Economic Impact Studies: An Argument for Funding

While the need for legal services for low-income populations continues to grow, funding has become increasingly scarce. Legal services programs seek income from diverse sources, but often find themselves competing with other charitable organizations for limited funding. Some programs have found that economic impact studies can show decision makers that the work of legal services reaches farther than the clients served. These studies show that the influx of federal benefits attained can have a positive impact on state economies and, as a result, can change the conversation about funding. IOLTA programs in Florida, New York and Pennsylvania have conducted these studies and have used the information to influence funding sources by showing the value of legal service to their communities.

On behalf of Dialogue, Calien Lewis, Executive Director of the Maine Bar Foundation spoke with Jane Curran, Executive Director of the Florida Bar Foundation, Chris O’Malley, Executive Director of the IOLA Fund of the State New York and Al Azen Executive Director of the Pennsylvania Lawyer Trust Account Board about the economic impact studies conducted for their programs.

Calien Lewis: What were the key factors in deciding to fund an economic impact study and what did your program hope to gain from the study?

Chris O’Malley: Our program decided to fund a study to develop a more complete picture of the economic benefits legal services to the poor provided in New York State. We believed that while clients received a direct benefit from legal aid, there was a stimulus effect on the state’s economy and savings to tax payers that had gone undocumented. We thought that documentation of this information would make a compelling case for the need to fund civil legal services, and that even in difficult budgetary times, funding the study would be money well spent.

Al Azen: Our program financed a five-year report on the results and accomplishments of filing fee funding. Authorization for this filing fee originated in a State statute passed in 2002. At the time, a five year sunset date was set but was subsequently extended through 2012. Along with the extension came a requirement; a performance audit was to be conducted by the PA Legislative Budget and Finance Committee to determine how the funds were used and whether a continuing need for funding existed.  Anticipating that audit, the IOLTA Board authorized the production of a five-year report on the results and accomplishments of the filing fee funding. The purpose of the reporting effort was to document the continuing need for the funding; however, the study also documented an economic stimulus effect, which benefited the entire commonwealth of Pennsylvania.

Jane Curran: We conducted an economic impact study to bolster our efforts to secure annual general revenue funding from the state of Florida for legal assistance for the poor. Like Chris and Al, we hoped to demonstrate that the state of Florida benefited economically from funding legal services.

Calien: How did your program choose the firm to conduct the study and what factors should programs consider in choosing a firm to conduct the study?

Al Azen:  In Pennsylvania, we used Ken Smith from The Resource of Great Programs (TRGP). A steering committee was appointed to determine the objectives of the five-year report and how best to meet these objectives. Once the intentions were formulated, the committee sought a proposal from Ken Smith. Because we worked with TRGP in the past on state wide strategic planning, we knew the quality of their work. In addition, the fact that they had our raw data helped keep costs down.

Chris O’Malley: We also used TRGP to conduct an economic impact study. We chose that firm because of their expert knowledge in the delivery of legal services and their access to our data. Compiling the necessary statistics can be time consuming and expensive; however, using a company that already has the necessary information is a time and cost saving measure. This year, in conjunction with the Chief Justices’ Task Force on Access to Justice, two outside economists have been working to further develop our study. 

Jane Curran: We issued an RFP to two firms, which our legislative counsel for state funding advised were well respected by members of  Florida’s legislative and executive branches.  Both firms submitted proposals.  We chose the firm which we worked with previously and which presented a more thorough proposal.

Calien: What was the cost of the study and was IOLTA the sole funder of the study?

Al Azen: The Pennsylvania IOLTA Board funded the five-year report, which was issued in February of 2009; the cost was $17,340. The IOLTA Board engaged Ken Smith to update the report and provide other services related to the recommendations of the performance auditors. The anticipated cost to update the results and document the economic impact of funding legal aid is approximately $20,000.

Jane Curran: In Florida, the Foundation paid $40,000 for the study. This fee covered the analysis of data provided by the foundation in electronic format. As mentioned, if TRGP had to collect data, their costs would have been higher.

Chris O’Malley: The cost of our study was between $7,000 and $10,000. Programs should not shy away from considering a study due to expense because the benefits have such great potential. If budgetary constraints are an issue, programs should note that the costs are largely driven by the level of detail a program is seeking.

Calien: Is it possible for an IOLTA program to conduct an economic impact study in house without hiring a consultant?

Chris O’Malley: It is possible for IOLTA programs to conduct their own economic impact studies. Programs would apply data from their state to the outcomes from other states or national studies that have been conducted on the particular legal services they are seeking to capture. It should be noted that in determining outcomes, programs should steer toward conservative numbers in order to maintain credibility.

Al Azen: While a program may be able to conduct such studies in house, the program would need to dedicate staff and research time, as well as, have some research expertise. If a program chose to complete its own study, resources are available through the NLADA website, which could be of assistance.
Jane Curran: There are standard models for calculating economic impact that can be used. Ken Smith used such a model in preparing our Annual Report on Legal Aid Grantee Work. Nevertheless, if a program has the raw data available, the cost to have a firm analyze that information is not exorbitant and may be well worth the investment.

Calien Lewis: What were the general findings from the study?

Chris O’Malley: The savings and economic impact in New York State totaled nearly $1 billion representing a five to one gain in the monies spent for civil legal services. These figures were derived from federal dollars coming into the state, which in 2010 totaled nearly $350 million, savings in emergency shelter costs, and the economic stimulus effect of the federal funds brought into the state. The state also saw savings related to domestic abuse cases. With legal aid, victims of domestic violence had greater access to restraining orders which saved the state in costs associated with medical care, mental health care, lost productivity and property damage. The study also documented other benefits to the state derived from matters such as, awards and settlements in family law, landlord/tenant issues, and consumer and employment issues.

Al Azen: The total economic impact of legal aid supported by the filing fee funding was $154 million over the five-year period of the report. This figure was more than four times the amount of the filing fee funding for that period of time.  The economic impact was derived from a combination of federal benefits awarded to legal aid clients, savings in emergency shelter costs, savings in cost related to domestic violence victims, and savings for low-income utility customers.

Jane Curran: Our study showed that state funding for legal assistance created 170 non-legal aid jobs, produced $13 million of output in the state economy, provided $22 million of disposal income and generated $13.86 of economic impact for every $1.00 spent on legal aid through state funding. The driving factor of this economic impact was the large recurring amount of Federal transfers generated by legal assistance cases. These federal transfers were the result of monthly payments of Supplemental Social Security Income.

Calien: How did or will your program use these findings?

Jane Curran: A one-page summary of the economic impact study and its findings is distributed to key legislators as we seek state funding. It is important to note that these studies are one tool to be used in an arsenal of arguments to fund legal assistance to the poor. When using the information, programs should be cautious and consider the objective they are trying to achieve. They should define the audience and determine whether a credible economic impact study would have a positive effect on them. Then the program must consider the budget needed to conduct such a study and whether it would be a cost effective endeavor.

Chris O’Malley: Our findings played a crucial role in a report calling for the expansion of funding for civil legal services. In New York, the economic impact study met with positive reactions and budget cuts were rescinded after seeing the results.  The Chief Justices’ Task Force on Access to Justice used the findings as a leading point in obtaining funding. Not only did our program use the results, but one of our grantees used our template for calculating the savings in homelessness prevention to thwart efforts to cut their funding at a county level.

Al Azen: We used the results in the noted five-year report by broadly distributing them. This circulation resulted in those figures being used as part of the performance audit report issued in May of 2011. The results will be used again in an updated report. As Jane stated, programs must be aware of the audience. In our case, some of the performance auditors were lukewarm to the economic impact argument. While the economic impact argument is one that resonates very strongly with some, it is not as effective with others. For this reason, it is important for programs to have more than this single argument. It is equally important to put the results of the study in the hands of those who want to and can use it.

Calien: What are some lessons learned that may be helpful for other IOLTA programs considering such studies?

Al Azen: Economic impact studies can be powerful arguments to the benefits of civil legal services to the poor. Having more studies made known to the public and giving these studies credibility is paramount. It may be useful to encourage State Bar Associations or universities, as part of a graduate, social service or research initiative, to perform legal aid economic impact studies. Third parties may be able to conduct the studies at little or no cost to IOLTA programs, and this type of study would have the added benefit of being more objective and consequently more credible.

Chris O’Malley: Our lessons learned are more practical. We learned that having detailed data available from the grantees on their outcomes was crucial. The availability of that data helped create efficiency for the study.

Jane Curran: Much of what is accomplished through legal assistance to the poor is not measurable. There are times a client story is more effective than analyzed data, and other times where a combination of data analysis and client story is most effective. Because of this variable, making a case for funding legal aid is not as simple as funding an economic impact study. These studies may be very influential, but it is important to know in whose hands one is putting that analysis.  Programs need to look at the reasons they want to conduct the study and decide whether funding it would help them obtain the desired outcome.

For more information on economic impact studies contact Susan Updike or call 312-988-5744.