A dwindling revenue stream for Justice Department programs would get a new source of cash under a bill the House passed Wednesday night, which would also give appropriators more breathing room to stay within annual budget targets.
The vote was 384-38 on the measure, which would enlarge the Crime Victims Fund. Created in 1984, the fund collects fines and penalties imposed in federal cases to compensate crime victims and finance programs to assist them.
The fund's reserves have dwindled in recent years as the number of high-dollar federal settlements has declined. As a result, the Crime Victims Fund year-end balance fell from a peak of $13.1 billion in fiscal 2017 to an estimated $4.4 billion in fiscal 2020.
To shore up the balance, the House bill would take fines and penalties from deferred prosecution and nonprosecution agreements, forms of out-of-court settlements, that currently are deposited into the Treasury as general revenue and instead park them in the Crime Victims Fund.
The diversion would result in about $7.5 billion in new spending over the coming decade on programs authorized under the 1984 law known as the Victims of Crime Act, according to the Congressional Budget Office.
"This bipartisan and bicameral legislation ensures that programs and services assisting victims of crime are fully funded and are better supported, with no new taxpayer dollars,” said House Judiciary Chairman Jerrold Nadler, D-N.Y., the bill’s chief sponsor, in floor debate Tuesday.
Lumpy and declining funds
State and local groups that administer programs funded with grants under the 1984 law have been pushing for years to supplement the victims fund with money from nonprosecution and deferred prosecution agreements.
Funding associated with criminal convictions has been lumpy in recent years and generally on the decline, according to data compiled by the National Association of VOCA Assistance Administrators. Crime Victims Fund deposits hit a high point of $6.6 billion in fiscal 2017, including $2.8 billion from the Volkswagen diesel emissions cheating scandal; during the most recent two full fiscal years, that figure dropped to about $500 million.
On the other hand, settlements from nonprosecution and deferred prosecution agreements have been on the rise in recent years. According to data compiled by Gibson Dunn, a law firm, calendar year 2020 was a record year for such collections, at $9.4 billion.
Some of that money was attributable to civil penalties and payments distributed to foreign and state governments. Steve Derene, the former executive director of the VOCA administrators group who's tracked such settlements for years, said even just the portion of nonprosecution and deferred prosecution deals stemming directly from criminal penalties paid to the federal government has been substantial.
Derene said in fiscal 2020 the Treasury Department collected almost $5 billion in such fines and penalties, and in the first six months of this fiscal year has collected almost $1 billion. The annual average over the past decade has been $1.6 billion, Derene told CQ Roll Call.
Nadler's bill isn't specific about what types of fines and penalties would be diverted into the Crime Victims Fund. It simply states that "any funds that would otherwise be deposited in the general fund of the Treasury collected pursuant to" nonprosecution and deferred prosecution agreements are to be directed into the fund.
Derene said under the current language it could create a situation where the administration would have to weigh how to structure such settlements.
For instance, the biggest 2020 settlement, a deferred prosecution agreement where Wells Fargo & Co. paid $3 billion to settle charges of falsifying bank records and identity theft, included a $500 million civil penalty to be paid to investors. If Nadler's bill had been law at the time, it's not clear whether that $500 million would have had to be walled off specifically for VOCA programs.
But those are details that could probably be clarified when the measure moves to the Senate, where there's broad bipartisan support for a companion bill introduced by Senate Judiciary Chairman Richard J. Durbin, D-Ill.
Two other Democratic co-sponsors, Appropriations Chairman Patrick J. Leahy of Vermont and New Hampshire's Jeanne Shaheen, who leads the Commerce-Justice-Science Appropriations Subcommittee, wrote to Attorney General Merrick Garland last week asking, among other things, how the agency would direct money from such out-of-court settlements.
Durbin's bill has nine GOP co-sponsors, including Judiciary ranking member Charles E. Grassley of Iowa, and Lindsey Graham of South Carolina, the top Republican on the Budget Committee.
Graham's backing is important, because historically critiques of Congress' use of Crime Victims Fund dollars has come from GOP budget hawks. For many years appropriators have been able to tap the fund to finance other Justice Department programs by setting a cap on annual obligations from the fund, and claiming the difference between that cap and the fund's balance as an offset.
This maneuver, derided as a gimmick by critics, is known as a change in mandatory spending, or "CHIMP," that doesn't actually save any money because it simply reserves fund balances for later use. At the same time, it allows appropriators to free up discretionary funding that otherwise wouldn't be available under annual spending limits.
“I want us to be able to use the Crime Victims Fund for crime victims, not as a cover for a change in mandatory programs so we can spend more in other areas,” Sen. James Lankford, R-Okla., said during a 2018 Appropriations panel markup.
He offered an amendment to prohibit tapping into the fund to finance other programs, but he was shot down on a voice vote. Shaheen said the amendment would have required cutting more than $8 billion from nondefense programs to make up for the loss.
Lawmakers in recent years began imposing annual limits on such CHIMPs, creating a 60-vote point of order in the Senate to go above those caps. The limits resulted in cutting allowable CHIMP funding from $20 billion in fiscal 2015 to $15 billion starting in fiscal 2019.
As a result of such caps as well as the Crime Victims Fund's dwindling balances, appropriators were only able to free up $3.5 billion to finance other programs in the fiscal 2021 Commerce-Justice-Science spending bill, enacted in December as part of an omnibus package. That's down from $5.7 billion the year before, and as much as $10.2 billion in fiscal 2018.
The cap on fund obligations has pinched programs intended to help victims of crime as well. The fiscal 2021 law set the limit at just over $2 billion, down from $2.64 billion a year earlier and $4.44 billion in fiscal 2018.
During that time appropriators have diverted money from the fund into Violence Against Women Act programs, though the dropoff hasn't been as steep: $492 million in fiscal 2018, down to $435 million this year, which held steady from fiscal 2020, according to data compiled by the National Network to End Domestic Violence.
At the same time, money for state victims assistance programs, which include things like counseling, emergency shelter and rape crisis centers, faces a steep cut in fiscal 2021, from $1.67 billion to $1.1 billion, according to the VOCA administrators' group. The comparable figure in fiscal 2018 was $3.39 billion.
The caps come off
Lawmakers wound up blowing through the Senate's CHIMP cap in the December omnibus for unrelated reasons, and the limits no longer apply in fiscal 2022. Thus appropriators have an opportunity, if the House-passed bill is enacted, to grab a bigger slice of the Crime Victims Fund pie than they've been able to in recent years.
A Senate Democratic aide said the Nadler-Durbin bill serves the twin purposes of addressing the fund's financing gap and freeing up more money for crime victims assistance. And while acknowledging the measure would free up more money for appropriators to tap, a House aide argued capping the fund's obligations keeps it "fiscally sustainable."
In addition to bolstering the Crime Victims Fund, the bill would increase the statutory amount awarded to victim compensation programs and expand the range of victims eligible for compensation.
Still, the fund's fortunes depend on future cash-generating settlements, and it's not at all clear that a return to the bonanza for appropriators and the Justice Department of years past is on the horizon.
"They used to be able to fund the Bureau of Prisons" with the victims fund offset, Derene said.
The fiscal 2021 appropriation for the federal prison system: $7.8 billion.
Peter Cohn contributed to this report.