Financial crisis crippling legal aid for poor

The nation's financial crisis is claiming two more victims: Poor people who need legal help, and their attorneys. Programs that provide free legal representation to the indigent are partly funded through interest on accounts for real estate transactions, legal aid groups say. As the housing market collapsed this year and interest rates dropped, funds disappeared. The problem stretches nationwide, but this area has been hit particularly hard, say representatives of local and national legal aid organizations. Thousands of people across the region won't have the same access to legal protection for foreclosure, eviction, domestic violence, divorce, school-related conflicts and problems with disability benefits. South Jersey Legal Services, which covers seven counties, will lay off five attorneys and close two offices beginning in January. It expects to provide legal help to 9,000 people next year, down from 12,000 this year. "The cruel irony of that is we have a lot of people calling us, losing their homes, being evicted from their homes, and we're not going to have the same staff as before in order to help them, which is painful," said Douglas Gershuny, executive director of South Jersey Legal Services. Pennsylvania is in a slightly better position because of a state Supreme Court move, effective last week, that forces banks to make interest rates for legal aid program money comparable to other similarly sized accounts, said Alfred Azen, executive director of Pennsylvania IOLTA Board. But Philadelphia-area offices are still instituting hiring freezes and not filling open positions for attorneys and other staff. Attorneys who work for these groups already make a relatively small salary compared with others in their field, starting at about $50,000. Clients never pay a dime. If it wasn't for such free help, Helen Cook, 75, of Woodbury, might still be having problems with her rent. A few years ago, an attorney from South Jersey Legal Services not only helped her get money back from the Department of Housing and Urban Develpment after she found out she was paying too much, but the attorney gave Cook a ride to the federal office to sign the paperwork. "I don't see why in the name of God they want to get rid of those people, because we poor people we need it!" Cook said yesterday. "I hope and pray they don't take them, because I might need them again." Much of the legal aid money nationwide comes through something known as IOLTA, or Interest On Lawyers Trust Accounts, which is often managed and mandated by state supreme courts. Interest on accounts temporarily created by attorneys for clients' real estate transactions and other matters is pooled to fund these organizations. Due to the collapse in the housing market, the reduction of Federal Reserve interest rates and the overall bleak economic picture, IOLTA funds have plummeted. "When the economy gets tough it hurts poor people the most because they have nothing to fall back on," said Debby Freedman, interim executive director of Community Legal Services in Center City, which has lost 10 percent, or $1.2 million, of its funding. In New Jersey during the second quarter of 2008, money from IOLTA decreased 48 percent, or $4.5 million, compared with that same period in 2007. It is likely suffering worse than any state in the country, according to Don Saunders, civil director at the National Legal Aid & Defender Association. New Jersey was one of the first states to mandate that banks provide comparable interest rates on IOLTA accounts as other similarly sized accounts, so it has grown accustomed to a steady supply of these funds. In most states, primary funding for legal aid still comes from the federal government, according to Saunders. But in New Jersey, last year IOLTA funds amounted to $40 million of the $70 million in total revenues. The umbrella group Legal Services of New Jersey only expects $25 million in IOLTA funds this year. South Jersey's portion is being cut in half, to $1.8 million, forcing closure of the Cherry Hill and Egg Harbor offices. Ten percent of the attorneys, along with 13 non-attorney positions, will be cut. "This is purely an economic disaster affecting us," Gershuny said. Other states are faring better. But they rely on federal funds, which have been stagnant for years. And this week's economic crisis could mean even that money is in question. "Every state is hurting, and it impacts every state differently," said Azen, adding that the Pennsylvania IOLTA board had to disburse a third less funding this year. Legal aid groups are spoken of in heroic terms in some parts, particularly in poor cities like Camden. South Jersey Legal Services has a record of successful lawsuits against major developments, such as a $1.2 billion plan to build 5,000 homes and a golf course in the Cramer Hill section. About 1,100 families would have been displaced through eminent domain, but the plan was thrown out of court two years ago after the suit. "We had no money, we had nobody to fight against those big guns - and I mean big guns," said Jose Santiago, one of the plaintiffs. "They're very important because they help stop the abuse of the political system who want to make money off Camden."