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Empire Justice Center Testimony at the Public Protection Hearing for 2010-2011

Joint Legislative Public Hearings on the 2010-11 Executive Budget Proposal: Public Protection

February 8, 2010


Prepared by:

Good afternoon and thank you for the opportunity to testify on 2010-11 Executive Budget.  My name is Anne Erickson and I am President and CEO of the Empire Justice Center.  A member of the Legal Services Funding Alliance, the 20 civil legal services providers outside New York City, the Empire Justice Center is a statewide, multi-issue, multi-strategy non-profit law firm focused on changing the “systems” within which poor and low-income families live.  With a focus on poverty law, Empire Justice undertakes research and training, acts as an informational clearinghouse, and provides litigation backup to local legal services programs and community based organizations.  As an advocacy organization, we engage in legislative and administrative advocacy on behalf of those impacted by poverty and discrimination.  As a non-profit law firm, we provide legal assistance to those in need and undertake impact litigation in order to protect and defend the rights of disenfranchised New Yorkers. 

As many of you know, we have helped lead the effort to secure state funding for legal services programs across the state since 1993.   We worked with you through the years of the Pataki administration, including the year when state funding was completely lost to gubernatorial veto.  We worked with you through the bare bones budget following the attacks of 9-11.  We worked with you during years of increased funding and the creation of the Legal Services Assistance Fund in 2003.  We worked with you last year as the new Senate Majority joined the long-term supporters of legal services in the Assembly and included a new funding for legal services in the final budget last year.

It is from this history that we believe this is the most critical year we have ever faced in terms of access to justice and the support needed by the legal services delivery system. 

Most years we confront the need to restore state funding to the budget.  This year we confront that and so much more.  We are facing a triple whammy: the elimination of over $13 million from the Executive Budget that had been in last year’s budget; a dramatic decline in funding from the Interest on Lawyer Account (IOLA) fund; and an unrelenting increase in people desperately seeking legal assistance as the economy continues to strip them of the ability to hold onto their jobs, homes and their economic stability.

The Need for Legal Services

It is important to remember why we need legal services: it is our effort to ensure access to justice.  Justice and the rule of law our fundamental to our democracy.  For most of us, our interactions with the law are few and far between.  Perhaps we need a lawyer to close on a new home or to put our wills and estates in order.  For those living on low or moderate incomes, the law plays a critical and often on-going role in their lives.  The law determines their access to critical benefits; it defines their protection from eviction and foreclosure; it establishes their right to health care and food assistance.  Many laws touch the daily lives of those on the economic edge in the most fundamental of ways.

The law in general is complicated, dynamic and ever changing.  The areas of law that most impact poor, low and moderate income households are exceedingly complex.  Take Medicaid with its vast and intricate eligibility rules, asset tests and application processes many of which vary based on age, income level and household size.  It can be an exceedingly difficult application process - one in which a denied application can literally threaten one’s very life or the health of one’s children.  The laws governing unemployment benefits, disability assistance, public assistance, immigration, domestic violence, consumer protections, evictions, foreclosures, public housing and family law are equally complex. 

These are dynamic areas with constant change in law, rule and regulations.  For example, in 2009, the Office of Temporary and Disability Assistance (OTDA) which oversees basic public benefits issued 24 administrative directives, 24 informational letters and 36 general informational messages clarifying and interpreting the rules of the system.  The Department of Health issued four administrative directives, 29 general information notices, an additional nine just on Long Term Care and two informational messages.  Add to these two state agencies the many directives from other state agencies and any number of federal agencies and the scope of constant clarification and interpretation becomes apparent.

Appropriately, into this mix, we build due process provisions and legal avenues for those adversely impacted by decisions made by those overseeing these benefits of health, safety and economic security.  We enable individuals to appeal denials and terminations before a neutral decision-maker. 

Now imagine confronting these issues and trying to navigate these legally complex arenas, without the benefit of counsel.  As the New York State Bar Association noted in it report on the legal needs of New York’s low income populations in the late 1980’s: 

few middle class Americans would represent themselves in court if their access to shelter, income, food or clothing were at issue... Yet, the poor are confronted by such problems repeatedly and are often defeated due to the lack of counsel…(1)

Or as Chief Judge Jonathan Lippman noted last month in his testimony before the joint Senate and Assembly hearings on the IOLA crisis:

“Many of us cannot even begin to imagine what it would be like to have to fight for life’s most basic necessities – shelter, personal safety, food, income, health services – much less to have to go it alone, without the help of someone with legal training.  For these vulnerable New Yorkers, civil legal services are the ultimate safety net- often the only means by which they can keep their lives afloat.(2)

The Cost-Effectiveness of Legal Services

Not only are legal services part of our social safety net, not only do they address one of our core values by ensuring some access to justice, they are also cost-effective for the state as an investment.

  • Client Benefits: In 2006 civil legal services generated $131 million in benefits for their clients, a return of 93 cents on the dollar.  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.   
  • Leveraging Federal and Private Funding:  legal services leveraged over $29 million in federal funding, and over $34 million in private dollars to provide legal assistance to low income clients resulting in payroll taxes, health benefits, rent, utilities, and staff salaries paid here in New York
  • Increasing Child Support Payments: legal services programs generated a total of $12,391,387 in child support payments to clients in 2006, increasing family resources and thus decreasing the need for publicly funded benefits including public assistance and child care subsidies. 
  • Maximizing  SSI/SSD payments to clients and to state and local government
    • 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.  
    • 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 public assistance cost reduction, resulting in a net gain of $14.6 million for the state and localities, more than twice the initial investment.
  • Maximizing Food Stamps - 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. 
  • Avoiding the High Cost of Homelessness:  In 1999 legal services providers helped a total of 48,014 adults and children avoid homelessness.  We 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. One study estimates a $4 savings for every $1 invested.   
  • Averting Foster Care CostsFor 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.
  • Creating Efficiencies in the Courts:  Civil legal services program resolve an estimated two out of three client problems by providing advice or non litigation services. Increasing the availability of legal services will help cut down on the number of cases that wind up before a judge unnecessarily.

New York’s Approach to Ensuring Access to Justice

In the best of times, across this country and here in New York we have barely met 15% to 20% of the legal needs of the poor. Add to this now the growing need for legal assistance among more moderate income households as they confront the legal morass of foreclosures or perhaps their first denial of needed benefits.

For far too long, New York’s commitment to ensuring access to justice has been a legislative commitment only.  Every year the Governor strips all funding out of the budget as he prepares the Executive Budget; every year the legislature restores these critical funds.(3)  Sadly, this year is no exception.  Even the scant $1 million that Governor Paterson had in his Executive Budget last year is eliminated.

Over $13 Million - All of Last Year’s Funding for Civil Legal Services - Eliminated

  • $4.2 million, Department of State, Assembly add
  • $4.4 million, Department of State, most targeted to civil, new Senate funds
  • $2.4 million Legal Services Assistance Fund, Division of Criminal Justice Services, Assembly add
  • $1.2 million for Domestic Violence Legal Services, Senate and Assembly
  • $1 million Legal Services Assistance Fund, Governor

We should note that the Senate Majority also used a portion of the Legal Services Assistance Fund to expand the District Attorneys’ Loan Repayment Assistance Program to include all public interest lawyers, including those working in legal services programs.

We urge the Legislature to restore these crucial access to justice funds.

The Looming Crisis in IOLA

Created in 1983, the Interest on Lawyer Account Fund (IOLA) “requires attorneys to deposit funds received from clients either in interest bearing accounts for the benefit of the clients or in interest bearing IOLA accounts, in accordance with the provision of the statute (Judiciary Law §497). The interest on IOLA accounts is pooled and provides the money for grants made by the Board of Trustees of the IOLA Fund to non-profit civil legal services providers across the state.”(4)  

The interest earned on these pooled funds provide a critical source of support for civil legal services.   Unfortunately, with interest rates hovering near zero since 2008, IOLA’s earnings – and therefore its grant-making capacity -- are down dramatically.  Last year, IOLA made $24.8 million in annualized grants to legal services programs across the state.   IOLA revenue is projected to drop to approximately $6.5 million for the period April 1, 2010 through December 31, 2010

Interest Income as of December 31, 2009


The Response of the Unified Court System and the Office of Court Administration

In response to this looming crisis, Chief Judge Lippman included a $15 million appropriation in the Unified Court System’s budget for 2010-11.  These funds, already included as part of the Executive budget submission and therefore already accounted for in the underlying financial plan, will be sub-allocated to IOLA, allowing the Fund to maintain current grant levels in the coming year.  Without this rescue, there will be a complete meltdown in the delivery system.

It is critical that the Legislature maintain this appropriation in the final budget.

Revenue Options

To generate the level of funding needed to adequately fund legal services will require a combination of new revenue from dedicated sources likes fees and fines and an increased general fund commitment.  Just as the health or education system are not be expected to be self-funding through fees and charges neither should the justice system. 

Clearly new revenue sources must be identified and secured.  Most states that fund legal services in any significant way do so through a combination of general funds and fees or fines.  Using fees to support legal services is not entirely new.  In 2003, the Legislature, at the urging of the Assembly, created the Legal Services Assistance Fund by dedicating a portion of a fee increase; in this case the fee imposed to conduct a criminal records search.

The American Bar Association’s Resource Center for Access to Justice Initiatives is currently updating its data on how states fund legal assistance.  Its most recent compilation shows that California generates over $6.7 million from court fees and fines and provides $11 million through general state funds to support legal services.(5)  Connecticut recently approved $7.7 million in new or increased court fees to support legal services in addition to its $1 million appropriation of general funds.  New Jersey now provides over $29.5 million in funding for legal services through a combination of court fees and general fund appropriations.  Texas generates $9.77 million through court fees and the state recently approved $10 million in general state funding over two years to replace lost IOLTA funds.

While we do not want to impose fees that will limit access to justice, we believe at this point, no revenue source should be “off the table” until a full review has been conducted of anticipated revenue levels as well as any real adverse impact such a revenue stream may have on access to justice.

The Lack of an Institutional “Home” for Civil Legal Services

Access to justice is not some special interest, but an obligation of the state to meet the core values of our democracy.  Unfortunately, as noted, the Legislature has basically been alone in ensuring access to justice.  They are joined in a very significant way this year by the Judiciary.

New York first provided general support for the delivery of legal services in 1993 when the Assembly Majority responded to that day’s dramatic decline in IOLA funding.  One of the criticisms of New York’s approach to state funding since then is that it is purely driven by legislative add-ons.  Frankly, we consider this a blessing because were it not for the Assembly Majority’s legislative adds over the years there would not have been any general support for the delivery of legal services in any state budget over those many years.  So we again thank the Assembly and we thank the Senate Majority and the Judiciary for taking a new leadership role on these issues.

Now is the time to move this funding process more formally and permanently into the initial budget making process so that the state’s investment in access to justice finally and appropriately becomes part of the base budget of the State of New York.

We believe this will require an entity within state government that has clear budget making authority and is at the table from the start of the budgeting process.  We believe the appropriate “home” for civil legal services within state government is with the Office of Court Administration (OCA).

Funding for civil legal services must become part of the core state budget. 

A Note on the State Contracting Process 

This is directed more to your role as monitors of state funding, but as we meet here today on February 8, 2010 we have yet to receive a single penny of the over $13 million included in the 2009-10 state budget for legal services.  We all fought long and hard to restore those funds and we have been fighting since last summer to move those funds out into the community where they are so desperately needed.  

We understand the state is trying to manage its cash flow, but it is being done by starving the non-profit sector.  While we may have a “prompt” contracting law on the books, given what we have been through this year that law, as best I can tell, it is meaningless.  We would welcome an opportunity to work on strengthening its provisions – and its enforcement mechanisms. 

The Impact on Empire Justice

For the Empire Justice Center, state funding is a critical part of our annual budget.  We have been the support center for legal services programs outside New York City since 1973.  Until 1996, state support centers were funded as part of the federal infrastructure for legal services through the Legal Services Corporation (LSC), one of the three core funding streams that to this day support the delivery of legal assistance.   In 1995, a Congress hostile to legal assistance for the poor, severely cut LSC funding, imposed a number of practice restrictions on those programs receiving LSC funding, and eliminated all funding for state and national support centers.   We lost one-third of our budget in a single year and we have struggled to maintain our services ever since.

The lack of federal funding for support services makes state funding even more critical.

Urgent Recommendations:

Avoid disaster.   We face a disastrous dislocation of services if something is not done to back-fill the $15 million that has been lost due to the historic near-zero interest rates currently being paid on IOLA accounts.  Supporting IOLA to maintain existing funding levels will help avoid complete meltdown in the legal services delivery system. 

Support the $15 million proposed in the Unified Court System’s budget.  This is not an expansion or an increase in funding -- it will simply allow the maintenance of current efforts.

Protect the base.  Restore and maintain all current funding, including the Assembly’s on-going support and the Senate Majority’s new financial commitment. 

This cannot be a zero sum game where funding provided to IOLA to avert disaster leads to reductions in other critical funding.

Create a Permanent Infrastructure.  We must create a more stable permanent funding stream for legal services.  We cannot continue with the “wipe out and restore” process we go through every year.  We know this will require support from the Governor but it will also depend on your leadership and we look forward to working with you to make this happen.

Investigate the Contracting Process.  We simply cannot operate in any reasonable fashion when we spend so much time, effort and energy trying to move the state contracting process.  Nor can we afford to carry the state’s obligations.  Something must be done to ensure that the state honors its obligations in a timely fashion.

Thank you for your time and I look forward to working with you as the budget process continues to unfold.


(1)  New York State Bar Association, The New York Legal Needs Study, Albany NY (1990, revised 1993).  This comprehensive statewide review, combining field visits, research and direct interviews with over 400 low income households, 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.”

(2)  Testimony of Chief Judge Jonathan Lippman at the January 7, 2010 Senate and Assembly Hearings on IOLA and Civil Legal Services.

(3)  Governor Spitzer included base funding for civil legal services in his first Executive Budget and then eliminated all general state funding from his Executive Budget the following year.

(4)  About IOLA:

(5)  This is California’s base funding for legal services and does not include the new fee-generated funding expected to raise an additional $10 million to fund a number of right to counsel pilot projects in the coming year.