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Shrinking victims fund signals tough times for appropriators

The program’s finances are drying up, and committees may not be able to depend on it to fill funding gaps elsewhere

Leahy: higher costs, less money to go around in fiscal 2020, even if there's a caps deal. (Tom Williams/CQ Roll Call file photo)
Leahy: higher costs, less money to go around in fiscal 2020, even if there's a caps deal. (Tom Williams/CQ Roll Call file photo)

It’s been an unspoken rule among appropriators for years: if the annual Commerce-Justice-Science subcommittee allocation feels a little light, fear not. There’s always money in the Crime Victims Fund.

However, the good times may be coming to an end. The program’s finances are drying up, and the Appropriations Committees are facing major new obligations in fiscal 2020 that will stretch the means of panel leaders even if there’s a deal to lift austere spending caps for next year.

Created in 1984, the aptly-named Crime Victims Fund collects fines and penalties from convicted federal offenders to directly compensate victims for crime-related losses, as well as local victim assistance agencies. The program is “mandatory,” therefore mostly off-limits to appropriators.

However, by placing a cap on the annual awards the Justice Department fund is able to make, lawmakers are able to claim the difference between the fund’s balance and the annual obligation cap as an offset. That lets appropriators cram in additional discretionary spending above the subcommittee’s “302(b)” allocation, which is in itself a function of the overall discretionary spending limits. Even better, the award cap simply prevents the extra money from being spent until the following year — when appropriators can raid the fund once again.

Conservatives have railed against use of the Crime Victims Fund in such a fashion as a “gimmick,” and Senate Republicans have successfully been able to cap the amount of paper savings from changes in mandatory programs, or “CHIMPs,” that appropriators can use that don’t actually cut any spending.

President Donald Trump wants to go further and eliminate the victims fund CHIMP starting in fiscal 2020, but it seems a safe bet appropriators will balk.

The larger the difference between the obligation cap and the fund’s balance, the more phantom savings Congress is able to grab to offset higher spending in the Commerce-Justice-Science bill. The savings have been large in recent years — over $10 billion in fiscal 2018, and nearly $8 billion this year — made more attractive by the onset of automatic spending cuts known as a sequester starting in fiscal 2013.

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The fund’s balance hit nearly $9 billion that year, sloping up to $12 billion in fiscal 2015. That figure dropped by about 25 percent the next year due to declining collections, but then the balance started its upward trajectory again, aided by some very large settlements in fiscal 2017.

That year saw $2.8 billion in Volkswagen payments stemming from the German automaker’s emissions cheating scandal, and $2.9 billion from six large banks in cases associated with foreign exchange and global interest rate manipulation. Those two settlements accounted for about 86 percent of the bumper crop of revenue that swelled the victims fund balance to $13 billion at the end of fiscal 2017.


No more Volkswagens?

But money is again getting tighter. On Monday, the White House released budget documents confirming that last year’s forecast of $2.5 billion in fiscal 2018 revenue was way off. Instead, new judgments brought only $445 million into the fund, shrinking its year-end balance by nearly $4 billion.

And there’s no pipeline of major new settlements in sight, which calls into question the administration’s assumption that the fund will still have about $8.3 billion remaining at the start of fiscal 2020. That figure assumes the program spends up to the new $3.35 billion obligation cap Congress imposed for this year in the fiscal 2019 omnibus — which is down about $1 billion from the previous year — and that another $2.5 billion in revenue flows in. That’s the same figure that proved nearly six times too optimistic in last year’s budget forecast.

33103 Steve Derene is executive director of the National Association of VOCA Assistance Administrators. VOCA stands for the Victims of Crime Act which created the victims fund. Derene’s association represents the 56 states, District of Columbia and U.S. territories that receive through formula grants the $2 billion or so a year left over once the federal programs are paid for.

Derene, who authored the victims fund’s lone history in 2005, has tracked the criminal cases whose judgments go into the fund ever since. He said the fiscal 2017 haul represented the high-water mark for fund collections and one unlikely to be repeated soon. For the first four months of fiscal 2019, collections have been $212 million, said Derene, who receives unpublished information about the fund’s finances. The Justice Department did not respond to questions about trends in collections or about revenues so far in fiscal 2019.

More important, there are no major cases with judgments of $100 million or more in the pipeline, Derene said, noting that there is usually a lapse of at least nine months between the announcement of a nine-figure settlement by prosecutors and the money being deposited into the fund.

“I suspect the people making these projections don’t know what’s in the pipeline,” he said. “I’m not aware of any major cases that will generate huge deposits into the Crime Victims Fund.” The only pending case, he said, might be last November’s announcement by the Justice Department that StarKist Co. would pay “up to $100 million” in criminal fines as part of its guilty plea for conspiring to fix canned tuna prices.

In all, there were 71 major cases bringing at least $100 million to the fund between 1996 and 2017, which accounted for two-thirds of total fund collections, Derene found. Subtracting those cases leaves an annual range of $450 million to $600 million annually into the fund, which might be the new normal going forward, he said.


Fiscal 2020 crunch

Declining collections were on Vermont Sen. Patrick J. Leahy’s mind when he took to the Senate floor three weeks ago to describe the growing gap in funding for fiscal 2020.

The Senate Appropriations Committee ranking Democrat complained that avoiding another spending meltdown will be harder than last year, as he tallied up some $15 billion in higher expenses and lower cost savings expected in fiscal 2020. And that’s before the little problem of overall spending caps sinking by 10 percent from the current year if there’s no deal to raise those caps.

A big part of the problem is the Commerce-Justice-Science bill, including the coming year’s $3 billion increase necessary to perform the decennial census, Leahy said. That issue is exacerbated by an estimated $2.5 billion less appropriators will be able to tap through the Crime Victims Fund.

The same drop, roughly, occurred for the current fiscal year. The amount offset by capping fund awards dropped by $2.5 billion, to $7.8 billion in fiscal 2019. That corresponds to the hole left by a declining fund balance that appropriators had to fill by increasing the subcommittee’s allocation.

For fiscal 2018, the Commerce-Justice-Science bill received a final allotment of $59.6 billion. But offsets, mainly the victims fund CHIMP, allowed total appropriations to climb to $70.9 billion. For fiscal 2019, the allocation was set at $64.1 billion. But through similar offsets, total funding was actually $72.9 billion.

Comparing the last two fiscal years, there was a $2 billion increase in total Commerce-Justice-Science funding, or 3 percent, in line with the overall increases allowed for capped discretionary programs in fiscal 2019.

But appropriators had to allocate an additional $4.5 billion in fiscal 2019 above the previous year, or nearly 8 percent. That meant less money for other spending bills and programs across the government, a problem which is compounded in fiscal 2020. Not only is the victims fund balance dropping, but costs for several other priorities are rising, including for low-income rental housing and veterans medical care, as Leahy noted.

Of course, congressional leaders could always tap the Crime Victims Fund in a way that shares the wealth among all the appropriations subcommittees. As part of a discretionary cap-raising deal for fiscal 2016 and 2017, lawmakers simply canceled $1.5 billion in fund balances to help offset the cost.

But if that occurs, lawmakers may need another Volkswagen-type scandal to come along — or at least a lot of StarKist tuna settlements — if they want the fund to keep paying future dividends.

CQ subscribers can find the bill page for the not-yet-introduced House fiscal 2020 Commerce-Justice-Science bill here.

And subscribers can find the not-yet-introduced Senate fiscal 2020 Commerce-Justice-Science bill here.

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