News
Public Interest
Apr. 23, 1999
Legal Aid Providers Struggle to Merge
Come Jan. 1, four or five major providers of legal services to the poor in the San Francisco Bay area will lose their federal funding. The money will go instead to just one, unchosen legal aid program for the entire region.
The federal Legal Services Corp., which doles out the federal dollars, is forcing the five existing recipients to merge or reconfigure. They have until the beginning of July to figure out how and to sell the LSC on their plan.
Some legal services activists, including leaders of some of the Bay Area programs, don't think much of the shotgun merger, but that doesn't matter. As one of them noted, the LSC can effect the change in funding "in an instant, with a stroke of a pen."
Consider what happened earlier this month farther north: Legal Services of Northern California in Sacramento acquired little Redwood Legal Assistance 300 miles away in Eureka .
The two programs had to merge when the LSC asked them to a year ago, according to Roberta Ranstrom, executive director of the much larger Sacramento-based program. "I was told, 'Merge with [Redwood] or we'll redraw your lines,' " she said.
As in corporate mergers everywhere, layoffs followed, Ranstrom said. The result is that right now there are even fewer lawyers for poor residents of the four counties along the northwest coast the Eureka-based program served.
This legal-aid merger mania is the California manifestation of LSC President John McKay's year-old mandate that the 260-odd legal-aid providers around the country - those that are "grantees" of the federal funds - integrate their work more thoroughly on a state-by-state basis. Programs should join in using technology, in administrative tasks, in litigation strategies and in whatever they can to increase efficiency, McKay has said.
Some programs may have to merge to achieve the right level of integration, but "the bottom line is we can add a lot of people [to the clients served] if we do this right," he said in an interview last year.
The LSC mandate has sparked a flurry of M&A work among legal aid directors and consultants nationwide. Besides the Bay area programs, grantees in Arizona and Nebraska have been told to merge before the year is out. Many other programs, such as some in Los Angeles and Orange counties, have until 2001.
Part of McKay's motivation matches that behind business mergers: reducing expenses by combining entities with similar products and missions.
"In a world of diminishing financial support for LSC ... it is important to make every dollar count," said Andrew J. Guilford of Sheppard, Mullin, Richter & Hampton's Newport Beach office, who co-chairs a committee that oversees legal aid issues for the State Bar Board of Governors. "I am absolutely convinced that is what he is trying to do."
Many people who share - or, at least, understand McKay's vision - believe that increasing and improving service to clients truly is his goal.
"I definitely think the result will be that legal services programs examine how to serve the broader population of low-income people" unrestricted by local boundaries, said Bruce Iwasaki, the executive director of the Legal Aid Foundation of Los Angeles. "Now, increasingly, we're seeing that all the clients in the combined area are our responsibility."
Other aid activists, such as Ramon Arias, the director of San Francisco Neighborhood Legal Services, uses the term fiduciary duty to describe legal-aid providers' responsibility to poor people regionally and statewide.
Arias said it was legal aid programs themselves that over the past few years promoted the benefits of coordination and integration. The LSC first extolled the idea in a 1995 letter to grantees.
The corporation put muscle behind the idea in a second letter in February 1998, after McKay became president. Grantees and other legal-aid-related groups in all states were told to devise statewide plans for coordinating delivery of legal services and to include timetables of how and when the plans' specific goals could be reached.
In a further set of instructions in July, the programs were encouraged to streamline operations, reduce administrative duplication and modernize. They were told to develop ways to serve "the most compelling needs of eligible clients, ensure the highest and most strategic use of all available resources, and maximize the opportunity for clients throughout the state to receive timely, effective and appropriate legal services."
The LSC distributes money based on population in "service areas," which can be part of a county, part of a state or a whole state. Generally every three years, it invites legal aid programs to bid for the job of aiding the poor in each service area. Last year, the corporation said results from the state planning process would influence grant decisions.
Like other states, California submitted its report last October. The report suggested dividing all the service regions in the state among five proposed regions, and it discussed coordination efforts in each.
Early in December, the LSC gave the effort a very mixed grade. It praised the California programs' detailed plans for using computers and technology for expanding training and for sharing information and legal work.
It criticized, however, sections of the report on collaboration among and reconfiguration of programs within the five new regions. A mere "rhetorical statement of factors to consider in the event of merger" wasn't good enough, the letter stated. "The existing configuration has been in existence for a long time. Programs should be able to analyze the pros and cons of configuration in the context of whether it impedes development of an integrated delivery system throughout the state."
Then came the funding decisions: The programs in the three regions that make up Southern and Central California would be funded for only two years, not three, said the letter from Anh Tu, the LSC program coordinator in charge of California. In that time, they should get their various regional-coordination acts together. No more "plans to plan," she wrote. The programs must come up with "a specific plan of action outlining the steps [they would] take to effect a better coordinated delivery system" - including a very serious look at mergers and reconfigurations.
Those regions got off light compared with the Bay Area. The plan for that region showed "a lack of action and concrete planning," Tu wrote, adding that "the decision not to consider the possibility of reconfiguration ... evidences lack of conviction ... to an integrated and comprehensive delivery system."
If the programs would not consider merger, the LSC would consider it for them. The programs would get funding only for 1999. In 2000, the corporation would award a single grant for a new Bay Area-wide service area.
The only region whose plan the corporation really liked was the one for the wide strip of the state from the Bay Area and Sacramento north, where there were only two grantees to begin with. One, the Sacramento-based Legal Services of Northern California, which covered 19 mostly rural counties, had already agreed to acquire the other, Redwood Legal Assistance in Eureka, which covered four.
The remaining director, Ranstrom, said the general idea of merger was sound because the Redwood program was little and had few resources, even lacking computers and a case-management system.
But in the short run, the merger has hurt clients, Ranstrom believes. She said some of the smaller program's lawyers had to be laid off or have their hours reduced because the program's funding could not support paying its lawyers the higher salary they would earn as employees of the unionized Sacramento program.
Ranstrom said the LSC gave her a year to accomplish the acquisition. Compare that with the Bay Area, where five programs currently cover seven counties.
Tu told the directors of the five programs about the LSC's one-for-all one-year funding decision during a telephone conference call Dec. 2, 1998, according to Lauren Hallinan, the executive director of Legal Aid of the North Bay, which covers Marin and Napa Counties. The application for the year-2000 grant is due July 19.
Tu said she is confident the directors of the five programs and their consultants can make it. "Because they are so concerned, they are working very hard. ... When push comes to shove, they will come together and they will do the right thing."
But they won't get an extension. Formal announcement of the single service area for the Bay Area will be published this month in the Federal Register, Tu said.
The San Francisco foundation's Arias also professes optimism. But his description of results so far is less heartening.
The Bay Area grantees have accomplished only two things since January, he said. One is that they have agreed to integrate certain administrative functions, such as accounting and training, although they have not yet figured out how.
The other accomplishment is that they have "come to understand that we have two fundamentally different views of how to structure the new program."
Some, including Arias, want one new program to replace the five. Others, he said, propose that the five entities form a sixth, which would apply for the LSC grant and hand the money out to the existing programs. The proponents of that idea contend the gambit would retain local control and identities while freeing the existing legal aid groups from some LSC restrictions, he said.
Those program leaders, including Peter Reid of the Legal Aid Society of San Mateo County, argue they should "find creative ways to prevent [the LSC mandate] from destroying the cornerstone of legal services programs, which is local control," Arias said.
But Arias said he fears that overlaying the existing aid programs with an additional one would further balkanize services in the region. "No local program can be effective without addressing local client needs," he said. "However, I don't think that means local programs. ... You can have a regional program with local offices."
Of course, San Francisco Neighborhood Legal Assistance might end up the last grantee standing in the Bay Area. When the LSC yanked the Legal Aid Society of Alameda County's federal funding in September 1998, it had the San Francisco program take over the Alameda service area.
Hallinan said Community Legal Services in Santa Clara County and the Contra Costa Legal Services Foundation - which, she said, have few funds besides those given them by LSC - already seem resigned to merging with San Francisco.
She is another critic of the forced merger. While combining the area's programs is not necessarily a bad idea, Hallinan said, "It's how you do it and where the money comes from."
She noted she has led her program through one successful merger already and was days away from signing final documents to merge with Contra Costa when the LSC issued its December command.
In a letter to the state's Commission on Access to Justice last month, she, Arias, Reid and other program leaders said pulling together a merger would take many more than a few months. Issues to resolve range from the structure of the new organization's board through employee, budget and technology questions to fundamental ones such as defining values, avoiding dilution of services to clients and retaining involvement of local law firms.
The cost would be about $100,000, the letter said, citing a consultant's report. The LSC has set aside $75,000 nationally to aid state coordination efforts. No state may apply for more than $15,000.
Overall, the five grantees in the Bay Area have combined budgets totaling $6.5 million, although less than half the money comes from the LSC, according to Hallinan. Arias said the many other legal aid programs in the area, which do not receive LSC money, have total budgets of about $14 million.
In an interview, Hallinan also criticized the LSC mandate for lacking criteria for measuring the success or failure of a merger. "Is it going to get us more service to people? Is it going to cost us more in the long run? Or the short run?" she asked. Hallinan said McKay told her the LSC has not devised any success criteria.
She noted those and other concerns have yet to be brought to the attention of California's congressional delegation.
Although the LSC also gave three programs in Nebraska and two near Tucson, Ariz., just a year to merge, Hallinan and Arias both see the Bay Area as a sort of model for the rest of the country. The area is "the West Coast test tube" for the LSC, Arias said.
So far, the corporation hasn't said precisely what other mergers it wants in California. Gregory Knoll, the executive director of the Legal Aid Society of San Diego, said no one has ever suggested to him that his program should merge with the one other grantee in his region, Inland Counties Legal Services, which covers Riverside and San Bernardino counties.
(Nearby Imperial County is part of the LSC service area of California Rural Legal Assistance, which primarily represents farmworkers statewide.)
The San Diego and Inland counties programs do cooperate sometimes, such as jointly training their lawyers in certain administrative law matters, Knoll said. But he said the two ended up together in the "southernmost region" in California's statewide plan because they were the programs left over.
Knoll said he has no idea what the LSC expects from his region.
The corporation's Tu said, in effect, that she doesn't know yet either. "Soon, I hope, I will begin my work in the southernmost region," she said.
Nor has she worked much with the programs in the central region, which covers everything from Riverside and Los Angeles north to Santa Clara and Sacramento. But they are working quite well together already, Tu said, in areas such as technology, training and litigation strategy. "There are enough indicia of integrated systems to make the corporation quite comfortable that they will get to the optimal structure," she said.
In the Los Angeles basin region, it seems clear McKay and his staff will expect some mergers.
Five grantees serve the area now: San Fernando Valley Neighborhood Legal Services, the Legal Aid Foundation of Los Angeles, the LSP for Pasadena and San Gabriel-Pomona, the Legal Aid Foundation of Long Beach and the Legal Aid Society of Orange County. Their directors have been meeting regularly all this year to devise ways to increase cooperation and integration as the LSC wishes.
"It absorbs all of my time," said Orange County's Robert Cohen.
Of course, they also talk about mergers. Their discussions have settled in on scaling back from five programs to three, which Cohen speculated the corporation might support.
Tu agreed that five programs are almost certainly too many. "There needs to be a change in the existing structure for integration to be carried out successfully," she said. Retaining the "status quo would be quite problematic."
On the other hand, she said, the LSC would not expect the five service areas to be combined into only one. "The Los Angeles basin is very different than the Bay Area," she said, and one program would likely be too big.
Or maybe it wouldn't be. McKay has at times mentioned having just one program, Tu said.
The directors of the two smallest L.A. basin programs - Toby J. Rothschild in Long Beach and Lauralee Saddick in San Gabriel - recognize their futures are shaky.
Rothschild looks on the bright side. "There are advantages that can be gained from a large system that might mean better services for our clients," he said.
Saddick has more trouble being sanguine. She talks about the ways her area is different from others in the L.A. basin, such as its huge Chinese population or the "fierce independence of all our little cities."
As Saddick sees it, the key issue facing the Los Angeles-area programs and the LSC generally is figuring out "what is the marginal, break-even point" at which enlarging a program helps but doesn't hurt clients.
Meanwhile, the five local grantees are beefing up their coordination efforts and preparing a new report to the LSC for October.
They have taken big steps toward setting up a combined telephone intake system with only one 800 phone number for all the programs. Like the systems that Orange County and a few other programs have now, it would give callers quick access to a lawyer or paralegal, who could answer basic questions, refer them to any of hundreds of other service agencies or set up appointments for further consultation.
Cohen said the Los Angeles-area programs are also working to expand their joint use of computers and the Internet to share information. Sometime soon, Cohen said, clients might even contact their legal aid program over the Internet at "remote access service centers."
"Our programs are going to be doing things to make legal services much more accessible to our clients. That is our goal," said Cohen.
#259494
Don De Benedictis
Daily Journal Staff Writer
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