The Financial Crisis of Legal Aid for the Poor: Why Americans are Not Equal Under the Law

By Jennifer Hitchcock

Staff Writer and Copy Editor

hen we think of legal representation today, many of us think of wealthy, famous people, like O.J. Simpson, with their high-priced attorneys who are the best and brightest in their field and who work with world-reknowned experts to ensure that the verdict will go in their client's favor. Or, we think of the attorneys on television, who tell us that if we've been in an accident, they'll work hard for us to make sure we get the settlement we deserve and we only pay if they win. However, most of us don't realize that there is another type of legal representation that is crucial to our concept of equality in our society. This form of legal representation is free legal aid for the poor, provided by legal aid organizations and funded by federal grants and IOLTA (Interest on Lawyers' Trust Accounts.) The U.S. Constitution guarantees that citizens shall be equal under the law. The legal aid organizations are part of that guarantee. Once the organization screens potential cases and chooses those cases which it will accept, legal aid attorneys provide free legal services to their clients. Drastic losses in funding, however, have forced legal aid organizations to turn away many people with serious legal problems.
Most of the cases which come to the legal aid organizations are housing or domestic issues: people facing unsafe housing conditions or eviction, people trying to retain custody of children, and women attempting to escape domestic violence by either obtaining restraining orders or getting divorces, or both. Potential clients also go to legal aid organizations to fight unfair denial of welfare benefits. Solutions to these problems can only be obtained through the legal system, which is why legal aid is so crucial. For the poor, legal aid is their only means of obtaining justice.
Within the past two years, legal aid has faced serious financial hardship. Most of the funding for legal services comes from IOLTA accounts. In Connecticut, banks have cut interest rates drastically, from a high of about 5 percent in 1990 to 1.25 percent, on average, in 1995. The lowest rate paid is .5 percent, by Eagle Federal Savings Bank. The highest rate paid is 2.5 percent, paid by only two of Connecticut's 100 banks participating in IOLTA: People's Bank and First National Bank of New England. These drastically reduced interest rates have cut IOLTA revenue by more than half. The recent Fleet-Shawmut merger will result in another $200,000 dollar loss in IOLTA revenue as the former Shawmut accounts, which earned between 1.59 percent and 1.84 percent, will now pay the lower Fleet rate varying from 1.15 percent to 1.25 percent, depending on the size of the account. Fleet defended its interest rates by citing the lack of service or transaction fees on the accounts, the services which Fleet provides the accounts, and the need to maintain competitiveness in banking. However, Fleet recently imposed an Account Analysis Fee on its IOLTA accounts, not deducted from the interest the account earned, but deducted from the attorney's balance. Many irate attorneys are questioning whether Fleet's Òservices" are worth maintaining an account there.
In addition to the deep loss in IOLTA funding, Congress' pending appropriations bill will cut funding to the Legal Services Corporation, the organization which distributes federal grant money to legal aid in each state, by 30 percent. Congress is also seeking to place strict stipulations on how the money may be spent. Under proposed regulations, legal aid attorneys cannot use any grant money to accept cases which challenge conservative legislation, even if private charities paid for such cases. In the Connecticut state legislature, Senator Lovegrove (R), co-chairman of the Human Services Committee, proposed a bill which would end the IOLTA program completely. The bill would allocate the interest to other uses, such as client protection from attorneys who steal their money. It died in committee. IOLTA is one of only a very few government-appointed programs which contributes to an important public service yet does not cost taxpayers any money.
The impact of heavy funding losses on the legal aid organizations has been devastating. In the past 15 years, these organizations have been forced to eliminate more that 100 attorneys. Of those who actually contact a legal aid organization for assistance with a legal problem, only 20 percent actually receive legal assistance. Thousands more face legal problems who do not approach the legal aid organizations for help. Only 15 percent of the 16,000 practicing attorneys in Connecticut donate pro bono services, and of those, most are only able to donate a very small portion of their time. The glut of attorneys in the private sector is cruelly ironic considering the number of people needing legal representation who never receive it.
On March 18, The Connecticut Bar Foundation held a conference entitled "The Survival of Legal Services for the Poor in Connecticut" at the State Capitol. The conference was sponsored by The Foundation's fellows program and attended by some of the state's most distinguished judges, attorneys, and law professors. Many others concerned with the future of legal aid for members of the community also attended. The Connecticut Bar Foundation is the organization designated by the state legislature to receive IOLTA funds from the banks and distribute it to legal aid organizations and to law schools for scholarships for economically disadvantaged students. The purpose of the conference was to gather and refine ideas for how the legal community, the legislature, and the judicial branch might come together to ameliorate the condition of legal aid. Many proposals arose from the day's discussions. Professor J.L. Pottenger of Yale proposed a mandatory pro-bono program, in which members of the bar would have to contribute a certain number of hours a year or else pay for those hours at a specific hourly rate. This idea was immediately rejected by the majority of the conference attendees, who believed this would place a hardship on solo practitioners.
One proposal that everyone agreed on, and which would be the most feasible, was to put more pressure on the banks to raise interest rates on IOLTA accounts. Tom Ritter, Speaker of the House in the Connecticut legislature, attested to the legislature's power to place regulations on banks which would benefit IOLTA, but did not want the state's relationship with banks to turn bitter. Banks participate in IOLTA on a voluntary basis. All of Connecticut's banks participate in IOLTA, however, because it is lucrative. On any given day, there is an estimated $350 million sitting in IOLTA accounts. Banks are capable of greater generosity, considering the need of the communities which they serve, without sacrificing profit. The pressure placed on banks, conference participants concluded, must come from the attorneys who hold IOLTA accounts.
Because equality under the law in this country is a constitutional guarantee, most of us assume that anyone who needs legal representation will receive it. Public defenders often come to mind. However, they only handle criminal cases. Thousands of people face problems which wreck havoc on their lives and their families' lives only because they cannot afford the exorbitant cost of hiring an attorney. Legal aid organizations cannot come close to assisting everyone who needs legal help but cannot afford it. The lack of adequate funding for legal aid undermines the constitutional principles which American society holds dear. Americans are clearly not equal under the law if it is only accessible to those who can afford to hire an attorney and the lucky few who are represented by attorneys from legal aid.