Lawmakers failed to pass a legal aid funding update. Now it’s being used against their interests

A group challenging a state law approved earlier this year is doing so using funds from a program lawmakers failed to reform in this year’s Legislative Session after the House didn’t consider the bill.

Americans for Immigrant Justice is one of three groups with attorneys representing plaintiffs in a suit against a new law criminalizing entry into the state of Florida for those who have illegally entered the U.S.

The legal team challenging the law argues it violates the Supremacy Clause in the U.S. Constitution, which places immigration enforcement authority with the federal government.

Americans for Immigrant Justice receives a sizable amount of legal aid funding via the Florida Bar’s Funding Florida Legal Aid (FFLA) initiative through the Interest on Trust Account (IOTA) program.

A recent rate-setting rule change has led to interest collections for IOTA accounts that are, in some cases, 10 times higher than similar accounts, such as business checking or savings accounts. And it has ballooned the amount of grant funding available for legal aid.

Most of FFLA’s funding comes from IOTA collections, totaling about $46 million in the 2022-23 fiscal year. But that number shot up exponentially to nearly $300 million in the 2023-24 fiscal year after a rule change amended how to calculate interest on accounts.

And Americans for Immigrant Justice, in turn, has seen a similar boon. Before the rule change, the group received just over $459,000 through the IOTA Funds Distribution. The next year, that amount increased more than fivefold, to more than $2.4 million. In 2024, the amount nearly doubled again, to more than $4.7 million.

So in essence, the Legislature’s failure to clear a measure aimed at ensuring fairness in the legal aid program — balancing the need for such aid with the ability of banks to remain competitive in the Florida market — has led to a massive funding increase that benefits numerous legal aid groups, including those like Americans for Immigrant Justice who are or may in the future challenge the Legislature’s own agenda.

It’s worth noting that Americans for Immigrant for Justice, as well as other legal aid groups that receive funding through the IOTA program, also receiving funding from other sources. And all groups are required to meet FFLA’s objective standards governing how they use the funds. Americans for Immigrant Justice remains in compliance with those standards and, if ever they were not, would lose access to IOTA funding.

While that funding increase affords the group additional resources, it’s worth noting that it is not its only source of revenue.

IOTA accounts are separate checking accounts. The Florida Bar requires nearly every lawyer in the state to keep clients’ funds separate from their firm’s operating funds.

These accounts hold settlement funds until distribution. The interest rate on the accounts, set by The Florida Bar, is passed along to FFLA’s IOTA program, which in turn funds legal aid for indigent individuals and other justice system improvement programs, such as legal education.

For decades, the IOTA interest rate had been tied to interest rates on comparable accounts, typically less than a half percentage point. The rule change, approved by the Florida Supreme Court, instead tied the interest rate to a much higher lending rate, set by the Wall Street Journal Prime Interest Rate.

After the rule change, that rate shot up to 3%.

Banks have been attempting to negotiate with the Florida Bar on a rate that provides stability for the legal aid program while ensuring fairness for banks, to no avail. The Legislature tried to step in with two similar bills filed in the House and Senate (HB 173, SB 498) that would set a much lower interest rate for IOTA accounts. The House bill never received a hearing. The Senate version cleared but was not adopted in the House.

The Americans for Immigrant Justice funding increase as a result of the FFLA rule change combined with its challenge against state law, should serve as a wake-up call to lawmakers for the next time they convene. While legal aid is a vital service and a critical part of a fair criminal and civil justice system, the Legislature has a vested interest in this particular rule change, because funds are aiding a group that is directly challenging priorities the Legislature championed.

The FFLA has argued the rule change was needed to ensure “consistency, predictability, and a meaningful increase in funds available for civil legal aid programs,” according to an explainer on its website. But by tying interest to the Prime Rate, participating banks are forced to pay interest on accounts — which total about $9 billion statewide at any given point — far higher than other customers enjoy.

Further, the added cost places a disproportionate burden on smaller banks, such as community banks and credit unions, that may be unable to afford the higher overhead. It’s important to note that participation is not required, but banks do so because it is profitable to them.

Americans for Immigrant Justice isn’t the only group that benefits from the newly increased IOTA distributions. Other groups include CAIR Florida, another group Republicans in the majority often oppose; the Gender Justice Clinic, which helps with transgender issues, such as name changes; and the Southern Legal Counsel, a civil rights advocacy group. All of those groups are often at odds with state policy handed down from a GOP supermajority in the Legislature.

Making legislation even more prudent, FFLA does not need the new windfall from the recent rule change. Of its nearly $300 million in interest accruals in the 2023-24 fiscal year, $142 million went unspent, prompting FFLA to request the Florida Supreme Court to allow them to hold the excess funds in reserves for future legal aid program needs.

Furthermore, not all the collected funds were used for legal aid. Earlier this year, the FFLA board approved $1.7 million for student loan repayments for lawyers who provide legal aid through the Loan Repayment Assistance Program. The program helps lawyers at a nonprofit legal aid organization pay down school loans, with full forgiveness when lawyers meet specific requirements.