When Courts and the Executive Branch Are in Charge of Appropriations

Posted in: Government

When the Democrats lost control of the House and Senate, President Obama said he still had the power of his phone and his pen. With his phone, he could cajole senators and representatives, and with his pen, he could veto legislation and issue executive orders. President Obama has favored issuing executive orders.

The president has the power to issue executive orders to implement a federal statute or the Constitution. If the president issues an executive order outside of his delegated authority, courts will enjoin its enforcement. That is what happened when the lower courts enjoined a dozen executive orders requiring federal agencies to stop deporting undocumented aliens, to aid in their resettlement, to issue them work permits, and so forth. The Supreme Court refused to overturn the injunction. The president does not have the power to waive the immigration laws. One study by the Mercatus Institute argues that President Obama has used “more restrictive executive orders” than the six previous six presidents have.

An important limit on executive orders is that the president needs Congress to appropriate funds. Article I, §9, clause 7 states, “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” The Appropriations Clause is an important part of the lawsuit that the House of Representatives brought against that the Administration, claiming that it is spending funds that Congress has not appropriated. Thus far, the district court held that the House of Representatives had standing to challenge Executive Branch’s actions in drawing funds from the Treasury in the absence of a valid appropriation. That court later enjoined the expenditure of funds that Congress did not appropriate and stayed its injunction pending appeal.

What should the president do if he wants to spend money that Congress has not appropriated? One alternative is to give money that the Affordable Care Act (ACA) (sometimes-called ObamaCare) collects to insurers instead of transferring those funds to the Treasury. The Department of Health and Human Services is doing that, although the nonpartisan Government Accountability Office says that redirecting the funds violates the law. Health and Human Services, nonetheless, is redirecting money.

That is not enough money to solve the problem of insolvent insurers, so the Administration has come up with another alternative—the Department of Justice lawyers will settle lawsuits and agree to turn over money that Congress has not appropriated. This tactic shores up insurers who are losing substantial amounts of money because their participation in the ACA has cost them substantially more than they or the Administration expected. (The Democrats blame the Republicans, who respond that since not one Republican voted for the ACA, it can’t be their fault.)

The response of the Administration is to urge insurers to sue the U.S. Government, which will then promptly settle by agreeing to pay the money. We are talking about paying billions of dollars of money that Congress has not appropriated. The class action suit by the insolvent Health Republic Insurance, an Oregon co-op, alone seeks $5 billion. Highmark, the insurance arm of Pittsburgh-based Highmark Health, is also suing, but for a comparatively measly sum, less than a quarter billion dollars, plus interest and legal fees. Still, these small amounts all add up to many billions.

The Administration plans to use the “judgement fund,” a fund of “indefinite appropriation available to pay judicially and administratively ordered monetary awards against the United States.” However, the law provides that the government many not use this fund for payments that the agency should pay for directly. The nonpartisan Congressional Research Service reaffirmed earlier this year that the Administration may not “settle cases” and use judgment funds to pay moneys that insurers claim under the ACA. The Administration is doing it anyway.

The federal government has used “settlements” before, to obtain what it could not obtain by legislation. Still, the amount of money involved in the ACA is mindboggling.

Over a decade ago, Professors Ross Sandler and David Schoenbrod, in their book, Democracy by Decree: What Happens When Courts Run Government, brought scholarly attention to this problem. The problem extends beyond the federal government to the states and cities as well.

Professors Sandler and Schoenbrod collected a compelling set of vignettes that show courts, with the help of government-lawyers, are replacing government officials in running many important government services, such as welfare, jails, prisons, noise pollution, and foster care. The judges typically issue detailed decrees, totaling hundreds of pages, instructing mayors, governors, prison wardens, and others how to run government. Instead of government by the people, there is government by judicial decree, or—more precisely—government by plaintiffs’ lawyers, for they are the ones who draft the decrees.

“Believers in democracy by [judicial] decree,” the authors acknowledge, “argue that the political process is not fast enough or cannot be trusted. We thought the same when we were public interest lawyers but we were wrong.” (p.31).

The provision for of attorneys’ fees in many cases allows plaintiffs’ lawyers to do good (in their view), and to do well (for themselves). There seems to be little judicial scrutiny of these fees. It is, after all, other people’s money. In one case, the plaintiffs’ lawyers received more than $2.1 million in fees for work performed during June 1989, and January 1999, although the case settled in 1986. (p. 131).

Judges also like being reformers deciding important policy issues (how to make the world a better place) instead of deciding humdrum matters (did defendant violate the trademark). The judges tend to defer to the plaintiff’s lawyers in approving the decrees, and those lawyers like sitting at the table as equal participants with the lawyers for the city, state, or federal government.

The defendants are also part of the problem, for they often prefer to settle and accept detailed consent decrees that go beyond what any statute might require because settling benefits their corner of the bureaucracy. For example, the decree will assure that the judge will keep money coming their way, so that they do not have to fight with others who make claims on the government budget. Thus, the San Francisco School Board insisted that it was still in violation of the law, so that the money to “cure” the violation will keep flowing. Defendants use the lawsuit to “force” them to do what they want to do but lack the political backing to accomplish.

One part of the equation that is missing are the plaintiffs—not the plaintiffs’ lawyers but the nominal plaintiffs. Too often, no one pays attention to them. For example, in one prison reform suit, the plaintiffs’ lawyers wanted the city to close the old jail and build a new one next to LaGuardia Airport, but many of the prisoners opposed the relocation because it would be a lot harder for their families to visit them. The “clients” fought with their lawyers and the lawyers won. The lawyers seemed to consider their “clients” a fifth wheel. (pp. 124-25).

Are the judicial decrees good policy? Consider one example dealing with prison reform. In 1982, some prisoners sued Philadelphia Mayor Wilson Goode and others over allegedly unconstitutional prison conditions. Mayor Goode proposed to agree to a decree that would limit the number of prisoners kept in the city’s jails. The district attorney, who was not part of the suit, heard about the negotiations and protested on the grounds that this reduction in the prison population would lead to bail jumping of those most likely to be guilty.

The mayor’s interests were different from the D.A.’s interests. By agreeing to releasing prisoners, the mayor need not spend money to fix the prisons. Instead, the mayor agreed to changes in criminal procedures that the D.A. would have to enforce. If the prisoners sued in the future, the damages would come from the D.A.’s budget, not the Mayor’s budget. The federal judge rejected the D.A.’s efforts to intervene and approved the decree. What resulted was “a blood-chilling crime wave.” In an 18-month period, the Philadelphia police rearrested nearly 10,000 of the defendants that the mayor’s consent decree had freed. The prosecutor charged these defendants with 79 murders, 90 rapes, 14 kidnappings, over 700 burglaries, and nearly 1000 robberies. One criminal (not knowing that he was dealing with an undercover policeman) asked for the illegal transaction to be moved across the street to the Philadelphia side, so that they could take advantage of the consent decree if they were arrested. (pp. 185-86).

Ah . . . the law of unintended consequences.

Posted in: Government

Tags: Legal

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