Legal Aid's Chief Attorney Expresses Gratitude for IOLA Refunding, But Points Out Loss of Federal Stimulus Money Will Impact Services
WEDNESDAY, MAY 25, 2011

The State's Interest on Lawyer Account (IOLA) Fund announced it will continue to provide $21.3 million in grants throughout the State, thanks to an infusion of $15 million from the Judiciary budget. Steven Banks, Attorney-in-Chief of The Legal Aid Society, told the New York Law Journal that "we are very grateful, but even at that re-funding level, we are only able to help one out of nine New Yorkers who come to us in desperate need of help." Banks pointed out that legal services organizations, including Legal Aid, are losing federal stimulus funding. Legal Aid has lost $1 million in the last year.

"Stimulus dollars had supported some of our foreclosure services, some of our immigration services and some of our housing services and those funds have dried up over the last year. It will exacerbate the legal services funding situation all over the state," Mr. Banks said.

IOLA Fund Holds Line on Grants With $15 Million From the Courts
By Joel Stashenko
New York Law Journal
May 25, 2011

ALBANY - The state's Interest on Lawyer Account fund is making the same $21.3 million in grants for civil legal services to the indigent, thanks to another infusion of funding from the courts.

Administrators of the fund say that $15 million in taxpayer money was passed through to the fund from the Judiciary for distribution this month to legal providers.

Only $6.5 million of the funding for the 2010-11 fiscal year has come the traditional way, through interest income on bank accounts held by attorneys in escrow for their clients.

That income, identical to last year's total, is down by almost 75 percent from the $25 million generated for the fund in 2007.

Advocates for low-income New Yorkers say the drop-off has come at the worst possible time, as the recession has increased the need for additional legal services in foreclosures, landlord-tenant disputes, consumer credit proceedings and in Family Court.

The 15-member IOLA board of trustees, appointed by the governor, distributes funds based on applications from civil legal services providers across the state.

IOLA estimates that about one-half of the 5.8 million New Yorkers living within 200 percent of the poverty level have at least one legal matter a year for which they need professiotnal help.

Christopher B. O'Malley, executive director of IOLA, said the fluctuations in interest rates over the past several years reveals the inherent weakness of IOLA.

"It is not consistent," Mr. O'Malley said in an interview yesterday. "It is very much tied to the interest rates and the economy, and when the interest rates fall, so does the income to the fund. And when the economy falls, we know the need for legal services increases exponentially for the poor."

Mr. O'Malley said the uncertainty of IOLA funding also harms legal service providers.

"Scarcity in hard times and an inability to plan long-term," he said. "It is a very difficult burden for providers to work with."

All but two of the legal services providers who received IOLA grants last year received grants from the IOLA board in 2011.

"We are aware that many of the providers had suffered drops of income from other sources, including states, counties and foundations and to the best extent possible, we tried to give them stability in our grants," Mr. O'Malley said.

The recession and the related fall-off in real estate sales are blamed as the chief culprits of the hard times for IOLA in New York and several other states where civil legal services are funded through similar vehicles.

With interest rates tied to such indexes as the federal funds rate, which was at about 4.25 percent in early 2008, IOLA was taking in about $3 million a month. By the next year, however, the rate was only 0.15 percent.

Fewer property transactions translated into less money held in lawyers' escrow accounts.

The largest IOLA grants, $3.36 million each, went to the Legal Aid Society of New York City and Legal Services of Western New York.

"We are very grateful, but even at that re-funding level, we are only able to help one out of nine New Yorkers who come to us in desperate need of help," said Steven Banks, attorney-in-chief of the Legal Aid Society.

Meanwhile, Legal Aid and other providers are losing funding as federal stimulus money is drying up. Mr. Banks said his organization has lost $1 million in the last year.

"Stimulus dollars had supported some of our foreclosure services, some of our immigration services and some of our housing services and those funds have dried up over the last year. It will exacerbate the legal services funding situation all over the state," Mr. Banks said.

Also, local providers have been hurt by congressional cuts in funding to the Legal Services Corp., which in 2009 provided 13.2 percent of the funding for civil legal services (NYLJ, April 14).

In addition to the $15 million funneled through IOLA, Chief Judge Jonathan Lippman included another $12.5 million in the state budget to support civil legal services.

Judge Lippman said the funding shortfalls have "decimated" IOLA and "was the initial thing that signalled to everybody that there is a crisis in civil legal services in the state."

The court has not yet finalized the rules for organizations to receive funds from the new program.

When it does, the chief judge said there would only be enough money to meet 20 percent of the legal needs of low-income New Yorkers.

"If the Judiciary is not going to stand up for civil legal services for the poor, particularly in these economic times, who is?" he asked.