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Empire Justice Testimony on Public Protection in the 2008-2009 Executive Budget

The Senate Finance and Assembly Ways and Means Committees



February 7, 2008

 

Prepared by:

 

Good afternoon, my name is Anne Erickson and I am President and CEO of the Empire Justice Center.  Empire Justice is a statewide organization working to achieve social and economic justice for people in New York State who are poor, disabled or disenfranchised. Our mission is to protect and strengthen the  legal rights of those in need by engaging in systems change advocacy, providing training, support and technical assistance to other advocates and organizations, and providing high quality legal  representation in civil matters. We focus on a broad array of poverty law areas including public benefits, child care, child support, health, domestic violence, immigrant access to benefits, housing, employment, consumer, disability and civil rights. Ensuring that poor and low income individuals and families have access to justice and that the state of New York has a strong and well-funded system for delivering civil legal services is core to our mission.

My testimony today is offered not just from the Empire Justice Center, but on behalf of the twenty legal services organizations that provide legal services outside of New York City (list attached).

Today, I will focus on one critical issue: maintaining the state’s commitment to ensuring access to justice by restoring state funding for civil legal services.

Maintain the Investment in Justice – Restore Funding for Civil Legal Services

Providing access to legal assistance is critical to the core fabric of any state’s human services delivery system. As noted by the New York State Bar Association in its seminal report of the legal needs of the poor:

“American society today is complex and the judicial system mirrors that complexity… few middle class Americans would represent themselves in court if their access to shelter, income, food or clothing were at issue… yes, the poor are confronted by such problems repeatedly and are often defeated due to the lack of counsel…”

The issues confronting the poor and those living on low incomes are, if anything, even more complex today. Whether it’s the ever-changing landscape governing access to public assistance or health care or the newly emerging legal needs of consumers and financially strapped homeowners, the legal needs of our state’s most vulnerable populations remain critical and all too often unmet.

The Continued Unmet Need

It was over ten years ago that the New York State Bar Association released its comprehensive statewide legal needs study based on several methods of inquiry: a telephone survey of 1,250 low income households, in-person interviews with 400 individuals in 27 counties and data collected from legal services providers. Low income households were defined as households in which the combined income was at or below 125% of poverty. [1]

The researchers defined a “legal need” as a situation “that an experienced attorney would recognize as potentially amenable to legal relief and would, therefore, merit an attorney’s professional attention and advice.”

The study found that low income households had “an average of 2.37 distinct non-criminal legal problems for which they had no legal help.”  [2] As a result, not more than 14% of the legal needs of the poor were being met; leaving them to confront at least 86% of their legal needs without assistance.

More recently, in September 2005 the federal Legal Services Corporation reported on the Justice Gap in America. [3] Not surprising to anyone involved in the struggle to expand access to justice, the report found that:

“at least 80 percent of the civil legal needs of low income Americans are not being met.”

Sadly, this national survey undertaken in early 2005, simply echoes the findings of the New York State Bar study of the late 1980’s.

Lack of Capacity Leads to Legal Triage

The reality is that most legal services programs today are providing only legal triage. They are helping those with a 72 hour eviction notice, but are unable to intervene earlier to negotiate payment of back rent that could avoid the eviction. They are helping victims of domestic violence untangle themselves from violent homes, but all too often only if the violence is active. They are helping the disabled secure federal benefits, but only after a denial has been issued and the case is moving deeper into the legal arena.

Not only is it more traumatic to provide such crisis-driven assistance, it is also more expensive and less cost-effective. The earlier a case is handled by legal services the more likely an agreement can be reached, benefits can be secured, or assistance can be given to help avoid longer-term problems.

Indeed, in many ways the state already “pays” for its failure to provide legal aid. For example, the state pays for

  • emergency assistance for the homeless when legal services programs are unable to represent those at risk of inappropriate evictions;
  • the high cost of foster care when families are not provided the legal aid that could help stabilize them and give them access to needed support systems;
  • increased emergency health care cost when legal services are not able to provide representation to secure coverage for on-going coverage that allows access to more appropriate primary and preventive care.

In addition, New York fails to benefit from the full provision of legal assistance. For example, millions of dollars in federal Food Stamp assistance are left untapped when applicants are inappropriately denied assistance and have no legal assistance to challenge those denials. Likewise when federal disability or supplemental security benefits are denied or terminated inappropriately and those denials are left unchallenged, New York often picks up the cost of caring for these individuals lest they become completely destitute.

While the Governor is to be commended for moving so quickly to streamline access to these critical supports and benefits, in many cases it will still take the intervention of legal assistance to ensure that benefits are properly awarded and to guard against improper disruptions in services.

The Core Legal Services Funding Streams

In order to meet the legal needs of poor and low income populations, legal aid programs across the country rely on three core funding streams: federal funding, Interest on Lawyer Account (IOLA) funds, and state funding. In New York, those funding streams include:

  • Federal Legal Services Corporation (LSC) – federal funding received by seven (7) LSC grantees in New York State. Launched in the 1960s, the federal Legal Services Corporation (LSC) is the national construct for funding civil legal services. These funds are distributed on a per-poor-person basis and support the general delivery of legal services based on local needs assessments.
  • Interest on Lawyers Account (IOLA) – received by many legal services organizations, but not all. Modeled after programs in Canada and Australia, IOLA is now a model of funding used throughout the country to tap into what had been non-interest bearing accounts held in escrow by attorneys and law firms. Seventy-five percent (75%) of the annual funding must be designated for the direct delivery of services to individuals, while 25% are designated for efforts to advance the Administration of Justice.
  • State Funding - the 2007- 08 State budget provided funding for legal services through the Office of Court Administration (OCA), the Department of State (DOS), and the Division of Criminal Justice Services (DCJS) as part of the Legal Services Assistance Fund (LSAF) – again, not all programs receive funding from all of the state funding streams.

Combined, these funding streams support a full range of services needed to ensure a vibrant civil legal services delivery system.

From front-line organizations that provide direct legal assistance though staff model programs, to organizations providing targeted assistance to special populations, to programs organizing the pro bono efforts of the private bar, to support centers providing the coordination and over-arching statewide training, support and technical assistance in broad areas of poverty law, the delivery system in each state should strive to meet the new standards adopted by the American Bar Association in 2006. These standards, along with the Principles of a State System for the Delivery of Legal Aid, also adopted by the American Bar Association’s full House of Delegates in August 2006, should form the blue print for what we strive to build and re-build here in New York. [4]

We have a solid foundation of service delivery here in New York and we have all the components needed to fully develop a comprehensive high quality delivery system. What we lack is stable core state funding.

The 2007-08 budget was historic in its treatment of civil legal services. Since 1993, when the state first provided general support for the delivery of legal services, this funding had always been a “super member item” carried by the Assembly Majority. In the 2006-07 budget these funds totaled $4.6 million. The Assembly Majority also led the effort to secure approximately $2 million in LSAF funding.

The 2007-08 budget brought the Executive, the Judiciary and the Legislature together to provide at total of $15.85 million in funding for civil legal services, including a new $8 million appropriation, the $4.6 million in base funding in the Department of State, the LSAF funds and, thanks to the combined efforts of the Senate and Assembly Majorities, a $1.2 million allocation for civil legal services for victims of domestic violence.

This was clearly a powerful new partnership and a powerful new commitment to revitalizing the delivery of legal assistance for low income New Yorkers.

The Executive 2008-09 Budget Proposal

The Governor also moved quickly in his first year in office to enact changes in the IOLA regulations that are now requiring banks to pay interest rates on IOLA accounts that are “comparable” to the rates the banks pay on similarly sized accounts. This change has had an extremely positive impact on IOLA earnings, allowing the Fund to award $25 million in grants for the 2008 calendar year cycle, up from $13 million in 2007.

The Executive Budget assumes IOLA income will grow to $72 million in the 2008-09 fiscal year. The Budget gives IOLA appropriate authority that will allow IOLA to spend up to $72 million if in fact the fund earns that much in the coming year. This is the “authority” to spend, not an actual appropriation of funding.

Based on this anticipated increase in IOLA funding, the Executive Budget proposed to eliminate the following state fund appropriations:

  • $4.6 million in general operating support through the Department of State budget – funding that has supported the delivery of legal services since 1993;
  • $2 million from the Legal Services Assistance Fund distributed by the Division of Criminal Justice Services for core services – again – the Assembly Majority has been responsible for ensuring that this funding has been available since 2005;
  • $8 million in new funding secured in last year’s budget- $5 million initially proposed by OCA and embraced and increased by the Governor and the Legislature;
  • $1.25 million for the provision of domestic violence related legal services – $1 million allocated by the Senate Majority and $250,000 by the Assembly.

The budget would provide a single undefined appropriation of $1 million for civil legal services.

There are a number of deep concerns with this approach:

  • As a state, we are still failing to meet some 80% of the civil legal needs of those in our communities;
  • This is a delivery system that relative to other human services has been severely underfunded for years;
  • This should be a period of growth and stability, not one in which we see IOLA gains off set by state funding losses;
  • State funding has become critical to the core operating funds of programs across the state;
  • The state of New York should maintain its own general fund commitment to the delivery of civil legal services;
  • Not all programs funded by the state are funded by IOLA;
  • State funding and IOLA funding do not provide the same level of support to all programs; if state funding is lost some programs will have no IOLA funding to help support their services, other programs will suffer disproportionate losses;
  • State funding will end effective April 1, 2008 while IOLA grants for 2008 have already been awarded, potentially leading to a disruptive seven-month gap in funding; and
  • There is no guarantee that IOLA funds will be available for distribution in time to cover any state losses.

IOLA has already committed $25 million in grants for the 2008 calendar year and must pay those grants first with their 2008 earnings. In addition, there are a number of troubling trends on the horizon that could substantially blunt IOLA’s earnings:

  • the Federal Reserve’s recent and future anticipated cuts in interest rates may drive down the new rates being paid on IOLA accounts;
  • given the current state of the economy, the principal balances being held in IOLA accounts could drop; and
  • given that much of the IOLA activity in New York state is driven by the real estate market, the continued depression in that sector will adversely impact the funds being held in IOLA accounts.

Indeed, New Jersey, which adopted IOLA comparability in February 2006 and saw its income climb to $52 million, is already feeling the impact of these troubling economic trends. IOLA revenue in New Jersey was down 6% in October, 9% in November and a dramatic 20% in December 2007. In Texas the IOLTA fund was expecting to earn $25 million to $28 million in revenue this year; in just the last week, the fund cut its projection in half to $14 million after the Fed slashed interest rates. It is expected that that figure may slip further depending on the Fed's future actions.

While the level of New York’s IOLA funding for 2009 grants remains uncertain, the state funding that has for 15 years provided stable core operating support has been reduced to a single undefined appropriation of $1 million. Because not all state funded programs receive IOLA funding and there is no guarantee that those that are funded by IOLA will be funded at a level comparable to the amount of support provided through the state budget, many programs providing critical services will be adversely impacted by these proposed changes.

National Context

Across the country, 2007 saw significant increases in state funding while also seeing expanded adoption of IOLA comparability rules.

According to the most recent information available from the American Bar Association, 17 other states have adopted IOLA comparability rules to increase resources for civil legal services (see attached). It is our understanding that at least five of these states have also increased their state funding commitment to legal services even as they have embrace IOLA comparability.

In fact, in neighboring Massachusetts, where IOLA revenues increased from $14.8 million in 2005 to an estimated $24.7 million after the comparability changes, the Governor has proposed a state fund increase of $2.4 million over a base of $9.6 million. (Massachusetts is also now re-adjusting its IOLA estimates downward.)

According to the ABA, there was a healthy increase in state funding in 2007, collectively totaling approximately 10%. Two states, New Mexico and Texas, reported new appropriations. California and Pennsylvania provided cost of living increases to their legal services providers. New York joined ten others states in increasing state funding for legal services last year. [5]

Restoration and Stability Urged

To ensure continuity of services and to maintain the state’s commitment to these critical services, it is essential that the Legislature restore the core state funding that civil legal services programs rely on to provide essential services to clients. We urge the Governor and the Legislature to join together to restore all state funding for civil legal services to the 2008-09 budget.

We have written to the Governor urging full restoration, and we urge the Legislature, at the very least to restore its traditional funding for civil legal services, including:

  • $4.6 million in general operating support through the Department of State budget;
  • $2 million from the Legal Services Assistance Fund distributed by the Division of Criminal Justice Services; and
  • $1.25 million for the provision of domestic violence related legal services.

We deeply appreciate the support you have given to delivery of civil legal services and we stand ready to work with you in any way we can.

Thank you for your time and attention.

End Notes:

[1] The New York Legal Needs Study, New York State Bar Association Committee on Legal Aid, June 1990, revised and reprinted December, 1993.
[2] The New York Legal Needs Study
[3] Documenting the Justice Gap in America, A report of the Legal Services Corporation, September 2005. hereinafter The Justice Gap; www.lsc.gov or link through www.empirejustice.org
[4] See: Standards for the Provision of Civil Legal Aid, Report 111 to the House of Delegates, Standing Committee on Legal Aid and Indigent Defendants, August 2006 and Principles of a State System for the Delivery of Legal Aid, ABA House of Delegates 2006.
[5] The other states are Florida, Hawaii, Iowa, Illinois, Massachusetts, Minnesota, New Hampshire, Utah, Virginia, and Washington.