Executive Director, Bruce Iwasaki

May, 2003

In volatile times, we are going to hear a mix of news, some good, some bad. So what do you want to hear first?

IOLTA: a half million dollar cut in two years

The good news, from last month, is that the constitutionality of Interest on Lawyer Trust Account funding -- attacked by enemies of legal aid in the U.S. Supreme Court -- was narrowly upheld.

The bad news is that the recession and low interest rates have severely diminished the IOLTA grant amounts. As a result, LAFLA will suffer a nearly $100,000 reduction in IOLTA beginning in July. In two years, our IOLTA revenue has dropped more than half, from $960,165 in 2001-2002 to $467,019 in 2003-2004, a far steeper crash than anyone expected. And the Trust Fund Commission is even worried that it won't collect from the banks enough money to cover the grant amounts it announced for this year, something unprecedented.

State Funding: tied to the budget deficit

With respect to state general funds, the bad news is that because of the disastrous condition of California's budget, funding for the courts will be reduced. This threatens the Equal Access Fund that we, and a hundred other legal services programs, receive.

Already in the current fiscal year (ending June 30th), mid-year reductions have been implemented in the judicial branch budget. On top of previous reductions these cuts total almost $240 million * a 9.15% reduction. The Los Angeles County Superior Court has already closed twenty-nine courtrooms. Such reductions in service decrease access to justice for all people. At a Saturday meeting of bar leaders a few weeks ago, it was repeatedly pointed out that the judiciary is a co-equal branch of government, and should not be treated, for budget purposes, in the same way as the Department of Motor Vehicles.

For the 2003-04 fiscal year (beginning July 1), Gov. Davis released last week his May Revise, leaving unchanged his proposal to reduce the trial courts by $116 million, and the appellate courts and Judicial Council budget (which is where the Equal Access Fund is tucked away) by $17.7 million. The presiding judge of the Los Angeles County Superior Court said that such a reduction would lead to shutting down sixty to a hundred courtrooms.

The good news is that yesterday, the budget subcommittees in both the Assembly and the Senate voted to restore about half of the Governor's proposed cuts to the Judicial Council budget. If this holds up through the full budget committees in each House, and both Houses, and the Governor, it may mean a relatively minor cut in the Equal Access Fund -- or even, very optimistically, no cut -- rather than the 30% loss (which, for LAFLA, would be more than $150,000) -- that was possible. There is a long way to go on the state budget, but the latest news is positive.

Local Funding

The good news locally is that for the first time in many years, the City of Long Beach is providing funding to Legal Aid. We have been recommended to receive over $43,000 to handle eviction work in the city. Congratulations to Mary Ann Heimann and Todd Howard for writing what appears to be a successful proposal.

On the other hand, the City of Santa Monica, a stalwart municipality that funds us at a much higher per poor person rate than the City of L.A., is finally feeling the pinch of the tech bust, and is trimming its budget. Under the current scenario, Santa Monica will reduce our revenue by about $22,000, despite being very happy with our work.

Dumb and Dumber

The federal tax cut package, passed by the House and (by a 51-50 vote this morning) by the Senate has been repeatedly described in the media as costing $350 billion over the next decade. In some ways the final bill is even more unequal and costly than what President Bush proposed. For example, the average tax cut for filers who make more than $1 million a year is $93,500. Under the Administration's original package, the savings would have been $89,500.

But for the rest of us, the story is different. The average 2003 tax cut for households in the middle quintile will be $217. Fifty-three percent of households will receive a tax cut of $100 or less; thirty-six percent will receive no tax cut whatsoever.

And of even greater significance is that due to gimmicks in the compromise package, the cuts could actually cost over one trillion dollars. Although most of the provisions are scheduled to expire in the next few years, Congressional Republicans have vowed to extend them. If that occurs, the cost through 2013 is estimated to be between $807 billion to $1.06 trillion. There is no good news offsetting this.

LAFLA Fundraising

But there is some promising news for our fundraising. Last week at its Retreat, LAFLA's board of directors voted to embrace in concept a $9 million capital campaign to replace our three owned facilities. This is all contingent on financial and real estate analyses and a market survey to determine LAFLA's capacity to raise funds. A huge amount of thinking and work must still be done, but this is an important early step.

With respect to annual funding, I am pleased to report that Amy Brenneman, executive producer and star of the CBS show "Judging Amy," will be an honoree at our Access to Justice Dinner in the fall. That bodes very well for our event, particularly getting financial participation from the entertainment industry and creating an exciting buzz.

BGI