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Legal Services funding clears early hurdles

ANNAPOLIS — The director of the nonprofit Maryland Legal Services Corp., which allocates funds to provide free legal services to low-income residents, is pleased that legislation to provide additional dollars has cleared preliminary legislative hurdles.

“Our legislators understand how critically important it is to provide this funding for low-income residents in Maryland,” Susan M. Erlichman said Thursday.

On Wednesday, the House of Delegates voted 100-35 in favor of legislation to extend a 3-year-old surcharge on filing fees in civil cases that provides $6 million annually to the MLSC. The surcharge, set to expire June 30, would now end June 30, 2018.

The House’s action followed the Senate’s March 14 vote of 46-0 vote on a measure that would extend the surcharge indefinitely.

Senators and delegates are expected to meet on the respective bills soon, with the goal of passing final legislation before the General Assembly adjourns April 9.

Also, the Senate on Thursday gave initial approval to legislation that would earmark $4.5 million over the next three years from the state’s Abandoned Property Fund for MLSC. That is a $3 million boost from the $1.5 million the agency would receive from the fund over three years under current law. In fiscal 2017, however, MLSC’s earmark would revert to its current level of $500,000 annually.

Alternatively, a bill pending before the House Judiciary Committee would earmark $3 million annually for MLSC from the Abandoned Property Fund, a yearly boost of $2.5 million.

Erlichman said the ideal would be for the General Assembly to extend the surcharges indefinitely and provide $3 million annually from the Abandoned Property Fund.

Such a result would assure MLSC grantees “that there is a level of funding stability they can rely on.” However, she said, a five-year extension of the surcharge is “a result we will be more than able to live with.”

In the most recent fiscal year, MLSC provided $15.7 million in grants to 35 legal services providers, which used that money to open roughly 160,000 new cases.

The General Assembly activity followed Erlichman’s announcement in January that the agency would suffer a 40 percent decline in revenue — about $6 million — if the surcharge is not extended beyond its June 30 sunset date.

Even with the surcharge extension, service providers would see their grants from MLSC decline 5 percent in fiscal 2014 — which begins July 1 — in the absence of an additional funding source, such as the Abandoned Property Fund, Erlichman said.

MLSC’s declining resources are tied to continuing lows in the interest rate. Legal Services has historically relied on funding from the interest on lawyers’ trust accounts. With interest rates hovering at an anemic 0.25 percent for several years, IOLTA funding now accounts for just $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, she added.

The General Assembly enacted legislation in 2010 to increase the surcharge on circuit court filings by $30, district court filings by $8 and summary ejectments by $3, earmarking the additional revenue for MLSC.

The 2010 law put the sunset date of the surcharge at June 30, 2013, as lawmakers predicted that interest rates would increase by then.