Funding for Civil Legal Aid in Maryland Faces Drastic Decline

Maryland Legal Services Corporation is facing a funding decline of approximately $4.5 million for the fiscal year that begins July 1, threatening the availability of crucial civil legal services as Maryland recovers from the COVID-19 pandemic.

MLSC’s nonprofit grantees – who are also facing canceled fundraising events and decreased corporate donations – need support now more than ever as they continue their vital work safeguarding the basic human needs of low-income Marylanders.

“The services provided by MLSC grantees – including help with eviction, foreclosure, domestic violence and more – will be critical in helping Marylanders recover from the pandemic,” said Susan Erlichman, MLSC’s executive director.

Both of MLSC’s major funding sources have taken a hit due to the pandemic. The interest on lawyer trust accounts (IOLTA) program is heavily dependent on interest rates, and the Federal Reserve recently cut the federal funds target rate to near 0%, echoing levels seen during the Great Recession. This rate cut translates to a projected 67% decline in IOLTA revenue.

“We saw similar interest rate cuts during the Great Recession, but the rapid drop in available funding is truly unprecedented in our 38-year history,” Erlichman said. “At a time when the need for civil legal aid has never been higher, we’re facing significant losses of funding.”

MLSC’s largest funding source is filing fee surcharges on certain court cases. Since March 16, Maryland courts have been closed to the public, hearing only certain emergency matters. In this fiscal year alone, MLSC expects to lose nearly $2.3 million due to decreased filings, and the possibility of a second wave of COVID-19 necessitating further court closures looms large for next year.

Layoffs and furloughs will also radically increase the number of clients who meet income-eligibility requirements for services from MLSC-funded providers. Even before the pandemic, more than 22% of Marylanders – approximately 1.3 million people – were income-eligible for MLSC-funded services.

At its June meeting, the MLSC board of directors committed to spending from reserves to offer some stability to the legal services delivery system. But even with significant spending from reserves, the current situation necessitated grant reductions for fiscal year 2021. Overall MLSC funding will decrease by 9%.

MLSC’s mission is to ensure low-income Marylanders have access to stable, efficient and effective civil legal assistance through the distribution of funds to nonprofit legal services organizations. Since the Maryland General Assembly established the organization in 1982, MLSC has made grants totaling over $312 million. MLSC grantees have provided services in more than 3.5 million legal matters concerning family, housing, employment and other civil legal issues.