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OCEAN TOWNSHIP – The Legal Aid Society of Monmouth County operates on a shoestring budget and out of a sparse office, but over the years it has provided thousands of local residents with free legal assistance, lawyers to fight for child support or custody, unravel landlord-tenant disputes and navigate through bankruptcy proceedings. It is one of the great equalizers for the poor.
As the non-profit marks its 65th year of existence, agency leaders find themselves worrying as much about a looming financial crisis as the next legal battle. They say the agency could close its doors come mid-September without a badly needed infusion of cash.
“There’s an obligation to help the less fortunate people. If we close, those people will have no place to turn,” said Lynn Staufenberg, president of the Legal Aid Society.
The amount of money that is outstanding — about $9,000 — sounds insignificant, until it’s understood that after a series of cutbacks, that sum represents nearly a quarter of the agency’s $40,000 operating budget. And the financial picture is not expected to improve anytime soon, thanks to a broken financial model.
Legal aid offices across the country have been stung by the same forces: government cutbacks to such discretionary programs for the needy, and once-steady funding streams have been compromised by miniscule returns on bank deposits, a fact of economic life in the age of historically low interest rates.
Such shortfalls leave the poorest residents without legal help and, as a consequence, they are outgunned by represented parties, including landlords and creditors. Unlike criminal cases, the poor aren’t guaranteed legal help in civil courts.
Very small returns
The critical funding for the Legal Aid Society of Monmouth County comes from New Jersey’s Interest on Lawyers Trust Accounts program. All 50 states have similar IOLTA programs, which were created in the 1980s.
Attorneys have interest-bearing trust accounts in which they place clients’ funds for safekeeping until the money is moved to its intended destination. The accounts are most often used for real estate transactions. The funds are held for such short periods of time it’s often difficult to determine whose money earned what interest, or the amount it so small — fractions of pennies — that it can’t be distributed to clients. Therein is how the poor benefit.
Under IOLTA, those pennies are pooled in statewide funds that then provide grants to nonprofit groups that provide legal help to the poor. In many cases, the threshold is 125 percent of poverty level. That’s an annual income of $14,713 for an individual and $30,313 for a family of four.
The IOLTA Fund of the Bar of New Jersey was hit worse than similar funds nationally after seeing revenues drop 83 percent, from a high of $52 million in 2007 to $8.6 million last year. Per court rules, 75 percent of IOLTA funding goes to Legal Services of New Jersey.
The remaining 25 percent is handed out in discretionary grants, Executive Director Ellen Ferrise said. At its peak, New Jersey’s IOLTA fund distributed grants to 81 non-profit agencies. This year, that’s down to 44 agencies. The Legal Aid Society of Monmouth County was one of those left without funding.
“There have been peaks and valleys. It completely tracks with prevailing interest rates,” Ferrise said. “This is an unprecedented valley.”
A national problem
In 2008, IOLTA programs nationally collected $225 million, making it the second largest funding source of civil legal aid for poor behind the federal Legal Services Corporation. IOLTA funds nationally drew in about $75 million last year. State programs have seen their IOLTA revenues tumble to anywhere from 70 percent to 80 percent of their peak before the Great Recession.
In New Jersey, the Legal Aid Society of Monmouth was able to make due for a few years off its reserves, said Lynn Staufenberg, president of the Legal Aid Society. It supplemented the lost grant money by hosting wine tastings and cocktail parties, raffling off iPads and Apple Watches and seeking donations from lawyers.
The legal community here has been helpful, but the funding woes have only grown. The situation has gotten so dire that the Legal Aid Society closed its doors for two weeks in June to save money.
“It was heartbreaking for everyone to make that decision,” she said.
Upcoming decisions could be no less difficult. The local office has enough money to stay open through mid-September. Its been offered an advance on funding it expects to receive later in the year, officials said. But if the agency takes that funding now, what will it do down the road?
Legal Aid Society operates on about $3,000 a month and would need about $9,000 to make it through the end of year, Executive Director Geoffrey Greenberg said. It expects funding from Monmouth County, which also provides office space and phone lines, later in the year.
Even Legal Services of New Jersey, which gets the bulk of the state’s IOLTA money, had to change how it operated, said Melville D. Miller Jr., president of the statewide nonprofit group. At the same time as the IOLTA funding started its decline, Legal Services of New Jersey saw its funding from the state cut in half from $29.6 million to $14.9 million.
The shortfall of cash forced the organization to cut is staff from a high of 720 employees statewide in 2008 down to about 330 or 340 last fall, Miller said. In December, it also consolidated Ocean Monmouth Legal Services program with its South Jersey program, dropping from six to five programs statewide.
The consolidation has increased the number of people seeking help from Legal Aid Society of Monmouth, Staufenberg said.
Other states have infused more cash into the system. Texas lawmakers set aside $37.56 million over a four year period for legal aid, while New York Courts Chief Judge Jonathan Lippman supplemented his state’s IOLTA with $15 million while setting aside another $70 million for other nonprofits that provide legal aid to the poor.
Money to pay for legal help for the poor has started to rebound after New Jersey lawmakers increased judicial filing fees, Miller said. But still his agency estimates it turns away about two out of three people seeking help.
His organization has conducted surveys that show New Jersey is at best providing legal aid for only 1 out of 10 civil legal problems. Most legal matters, he said, are too complex for a lay person to represent themselves.
“There’s a huge non-availability of lawyers for low-income people who can’t afford a lawyer themselves,” he said. “It’s a sad commentary for a society that professes equal justice for all under the law. We’re not quite there yet.”