Daily Business Review, August 19, 2009
By: Susannah A. Nesmith

When a 70-year-old Miami-area woman got sick, fell behind on her bills and was quickly facing foreclosure, a rescuer who promised to save her home made matters worse by getting her to transfer the deed to him.

The woman didn’t have money to hire a lawyer to help her sort the mess out, so she turned to a legal aid group that helps the poor.

Carolina Lombardi, senior housing attorney at Legal Services of Greater Miami, was able to set aside the deed transfer and saved Thelma Williams’ most important asset.

“There is nobody else who’s going to do that,” executive director Marcia Cypen said.

Wide-ranging fallout from the recession has Cypen scrambling for funding to continue providing the same kinds of services. Major donors like Miami-Dade County have cut grants for legal aid even as more people seek free legal assistance. The one bright spot — at least for the moment — may be the Florida Bar Foundation.

The foundation distributed $31 million in grants last year, and most went to the state’s 31 legal aid organizations. The foundation also funds some administration of justice and law student assistance programs.

Foundation revenue is down nearly 75 percent this year, but the nonprofit decided back in 2005 to begin building up a reserve. This year’s grant awards have not yet been decided, but foundation officials hope to be able to maintain last year’s levels by tapping those reserves.

“The Florida Bar Foundation was smart enough to set aside money to plan for the future, but no one could plan for this,” she said.

The foundation gave Legal Services of Greater Miami more than $1.5 million last year, about 22 percent of the organization’s $6.8 million budget.

If the economy doesn’t rebound pretty soon, however, the foundation may have to scale back grants in coming years.

“We do have enough money for this year and next year, but if the economy doesn’t start to pick up by the end of 2010, I’m afraid we will exhaust the reserves,” said foundation executive director Jane Curran.

Most of the foundation’s money comes from the Interest on Trust Accounts Program, which collects interest on funds that lawyers place in trust accounts. The foundation’s program is called IOTA, but nationally the programs are called IOLTA, short for interest on lawyer trust accounts. Established in 1981 by the Florida Supreme Court, the IOTA program captures the interest on funds that are either too small or are held in trust for too short a time to benefit law clients. Collections have been on a steep slide for two years: $11.5 million in 2008-09, $44 million in 2007-08 and $73 million in 2006-07.

An overall decline in the amount of money lawyers have placed in trust, most likely due to the real estate crash, and a decline in short-term interest rates have taken a toll, Curran said.

When foundation officials set up the reserve account, they were hoping to use it to maintain grants at current levels for four years, Curran said.

“We based the worst-case scenario on making $12 million. This year it’s $11 million. The projections for next year are it could go as low as $4 million and is probably more likely going to be $6 million,” she said.

In contrast, a similar program run by the Georgia Bar Foundation cut awards to its major grantees by more than half this year because of lagging revenue. The Georgia foundation also cut all funding to 20 groups, focusing its efforts on just 12 programs.

“We’re one of only a few states that set up reserves,” Curran said, noting some programs have a pay-as-you-go philosophy, giving out money when they have it rather than saving for the future.

Lean Years

The Florida foundation has a small endowment valued at more than $4 million. The endowment doesn’t pay out money every year, instead it’s saved for lean years. Donations from the foundation’s fellows program, which collects yearly pledges from Florida Bar members, fund the endowment. The foundation also has other smaller fundraising projects including the Our Kids Deserve Justice specialty license plate, which brought in nearly $45,000 last year and a charitable annuity program set up a year ago. Members of The Florida Bar donated $133,000 last year in one-time $45 donations, according to Tim Bachmeyer, the foundation’s director of development. Donations from individual attorneys are up 14 percent in the initial months of the annual drive.

“There are 86,000 members of The Florida Bar, and we solicit money from all of them,” he said.

On average, the foundation funds about 25 percent of its grantees budgets, he said.

Cypen is happy that the foundation has reserves but worries about future years.

“The Florida Bar Foundation was smart enough to set aside money to plan for the future, but no one could plan for this,” she said, noting she’s already seeing cuts in funding from other major donors like Miami-Dade County. Meanwhile, demand for free legal services is spiking.

“More clients are coming to us than ever before,” she said. “The needs are greater.”

The Florida Immigrant Advocacy Center, which receives $1.5 million of its $4.2 million budget from the foundation, also is concerned about funding cuts and thankful the foundation money appears stable, at least in the near term.

“God bless the foundation,” FIAC director Cheryl Little said. “Without the foundation funding, we would be in serious trouble.”

She said the center is already cutting expenses, freezing open positions and doing whatever possible to maintain the level of legal services it provides to immigrants.

“Management is looking at taking a cut in pay. We hope that we don’t have to lay anybody off,” Little said.

She’s concerned that law firms that have provided pro bono services are so strapped now that they may not be able to give as much of their attorneys’ time.

“With the downturn in the economy, many firms are hard-pressed to have their attorneys do that. They need to be bringing in money,” Little said.

The foundation awarded more than $8.5 million in grants in South Florida last year. While FIAC and Legal Services of Greater Miami are among the larger grant recipients, the foundation also supports smaller efforts such as the Cuban American Bar Association Pro Bono Project. The foundation grant of $72,741 made up the majority of the project’s budget this year, according to executive director Raul Flores.

“We do some local fund raisers here in Miami, but it’s not even a quarter of our budget,” he said. “We’re very dependent on the IOTA funds.”

The project closes about 60 cases a quarter, most of them immigration cases, and also handles landlord-tenant, domestic violence and consumer fraud cases.

“Most of our clients are people of low income, often with limited reading and writing skills, so they’re preyed upon,” Flores said. “We wouldn’t be able to survive without IOTA,” he said.