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Trust fund grants drop 44 percent in two years

The Legal Services Trust Fund Program annually distributes grants to a variety of programs that assist impoverished Californians who often have nowhere else to turn for legal help. But due to low interest rates in a sluggish economy, the program has seen its distributions plummet 44 percent — from $13.5 million to $7.5 million — in just two years.

Program director Judy Garlow sees no signs of a turnaround.

"It's a little early to predict what grants will be next year," said Garlow. "But given the continuing decline in interest rates, I think it's likely they'll be down a little more."

California's IOLTA (Interest on Lawyers' Trust Accounts) program pools funds held briefly in trust by attorneys for their clients and then distributes the earned interest in grants to legal services programs. Other states have similar programs.

Just this spring, legal services providers nationwide got some good news when the U.S. Supreme Court — in Brown v. Legal Foundation of Washington — narrowly rejected a constitutional challenge to the way in which the state IOLTA programs collect and distribute funding. Last year alone, legal services providers across the country received some $160 million in IOLTA funding.

In California this year, 99 legal services providers and statewide support centers received IOLTA grants in amounts ranging from roughly $3,000 to $669,000 each. The support centers, 23 in all, receive 15 percent of the pot and the remaining funds are split up among counties based on a formula. The formula takes into account the number of poor residents in each county and the size of the particular legal services organization.

Since its creation two decades ago, California's IOLTA program has distributed some $250 million. The grants, which fluctuate with interest rates, hit a high of $22.7 million in 1992. In recent years, some legal services programs have lost hundreds of thousands of dollars in IOLTA grant money due to the shrinking fund. At the same time, such grants continue to be seen as a particularly important source of steady funding that, unlike restricted grants earmarked for special programs, can help fill gaps in operating expenses as well as basic legal services.

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