The federal program to provide legal services for the poor is in lean times. Its budget shrank by a third two years ago, and has remained at about the same level since. Now the Supreme Court has handed down a ruling that could further dry up resources.
The court knocked one pin, at least, from under an important auxiliary source of funds for legal services, a program called Interest on Lawyers Trust Accounts (IOLTA). This arrangement pools the interest from bank accounts used by lawyers to hold clients' funds for short periods of time. The amount of interest per client is usually tiny, often just a few cents. But when it's combined nationally, drawing on transactions handled by nearly 700,000 attorneys, the total rises to around $100 million.
That's a significant addition to the $238 million currently budgeted for the federally chartered Legal Services Corp. The money is collected and distributed through foundations set up by state supreme courts or legislatures. Nearly all of it is used to provide legal representation for those unable to afford it. Typically, housing disputes, consumer fraud, and family issues dominate the legal services agenda.
The IOLTA program has been challenged on two counts: that it is an unconstitutional taking of clients' private property, and that it forces people to contribute to a cause they may not agree with. The Supreme Court didn't rule on those questions, but found, by a slim 5-to-4 majority, that the interest involved is indeed private property. It referred the constitutionality of using this interest to fund legal services back to the lower courts.
Thus this issue has a long legal road ahead. But here are some points to keep in mind: The amount of interest involved is so small per client that bank fees involved in processing the accounts typically cancel it, leaving no net sum for clients. So the issue of a "taking" that requires compensation to owners is mostly nonexistent. Under IOLTA, banks agree to allow most of the interest to go to the program instead. In cases where net interest would exceed bank costs, the money currently goes to the client, not to the IOLTA program.
Since there is usually no net interest that would go to the lawyer's client, there's no forced "contribution." Beyond that, the "cause" is access to the legal system for people who can't afford it. It hardly seems unjust to use for this purpose tiny amounts of interest generated by the transactions of those who can.