Why Civil Legal Services are a Cost Effective Investment for the State of New York

October 3, 2008

Author: Kristin Brown Lilley

Ensuring adequate funding for civil legal services is not just the right thing to do, it’s an economically sound investment that generates economic activity and helps state and local governments avoid substantial costs. As our state and local economies continue to falter, the likelihood that low income New Yorkers will encounter issues that they need legal assistance with increases exponentially.   So does the potential for cost avoidance and cost savings generated by ensuring that legal services programs have the capacity to respond this increased demand for services.

On a daily basis, civil legal services programs save the state money by averting costly “crisis” services such as emergency and homeless shelter stays. They offset state costs by helping families and individuals secure federally funded benefits such as Social Security and Food Stamps. They help stabilize families and thus avoid foster care costs and they help increase economic security by maximizing child support benefits for low income parents and children. Finally, they leverage private and federal funds that bring dollars and jobs to every region of the state where a legal services program is located (see attached).

Securing Resources for Low Income Families and Leveraging Private and Federal Funds:

According to the IOLA Fund, in 2006, IOLA grantees helped win $131 million in benefits for their clients. This includes over $88 million in Social Security and SSI payments, over $12 million in child support payments, approximately $3.5 million in Unemployment Compensation and over $23 million in federal and other benefits.

Taking into account total funding allocated to IOLA grantees from all sources, civil legal services generate over $9,000 in client benefits for every $10,000 invested, a return of 93 cents on the dollar. The impact of these client benefits on local economies cannot be understated. Low income families primarily spend their resources on subsistence items – from utility and grocery bills to paying for child care or transportation to and from work. As a result, the majority of the benefits flow almost immediately into state and local economies resulting in sales tax revenues and business income to state and local businesses.

Indeed, in their 2001 Grantee Activity Report, the IOLA Fund used a standard economic activity multiplier to estimate that in 1999 IOLA grantees generated $634.9 million in new economic activity and 10,793 jobs resulted from both the benefits generated for clients and federal funding secured by grantees to provide services.

More recently, in 2005, the 33 members of our Statewide Campaign for Civil Legal Services (these 33 grantees received 62% of all IOLA funding in 2005 and are the primary recipients of state funding for civil legal services) leveraged $29,519,602 in federal funding, and $34,482,395 in private dollars to provide legal assistance to low income clients. This funding resulted in payroll taxes, health benefits, rent, utilities, and staff salaries paid here in New York.

Averting Costs Associated with Homeless Shelter Stays:

Civil legal services programs are incredibly effective at working with families to keep them in their homes and avoiding eviction. While not all evicted families wind up in homeless shelters, many do.

Indeed, in 1999, IOLA grantees helped a total of 48,014 adults and children avoid homelessness. In New York City it is estimated that it costs approximately $1785 per case to provide representation in housing court (in most areas outside the City, the cost of representation would be somewhat lower) while the average cost of housing a homeless family with children is estimated at $33,000 per family. Therefore, we can estimate that for each family in New York City that avoids eviction as a result of civil legal services representation, $31,215 in savings is generated. Savings around the state will vary, but are still substantial. More conservatively, in 1990, a statewide New York State Department of Social Services study of the Homeless Prevention Program estimated a $4 savings for every $1 invested in the program. Clearly the effectiveness of these services results in significant immediate savings to state and local governments and warrants increased investment.

Foster Care Savings and Child Support Revenues

Another way in which civil legal services programs provide substantial savings to state and local government is by working with families to stabilize their circumstances. Child Welfare Watch estimates the cost of care in foster boarding homes at $16,200 per year. City data show that kids entering the system for the first time stay, on average, less than a full year, but those who have been in care multiple times stay much longer. These data also show that 40 percent of all children in care at any given time are longtime foster children. For kids that have been in care for more than three years, the current estimated total cost is a minimum of $48,600 per child - and this does not account for far more expensive therapeutic care.

Based on the most recent data available, then, we can estimate that, for every child a legal services program is able help keep out of the system, government will save an average of 16,200, at bare minimum. For many children, the savings would be much higher - as much as $48,600 for children without special needs, and much more for those who have disabilities or need therapeutic care.

IOLA funded legal services programs generated a total of $12,391,387 in child support payments to clients in 2006, helping to provide critical ongoing financial support and resources to low income parents and children. Every child support dollar that flows into the pockets of these families helps to reduce potential costs to government by increasing family resources and thus decreasing the need for publicly funded benefits including public assistance and child care subsidies.

Generating Federal Dollars for the State and Financial Security for Disabled New Yorkers

Through the Disability Advocacy Program, legal services programs in every region of the state provide low income disabled New Yorkers with legal assistance when their SSI/SSD applications have been denied or their benefits terminated. Many of the clients represented receive welfare benefits while they await a decision about their application. For each successful case, the Social Security.

Administration provides a retroactive award to the client for benefits they would have received, beginning from the time of initial application and reimbursement to state and local governments for the benefits provided. With a success rate of 83% in 2007, the DAP program consistently generates federal reimbursement money for the state that exceeds the state funding used to provide the services.

In 2007 DAP advocates generated $24,494,483 in retroactive awards for their clients and $7,620,771 in interim assistance for benefits provided for the State. The program also generates significant ongoing cost avoidance by avoiding long term benefit costs for the state. According to the Office of Temporary and Disability Assistance’s most recent Biennial Report to the Legislature, it is estimated that in 2005 DAP generated $10.5 million in pubic assistance cost reduction, resulting in a net gain of $14.6 million for the state and localities, more than twice the initial investment.

Flat funded for years, this program has had to increasingly turn clients and thus potential savings for state and local government away due to lack of resources. With an increased investment the program would be able to at least maintain the same level of services – so that savings can continue to be generated over time.

Bringing Federal Food Stamp Dollars into Local Economies

At the local level legal services programs work with clients to identify and remove barriers to obtaining federally funded Food Stamps, thus increasing resources for low income households on a case by case basis. At the state level, legal services programs work with the Office of Temporary and Disability Assistance to identify creative policies that will serve to increase the number of low income recipients receiving benefits. Most recently legal services programs and other advocates suggested a new initiative which OTDA plans to pursue. This new policy will make working families with child care costs who earn up to 200% of poverty categorically eligible for Food Stamps, thus increasing the likelihood that these families will take advantage of the benefit. We estimate that these types of policy initiatives have resulted in thousands of Food Stamp enrollees.

The impact of securing Food Stamp Benefits for a family is substantial. For every family of three who receives Food Stamps, as much as $5,556 in federal dollars is generated in nutritional support and subsequent expenditure in the local economy.

Creating Efficiencies in the Courts

In 1998, Chief Judge Kaye’s Blue Ribbon Panel Report to the Chief Judge on Funding Legal Services for the Poor, recognized the efficiency of civil legal services program’s ability to resolve an estimated two out of three client problems by providing advice or non litigation services (drafting a letter or making a call). The panel concluded that providing additional funding for civil legal services would not cause a proportional increase in court caseloads and thus an increase in court costs. Indeed, having legal services providers readily available to assist low income clients would help cut down on the number of cases that wind up before a judge unnecessarily.