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Study Shows Free Legal Services For The Poor Are Good For Business, Not Just To Feel Good

The Florida Bar Foundation is trying to make a business pitch about funding legal services.
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The Florida Bar Foundation is trying to make a business pitch about funding legal services.

Why should a community fund free legal aid services for its low-income residents?

The Florida Bar Foundation is trying to make the case that these programs, which provide representation by civil legal aid advocates in cases directly affecting families, homes, incomes, jobs and access to vital services, should be funded because they are  good for the economy.

A new study from the Foundation found that for every dollar spent towards legal aid services, there is a $7 return on investment. 

Credit The Florida Bar Foundation
The Florida Bar Foundation

According to the study of 33 legal services organizations in Florida, the economic impacts came in three areas: 1) direct dollar benefits received by low-income clients and other entities as a result of successful legal assistance, like Social Security payments or Medicaid reimbursements; 2) cost savings by preventing clients from needing emergency shelters or from foreclosure costs; and 3) an economic multiplier from clients who use their savings and new income to buy things within the state, like groceries.

For example, when legal aid services aids a veteran in his/her claims for benefits, direct monthly payments might help stabilize a person’s living situation. She might use some of the money to pay for groceries in local stores and won’t need emergency medical services to take care of primary care needs because she has  insurance that covers doctors visits.

The study reflects similar findings in other states that show a return on investment, like in Texas ($7.42), Iowa ($6.71) and Virginia ($5.27).

“It's good for business, It's not just to feel good,” said Bill Schifino, president of the Florida Bar. “It really helps the economy in Florida, so that's the message we're going to scream from the top of the mountain.”

Part of the impetus for the study is dwindling funds designed to support legal aid services.

In 2010, legal services got roughly a third of their funding from the Florida Bar Foundation. That shrank to less than 10-percent last year.

Credit The Florida Bar Foundation

The driver of those shrinking funds is the mechanism that generated that money in the first place. In 1981, Florida pioneered an approach to funding legal services through an Interest on Trust Account or IOTA program.

The way it works, when lawyers are working on putting together large financial or real estate transactions, deposits are put into a trust account until everything is finalized. The transaction doesn’t happen the next day, in fact it could take several weeks to more than a year. While that money is sitting there, the bank is investing it and earning interest. That interest is then paid into the IOTA fund that the Florida Bar Foundation is responsible for administering.

Credit The Florida Bar Foundation

Almost every state now has a similar system for funding legal aid services.

Since the 2007-2009 recession, that fund has not been generating new revenue due to flat interest rates.  As a consequence, the Florida Bar Foundation has had to deplete its reserve funds to continue funding legal services.

As you can see from the graph below, revenues from the IOTA Fund, that were as high as $72.6 million during the 2006-2007 fiscal year, have shrunk to mere $5.8 million this past year, lower than the revenue made in the 1989-1990 fiscal year. And projections for the next several years suggest the low-revenue streak will continue.

Credit The Florida Bar Foundation

Credit The Florida Bar Foundation

The Florida Bar Foundation uses money from the IOTA Funds primarily to fund legal services, to the tune of $9.5 million during the 2015-2016 fiscal year. The challenge is how to fill the gap between that revenue and the growing need for legal services. 

This is why the Florida Bar Foundation is trying to make the case to the business community that funding legal services will be good for everyone, so they should contribute too. 

"We have to engage our business community in this. This isn't just a lawyer fix; it can't be. It’s just like doctors can't fix the medical problems in the country,” said Bill Schifino.

Schifino doesn't want to dismiss other points, like the 1.7 million hours of pro-bono work Florida lawyers donated over the past year, but says the financial need is pretty dire.

“I think we're really missing the vast majority of our middle class,” said Schifino. “Clearly you have your poverty level and they have access to legal aid, but you've got this whole middle section that we have a complete gap there.”

He estimates that legal services programs and organizations are only able to serve 10- to 20-percent of the need.

Credit The Florida Bar Foundation

“It is an uphill battle,” said Matt Brenner, president of the Florida Bar Foundation. “It's not just a liberal cause or a cause that is just for poor people, the problem affects everybody. The justice gap that exists in Florida and around the country impacts rich, poor, business, private sector, public sector, it affects everybody.”

He says in light of declining IOTA funding there is no silver bullet and it’s unlikely that one-time donations from businesses or law firms will be able to push the needle in any significant way.

The hope is that technology will be able to fill the gap.

While few projects are currently in the works, one suggestion is to create an online portal to help connect clients with simple legal questions to a lawyers who can answer them.

Through the American Bar Association's new innovation center, which launched in the summer of 2016, Miami lawyer Hilarie Bass says they’re exploring how to design a pilot program that would create a small claims court online, for instance.

“We have to rely on technology do a better job of eliminating the justice gap,” said Bass, president-elect of the ABA. “There’s no reason why we couldn’t have more online.”

And while she is sensitive to concerns of some lawyers who wonder if they will be able to compete as more legal assistance and information is put online for free, “the reality is that an informed public, I view it as always a good thing.”

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Wilson Sayre was born and bred in Raleigh, N.C., home of the only real barbecue in the country (we're talking East here). She graduated from the University of North Carolina-Chapel Hill, where she studied Philosophy.
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