LSNJ Press Releases - Legal Services Funding Crisis Deepens, despite Increased State and Other Support

July 9, 2008 - Legal Services Funding Crisis Deepens, despite Increased State and Other Support

EDISON—Legal Services of New Jersey (LSNJ), which coordinates the statewide network of non-profit corporations by which New Jersey provides free civil legal assistance to its impoverished residents, announced today that revenue from its primary funding source, the New Jersey Supreme Court Interest on Lawyers’ Trust Accounts (IOLTA) program, has continued to decline, at an even more precipitous rate than feared earlier. As Melville D. Miller, Jr., LSNJ president, described it, “Driven by a perfect storm of negative economic factors, IOLTA revenues are in free fall, and the statewide Legal Services system is on the edge of crisis.” Previously expected to bottom out at a level 55% below last year’s, IOLTA revenues in fact were down 58% in May and 66% in June, “with no end or improvement in sight,” said Miller.

“Conservatively,” Miller continued, “the projected shortfall for State fiscal year 2009 – July 1, 2008 through June 30, 2009 – is at least $21.5 million, or 57.5%. Thus, while the additional $4 million for Legal Services included in the just-passed State budget, and a very welcome one-time emergency grant of $300,000 from the United States District Court, will help stave off disaster, Legal Services still needs $8.95 million in additional State funding during State fiscal year 2009. Unless a supplemental appropriation is made by year’s end, when statewide reserves will be depleted, severe staff and service cuts will begin in the new year.”

Miller explained that “IOLTA returns depend on three factors: the residential real estate market, which produces the greatest share of attorney trust account deposits; interest rates set by the Federal Reserve; and the overall economy. All three have been in decline. If additional State replacement funding is not forthcoming, the effect on Legal Services and its clients will be catastrophic. Each $1 million in lost funding means 1,100 fewer clients served and at least 10 full-time staff positions lost.

“Changes by the Supreme Court in the operation of the IOLTA program led to important funding increases over the past two years, from $18 million in 2005 to $33.7 million in 2006 and $40.2 million in 2007,” Miller said. “These increases have helped close New Jersey’s justice gap significantly, allowing Legal Services to accept more than 63,000 new cases in 2007, topping by 8,000 the record high achieved the previous year. We have been able to bring on more staff and rebuild our technological infrastructure, to achieve much greater efficiencies. It would be tragic and senseless,” he added, “to allow the recent gains in Legal Services’ capacity to now collapse and the justice gap widen.”

IOLTA funds are administered by the IOLTA Fund of the Bar of New Jersey, an entity created by the New Jersey Supreme Court. Miller noted that “IOLTA has taken a huge burden off the state’s taxpayers in recent years, because increased IOLTA returns have meant that these amounts did not have to come from a direct state appropriation. To avoid substantial dismantling of the Legal Services system, we now have no choice but to turn to the state to make up the difference.”

“Nearly all civil legal problems of low-income people occur in state courts or agencies,” Miller emphasized. “If people are to have the fundamental and constitutional right of ‘equal justice under law’ fulfilled, the State must step up to what fundamentally is primarily a state obligation.”

Legal Services programs provide essential legal aid—and access to the judicial system to resolve disputes—to people who cannot afford legal counsel for their civil legal problems, operating through a network of six regional Legal Services programs and LSNJ, the statewide coordinating office.