Budget Compromise Slashes Funds for Organizations That Help Poor Deal With Predatory Lending, Domestic Violence, Foreclosures

Providers of civil legal services to the poor are having to furlough their staff, triage their clients, and turn away more people in need as a result of the congressional budget compromise reached last month. Legal services may include defending low-income individuals dealing with predatory lending, domestic violence, landlord-tenant disputes or foreclosure. As we've noted, legal experts have particularly urged to Congress to adequately fund legal services in order to alleviate the crisis of flawed foreclosures.

But far from seeing any budget increases, the umbrella nonprofit group Legal Services Corporation had its funding cut by $15.8 million —about 4 percent of its most recent budget—as a result of last month's budget compromise. It was spared a $75 million cut first proposed by House Republicans.

The modest reduction isn't the only reason that the 136 legal aid programs across the country funded through LSC are in a tight spot. In addition to less funding from the federal government, they have limited support from cash-strapped states, dwindling revenue from trust accounts and a growing population of people eligible and in need of their help.

“You do reach a point where you can no longer absorb” the cuts, Edwina Frances Martin, a spokeswoman for Legal Services NYC, told me. Martin said her organization gets about 14 percent of its budget from Legal Services Corporation and lost about $720,000 in the final federal budget. It’s planning cutbacks large and small—cutting the budget for food at trainings, leaving some empty positions unfilled and implementing furloughs in some field offices.

Elsewhere in the country, Idaho Legal Aid Services is starting to shutter its offices several days every month, the Associated Press reported. The organization lost about 60 percent of its funding in the final federal budget.

In Virginia, chapters of the Virginia Legal Aid Society are starting to lay off attorneys.

In Maine, Pine Tree Legal Assistance—the group whose volunteer attorney Thomas Cox deposed a GMAC employee last year and set off a nationwide furor over flawed foreclosure practices at the nation’s biggest banks—estimates that the cuts will affect its ability to serve about 125 families this year.

In New Jersey, the group that coordinates civil legal services across the state said that programs are providing less full representation for clients and instead are opting to offer more limited help—such as legal advice—to more people. (Read the Legal Services of New Jersey’s report from last month.)

The reasons for this are manifold. Like other states, New Jersey has lost some federal funding through Legal Services Corporation, but that’s only its third-biggest revenue stream. Its biggest dilemma  is a drop in revenue from lawyers’ trust accounts, which collect interest on payouts to clients and donate that interest to legal aid. That revenue has dropped from $40 million to $8 million annually, Legal Services of New Jersey said.

In New York, another stream of funding is also being lost. On top of its federal cut on general funding, Legal Services NYC is no longer going to be getting federal stimulus dollars specifically allocated by the state  for foreclosure prevention, as the New York Times reported on Friday. As we reported last week, the organization’s foreclosure prevention efforts helped two homeowners in the Bronx discover and contest clauses hidden in the fine print of their mortgage modification agreements that would limit their ability to sue or fight foreclosure.

At least in New York, legal services providers do have friends in high places. The state’s chief judge, Jonathan Lippman, has for months crusaded for more state dollars  to go to civil legal services and has pledged to make it happen.