Support for Legislation to Protect IOLA Fund

BILL INFORMATION

A.10253-A (AM Solages) / S.9130-A (Sen. Ryan) – Allows certain payments from the IOLA fund to be made without appropriation by law (NYS 2024)

REPORT

REPORT ON LEGISLATION BY THE
PRO BONO AND LEGAL SERVICES COMMITTEE

A.10253-A (M. of A. Solages)
S.9130-A (Sen. Ryan)

AN ACT to amend the state finance law, in relation to allowing certain payments from the IOLA fund to be made without appropriation by law

THIS BILL IS APPROVED

On behalf of the New York City Bar Association, we are writing to express our strong support for A.10253-A / S.9130-A, to prevent the future diversion of funding from the Interest on Lawyers Account (IOLA) Fund by removing it from the annual budget process and allowing the IOLA Board of Trustees to act on their authority to make appropriations to legal services organizations to help close the access to justice gap for low-income New Yorkers.[1]

Although the IOLA Fund was created to provide financial support to civil legal services organizations across New York State, taxpayer money is not the source of the Fund’s revenue. Rather, the money in the Fund comes from the pooling of interest generated on accounts that attorneys are ethically and fiduciarily required to keep on behalf of their clients. According to the IOLA Fund, there are currently about 50,000 IOLA accounts in nearly 200 participating banks. Attorneys and banks have the ability to use IOLA accounts because of legal ethics opinions, an IRS private letter ruling, and a U.S. Supreme Court ruling validating the IOLA program. These endorsements were predicated on IOLA supporting legal services for low-income individuals.

In April of this year, for the first time in IOLA’s forty-year history, funds were used for purposes not determined by IOLA’s Board, outside the stated intent of its enabling statute. Over strong opposition,[2] the FY2025 Enacted Budget diverted $55 million from the IOLA Fund to support other government programs. As legal services and pro bono professionals, we have serious concerns that the precedent set by the FY25 budget process could jeopardize the future of the IOLA program, which New York civil legal services organizations rely on for critical funding. Currently, using an open and competitive RFP process, IOLA provides funding to 80 nonprofit legal services organizations across the state. Last year, IOLA funding resulted in over 307,000 closed cases, benefiting nearly 640,000 New Yorkers[3] and generating over $3.5 billion of economic benefit to New York.[4] 

Access to free legal services promotes the health and stability of low-income communities across the state. In the absence of legal representation, low-income communities are unable to assert their rights, which can have devastating consequences, including homelessness, hunger, loss of desperately needed educational and/or employment opportunities, an increased risk of abuse and exploitation, and, for some, the inability to escape abuse and/or exploitation they are already experiencing. Currently, demand for free civil legal services is at an all-time high. Without guaranteed continued access to IOLA funding, legal services organizations will be unable to sustain current service levels and low-income New Yorkers will be denied access to justice.

A.10253-A / S.9130-A will preserve the integrity of the IOLA fund, protecting it from future potential diversion of funds by removing it from the budget process and ensuring that the IOLA Board of Trustees is able to act on its authority to make appropriations to legal services organizations. The New York City Bar Association endorses A.10253-A / S.9130-A and encourages the Legislature and Governor to quickly pass this legislation to ensure continued civil legal support services for low-income New Yorkers.

New York City Bar Association
Susan J. Kohlmann, President

Pro Bono and Legal Services Committee
Hamra Ahmad and Jessica M. Klein, Co-Chairs

Reissued May 2024