Legal Services Funding in New Jersey is in Big Trouble

BY KATE COSCARELLI, Star-Ledger Staff

The agency that coordinates free legal help for people with civil problems ranging from housing disputes to divorce is facing a potential budget shortfall, officials said yesterday.

The primary funding source for the nonprofit Legal Services of New Jersey has dropped off in recent months, threatening the agency's ability to take cases, said Melville Miller, president of the organization. Legal Services runs a network of legal assistance offices around the state and represented more than 55,000 poor clients in the past two years.

"If these revenue drops persist, or worse, it will lead to crippling staff reductions and severely diminished client services," said Miller.

The December figures were down 20 percent, said Miller. That follows declines of 9 percent in November and 6 percent in October.

For the past two years, the legal aid agency has gotten more than half its $72 million annual budget through interest earned on certain accounts lawyers keep for clients, called the New Jersey Supreme Court Interest on Lawyers' Trust Accounts program. The funds are administered through an independent agency in New Brunswick, said Ellen Ferrise, the executive director of the IOLTA Fund of the Bar of New Jersey.

The funding has fluctuated over recent years, Ferrise said. While it is too early to tell what 2008 might bring, she said market indicators signal that it could be a down year.
The accounts depend largely on the strength of the real estate market, Federal Reserve interest rates and the overall economy.

"All three are in decline, with no end in sight -- a kind of terrible perfect storm for our funding," said Miller. "We did not really foresee the depth and suddenness of this drop."
The past two years have seen record revenues for the fund, and much of that extra money went to Legal Services, allowing it to take on more cases and hire staff. If the financial woes continue, those gains will be cut, said Miller.

Judiciary officials, who appoint the trustees to the fund but are not involved in its day-to-day management, said they are always concerned with the financial well-being of the agency.
"The courts certainly have confidence that the trustees who manage this money are managing it well in these difficult times," said Winnie Comfort, a judiciary spokeswoman.

Legal Services isn't the only agency that gets funding from the trust accounts. The New Jersey State Bar Association's foundation also gets about 12 percent of its annual funding from the accounts, said Angela Scheck, the bar's executive director. But the foundation anticipated the money might fluctuate and established a reserve to cover possible shortfalls.