Federal Spending Will Be the Next Big Separation-of-Powers Fight

The Supreme Court previews the constitutional clash over who controls federal spending.

This past term, the U.S. Supreme Court’s decisions in Trump v. Slaughter and Trump v. Cook made the President’s authority to remove federal officers the most closely watched issue in the ongoing struggle between the President and the U.S. Congress over their respective constitutional powers. But three less-noted orders from the Court suggest that the next interbranch dispute the Court is likely to address concerns an even more consequential power: control over federal spending. Until recently at least, it seemed virtually unquestioned that the U.S. Constitution assigns to Congress the “power of the purse” and thus a nearly complete authority to determine whether, in what amounts, and for what purposes federal funds can be spent. But, as in other areas, so too in the realm of fiscal affairs, President Donald J. Trump has mounted an aggressive effort to expand presidential power at the expense of Congress. By one count, that effort has already led to the filing of more than 160 lawsuits.

Only three of those cases have so far made it to the Court, and it has addressed them only on its emergency docket.

The first to arrive was Department of Education v. California, in which eight states challenged the Department of Education’s cancelling of more than 100 teacher-training grants. Bringing their claims under the Administrative Procedure Act (APA), the plaintiff states alleged that the terminations, assertedly based on the grant recipients’ promotion of so-called “diversity, equity, and inclusion” (DEI), were arbitrary and capricious and thus unlawful. The district court granted a temporary restraining order against the Education Department, which the Department asked the Supreme Court to stay. Treating the temporary restraining order as a preliminary injunction, a five-justice majority granted the stay request.

In its brief opinion, the Court’s majority relied on Great-West Life & Annuity Insurance Co. v. Knudson for the proposition that the APA’s limited waiver of the federal government’s sovereign immunity “does not extend to orders ‘to enforce a contractual obligation to pay money’ along the lines of what the District Court ordered here.” Instead, the majority indicated that pursuant to federal law, the Court of Federal Claims is granted jurisdiction over suits based on “any express or implied contract with the United States.”

Like Department of Education v. California, National Institutes of Health v. American Public Health Association) is an APA action challenging systematic grant terminations by a federal agency. But in National Institutes of Health, the plaintiffs also challenged the NIH guidance documents—policy statements that direct the NIH staff’s decision-making—that had led to the terminations. Those directives provided that going forward, the NIH would “not fund research related to DEI objectives, gender identity, or COVID–19.” A district court judge held that both the grant terminations and the directives were unlawful, and again the government sought a stay from the Supreme Court. By a vote of 4-1-4, with Justice Amy Coney Barrett writing the controlling opinion, the Court granted the stay as to the portion of the lower court’s decision that invalidated the grant terminations but denied it as to that court’s determination that the forward-looking directives were unlawful. This dispute over the proper statutory basis, and thus the proper forum, for challenges to systematic grant terminations produced five separate opinions from the justices.

In her controlling opinion, Justice Barrett pointed to Department of Education v. California for the proposition that challenges to grant terminations, regardless of their nature, must be brought under the Tucker Act—which waives the government’s sovereign immunity for non-monetary claims—in the Court of Federal Claims. Because the plaintiffs’ challenge to NIH’s directives concerned agency policies, however, Justice Barrett concluded that review under the APA in district court was appropriate even though the “policies related to grants.”

Chief Justice John G. Roberts, Jr., joined by Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson, would have permitted the plaintiffs to pursue all of their claims in district court. In a one-paragraph statement, these justices reasoned that because the plaintiffs’ attack on the directives sought relief that was “prospective” and would have “generally applicable implications beyond the reinstatement of specific grants,” it clearly fit within the bounds of judicial review under the APA. The challenges to the grant terminations fit there as well because, as the government apparently did not contest, the grant cutoffs resulted from the directives.

Justice Jackson, in the longest opinion the case produced, wrote separately to assail the controlling opinion on two grounds. First, she criticized Justice Barrett’s opinion—correctly, in my view—as another example of the Court’s willingness to resolve difficult questions with neither the benefit of full briefing and argument nor careful attention to the factual record created below. It thus represented a “cautionary tale about lawmaking on the emergency docket.” Second, Justice Jackson explained why, in her view, the controlling opinion was likely wrong on the merits. Because the challenged grant terminations flowed from an agency policy determined to be arbitrary or capricious, and thus unlawful, under the APA, an appropriate component of the remedy was reversal of the terminations.

Justices Neil Gorsuch and Brett Kavanaugh each offered separate opinions. Justice Gorsuch complained that the district court judge, and other district court judges in other cases, had not, in his view, abided by the Court’s order in Department of Education v. California. Justice Kavanaugh weighed in to defend the view that the NIH’s directives were not arbitrary or capricious.

For students of administrative law and the regulatory state, National Institutes of Health offers several important takeaways.

First, appropriations law is shaping up to be the next great separation-of-powers battleground. The second Trump Administration is seeking to reshape this area of law in order to establish what one group of leading scholars has accurately called a new “appropriations presidentialism,” undoing a longstanding balance between the political branches that another leading scholar with extensive experience in the executive branch contends has thrown appropriations law into “crisis.”

Second, because appropriations law constitutes a distinctive component of administrative law, one with its own complex legal foundations and history, judges, including those on our highest court, need to educate themselves carefully before setting new ground rules for this immensely consequential legal domain.

Finally, although opponents of the Trump Administration’s initiatives have looked to the courts to challenge presidential aggrandizement, that strategy is just as likely to boost judicial power as it is to enhance Congress’s control over federal spending. As a number of scholars with deep expertise in appropriations law have sensibly contended, Congress itself must take the lead in defending its constitutional prerogatives.