City Bar challenges proposed $100 million IOLA Fund diversion

February 14, 2024 Robert Abruzzese, Courthouse Editor

Gov. Kathy Hochul has concerns raised over her proposal to divert $100 million from the IOLA Fund.
Photo: Hans Pennink/AP

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The New York City Bar Association, representing a broad spectrum of the legal community, is spearheading opposition against Gov. Kathy Hochul’s proposal to divert $100 million from the Interest on Lawyer Account (IOLA) Fund to the state’s general budget.

The association warns that this action could critically restrict access to essential legal services for the indigent, with far-reaching implications for New York’s justice system and economic well-being.

Established in 1984, the IOLA Fund has been instrumental in providing essential legal services to those unable to afford them, funded by the interest generated from lawyer trust accounts. This model, mirrored across the United States, has proven effective in supporting a wide array of legal aid initiatives.

In the last year alone, IOLA-funded organizations have resolved more than 300,000 cases, directly benefiting over 600,000 residents and contributing an estimated $3.5 billion in economic benefits to New York, spanning areas such as food security, housing, employment, and healthcare.

Susan Kohlmann, president of the New York City Bar Association, highlighted the profession’s trust in the IOLA system as a means to bridge the state’s justice gap, which requires up to an additional $1 billion in funding.

“Lawyers across New York recognize, trust and expect that their use of IOLA escrow accounts will result in contributions to legal services for those in need, at a time when up to an additional $1 billion is required to close the justice gap in the state,” Kohlmann said.

Kurt Denk, executive director of the City Bar Justice Center, pointed out the human impact of the proposed IOLA sweep, which threatens to dismantle established services essential to New Yorkers lacking legal representation.

“The risk of the governor’s proposed ‘IOLA Sweep’ for IOLA-funded organizations like the City Bar Justice Center and 80 other IOLA grantees across New York State is a deeply human one because it risks unsettling longstanding services that provide those essentials of life to our neighbors who cannot afford legal help,” said Denk.

The concern extends beyond the immediate reduction in services; a joint letter from New York’s legal leadership warns of the ethical dilemmas and existential threats to civil legal service funding that could emerge from the proposed fund diversion.

This collective outcry has led to a formal statement of opposition from the IOLA Board of Trustees, which unanimously rejects the governor’s budget proposal for FY25 that includes the IOLA fund transfer.

The list of signatories urging Governor Kathy Hochul to reconsider the proposed transfer of $100 million from the IOLA Fund to the State General Fund encompasses a broad and diverse coalition. It includes key legal aid organizations, such as the Legal Aid Society and the City Bar Justice Center, alongside advocacy groups like Advocates for Children of New York and the Center for Elder Law & Justice. Leaders from large law firms, corporate legal departments, and various bar associations have also signed the letter. This collective spans a range of professionals from chief attorneys, executive directors, and board members to corporate counsels, legal services providers, and advocacy group leaders, reflecting a widespread consensus within the legal community on the importance of maintaining the IOLA Fund’s integrity for supporting civil legal services in New York.