Members of the House Select Committee on Oversight and Reform questioned the trajectory of the support awarded by North Carolina IOLTA (Interest on Lawyers’ Trust Accounts) during Wednesday’s hearing with North Carolina Bar Association Executive Director Peter Bolac and NC IOLTA Executive Director Mary Irvine.

Co-Chair Rep. Harry Warren (R-Rowan) explained what IOLTA is for those who were unfamiliar:

“The State Bar and Supreme Court created NC IOLTA in 1983 to distribute interest earned on income from lawyers’ general trust accounts to fund legal services and other programs for the public’s benefit. When a client hires a lawyer, retainer fees, settlement fees, and upfront payments are put into a trust account for later distribution to the appropriate parties. Although the accounts earn interest, attorneys cannot ethically claim the interest, therefore, North Carolina and every other state have created a version of IOLTA to help with access to civil courts.”  NC IOLTA’s grant funding jumped from a fairly consistent $1.6 million through the 2010s to $3.4 million in 2020 and continued to balloon to $12.1 million in 2025.

“At its simplest,” Warren said, “IOLTA uses that interest to help those who couldn’t afford legal services.”

Bolac and Irvine agreed that NC IOLTA funding is, in Bolac’s words, “for the provision of legal services to be available for all North Carolinians regardless of ability to pay.”

Several members emphasized the importance of IOLTA’s civil legal aid while raising questions about how it distributed the money, the recipients, and whether it was an appropriate source of funds in the first place. The General Assembly included a provision in SB429 to freeze IOLTA grants through June 2026 due to questionable organizations and grants.

“I have no problems with the goals of this program,” Rep. Grant Campbell (R-Cabarrus) said. “I’ve looked at eligibility requirements. I’ve seen many examples of positive impacts.” Campbell continued, “I’m not a throw-the-baby-out-with-the-bathwater kind of guy, but we have found some examples where maybe the purpose of this program has lost its way.”

Campbell cited the Amica Center for Immigrant Rights, based in Washington, D.C., which explains on its “Becoming an Anti-Racist Organization” page: “The United States’ wealth and power is built on stolen land, from enslaved labor, and under the racist lie that White people were superior to Black people, Indigenous people, and people of color.”

Warren, in his opening remarks, noted that the Children’s Law Center of Central North Carolina aims to dismantle the “systems of oppression…that don’t support equitable outcomes.”

Irvine agreed that grants should not be used to fund political activism. Members wondered how IOLTA could police the use of funds. Rep. Mike Schietzelt (R-Wake) said, “It begins to matter when you fund organizations that engage in political activity, because it frees up resources to use for political activity.”

Bolac suggested IOLTA could stop funding organizations that engage in any political activity beyond legal aid.

Irvine told Rep. Allen Chesser (R-Nash) that only “a couple of times” has the NC IOLTA board pulled back funding from grantees who did not meet their grant commitments.

In response to member concerns about rural counties being excluded, Irvine said, “We’ve made a concerted effort to try to make sure that funds are getting to rural communities including by launching a relatively new project to support law students who are working in more rural communities.”

The dual nature of the State Bar and the unusual status of IOLTA funds raised additional questions. Bolac agreed with members that, although the State Bar is subject to the Administrative Office of the Courts in its administration of attorneys, its funding and existence are subject to the General Assembly.

“As we looked into it, we wondered, ‘Whose money is it anyway?’” Warren said. “Does the interest earned belong to the client? Should the money be considered part of the General Fund to be appropriated by the General Assembly?”

Co-chair Warren left open the possibility of another hearing with NC IOLTA to give members time for additional questions.