Cy pres state budget proposal divides traditional allies

SACRAMENTO — A proposed change to legal aid funding in the state budget has prompted a battle between progressive groups that are usually allies.

Under an agreement between legislative leaders and Gov. Jerry Brown, the state would deposit 25 percent of cy pres funds each year in the Equal Access Fund. This fund supports legal aid organizations that provide services to low-income Californians. Cy pres funds consist of unclaimed portions of class action settlements. Supporters of the change say many other states use these funds to support legal aid programs.

Many nonprofit groups that traditionally received cy pres funds from the state say the change could severely cut into their budgets and amounts to a betrayal from longtime allies.

Helping lead the effort to stop the change is Richard Holober, executive director of the Consumer Federation of California.

The Consumer Federation and its allies — a coalition of at least two dozen organizations that also includes the California Nurses Association and Environmental Working Group — sent several opposition letters to legislators in the past few days.

Holober said the change didn't appear in print until a week before the Legislature's deadline to pass a budget. It showed up in AB 103, the Assembly's public safety budget bill, on June 8, and appeared the next day in the Senate's public safety bill, SB 87.

AB 103 passed the Senate floor on Thursday afternoon, and will be headed to the governor.

The change in cy pres funding represents a major policy shift that should go through policy committees, including the judiciary committees in each house. Holober argued.

"My sense is they knew this would be dead on arrival if it had that kind of scrutiny," Holober said.

The cy pres amendment is an example of something budget watchers in Sacramento have seen many times: a last-minute change decades in the making.

"This is an idea that has been kicking around in California for between 10 to 15 years," said Salena Copeland, executive director of the Legal Aid Association of California. The idea received renewed momentum in early May, when legal aid attorneys from California gathered with hundreds of their colleagues from around the country at the American Bar Association's Equal Justice Conference in Pittsburgh.

Copeland said she and at least three other California legal aid attorneys attended a session in which attorneys from other states talked about how they convinced their legislatures to write cy pres funding into law.

"It's something that has been gaining momentum around the country," said Kevin Baker, the legislative director of the ACLU California Center for Advocacy and Policy, who has been one of those leading the effort to allot cy pres funds for legal aid.

To some degree, the two sides are debating the proper interpretation of "cy pres," a French legal term that is usually translated "as near as possible." An opposition letter from Consumers Union describes the concept's origin in "6th Century Rome."

The more traditional use of these funds has been to give them to groups working in the same area as the original class actions, such as consumer rights or environmental justice, Holober said.

The idea is that if money can't be given to the people directly harmed, it should go to groups fighting to make sure no one else suffers the same harm. He said legal aid organizations are already eligible to receive cy pres funds individually, provided they work in the area addressed by a particular class action.

Baker counters that the legal aid groups directly work to help low-income people through the legal system. Their traditional source of funds, the Interest on Lawyers' Trust Account, has largely dried up since the 2008 financial crash because of low interest rates.

He dismissed the idea the change would drive nonprofits out of business. Cy pres funds are hard to predict. The overall amount changes year to year, and usually funds are allotted through agreements written into settlements.

Cy pres "doesn't happen with any regularity you can rely on," Baker said. "You can't build a budget around it."

The Consumer Federation does budget around it, Holober countered. In fact, he said, about half of his group's annual budget comes from cy pres funds in any given year.

Holober argues using cy pres for legal aid plays into the hands of conservative opponents who have been working for years to do away with it entirely. He pointed to comments made by U.S. Supreme Court Chief Justice John Roberts expressing "fundamental concerns" about cy pres settlements.

On June 5, U.S. Attorney General Jeff Sessions sent a memo calling on Justice Department lawyers to "no longer engage in the practice" of agreeing to settlements that include payments to "third-party organizations who were neither victims nor parties to the lawsuits."