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April 15, 2014
Board considers short-term Foundation help

Opposes petition to raise Bar fees to fund legal aid

By Gary Blankenship
Senior Editor

The Bar Board of Governors voted to oppose a proposed petition to the Supreme Court to raise Bar annual membership fees by up to $100 to support struggling legal aid programs.

The vote came after the board heard that Bar leaders are exploring an up to $6 million short-term loan to The Florida Bar Foundation. Bar President Eugene Pettis also reported that the Bar is discussing with the Foundation and the Supreme Court undertaking a study to find alternative and more cost-effective ways of delivering legal services to the underserved.

The board, at its March 28 meeting in Palm Coast, voted to conceptually approve the idea of the bridge loan, with final details to be provided and formally approved at the board’s May 23 meeting.

Pettis said Bar leaders met with Foundation officials to discuss the petition, now signed by 330 lawyers, calling for the increase in Bar fees. The Foundation Board of Directors voted to take no position on the petition.

While the Bar’s Board of Governors is committed to legal aid, Pettis said, they do not see raising Bar fees to address the Foundation’s shortfall as the best response to the funding crisis.

“It is critical, in my opinion, that we start looking at a new model of delivering legal services . . . to reach people who need legal help,” Pettis said. “The old model of throwing money and lawyers at it is not going to work. I don’t think we can hire enough of them to reach the people who need legal services.”

The problem is caused by the collapse of Foundation funding from its IOTA program due to historic low interests rates. Income from the Interest on Trust Accounts Program went from a high of more than $70 million a few years ago to $5.5 million now. Foundation President John Patterson told the board the Foundation, in its high-income years, established a reserve for hard times, but no one foresaw how long the effects of the Great Recession would last or how long those effects would keep interest rates on bank deposits depressed.

The suggested solution, Pettis said, is for the Bar to make a loan of $2 million a year for each of the next three years, to be repaid over the following five years.

“We have the clear capacity to do this and certainly can put together the documents to give us some comfort on doing this,” Pettis said.

He added that the loan idea has already been referred to the Budget and Investment committees, which will report to the full board in May.

Patterson said the Foundation is funding legal aid at $15 million a year at the moment, and even with the bridge loan anticipates cutting that amount to $11 million. He said all of its reserves will be used by the 2016-17 fiscal year and that the Foundation is dipping into its endowment funds.

“The recession lasted longer than anyone thought it would and the Federal Reserve held down interest rates longer than anyone thought they would, and they are continuing to hold them down,” Patterson said. He added that predictions are that the Fed may ease interest rates at the end of 2015, which would help restore the Foundation’s funding.

He also said the Foundation needs to know if the money will be available as of next January to avoid even deeper cuts in Foundation grants to legal aid agencies.

In response to a question, Patterson acknowledged that the Foundation’s ability to repay the Bar’s loan will depend on interest rates going up, but he added that even a small change will make a dramatic difference. He reported that the Foundation currently is earning 0.13 percent on lawyers’ IOTA trust funds.

“We take this as a moral obligation to be able to repay [the bridge loan],” Patterson told the board. “We need the interest rate to come back to some kind of historical norm, and we’ll be OK when that occurs.”

If the bridge loan to help the Foundation in the short term is part of the solution, then the second step is studying new ways of delivering legal services to those who can’t afford them. Pettis said it will be a broad-based effort involving many interests, including the Bar, the Foundation, court clerks who work with pro se litigants, the business community, legislators, and others.

The model, Pettis said, is that grocers are not expected to deal alone with the problem of hunger and doctors are not expected to deal alone with medical access issues. By the same token, the Bar must look for additional resources outside the legal community to deal with access issues.

“We need a new paradigm for the delivery of legal services in Florida,” Patterson said. “We were meeting only 20 percent of the need [before the recession] and now are doing less. We need to serve 100 percent of those who need access to justice. That should be our goal, not to get back to 20 percent but to get to 100 percent. And we can’t do that under the old models.”

To that end, he and Pettis noted representatives of the Foundation, the Bar, and state court officials are studying innovative legal assistance programs in Illinois, which include both computer programs to help people manage some legal issues on their own and a legal aid office that relied on a wide variety of grants, including from the business community, to fund its operations.

Pettis said the Bar has approached Chief Justice Ricky Polston and Chief Justice-elect Jorge Labarga about having Labarga head a joint effort on new ways of delivering legal services. He said the two were enthusiastic, but that the matter had to be considered by the full court in conference.

Board member Ian Comisky, who chairs the Bar’s Investment Committee, said an initial review indicated the Bar could handle the bridge loan to the Foundation from its short-term funds without affecting its long-term investments.

He said that the Bar is to be conservative on its income predictions and expansive on its revenue predictions and consequently, “our cash flows are traditionally better than budgeted.” Comisky noted that earlier in the meeting, when the board approved the Bar’s 2014-15 budget, it had heard that an increase in membership fees was likely not needed for another five years and that making the loan probably would not change that forecast.

Bar Executive Director John F. Harkness, Jr., noted the Bar had recently moved $5 million from its short-term funds to its long- term portfolio, which showed the health of its finances. He also underscored the impact of helping the Foundation, which provides about one-third of the funding for legal aid agencies around the state.

“Before the recession, there were 487 legal aid attorneys in the state of Florida. After the recession . . . we’re down to 390. By the [fiscal year] 2015-16 that would drop to 280 lawyers,” Harkness said.

“A lot of that money is going to save the jobs of 110 lawyers who won’t be unemployed, plus we’re going to be giving service to people who deserve it.”

Pettis said the Budget and Investment committees will use the time before the May meeting to study the loan and make sure the Bar is protected.

By voice vote, the board unanimously gave conceptual approval to the idea, although Pettis noted it will still take another vote in May before a loan can happen.

As for the petition, President-elect Greg Coleman said it was necessary for the board to take a position, and it unanimously approved his motion to place the board on record opposing it.

Pettis said he received calls and emails from Bar members who objected to Bar membership fees being raised for what amounted to a charitable contribution and he said he understood that sentiment.

“It’s important that we do not allow this type of initiative to amend our fee structure, our dues structure. We have concerns about this path,” he said.

Bar rules require that the petition be filed with the Board of Governors before it is submitted to the court. Kent Spuhler, executive director of Florida Legal Services and one of the petition’s backers, said the board’s opposition was expected and backers are continuing to collect signatures. At Bar News press time, he still planned to file the petition with the Supreme Court.

“We still think it’s a positive tool to have available to deal with this [funding] crisis,” Spuhler said.

As for the bridge loan, Spuhler said, “I think that is a very positive development, and I do think it’s a statement by the Board of Governors that they are now taking the access crisis seriously and trying to deal with it, which is positive. We also think it is positive they are going to help take the lead with The Florida Bar Foundation in calling together leaders in Florida to look seriously at access to justice in this state.”

[Revised: 06-27-2016]