Budget Provision Appropriates IOLTA Funds for State Use

A provision added to the state budget draft directs NC IOLTA funds to the state Office of Indigent Defense Services for its Private Assigned Council (PAC) Fund. If enacted, the provision will significantly reduce access to civil legal assistance for the 1.35 million North Carolinians living in poverty.

“Despite months of good-faith efforts by State Bar and NC IOLTA leadership and other stakeholders to understand legislators’ concerns and make reasonable modifications to IOLTA’s grantmaking policies and procedures, the state budget, released yesterday, includes a provision that directs nearly all of NC IOLTA’s available annual grant funding away from civil legal services,” Peter Bolac, executive director of the State Bar, said. “This loss of funding will prove devastating to the tens of thousands of low-income North Carolinians facing legal concerns that threaten their housing stability, income, access to health care and benefits, and safety from domestic violence and human trafficking.”

The provision, added to the budget draft on June 30, appears to appropriate up to $15 million per year from NC IOLTA funds to help pay for a state program that uses court-appointed private attorneys to defend indigent clients in criminal cases. While the provision allows NC IOLTA to use up to $2 million each year to fund grants supporting the administration of justice, it states that the money may come only from funds earned by the program prior to July 1, 2025 — meaning that all future IOLTA earnings are directed to the state for indigent criminal defense.

The provision also eliminates from grant eligibility any entity that provides immigration legal services, representation or advocacy for individuals seeking gender-affirming health care, and policy or grassroots organizing.

“The state has a constitutionally mandated responsibility to provide criminal defense attorneys for North Carolinians who cannot afford one on their own,” NC IOLTA Board Chair Judge John Arrowood said. “While we stand in support of the work of the Office of Indigent Defense Services and Bar members who serve as private assigned counsel, this provision appropriating IOLTA funds — which have funded civil legal aid grants for more than 40 years — to bolster the PAC Fund shifts the burden of navigating a complex and intimidating justice system to vulnerable individuals and families facing civil legal challenges.”

The philanthropic program of the North Carolina State Bar, NC IOLTA is funded by interest earned on lawyers’ general trust accounts, a nationwide model known as IOLTA, and does not use any taxpayer dollars. Since its inception in 1983, the program has allocated more than $134 million to support access to justice for low-income North Carolinians.

In 2025, 42 organizations across the state were awarded $12 million in grants, including more than $11 million in civil legal aid grants to nonprofits including Charlotte Center for Legal Advocacy, Pisgah Legal Services and Legal Aid of North Carolina. In July 2025, a provision included in the Public Safety Act barred NC IOLTA grantmaking from July 1, 2025, to June 30, 2026.

The loss of anticipated NC IOLTA funding for 2026 has led to grantee office closures, staff reductions and the consolidation of programs serving rural communities. Recipients of 2025 civil legal aid grants reported an average of 22% fewer cases closed and 11% fewer clients served in the first quarter of this year as compared to the same period in 2025. Grantee organizations that provide services in family law reported serving 29.4% fewer clients in matters such as domestic violence protective orders, child custody agreements and guardianship provisions. Further reductions in staff and related service capacity are expected to begin immediately.

“These numbers translate to thousands of North Carolinians — families, seniors, veterans, children, people with disabilities — without access to legal aid to secure and protect their fundamental needs such as housing, health care, employment and safety from violence in 2026,” NC IOLTA Executive Director Mary Irvine said. “That’s a significant step backward in the journey toward fulfilling America’s promise of ‘justice for all.’”

The provision makes North Carolina the only state in the nation to use IOLTA program funds to meet its constitutional obligation to provide for indigent criminal defense instead of grantmaking for civil legal aid.

“It is important for lawyers to be fully aware of these changes and the impact they will have on North Carolina residents, communities and the courts,” Bolac said.

Learn more about NC IOLTA and find additional information on our Media Resources page.

The June 30 budget draft may be reviewed here; IOLTA provisions are on pp. 435-437.