NYC Legal Aid Groups Warn of Crisis as City Withholds Tens of Millions in Payments

New York City owes tens of millions of dollars to the nonprofit legal service providers it depends on to offer free legal counsel to low-income and elderly residents, a backlog that organizations say could bring their operations to a standstill within weeks if funds are not released.

Legal Services NYC, the city’s largest provider of civil legal representation for vulnerable New Yorkers, says it is owed approximately $20 million by the city for work completed over the past year and a half. Greg Klemm, the organization’s chief financial officer, said the delayed payment has left the nonprofit on the brink of collapse.

“If we aren’t paid, it would create existential problems for our organization,” Klemm said.

The unpaid work includes services tied to city programs aimed at protecting residents facing eviction, immigration difficulties, landlord harassment, and deportation. Klemm explained that Legal Services NYC has already drawn the full $15 million from its line of credit just to keep basic operations running and staff paid, accruing $370,000 in interest this year alone.

“It’s putting us in a bind,” Klemm said. “If they do not pay us at all for December or January, we wouldn’t be able to meet payroll at the end of January.”

Legal Services NYC gets 45% of its income from city contracts and has had to drain its reserves while waiting for compensation. The organization says the city has yet to provide a payment timeline, and repeated attempts to reach upper leadership at the Department of Social Services have gone unanswered.

“It is hard to tell whether it is stonewalling or incompetence, but there seems to be a general lack of willingness by them to move quicker,” Klemm and his team wrote in an email. The group is seeking at least $2 million this week to cover one outstanding invoice, though success is uncertain.

“If attorneys begin leaving in January if payroll is missed, we will not easily recover,” Klemm said, noting that such a loss could severely hinder service delivery and staff recruitment.

Klemm described a potential domino effect in the city’s legal system if their and other providers’ budgets run dry. “That is a substantial number of people that would not get services,” he said. “I couldn’t imagine the devastating impact it would have on low-income New Yorkers taking legal action against landlords who are not making sufficient repairs. There would likely be an increased threat of deportation and family separation. It would be devastating.”

Legal Services NYC is not alone in reporting serious financial strain. The Legal Aid Society says it is owed $16 million in outstanding city payments for work performed during fiscal year 2025, which ended in June. Although the nonprofit received a 50% advance for its fiscal year 2026 contract, which started July 1, the city has yet to approve the FY26 budget or allow the group to submit invoices six months into the fiscal year.

“The delay in payments severely impacts the Legal Aid Society’s cash flow and threatens our ability to make payroll for our staff and to pay vendors and subcontractors who are critical to service delivery,” a spokesperson for Legal Aid said. “LAS spends a significant amount of time just trying to get paid. [The city] has created unnecessarily complex processes and procedures that delay contract budget approval and invoice submission. This complexity not only delays a crucial payment process but also diverts limited staff time to attending to this rather than other crucial priorities.”

The New York Legal Assistance Group (NYLAG) is facing similar delays. The organization, which reports over $5.5 million in unpaid dues stretching back to fiscal year 2023, said that payments remain unprocessed because budgets are still not approved.

“As we move into the second half of this fiscal year, budgets remain unapproved, we remain unable to invoice, and no additional advances have been provided,” NYLAG CEO Lisa Rivera stated in an email. Rivera acknowledged the advances the city has provided but emphasized their limits without consistent processing of payments. “The costs of doing this work exist in real time, addressing contract registration and payment delays is crucial, and expanding the use of advances when those delays cannot be mitigated is essential.”

The city’s Department of Social Services, which oversees these contracts, acknowledged the delays in an emailed statement, attributing them to “numerous factors.”

“Ensuring all appropriate payments are made in a timely manner is a top priority and both the city and agency have made significant strides to address payment delays,” a DSS spokesperson said. They cited measures such as appointing a chief nonprofit officer, streamlining internal processes, and working with providers to identify bottlenecks in the payment system.

Still, the agency did not respond directly to when outstanding payments would be made or offer detailed timelines for releasing funds. Legal Services NYC said contact with city contract managers has not led to meaningful progress, adding to the organization's frustration.

Klemm underscored that Legal Services NYC expanded its operations to meet the city’s pressing demands for more eviction defense work, onboarding staff and increasing caseloads based on commitments made by the city.

“We have grown our organization to meet the city’s desperate need for eviction defense attorneys, and that means relying on the city’s promise to fulfill its end of our contracting bargain,” Klemm said. “Yet, year after year we find ourselves on the brink of collapse due to the city’s inability to pay legal service providers on time.”

Klemm added that unlike other city contractors, legal service nonprofits are consistently left waiting for funds despite the savings they provide the city in other areas.

“We estimate that we save the city over $350 million a year in averted shelter costs by keeping our clients in their homes, yet we have to continually beg to get paid for that work,” he said. “It’s hard for me to speculate why it keeps happening, but it’s not okay.”

With budgets still unapproved and back payments mounting, providers say the consequences are imminent if city action does not come soon.

“The city has to make immediate payments on its nonprofit contracts,” Klemm said. “Time is running out.”