COMMENTARY: Past State Bar President Margaret Hickey: Zales Commentary Not Accurate

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By Margaret Hickey

I write to respond to Atty. Nick Zales, who wrote an opinion letter posted on March 18 on the Wisconsin Law Journal’s website, titled “COMMENTARY: State Bar Board displays ‘irresponsibility, buffoonery and ineptitude.’”

The “commentary” criticizes other members of the State Bar of Wisconsin’s 52-member Board of Governors (Board) for proposing to raise State Bar membership dues after transferring some of its reserve funds to a special purpose trust, instead of using reserves to fund the State Bar’s ongoing operations. It is one thing to be critical of decisions, but another to spread information that is not accurate.

Using Reserves to Fund Operations

I am the immediate Past President of the State Bar of Wisconsin and was President of the State Bar when the special purpose trust was approved in June 2023. I disagree with several of the premises and statements in Atty. Zales’ commentary.

First, it is not good financial practice to use reserves to fund operations. Financial experts recognize that using reserves to fund operations will ultimately deplete reserves while leaving an annual shortfall in the budget. It is the Board of Governors’ policy and practice to only use reserves as a last resort for operations. We have a reserve policy that informs us when and how reserves should be used for long-term or short-term needs.

Open Discussion

Second, Atty. Zales’ statement that “without the knowledge, much less approval of the Board of Governors, a secret group had been planning and spending our money for years to create a special purpose trust and place our members’ money in it” is simply false.

The decision to fund a special purpose trust was not made in secret or by leadership without input from the Board of Governors and members.

Although unique in that it required the advice of legal counsel, the trust concept started as an idea and ultimately moved through the Board of Governors’ regular process for making decisions, including reporting, discussing, and acting in numerous meetings in which Board members were participants.

In September 2021, the State Bar Board of Governors heard a report that a working group was exploring an organizational plan to protect the State Bar’s assets. Atty. Zales attended the September 2021 Board meeting at which this was discussed.

The Board formally heard about the trust concept at its meeting on Dec. 2, 2022. The Board heard more detailed information and engaged in discussion about the trust in subsequent meetings in February and April 2023, leading up to the discussion and vote in June 2023.

Contrary to Atty. Zales’ contention, Board members had more than “a few weeks” to discuss the Trust with members. Board members were free to discuss the trust with constituents as of April 2023, two months before the Board voted on it.

An article, “State Bar Board Considers a Special Purpose Trust to Safeguard Reserve Assets,” was published on May 17, 2023, a month before the June 2023 meeting.

It explained that the Board of Governors was formally considering the special purpose trust at the June meeting and told members “to direct any questions concerning the proposal to their elected representative(s) on the State Bar Board of Governors.”

As noted, Atty. Zales was on the State Bar’s Board of Governors when the Board discussed the special purpose trust in numerous meetings and ultimately approved it by a majority vote.

Again, the decision to transfer funds to the special purpose trust was made after numerous Board of Governors’ meetings – some of which went into closed session to consult with legal counsel – and after a public Board meeting and extensive debate.

Debate, discussions, and background were reported in the State Bar’s June 15, 2023 article, “State Bar Board Votes to Establish Special Purpose Trust, Among Other Actions.”

And contrary to Atty. Zales’ statements, the Trust, its initial Trustees, and the State Bar’s finances are published on the State Bar’s website and made available to all members.

Retaining Sufficient Reserves

It should be noted that while funds were transferred to the special purpose trust, the State Bar retained significant reserves to address any needed short- and long-term issues according to the State Bar’s reserve policy.

Please look at what actually happened: the facts, the timeline, and why the Board of Governors believed that protecting State Bar reserves was in our members’ best interests.

Upcoming Budget Vote

The State Bar Board of Governors will be voting on the budget for next fiscal year at its April 12 meeting. I hope that State Bar members will read all the information available as we debate the next budget. We anticipate a dues increase of roughly 3% of current annual dues, which is less than inflation over the past two years and amounts to $9.

Leadership, the Finance Committee, and members of the Board of Governors take very seriously their fiduciary duty to manage assets responsibly for all members.  While we may pass a budget with an incremental dues increase, it will be done after careful consideration of all options available.

Atty. Zales, a member of the State Bar’s Board of Governors, clearly does not agree with the Board’s decisions on these issues. I respect that.

But the State Bar’s Board of Governors, elected leaders who represent the membership, made these decisions as a majority and after extensive debate. Suggesting the Board’s process was improper is false and misleading. I wanted to set the record straight.