Chicago Legal Aid Societies Impacted by the Economy

Feb. 17, 2009 – Chicago legal aid societies, providing services for some of the city’s poorest residents with non-criminal cases, are bracing themselves.

As a result of lowered federal interest rates, these organizations will see a sharp cut in funding, while requests for their services has, in some cases, doubled.

Legal aid societies have benefited from a program called Interest on Lawyer’s Trust Accounts, or IOLTA. Interest gained from short-term accounts, such as real estate transactions and retainers, are placed in this pooled-interest bearing trust account.

In Illinois, the IOLTA fund has two sources of funding – interest from short-term accounts and from state licensing fees, which brings in $2.5 million, with all of it going toward legal representation for the poor or working-class poor. Other states are directed by law or choose to direct their funds toward services in high demand.

During the 2008 fiscal year, which began July 1, $17.1 million was available for some agencies to expand services, recruit and retain lawyers and improve technology.

Thirty-four Cook County firms received grants from IOLTA in 2008, with  $3.1 million allocated among the three largest firms – CARPLS , Legal Assistance Foundation of Metropolitan Chicago and Chicago Volunteer Legal Services .

But as interest rates dropped from 5.25 percent to between 0 and 0.25 percent, Illinois IOLTA income could plunge to about $5 million total for fiscal year 2009.

Now, many agencies will seek alternative sources – private firms and donors – in addition to fundraisers to meet the growing public need for legal advice.

Kendra Reinshagen, executive director of Legal Aid Bureau of Metropolitan Family Services , said that she wouldn’t know until April how much in IOLTA grant funds her agency will receive for fiscal year 2009, but they are prepared for it to be lower than previous years.

“We’re reaching out to the law firms and other sources for funding,” said Reinshagen.

Last year, an increase of $50,000 in grant funds enabled the firm hire an eighth lawyer to serve the Southwest suburbs. This year separate funding for this position will not be available. Reinshagen is hoping to raise additional funds from outside sources to maintain the position.

Also, Reinshagen said her firm is telling staff about the possibility of furloughs and no raises for the year. She said many local agencies are already doing so.

The decrease in funding comes at a time where many firms are seeing an increase in requests for legal assistance for foreclosures, consumer debts and family issues. At the Richard M. Daley Center , CARPLS operates four legal advice desks and has seen 6,500 clients in the past year seeking assistance.

Selene James, 62, a project manager at Healthy Families of Illinois, was recently served with a judgment by Midland Financial Bank for unknown debt. She called the CARPLS hotline and was referred to their municipal desk on the sixth floor at the Daley Center.

As she waited more than 30-minutes to speak with a CARPLS’ attorney, she said wasn’t aware any such debt and suspected they bought the debt from some other company. James said the company claimed her sister was served with papers in 2008.

She doesn’t have a sister.

Concerned, James said if the judgment was made against her, she would face having her wages garnished.

Ashlee Highland, supervising attorney at the 1401 collections desk at the Daley Center, said the numbers alone don’t reflect the problem clients are faced with. She is concerned with any cuts in services due to lack of funding.

“I think if we weren’t available, people won’t be aware of certain rights,” said Highland. “And they might waive them or lose them.”

The Chicago Legal Clinic created their chancery desk five years ago, designed to assist clients in understand court procedures such as mortgages and name changes. At that time Executive Director Edward Grossman estimated the desk would see roughly 20 clients a day.  Now, on some days, it’s up to 40 a day, he said.

Allen C. Schwartz, executive director at CARPLS, said they have been able to maintain their current budget, but he worries about the coming fiscal year because of the indications funding will be reduced.

A recent survey of calls to their hotline in the second quarter in 2009 showed a 25 percent increase from 2008. Requests for foreclosure and consumer debt were up 58 percent and 34 percent respectively. Their Spanish hotline saw an increase of 49 percent. Schwartz said Hispanics are a population that is being hit disproportionately.

Besides the concerns CARPLS has over IOLTA funding, they are also worried about funding they receive from the city, state and county. Schwartz said it isn’t clear what the economic crisis impact will have on those sources of revenue.

“We’re hoping for the best, at this point we’re hoping to maintain the current levels of service and staffing but basically we have to play it by ear,” said Schwartz. “It’s a month to month thing.”

Some legal aid societies said there are not enough legal services available to the poor in Illinois. If service is cut because of funding, it will have a direct impact on their ability to protect their rights.

“A lot of times we are the only thing that separates folks between a proper resolution of their legal problems,” said Schwartz. “Most unrepresented litigants are people not familiar with the law and don’t tend to come out on the right side of the law when they have a legal problem.” 

Schwartz said this could manifest in higher levels of wage garnishments, evictions, and foreclosures. 

Ruth Ann Schmitt, executive director for the Lawyers Trust Fund of Illinois , said there will be an impact next year if funds did not increase and by 2011 the impact could be “devastating” for many programs.

Schmitt said most programs will be able to weather the economic storm with slight adjustments in their budgets, but beyond the 2010 budget year, many could close or merge.

“I think we have hit rock bottom in terms of monthly income,” said Schmitt. “Right now, the real question is how long will [federal] rates stay this low. And number two, how can we stretch the limited reserves to meet needs.”

Schmitt said the IOLTA reserves were “beefed up” because of the income generated in 2008 but now these reserves will sustain for one or two years but after that they will be depleted. She said if the income per year were $1 million to $2 million, it would put IOLTA back 10 to 20 years in grant funding.

“Money is very tight,” said Schmitt. “And that’s why it’s gonna take all of our ingenuity to preserve IOLTA as a viable funding source through out this crisis.”

For more information about legal services in Cook County contact or visit the following websites:

Legal Assistance Foundation of Metropolitan Chicago
111 W. Jackson Blvd. 3rd Floor
Phone: (312) 341-1070
www.lafchicago.org

CARPLS
(312)738-9200
www.carpls.org

Chicago Legal Clinic, Inc.
2938 E. 91st Street
Chicago, IL 60617
(773)731-1762
www.clclaw.org

Chicago Volunteer Legal Services
100 North LaSalle Street, Suite 900,
Chicago, Illinois
Phone: (312) 332-1624
www.cvls.org

Chicago Legal Aid Bureau of Metropolitan Services
(312) 986-4000
http://www.metrofamily.org

Illinois Legal Aid.Org

http://www.illinoislegalaid.org

Prairie State Legal Services

http://www.pslegal.org.