The North Carolina General Assembly passed a bill that would impose a freeze on the use of a major legal aid fund for anything other than administrative fees Thursday. The measure would place a hold on millions of dollars used for public assistance until 2026.
The provision, included in three bills that passed the House Wednesday, was approved by the Senate on Thursday as part of Senate Bill 429, the “2025 Public Safety Act.” It stipulates that no money from the North Carolina Interest on Lawyers’ Trust Accounts (IOLTA) fund, established in 1983 to fund legal aid throughout the state, may be used to issue grants or other public assistance programs.
IOLTA operates by pooling funds that lawyers are required to hold in trust so that they may collectively generate interest, which is used to fund aid programs for individuals who cannot otherwise afford legal assistance. Since its inception, IOLTA has awarded $134 million in grants supporting these efforts, helping in areas such as education, healthcare access, and housing.
Rep. Marcia Morey (D-Durham) moved to remove the IOLTA restrictions from all three bills Wednesday, noting a lack of relevance to the subject matter of the bills. The IOLTA provision was added to all three bills the day prior to their vote on the House floor.
“This is private money that accrues interest on lawyers’ trust accounts, and what this amendment will do, it will freeze it,” Morey said. “All the grants that could be started in 2026 will be frozen. All of you in your districts benefit from many of the grants that the State Bar puts out.”
She cited the importance of grants for victims’ compensation, elder law, and foreclosure prevention, as well as numerous other civil matters. “On January 1, there will be no money coming into these organizations that have been helping people in civil matters.”
Though the Senate rejected two other bills containing the provision Thursday, it ultimately passed the Public Safety Act, which includes the IOLTA freeze alongside dozens of noncontroversial changes to criminal procedure, such as increased penalties for soliciting minors, greater access to protective orders for victims of domestic violence, and creating new criminal offenses for habitual domestic violence and exposing children to controlled substances.
The bill heads to Governor Josh Stein’s desk for his decision on whether to approve or veto it. Should it become law, IOLTA funds will be frozen from July 1, 2025 until June 30, 2026. Grants issued in 2025 would still be paid out, but none could be issued in 2026.
In a January press release, IOLTA announced it would disburse roughly $12 million in grants in 2025, including $5,325,000 to Legal Aid of North Carolina, $1,160,000 to Pisgah Legal Services, $1,070,000 to the North Carolina Justice Center. Smaller grants were allocated to groups like the Home Defense Project, Disability Rights North Carolina, and the Council for Children’s Rights.
The funds have also proved invaluable in the past in funding legal aid services to people impacted by natural disasters, with $970,000 being issued in 2024 for legal aid to victims of Hurricane Helene, that went toward helping indigent North Carolinians navigate insurance claims and evade consumer fraud attempts.
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