Notice & Comment

Which Appropriations Power?: Getting Back to Basics in the Supreme Court’s Upcoming CFPB Funding Case, by Chad Squitieri

Next term the Supreme Court will hear argument in CFPB v. Community Financial, which concerns whether the Consumer Financial Protection Bureau (“CFPB”) may constitutionally receive its funding from the Federal Reserve, rather than through the annual appropriations process.  The case presents the Court an opportunity to address an important point made earlier this summer by Justice Thomas in a dissenting opinion regarding the “source and scope of Congress’s power to spend.”  As he explained, “the Constitution contains no ‘spending clause,’” and “there are serious problems” with the “Court’s modern doctrine” that suggest the opposite.  Something similar, I think, can be said of the way in which the CFPB case has been argued to date—namely, as a disagreement concerning whether the Appropriations Clause has been violated.  But as I explain in a new law review essay (“The Appropriate Appropriations Inquiry”), it is not the Appropriations Clause that vests Congress with their appropriations powers.*  By acknowledging as much, the Court can use Community Financial to get back to basics regarding Congress’s authority to appropriate funds.

This post offers a brief overview of my essay’s argument that Congress must rely on different constitutional provisions to fund different types of entities.  The upshot of recognizing as much is that, although Congress may be able to constitutionally fund some entities (such as the post office, national mint, and perhaps the First Bank) outside of the annual appropriations process, the same may not be true for other entities (such as the CFPB).  The difference in constitutionality stems from the different constitutional text that Congress must rely on to fund different parts of the government.  The Court should thus focus on that different constitutional text (rather than the Appropriations Clause) in Community Financial.

Where is Congress Vested With Authority to Appropriate Funds?

Start with what might seem like a simple question: Where, exactly, is Congress vested with their authority to appropriate federal funds?  The Constitution contains only two explicit references to appropriations.  Both those references offer limitations on Congress’s authority to appropriate funds; neither grants Congress the authority to appropriate funds outside of the military context.

The first constitutional reference to appropriations is the Appropriations Clause of Article I, Section 9, which provides that “[n]o money shall be drawn from the treasury, but in consequence of appropriations made by law.”  Similar to the other limiting provisions of Article I, Section 9, the Appropriations Clause simply places a limitation on federal power.  To wit, the Clause makes clear that if an appropriation is to occur (pursuant to some other power vested elsewhere), then that appropriation must be “made by law.” 

The Constitution’s second reference to appropriations, Article I, Section 8, Clause 12, states that Congress shall have the power “[t]o raise and support armies, but no appropriation of money to that use shall be for a longer term than two years.”  Similar to the Appropriations Clause, the back half of Article I, Section 8, Clause 12 places a limitation (i.e., a two-year time limit) on Congress’s appropriations authority relating to the army.  To be sure, the best reading of the front half of that clause, which refers to the power to “raise and support armies,” might vest Congress with a power to appropriate funds for certain military purposes (although my essay takes no position on that question).  Such a reading would provide additional context as to why an explicit grant of army-appropriations power is cabined by a two-year limitation, while Congress’s authority to appropriate funds more generally is limited (as explained below) by the more general requirement that appropriations be “necessary and proper.”  But even if the first part of Article I, Section 8, Clause 12 does grant Congress with the authority to appropriate funds for certain military purposes, it certainly does not vest Congress with any power to appropriate funds for unrelated reasons (such as funding the CFPB).  The power to appropriate funds for the CFPB must be found elsewhere.

Next consider the Taxing Clause of Article I, Section 8, Clause 1, which provides that “Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.”  Current doctrine maintains that the phrase “provide for the . . . general Welfare”  vests Congress with a freestanding authority to spend.  But to borrow again from Justice Thomas, who expresses a common view shared by others, “the only authority vested by [Article I, Section 8, Clause 1] is a power to ‘lay and collect Taxes, Duties, Imposts and Excises.’  This power is then qualified by the Debts and General Welfare Clauses, which limit the objects for which Congress can exercise that power.” 

Where, then, is Congress vested with the ability to appropriate funds?  As I explain more fully in my essay, Congress is vested with the authority to appropriate funds via the interplay between two categories of constitutional provisions.  First is the category of provisions vesting Congress (and other federal actors) with various substantive powers—such as Congress’s powers to regulate interstate commerce and constitute tribunals. Second is the Necessary and Proper Clause, which vests Congress with the power “[t]o make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.”  

In most instances, then, Congress may only appropriate funds when the appropriation is a “necessary and proper” means of “carrying into execution” a power that is vested elsewhere by the Constitution.  I refer to this type of power-specific analysis as the “appropriate appropriations inquiry.” 

Answering the Appropriate Appropriations Inquiry in Community Financial 

What power might Congress have relied on to enact 12 U.S.C. § 5497, which permits the CFPB to obtain perpetual funding from the Federal Reserve rather than annual funding directly from Congress?  Presumably Congress’s power to regulate interstate commerce—i.e., the power to “regulate commerce  .  .  .  among the several states.”  If that is correct, then the appropriateappropriations question in Community Financial concerns whether Section 5497 constitutes a “necessary and proper means” of “carrying into execution” Congress’s power to “regulate commerce  .  .  .  among the several states.”  And when that inquiry is considered through an originalist lens (which views the issue from the perspective of an objective reader in 1788), Section 5497’s problems come into focus. 

As Professor Zachary Price has explained in an informative article, beginning with the First Congress, Congress established “the ingenious practice . . . of appropriating funds only one year at a time.”  And that “practice of annual appropriations” was “derived . . . from prior practice in the English parliament and colonial legislatures.” Placed in terms of the appropriate appropriations inquiry, this historical evidence suggests that the objective reader in 1788 would have considered annual appropriations to be a “necessary and proper” means of carrying most (if not all) of the federal government’s powers “into execution.”  After all, annual appropriations were how the governments familiar to that reader had long been funded.  

That is not to say, however, that annual appropriations are the exclusive means through which the federal government can be funded.  Indeed, although annual appropriations are steeped in English and early American history, Professor Price has argued on this blog that there is “no constitutional requirement that Congress” fund the government through annual appropriations, even if doing so is “generally a good idea.”  

I would agree in the sense that annual appropriations are not the only “necessary and proper” means of funding the government.  But that does not mean that there are no limits to how Congress may appropriate funds.  As I write in my essay, “annual appropriations are something of a constitutional safe harbor (i.e., a manner of funding the government that was so familiar to the objective reader that its necessity and properness can rarely if ever be called into question), and judicial suspicions should be heightened when that safe harbor is deviated from without a justification rooted in constitutional text, structure, and history.”

Recognizing that Congress can sometimes (but not always) deviate from the standard method of funding the government through the annual appropriations process demonstrates a shortcoming in the government’s position in Community Financial. In its briefing to date, the government has pointed to the post office (funded through its collection of postage rates), the national mint (funded through its collection of fees), and the First Bank of the United States (funded through private investments) as founding-era examples of government entities funded outside of the annual appropriations process.  But these examples do not offer a historical analog for Section 5497’s means of funding the CFPB.

To start, funding the post office concerns Congress’s power to “establish post offices and post roads.” And funding the mint concerns Congress’s power to “coin money.”  The historical evidence indicates that, at the time of the Constitution’s ratification, postage rates and minting fees were familiar methods of funding those activities, suggesting that the ordinary reader in 1788 would consider such funding to be “necessary and proper” means of carrying Congress’s postal and coining powers “into execution.”  And of course, the historical record of using postage and coinage fees as funding sources for those distinct activities sheds little if any light on whether Section 5497 would have been considered a “necessary and proper means” of carrying Congress’s interstate commerce power “into execution.”

The First Bank, on the other hand, might offer a more informative historical analog to Section 5497—at least to the extent that, in establishing the First Bank’s funding structure, Congress relied on their power to regulate interstate commerce.  But even assuming that the First Bank was a constitutional exercise of Congress’s power to regulate interstate commerce (rather than an (un)constitutional exercise of that or some other power), historical evidence suggests that funding central banks through private investments was routine, and thus likely to be thought a “necessary and proper” means of funding the First Bank.  And it is difficult to see how maintaining a historical practice of funding central banks through private investments speaks to the necessity and properness of allowing the CFPB to secure indefinite funding directly from the Federal Reserve.

Next Steps

Because the parties in Community Financial have not asked the Court to consider the precise source of Congress’s appropriations authority, the Court might wish to decide the issue as it is has been argued to date—i.e., as a disagreement concerning whether Section 5497 violates the Appropriations Clause, rather than one of Congress’s appropriations powers.  But different constitutional text vests Congress with appropriations powers.  Should the Court agree, I see at least three alternative steps forward.

First, the Court may wish to dismiss the writ of certiorari as improvidently granted in Community Financial so that argument concerning the source of Congress’s appropriations authority can further percolate in the lower courts. Alternatively, the Court could retain the case and order the parties to address specifically (either in supplemental briefing or at oral argument) the textual basis for Congress’s appropriations authority, as well as how that basis informs how the Court should rule.  Or finally, the Court could decide the case as it has been argued to date, but signal an interest in considering the textual basis of Congress’s appropriations authority in a future case.

Chad Squitieri is an Assistant Professor of Law at the Catholic University of America, where he also serves as a Fellow for the Project on Constitutional Originalism and the Catholic Intellectual Tradition

* Portions of this post were published initially in Chad Squitieri, The Appropriate Appropriations Inquiry, 74 Fla. L. Rev. F. 1 (2023). 

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