The primary provider of free legal services for low-income Marylanders faces a devastating 40 percent decline in revenue if the General Assembly does not extend a surcharge on filing fees in civil cases, set to expire June 30, said the executive director of Maryland Legal Services Corp.
Even with the $6 million an extension is expected to provide, legal-aid agencies can expect an additional 5 percent reduction in their grants from MLSC next fiscal year unless another source of money can be found, said Susan M. Erlichman.
“The first order of business is we have to repeal the sunset,” Erlichman said Tuesday. “An elimination of 40 percent … would truly be catastrophic. We desperately need that funding and we need it to be permanent.”
Besides pressing for a surcharge extension, MLSC is urging the General Assembly to increase its earmark from the state’s Abandoned Property Fund by $2.5 million.
Combined with the surcharge extension, that measure would beef up MLSC’s annual revenue to $17.5 million and could stave off the 5 percent cuts, Erlichman said.
Erlichman recently warned grantees to expect that their grants for fiscal 2014, which begins July 1, might be 5 percent less than their current funding levels. It would be the second 5 percent cut in as many years, Erlichman added.
That news was “another difficult blow” for the Maryland Disability Law Center, still reeling from this year’s 5 percent across-the-board cut by MLSC and the loss of a federal grant, said Virginia Knowlton, MDLC’s executive director.
“If it were just the only funding loss, we might be able to come up with a [way] to cover it,” Knowlton said. “But it’s not. We are now looking at what we can do to keep us at the current levels of service. But something has to give.”
Knowlton said the center is “looking at all our options” to trim expenses if its funding level is reduced, including a possible workforce reduction.
MDLC has a $3 million budget — of which about $708,000 comes from MLSC — and 32 full and part-time employees, she said.
“We are cutting into the bone at this point,” Knowlton added. “Meanwhile our clients need more assistance from us, not less. So really we are in a double bind.”
Wilhelm H. Joseph Jr., executive director of Maryland’s Legal Aid Bureau Inc., said he is optimistic the filing fee surcharge will be extended indefinitely.
“Maryland, without a doubt, has established itself as the number one human rights state in this country,” Joseph said, citing the state’s recent legalization of same-sex marriage. “I can’t even conceive of Maryland allowing this civil filing fee sunset to not be repealed.”
Legal Aid had a budget from all sources of $25 million in 2012, with about $11 million of that coming from MLSC.
He declined to speculate on what steps Legal Aid might have to take under a 5 percent funding cut, other than to say such a reduction would have a devastating effect.
“When a small entity has a 5 percent cut, it’s a sneeze,” Joseph said. “When Legal Aid has a 5 percent cut it’s influenza, and influenza is very contagious. Everyone gets sick.”
The decline in MLSC’s resources is tied to continuing lows in the interest rate.
Legal services historically relied on funding from the Interest on Lawyers’ Trust Accounts, Erlichman said.
But, with interest rates hovering at an anemic 0.25 percent for several years, IOLTA funding now accounts for $1.8 million, or 12 percent, of MLSC revenues, Erlichman said.
MLSC’s situation is even more dire than it was in 2010, when IOLTA revenues fell from $7 million to $2.3 million, Erlichman said. The General Assembly enacted legislation to increase the surcharge on circuit court filings by $30 and district court filings by $8, earmarking the additional revenue for the agency.
The 2010 legislation put the sunset date of the surcharge at June 30, 2013, as lawmakers predicted that interest rates would increase by then.
But they were wrong, Erlichman said.
This month, Senate Judicial Proceedings Committee Chair Brian E. Frosh introduced Senate Bill 640, which would extend the filing fee surcharge indefinitely. He also introduced SB 809, which would raise MLSC’s share of the Abandoned Property Fund from $500,000 to $3 million.
“They survived the past three years because we raised the filing fees,” Frosh said, referring to MLSC. “In order to keep them in business, we have to remove that sunset.”
In addition, raising MLSC’s share of the Abandoned Property Fund will give legal services “a better shot at representing people who desperately need their services,” added Frosh, D-Montgomery.