The California Bar Journal reports that revenue for legal aid programs from the state's Interest on Lawyers Trust Accounts (IOLTA) program, which has historically provided varied funding levels from year to year, is projected to come to an almost complete halt in 2009.

Hopes were initially high for this year, as an IOLTA comparability law passed in January 2008 promised to drastically increase IOLTA funding for the state's legal aid programs. But that was before the nation's economy started to crumble and the Federal Reserve began slashing interest rates. IOLTA funding is tied to the federal rate, and when it dropped to less than one percent, IOLTA funding fell with it.

That is why Stephanie Choy, who manages the state bar program that distributes the funding, predicts that total IOLTA revenue for 2009 could be no more than $3 million-$17 million less than the program provided in 2007-2008 and $37 million less than the approximate $40 million that was initially predicted for 2009.

The shortfall has real consequences for legal aid programs and their clients. Gary Smith, executive director of Legal Services of Northern California, says that his IOLTA grant could drop by 70 percent this year, which would force staff layoffs that ultimately result in less clients being served. Ramon Arias, who heads Bay Area Legal Aid, thinks he will lose half his IOLTA grant and be forced to lay off three people. Chris Schneider, who heads Central California Legal Services, says that the funding cuts could not come at a worse time, as more and more clients affected by the economic downturn are more in need of legal services than ever.