Legal aid groups across the U.S. brace for another strained year with shrinking IOLTA revenue and funding shortfalls

The National Law Journal reports:  “State and local funding cuts vary across the country, but sharp declines in IOLTA money during the past three years have hit every state, said Betty Balli Torres, director of the National Association of IOLTA Programs, an organization of state administrators. . . . ‘Basically, what we’ve seen nationally is a 75% decrease in public interest funding through IOLTA,’ Torres said. ‘We’re talking about a huge drop in a matter of three years. It’s playing out that way state by state by state.’ IOLTA generated $380 million nationally for legal aid groups in 2008, but that fell to $124 million in 2010, Torres said. Interest rates were at 5.25% in September 2007 and have since fallen to 0.25% or even lower, she said.

“‘First and foremost, interest rates are in a bad position. I can’t think of a time when IOLTA revenue and interest rates were this low,’ said Lora Livingston, a district judge in Texas and the chairwoman of the American Bar Association’s Commission on IOLTA. ‘Until interest rates go up, there’s not a whole lot we can do right now.’

“And no one is predicting a quick rise in those rates. Interest rates are not expected to rise until the first quarter of 2012, meaning they will likely stay low throughout 2011. . . . Federal money is another key component for legal aid organizations, and one of the few bright spots in the financial picture. The Legal Services Corp. funnels federal money to 136 legal aid programs across the country and has seen its appropriation increase in recent years. It received $390 million from the federal government in 2009 and $420 million in 2010. However, that increase has not been enough to offset cuts in IOLTA money and state and local support, said John Constance, the corporation’s director of government relations and public affairs.”

For more: Karen Sloan, “Perfect storm hits legal aid,” National Law Journal, January 3, 2011

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