The Court Acts to Tame Government Shutdowns

David Super

     The Court’s decision Monday in Maine Community Health Options v. U.S. substantially reduced the stakes in the next federal government shutdown.  In so doing, it likely reduced the incentives to precipitate such crises and thus, one may hope, their frequency. 

     By way of background, federal spending programs typically fall into one of three general categories.  Some contain rights-creating language and a permanent appropriation of funds to fulfill those rights.  Social Security (Old-Age, Survivors and Disability Insurance) is one such program; the Judgment Fund (for judgments rendered against the United States) is another.  These are sometimes called “unappropriated entitlements.”

     A second set of programs have statutes containing rights-creating language but no formal appropriation of money.  Medicaid, part of Medicare, and school meals are examples of this type.  For example, section 1902(a)(8) of the Medicaid statute provides that “that all individuals wishing to make application for medical assistance under the plan shall have opportunity to do so, and that such assistance shall be furnished with reasonable promptness to all eligible individuals”.  Congress routinely includes funding for these programs in annual appropriations bills, occasionally with riders constraining how the programs operate.  Because everyone understands that Congress makes its substantive decisions about these programs when it writes and amends permanent legislation setting the terms of claimants’ rights, congressional budgetary rules account for increases and decreases in those programs’ costs at that stage and not in the appropriations process.  In other words, because everyone assumes that any rights created in permanent legislation will be honored, the appropriations level is deemed irrelevant to federal spending.  The scorekeepers at the two Budget Committees, the Congressional Budget Office (CBO), and the Office of Management and Budget (OMB) do not “charge” the appropriations committees for any money provided to these “appropriated entitlements.” 

     Finally, the vast majority of federal programs are established by legislation that either creates no rights to funding for any outside entity or explicitly makes those rights conditional on the availability of appropriations.  These are called “discretionary programs” because Congress has retained discretion to determine how much funding they will receive through the appropriations process.  Examples include almost all the defense budget, the Centers for Disease Control, the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), foreign aid, national parks, and much, much more.  Federal budget process rules constrain these programs’ spending by capping the total amount of funding the appropriations process may provide all discretionary programs in any given year, with the across-the-board cuts known as “sequestration” looming if appropriators exceed their caps.  Congress routinely “authorizes” much more spending for discretionary programs in those programs’ various permanent statutes than it ever actually spends on them in appropriations legislation.  Indeed, many discretionary programs never receive any money at all. 

     It long has been completely obvious that unappropriated entitlements are not affected by government shutdowns and that discretionary programs are.  But what about the middle group, the appropriated entitlements?  One might assume that they should not be affected given the budgetary scorekeepers’ assumption that funding for them in the annual appropriations is legally irrelevant.  This answer’s reliability, however, depends on the strength of the support for that assumption. 

     The House and Senate Budget Committees, CBO, and OMB long have believed that if Congress ever failed to appropriate money for these programs, claimants – people with disabilities meeting the statutory criteria for Supplemental Security Income, child care providers entitled to reimbursement for meals served to low-income children, etc. – could invoke their permanent statutes’ rights-creating language to sue the federal government in the Court of Federal Claims.  Assuming the plaintiffs did, indeed, fall within the rights that the permanent statute granted, the United States would have no defense and the Court of Federal Claims would grant a judgment for the plaintiffs.  That judgment would be paid in full out of the Judgment Fund – an unappropriated entitlement. 

     This is a sound scenario, but for many years it remained essentially untested:  Congress understood that the proper response to an entitlement it no longer favored was to repeal the entitlement, not to short the appropriations.  But scorched-earth Republican opposition to the Patient Protection and Affordable Care Act (ACA) has turned many well-settled assumptions on their heads.  And so it is here. 

     A relatively small and temporary provision in the ACA, rather abstractly titled “Risk Corridors”, provided for making payments to insurers whose plans lost substantial sums in the Act’s first three years.  The fund had rights-creating language but, unlike some other parts of the ACA, no permanent appropriation.  It was therefore a classic appropriated entitlement.

     When Republicans took control of the House after the 2010 election, they refused to appropriate funds for the Risk Corridors and some other parts of the ACA.  President Obama would have vetoed an attempt to repeal the rights-creating language, but in his contentious budget negotiations with Republicans he proved unable to extract appropriations for the Risk Corridors.  Indeed, he could not even prevent Republicans from attaching riders to annual appropriations bills prohibiting transfers to the Risk Corridors from other accounts.

     Insurers falling within the statute’s rights-creating language did what budgetary scorekeepers have always assumed such people would do:  they sued for their money in the Court of Federal Claims.  Most lost there, and all lost in the Federal Circuit.  The Federal Circuit regarded the failure to appropriate funds and the riders barring transfers as showing a congressional repudiation of the still-extant rights-creating language in the Risk Corridors section of the statute.

     The Supreme Court reversed.  In an opinion by Justice Sotomayor and joined in all significant sections by seven of her colleagues, the Court held that the ACA’s rights-creating language was sufficient to support a lawsuit under the Tucker Act without regard to the lack of appropriations.  It rejected the notion that Congress could effectively repeal such rights merely by withholding appropriations or barring transfers.  It also rejected the idea that the Appropriations Clause, or the Anti-Deficiency Act (which seeks to enforce that clause), prevent the federal government from incurring obligations without an appropriation.  The Court noted that Congress observed a sharp distinction between entitlements and discretionary programs and found no justification for making the former subject to appropriations when Congress had chosen not to do so. 

     Justice Alito dissented alone.  He found the Court’s decision difficult to square with its recent refusals to recognize implied private rights of action and suggested that the cases be rebriefed and reargued on that point. 

     As a result of the Court’s holding, the next government shutdown might temporarily disrupt the appropriated entitlements, but statutory beneficiaries have clear, immediate recourse.  As soon as the relevant federal agency indicates enough of a likelihood of interrupted payments to create standing, a class of beneficiaries is likely to sue in the Court of Federal Claims to have their benefits paid out of the Judgment Fund.  The Court’s decision eliminates any doubt that these plaintiffs are entitled to judgment without delay.  This process will be a colossal waste of everyone’s time, but wastes of time are fairly typical for government shutdowns. 

     The Court’s decision is neither surprising nor a departure from well-settled expectations.  Still, advocates had been haunted by the worry that the Court might somehow refuse to honor the terms of appropriated entitlement statutes.  Nobody wanted to be the one who lost the lawsuit that destroyed the appropriated entitlements. 

     With both sides knowing that the appropriated entitlements will be protected, Republicans (who typically criticize appropriated entitlements despite having winning countless votes from the programs’ recipienrs) will have considerably less leverage against Democrats (who historically have made concessions to protect constituents dependent on these benefits).  This could, in theory, prompt more risk-taking behavior by Democrats, resulting in more shutdowns.  On the other hand, with neither side’s base at imminent risk, this could lead to a search for other sources of leverage just as both parties seem to have recognized that threatening to have the country breach the Debt Limit confers no advantage. 

     @DavidASuper1 
Posted 12:46 AM by David Super [link]