A state program funding free legal services was frozen in June. The legislature isn’t rushing to fix it.
The Interest on the Lawyers’ Trust Account, or IOLTA, is a high-interest bank account that lawyers across the state contribute client funds to. The interest generated from these accounts is distributed as grants to civil legal aid groups across the state.
To date, NC IOLTA has awarded $134 million to its grantees to help provide North Carolinans access to free legal services.
Earlier this summer, the North Carolina General Assembly voted to halt awarding new grants from the state bar’s IOLTA fund for the 2026 grant cycle. The freeze was buried in a provision of a bipartisan public safety bill. Republican lawmakers cited that the funds, which are used to help North Carolinians access free legal services, were being awarded to leftist causes.
“We’ve heard from a number of folks that IOLTA does good work, and we have seen evidence of that, but IOLTA has also gone somewhat rogue, awarding grants to leftist groups with leftist ideologies,” Rep Harry Warren (R-Rowan) said at the House Select Committee on Oversight and Reform hearing on October 22.
Looking at the last grant cycle’s recipients reveals that IOLTA does not fund any partisan political organizations. In fact, one of the biggest grantees last year was Pisgah Legal Services, a group that has been working with victims of Hurricane Helene in Western North Carolina — just a few counties over from Rep. Rowan’s district.
Now, legal service providers across the state are feeling the squeeze. The state’s largest nonprofit law firm, Legal Aid NC (LANC), is losing over $6 million in funding as a result of the freeze.
This past week, they announced that they were ending their lease on their Pembroke office.
“The Pembroke office is the second LANC location facing the potential for closure due to the IOLTA freeze, which threatens access to legal assistance for vulnerable communities across North Carolina,” the group said in a statement. “The impact would be deeply felt by Pembroke residents — particularly veterans, seniors, survivors of domestic violence, and disaster victims — who rely on LANC’s services for safety and stability.”
Only a month ago, they announced that they were closing their Rocky Mount office as well.
“When we say the Pledge of Allegiance, we promise liberty and justice for all,” LANC’s CEO, Ashley Campbell, said. “Our flag reminds us of that promise every day. This is what IOLTA funds are for — making those words real for every North Carolinian. We are deeply disappointed that we cannot use those funds to serve the people in Nash County who deserve fairness and protection under the law.”
In the Triad, the Children’s Law Center of Central North Carolina said they are trying to close the financial gap to make up for the loss of IOLTA.
“We are looking into how we continue serving children, but it is certainly a challenge,” Executive Director Iris Sunshine said. “The freeze does pose a challenge for us, and we are having to look for alternative sources of funding.”
According to NC IOLTA’s website, the center received $85,000 in grant awards last year.
“These are challenging times in the nonprofit sector for organizations like the Children’s Law Center, as well as other nonprofits in the Triad and across the state, due to reductions in public funding,” Sunshine said.
Lawmakers say they are using the freeze — which lasts until July — to investigate IOLTA’s grantees. Until then, a central pillar of funding for the state’s legal aid community hangs in limbo, leaving North Carolinians across the state without access to free legal services.
