BACKGROUND PAPER

The Legal Services CorporationBudgetary Issues

and Alternative Federal Approaches

July 1977

Congress of the United States

Congressional Budget Office

Washington, D.C.
THE LEGAL SERVICES CORPORATION—

BUDGETARY ISSUES AND ALTERNATIVE FEDERAL APPROACHES

The Congress of the United States

Congressional Budget Office

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402
PREFACE

This analysis of alternative budgetary levels for

the Legal Services Corporation was undertaken at the

request of the Senate Budget Committee. Its purpose

is to provide the Congress with a basis for assessing

future resource requirements of the legal services

program in light of such key programmatic considerations

as the number of persons to be served and the level of

legal services to be provided. In accordance with the

Congressional Budget Office's mandate to provide

objective and nonpartisan information, this report

contains no recommendations.

Estimates of the numbers of persons to be served

are based on a model used for CBO Background Paper

No. 17, Poverty Status of Families Under Alternative

Definitions of Income (revised edition, June 1977).

This legal services study was prepared by Earl A.

Armbrust, Donald G. Deloney, and David M. Delquadro

under the supervision of Seymour D. Greenstone of the

General Government Management Staff of CBO's Office

of Intergovernmental Relations. It was edited and

prepared for publication under the supervision of

Johanna Zacharias. Betty Ripple typed the several

drafts and the final published manuscript.

Alice M. Rivlin

Director

July 1977

111

TABLE OF CONTENTS

Preface . ^^.j

Summary , . . ^x

Chapter I. Background in Brief of the

Legal Services Corporation. ... . i

Chapter II. The Current Program--Its Costs

and Management Issues 5

The Program's Costs Now and

Five Years Ahead 5

Management Issues 8

Chapter III. The Number of Poor People and

Levels of Legal Service ..... . 12

Projecting the Potential Legal

Services Population 12

Projecting Population According

to Different Criteria ..... . 14

The Level of Legal Services

Available 16

Other Cost and Support Factors. , . . 17

Chapter IV. Alternative Approaches and What

They Could Mean for the Program . . 19

Basis of the Analysis 19

Variations of the Current Program . . 19

Basic Departures 21

Pros and Cons of the Local

Initiative Approach .. . 24

Appendix. Distribution of Legal Service

Corporation Grants by State ... . 27

v

LIST OF TABLES

1. Estimated Distribution of Legal

Services Corporation Funds 6

2. Five-Year Cost Projections for

Legal Services Program Under

Current Agency Planning 7

3. Length of Experience of Legal

Services Attorneys as of

June 1976 9

4. Estimated Distribution of Local

Plans by Eligibility Requirements as of March 1977 11

5. Projecting the Number of Poor 15

6. Effects of Alternative Program

Funding Levels 21

VII

SUMMARY

The present authorization for the federal assistance

program administered by the Legal Services Corporation

is due to expire at the end of fiscal year 1977. The

corporation has requested an appropriation of $217

million for fiscal year 1978 and has projected it will

require $275 million the following year. The President's

budget proposed $175 million for the program, an estimate

not binding on the corporation since it is independent

of the Executive Branch.

Through the Legal Services Corporation, the federal

government currently spends about $125 million a year to

finance legal aid in noncriminal cases to approximately

13 million poor people. The assistance is provided in

the form of federal grants to about 300 local programs

employing a total of some 3,000 staff attorneys and

1,100 paralegal personnel. To provide a basis for

assessing the future resource requirements and direction

of the legal services program, this paper analyzes:

o The current program and its costs, and key

management issues;

o Projections of the potential legal services

population;

o Alternative funding levels based on differences

in the number of poor people and levels of legal

service to be provided; and

o Some basic departures from the present approach.

The quality of legal services actually delivered

is not discussed. While quality of service delivered

is a significant aspect of any comprehensive evaluation

of program effectiveness, it does not come within the

purview of this paper.

IX
The Legal Services Corporation places its estimate

of the number of persons in need of free legal service

at 29 million; this figure reflects the number of people

below the poverty level. According to the corporation,

16 million are now denied legal aid because they live

outside areas served by legal service programs or

because existing resources limit the services available

through ongoing programs. The corporation maintains

that the $217 million it has requested for fiscal year

1978, and an estimated $275 million for fiscal year 1979,

would enable it to extend coverage to all the estimated

29 million people. If these funding levels were provided

and the program remained unchanged in other respects, the

projected appropriation requirement for fiscal year 1982

would be $323 million.

THE PROGRAMMATIC BASIS FOR ALTERNATIVE FUNDING LEVELS

Two programmatic elements are key to a consideration

of future funding levels for the Legal Services Corporation: the number of persons to be served and the level

of legal services to be provided. Attorneys' salaries

and associated costs, and the availability of other

sources of program support, are other factors to take

into account.

The key program management problems usually ascribed

to the legal services program include low salaries for

attorneys and high staff turnover. Average annual

salaries for legal aid attorneys are about $13,900, a

level of compensation generally lower than that paid by

federal agencies and state and local governments to staff

lawyers.

The Legal Services Corporation Act of 1974 defines

an eligible client as "any person financially unable to

afford legal assistance . . . ." and establishes priority

for "persons least able to afford legal assistance".

These provisions allow wide latitude for setting eligibility standards; they could include persons whose

incomes are above the poverty level established by the

Office of Management and Budget (OMB).
The Congressional Budget Office has projected the

number of persons to be served using three eligibility

standards and three definitions of income in order to

illustrate the sensitivity of the number of poor to

these criteria. The projections were made for fiscal

year 1982 because it will be difficult to build up

legal services coverage to serve the total target

population much before that date. The eligibility

standards include:

o 100 percent of the poverty level;

o Average eligibility under the present program

(106 percent of the poverty level); and

o Maximum eligibility under present Lega,l Services

Corporation regulations (125 percent of the

poverty level).

The income definitions include:

o The Legal Services Corporation income guidelines

which exclude cash income from governmental

income-maintenance programs such as public

assistance, supplemental security income, and

unemployment compensation;

o The OMB income definition, which considers all

the cash or money income a family receives

before taxes; and

o An income definition that considers all cash or

money income and in-kind benefits (such as food

stamps and public housing assistance, but

excluding medicare and medicaid).

The CBO projections are based on current census

data, demographic changes, and optimistic economic

assumptions about the gross national product and unemployment rates (i.e. a real growth in GNP of 3.5

percent and unemployment rate of 4.5 percent for fiscal

year 1982). The estimated number of poor people would

be greater under projections of lower economic growth.

The CBO projections are national estimates that do not

attempt to reflect any specific geographic distribution.

Such allocations would be an aspect of the operating

program procedures.

xi
The range of differences between the three income

definitions is significant. At or below the poverty

level, the number of poor people in 1982 would be 24.9

million under the Legal Services income guidelines,

20.5 million under the OMB income guidelines, and 15.9

million under the OMB guidelines adjusted for in-kind

benefits—a range of 9 million people. At the current

average local eligibility standard (106 percent of the

poverty level), the numbers of poor in 1982 would be

26.6 million, 22.5 million, and 18.5 million,

respectively—a range of 8.1 million people. At the

corporation's maximum eligibility limit (125 percent

of the poverty level), the numbers of poor in 1982

would be 30.9 million, 27.4 million, and 24.5 million,

respectively--a range of 6.4 million people. The

concept and methodology involved in including in-kind

transfers as a part of income are, of course, complex

and controversial.

Access to legal services is now based on a ratio

of two attorneys per 10,000 poor persons. By most

comparisons, this ratio appears to offer the poor sparse

legal coverage. The corporation's long-term goal is to

change the ratio to 4:10,000.

ALTERNATIVE FUNDING LEVELS

The Legal Services Corporation has projected its

appropriation requirements to extend coverage from 13

million to its 1969-based estimated target population

of 29 million poor people in two fiscal years — that is.,

by the end of fiscal year 1979. CBO estimates of the

population to be served are lower and are based on

calculations for fiscal year 1982. All estimates are

based on the OMB income definition--a mid-course between

the Legal Services Corporation eligibility guidelines

and the OMB definition adjusted for in-kind benefits.

The OMB definition used as an analytical device permits

a quantifiable comparison; it is not intended to impute

any value to any one criterion.

All costs in the alternatives outlined below allow

for associated increases in administrative and support

activities; they are expressed in 1977 dollars. Funding

for research, evaluation, and demonstration projects is

continued at the 1977 level.

xi i
Option 1^ The President's Budget Recommendation

(Appropri_ati_on_of JT75 million)

The $175 million estimate included in the

President's budget for fiscal year 1978 represents

an increase of $50 million over current funding.

This level would permit expansion of program coverage

from 13 million to 19.4 million people under the

existing service ratio of two attorneys per 10.000

poor persons.

Option 2: Eligibility Increased to 125 Percent of

the Poverty Level (Appropriation of $238 mi 11 ion~

This option would permit all local plans to set

eligibility at the current Legal Services Corporation

maximum under the OMB income definition by fiscal year

1982. At this level, the program's coverage would be

extended to 27.4 million people under the existing

service ratio of two attorneys per 10,000 poor people.

The estimated full-year federal cost would be $238

mill ion.

Option 3: Level of Services Available Raised,

Stricter Eligibility Requirements Imposed (AppropriatTon o f $344 million)~ ~

This alternative provides for an increase in the

level of services available from an equivalent of two

to four attorneys per 10,000 persons; it also restricts

eligibility to the 20.5 million persons estimated in

1982 to have family incomes below the poverty level.

This alternative illustrates the significant cost

entailed in increasing the level of services, even

though there would be a substantial reduction in the

number of people covered. The estimated full-year

federal cost would be $344 million.

BASIC DEPARTURES FROM THE CURRENT PROGRAM

The corporation is required to report to the

President and the Congress on alternative methods

of delivery that could supplement or replace the

XII 1
existing program. The various alternatives being

considered as a result of 19 demonstration projects

could result in some revisions to the current program.

Overall programmatic and financial responsibility,

however, would remain with the federal government as

a separate categorical grant program.

A fundamental departure from the present or

modified categorical approach would rely on local

initiative and discretion in providing legal assistance

to the poor. It would emphasize pro bono, or donated,

services by members of the bar and prepaid legal

services programs in addition to indirect federal

assistance from programs such as General Revenue

Sharing and Title XX (Social Services) of the Social

Security Act.

xiv
CHAPTER I. BACKGROUND IN BRIEF OF THE LEGAL SERVICES

CORPORATION

At present, the federal government spends about

$125 million a year directly to provide about 13 million

poor persons with minimum legal assistance in noncriminal matters. For the most part, this service is

delivered by some 3,000 attorneys and 1,100 paralegal

aides in nearly 300 local legal assistance programs, !_/

These local programs are funded predominantly by federal

grants administered by the Legal Services Corporation,

a private, nonprofit corporation created in 1974.

In 1976, programs funded by the corporation handled

an estimated 1.25 million cases, dealing mainly with

such routine matters as family relations, consumer

affairs, housing, and administrative law. Only about

15 percent of the cases resulted in court litigation.

The present authorization for federal assistance

is due to expire at the end of fiscal year 1977.

Anticipating reauthorization by the Congress, the

corporation has requested an appropriation of $217

million for fiscal year 1978—an amount larger by $42

million than the $175 million included in the

President's budget. 2_/ (This estimate is not binding,

however, since the corporation is independent of the

Executive Branch.)

The history of the legal aid movement in the United

States dates back to the nineteenth century. Until the

mid-1960s, however, free legal assistance to the poor

was limited primarily to the services of Legal Aid

Societies, which were often formed and supported by the

\j Of the estimated 1,100 paralegal employees in legal

~~ assistance programs, about 500 are supported by

funds from the Legal Services Corporation.

_2/ The Ford Administration's fiscal year 1978 estimate

of $90 million was amended by President Carter to

$175 million.
organized bar. In the 1960s the Ford Foundation

supported various demonstration projects intended

to provide what was termed "a more comprehensive

approach" than that offered by the traditional legal

aid movement. _3/

Federal funding for legal assistance had its

genesis in the now-defunct Office of Economic

Opportunity (OEO), which began to support local

projects in 1966. 4_/ OEO funding earmarked for

legal services increased from $35.8 million in fiscal

year 1969 to $50.8 million the following year. Over

the next five years, funding peaked in fiscal year

1973 at $74.6 million; it declined to $71.5 million

in 1975 when administration of the program was taken

over by the successor agency to OEO, the Community

Services Administration.

During the period between 1966 and 1975, the

legal services program faced severe resource and

management problems. Ultimately, these difficulties

resulted in funding disparities among local projects,

inadequate coverage for the entire eligible population

in an approved project area, short-funding of projects

for less than a full year, and for many areas, no

coverage at all. Efforts that ranged from terminating

altogether to establishing a legal services corporation

kept the future of the program uncertain. Although the

Legal Services Corporation Act was approved on July 25,

1974, the corporation did not become operational until

October 1975 because of delay in appointing its Board

of Directors.

The corporation was established to fund legal

assistance to persons unable to afford such aid. 5_/

Its mandate permits wide latitude in determining what

_3/ Leonard H. Goodman, and Margaret H. Walker. The

Legal Services Program: Resource Distribution

and the Low Income Population, Bureau of Social

Science Research Inc. , Washington, D. C. ,. July 1975,

pp. 1-10.

4/ Ibid.

5/ Public Law 93-355, July 25, 1974 (42 U.S.C. 2996b).

2
level of federal support should be provided. The

major points of judgment are the income level at

which a person should be eligible for free legal

aid and the level of access to or availability of

such help. These determinations—or planning

assumptions — are based on program judgments and

available resources.

The 1974 act authorized funding for three

years--$90 million for fiscal year 1975 (appropriated to the Community Services Administration),

$100 million for fiscal year 1976, and "such sums

as necessary" for fiscal year 1977. Within the

specified authorizations, lesser amounts actually

have been appropriated--$71.5 million in 1975 and

$92.3 million in 1976. For fiscal year 1977, $125

million was appropriated.

In order to provide a basis for assessing the

future resource requirements and direction of the

legal services program, this paper focuses on an

analysis of:

o The current program and its costs, and key

management issues; &_/

o Projections of the potential legal services

populat ion;

o Alternative funding levels based on differences

in the number of poor people and levels of

legal service to be provided; and

o Some basic departures from the present approach.

In assessing the legal services program, an

important distinction should be remembered: the

program is limited by statute to noncriminal matters.

6/ The quality of legal services actually delivered

~~ is not discussed in this report. While quality

of output is a significant aspect of any comprehensive evaluation of program effectiveness, it

is not within the purview of the analysis in this

paper.

93-010 O - 77 - 3
In general, however, the Constitution does require

that indigent criminal defendants be provided counsel

at public expense, and the states use a variety of

mechanisms to meet the constitutional responsibility.
CHAPTER II. THE CURRENT PROGRAM—ITS COSTS AND

MANAGEMENT ISSUES

THE PROGRAM'S COSTS NOW AND FIVE YEARS AHEAD

In fiscal year 1977, the Legal Services Corporation (LSC) will spend an estimated $129.4 million, of

which $125 million is to come from new federal appropriations and the remainder from prior-year funds.

The program will provide some 13 million poor persons

with minimum access to free legal service--defined as

the equivalent of two attorneys per 10,000 poor

persons. LSC assumptions indicate, however, that

16 million of the poor will be denied access to legal

aid, either because they live outside areas served by

legal service programs or because existing resources

limit the services available in established projects.

(Estimates made by the Congressional Budget Office of

the poverty population, discussed in Chapter III, are

lower.)

About 85 percent of the current $129.4 million

program is for grants to local legal aid projects !_/

and contracts for 13 support centers that provide

specialized legal services to the local programs.

The $18.9 million balance is for fellowships for law

school graduates who serve in local programs, for

central administration and operation of regional

offices, and for research, evaluation, and demonstration projects. Table 1 presents a categorical

breakdown of the distribution of LSC funds.

See Appendix for distribution of LSC grants by

state.
TABLE 1. ESTIMATED DISTRIBUTION OF LEGAL SERVICES

CORPORATION FUNDS

Dollars in

Millions Percent

Grants to Local Programs

Contracts to Support Centers

Subtotal

Internships

Administration and Support,

Including Regional Offices

106.2

4.3

(110.5)

4.4

8.5

82.1

3.3

(85.4)

3.4

6.6

Research, Evaluation, and

Demonstration Projects 6.0 4.6

Total 129.4 100.0

SOURCE: Legal Services Corporation Budget for Fiscal

Year 1978, Appendix C, pp. C1-C17

The current plans of the Legal Services Corporation

call for extending minimum access to legal services to

the remaining 16 million poor persons (according to LSC's

estimate) over the next two fiscal years. To this end,

the corporation has estimated appropriation requirements

of $217 million in fiscal year 1978 that would provide

assistance for an additional 10.6 million poor persons.

The estimated $275 million needed for fiscal year 1979

would provide minimum assistance for the remaining 5.4

million and strengthen administration and support

services. 2_/ If these amounts were appropriated and

2_/ The 1979 appropriation estimate provided by LSC

includes costs for field services and other

activities. These estimates could be smaller if

different assumptions on cost and the number of

poor persons currently in the population were

used.

6
the ratio of two attorneys per 10,000 poor remained

unchanged, funding would level off in fiscal year

1980 and subsequent years, except for periodic

adjustments for inflation. Allowing for inflation

after fiscal year 1979 would place the LSC estimates

at $333 million for fiscal year 1982 (see Table 2).

TABLE 2. FIVE-YEAR COST PROJECTIONS FOR LEGAL

SERVICES PROGRAM UNDER CURRENT AGENCY

PLANNING: BY FISCAL YEARS, IN MILLIONS

OF DOLLARS

1977 1978 1979 1980 1981 1982

Appropriation 125.0 217.1 275.5 290.4 305.7 322.6

Interest

Income from

Prior Year ' — 4.5 7.6 9.7 10.2 10.7

Other

Resources 4.4

Total

Program

Level 129.4 221.6 283.4 300.1 315.9 333.3

Number of

Poor Persons

Provided

Minimum

Assistance 13.0 23.6 29.0 29.0 29.0 29.0

Number of

Poor Persons

Without

Minimum

Assistance 16.0 5.4

SOURCE: Estimates for fiscal years 1977 through 1979

were provided by the Legal Services Corporation,
MANAGEMENT ISSUES

The decentralized nature of the legal services

program permits considerable latitude in the design

and operation of the nearly 300 individual projects.

Nevertheless, these local programs experience certain

common management problems.

Although there are wide variations in size, a

typical—although hypothetical—program would have

15 attorneys and would receive about $370 thousand

from the Legal Services Corporation. In 1976, the

average legal services attorney handled somewhere

between 360 and 415 cases over the year. The local

staff attorneys are assisted by paralegal employees

at an average of about one paralegal employee to

three attorneys. These employees assist in various

activities such as interviewing prospective clients,

doing legal research, and undertaking case investigations and followup.

Most lejgal aid programs face problems of

relatively low salaries and high turnover. Also,

eligibility requirements vary considerably among

different parts of the country. Together, these

factors make it difficult to draw any conclusions

about program effectiveness from a national perspective.

Salaries

Salaries for LSC-funded attorneys generally are

not sufficient to interest experienced lawyers in

long-term careers in legal assistance to the poor.

Legal positions in other public service areas offer

a relevant basis for comparison. Average annual

salaries for staff attorneys start at about $12,000

and average roughly $13,900. These levels are

generally lower than those paid by federal agencies

and state and local governments. The average LSC

entry level salary of $12,000 compares poorly to

$17,000 for new lawyers hired by the Internal Revenue

Service and $14,000 by the General Accounting Office.

Labor unions also offer a basis for comparison.

For example, average salaries for staff attorneys in

8
AFL-CIO-run programs in Massachusetts are $15,000 and

$21,500 for Washington , D.C. In New York City, the

prepaid legal plan for members of the State, County,

and Municipal Employees Union offers a starting

salary of $15,000.

Turnover

An analysis prepared in 1976 by the Legal Services

Corporation found a turnover rate of 33 percent among

attorneys supported by LSC grants. While this rate is

high, the local programs have nevertheless been able

to build a corps of experienced attorneys. A survey

conducted in June 1976 indicated that about one-third

of all legal service attorneys had more than two but

less than five years of experience. As shown in

Table 3, nearly 14 percent had five years' experience

in legal services and less than 2 percent had six

months or less.

TABLE 3. LENGTH OF EXPERIENCE OF LEGAL SERVICES

ATTORNEYS: AS OF JUNE 1976

Years With Local Program Percent

Less than 6 Months 1.6

6 Months to 1 Year 24 8

1 Year to 2 Years 25. 8

2 Years to 5 Years 33.9

More than 5 Years 13.9

TOTAL 100.0

SOURCE: Legal Services Corporation.

Eligibility Requirements

The Legal Services Corporation Act of 1974 defines

an eligible client as "any person financially unable to

afford legal assistance ." and establishes

priority for "persons least able to afford legal

9
assistance". These provisions offer wide latitude

for setting eligibility standards; clients can include

persons whose incomes are above the poverty level

established by the Office of Management and Budget.

Within the regulations established by the Legal

Services Corporation, each local program sets its own

eligibility requirements. The income-related criteria

are often expressed as a percent of the poverty level

established by the Office of Management and Budget

(OMB). These guidelines indicate, by family size and

other factors, the level of a family's cash income

that determines poverty.

The corporation's regulations set the maximum

income at 125 percent of the poverty level; they also

allow various family and financial circumstances other

than income to be considered. In addition, the

regulations permit income from public assistance,

supplemental security income, unemployment compensation,

or other governmental income maintenance programs to

be disregarded if the individual would otherwise be

eligible. Thus LSC guidelines, in effect, differ from

the OMB definition of income, which includes all cash

or money income before taxes—including interest,

social security, pensions, unemployment compensation,

and public assistance. The corporation believes that

the maximum of 125 percent of the poverty level is a

stringent standard, and that it gives priority to those

individuals least able to obtain legal assistance

while still excluding a large number of persons unable

to afford adequate legal counsel. As a practical

matter, the corporation's funding estimates assume

that overall eligibility nationwide would average 100

percent of the OMB poverty level. Without resource

constraints, different eligibility standards could be

considered.

The average eligibility now in effect at the local

level is estimated to be 106 percent of the poverty

level. Within this average, there is wide variation--

from 71 percent for Shreveport, Louisiana, to 152

percent for Newark, New Jersey. About a third of the

local program plans have eligibility requirements of

100 percent or less of the poverty level, and 60

10
percent are between 101 percent and 125 percent of

the eligibility requirements (see Table 4). _3/

TABLE 4. ESTIMATED DISTRIBUTION OF LOCAL PLANS BY

ELIGIBILITY REQUIREMENTS: AS OF MARCH 1977

Range of Income Eligibility

As Percent

of OMB

Poverty Level

Income in Dollars

for a Non-farm

Family of Four a/

Percent of Plans

(Weighted to

Reflect Relative

Size)

80

81

101

126

136

or Less

to 100 b/

to 125 b/

to 135

and Over

4,

4,

5,

7,

7,

539

540

675

093

661

or

- 5

- 7

- 7

and

Less

,674

,092

,660

Over

Total

7.

29.

60.

.

3.

100.

5

0

2

3

0

0

a./ Computed for fiscal year 1976 from weighted average

poverty threshold for a non-farm family of four

headed by a male. See Poverty Status of Families

Under Alternative Definitions of Income. CBO Background Paper No. 17, revised edition, June 1977,

Table A-3, p. 23.

b/ Of all local plans (weighted to reflect relative

size), 9.9 percent are at 100 percent of the poverty

level and 8.5 percent are at the 125 percent maximum

established by the Legal Services Corporation.

3/ Estimated by CBO on the basis of a March 1977 sample

of 60 local programs, which cover 23.9 percent of

LSC grant funding for fiscal year 1977. Four programs

in the LSC sample have eligibility standards in excess

of 125 percent of OMB guidelines. These standards

were in effect before the LSC regulations were set

and are currently under review. Completion of a

field survey underway by the General Accounting Office

should provide a more definitive basis for estimating

income eligibility.

11
CHAPTER III. THE NUMBER OF POOR PEOPLE AND LEVELS OF

LEGAL SERVICE

Two elements are key to any consideration of future

funding levels for the Legal Services Corporation: the

number of poor persons to be served and the level of

legal services to be provided. Other factors that have

to be weighed include attorneys' salaries and associated

costs and the availability of other sources of program

support.

PROJECTING THE POTENTIAL LEGAL SERVICES POPULATION

A key planning assumption on which the Legal

Services Corporation bases its requirements is its

estimate of the number of poor people. The definition

of income currently used by OMB to determine poverty

includes cash or money income from virtually all sources

but excludes in-kind benefits such as those from food

stamps, child nutrition programs, housing assistance,

medicare and medicaid. There is fundamental disagreement over whether in-kind payments should be counted.

The corporation and other authorities take the

position that in-kind benefits have little direct

bearing on the standard it believes the Congress has

imposed in the Legal Services Corporation Act: whether

an individual or group of individuals has the ability

to afford legal assistance. The policy aspects of this

question are not within the purview of this paper. But

future implications of including in-kind payments as

income in defining poverty would be significant. Even

excluding medicare and medicaid, inclusion of other

in-kind benefits would substantially lower the number

of poor.

The Legal Services Corporation assumes that there

are about 29 million persons below the poverty level

(in the United States, Puerto Rico, and Trust Territories)

basing this estimate on 1969 U.S. Census data. The

definition of income used by the Bureau of the Census

is similar to that used by OMB in that it includes cash

12
or money income from virtually all sources. In-kind

benefits are not considered as income in determining

poverty. The corporation adheres to the 29 million

figure because it believes resource limitations

preclude broader eligibility standards and because the

1969 data provides the degree of detail (i.e. of a

census tract) used in allocating LSC grants.

From an administrative standpoint there may be

great advantage in using 1969 census data for allocating grants. But for purposes of projecting future

resource requirements on a national basis, the 29

million number does not reflect the most recent census

data, nor is it free of bias built in the census data

base concerning under-reporting and non-reporting of

income by persons surveyed. _!./

Census data for calendar year 1975 (expanded to

include persons residing in the territories) place

the number of poor at 27.6 million. 2/ Even this

figure should be revised further to remove biases from

the census data base for under-reporting and nonreporting of certain income by persons surveyed and to

reflect estimated changes in economic and demographic

characteristics. /

jL/ See Poverty Status of Families Under Alternative

Definitions of Income, CBO Background Paper No. 17,

revised edition, June 1977, pp. 6-7 and Part II

Appendix "Estimating Poverty Population", pp. 17-

20.

2/ Calculated by CBO, based on U.S. Department of

Commerce, Bureau of the Census, Current Population

Reports, (Series P-60, No. 103), Money Income and

Poverty Status of Families and Persons in the United

States: 1974 and 1975 Revisions, Issued September

1976, Table 17, p. 34.

3^/ Estimates of numbers of poor persons based on CBO

model used for Poverty Status of Families Under

Alternative Definitions of Income, op. cit.

13
PROJECTING POPULATION ACCORDING TO DIFFERENT CRITERIA

The OMB poverty level offers a convenient benchmark for comparing various alternatives concerning the

number of persons to be provided free legal assistance.

It is used by the corporation in its regulations on

eligibility standards.

Decisions on the number of persons to be served

depend on two factors: eligibility standards and the

definition of income. Projections under three eligibility standards and three definitions of income were

prepared for this report to illustrate the sensitivity

of the number of poor people to these two factors. The

eligibility standards used are: 100 percent of the OMB

poverty level, average eligibility under the present

program (106 percent of the poverty level), and

maximum eligibility under present LSC regialations

(125 percent of the poverty level). The income

definitions include:

o The? Legal Services Corporation income guidelines, which exclude cash income from governmental income maintenance programs such as

public assistance, supplemental security

income, and unemployment compensation;

o The OMB income definition, which considers

all the cash or money income a family receives

before taxes; and

o An income definition that considers all cash

or money income and in-kind benefits (such as

food stamps.and public housing assistance,

but excluding medicare and medicaid).

The CBO projections (see Table 5) are based on

current census data, changes in demographic characteristics, and optimistic economic assumptions concerning

the gross national product and unemployment. 4/ The

4_/ The econometric model used in the development of

these projections assumed a real growth in GNP

of 3.5 percent and an unemployment rate of 4.5

percent for fiscal year 1982.

14
estimated number of poor would be greater under

projections of lower economic growth. The CBO

projections are national estimates; they do not

attempt to reflect any specific geographic distribution. Such allocations would be an aspect of

the operating program procedures.

TABLE 5. PROJECTING THE NUMBER OF POOR: BY FISCAL

YEARS: NUMBERS IN MILLIONS

Legal Services OMB Guidelines

Income OMB Income Adjusted for

Year Guidelines Guidelines In-Kind Transfers

At 100 percent of the poverty level

1976

1978

1982

30.3

26.5

24.9

23.5

21.6

20.5

17.8

16. 8

15.9

At the average local eligibility level--106 percent

of

1976

1978

1982

the poverty level

32.3

28.3

26.6

26.

23.

22.

2

7

5

21 .

19.

18.

2

6

5

At the LSC maximum level—125 percent of the poverty

level

1976

1978

1982

38.4

33.6

30.9

32.8

29.6

27.4

29.8

26.6

24.5

There is a significant range of differences

between the LSC's income definition, the OMB income

definition, and the OMB definition adjusted for inkind transfers. The differences in the estimated

number of poor people in fiscal year 1982 are

15
9 million at or below the poverty level, 8.1 million

at the LSC average eligibility at the local level,

and 6.4 million people at the corporation's maximum

income eligibility level. (It should be noted, of

course, that the concept and methodology involved in

including in-kind transfers as a part of income are

complex and controversial.)

THE LEVEL OF LEGAL SERVICES AVAILABLE

The Legal Services Corporation's current plans

are to achieve a ratio of two attorneys to every

10,000 poor people; this matches the level of access

in the region with the best ratio when the corporation

was created. 5_/ This ratio was recognized by LSC as

providing a minimum level of access consistent with

limited resources and the availability of other

sources of support such as donated attorney services.

The corporation's long-range goal, however, is to

double this ratio to four attorneys per 10,000 poor. (3/

By most comparisons, the 2:10,000 ratio appears

to provide the poor with sparse coverage. On a

national basis, there are an estimated 14 attorneys

in private practice per 10,000 persons (excluding

attorneys employed by industry, government, and

educational institutions). One study has estimated

a requirement of 4.6 attorneys per 10,000 based on

the legal needs of the poor; this study assumed the

legal needs of the poor to be less than those of the

general population owing to the high proportion of

5_/ In fiscal year 1974, LSC's Region I (Boston) had

1.99 LSC-funded attorneys per 10,000 poor persons

compared to an average of 0.76 per 10,000 for all

LSC regions. Leonard H. Goodman and Margaret H.

Walker, The Legal Services Program: Resource

Distribution and the Low Income Population, Bureau

of Social Science Research, Inc., July 1975,

Table 1, p. 20.

67 Legal Services Corporation Annual Report 1976,

p. 14 (note) and p. 27.

16
poor persons under 18 years of age. 7_/ There are

arguments to the contrary—that the legal needs of

the poor are greater; they contend that the law

affects the poor more often because of crisis situations that often involve children and dependence on

public benefit programs.

OTHER COST AND SUPPORT FACTORS

Under current LSC planning, an estimated annual

cost of $7.82 is needed for each additional person

provided legal coverage on the basis of two attorneys

per 10,000 persons. This estimate of unit costs

includes $7.39 for staff attorneys and related

expenses, 5£ for support centers, and 38£ for central

overhead. £3/

The corporation indicates that the availability

of other sources of support was taken into account in

setting the minimum ratio at 2:10,000. Thus, resources

for the minimum level are assumed to come entirely

from federal grants from the corporation with other

sources of support serving as essential supplements

to the minimum program. Such supplementary support

7_/ Calculated by CBO, based on Leonard H. Goodman

and Margaret H. Walker, Bureau of Social Science

Research, Inc., The Legal Services Program:

Resource Distribution and the Low Income Population, July 1975, p. 21 (note 13) and p. 63.

(The ratio of 4.6 attorneys per 10,000 persons

assumed an annual average attorney caseload of

500. )

&_/ Calculated by CBO from data in Legal Services

~~ Corporation Budget Request for Fiscal Year 1978,

Appendix C, pp. C-6 through C-17. Estimates do

not include increases for fellowships, travel,

research, demonstration projects, and program

evaluation. These activities are assumed to

continue at the fiscal year 1977 level.

17
is considered vital by LSC in making up for program

deficiencies, augmenting minimum levels of service,

and providing assistance to special groups.

legal assistance is

than LSC grants: other

itself (i.e. earnings

attorneys paid by LSC

federal grant programs;

Significant support for

available from sources other

resources of the corporation

from prior-year interest and

fellowships); other existing

nonfederal funds from foundations, charitable

organizations, and state and local governments; and

pro bono or donated services. Such supplementary

support may be provided both to LSC funded projects

and to legal assistance programs that are entirely

independent of the corporation. The nationwide extent

and net impact of these other resources are still not

known. (Completion of a forthcoming comprehensive

field survey by the General Accounting Office should

provide a basis for developing reasonable estimates.)

18
CHAPTER IV. ALTERNATIVE APPROACHES AND WHAT THEY COULD

MEAN FOR THE PROGRAM

BASIS OF THE ANALYSIS

For an analysis of alternative funding levels,

the projections used in this chapter cover the fiveyear period fiscal years 1977-1982. The three options

presented here would extend legal services to various

numbers of poor people under different levels of

service. The numbers of persons covered reflect

changes in eligibility under the definition of income

in the OMB poverty guidelines—a mid-course between

the Legal Services Corporation definition and the OMB

income definition adjusted for in-kind transfers. The

OMB guidelines serve as a basis for developing funding

levels because they represent a common and widely

understood denominator. This analytical device permits

a quantifiable comparison; it is not intended to impute

particular value to any one criterion. Each option

identifies the number of poor persons covered in

fiscal year 1982. _!/

All costs allow for associated increases in

administrative and support activities and are expressed

in 1977 constant dollars. They do not provide for

significant increases in attorney salaries. It is

assumed that funding for research, evaluation, and

demonstration projects would continue at the 1977

level.

VARIATIONS OF THE CURRENT PROGRAM

The alternative funding levels described below

are based on variations in the number of poor persons

Each of the options except the first (the President's

budget) reaches this numerical level of coverage by

the end of fiscal year 1979. For the higher options,

so rapid a buildup may be unrealistic.

19
to be served and the level of legal services available.

Each option is a modified version of the current program.

Some different approaches are reviewed later in this

chapter.

Option 1: The President's Budget Recommendation ($175

Million Appropriation)

The $175 million estimate included in the

President's budget for fiscal year 1978 represents an

increase of $50 million over current funding. This

level would expand program coverage from 13 million

poor persons to 19.4 million continuing the existing

2:10,000 service ratio.

Option 2: Eligibility Increased to 125 Percent of the

Poverty Level ($238 Million Appropriation)

An appropriation of $238 million (in 1977 dollars)

would permit all local plans to set eligibility at the

current LSC maximum under the OMB income definition by

fiscal year 1982. At this level, the program's coverage

would be extended to 27.4 million people continuing the

existing service ratio.

Option 3: Level of Services Available Raised. Stricter

Eligibility Requirements Imposed ($344 Million Appropriation )

For an appropriation of $344 million to provide

for raising the level of services available from an

equivalent of two to four attorneys per 10,000 persons,

eligibility would be restricted to persons with family

incomes at or below the poverty level. This option

illustrates the significant cost entailed in raising

the level of services, despite a substantial reduction

in the number of persons covered. At this level, the

program's services would be extended to 20.5 million

people, the estimated number of poor people at 100

percent of the poverty level projected for fiscal year

1982.

20
Table 6 summarizes the effects of these three options.

TABLE 6. EFFECTS OF ALTERNATIVE PROGRAM FUNDING LEVELS

Number of Federal

Attorneys Funding

Per Millions Level

10,000 of - (Millions

Poor People of 1977

Persons Covered Dollars)

Option 1:

President's Budget 2 19.4 175

Option 2:

Eligibility

Increased to

125 Percent of OMB

Poverty Level (No

change in level of

service) 2 27.4 238

Option 3:

Level of Service

Raised, Stricter

Eligibility

Standard Imposed

(100 Percent of

OMB Poverty Level) 4 20.5 344

BASIC DEPARTURES

Under each of the alternative funding levels,

programmatic and financial responsibility would remain

with the federal government as a separate, so-called

"categorical" grant program administered by the Legal

Services Corporation. A fundamental departure from

the categorical approach can also be considered. This

approach would rely on local initiative and discretion

in providing legal assistance to the poor with indirect

assistance from the federal government.

21
A local initiative approach would have considerable

potential resources to draw upon. The principal sources

of support are in three areas: indirect federal

assistance, donated lawyers' services, and growth in

prepaid and group legal service programs.

Indirect Federal Assistance

In fiscal year 1978, three federal programs will

provide an estimated $9.5 billion to state and local

governments to spend for projects that could include

legal assistance to the poor. These three federal

programs are

General Revenue Sharing $6.9 billion

Social Services under Title XX

of the Social Security Act $2.4 billion

Community Services under the

Older Americans Act $0.2 billion

TOTAL $9.5

Grants under Title XX of the Social Security Act and

the Older Americans Act generally cover 75 percent of

project costs, with the balance coming from state and

local matching funds. (Other federal programs with

funds that can be used for legal assistance include the

Community Development Act of 1974, Volunteers in Service

to America,, and the Comprehensive Employment Training

Act.) In all state allocations—particularly for Title

XX funds—state officials have considerable discretion

about what kind of social services to provide and how

legal or other assistance may be delivered. The

particular mechanism for state and local decisionmaking varies widely from state to state. This year,

an estimated $33 million in federal and state Title XX

funds will be expressly designated for free legal aid

to low-income persons. 2/

2_/ U.S. Department of Health, Education, and Welfare,

Technical Notes: Summaries and Characteristics of

States' Title XX Social Services Plans for Fis<• al_

Year 1977, March 1, 1977, p. vi.

22
Nonfederal Resources

In local legal aid projects funded by LSC, a

significant number of attorneys and paralegal

employees are funded by other sources. A survey of

Legal Services Corporation projects in six large

cities indicated 25 percent of the attorneys and 36

percent of the paralegals were funded by sources

other than LSC grants. 3_/ An estimated 400 local

legal aid programs are independent of LSC support

and provide assistance ranging from referral to

full-scale legal counsel. 4_/

Donated Services

Legal assistance provided by attorneys free of

charge to poor clients is another significant

resource available in the local initiative approach.

The American Bar Association's Code of Professional Responsibility (Cannon 2) sets forth the; basic

obligation for making counsel available to persons

unable to pay. The bar is currently considering how

this responsibility can best be carried out. Some

observers have suggested that lawyers donate services

or equivalent financial contributions ranging from

5 to 15 percent of total client-related time. 5/

_3/ The six cities are Atlanta, Chicago, Dallas, the

District of Columbia, Los Angeles, and New York;

data were provided by LSC. Results of this survey

are generally consistent with a 1974 nationwide

analysis prepared by Goodman and Walker, op. cit.,

pp. 74-83.

4_/ Tentative estimate from the General Accounting

Office based on a preliminary review of data

supplied by the National Legal Aid and Defenders

Association.

5_/ American Bar Association, Special Committee on

Public Interest Practice, Informational Report

(circulated for discussion only), February 1977,

PP. 4-6.

23
If each attorney provided an average of 50 hours

of free service each year, the equivalent of four

full-time attorneys per 10,000 persons could be

provided to 24 million poor.

Prepaid and Group Legal Services

The movement toward prepaid legal services

now covers some 1.5 million persons in 5,000

organizations such as labor unions, consumer cooperatives, and student groups. 6/ There have

been predictions that, by 1985, between 10 and 20

million households will be covered by prepaid

programs. 7/ While these plans are not directed

at the poor, they may offer a source of assistance

for persons on the edge of poverty or those who

face short-term hardships because of seasonal

unemployment or other temporary financial reverses,

PROS AND CONS OF THE LOCAL INITIATIVE APPROACH

Under an approach that relied primarily on

local initiative and discretion, the actual delivery

of legal services could take several forms. The

use of local staff attorneys could continue as the

primary method, or various alternative or supplementary delivery methods could be adopted.

6_/ Theodore J. St. Antoine, "Growth Patterns in

Legal Services", AFL-CIO American Federationist.

March 1976. Estimate of numbers of persons

covered by prepaid and group plans were obtained

from the Resource Center for Consumers of Legal

Services.

T_l Council for Public Interest Law, Balancing the

Scales of Justice, 1976, pp. 325-326 refers to

work of Harold S. Becker, et al.; The SocioEconomic Impacts of Prepaid Legal Services

(Glastonbury: The Futures Group, 1975).

24
Even under the existing LSC program, 19

demonstration projects are being studied that

include alternatives such as:

o Vouchers with which a client can purchase

services from legal service agency or

private attorney;

o "Judicare", which reimburses members of the

private bar;

o Contracts with private law firms;

o Prepaid legal insurance; and

o Legal clinics staffed by volunteer lawyers.

The corporation will submit an interim report to

the Congress on the status of these projects. The

alternatives recommended in the final report could

be incorporated in the existing program or under a

basic departure from the present system.

The major advantage to relying on local

initiatives with general financial assistance from

the federal government is that it permits priorities

to be established at the local level—both in terms

of which programs for the poor are most important

and how such programs rank with other claims for

public funds. Some of the more general federal

grants, such as Title XX of the Social Security Act,

also involve commitment of local funds through

matching requirements. Reliance on indirect federal

assistance would also remove duplicate sources of

federal funding, which may overstate total LSC grant

requirements for providing minimum services.

On the other hand, the Legal Services Corporation

does not consider indirect federal assistance or

donated services to be realistic alternatives to

direct federal funding.

Several major objections can be advanced

against a local discretionary approach. Most

important, state and local governments and the

25
private bar might or might not elect to finance

legal assistance to the poor, depending on other

priorities. The unlikelihood of adequate local

initiatives was one of the factors that led to

direct federal financing more than a decade ago.

Other federal grant programs are considered too

indirect in their program coverage, and they do

not target the specific population of concern to

the LSC. The centralized direction provided by the

Legal Services Corporation is also considered an

effective means of providing oversight and leadership to local programs independent of political

control at the national and local level.

26
APPENDIX. DISTRIBUTION OF LEGAL SERVICE CORPORATION

GRANTS BY STATE: ESTIMATED FOR FISCAL

YEAR 1977; IN THOUSANDS OF DOLLARS a/

Alabama

Alaska

Arizona

Arkansas

Cal ifornia

Colorado

Connecticut

Delaware

District of Columbia

Florida

Georgia

Hawaii

Idaho

Illinoi s

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mi ssi ssippi

Mi ssouri

Montana

1

2

13

1

1

1

2

2

3

1

J

1

3

3

1

1

, 310

850

,429

217

,650

,525

,907

192

,670

,792

,412

422

358

,942

. 148

593

381

,651

,950

677

954

.,793

,867

639

,982

,363

549

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Vi rgi n i a

Wash ington

West Virginia

Wi scons in

Wyoming

Mic rones i a

Puerto Rico

Virgin Islands

Undist ributed

458

217

481

3.736

865

10,772

1 ,611

296

3,697

995

1 ,304

3,342

559

873

386

1 ,650

5,092

402

386

1 ,308

2 ,044

1 , 700

1,315

137

696

4,352

183

102,080

4, 152

TOTAL 106,232

_a/ Includes special programs for Indians and migrant

workers. Excludes contracts for regional support

centers.

27

U. S. GOVERNMENT PRINTING OFFICE : 1977 O - 93-010