In 1956, the Wisconsin Supreme Court established the State Bar of Wisconsin as an association of Wisconsin licensed attorneys to fulfill stated purposes found in Wisconsin Supreme Court Rule (SCR) 10.02(2).
The Court entrusted the members of the State Bar’s Board of Governors, as the elected leaders of the integrated organization, with the authority and fiduciary responsibility to make informed decisions in carrying out those purposes.
Through SCR Chapter 10.02, the Court granted the State Bar leadership authority to, for carrying out the purposes for which it is organized “enter into contracts, acquire, hold, encumber and dispose of real and personal property.”
For the last 67 years, membership dues have been a major source of revenue. Yet, to sustain its operations over time and to permit it to successfully achieve the stated purposes in SCR 10.02, the State Bar has always relied on non-dues revenue. Currently, 55% of the State Bar’s revenue is from non-dues sources. All membership dues are used each year, as are the majority of the net income gained from non-dues-based activities, plus other revenue sources like investment income, to fund the activities of the State Bar.
The State Bar, like many other businesses, has sought to instill best business practices throughout its history. As such, and as it has been able to do so, it has built reserve dollars to provide for unplanned events (a rainy day fund), for investments in the State Bar building and/or equipment including technology, and for the pursuit of business opportunities that would make good financial sense for the organization yet fall outside the constraints of the State Bar’s annual operating budget.
Per a November 2022 Forbes article, “A nonprofit in good financial health is one that has enough money to cover its operating expenses, and also enough savings or reserves that it can successfully face unexpected events and invest in strategic areas for the future.”
For many businesses, a best practice is to have 3, 6, 9, or more months of operating expenses in reserves. The State Bar has only 5 months of reserves. And yet, in speaking about “best business practices,” the State Bar currently does not have a means to safeguard those assets from challenges.
Recent State Bar leadership has felt strongly that this is a situation that cannot exist indefinitely – it needed to be researched and addressed. A small work group was formed under former State Bar President Chris Rogers (2018-19). Over the last year, the results of that very extensive research and strategic thinking has emerged and is now being brought forward – what is truly thought to be the best solution for the organization and on behalf of its members.
The Board of Governors is considering a proposal to establish a special purpose trust, permitted under Wisconsin’s Trust Code, that places certain assets into the trust and provides insulation and safeguarding of those assets from outside challenges.
The purposes of the special purpose trust would mirror the purposes of the State Bar. Trustees would administer the trust in accordance with those purposes, and trust protectors would ensure that the trust achieves those stated purposes.
All initial trustees and trust protectors would be present or former elected officers of the State Bar, as well as the executive director.
Under the proposal, some of the State Bar’s reserves, which is less than five months of operating expenses given the State Bar’s annual budget, would be placed into the trust, while adequate short-term reserve dollars, all day-to-day operating funds, the building, and all intellectual property would be kept
outside the trust, allowing the State Bar to carry out its business just as it does now.
Although the assets placed within the trust would then be property of the trust to ensure the safeguarding of those assets, an application/award process would permit the trust to grant funds to the State Bar in support of those stated State Bar purposes.
At its meeting on June 14 in Milwaukee, the State Bar’s Board of Governors will consider the proposal to create a Special Purpose Trust to preserve and protect a portion of the State Bar’s reserve assets, in furtherance of its fiduciary duty.
Members should direct any questions concerning this proposal to their elected representative(s) on the State Bar’s Board of Governors.
