IOLTA Challenges Jeopardize
Legal Services Funding

Legal services for the poor may suffer yet another blow. In addition to congressional cutbacks in Legal Services Corporation funding, legal challenges may result in eliminating Interest on Lawyer Trust Accounts (IOLTA) funds - which would mean a $1 million loss to legal aid programs in Wisconsin.

IOLTA programs in each state build earnings by pooling clients' money - such as deposits for legal costs - into interest-earning bank accounts. Usually these individual amounts are small or held only for the short term. Before IOLTA, which dates to the early 1980s, lawyers deposited these sums in noninterest-bearing accounts. IOLTA created a way to pool those funds in interest-bearing accounts, then channel the interest earnings into legal services for the poor. IOLTA backers see it as free enterprise in action.

But some attorneys have challenged IOLTA, arguing that it's a form of compelled charity. Challengers won their case in the 5th U.S. Circuit Court of Appeals. The U.S. Supreme Court has agreed to review that decision in late winter 1998.

"The Supreme Court's decision will be of significance to our IOLTA program - and its million dollars," notes John Skilton, former State Bar of Wisconsin president. "So we have another potential hit on legal services. That's of concern to the Equal Justice Coalition because we have a funding problem right now. To lose another million dollars would be another crisis."