IOLTA Challenges Jeopardize Legal Services Funding
Legal services for the poor may suffer yet another blow. In addition
to congressional cutbacks in Legal Services Corporation funding, legal
challenges may result in eliminating Interest on Lawyer Trust Accounts
(IOLTA) funds - which would mean a $1 million loss to legal aid programs
in Wisconsin.
IOLTA programs in each state build earnings by pooling clients' money
- such as deposits for legal costs - into interest-earning bank
accounts. Usually these individual amounts are small or held only for
the short term. Before IOLTA, which dates to the early 1980s, lawyers
deposited these sums in noninterest-bearing accounts. IOLTA created a
way to pool those funds in interest-bearing accounts, then channel the
interest earnings into legal services for the poor. IOLTA backers see it
as free enterprise in action.
But some attorneys have challenged IOLTA, arguing that it's a form of
compelled charity. Challengers won their case in the 5th U.S. Circuit
Court of Appeals. The U.S. Supreme Court has agreed to review that
decision in late winter 1998.
"The Supreme Court's decision will be of significance to our IOLTA
program - and its million dollars," notes John Skilton, former State Bar
of Wisconsin president. "So we have another potential hit on legal
services. That's of concern to the Equal Justice Coalition because we
have a funding problem right now. To lose another million dollars would
be another crisis."
Wisconsin Lawyer