State transfer of $100M from legal aid fund draws ire
Providers: Action imperils ability of nonprofit agencies to provide counsel
ALBANY — Legal aid providers are clamoring against Gov. Kathy Hochul’s proposed transfer of $100 million from a little-known state agency in a move they say could threaten access to legal representation for low-income New Yorkers who cannot afford to hire attorneys in high-impact civil cases.
It appears to be the first time money has been “swept” from the obscure entity known as the Interest on Lawyers Accounts, or IOLA, a trust fund that lawmakers set up in 1983 with a clear directive: to help close a well-documented “justice gap” that often leaves New Yorkers defending themselves without legal counsel in civil courts. The agency that controls the account distributes millions of dollars in grants to nonprofit civil legal aid providers across New York each year.
The decision to transfer the $100 million from the legal account to the state’s general fund has caused a stir among the program’s advocates, including the New York State Bar Association, who have urged Hochul and budget officials to reverse their decision. Already, civil legal services providers have said they face difficulty recruiting attorneys to represent thousands of lowincome defendants who often find themselves involved in housing or Family Court cases that can have life-changing outcomes.
The supporters said losing grant funds from the legal services account would further threaten the ability of nonprofit agencies to provide counsel.
The move also comes as high-ranking court officials have telegraphed their desire to “reimagine” the existing court system. In September, during a public hearing conducted by the state Office of Court Administration, Court of Appeals Chief Judge Rowan D. Wilson said that the courts would need an extra $1 billion annually, in addition to what they already provide, to fund adequate civil legal services for low-income New Yorkers.
State Division of the Budget spokesman Tim Ruffinen said in an email that Hochul’s administration has provided over $705 million in funding for both criminal and civil legal aid for low-income New Yorkers. In the past seven years, the state has transferred more than $100 million into the legal services account, according to Ruffinen. He also pointed to the fund’s record-high balance — $375 million — and said the proposed transfer would support key investments in Hochul’s budget.
But the move has left the agency fearing a “dangerous precedent” — enabling governors to dip into the account when funds rise above a certain level,
said Christopher O’malley, IOLA’S executive director. He added their program was not consulted about the transfer.
“It threatens the fundamental building blocks of why IOLA exists,” O’malley said.
By removing the money from the program’s purview, there is no guarantee that the state will use the money to help fund civil legal aid, O’malley said.
On Thursday, dozens of legal aid groups, law firms and attorneys sent a letter to Hochul’s office asking her to rescind the decision, which they said could “jeopardize the legal profession’s ethical basis for participating in the IOLA Fund.”
The letter pointed to over 307,000 cases that the fund’s grantees helped close in 2023.
The proposed transfer also first drew attention at a budget hearing on public protection last month, when court officials indicated they were opposed to the move. When prompted by lawmakers, Chief Administrative Judge Joseph A. Zayas called the transfer concerning and pointed to court backlogs, especially in civil courts like Family Court, where he said there is “huge, huge unmet need.”
“Our backlogs will be difficult to address if we don’t have lawyers in the courtrooms,” Zayas told lawmakers.
Attorneys in New York are required to set up accounts for regular transactions with their clients that then generate interest income. The interest collects in the legal services program’s fund and is then distributed by its board of trustees to legal providers across New York. There are over 48,000 IOLA accounts in the state, according to the New York State Bar Association.
O’malley pointed to high interest rates this past year that led to record-high levels of money sitting in the account, but said the money is typically in flux because of interest rates outside of the agency’s control. The agency cannot spend the money outright, instead having to get it appropriated annually through the budget process. This year, budget officials raised the cap on how much the program can distribute to grantees, a move O’malley said the agency had initially cheered.
But because the money is private and not taxpayer revenue, legal advocates have questioned the state’s right to use it for a purpose other than what the account was intended for.
“To just invade them and sweep them into general funds is contrary to what we believe to be a legal purpose for the use of this money,” said Richard Lewis, president of the New York State Bar Association. He added their association intends to fight the proposal and is asking Hochul to issue a 30-day amendment reversing it.
“Our concern is — where does that leave these people that are underserved?” Lewis said. “Once again, the gap, instead of being narrowed, gets greater and greater. The people that are going to suffer are not the lawyers. It’s the clients.”