NC IOLTA Fund Reallocation Sparks Concerns Over Civil Legal Aid
Interest on Lawyers’ Trust Accounts (IOLTA) funds in North Carolina, traditionally used to support civil legal services for low-income residents, are being redirected. The recent state budget decision diverts these funds to aid public defenders, raising significant concerns among legal aid organizations.
NC IOLTA operates by pooling interest from client funds held by attorneys, which is then allocated to provide civil legal aid. IOLTA spokesperson Karen Taylor explains, “They all have IOTA funds, and they can be structured differently, but for all of them, the purpose is to provide civil legal aid, because unlike criminal defense funds, the government is not obligated to help people with civil legal needs.”
Last summer, North Carolina’s decision to freeze IOLTA’s grants prompted a substantial impact, forcing groups like NC Legal Aid to reduce services and close offices. According to Taylor, this led to a 22% reduction in closed cases and an 11% drop in clients served.
State Bar Executive Director Peter Bolac expressed concern about the budget’s implications: “Despite months of good-faith efforts by State Bar and NC IOLTA leadership and other stakeholders to understand legislators’ concerns and make reasonable modifications to IOLTA’s grantmaking policies and procedures, the state budget […] includes a provision that directs nearly all of NC IOLTA’s available annual grant funding away from civil legal services. This loss of funding will prove devastating to the tens of thousands of low-income North Carolinians facing legal concerns that threaten their housing stability, income, access to health care and benefits, and safety from domestic violence and human trafficking.”
The budget reallocates up to $15 million to the Office of Indigent Defense Services’ Private Assigned Counsel (PAC) Fund, which supports public defenders. This shift addresses financial shortfalls in public defense but leaves civil legal aid with reduced resources.
As NC IOLTA Board Chair Judge John Arrowood noted, “This provision appropriating IOLTA funds — which have funded civil legal aid grants for more than 40 years — to bolster the PAC Fund shifts the burden of navigating a complex and intimidating justice system to vulnerable individuals and families facing civil legal challenges.”
The PAC funding cap at $15 million is expected to consume most IOLTA revenues annually, potentially leaving little for civil cases involving evictions, family law, and post-disaster insurance claims.
