The latest budget plan proposal from New York Governor Kathy Hochul has sparked major criticism from multiple Biglaw leaders. The crux of the issue is the Governor’s plan to siphon off $100 million from the New York Interest on Lawyer Account Fund (IOLA), a fund traditionally used to provide legal aid for low-income New Yorkers. Under Hochul’s scheme, the earmarked money would instead go into the state’s general fund.
This move has sparked outcry amongst business law circles with prominent law firms collectively condemning the plan. Legal luminaries from top tier law firms including Paul Weiss, Cravath, Hogan Lovells, and several others, have labeled this move as ‘misguided’ and an ‘existential threat’ to essential legal services. In a widely circulated statement, they outline their primary concerns, “We are deeply concerned that this unprecedented diversion of funds would impose lasting harm on low-income New Yorkers…”
As detailed in an article by Law360, the IOLA program mandates attorneys to keep special interest-bearing trust accounts, referred to as “qualified funds”. These funds are combined in an IOLA account, and the interest generated from this account is utilized for legal aid and improvements in the administration of justice.
However, opposition to the proposed diversion isn’t just limited to the Biglaw entities. The New York City Bar Association and numerous social service agencies, such as Access to Justice Brooklyn and the City Bar Justice Center, have also lodged their grievances about Hochul’s plan.
Even the Board of Trustees of IOLA has expressed their dissent, advising the fund not be redirected despite the state’s budgetary concerns. They reference the several challenges New York state has weathered over the 40-year lifespan of IOLA, such as housing crises and global pandemics, but asserts that, “IOLA’s funds cannot and should not be diverted to the general fund.”
Whether Governor Kathy Hochul will heed these concerns and revisit her funding proposal remains to be seen.