The funding comes from NC IOLTA, or Interest on Lawyers' Trust Accounts. Basically, any time an attorney holds money for a client, the interest is put into a shared account that has historically been spent on civil legal defense for the poorest North Carolinians.
IOLTA spokesperson Karen Taylor says it’s a model shared across the country by states and territories.
"They all have IOTA funds, and they can be structured differently, but for all of them, the purpose is to provide civil legal aid, because unlike criminal defense funds, the government is not obligated to help people with civil legal needs," she said.
North Carolina took the unprecedented step of freezing IOLTA’s grants last summer, meaning organizations like NC Legal Aid had to close offices and limit services. Taylor says that had a significant impact on low-income North Carolinians facing evictions or seeking domestic violence protection orders.
She said several organizations that IOLTA had previously given grants to “reported an average of 22% fewer cases closed without IOLTA funding, and 11% fewer clients served,” in the year after the grants were frozen.
In a statement, State Bar Executive Director Peter Bolac said, "Despite months of good-faith efforts by State Bar and NC IOLTA leadership and other stakeholders to understand legislators’ concerns and make reasonable modifications to IOLTA’s grantmaking policies and procedures, the state budget [...] includes a provision that directs nearly all of NC IOLTA’s available annual grant funding away from civil legal services. This loss of funding will prove devastating to the tens of thousands of low-income North Carolinians facing legal concerns that threaten their housing stability, income, access to health care and benefits, and safety from domestic violence and human trafficking.”
The new state budget instead puts up to $15 million of the IOLTA grants toward the Office of Indigent Defense Services’ Private Assigned Council (PAC) Fund to support public defenders, whose services the government is constitutionally required to fund.
Public defender offices have faced budget shortfalls in recent years, requiring the legislature to step in with emergency funding. This move in the budget takes non-taxpayer money away from civil defense and uses it to plug that hole.
NC IOLTA Board Chair Judge John Arrowood said, "This provision appropriating IOLTA funds — which have funded civil legal aid grants for more than 40 years — to bolster the PAC Fund shifts the burden of navigating a complex and intimidating justice system to vulnerable individuals and families facing civil legal challenges.”
While the PAC funding is capped at $15 million under the new budget bill, that's likely to swallow all available IOLTA revenue most years. It means there’s unlikely to be money left over for civil defense cases like evictions, family law, and insurance claims after natural disasters.
