Gov. Hochul faces backlash over attempt to divert $120m from legal aid fund

Recent controversy over IOLA fund cutbacks echoes in new proposal

March 14, 2024 Robert Abruzzese, Courthouse Editor

Gov. Kathy Hochul is under scrutiny for her budget proposal to divert funds from the Indigent Legal Services, sparking widespread concern among legal advocates and professionals.
Photo: Hans Pennink/AP

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The New York State Bar Association (NYSBA) has voiced strong opposition to Gov. Kathy Hochul’s recent executive budget proposal, which aims to redirect $120 million from the Indigent Legal Services Fund to the state’s general fund.

This move, coupled with the denial of a $46.3 million budget increase requested by Indigent Legal Services, has sparked concern among legal professionals and advocacy groups regarding the potential impact on legal aid for the state’s most vulnerable populations.

Richard Lewis, NYSBA president, criticized the proposal for jeopardizing essential legal services for indigent New Yorkers, particularly in areas such as Family Court and public defense. The proposal requires an annual appropriation for the distribution of these earmarked funds, a process that has repeatedly seen the executive branch withhold necessary funding, according to Lewis.

“Gov. Hochul is proposing to sweep $120 million earmarked for Indigent Legal Services into the state’s general fund,” Lewis said. “She has also rejected a request from Indigent Legal Services for a $46.3 million increase over last year’s budget — all of which would have come from the Indigent Legal Services Fund and none of which needed to be appropriated from the general budget.

“Even though these funds are earmarked, there must be an annual appropriation in the state budget for Indigent Legal Services to distribute the funds,” Lewis continued. “Despite annual requests to use these funds according to their designated purposes, the executive branch has declined to appropriate much-needed funding, creating the paradox of monies remaining in the fund but not being able to be distributed under the State Finance Law.”

The controversy follows a similar situation earlier this year when Hochul proposed cutting $100 million from the state’s Interest On Lawyer Account (IOLA) Fund, a plan that was met with widespread condemnation from the legal community. The IOLA Fund, crucial for supporting nonprofit legal organizations providing civil legal services, saw a reversal of the governor’s decision after significant backlash, highlighting the importance of such funds in addressing New York’s justice gap.

Critics, including public defense groups and leaders of prominent New York law firms, have underscored the legal and ethical implications of diverting funds designated for civil legal defense. The IOLA Fund, not reliant on taxpayer dollars but on interest from attorney escrow accounts, serves as a vital resource for legal service providers across the state. Last year, the fund’s grantees closed more than 307,000 cases, generating significant economic benefits for New York.

Gov. Kathy Hochul’s executive budget proposes shifting $234 million from the Indigent Legal Services Fund (ILSF), directing $120 million to the State General Fund and properly allocating $114 million to fund the state’s assigned counsel/18b attorneys. Established to enhance New York’s public defense system, the ILSF supports counties, New York City and the improvement of public defense services.

Hochul’s budget rejects a requested $46.3 million increase for public defense, particularly in Family Court, and overlooks calls for fully state-funded rate increases for 18b attorneys. This move, which contradicts the ILSF’s legislative purpose and threatens the quality of public defense improvements, has drawn opposition from the New York State Bar Association, which advocates for using the ILSF as intended.

“The New York State Bar Association opposes the sweep and urges that Gov. Hochul allow the money to be spent for the purposes for which it was intended, which would address a serious need for attorneys in Family Court and improve the quality of public defense,” Lewis said. “We commend the state Senate for supporting this position.”