One of the most important aspects of the separation of powers is the commitment of the power of the purse to the legislative branch. It constrains the executive and the judiciary from engaging in unilateral action without congressional approval. If there’s no approval, there will be no money to pay for the executive action, as the rule would have it. Unsurprisingly, with the advent of the administrative state and an aggressive executive, this power has been significantly diminished in modern times
Indeed, Article I, Section 8 of the Constitution provides expressly that “[t]he Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts,” to the exclusion of any other branch’s exercise of those powers. The upshot: the separation of powers, especially Congress’ power over appropriation priorities, is eroded as executive agencies and executive allies have access to funds not appropriated by Congress.
In order to keep their power of the purse intact, Congress originally enacted the Miscellaneous Receipts Statute in 1849. That law is now codified today in Title 31 of the U.S. Code. It requires all government officials in receipt of funds, such as settlements from civil or criminal enforcement, to deposit that money with the Treasury. As a structural point, the law effectively aims at stopping executive agencies from self-funding through enforcement or other receipts of money. It maintains their dependence on Congress for their annual appropriation.
However, the Justice Department has found a way around this law to fund political allies on the left or executive priorities without congressional approval: settlement agreements. As Wall Street Journal columnist Kimberley Strassel recently reported, “[i]t works like this: The Justice Department prosecutes cases against supposed corporate bad actors. Those companies agree to settlements that include financial penalties. Then Justice mandates that at least some of that penalty money be paid in the form of “donations” to nonprofits that supposedly aid consumers and bolster neighborhoods.”
The trick here is that Justice never “receives” the funds within the meaning of the Miscellaneous Receipts Statute, and thus has no requirement to deposit the funds it exacts from defendants with the Treasury—the donations are made directly without money ever being received into Justice’s hands.
Despite the fact that Justice Guidance discourages the practice because “it can create actual or perceived conflicts of interest and/or other ethical issues”—and, indeed, it was almost banned in 2008 due to perceptions of abuse—Justice continues to push this method of funding political allies and favored priorities of the executive. In fact, “[i]n 2011 Republicans eliminated the Housing Department’s $88 million for ‘housing counseling’ programs,” Strassel reports, “which spread around money to groups like La Raza. Congress subsequently restored only $45 million, and has maintained that level. . . [B]ank settlements pour some $30 million into housing counseling groups, thereby essentially restoring all the funding.”