The Supreme Court upheld a funding scheme apparently meant to insulate a powerful federal agency from future congressional oversight.
The court ruled 7-2 that the funding scheme for the Consumer Financial Protection Bureau does not violate the Constitution’s appropriations clause, which forbids the executive branch from taking money from the federal Treasury except “in consequence of appropriations made by law.”
“Under the appropriations clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes,” Justice Clarence Thomas, an appointee of President George H.W. Bush, wrote in the majority opinion. “The statute that provides the bureau’s funding meets these requirements. We therefore conclude that the Bureau’s funding mechanism does not violate the appropriations clause.”
Congress created the Consumer Financial Protection Bureau in the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in response to the 2008 financial crisis. Unlike most federal agencies, the bureau does not have to petition Congress for funding annually, because Congress authorized the bureau to draw funds from the Federal Reserve System. This insulates the bureau from a normal process that allows Congress to check the administrative agencies under the executive branch by refusing to fund them.
Thomas wrote the opinion, in which Chief Justice John Roberts and Justices Sonia Sotomayor, Elena Kagan, Brett Kavanaugh, Amy Coney Barrett, and Ketanji Brown Jackson joined. Only Justices Samuel Alito and Neil Gorsuch dissented.
Alito cited English and American history, noting that Congress’ power of the purse traces back to debates in England.
“In England, Parliament had won the power over the purse only after centuries of struggle with the crown,” he wrote. “Steeped in English constitutional history, the Framers placed the appropriations clause in the Constitution to protect this hard-won legislative power.”
“This provision has a rich history extending back centuries before the founding of our country,” he added of the appropriations clause. “Its aim is to ensure that the people’s elected representatives monitor and control the expenditure of public funds and the projects they finance, and it imposes on Congress an important duty that it cannot sign away.”
“Unfortunately, today’s decision turns the Appropriations Clause into a minor vestige,” Alito warned. “The court upholds a novel statutory scheme under which the powerful Consumer Financial Protection Bureau may bankroll its own agenda without any congressional control or oversight … . Under this interpretation, the clause imposes no temporal limit that would prevent Congress from authorizing the executive to spend public funds in perpetuity.”
The justice cited the French philosopher the Baron de Montesquieu, whose pivotal work “The Spirit of the Laws” informed the U.S. Constitution. Montesquieu warned that a legislature will lose its power of the purse if it passes an appropriation that lasts “forever.”
Alito also noted that the court’s interpretation does not “require Congress to set an upper limit on the amount of money that the executive may take.” He also cited the federal government’s argument that an agency may draw funds from private sources, as well as from the Treasury.
“In short, there is apparently nothing wrong with a law that empowers the executive to draw as much money as it wants from any identified source for any permissible purpose until the end of time,” Alito warned.
Thomas disagreed, citing Congress’ schemes for funding the Customs Service and the U.S. Postal Service, which Congress allowed to assess fees for their funding. Alito argued that the Customs Service and the post office had more limited functions than the Consumer Financial Protection Bureau, but Thomas ruled that “to make a valid appropriation, Congress must designate the objects for which the appropriated funds may be used—as it did here.”
In 2017, the bureau issued stringent restrictions on small-dollar loans, leading two trade associations, the Community Financial Services Association of America and Consumer Service Alliance of Texas, to sue on constitutional grounds. A district court upheld the bureau’s claim that its funding scheme was constitutional, while the U.S. Court of Appeals for the 5th Circuit found in favor of the associations.
“Sadly, the Court has given the green light to Congress to abrogate its own power of the purse,” Iain Murray, director of the Center for Economic Freedom at the Competitive Enterprise Institute, said in response to the ruling. “We can expect future Congresses to come up with ever more inventive ways to allow the executive branch to fund its whims.”
“The only hope for responsible government is for Congress to rediscover its own prerogatives and repeal unusual funding mechanisms for executive agencies that exercise more power over American citizens than the post office—starting with the CFPB,” Murray added.
