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Important Update on the IOLTA Program and 2026 Grant Funding

Thursday, November 6, 2025

Important Update on the IOLTA Program and 2026 Grant Funding

Dear North Carolina Lawyers,

I am writing to you today to make you aware of  events that will affect the North Carolina Interest on Lawyers’ Trust Accounts (NC IOLTA) program for 2026.

Background

The NC IOLTA program was established in 1983 by order of the Supreme Court at the request of the State Bar. For more than 40 years, it has provided sustained funding for civil legal services without the use of state tax dollars. The program represents a longstanding partnership among the legal profession, banks, and the public to ensure that people across our State  have access to civil legal assistance regardless of their ability to pay.

Recent Events

As some of you are likely aware, in May 2025, the House version of the state budget (S257) included a provision directing that all IOLTA interest income be remitted to the Office of Indigent Defense Services for use in the Private Assigned Counsel Fund. Although the Senate did not concur (and no budget has been passed), a subsequent measure regarding IOLTA was included in the Public Safety Act, enacted in July 2025. That law contains a provision that freezes IOLTA grantmaking for the period from July 1, 2025, through June 30, 2026.

Throughout this process, the State Bar and NC IOLTA leadership have been in active communication, both formally and informally, with legislators to share information about the program and its structure. At the request of, and in conjunction with, members of the General Assembly, we have proposed compromise legislation that addresses the concerns raised by members of the General Assembly while allowing IOLTA funding to continue supporting vital civil legal services in North Carolina.  

On October 22, 2025, the House Select Committee on Oversight and Reform held a hearing on the IOLTA program. NC IOLTA’s Executive Director, Mary Irvine, and I were called to testify about the structure, governance, and history of the program, as well as its role in supporting access to civil legal services across the state. You may view the materials and recordings from that hearing below:

Impact for 2026

Because of the current legislative freeze, the NC IOLTA Board is not currently able to make 2026 grant awards. Consequently, civil legal aid programs and other nonprofit legal organizations that have historically relied on IOLTA funding are facing significant shortfalls in the coming year. As an example, Legal Aid of North Carolina anticipates a $6.5 million reduction in its 2026 budget, which has led to the closure of multiple offices in rural areas of the state  and a reduction in staff and services in most every location. Similar impacts are expected for other IOLTA grantees; many of whom provide services in the following areas: disaster legal services, special education and disability advocacy, and support to victims of domestic violence,

Anticipated impact on the Courts and the Profession in 2026

State Bar leadership and some court officials with whom we have spoken are concerned that the anticipated reduction in civil legal services funding will not only adversely affect clients and communities but also will adversely affect the functioning of our court system. Fewer legal aid attorneys mean more individuals will appear in court without representation, resulting in longer hearings, more continuances, and increased administrative burdens on clerks, judges, and attorneys. The absence of legal assistance can also lead to more procedural errors and a rise in filings that might otherwise have been resolved without the necessity of court intervention.

Over time, these challenges will strain judicial resources and diminish the efficiency of court proceedings. Lawyers in both the public and private sectors are likely to see the effects firsthand through heavier caseloads, slower case movement, and the growing presence of unrepresented litigants across all civil dockets.

Our Shared Professional Responsibility

Both the Preamble and Rule 6.1 of the North Carolina Rules of Professional Conduct remind every lawyer of our professional responsibility to provide legal services to those unable to pay. This principle reflects one of the core values of our profession and the collective commitment that has long defined the Bar in North Carolina.

Because of the current reduction in civil legal aid resources, we encourage lawyers to consider:

The lawyers of North Carolina have long pursued the constitutional mandate that “every person for an injury done him in his lands, goods, person, or reputation shall have remedy by due course of law; and right and justice shall be administered without favor, denial, or delay.”  We must continue to do so.  

NC IOLTA has been one important way North Carolina lawyers have contributed to realizing these foundational principles of our justice system, and we remain committed to working with the legislature and other stakeholders to identify a resolution to allow IOLTA funding to resume. Until that occurs, now is the time for us to rise to the challenge and work together to find alternative solutions to help those individuals who will no longer be able to be helped by these civil legal aid programs.  

I will keep you informed as this issue evolves.  

Sincerely,
Peter Bolac
Executive Director
North Carolina State Bar

Filed Under: General News

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