New policies aimed at boosting Interest on Lawyer Trust Account (IOLTA) funding for legal services programs have been adopted in Alabama and California.

Alabama's Supreme Court, by a unanimous decision, recently made participation in the state's IOLTA program mandatory for all of the state's 15,400 licensed attorneys. The rule change becomes effective January 1, 2008, and will make Alabama the 35th state to adopt a mandatory IOLTA program. Previously, Alabama attorneys could opt out of the program. Tracy Daniel, Executive Director of the Alabama State Bar's Law Foundation, which administers the IOLTA program, told the Huntsville Times that she expects IOLTA funding to double under the new rule. The foundation has already distributed more than $800,000 in grants this year, according to the Times.

On October 10, California Governor Arnold Schwarzenegger signed a bill (AB 1723) requiring IOLTA funds to be placed in accounts at eligible financial institutions that pay interest rates on these accounts comparable to accounts of similar size. Governor Schwarzenegger said in a signing statement, "Expanding the reach of legal services for the poor will not only benefit those who are able to obtain legal assistance, but will also benefit the courts by alleviating some of the burdens imposed by litigants who are currently forced to represent themselves." Similar rule changes in other states are predicted to double or even triple IOLTA revenue.

IOLTA accounts are used by lawyers to hold their client's funds in trust. These accounts earn very little interest individually, but can generate millions of dollars a year when pooled together on a statewide level. Traditionally, the interest is collected by the state and distributed to legal services programs. Nationwide, IOLTA funding generates tens of millions dollars a year for LSC-funded legal services programs.

To read "Alabama Supreme Court Makes IOLTA Participation Mandatory" in The Huntsville Times, click here.

For more information on California's rule change, read"Governor Signs Interest on Lawyer Trust Accounts Bill" in The Metropolitan News-Enterprise.