Three of the state’s largest civil legal‑aid providers – the Charlotte Center for Legal Advocacy (CCLA), Pisgah Legal Services, and Legal Aid of North Carolina – have taken the fight to the courts. Their lawsuit, filed on Oct. 9 in Wake County, seeks to overturn a legislative action that redirected up to $15 million a year from the Interest on Lawyers’ Trust Accounts (IOLTA) program to fund indigent criminal‑defense services.
Why the lawsuit matters for low‑income North Carolinians
Since its inception in 1983, the IOLTA program has collected interest earned on lawyers’ trust accounts and distributed it to civil‑legal‑aid organizations. The money has helped thousands of low‑income residents obtain representation in matters such as domestic‑violence protection, human‑trafficking cases, disaster recovery, and other civil disputes.
In July 2025, Republican legislators froze the program, citing concerns about “inappropriate political activity.” A subsequent audit by State Auditor Dave Boliek found no evidence of misuse, but did note a lack of independent oversight and offered recommendations for stronger controls.
Republican rationale and bipartisan acknowledgment
Republican leaders, including House Speaker Destin Hall and Senate President Pro Tempore Phil Berger, argue that because the IOLTA program operates like a tax – it is mandatory and generates revenue – the legislature has a duty to oversee it. They stress that they do not oppose the program’s charitable purpose; rather, they want to ensure funds are not used for lobbying or other prohibited activities.
Even as they defend the redirection, the lawmakers acknowledge the vital services the program has supported for decades. Their concern centers on the possibility that some recipient organizations might engage in advocacy that exceeds the program’s statutory limits.
Legal challenges and constitutional claims
The plaintiffs contend that the legislative action violates a 2007 North Carolina Supreme Court decision that requires IOLTA funds to be used consistent with the State Bar’s plan – a plan that does not include criminal‑defense services. They also argue the move infringes on their First Amendment rights by imposing new speech restrictions that limit the types of advocacy they can conduct, even when such advocacy is funded with non‑IOLTA dollars.
“Redirecting these funds away from legal‑aid programs will force vulnerable people to navigate complex legal systems alone,” said Pisgah Legal Services Executive Director Jackie Kiger. “Our clients include domestic‑violence survivors, veterans, seniors, families at risk of losing their homes, and disaster‑affected residents.”
Impact on legal‑aid providers
Legal Aid of North Carolina, the largest recipient of IOLTA money, received more than $6 million in the last full grant cycle – about 15 % of its annual budget. Pisgah Legal and the Charlotte Center similarly relied on the program for roughly 13‑15 % of their budgets. While the organizations have adjusted by excluding IOLTA funds from their 2026 budgets, they report a 22 % drop in cases closed and an 11 % decline in clients served in the first quarter of 2026 compared with the prior year.
Consequences have already been felt: Legal Aid of North Carolina has closed or consolidated five offices, laid off dozens of staff, and scaled back disaster‑relief and domestic‑violence programs.
Next steps
The lawsuit seeks a court declaration that the redirection is unconstitutional and an order restoring the IOLTA funds to civil‑legal‑aid organizations. The case highlights an ongoing debate in North Carolina over the proper balance between legislative oversight and the autonomy of nonprofit service providers.
As the litigation proceeds, low‑income residents and the organizations that serve them await a decision that could shape the availability of essential civil‑legal assistance across the state.
Original reporting: Carolina Public Press — read the source article.
