Senate advances filing-fee surcharge for legal services

ANNAPOLIS — Legislation to provide funds to the financially strapped providers of legal services to low-income Marylanders continued a steady advance in the Senate on Tuesday.

By a voice vote, the Senate gave preliminary approval to legislation that would extend through June 30, 2018, surcharges on filing fees in civil cases. With its vote, the Senate essentially abandoned a measure it had approved to preserve the surcharge indefinitely in favor of a House-passed bill, HB 838, to extend it for five more years.

Without an extension, the surcharge — which provides $6 million annually to the Maryland Legal Services Corp. — will expire June 30. The Senate could vote as early as Wednesday for final passage of the measure, which Gov. Martin O’Malley supports.

“It’s certainly important that we are successful,” said MLSC Executive Director Susan M. Erlichman. “I really hope we don’t have to reduce funding next year.”

The Senate also gave preliminary approval to legislation that would earmark a total of $4.5 million for MLSC from the state’s Abandoned Property Fund. The money, to be phased in over the next three years, is $3 million more than the $1.5 million the corporation would receive during that span under current law.

Under the new measure, the agency would get $1 million in fiscal 2014, which begins July 1; $1.5 million in fiscal 2015; and $2 million in fiscal 2016.

In fiscal 2017, MLSC’s earmark would revert to its current level of $500,000 annually.

While the Senate had given preliminary approval to identical terms last month, Tuesday’s vote amends a House-passed bill that would have provided far more money to MLSC. That measure, House Bill 1303, would earmark $3 million annually for MLSC from the fund, a yearly boost of $2.5 million.

The Senate could vote as early as Wednesday to approve its version of the measure. Senators and delegates would then meet to try to hammer out differences between the measures with the goal of having both chambers pass unified legislation before the General Assembly adjourns at 12 a.m. April 9.

“When you go to conference, by definition it implies compromise,” Erlichman said, adding that she hopes the final bill comes “as close … as possible” to the House version.

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

But 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.

“We’ll certainly do everything we can not to be left in that position,” added Erlichman, who has lobbied strongly for the surcharge extension and Abandoned Property Fund increase. “It’s critically important that we are successful.”

MLSC’s financial straits are tied to continuing lows in the interest rate.

Legal services has historically relied on funding from the Interest on Lawyers’ Trust Accounts. 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, 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 erroneously predicted that interest rates would increase by then.