Oregon State Bar Bulletin AUGUST/SEPTEMBER 2014
A Business, or a Service?
By Tom Kranovich
Last month I referred to bar services and products such as BarBooks, Fastcase, lawyer referral services and CLE programming as being part of the bar’s efforts to meet its statutory mission of “advancement of the science of jurisprudence and the improvement of the administration of justice.” I emphasized that the programs provided to carry out this obligation are discretionary and, accordingly, potentially the most vulnerable to reduction or elimination. From last month’s article you know that the Board of Governors is reviewing all of the bar’s programs and services, beginning with the OSB CLE Seminars Department, to assure that bar resources are used appropriately and efficiently.
Historically, the Board of Governors has set policies and bar staff has implemented procedures that have not only maintained but increased services to the membership. Through the exercise of sound fiscal decisions, new services, such as BarBooks and Fastcase, have been provided to all members, statewide, without any fee increase or assessment. Through the program review process, the board and bar staff reduced expenses and made relevant programs more efficient to the degree that there has not been a fee increase in 10 years.
Our program reviews have focused on service programs that generate supplemental income separate from annual membership fees. As a result of earlier program reviews, the board eliminated the printed membership directory and decided to make BarBooks a member service, foregoing an earlier subscription model (and the associated revenue) to make sure this valuable service and resource was available to all members. Other than occasional (and diminishing) laments to bring back the printed directory, no one is proposing we do anything differently with bar publications.
Several years back, the lawyer referral service went through a stringent review and the flat-fee registration system was changed to a percentage recovery system. Until that time, the Lawyer Referral Service had been running at a $240,000 yearly deficit. Lawyers who participate in the LRS program have the potential of making money from the referrals generated. Accordingly, changing to a percentage system seemed a more equitable way to minimize and recover the bar’s costs for the service of connecting potentially profitable clients with proficient attorneys. While the LRS deficit has not yet been eliminated, it has been significantly reduced and continues to shrink at a rate greater than what was originally forecast.
Of the bar’s remaining revenue-generating services, at least for this year’s board, the discussion on CLE seminars has been the most protracted and, dare I say it, contentious topic. As of the July meeting, the board seems to have reached a consensus that the bar should continue to provide CLE seminars to its members. The unresolved issue under discussion is: should the bar provide CLE seminars on a strict business model, or should the bar subsidize CLE seminars as a service to members?
Unlike lawyer referral, continuing legal education is mandatory (although there is no requirement to obtain CLE credits from the OSB). Like lawyer referral, the CLE seminars program has never “run in the black,” and the CLE seminars department is now under similar scrutiny as was the LRS program
. The questions before the board are 1) should we take steps to require the CLE seminars department to run “in the black” as a business model (and if we cannot, should the department be eliminated?); or 2) should we continue to “subsidize” CLE programs as a bar service, albeit after implementing as many efficiencies as are reasonably possible? To answer these questions, we need look at the circumstances defining the deficit, the limitations preventing the CLE seminars department from minimizing the deficit and the prior policy decisions that have promoted, contributed to and/or exacerbated the situation.
Defining the deficit. The OSB CLE Seminars Department produces and markets 45 to 55 programs a year. Of those, 18-20 are co-sponsored with sections and other bar groups in multiple formats that provide convenient statewide participation options, including: live webcasts; DVDs; online, on-demand video; and audio-only formats. In 2013 the CLE seminars department generated revenues of $984,855 with direct expenses (staff salary and benefits, materials, promotional and venue expenses) of $832,258, for a net revenue of $152,597. The department made more than it cost in direct expenses but the analysis does not stop there.
After allocating the department’s share of indirect costs it had a net expense of $230,000. Indirect costs include the department’s percentage of building floor space and pro rata allocations for I.T., human resources, creative services and other “overhead” expenses. Eliminating the department would only cause its share of the indirect expenses to be reallocated back against the remaining departments while at the same time giving up the $984,855.00 in revenue that it brought in last year.
Competing interests. Although the bar was once the primary provider of continuing legal education for members, that is no longer the case. Many bar-related groups such as the Oregon New Lawyers Division, bar sections and the Professional Liability Fund offer discounted or free CLEs to their members. There is a myriad of other nonprofit and for-profit CLE providers in the market, some who offer online CLE “blocks” of 45 hours of CLE for under $200. I offer no opinion on the quality of such “block” programming, but I recognize that for our under-employed attorneys or others in tight financial circumstances, these offerings are a godsend. Similarly, while most other states require a certain percentage of credits to be earned in settings that allow participation (live programs, live webcasts and moderated replays), our board and the court have historically been reluctant to do the same lest it make meeting MCLE requirements more onerous for members, especially those in rural areas.
Past policy decisions. The board does what it can to promote the availability of low cost CLEs. Currently, if someone buys or streams an online OSB program, anyone else can watch it and claim credit for having seen it without paying for its use. Law libraries offer CDs of OSB CLEs for no charge. Additionally, over the years the board has adopted “complimentary admission” policies to support member involvement in certain events (serving on CLE panels, grading bar exams, teaching law school classes, participating in the New Lawyer Mentoring Program) or in recognition of certain status (judges and their staff, 50-year members). The board also promotes and subsidizes the CLE offerings of our sections by charging less than what it costs us for support services, especially the handling of checks by our accounting staff. We also try to minimize CLE costs for those providing low-cost or free legal service for underrepresented people. From a public service point of view and as a policy matter, this all makes sense, but from a break-even business point of view, revenue is not being optimized.
Considerations to be discussed (not comprehensive or exhaustive):
- Should the bar stop offering CLEs that have historically proven unprofitable because they relate to less common practice areas of law?
- Should we require that a minimum number of MCLE credits come from seminars with program formats that allow live interaction among participants?
- Should all sections be required to use OSB support services for their CLEs and if so, should the cost to the section be directly proportionate to OSB’s cost?
- Should all sections be required to provide a certain percentage of discounted or free CLE?
- Should our pricing take into consideration the lack of availability for CLEs in remote areas of the state?
- Should the bar continue to offer free registration for 50-year members, active pro bono members, and judges and their attorney staff?
- Do our current policies and efforts to hold down CLE prices help keep down the prices from outside vendors and, if so, should that be a concern? What will happen to outside vendor prices if the OSB is no longer in the market?
- Should MCLE credit be given for listening to a CD for which the listener has made no payment?
- Should OSB be more stringent on quality control and exercise more rigorous MCLE approval criteria for all CLEs regardless of who puts them on?
The bar staff has been diligent in finding ways, consistent with board policy, to efficiently deliver quality CLE programs at the lowest cost possible while at the same time seeking to maintain or increase our market share. Expect to see some new products and new delivery platforms in the next year or so, including more emphasis on live webcasting so lawyers can participate remotely in real time for more seminars. We are also watching developments in other states, many of which are seeing declines in CLE revenue despite more business-oriented policies.
We on the board will continue our review. Are we in the business of providing CLEs or are we providing CLEs as a member service? Are CLE seminars an essential part of the bar’s core mission in providing necessary services for the benefit of the public and the membership, or are they an opportunity to promote the bottom line?
Write me at firstname.lastname@example.org or send a letter to the editor. I invite you to weigh in.
ABOUT THE AUTHOR
OSB President Tom Kranovich practices law in Lake Oswego. Reach him at email@example.com.