Executive Director, Bruce Iwasaki

March 13, 2003

One thing is clear: government funding for legal services is not a growth area. For the immediate future, we will scramble to hold on to what we have.

The Federal Picture

More than 55 percent of LAFLA's income comes from the Legal Services Corporation. As I have previously reported, the 2003 appropriations bill, which was finally approved last month, included a $9 million increase for LSC to cover part of the shortfall many programs experienced because of the revised poverty data in the 2000 census. California programs, because of the sharp increase in poverty in this state, already got a population-based increase in LSC funds, and thus will not share in the supplemental appropriation.

The politics of this appropriation were interesting. Congress would not have agreed to fund LSC at a higher level except that many states lost money. Even Trent Lott got involved in trying to get an LSC increase because Mississippi lost funds. The result is that in the current fiscal year, LSC was appropriated $338 million, more than the $329 million the Bush Administration asked for.

While for FY 2004 the Administration has again asked for only $329 million (the same it requested the previous two years), and while many in Congress probably saw the $9 million bump as a one-time transitional fix, supporters of legal services hope to use 2003's higher level as the starting point for 2004 appropriations. The issue will be: what if an increase is specified in whole or in part to once again supplement programs that lost money because of the census? This is one of those touchy issues within the legal aid community. Whenever there is a departure from a straight "dollars per poor person" formula, all kinds of disputes arise. (Back in the late 1970s, the Bay Area programs were vastly over funded compared to Southern California. This year, although we in California are happy to have gotten an increase, it really only represents how disproportionately underfunded we were all during the mid- and late-1990s.)

How this plays out depends on the federal budget, the politics in Congress, and changes at the Legal Services Corporation. With respect to the federal budget, of course, things look worse everyday. Last year at this time the federal government had an $8 billion surplus; now it has a $94 billion deficit, with projections of red ink reaching $400 billion by the end of the year. And that's without the tens of billions that would be directed to a war. New federal money is going to be hard to get.

New Congress

In Congress, of course, the 108th Congress is a new story as well, with Republicans controlling both Houses. In the Senate, New Hampshire Republican Judd Gregg is now the chair of both the appropriations and the authorization committees in charge of LSC. He has tended to defer to Sen. Domenici, a supporter of LSC, on funding issues. In the House, the chair of the appropriations committee is Frank Wolf, of northern Virginia, a grudging LSC supporter, while the chair of the House judiciary committee is James Sensenbrenner, a bitter foe of legal services since the early 1980s. Sensenbrenner has already written a couple of nasty letters to LSC, seeking to grind to a halt months of work reforming the financial eligibility regulations. These changes -- particularly with respect to group representation, which I testified to the LSC board committee on late last year -- are very important for us. We are urging LSC not to simply knuckle under.

For FY 2004, the White House requested $329 million. NLADA is urging $506 million for LSC, a politically unrealistic amount, but which equals LSC's 1995 funding with inflation, and highlights how far below that mark we have fallen. The Corporation initially requested $415 million, but got beat up by the Office of Management and Budget and was forced to toe the Administration line. Now, with the increase for 2003, LSC is planning to request around $350 million. Legal aid supporters have cavils about aspects of LSC's proposal. LSC seems to want a larger increase for its management and administration than for the field. In addition, NLADA, representing the field, will push for straight per capita funding rather than creating an unwieldy and divisive two-tier structure in which California programs will receive less per eligible client than other states. But the dilemma will be what if Congress is only willing to increase overall funding by abandoning the per-poor-person formula?

LSC Board

Another reason things are somewhat in limbo at LSC is that the current board -- a supportive one appointed by Clinton over ten years ago -- is something of a lame duck. A few weeks ago I had dinner in D.C. with Randi Youells, LSC's vice president for programs and a life-long legal services lawyer and program director. She pointed out that a number of important initiatives are happening, including requests for proposals on a new technology grant. But until there is a new board, it won't be clear what senior staff's marching orders will be.

Many folks in LAFLA don't know what a hostile LSC board can do because we had a supportive board and management through most of the 1990s. But those who remember from the mid-1980s can tell you: a hostile LSC can inflict misery. So, who sits on LSC's board is very important. For many months, the Republican nominees have been known, and in fact have attended -- but not participated in -- LSC board meetings. Recently there has been a flurry of activity in nailing down the Democratic appointees. (By statute, LSC's board must be bipartisan.) It is far from clear who the chair of the board will be -- certainly a Republican -- and that can make a huge difference as well. Our friends in D.C. think that the Democrats being considered are a strong and supportive group. In a few weeks, perhaps, the full slate will be sent to the Senate for confirmation.

When that happens we can expect a definite change in philosophy at LSC. We hope it won't deteriorate to the situation in the 1980s -- when it was Congress, especially people like Republican Warren Rudman who saved us -- but it will be a change. We should make sure our LSC compliance is clean as a whistle, because we can expect more audits. We must also expand our base of support within the community. That is one reason LAFLA's board is in the process of expanding its size from 48 * already large -- to (gasp) 57.

The California Picture

We are awaiting the U.S. Supreme Court decision in the IOLTA case of course, but with the downturn in the economy and continued low interest rates, statewide IOLTA grants will decline by 9.8% this year. And Los Angeles County will actually decline slightly more than that because -- believe it or don't -- the percentage increase in poverty in L.A. County was actually slightly behind the state average. Other factors affect what LAFLA ultimately gets, but last year, we also did worse than the state and county averages. That could be a $60,000 reduction.

LAFLA also receives Equal Access Fund money from state general funds. Of course, the state deficit is so huge, legislators cannot tell whether the shortfall is $34.6 billion (the Governor's estimate), or $26.1 billion (the Legislative Analyst's estimate). We had been hoping to keep our heads down and skate through, but the judiciary, where this line item exists, is taking a big hit -- courts are closing up and down the state, clerks are being let go, judges have forgone pay raises -- that it seems unlikely that the EAF will escape unscathed.

The governor has proposed unallocated cuts to the Judicial Council of $18 million, but much of that budget -- not the Equal Justice Fund -- is untouchable. You can't stop paying the Supreme Court, for instance. A worst case scenario is elimination of the Fund, but the amount now being discussed as a possible cut is a $2.8 million reduction -- a 28% cut. That would reduce our overall EAF revenue by some $200,000. That, of course, would be disastrous.

Dedication

In the chilly era we are entering, the programs that survive will provide excellent service, be well-regarded in the community, have strong and diverse political, volunteer, and financial support, and have compliance licked -- current time sheets, clean files, no eligibility problems. (Ask Alameda County, Pasadena, and other programs that LSC killed what happens if you don't do that.) LAFLA is moving forward on these things and more, so we are in good shape to weather a rough time. No one said it would be easy.

BGI