American citizens have a Constitutional right to legal representation in criminal cases. They do not have that right in civil cases, such as domestic abuse protective orders, child custody, legal guardianship, or tenants’ rights.
IOLTA, which stands for “Interest on Lawyers’ Trust Accounts,” fills that gap. It’s a program that uses the interest generated by unearned client funds (i.e., money held in escrow) to pay for civil legal aid to people who can’t afford an attorney.
North Carolina’s IOLTA program was established in 1983. Since that time, it has provided over $134 million in legal aid to North Carolinians. There are over 1.35 million North Carolinians living in poverty today, tens of thousands of whom rely on legal services funded by IOLTA to seek justice.
Last year, the state legislature froze the funds in the program for 2026. That reduction resulted in a 22% reduction in case closures and an 11% reduction in clients served statewide, according to a press release from NC IOLTA.
The new North Carolina state budget (analysis here) seizes the funds generated by IOLTA—which are not taxpayer dollars—and redirects them to the state’s Private Assigned Counsel fund. That fund is used by the Office of Indigent Defense Services to pay private attorneys assigned by the court to represent clients who can’t afford their own lawyer.
That may sound fine at first brush. But there’s a reason no other state in the union does this.
Diverting IOLTA funds from civil litigation to criminal litigation takes money away from renters who are fighting bad landlords, from spouses seeking protection from domestic abuser, from families seeking legal guardianship for an incapacitated adult, and many other serious legal issues. Going to court is expensive and complex. Many civil litigants who cannot afford attorneys simply won’t seek justice if this change goes through—and those who do will either get worse outcomes or be forced into debt they can’t afford to pay for legal services that would previously have been available to them for free.
We don’t have to choose between the Constitutional obligation to provide criminal defense attorneys and the ethical obligation to provide civil legal aid to people who can’t afford it. Unfortunately, that’s precisely what leaders in the NCGA have decided to do.
In addition to massively reducing the funds available for civil legal aid, the new law shrinks the circle of organizations eligible to provide legal aid using these funds.
Under the old model, grants were awarded based on the purpose for which the money would be used. An organization with multiple areas of practice could receive IOLTA funds as long as they spent them on eligible activities.
The new law outright blocks organizations that provide immigration legal services, advocate for or represent people seeking gender-affirming care, formally lobby the NCGA on state policy, or engage in grassroots organizing from receiving funding.
In addition to seizing IOLTA’s funds and restricting access to its remaining grants, the new law makes changes to its governing board.
Up until now, IOLTA has made grants to various organizations under the direction of an independent Board of Trustees. The IOLTA Board of Trustees has nine members. Under current law, all nine of those Trustees are appointed by the State Bar Council, which has 5 officers, 43 members elected by lawyers across the state, and 3 public members (non-lawyers) appointed by the Governor.
The new budget changes that: 6 of the IOLTA Board members will now be appointed by politicians (2 by the Chief Justice, 2 by the House and 2 by the Senate) and 3 will be appointed by the non-partisan State Bar Council.
These changes mask the real issue: legal aid is already too rare in North Carolina. The UNC School of Law identifies 48 of 100 counties as “legal deserts” — counties with less than one lawyer per 1,000 residents. Only 40 counties have public defender offices. A 2018 report from the Equal Access to Justice Commission calculated that 2 million North Carolinians were eligible for legal aid, that almost 1.5 million of them would have at least one qualifying civil legal issue per year, and that almost 1.2 million of those people would not get help because of how little money there is for legal aid.
And that was before this new budget redirected most of IOLTA’s funds.
Justice in America should not be restricted to those who can pay for it. IOLTA has allowed countless North Carolinians to navigate our complex and expensive legal system successfully. Instead of defunding those services, the state legislature should restore the IOLTA funds, expand legal aid services, and ensure that every North Carolinian can afford to seek justice when they are wronged.
