Legal service groups could see IOLTA grants decline

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Legal service providers anticipate the benefits of new state money, but they are keeping an eye on an older revenue source that could shrink.

As organizations anxiously await their share of a $1 million state budget provision, agency officials are also bracing for the impact that declining interest rates may have on grant money.

Specifically, the amount that organizations receive from money generated by the Interest on Lawyer’s Trust Accounts (IOLTA) could drop significantly in 2009. This year, the Wisconsin Trust Account Foundation (WisTAF) split more than $1.7 million in IOLTA grant money among 12 agencies.

DeEtte Tomlinson, executive director of WisTAF, said that it is too early to assess what effect the slumping interest rates will have on grantees, but some legal service providers are preparing for the worst.

Interest Rates Plummet

The current interest rate on IOLTA accounts is about 0.5 percent, said Tomlin-son, compared to approximately 1.4 percent 12 months ago.

“It’s just that interest rates never plummeted this fast before, so we’re sitting here going ‘Wow,’” said Tomlinson, who noted that 2008 grants have been fulfilled. “That’s pretty dramatic and it basically cuts income really quickly.”

Legal Action of Wisconsin (LAW) received almost $750,000 in IOLTA grants this year, the most of any agency in the state.

Executive Director John Ebbott said the total represents about 20 percent of LAW’s total funding and a substantial decrease eliminates any expansion and could mean a reduction in staff and services.

“We’re not doing any hiring because we could find ourselves hiring three or four lawyers and then if WisTAF has a decline in revenue and grants go down, we’ll have to lay off the people we hired,” said Ebbott.

Matching Funds

In addition to possible staff reductions, a cut in IOLTA money could reduce grant money LAW receives from other sources. Ebbott said LAW parlays local WisTAF grant money into matching funding from national organizations.

For every $1 from WisTAF, LAW may receive matching funding from a number of other sources, said Ebbott.

“I’d say the quality of the WisTAF money is better because of this factor,” said Ebbott, who indicated that LAW has lost about $1 million in support money during the last year.

“So we wouldn’t be losing a dollar for a dollar.”

A loss of $1 from WisTAF could result in an overall loss of $4, he said.

IOLTA grant money accounts for far less of the $3.4 million budget for the Legal Aid Society of Milwaukee, but a reduction in the $240,000 received this year will still have a significant effect, according to Executive Director Thomas R. Cannon.

“I have a dream about this every night in nightmare form,” said Cannon, who also implied that severe financial cuts could lead to staffing cuts.

For the Interfaith Coalition for Worker Justice (ICWJ), which received $7,500 in grant money for the second year in a row, a reduction will affect educational services. Though the ICWJ does not have any attorneys on staff, volunteers provide information to visitors on employment rights and immigration.

Patrick Hickey, director of the Workers Rights Center, an affiliate of ICWJ, said the organization refers visitors to attorneys when appropriate, and the IOLTA grant money allows staff to keep up with the demand.

“We’re trying to get information out about basic rights for workers,” said Hickey. “A cut would definitely hurt because we’ve found the need is already greater than what we can provide for.”

On the Bright Side

Both Legal Aid and Legal Action are in line for a portion of the $1 million set aside in the state budget for legal services, which will provide a cushion if the IOLTA grants dip.

Ebbott said LAW expects about $350,000, while Cannon said Legal Aid is set to receive approximately $155,000.

In addition, WisTAF will be submitting a petition to the Supreme Court asking financial institutions to provide interest rates for IOLTA accounts comparable to regular business accounts.

But until both measures take effect, Tomlinson is prepared to tap into the WisTAF reserve to stabilize the grants.

“Basically, we would underwrite the grants dollar for dollar,” said Tomlinson, who estimated that there is about $1.4 million currently in the reserve.

If the long-term economic forecast remains bleak, Tomlinson said WisTAF will likely be more conservative with how it distributes money from the reserve.

“Then it might require some serious conversations with organizations,” said Tomlinson.