State Lawmakers Put Funding for Nonprofit Legal Help on Ice

North Carolina organizations that provide free legal assistance to help low-income people with concerns like housing, employment, and domestic violence have been dealing with budget uncertainty for months. In 2026, things might get a whole lot worse.

The Republican-led General Assembly passed a crime bill in late June that included stricter penalties for certain offenses, salary increases for law enforcement and correctional officers, and widened the window for crime victims seeking compensation.

Buried in that bill was a provision that put a year-long freeze on the North Carolina Interest on Lawyers’ Trust Accounts, or NC IOLTA, which  distributes millions of dollars a year to legal-aid organizations.

Between the freeze and other federal- and state-level policy and funding changes, many of those organizations are now being forced to consider cuts and hunt for other funding sources. At the same time, those changes are creating increased demand for legal services.

State Rep. Harry Warren, a Republican from Salisbury, has contended that NC IOLTA has “gone somewhat rogue, awarding grants to leftist groups with leftist ideologies,” echoing similar allegations from other lawmakers in his party.

The program, created in 1983 by the state Bar and state Supreme Court, is funded from the interest accrued when law firms hold clients’ money in escrow. It has been used to support legal aid for veterans, children, women, and others confronting non-criminal matters in the courts. Last January, the program awarded nearly $12 million in grants to 35 non-profits across the state. The 62-member NC State Bar Council appoints a board of trustees that makes the ultimate decision about grantees.

Democratic Gov. Josh Stein signed the bill in early July despite his concerns that the law “punishes organizations providing civil legal services and education to low-income North Carolinians.”

Legal Aid of North Carolina, the state’s largest non-profit law firm, estimates that the freeze will result in a loss of nearly $6.3 million they had expected to get during the grant cycle that begins in January 2026. That prompted the organization to shutter an office in Rocky Mount and announce plans to close another in Pembroke. Those two locations draw clients from large swaths of rural eastern North Carolina. 

Legal Aid is the only non-profit civil law firm serving all 100 counties–but it could have to close between eight and 10 offices and lay off employees, said CEO Ashley Campbell.

Some lawmakers question whether they even have the authority to block the flow of non-taxpayer funds to grantees. Rep. Marcia Morey, a Durham Democrat and former district court judge, thinks the General Assembly has exceeded its bounds in going after NC IOLTA.

Few attorneys, though, have been willing to say that publicly because lawmakers set the budget for the state Bar, which regulates the legal profession.

“It’s this tactic of strong-arming and fear and then compliance because nobody wants their situation to become even worse,” Morey told The Assembly.

Missions Under Question

Peter Bolac, executive director and secretary of the state Bar, was called to testify before the House Select Committee on Oversight and Reform on October 22 along with Mary Irvine, NC IOLTA’s executive director.

Many of the lawmakers expressed support for the organization’s mission and some of the organizations it has funded–even Republicans who had pointed things to say about other organizations’ mission statements advocating for immigrants and equity.

Toward the end of the 75-minute meeting, Rep. Allen Chesser, a Nash County Republican, asked Bolac about legislative authority over the state Bar.

“I want to start by echoing the fact that we think there’s a lot of organizations you guys partner with that do great work across the state,” Chesser said. “But I do believe that because of your willingness over the past couple years to engage with entities who seem to have at least on the public-facing side placed a priority on fighting against laws as written, as opposed to helping enforce the fair and equal application of justice, you now face a public perception issue.”

Then Chesser posed a winding question asserting that lawmakers had authority over the funding that Bolac, an attorney, sidestepped.

“We’re here today to try to move forward on this and appreciate your concerns on it and want to try to constructively find a way to lift this freeze,” Bolac said. “I’m not here to …create or make any legal arguments either way.”

40 Years of Precedent

Since its inception, NC IOLTA has distributed more than $134 million to improve access to justice across the state.

Legal Aid of North Carolina received almost half of the IOLTA funds distributed this year, supplementing funds the organization receives from the Legal Services Corporation, which was created by Congress.

“We’ve received IOLTA grants for 40 years,” said Campbell. “We’ve always been the biggest grantee because we’re the only one that provides services in all 100 counties.”

Campbell described some of the cases the organization takes on.

“Domestic violence is a huge one, and there are certain areas of the state where we see really severe domestic violence,” Campbell said. “If you have a victim, you can help the victim get custody, possession of their home and their car.”

Their lawyers also help with landlord-tenant issues and represent veterans and seniors who have been victims of scams.

Larissa Manon Mervin, CEO of the Charlotte Center for Legal Advocacy, said the freeze will impact their veterans law program, home foreclosure defense fund, and other services.

“Without our services, some of these people just simply are not going to be met,” she said.

At the October 22 hearing, lawmakers discussed trying to unfreeze funds for Legal Aid and other organizations that Republicans had not singled out over concerns about their mission. Leaders of the oversight committee said they might call back state Bar and IOLTA representatives to discuss the issue further.

Campbell of Legal Aid said she hopes a resolution is swift. “We have to take action because the financial hit begins in January,” she said. Legal Aid gets calls from 300,000 people every year seeking their help, according to Campbell.

“There already are not enough resources to serve all the people who need us,”  she said. “So we’re going to be able to serve fewer people, and you’re going to have a lot of people walking around the courthouses, not knowing where to go, not knowing what to do, with no one to help them.”