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Legal Service Providers in Financial Crisis

by Joe Surkiewicz

Funding for civil legal services for Maryland’s poor is in a tailspin—as the number of clients who need it soars.
Everyone knows Baltimore is a tough town to be poor in. Two reports out of Washington released last month back that up with statistical proof—and add urgency to a crisis in Maryland’s legal service network that will compound the problems of poor people.

First, the reports.

The annual "Out of Reach" report published by the National Low Income Housing Coalition reveals that nowhere in the U.S. can a minimum-wage worker afford to pay rent on a two-bedroom apartment. In Baltimore, someone earning minimum wage would have to work 131 hours a week to afford a two-bedroom apartment renting for fair market rent ($844) and still pay for food and other basic needs.

That survey came on the heels of a Census Bureau report showing that 11.7 percent of the U.S. population lives in poverty, up from 11.3 percent in 2000. The report noted that the poverty rate among blacks and Hispanics continues to run about double of the population at large.

What’s it all mean? For one thing, it’s a safe bet that illegal evictions, homelessness and other civil legal problems facing the poor will rise in Baltimore and throughout Maryland.

Yet there’s more bad news. The folks who help low-income people with legal problems—legal service providers that supply the stitching to the social safety net—are faced with an unprecedented problem of their own.

Historically low interest rates now being paid on lawyers’ trust accounts—a mandatory funding mechanism found in all 50 states that supports legal services to the poor—are creating a statewide fiscal crisis.

Interest on Lawyer Trust Accounts (IOLTA) is down to about $3 million in 2002, with another 25-percent drop projected for next year.

Compare that to last year, when IOLTA earned $4.2 million to fund programs that provided services in 108,000 cases that helped over 400,000 low-income people throughout Maryland.

"We’ve been getting about $5 million a year from IOLTA," said Robert J. Rhudy, executive director of the Maryland Legal Services Corp. (MLSC), the nonprofit organization established by the General Assembly to distribute IOLTA funds. "But this year, it’s $3 million—and there’s our dilemma.

"Assuming we don’t see a turnaround, we’ll need $1.5 million additional to maintain services where they are now," added Rhudy, who noted that legal service providers reach only about 20 percent of eligible poor people who need legal help.

Many legal service providers are already taking it on the chin. Reeling from the cash-flow crisis, last summer MLSC cut grants by up to 20 percent to 18 of the 28 providers it funds.

Yet it could have been worse: A one-time infusion of $588,000 from the MLSC’s $3 million "rainy day" fund and $760,000 in emergency funding from the Maryland courts have kept all programs operating for the time being, though with some reductions in service. The 10 programs that focus on direct service to clients—including the largest provider in the state, the Legal Aid Bureau—haven’t yet been cut at all.

Unless the economic picture rapidly changes for the better, however, these direct service providers have only temporarily dodged the bullet. "Our concern is, where does the money come from next year?" asked Rhudy.

By most criteria, Maryland has one of the best legal service legal aid programs in the US—and provides those free services without direct state funding. (After IOLTA, the next largest source is small surcharges on civil court filing fees.)

Yet funding for civil legal services for the poor is in a tailspin—as the number of clients who need it soars.

Private giving from lawyers, foundations and other sources is up significantly. More than ever, attorneys in private practice are donating pro bono work. But this will not be enough. If public justice in Maryland is to survive in an era of increasing poverty, the State of Maryland needs to increase its support in order to fulfill its promise of equal access to justice.

Joe Surkiewicz is director of communications at the Legal Aid Bureau, which provides a full range of free civil legal services to poor people in Maryland. For information about the organization, call (410) 539-5340, ext. 2235.

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This story was published on November 9, 2002.
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