The New York City Bar Association urged Gov. Kathy Hochul in a statement Wednesday to ensure the 2027 executive budget gives the New York State Interest on Lawyer Account Fund access to its revenue for civil legal services, noting the current proposed budget did not grant full spending authority.

The program, known as the IOLA Fund, assists low-income residents with civil legal issues that affect their access to basic needs like food, shelter, employment and healthcare. The funds are not taxpayer dollars but rather money generated by interest on attorney escrow accounts.

The current budget mirrors what was enacted for fiscal year 2026, but the bar association said it falls about $25 million short of the $102.5 million in available IOLA money.

"Governor Hochul will continue to negotiate in good faith with the state legislature to deliver a budget that makes New York state safer and more affordable," a spokesperson for the governor told Law360 Pulse in an email.

IOLA's spending has more than doubled since Hochul took office amid rising interest rates. The use of its funds has generated controversy before. Back in 2024, the nonprofit New York Lawyers for the Public Interest asked the state legislature to pass legislation reforming how the money can be used after Hochul planned to divert $55 million from IOLA to a general fund that can be used for other state programs.

The legislation stalled in the New York State Assembly, but a new bill that currently sits in the chamber's Governmental Operations Committee would forbid the use of its funds and payments for any purpose other than those stated in the state finance law. Another proposal in the Senate Banking Committee would prohibit service charges or minimum balance requirements for attorney trust accounts.

The governor initially wanted to divert $100 million in 2024 but rescinded that figure during the budget's 30-day amendment period in light of the backlash those plans created. The $55 million she did divert went toward foreclosure prevention and eviction legal services, Empire Justice Center noted. The nonprofit group called those programs important but nonetheless opposed "any sweeping of IOLA for any other purpose."

Similarly, the New York City Bar Association is urging Hochul to use the 30-day amendment period to grant IOLA access to the rest of its funds.

"In 2024, IOLA initiated a five-year, competitively bid contracting process designed to provide long-term stability and predictability for service providers. This multi-year approach — widely embraced by the field — enables organizations to plan responsibly, recruit and retain staff, and meet increasing demand for services," the association said in its statement. "It is already improving coordination and strengthening service delivery across the state. Without the additional $25 million in spending authority needed to fully fund IOLA's request, the second year of these contracts faces significant cuts."

--Additional reporting by Lauren Berg. Editing by Covey Son.