Essential Legal Services

Funding the Legal Services Corporation

Millions of low-income families across our country are more in need than ever of service-oriented lawyers to help them cope with legal issues in a deepening recession. They need lawyers who provide legal assistance to families who cannot afford to pay for attorneys to help them navigate a variety of civil legal challenges, including foreclosure, landlord-tenant issues, government assistance eligibility, family law issues and consumer issues.

Expectations that the latest unemployment numbers due out later this week will be the worst yet recorded in the Bush recession that began in December 2007 is putting even more pressure on lawyers and others who assist the poor in securing such basic necessities as shelter, food, education, income, and physical safety. The talents of this group of service-oriented lawyers are sorely needed as the number of people experiencing poverty expands along with their list of legal troubles.

What’s more, non-profit organizations and other entities that provide free legal services to the poor are facing their own uphill recession-related challenges, including reductions in just about every revenue stream, slashed budgets, and layoffs. In this environment, ensuring justice and access to needed resources for low-income families will require substantial new commitments from the federal government and the private bar.

That’s why the Obama administration and Congress need to provide adequate levels of appropriations to ensure the Legal Services Corporation is prepared to lend a hand wherever needed. In addition, Congress needs to pass the Civil Access to Justice Act of 2009, increasing the authorized funding level of the program in this year and future years.Before detailing these recommendations, however, we first need to understand just how necessary these steps are to take by looking at the current crisis facing legal services for the poor.

Greater need for legal services

“Our challenge is large,” acknowledges Helaine Barnett, the president of the Legal Services Corporation, when describing the current state of free legal services for low-income Americans. LSC is funded annually by Congress to provide nationwide funding to 137 legal aid programs with 920 offices and employing approximately 58 percent of attorneys working within such programs. Although the program benefited from an 11-percent increase in funding during fiscal year 2009, additional resources are needed to manage the growing need for services and emerging funding challenges being experienced by the organizations as a result of the economic downturn.

Legal services organizations—those funded by LSC and those that aren’t (and which employ 42 percent of legal aid attorneys)—provide a number of services for which there is an increased need during this recession, including:

  • Housing. Legal services can help responsible at-risk families through the foreclosure crisis and growing unemployment and other financial hardships. Attorneys keep track of recent changes to the law, advise low-income homeowners and renters of their options, and help renegotiate loans.
  • Access to government benefits. With rising unemployment, more people are in need of necessary support services such as unemployment insurance, food stamps, and healthcare. Legal services organizations assist individuals in navigating the sometimes complicated processes for obtaining these benefits while also helping to resolve any barriers affecting access.
  • Family law issues. Economic distress can result in family disturbances that require legal assistance. Between 2007 and 2008, for example, the National Domestic Violence Hotline reported a 21-percent increase in calls, with 54 percent of callers reporting a recent change in their family’s financial circumstances. Legal services organizations help victims with protection orders and custody issues.
  • Consumer issues. The recession also brings to the fore a whole host of consumer concerns, including bankruptcies, collections, repossessions, and delinquent utility bills. Legal services attorneys can help their clients understand their legal options, negotiate payment arrangements, or pursue action against unfair practices.

In addition to increased need related to the services provided by legal aid organizations, the actual number of people who qualify for assistance is likely to grow. LSC currently provides services to individuals and families living at or below 125 percent of poverty ($27,563 for a family of four). Given recent increases in national unemployment, which is currently at 8.5 percent, there is a likelihood that poverty levels will rise. Based on patterns from previous downturns, LSC estimates that their eligible population will increase by 22 percent from 2007 to 2009.

Funding and resource crisis

Unfortunately, legal services organizations are facing tremendous funding challenges during the current recession. A significant source of their trouble is a decline in the revenues generated by Interest on Lawyers Trust Accounts. As the program’s title implies, IOLTA generates money by collecting interest on attorney bank accounts that temporarily hold client funds, including settlement checks, real estate escrows, fees paid in advance for services yet to be performed. In 2007, IOLTA generated $240 million that were used to provide legal services to the poor. It accounted for 12 percent of the budgets of LSC-funded organizations.

The current problem with IOLTA is that the value of the accounts is tied to interest rates. In responding to the economic downturn, the Federal Reserve Board slashed interest rates to near zero. Thus, legal services organizations have been, and will be, receiving less money from these accounts. Connecticut’s IOLTA revenue, for example, was $21 million in 2007, but is projected to be $4 million in 2009.

In this environment, federal funds take on a greater significance. The federal government has increased the funding of the Legal Services Corporation in recent years, hopefully reflecting a trend that will continue into the future. The fiscal year 2009 appropriation was $390 million, representing an 11-percent increase over the previous year. Although a definite improvement, this sum pales in comparison to previous years marked by funding highs—the inflation-adjusted appropriations for 1981 and 1995 are $750 million and $554 million, respectively. Thus, the value of the program’s budget is almost half of what it was three decades ago.

Finally, it is worth noting, that some private law firms are helping to address the crisis. When the economic downturn caused them to layoff over 10,000 legal professionals (including 4,218 lawyers) since the beginning of the year, some sought to find those attorneys (and other underutilized law firm talent) temporary full-time placements in legal services organizations. The results of these efforts, however, have yet to be determined.

Recommendations

In developing its appropriations bills for FY 2010, which begins October 1, 2009, Congress should dramatically increase its investments in the Legal Services Corporation and any other federal programs that provide funding for legal services. Such increases are supported by two-thirds of Americans surveyed.

To advance long-term solutions to the justice gap, Congress should pass the Civil Access to Justice Act of 2009 (S. 718). Introduced by Sen. Tom Harkin (D-IA), this legislation would increase LSC’s authorized funding level to $750 million per year while providing new federal funding for law school clinical programs.

States and localities also should avoid cuts to legal services programs as they seek to balance their budgets. Hopefully the federal government’s economic recovery funds will help in relieving some of their financial pressures.

Joy Moses is a Policy Analyst at the Center for American Progress . To learn more about the Center’s anti-poverty programs, please go to the Poverty and Mobility page of our website.