IOLTA Feature

Don't Forget Your Umbrella

The Weather Report

Funding for civil legal services fluctuates as the economy rises and falls and as political preferences change. For civil legal services, the IOLTA boom (2005–2008) and crash (2009–Present) and renewed opposition to LSC funding in Congress (2010–2012) have been recent examples of such fluctuations. Taking a longer view of patterns, the push by legal aid programs to diversify funding sources in the 1980s and 1990s brought increases in funding from other federal agencies than LSC, from state governments and from law firms. Support from these sources has continued to increase as state Access to Justice Commissions have emerged as powerful leadership institutions. Is it possible that civil Gideon or a broad commitment of charitable dollars is coming into view?

It's a little like the weather. We can't know the future but we can make predictions and protect ourselves in many circumstances. Rain or shine tomorrow? Carry the umbrella. Hurricane shaping up out to sea? Tie everything down and move the family to a safe location for a few days. Global climate change? Buy property in the mountains.

Facing Uncertainty

Facing such uncertainty, legal aid programs and their funders need to strengthen their planning and decision–making in order to lead our institutions to stable operations and to maintain high quality advocacy. IOLTA Boards and staff are every bit as responsible for this leadership as the board members and executive directors of grantee programs.

There are a few lessons that our history has taught us about these circumstances:

First, an organization facing a dramatic loss of resources needs to examine its fundamental mission. At the new level of resources, in a new political, social and legal environment, what should the organization be trying to accomplish? Become the best possible organization under the new conditions.

Second, a grantor faces the same types of retrenchment issues as its grantees. What is the best use of resources? How does the grantor's mission change?

Third, a major grantor can be a powerful source of assistance for grantees facing the unpleasant and challenging need to retrench.

Fourth, funding is cyclical. It is absolutely certain that grantees and grantors will grow, and shrink, in the future. Neither retrenchment nor abundance is a crisis. Both are predictable management challenges that can be planned for.

Projecting Future Revenue and Planning Pessimistically

When planning for the future, the obvious place to start is to make estimates of future revenue. The goal in such an exercise is to see that the organization's actual revenue could turn out to be much more, or much less, than the current expectations. Consider the following Revenue Projection Worksheet:

PROJECTION
STANCE
YEAR
201320142015
OPTIMISTIC   
REALISTIC   
PESSIMISTIC   

Fill in the Worksheet based on educated guesswork.1 Start with the current year's budget as the "realistic" revenue, and recognize that even the current year's revenue contains contingencies. Then move to the next year (2014 in the Worksheet) and estimate the three numbers. How good could it get? How bad? The third year is the hardest. Consider each major funding source and how it could grow or shrink. Where might the program be in two years?

In times like these, many funding streams are uncertain. As a result, most revenue projections are going to show a significant decline in resources in the Pessimistic 2015 box. The critical lesson of this Worksheet is that each organization needs a plan for 2015 in which it provides clients with high quality services for the highest priority legal problems they face despite reduced circumstances. If the pessimistic future comes to pass, the program is going to be substantially reduced in size and capability unless steps are taken now.

What kind of steps? The Wharton papers2 suggest that a program should seek stability over a multi–year period. The Worksheet uses a three–year period. Figure 1 illustrates a projection of declining revenue. To bring stability to the revenue over three years an organization needs to reduce its current operations to a level that the total revenue over three years can achieve. The horizontal line in Figure 2 represents that level. The area under each line — representing the total funding over three years — is the same.

Riding the Razor vs. Right Size

Legal Aid Programs have had experiences with retrenchment. Some have tried to deal with declining revenue by cutting services and expenses as revenue drops. This strategy involves reduced hours for staff, reduced compensation, furloughs, payless paydays, offices with just one lawyer and layoffs as a last resort. It leads to low morale, a constant state of dissatisfaction in the staff, departures by those who can find more stable jobs elsewhere and a decline in the effectiveness of advocacy. I call this strategy "riding the razor" because the program is taking cuts all the way down.

In contrast, other programs figured out what their "right size" was for the planning period and cut their operations to that size at the start of the period.3 That meant lay–offs in most cases, but the remaining staff experienced a consistent work environment for an extended time. Because the capacity of the program was reduced, moving to "right size" often meant a change in service delivery patterns or even mission. Offices were closed. Case acceptance practices had to be adjusted; some kinds of work could no longer be afforded. Some programs replaced high–volume practices with systemic advocacy; they represented fewer individuals but they sought remedies that affected many eligible individuals.

A full analysis must include a program's expenses and operating reserves. Materials for such an analysis can be found online here: Sample Projection Worksheet and Projection Worksheet Form. The lesson is the same: plan to be a stable but smaller organization, prepare to be the size suggested by the pessimistic projection and then become the best program possible at this reduced level. As time passes, adjust for actual revenue. It's easier to add services based on better revenue than to ride the razor if revenue is lower than planned for.

Preparing for Abundance

The Revenue Projection Worksheet has an Optimistic row! Hard work has already been rewarded in a number of states by new revenue from state legislatures that has more than overcome the drop in IOLTA and LSC funding. The national mortgage settlement has brought substantial funding in many states. Programs and funders should be preparing now for more such contingencies, and for an upturn in LSC grants, more awards of attorneys' fees, an eventual rise in interest rates and new revenue from filing fees, cy pres awards, license fee add–ons and fund raising campaigns among lawyers or in the broad philanthropic community.

If "riding the razor" describes making cuts without a long–term strategic adjustment, perhaps "riding the up escalator" can bring to mind taking planned steps to prepare for new future revenues. For example, every state should pursue the types of revenue listed in the previous paragraph. Access to Justice Commissions do this work in many states, but IOLTA programs could be an option.

This is a good time to address important deficiencies in a program or state delivery system. What needs improvement? It may be a good time to re–examine state planning issues, identify low–cost steps to improve practices and do the research and priority–setting that will guide the use of new resources when they are obtained.4

The IOLTA Programs Role

A funder has many ways to influence its grantees without spending much money. In dealing with declining revenue, it can support training that teaches effective planning, pursue new streams of revenue, offer technical assistance to challenged managers, discourage razor riding, and support better fiscal controls in programs.

Finally, looking toward future abundance, there are a number of policy issues that could best be resolved now. What will be the future IOLTA reserve policy? Will new funding be channeled into improving salaries, or should salaries be kept up by "right size" organizations so that new funding can be used for new services? What is the role of legal services programs with regard to evolving court practices for dealing with self–represented litigants? Who will do state planning? What research data does the state funder need in order to best support its grantees?

Getting It Done

Effective state planning on these issues is far more complex than planning for an individual Legal Aid program, but it is increasingly essential. The Wharton Papers give no guidance here. We have a lot to learn.

Gerry Singsen is a consultant to legal services and access to justice programs.


1 Guessing is essential. There are no "correct" answers. The planner can always make another guess tomorrow, as new information becomes available.

2 In 1981 the Legal Services Corporation hired scholars at the University of Pennsylvania Wharton School to prepare materials LSC–funded legal services programs could use to plan and carry out a retrenchment process. The resulting "Wharton Papers" are available in the online library of the Management Information Exchange, www.m–i–e.org. See J.Arango, "An Overview of the Wharton Papers," MIE Journal, Spring 2009, p. 49.

3 An extensive exploration of this strategy can be found in the Wharton papers, Note 3,supra.

4 See the Second Interim Report of the Massachusetts Access to Justice Commission's Special Planning Committee at www.massaccesstojustice.org for an example of such planning.