What’s next for civil legal aid fund that is frozen by NC lawmakers?
AI-generated summary reviewed by our newsroom.
- Lawmakers froze legal aid grantmaking for one year over grantee concerns.
- Committee questioned NC IOLTA board choices and alleged political advocacy.
- Governor urged protection for legal aid; Republicans demand grant controls.
State lawmakers Wednesday addressed the future of a fund that provides millions of dollars each year to help low-income North Carolinians access legal aid in civil matters.
The N.C. Interest on Lawyers’ Trust Accounts fund, which pools interest accrued in the trust accounts of attorneys handling their clients’ money and distributes that earned interest in the form of grants to organizations that provide civil legal aid, has been barred from issuing any new grants since July.
Lawmakers instituted a one-year freeze on new grantmaking by NC IOLTA with a provision in a wide-ranging public safety and criminal law measure that was passed earlier this year with bipartisan support.
Signing the bill into law on July 9, Democratic Gov. Josh Stein said that although he supported the bill’s provisions to help victims of domestic violence and increase penalties for the sale of fentanyl, he was concerned that it “punishes organizations providing civil legal services to low-income North Carolinians.”
Stein urged lawmakers to “protect funding for Legal Aid and other organizations.”
The provision in question prohibits NC IOLTA from spending any funds “for the purpose of awarding grants or for any purpose other than administrative costs” between July 1, 2025 and June 30, 2026.
Republican lawmakers have raised concerns about some of the organizations that have received grants from NC IOLTA, and the political makeup of NC IOLTA’s board of trustees in recent years.
Republican lawmakers ask for more information on civil legal aid grants
During a hearing Wednesday of the House Select Committee on Oversight and Reform, GOP lawmakers said they support much of the work NC IOLTA assists financially, but want more clarity from leaders on how grantees are chosen and whether some of them engage in political advocacy.
Testifying at the hearing were NC IOLTA Executive Director Mary Irvine and N.C. State Bar Executive Director Peter Bolac. NC IOLTA was established by the State Bar and state Supreme Court in 1983.
Rep. Harry Warren, a Salisbury Republican and the committee co-chair, said in his opening remarks on Wednesday that while NC IOLTA “does good work,” he believes the organization “has also gone somewhat rogue, awarding grants to leftist groups with leftist ideologies.”
Rep. Jake Johnson, a Republican from Columbus County and another committee co-chair, specifically raised concern about one grantee, which he said he would not identify, “fighting the collaboration of local governments to cooperate with (U.S. Immigration and Customs Enforcement).”
Johnson told The News & Observer after the committee that he hopes lawmakers will be able to lift the freeze on NC IOLTA’s grantmaking, but he cautioned that support for such a move will hinge on whether the organization commits to not distributing funds to groups that don’t “comply with state law.”
“We just passed a bill and overrode it into law that said (sheriffs) have to cooperate with ICE. If you are giving money to a group who is putting as their sole purpose of getting local governments to not cooperate with us, you are breaking state law,” Johnson told The News & Observer after Wednesday’s hearing.
Another Republican, Rep. Allen Chesser of Nash County, said during the hearing that NC IOLTA partners with and provides grants to many organizations “that do great work across the state.” He said “that is not up for debate.”
“But I do believe that because of your willingness over the past couple of years to engage with entities who seem to have, at least on the public-facing side, placed a priority on fighting against local laws as written as opposed to helping enforce the fair and equal application of justice, you now face a public perception issue and that is why you find yourselves here,” Chesser told Bolac and Irvine.
Rep. Maria Cervania, a Cary Democrat, used her allotted time during the hearing to emphasize that the money NC IOLTA pools from interest in legal trust accounts doesn’t contain any taxpayer funds. She argued that if NC IOLTA is awarding grants funded by private money, not public money, the legislature should not be conducting oversight of the program or grantees.
Cervania asked Bolac if it is the case that “since it was not created as a state taxpayer dollar fund, there is no aspiration or expectation that it should be accountable to the state of North Carolina and have accountability here in our (legislature).”
Bolac responded that he didn’t want to “speak on what the legislature can and can’t review, or take a look at.”
“We certainly want to work with the legislature and be accountable and transparent,” Bolac said.
Second oversight hearing ahead
The hearing adjourned ahead of House voting sessions on Wednesday on a newly redrawn congressional map and budget bills. Warren and Johnson asked Bolac and Irvine to return for a second hearing to allow remaining lawmakers who didn’t get time on Wednesday to ask them questions.
NC IOLTA says on its website that it typically opens grant applications for the following calendar year in July, and final decisions on which organizations are awarded grants are made by its Board of Trustees in December.
In light of the new law freezing the grantmaking process, “the 2026 funding cycle has not been opened,” the organization said in August.
NC IOLTA planned to issue $12 million in grants in 2025 to 35 nonprofit organizations across the state.
Of the $12 million it distributed in grants in 2024, $8.7 million went towards civil legal aid for low-income people, and $970,500 was spent on funding to support disaster-related legal services for people in Western North Carolina impacted by Hurricane Helene.
Cervania’s office provided The N&O on Wednesday with letters from five NC IOLTA grantees including the North Carolina Justice Center, Legal Aid of North Carolina and Disability Rights North Carolina, detailing the impact of losing IOLTA funding on their operations.
Legal Aid of NC said it stands to lose nearly $6.3 million in funding because of the freeze. On Tuesday, it announced it was closing its office in Rocky Mount.
In a news release, Legal Aid of NC said the office offered “critical legal help to veterans, seniors, survivors of domestic violence, and families recovering from disasters.”
If the freeze continues, the nonprofit organization said in the letter to Cervania’s office, it will be forced to handle 6,000 fewer cases each year, and close an additional eight to 10 offices across the state.
This story was originally published October 22, 2025 at 4:44 PM.
