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Pro Bono & Access to Justice

IOLA and the Future of Public Interest Law

Over 70 public interest legal organizations across the state receive funding from the New York State Interest on Lawyer Account Fund: IOLA. This coming fiscal year, these organizations--including the City Bar Justice Center--will see a dramatic drop in IOLA support, as the fund dips from approximately $32 million in 2008 to an expected $6.5 million for 2010-2011.

IOLA’s interest income was at $2.6 million in October of 2008, but has dropped to just over $500,000 for December 2009, according to the IOLA website. Such a huge drop is a direct result of the collapse of the economy and low interest rates, and comes at a time when legal services for the needy are receiving more requests for help than ever. Now, public interest advocates say that current programs will only be fulfilling a fraction of the growing need across New York City in the coming year.

“We have seen a definite increase in demand for our pro bono services, especially in the areas of bankruptcy and foreclosure,” said Lynn Kelly, Director of the City Bar Justice Center. “The waiting list for our Consumer Bankruptcy Project has over 100 people on it, and our Legal Clinic for the Homeless is facing an increase in homeless families.” The Justice Center’s work has been supported in part through an annual IOLA grant, and it now fears cuts due to the IOLA shrinkage.

IOLA funding comes solely from the interest accrued on qualified trust accounts opened by lawyers across the state. When attorneys receive nominal or short-term funds to hold in escrow, the state requires that the funds be deposited into an interest-bearing bank account through IOLA. While the fees and service charges for individual transactions would virtually negate any gains, over a year’s worth of transactions, IOLA has taken in well over $20 million a year. This year, it may take in only $8 million. (NYLJ, 8/18)

IOLA funding for civil legal services was started in 1983 in response to statewide budget cuts and increasing need for legal services funding. Now, attorneys, organizations, and some lawmakers are turning to the state to shore up IOLA funds due to the drastic drop in interest rates.

On December 9th, Stacey O'Haire Fahey, Chair of the City Bar's Committee on Pro Bono and Legal Services, testified at a State Senate hearing in New York City on the state of IOLA. She described the increased demand for Justice Center services, and the large impact those services have. Citywide, every $1 million in funding for pro bono programs is able to leverage $9 million worth of services. This work prevents homelessness, staves off bankruptcies, and keeps families together, in turn strengthening and stimulating communities.

The Pro Bono and Legal Services Committee called for $15 million in emergency appropriations for IOLA to support legal services and pro bono programs iin an October letter to the State Legislature and Chief Administrative Judge Ann Pfau. In turn, state court administrators, including Judge Pfau, have asked Governor Paterson and the State Legislature for $15 million in IOLA funding as part of their FY 2010 budget request. (NYLJ, 12/03)

“Through legal services initiatives of the New York City Bar and through our work with a variety of legal service organizations, we witness firsthand on a daily basis the vast unmet legal needs of New York’s poor,” the City Bar’s letter states. “We also witness firsthand the tremendous impact that these programs can have on the lives of these most vulnerable members of our society.”

Senate Democratic conference leaders are continuing to hold public hearings on the issue. The second hearing was on December 16th in Buffalo, and a third will be January 7th in Albany.

Read Stacey O'Haire Fahey's testimony before the NYS Senate here.

Read the City Bar letter to the NYS Legislature here.

The New York Law Journal, "Staggering Gap in Civil Legal Assistance Looms as IOLA Fund is Squeezed by Interest Rate Plunge" 08/18/09

The New York Law Journal, "Judiciary Budget Projects Rise in Spending" 12/03/09

Legislative Gazette, "Fund that Pays for Low-Income Legal Services Spirals Downward" 12/07/09

IOLA Website.