBA President Stan Bastian

As an integrated, unified, and mandatory bar association, the WSBA has many duties, responsibilities, and functions including bar examinations, admissions, character and fitness reviews, member services, CLE compliance, and discipline. These are all expensive programs, and most are funded primarily from the WSBA general fund.

This year, the WSBA is facing a significant budget deficit and the Board of Governors must soon make some important decisions regarding finances and member license fees. Since 2004, these fees ($414 in 2008) have increased by only two percent annually. Unfortunately, this increase has not kept pace with inflation and the cost of doing business. Expenses are increasing at a faster rate than revenues, causing a budget deficit. In addition, as the WSBA membership continues to rise, so do demands for additional member services.

The expected budget deficit was caused by five primary factors:

1. Cap on License Fees

The general fund’s primary source of revenue is license fees; in fact, approximately 73 percent of the general fund budget is supported by these fees ($11 million per year). License fees for fiscal years 2007 through 2009 were established back in 2005, and at that time projections were made regarding both revenue and expenses. However, the economic landscape has changed significantly and expenses increased beyond what was predicted three years ago. Expenses for office rent, staff salaries, and staff benefits all increased faster than expected.

2. Rent

The cost for office rent has increased 40 percent since 2005. This was not unexpected, and in fact two things were clear when the 2006 office move was first contemplated. First, more space was necessary, regardless of whether the WSBA moved or stayed in the old location. The Bar Association had clearly outgrown its space and our staff had been in cramped quarters for several years. An additional 17,000 square feet was acquired when the office was moved into the new location at Puget Sound Plaza. Second, higher rent was unavoidable. Member surveys indicated a desire to keep the WSBA offices in downtown Seattle, but staying at the old location in the Fourth and Blanchard Building would have resulted in much higher rent rates than under the old and expired lease. Fortunately, the rent that the WSBA is now paying is below market rates, and this is because the new lease was negotiated at the bottom of the local rental market (in 2003).

Unfortunately, the cost for commercial leases has almost doubled since 2003, and the WSBA must plan for the possibility of significantly higher rent when the current lease expires in eight years. As a result, the WSBA may have to move its offices out of downtown Seattle at the end of its current lease.

3. Staff Salaries

The WSBA is a strong and vital organization in large part because of our dedicated and professional staff. They are a valuable and important asset, and they are responsible for managing most of the Bar Association’s work and programs. However, a professional and loyal staff requires competitive compensation. The compensation system was thoroughly reviewed in 2006, and it was discovered that staff salaries had fallen behind — WSBA staff were significantly underpaid in relation to comparable positions in the market. Consequently, necessary adjustments were made and salary costs have increased by 30 percent in the last few years.

4. Benefits

Staff benefit costs have also increased — over 62 percent in the last three years. This was fueled by increases in overall staff salaries, increases to the cost of retirement contributions to the Public Employee Retirement System, and increases in the medical insurance premiums for WSBA employees. The Bar Association has no control over either the amount of retirement contributions or the amount of insurance premiums, because these rates are set by the state.

5. Business Costs

Expenses have risen for the numerous committees, boards, and panels which help develop and oversee WSBA policies, procedures, and regulations. The cost of travel is the primary culprit, and it is no surprise that as oil prices continue to rise, so does the cost of food, lodging, office supplies, and equipment.

The Board of Governors and staff are taking the necessary steps to address this fiscal situation. We are realigning and reducing WSBA programs to save money, and we have established reserve funds and long-term investments in anticipation of higher expenditures in the coming years. We have also started a comprehensive review to limit and focus WSBA efforts to serving key guiding principles.

Over the next few months, the Board will begin discussing these budget issues, and those discussions will raise difficult questions and choices. The Board does not want to raise your license fees, but unfortunately, a raise may be necessary. This decision will not be easy, but I assure you that it is being taken very seriously. We understand the universal desire to keep bar dues as low as possible and we share those views. We also believe the WSBA must maintain a professional and competent staff to serve members, the court, and the public.

The Board and I are committed to maintaining the WSBA’s fiscal integrity. But we are also committed to improving the legal system for individuals throughout Washington and to maintaining the highest levels of integrity within the bar. 

WSBA President Stan Bastian can be reached at stanb@jdslaw.com or 509-662-3685.