By Robert Nichols and Andy Liu
OMB claims that President Trump has the power to freeze appropriations until after they expire. GAO maintains that such action would violate the Constitution’s Separation of Powers and the Impoundment Control Act – the very statute Congress enacted to curb similar abuses by President Nixon. At stake is $4.3 billion in unobligated foreign assistance appropriations due to expire September 30.
For the second August in a row, OMB has begun impounding these appropriated funds, only to relent when foreign aid advocates have pushed back. Insider sources, however, tell us that OMB may proceed in sending a rescission bill to Capitol Hill within the next 10 days. Relying on political pressure and a divided Congress to save the funding may be an unacceptable risk, given the stakes.
Would a Federal judge issue an injunction to keep the appropriations available to the Agencies? Perhaps. At the same time, the Administration may bet that no interested party – Congress, GAO, States, International Organizations, Contractors, or NGOs – is able and willing to bring a lawsuit in time to save the appropriations.
But in our view, if an able party is willing to bring a lawsuit, while there are legitimate issues to overcome, they should be surmountable.
The current dispute over foreign aid funding arises around politics and fiscal policy. It may ultimately be decided by a judge hearing from lawyers who know both government contracts law and appropriations law.[1] This article outlines several legal issues that interested parties should understand as they monitor OMB’s actions relating to foreign assistance appropriations.
Recent Events
On August 3, 2019, OMB sent the attached letter to the State Department and USAID freezing foreign aid funds that Congress appropriated for FY19. The letter states:
Pursuant to the authority delegated to me by the Acting Director of OMB to carry out OMB’s apportionment authority under 31 U.S.C. 1512, this letter constitutes a reapportionment of all previously approved apportionments of the below-mentioned Treasury Appropriation Fund Symbols (TAFS). All previously apportioned unobligated resources in the TAFS shall be unavailable for obligation until three business days after the Office of Management and Budget receives an accounting from your agencies of the current outstanding unobligated resources in the TAFS.
The letter lists eight areas that cover a variety of assistance: international organizations, peacekeeping operations, international narcotics control and law enforcement, development aid, assistance for Europe, Eurasia and Central Asia, economic support funding, foreign military financing programs, and global health programs.
Foreign aid advocates sounded the alarm that the Administration planned to cancel the target funding – or possibly keep it frozen until it expires September 30. Dozens of NGOs released a joint statement this past Thursday condemning the action. Four top foreign policy lawmakers sent a tough bipartisan letter directly to Mulvaney.
Understanding Appropriations Law
The Constitution assigns to Congress the power to control the government’s purse strings. This is perhaps “the most important single curb in the Constitution on Presidential power.”[2] Congress implements its power through the annual budget and appropriations process and through a series of permanent statutes that establish controls on the use of appropriated funds. This legal framework is designed to combat abuses by the Executive Branch.
Simply put, Congress appropriates, OMB apportions, and the receiving agency allots (or allocates) within the apportionment.[3] OMB’s August 3rd letter addressed only the reapportionment of funds. Reapportionment occurs when there is a need to make “changes to the previously approved apportionment for the current year.”[4] This is a standard budgetary tool – except that, in this case, it was likely not being used to move funds but rather to impound them so the agencies cannot spend them.
Impoundment is any Executive action or inaction that temporarily or permanently withholds, delays, or precludes the obligation or expenditure of budgetary resources.[5] These are most often seen as political battles between Congress and the White House. When President Nixon threatened to withhold appropriations for programs that were inconsistent with his policies, Congress enacted the Congressional Budget and Impoundment Control Act of 1974 (ICA).[6] The ICA defines two types of impoundments and establishes the conditions for each.
- The President may ask Congress to rescind all or part of an appropriation and may freeze the funds for 45 days of “continuous session” while they consider this request rescission legislation. If Congress does not act, the President must immediately unfreeze the funds for agency obligation and expenditure.
- The President may issue a deferral – that is, temporarily freeze the appropriated funds to be disbursed later in the year.[7]
Under the ICA, the President must immediately notify both houses of Congress when taking either a rescission or a deferral action so that Congress can respond. The existence and timing of this notice is key.
Dispute Over Impoundment Powers
There is a strong argument that OMB’s August 3rd letter, by itself, constitutes an illegal impoundment of appropriated funds if OMB failed to timely notify Congress of the action. Having said that, the Administration’s release of funds this past Friday effectively mooted this issue. Ensuring proper notice is an important requirement to keep in mind for future actions.
More significant here is the legal question of whether the President has the authority to impound appropriated funds until after they expire. On this point, GAO and OMB appear to be at odds. The General Counsel of GAO opined on this issue in a December 2018 letter to the Committee on the Budget of the U.S. House of Representatives.[8] GAO’s opinion referenced (but did not include) a letter from OMB’s General Counsel on the same topic.
GAO takes the position that the President has no power to impound funds except in the limited circumstances authorized by the ICA. Congress did not intend the ICA to authorize the President to use either a rescission or a deferral action to impound funds past their expiration date. If the Administration were to try to do so, it would be unilaterally revising the appropriation law, which not only would exceed the authorities conferred in the ICA but also constitute an illegal line-item veto.
GAO maintains that:
It would be an abuse of this limited authority and an interference with Congress’s constitutional prerogatives if a President were to time the withholding of expiring budget authority to effectively alter the time period that the budget authority is available for obligation from the time period established by Congress in duly enacted appropriations legislation. It would be inimical to the ICA and to its constitutional underpinnings for the executive to avail itself of the withholding authority in the ICA, but to ignore the remainder of the process.
Without citing any particular statutory language, GAO contends that the ICA authorizes the President to impound funds for up to 45 calendar days for a rescission, but only if the Administration releases the funds “in sufficient time . . . to be prudently obligated.” The opinion draws no bright lines about what is sufficient time, saying that it may be hours or days or weeks or months based on the program at issue. GAO also cites no consequences for the Administration if it does not provide for sufficient time. GAO describes some “particularly troublesome” past instances when OMB lifted an impoundment with insufficient time for the agency to prudently obligate the unfrozen funds.
In response, OMB correctly asserts that the language of the ICA does not expressly preclude an impoundment from persisting through the date on which amounts would expire. The ICA may require sufficient time following a deferral for the funds to be spent, but the statute’s language on rescissions is silent on the matter. According to OMB, these distinctions demonstrate that Congress did not intend for the President to make withheld budget authority available for obligation before the end of the fiscal year. The ICA grants the President authority to withhold funds for the entire 45-day period, even if such withholding would result in the expiration of impounded balances.
The fact is that GAO and OMB appear not to agree on the proper interpretation of this statute raises the prospect of unilateral action by the Administration.
Questions in Bringing a Challenge
We have studied all of the legal arguments and authorities cited by GAO and OMB. Both sides are relying on their own interpretation of what is, unfortunately, a vaguely-written law. Having said that, we believe that GAO is almost certainly right that OMB would be acting illegally if it simply issues a deferral or rescission notice and tries to “run out the clock” on the appropriation. But that question is academic unless some interested party takes legal action against the Administration.
In our view, bringing this challenge need not wait for OMB to issue its rescission notice but should be started immediately. The Administration has already improperly impounded funds and is likely to do so again in the coming days. Having arguments and papers ready to file is important.
Any legal challenge would likely occur in the U.S. District Court for the District of Columbia. Plaintiffs would want to seek a temporary restraining order and permanent injunction, either enjoining the rescission notice entirely or providing other such relief that would leave proportionate time after the notice period for the unfreezing, obligation, and expenditure of funds before they expire.
Finally, and perhaps most important: who is able and willing to bring the challenge. A litigant can bring a court action only if it establishes standing. Members of Congress generally do not have standing to bring a lawsuit on behalf of Congress,[9] and industry associations have met mixed results when suing on behalf of their members.[10] The ICA authorizes the Comptroller General to hire legal counsel to bring an action,[11] but the hurdles to that happening are uncertain.[12] Beneficiaries of the foreign funding – including Contractors, and NGOs – may be the best hope for establishing standing, though they too have standing hurdles to overcome.[13] Perhaps a combination of these interested parties has the best chance of success.
In the end, though, the largest barrier may be whether there is a sufficient level of desire for taking on this fight.
[1] Robert Nichols is a government contracts lawyer who started his career as a fiscal law attorney in the Honors Program of the U.S. Army Corps of Engineers. GAO’s Managing Associate General Counsel on this matter, Julie Matta, came from the same program. Andy Liu is the former General Counsel of the Social Security Agency and regularly dealt with OMB on appropriations issues.
[2] Principles of Federal Appropriations Law, Fourth Ed., Ch. 1 (2016) (“GAO Redbook”), available at https://www.gao.gov/assets/680/675709.pdf.
[3] 31 U.S.C. §§ 1511-1516.
[4] See OMB Circular No. A–11, Preparation, Submission, and Execution of the Budget, Section 120 (2019), available at https://www.whitehouse.gov/wp-content/uploads/2018/06/a11.pdf.
[5] OMB Circular A-11, § 112.2.
[6] Pub. L. No. 93-344, 88 Stat. 297 (codified as amended in scattered sections of 2 U.S.C.).
[7] 2 U.S.C. §§ 682-684
[8] Impoundment Control Act—Withholding of Funds through Their Date of Expiration, B-330330 (Dec. 10, 2018), https://www.gao.gov/assets/700/695889.pdf.
[9] See William C. Freeman and Kevin M. Lewis, Congressional Participation in Litigation: Article III and Legislative Standing, CRS Report R45636 (Mar. 28, 2019), available at https://fas.org/sgp/crs/misc/R45636.pdf (“[C]ourts have generally (though not universally) been less willing to permit individual legislators to seek redress for injuries to a house of Congress as a whole, at least in the absence of explicit authorization to do so from the legislative body itself”).
[10] The U.S. Supreme Court has held that an association has standing to sue on behalf of its members only if the following conditions are met: (1) the association’s members would otherwise have standing in their own right, (2) the interest the association is seeking to protect is germane to the association’s purpose, and (3) neither the claim asserted, nor the relief requested, requires participation of individual members in the lawsuit. Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333 (1977).
[11] 2 U.S.C. § 687.
[12] See Wm. Bradford Middlekauff, Twisting the President’s Arm: The Impoundment Control Act as a Tool for Enforcing the Principle of Appropriation Expenditure, 100 Yale L.J. 1 (1990) (describing the Reagan Administration’s attempts to resist GAO enforcement of the ICA).
[13] In Public Citizen v. Stockman, 528 F.Supp. 824 (D.D.C. 1981), a Federal court found no private right of action for an ICA challenge, but that case may be distinguishable.
