Non-Profit Legal Services Groups Take Funding Hit As Interest Rates Drop

The Philadelphia Business Journal reports:

• Nonprofit legal service organizations are facing dramatic budget shortfalls after a major funding source was cut because of precipitous drops in interest rates. Pennsylvania's Interest on Lawyers Trust Accounts (IOLTA) board of directors said its grants have dropped by 33 percent, or $7.3 million, for the fiscal year that began July 1. There will be $23.5 million in grants for the 36 legal aid organizations that count on the funding for their annual budgets.

• All lawyers and firms are required to establish accounts with banks where they place money they are holding in a trust for a client. Banks pay interest on those accounts that is collected by IOLTA staff, who report directly to the Pennsylvania Supreme Court. Each state has its own IOLTA program. The board approves grant applications submitted by organizations providing legal services to the poor. When interest rates are high, the fund has lots of money. But when the Federal Reserve cut rates earlier this year, less interest can be earned.

For more, see Falling interest rates hit nonprofit legal services groups (subscription required for the rest of the story).