Steven C. Agee Economic Research and Policy Institute

Transcription

1 Steven C. Agee Economic Research and Policy Institute November 10, 2011 Economic Research & Policy Institute Oklahoma City University 2501 N. Blackwelder Oklahoma City, OK 73106

2 The Steven C. Agee Economic Research and Policy Institute at the Meinders School of Business was tasked with reviewing the operations of and funding for Legal Aid Services of Oklahoma Inc. (LASO). A review of case loads, operational strategy, and external funding allowed for an analysis of the total economic impact to Oklahoma that results from outside dollars flowing into the state in support of LASO s mission. Among the key findings of the study are the following: LASO has provided legal services to an underserved statewide population since Before 2002, services were provided by predecessor organizations since the 1970s. Legal Aid Services of Oklahoma (LASO) funding totaled over $8.7 million in 2010 of which $4.84 million was from out- of- state sources (65%). In 2010 LASO employed 134 individuals including attorneys, paralegals and clerical staff. In contrast to similar operations in other states, caseloads are more focused on family related civil cases. LASO closed over 15,000 cases in 2010 and has directly or indirectly affected over 338,000 Okla- homans since LASO operations attract out- of- state funding and client awards that generate economic impacts within the state. o In 2010, just over $5 million in outside funding led to $4.84 million of direct expendi- ture that resulted in $7.1 million of economic activity statewide. o Outside client awards led to an additional $648,476 in economic activity within the state bringing total impacts to $7.75 million in Oklahoma production. o As a result of outside funding and client awards, LASO operations supported an addi- tional 108 jobs, $4.1 million in income and $351,458 in state and local tax collections. 2

3 Introduction Legal Aid Services of Oklahoma (LASO) has been providing civil legal services to the underserved and senior citizen population of Oklahoma since With legal offices in Ardmore, Bartlesville, Hugo, Lawton, Muskogee, Norman, Oklahoma City, Stillwater, Tulsa and Weatherford as well as administrative offices in Oklahoma City, the 501(c) 3 non- profit law firm provides civil consultation and litigation support for low- income and elderly Oklahomans in every county of the state. In 2010 LASO employed 134 staff members including 64 full- time attorneys, 12 part- time attorneys, 17 paralegals and 41 clerical and administrative support staff. Additionally, nearly 1,000 private Oklahoma attorneys volunteered their expertise to support the mission of the organization. In that year alone, LASO closed over 15,000 cases. However, client requests for service continue to exceed available resources. The reality of scarce resources in the face of elevated client needs requires LASO to strategically dispatch available resources. To this end, LASO has developed the following goals of its priority resource allocation program in pursuit of its overarching mission to make equal justice for all a reality. These goals are: improve access to justice, preserve housing and build stronger communities, protect consumers, promote health and economic security, ensure safety for clients and their families, and address the needs of populations with special vulnerabilities. 1 Where direct allocation of legal service resources is not feasible, LASO pursues other avenues of support such as offering clients advice and referrals, guidance on pro se representation, or engaging the community in legal education programs. The lofty goals of the organization and its programs are supported through a funding mix of public and private, in- state and out- of- state dollars. For 2010, funding for operations from all sources offered an operating budget of approximately $9.2 million. Figure 1: Legal Aid Services Funding 2010 In State Private 17% In State Government 18% Out- of- State Private 5% National Legal Services Corporation 60% In 2010, 65% of LASO funding came from sources outside the state. Of this 65%, the primary contributor was the Legal Services Corporation (LSC) a federal government sponsored organization tasked with providing legal assistance to low- income citizens nationwide. The other, much smaller source of out- of- state funding was private donations from individuals and groups. The remaining 35% of funding came from in- state sources, with 18% 1 For a full account, see Legal Aid Services of Oklahoma Inc., Statement of Priorities

4 from state government and 17% from private donations. LASO maintains a ongoing relationship with the United Way programs statewide, the Oklahoma Bar Foundation, and private attorneys across the state, with these three in- state groups accounting for nearly 15% of total funding. 2 The case load of LASO attorneys remains heavily focused on civil domestic cases, with nearly half of all cases in the area of family law and 13% of all cases involving matters of domestic. While this caseload is consistent with LASO priorities identified previously, identifying quanitifiable economic impacts from resolving such cases is difficult. State economic activity certainly benefits from the productivity gains due to family dispute resolution. The stability offered to nearly 16,000 children involved in LASO cases over 6,000 adults and nearly 4,000 children involved directly in domestic violence cases facilitates educational and social development of those children. It is likely that early family dispute resolution averts an escalation of events that would otherwise end up costing the state s criminal justice system. These, and other non- market benefits, are difficult to assess directly. However, the operation of LASO offices and the spending of funding awarded to clients does manifest itself as new economic activity in Oklahoma and can be analyzed in a traditional economic impact (mulitplier) analysis. Out- of- state funding including revenue provided from national organizations as well as private donations manifests itself as a net increase in spending within the state and has an associated multiplier effect on statewide production, employment and income. Similarly, LASO case resolutions which result in qualifying otherwise unqualified state residents for social security survivor or disability payments, allow collections of child support or alimony payments from out- of- state spouses and recover lost or garnished wages. result in new disposable income being introduced to the state s economic system. As a portion of this income is spent on domestic consumption of goods and services, quantifiable economic impacts result. The present study serves to underscore the role that LASO plays in the broader civil justice system by providing access to quality representation to those who might otherwise go without. To this end, a brief review of LASO caseload and client base is provided. Further, this study highlights the economic impact to the state that originates with LASO operations and consumer spending of client awards. By analysing the expenditure pattern of the legal services sector of the Oklahoma economy, this report distinguishes itself from previous efforts in other states and applies industry specific multipliers. A brief review of accepted economic impact methodology is presented, follwed by a summary of findings and a comparison of similar reports prepared for Nebraska and Massachussettes. It is worth emphasizing again that the reported economic impacts are expected to understate the true value of the organization as it necessarily fails to include the estimated value of non- market benefits identified previously. 2 Private attorney donations come largely in the form of donated services. 4

5 Background Legal Aid Services of Oklahoma began providing legal services to Oklahoma s underserved population in 2002 following the merger of two regional legal services programs Legal Aid of Western Oklahoma and Legal Services of Eastern Oklahoma. LASO assists Oklahomans of all ages across the state. Those eligible for assistance include lowincome individuals or families, seniors and unrepresented minors with civil legal problems and incomes below 200% of the federal poverty guidelines. The majority of the cases handled by LASO are family related. As a result, seniors and children are significant beneficiaries of LASO services. Since 2002, LASO has directly and indirectly served 338,274 people with 151,101 families, 31,075 Senior Citizens and 156,098 children. Of these cases, priority was given to the most urgent, time sensitive matters. Of the cases that are closed by LASO, the majority are family related cases. Specifically, these deal with divorce, custody, support, and domestic disputes. In addition to family law, Legal Aid handles income cases, housing, education, employment, health, juvenile, consumer, as well as individual rights and other cases. In 2010, LASO closed 15,141 Figure 3: Services Provided in 2010 cases. Closed cases included cases Income Maintenance 5.72% Housing 10.82% Health 1.07% Individual Rights 1.66% Juvenile 4.74% Family 48.33% Figure 2: Clients Served and Individuals Affected by Legal Aid Services of Oklahoma Unduplicated Seniors Unduplicated Direct Clients Unduplicated Children Other/Multiple Topics 8.89% Consumer 16.65% Education 0.27% Employment 1.85% that required extended legal services as well as those that required brief services such as legal advice. These cases were placed into one of ten categories: Consumer, Education, Employment, Family, Juvenile, Health, Housing, Income Maintenance, Individual Rights, and Other/Multiple Topics. Of those closed cases, 48% involved domestic abuse, divorce, child custody, and other family matters. LASO also prevented over 100 tenant evictions and home foreclosures. 5

6 The majority of people who apply for LASO assistance do not receive full services. For example, in 2009, LASO provided assistance for, and closed 16,997 out of 26,189 cases taken, leaving 9,192 cases that could not be fully served. These undeserved cases may have received partial service and/or certain referrals. However, 29,952 cases were turned away because they did not meet the income guidelines or the civil case guidelines or program priorities by case type. The closed cases by year are categorized and reported by their share of the total closed cases in Figure 5. The cases are divided into four categories: Financial, Family, Housing, and Other. Financial cases include any consumer, income, or employment related issue. Family cases include family, education, and juvenile matters. Housing cases deal with housing problems, like eviction and home foreclosure. Other cases include health, individual rights, and matters such as tribal law or power of attorney. Since 2002, Family cases have accounted for more than 50% of all cases closed. This stands in contrast to Legal Aid of Nebraska which works primarily with Financial cases obtaining Federal SSI/SSID benefits for clients. Figure 5: Annual Closed Cases by Type 0 Figure 4: Cases Closed, Unable to Serve or Fully Serve ,997 Cases Closed 29,952 Unable to Serve (includes certain referrals) 9,192 Unable to Serve Fully (includes certain referrals) 60.0% 25,000 Percentage of Cases by Type 50.0% 40.0% 30.0% 20.0% 10.0% 20,000 15,000 10,000 5,000 Total Cases Closed 0.0% Family Financial Housing Other Total - 6

7 Table 1: 2010 Revenues and Expenses 3 Revenue Government Grants $6,047,303 Private Grants $313,882 Contract Revenue $1,112,263 United Way $508,298 Contributions $724,804 Miscellaneous Income $7,181 Interest Income $8,819 Total Revenue $8,722,550 Expenses 4 Legal Services $6,499,965 Overhead $1,766,848 Total Expenses $8,266,813 LASO revenues ranged from $7,154,081 in 2002 to $8,722,550 in In 2010, sixty five percent of all revenues came from out-of-state sources with the largest share coming from the Legal Services Corporation (LSC). Table 1 reports the financial statement for LASO for The primary source of all funding came in the form of State and Federal Grants. Of the $6 million in grants, over $5 million came from LSC. Legal expenditures by case type are reported in Figure 6. This chart uses the same four case type categories as Figure 5 to report the expenditures for each year from 2002 to As the figure demonstrates, expenditures on family cases have continually increased while expenditures on the other categories have remained fairly constant on average. More recently, financial case costs have been trending upward. Figure 6: Legal Aid Services Expenses By Case Type $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $ Family Financial Housing Other 3 Financial Statement for Civil Services only. 4 Overhead shares were derived from 2009 LASO Annual Report financial statements. Total expenditure data for 2010 was provided by LASO personnel. 7

8 Methodology Regional economic activity is characterized by flows of income for goods and services between industries, households, and the public sector. By taking a snapshot and freezing these flows of goods and services in time, estimates are derived of the degree to which one regional industry depends on the production of another. For example, the production of legal services in Oklahoma is most reliant on the output (or production) of the following industries: real estate and rental services, professional, scientific, and technical services, administrative and waste management services, information services, and finance and insurance services. Thus, a direct increase in the production of legal services requires an indirect increase in these support industries. These indirect impacts represent the first layer of economic impact analysis. Additional economic impacts are realized as those individuals employed in the support industries identified above spend the portion of their income attributed to the initial increase in demand for legal services in the local economy. As these dollars flow into the local retail sector they set off a secondary chain of economic ripple effects referred to as induced impacts. Similar impacts occur as the attorneys and administrative staff of LASO spend a portion of their incomes in the local economy. These impacts will be referred to as payroll induced impacts in the reporting that follows. Finally, an increase in economic activity with consequent multiplier impacts are realized as clients spend a portion of their benefits within the local economy and will be reported as client induced impacts. All impacts are the product of multipliers derived from patterns of business and consumer spending within the state. For this report multipliers are constructed from economic models developed within the Implan software nationally available and commonly used in impact analysis. 5 Spending patterns are adjusted where necessary by research personnel to reflect local knowledge of industry activity. All data employed in the estimation of economic impacts were provided by LASO and reflect 2010 operations. 6 5 For a complete review of the Implan software, please visit the Minnesota Implan Group at 6 Similar studies for Nebraska (Deichert and Feelhaver, 2008) and Massachusetts (Massachusetts Legal Assistance Corporation, 2010) assumed a multiplier of 2.0. The Implan multiplier for legal services expenditures of 1.48 was used to determine the expenditure impacts of LASO operations. The final LASO multiplier resulted from the sum of expenditure impacts and client benefit impacts resulting from out-of-state funding. The Nebraska and Massachusetts studies also assumed that benefits accrued across multiple years. Rather than continue with their methodology, we used 2010 as a representative year for benefit payments. 8

9 Economic Impacts Legal Aid Services of Oklahoma brings money into the state through grants from the federal government and private donations from individuals and organizations that otherwise would not have flowed into the state. This money helps provide legal services to individuals and families, who, without funding would have no legal representation. Additionally, some LASO cases that deal with monetary judgments also provide income or prevent the loss of income for state residents. The money saved or received by clients can then be spent within their communities. The money that flows into the state (or is prevented from flowing outside the state) creates economic activity within the state that is directly attributable to LASO operations. LASO funding from all sources supported 134 workers earning $5.45 million in employee compensation and total operational expenditures of $8.27 million. Fully two-thirds of all funding comes from sources outside the state and represents new direct economic activity that would otherwise be foregone. Expenditure patterns of legal services firms suggest that it is largely a local activity, with the majority of expenditure occurring near the point of service delivery. Given the nature of the caseload carried by LASO, we estimate that the local nature of these expenditures is exaggerated even further. In total, we estimate that $7,440,132 of the $8.27 million total expenditures occur within the state. Applying the share of expenditures originating from out-of-state sources suggests that funding stimulates $4.84 million in direct Oklahoma production, supports 87.1 jobs, and generates $3.54 million in labor income. These values serve as the starting point for analysis and are reported as direct impacts in the accompanying tables (tables 2 and 4). LASO statewide economic impacts stem from two primary sources: operational expenditures and client awards. First, their expenditures from operations inject dollars into the economy directly and set off subsequent rounds of spending as suppliers and support industries adjust to the increased demand for their output (indirect impacts). As LASO and support industry employees spend the portion of their income attributable to the original LASO operations, additional impacts are realized (induced impacts). The direct, indirect, and induced impacts are reported in table 2 below. Second, clients served by LASO who win monetary awards (alimony, child support, SSI/SSDI, restoration of garnished wages, etc.) or avoid adverse monetary judgments spend a portion of their acquired/retained income within the state and generate additional rounds of induced impacts. Table 2: Economic Impacts of LASO Expenditures from Operations, 2010 Expenditures Category Direct Indirect Induced Subtotal 7 Output $4,836,086 $580,714 $1,686,164 $7,102,964 Employment Income $2,187,627 $187,317 $521,992 $2,896,936 7 Totals may not sum due to rounding differences. 9

10 In total, operational expenditures that originated with new dollars to the state are estimated to generate $7.1 million in Oklahoma output (production of Oklahoma goods and services). In addition to the jobs maintained with outside monies at LASO, indirect and induced impacts support an additional 20.4 jobs for a total impact of Oklahoma jobs. Direct, indirect, and induced impacts suggest likewise that LASO operations generate $4.56 million in labor income to that state that would otherwise not occur. In 2010, LASO was successful in achieving monetary awards or avoided monetary judgments to Oklahomans worth more than $4.6 million. The majority of the monetary awards represents transfers from existing state agencies or individuals and does not represent new economic activity to the state. An analysis of the cases suggests approximately $963 thousand of Oklahoma labor income is awarded or saved as a result of LASO activities. A portion of this income is consequently spent within the state and generates additional induced impacts. These impacts are reported in table 3 below. Table 3: Impacts from Benefits Obtained by Clients, 2010 Category Client Benefit Expenditure Impacts Output $648,476 Employment 5.69 Income $1,164,898 8 By summing the results of these impact channels, we estimate that the $3.1 million 9 in funding from in-state sources led to new economic activity of $7.8 million, 113 jobs and income of $4.1 million. These impacts yielded a combined multiplier of 2.54 indicating that every $1 of LASO in-state expenditure yielded an additional $1.54 of new economic activity. Table 4: Total Economic Impacts of Legal Aid Services of Oklahoma, 2010 Expenditures Client Benefits Category Direct Indirect Induced Induced Total Output $4,836,086 $580,714 $1,686,164 $648,476 $7,751,440 Employment Income $2,187,627 $187,317 $521,992 $1,164,898 $4,061,834 8 Out-of-state client benefits totaled just over $963 thousand in income to local residents. The share of this income spent within the state generated another $642,476 in statewide output and $201,330 in income. The $1.164 million in income is the total income that resulted from the out-of-state transfers ($963,568 + $201,330). 9 In-state funding of $3,052,893 was 35% of total revenue for

11 Fiscal Impacts The Fiscal Impacts listed here correspond to the total impacts given in Table 4. The Fiscal impacts came from three primary sources: property, sales and income taxes. All other collections were combined into the Other Tax category. Table 3 reports the fiscal impacts from LASO operations. According to our estimates, state and local sources collected over $821 thousand in tax payments due to LASO operations. It is important to again emphasize that much of the tax collections are due to funding from non-state sources. Table 5: Fiscal Impacts from LASO Operations, 2010 Indirect Description Business Tax Payments Household Tax Payments Total Collections Income Tax $36,024 $36,024 Sales Tax $139,819 $139,819 Property Tax 10 $76,864 $807 $77,671 Other Tax $80,421 $17,523 $97,94 Total State and Local Tax $297,104 $54,354 $351,458 Conclusion Legal Aid Services of Oklahoma provides significant legal services to Oklahoma residents. All these services accrue to low-income families, elderly and minor residents who otherwise would receive no representation. They focus on civil representation that, to a large degree, brings revenues into the state that directly benefits their clients and indirectly benefits the residents of the state by the purchase of local goods and services. Additionally, because 65% of their funding comes from outside the state, much of their direct operations provide monetary benefits to state residents through their purchase of local goods and services. As a result of their operations, we estimate that LASO output contributed over $9.2 million to Oklahoma gross state product in 2010 through direct, indirect and induced channels. Additionally, their operations directly and indirectly provided employment for 122 workers and nearly $6 million in income. 10 Property taxes are paid locally so the impacts will be felt primarily at the local level. 11

12 References Deichert, J.A. and Feelhaver, R The Ecoomic Impact of Legal Aid of Nebraska: Massachusetts Legal Assistance Corporation, Civil Legal Aid Yields Economic Benefits to Clients and to the Commonwealth: Some Benefits from FY10 Advocacy. 12