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IOLA fund hits new low

Legal providers say Campaign for Justice takes on new meaning

Alan S. Harris stopped going online to check the Interest on Lawyer Accounts Fund of the State of New York.

“It’s all bad news,” said Harris, president and CEO of Legal Aid Society of Rochester. “It just went off the table.”

As Harris and other nonprofit legal service providers gear up for the 24th annual Campaign for Justice — which wraps up today — they are also in waiting to see how the IOLA funds shake out. Last year, the fund hit its greatest crisis in history, dropping 75 percent from $32 million to $6.5. This year, it will drop even lower, said IOLA Executive Director Chris O’Malley.

Funding will likely dip, and the 73 organizations it helps fund will feel a 10 percent pinch, O’Malley said. Many of the accounts that feed interest to the IOLA funds range from zero to .25 percent. By comparison, the interest rate was more than 2 percent at the end of 2008, when the IOLA had $32 million in funding.

“When I say the interest rates are historically low, there’s never been an interest rate environment like this,” O’Malley said.

There are several organizations in the region that receive IOLA funding, including the Empire Justice Center, Legal Aid Society of Rochester, Farmworkers Legal Services of New York and Volunteer Legal Services Project of Monroe County Inc.

Last year, the funding would have been worse if New York State Chief Judge Jonathan Lippman had not allocated $15 million for the IOLA fund through the Office of Court Administration.

Harris said without that, Legal Aid would have cut 10 positions from its civil program — seven attorneys and three support staff. If Judge Lippman is unable to allocate funds again, then Harris said Legal Aid may be forced to make cuts. He said those attorneys handle about 100 cases.

“There will be significantly less representation of low-income people,” he said.

Nearly 2 million litigants went unrepresented in the past year, O’Malley said. Foreclosure cases have increased 153 percent from 2007 to 2009. Cases that assist people with obtaining, increasing or preserving food stamp eligibility increased 115 percent. He said with a poor economy, more people need assistance, but because fewer people are working and businesses are struggling, funding is drying up.

“With all the increased need, the number of unrepresented litigants in the system has exploded,” O’Malley said.

The Volunteer Legal Services Project received $91,945 from IOLA for this year’s budget, which was a 9 percent drop from the year before, according to Linda Kostin, the organization’s pro bono coordinator.

The $91,945 accounts for 15 percent of the organization’s budget and pays for several staff positions. It’s possible that the IOLA has very little, if anything, to give this year. She said the organization usually has a projection for the following year’s IOLA funding, but it’s too hard to tell right now.

“If we lose 15 percent of our budget, there could be some potentially dire consequences,” she said.
VLSP, which handles 2,000 cases a year, is taking part in the Campaign for Justice, which is trying to raise $240,000. The organization’s budget is $800,000 and the campaign takes up a large chunk of that, VLSP Executive Director Sheila A. Gaddis said. She said the campaign takes on a new level of importance this year and she expects them to meet their goal.

“There’s no guarantee going forward. We don’t know what will happen next year. The economy is, by all measures, slowly on the recovery, but we’re not predicting a quick recovery,” Gaddis said. “The Campaign for Justice means more than ever for VLSP and its sister agencies. … We can’t count on state and IOLA funding, and we must ask the community to help.”

She said if the organization lost that 15 percent of its funding, it’s board would need to consider layoffs, a merger with another organization or even closing.

“I suppose that would be an option. VLSP only has four part-time attorneys,” she said. “That’s not the only option, but we’d have to make a plan on how to move forward. Losing any attorneys or paralegals would severely impact the work we do for the community.”

When attorneys hold funds for a client, they go into a bank account and the interest goes into the IOLA fund. It’s typically only pennies on each account, but there are tens of thousands of them across the state that pitch into the IOLA.

Daan Braveman, Nazareth College’s president and a trustee for IOLA, said two things are hurting the fund. The first problem is that interest rates from banks are very low. The other problem is that there are few business transactions, especially in the real estate market, he said.

He said he’s not sure how the fund will look in the end, but low-income people will feel the impact, as will the justice system.

“If you can’t enforce your rights, then the rights become meaningless,” he said. “People will not be represented. That makes the cases more difficult sometimes to resolve, because you don’t have a lawyer to settle issues ahead of time.”