Saving the Consumer Financial Protection Bureau (and the Constitution) from the Courts

[This piece is cross-posted and was originally published in the Yale J. on Reg.: Notice & Comment blog] Administrative law is almost certain to undergo monumental change during the Supreme Court’s current Term.  On May 16, 2024, the Court issued its first in a series of blockbuster administrative law decisions: Consumer Financial Protection Bureau v. Community Financial Services Ass’n. The Court’s 7-2 decision declaring the Bureau’s funding structure constitutional brings good news for the administrative state — Justice Thomas’s majority opinion validated the ongoing regulatory activities of not just the Bureau but also similarly funded financial regulators such as the Federal Reserve.  The decision also brings good news for originalism. Justice Thomas’s analysis centered on original public meaning and drew a strong majority of Justices, albeit in a case that may have been relatively easy once the Justices had the benefit of additional briefing on historical issues.  His opinion focused on the “narrow question whether” the Bureau’s standing and self-directed “funding mechanism complies with the Appropriations Clause.” Slip op. at 1. At the same time, concurring opinions by Justices Kagan and Jackson and a dissenting opinion by Justice Alito suggested that the Justices might adopt differing analyses of text and history when faced with more challenging issues in the future.

In the decision on appeal, the United States Court of Appeals for the Fifth Circuit found that the Bureau’s funding structure was an unconstitutional “abomination” of which the “Framers warned.” Its decision was a classic case of originalism gone awry — selective law office history which did not withstand the comprehensive historical record presented in further briefing to the Supreme Court and scholarship such as my forthcoming Virginia Law Review Article, The Founders’ Purse.  Had the Fifth Circuit invited further historical briefing on Appropriations Clause challenges (issues that the parties likely regarded as throwaway arguments for much of the litigation), one wonders if the Court of Appeals would have corrected its own mistakes without a trip to the Supreme Court. Even well-intentioned judges can go very far astray if they pluck select evidence from the historical record and forego a more comprehensive analysis. The time-intensive historical inquiries demanded by originalism pose challenges for district and court of appeals judges with many cases to decide.  It seems, however, that lawyers and historians could step up to offer enhanced historical analyses in these cases. In Community Financial Services, such enhanced historical analysis did not occur until the case reached the Supreme Court.

At the Supreme Court, additional historical briefing and a brilliant oral argument by Solicitor General Elizabeth Prelogar clarified the inherent constitutionality of the Bureau’s funding structure. Seven Justices found that the text and history of the Appropriations Clause favored the Bureau. Justice Thomas’s majority opinion focused on the original public meaning of the Appropriations Clause. Concurring opinions by Justices Kagan and Jackson aligned with this result while offering important qualifications on the use of text and history. Justice Alito’s dissent (which was joined by Justice Gorsuch) reached the exact opposite result and would have affirmed the Fifth Circuit’s decision. His conclusion rested on an exceptionally narrow analysis of history and tradition.

Text. The language of Article I, Section 9, clause 7 is simple: “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”  Justice Thomas’s majority opinion focused on the original public meaning of the term “appropriation” and drew from Founding-era dictionary definitions of this term. Slip op. at 7.  He concluded that, in “ordinary usage,” an appropriation imposed fairly simple requirements: it demanded only “a law authorizing the expenditure of particular funds for specified ends.” Id. Justice Thomas’s approach emphasized public meaning and did not incorporate additional, corroborating evidence such as Alexander Hamilton’s observation that appropriations laws must ascertain the “purpose” and the “fund” for an expenditure. See The Founders’ Purse at 18.

In his dissent, Justice Alito also focused on the term “appropriation.”  He chided the majority for “consulting a few old dictionaries” to determine the meaning of “a term of art” whose meaning ought to be “interpreted in light of legal tradition and . . . centuries of practice.” Slip op. at 6-7 (Alito, J. dissenting) (cleaned up). According to Justice Alito, collapsing text into a legal and traditional understanding of appropriations “demand[ed]” heightened “legislative control over the source and disposition of the money used to finance” the Bureau’s operations.  Id. at 17.  As the majority noted, however, Justice Alito did not translate this understanding into a competing definition of the word “appropriation.”  Slip op. at 19.

Further, both Justice Thomas’s and Justice Alito’s initial focus on the meaning of the term “appropriation” detracted from other significant textual evidence of temporal limits on spending.  When the Framers wanted to impose a time limit on spending they did so expressly, such as the two-year time limit for army appropriations in Article I, Section 8, clause 12. The lack of similar language in Article I, Section 9, Clause 7’s Appropriations Clause strongly suggests that there was no time limit for general appropriations.  Justice Thomas emphasized this point only in rebuttal, and Justice Alito did not address it.

Perhaps because of these divergent analyses of a relatively simple clause, Justice Jackson’s concurrence emphasized the proper role of judges in constitutional interpretation. As she noted, “[w]hen the Constitution’s text does not provide a limit to a coordinate branch’s power, we should not lightly assume that Article III implicitly directs the Judiciary to find one.” Slip op. at 1 (Jackson, J., concurring).  While Justice Jackson’s concerns about courts finding “unstated limits in the Constitution’s text” and “undercut[ing] considered judgements of a coordinate branch” (id. at 3) were easy for the majority to avoid here, they will be important in future cases.  In the Court’s upcoming decisions in SEC v. Jarkesy and Trump v. United States, litigants have also asked the Court to find presidential removal powers and immunities that lack an explicit basis in the Constitution’s text.  Justice Jackson’s concurrence reiterates the importance of judicial modesty when deciding these separation-of-powers issues.  The removal issues in Jarkesy may tee up an additional set of related interpretive concerns – whether judges who emphasize unrepresentative statements from Framers like James Madison have erroneously read removal powers into Article II. See Jed Handelsman Shugerman, The Indecisions of 1789: Inconstant Originalism and Strategic Ambiguity, 171 U. PA. L. REV. 753 (2023); Lorianne Updike Toler, Un-fathering Executive Removal, 57 CONN. L. REV. (forthcoming 2025); Brief Amicus Curiae of Jed H. Shugerman, SEC v. Jarkesy (2023) (No. 22-859). (For additional historical perspectives on Jarkesy see Brief Amicus Curiae of Professor Ilan Wurman, SEC v. Jarkesy (2023) (No. 22-859); Brief Amici Curiae of Constitutional Originalists Edwin Meese III, Steven G. Calabresi, and Gary S. Lawson.)

History. Justice Thomas’s majority opinion set forth a lengthy Founding-era history that the Fifth Circuit missed. He began with pre-constitutional history in England, the colonies, and the states and concluded that “early legislative bodies exercised a wide range of discretion” whether or not to impose temporal limits or specific parameters on spending. Slip op. at 8-12; see generally Josh Chafetz, Congress’s Constitution: Legislative Authority and the Separation of Powers (2017). Another important body of evidence missed by the Fifth Circuit involved post-ratification spending laws that operated outside of annual appropriations.  As I note in The Founders’ Purse (pp. 31-36), one of the most generous early spending laws granted the Sinking Fund Commission indefinite authorization to self-direct spending from an initial sum that in today’s terms would exceed $400 billion.  Many other laws afforded field officers standing, self-directed funding based on fees for their services.  Id. at 36-44. Justice Thomas relied on some of these post-ratification practices including statutes in which early congresses authorized expenditures of “sums not exceeding” capped amounts and extended pre-constitutional practices of funding customs and postal officers through indefinite and independently determined fees. Slip op. at 12-15; see generally Nicholas Parrillo, Against the Profit Motive: The Salary Revolution in American Government 1780–1940 (2013).   He found that “early appropriations displayed significant variety in their structure,” and that the “Bureau’s funding mechanism fits comfortably within the First Congress’s appropriations practice.” Slip op. at 15.

Justice Alito’s dissent relied on largely the same history to reach the opposite conclusion.  He found that key historical funding practices, such as fee-based funding for customs officers, were not sufficiently analogous to the Bureau’s funding structure.  For example, Justice Alito noted that customs officers had to return excess funding while the Bureau could retain unspent funds. Slip op. at 20 (Alito, J., dissenting). But he did not explain why this distinction crossed a constitutional line. His description of more recent precedent suffered from the same flaw.  When describing the Federal Reserve Board as “a unique institution with a unique historical background” (id. at n. 16), Justice Alito never clarified a constitutional sense in which the Bureau’s funding differed from the near-identical funding structure for the Fed.

The majority criticized Justice Alito’s dissent for adopting a selective historical approach.  “The dissent [did] not meaningfully grapple with the many parliamentary appropriations laws that preserved a broad range of fiscal discretion for the King,” including “’sums not exceeding’ appropriations.”  Slip op. at 20 (cleaned up).  While the dissent “engage[d]” with post-ratification history, the majority found it “unclear why” the “differences” Justice Alito identified would “matter under the dissent’s theory.” Id. at 21.  One wonders whether Justice Alito’s objections to the Bureau’s “novel,” “unprecedented,” and “never before seen” funding structure (slip op. at 1, 3, 22 (Alito, J., dissenting)) are so strong that they exceed Bruen’s originalist requirement that the government supply “a well-established and representative historical analogue” but “not a historical twin.”  New York State Rifle & Pistol Ass’n v. Bruen, 142 S.  Ct. 2111, 2133 (2022).

As Professor Leah Litman has aptly explained, anti-novelty arguments of the sort made by Justice Alito can be quite problematic when assessing the constitutionality of legislatively established structures.  “[G]iven the sheer number of policies that [Congress] could conceivably pursue, Congress may not have tried out all forms of constitutionally permissible regulation.” Leah M. Litman, Debunking Antinovelty, 66 DUKE L.J. 1407, 1444 (2017). And yet Justice Alito seemed to expect this type of legislative precedent when he demanded that the Bureau show a precise historical analogue for its funding structure.  While Professor Litman did not offer an originalist analysis, her points align with prominent originalists’ related concerns about reducing constitutional meaning to a narrow and potentially unrepresentative or factual erroneous subset of original applications or “constitutional references.” See Lawrence B. Solum, Original Public Meaning, 2023 MICH. STATE L. REV. 807, 841-43; Christopher R. Green, Originalism and the Sense-Reference Distinction, 50 ST. LOUIS U. L. J. 555, 591 (2006). Justice Alito seemed to offer an even more fraught variant of an original applications problem — he suggested that a funding structure must have a preceding, original identical application (and perhaps one that is grounded in centuries of practice) before it can be considered constitutional.  Justice Alito’s apparent requirement is novel, narrow, and has so little to do with constitutional meaning that it should not be considered originalist.

Justice Kagan’s concurrence offered a far more accommodative approach to history and was joined by Justices Sotomayor, Kavanaugh, and Barrett.  Justice Kagan agreed with the majority that the Bureau’s funding scheme “would have fit right in” during the late-18th century. Slip. Op. at 1 (Kagan, J., concurring).  In addition, she endorsed the consideration of an extended historical timeline and an “unbroken congressional practice” showing significant variety in appropriations practices that continued “for more than  two centuries.”  Id. at 5.   She further emphasized the need to ease up on the level of specificity required of historical evidence. As Justice Kagan pointed out, “[w]hether or not the CFPB’s mechanism has an exact replica, its essentials are nothing new.”  Id.  In contrast to Justice Alito’s strict anti-novelty test, Justice Kagan’s more general approach makes it easier for judges to ground modern regulatory structures in history.  The Justices’ differing approaches to the use of history will likely loom large in upcoming decisions ranging from the Second Amendment issues presented by United States v. Rahimi to separation-of-powers concerns presented by SEC v. Jarkesy.

* * * * *

Once the Court had the benefit of a more complete historical record, Consumer Financial Protection Bureau v. Community Financial Services Ass’n became a relatively easy decision for Justices across the ideological spectrum.  While seven Justices signed on to Justice Thomas’s analysis of original public meaning, a closer examination of the Justices’ opinions reveals methodological pluralism even within the relatively narrow originalist modalities of text and history.  Only time will tell how the Justices will sort out their underlying methodological concerns in future separation-of-powers cases.  Consumer Financial Protection Bureau v. Community Financial Services Ass’n has set the stage for the Court to decide what may well become some of the most important decisions ever in the areas of administrative law and separation of powers.

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How population is changing in Wisconsin and the Upper Midwest since the pandemic

map showing population change from the 2020 census to July 2023 in the subcounty geographies of selected midwestern states

(This post also appeared in The Recombobulation Area).

The official census count occurs just once every ten years, and it’s out of date by the time it gets released. 

The last census was officially conducted on April 1, 2020, so it missed essentially all the population changes caused by the COVID-19 pandemic. But each year, the U.S. Census Bureau also releases “intercensal” population estimates. These are based on carefully collected administrative records (births, deaths, tax returns, etc.), and they give us the best look at how our current population is changing. The estimates cover 12-month periods beginning on July 1. The latest data covers the year from July 1, 2022 to June 30, 2023.

The pandemic and its aftermath is still the big story in this data. Cities across the country shrank. Some, like Detroit, have begun to grow. Despite Milwaukee Mayor Cavalier Johnson’s well-publicized goal of “1 million Milwaukeeans,” the city’s population recovery has yet to begin.

The latest estimates show positive signs for Wisconsin, but continued struggles for Milwaukee, relative to our midwestern peers. Wisconsin has largely returned to pre-pandemic form, while Milwaukee County is continuing to shrink at twice the rate of the 2010s.

Wisconsin added 20,000 net new residents from July 2022 to July 2023, a growth rate of 0.35%, which is practically identical to the state’s average growth rate during the previous decade. That growth was nearly double the state’s increase of 11,000 in 2022, which came on the heels of a 17,000-person loss in the first year of the pandemic.

Population change can be broken down into two components — net migration and natural change (births minus deaths). The next graph shows why each state grew or shrank over the past three years. Wisconsin’s 2023 growth rate falls below Minnesota and Indiana but above Michigan and Iowa. Illinois is still shrinking badly.

bar plot showing the components of population change for selected midwestern states

Each state has followed a different trajectory. 

  • Wisconsin had slightly more deaths than births in 2021 and 2022, before flipping to slightly more births in 2023. The bigger change has come from improving migration numbers. The state lost 16,000 net migrants in 2021 but gained 15,000 in 2022 and 19,000 in 2023.
  • Michigan has followed a similar trajectory as Wisconsin, but with more negative natural increase and slightly less migration.
  • Minnesota’s net migration has bounced around over the past few years, but its strong birth rates have kept it from shrinking much.
  • Iowa is close to flat—but slightly positive—in both natural change and net migration.
  • Illinois has maintained slightly positive natural change, but it gets hammered on net migration. A net of more than 100,000 people left the state in both 2021 and 2022. The outbound tide slowed to 43,000 in 2023, but Illinois remains the only state in this set to have negative net migration.
  • Indiana has attracted more than 20,000 net new residents in each of the past 3 years—some of them, doubtlessly, former Illinoisans.

Milwaukee County’s population fell by an estimated 1,800 during the 12-month period ending July 2023. That was an improvement over the previous two years, when the population fell by 6,200 and 14,300, respectively. Still, the county shrank by 0.2% in 2023, compared with an average annual decline of less than 0.1% throughout the 2010s.

The maps below show components of population change for each county.

maps showing county level components of population change for selected midwestern states

The strongest position is in the top left map, which shows counties with more births than deaths and positive net migration. It includes the counties surrounding Indianapolis and the Twin Cities—though notably not any of those cities themselves. The growth emanating (though not shared by) the Twin Cities is so strong that it reaches as far as Eau Claire, Wis. Other areas in Wisconsin in this strong position include Dane and Marathon counties, the Fox Valley, and the greater La Crosse area.

Only a handful of counties have negative migration but enough of a positive birth rate to keep growing nonetheless. The largest in this category is Hennepin County, home to Minneapolis. In Wisconsin, they include Clark, Lafayette, and Trempealeau counties.

Many more counties have aging populations, resulting in negative natural change, but enough in-migration to create population growth. Broadly speaking, this includes a great swathe across northern Michigan, Wisconsin, and Minnesota. Perhaps the remote work boom is finally creating the conditions for population growth across the Northwoods.

If the healthiest counties grow from births and migration, then the most troubled counties are shrinking for both reasons. These counties — which have more deaths than births and more leavers than comers — are found most commonly in rural Illinois and Iowa. In Wisconsin they include just Columbia, Crawford, Juneau, and Jackson counties.

Seven of the region’s largest 10 counties fall into the next category — where natural change is positive, but offset by out-migration. To put it reductively, people seem to have kids in these counties, then they leave. This status includes Milwaukee County; Cook, Kenosha, Lake, and DuPage counties in the Chicago metro; Wayne and Oakland counties in the Detroit metro; and Marion County (containing Indianapolis).

The final category, positive migration but an even larger negative natural change, occurs mainly in rural counties — particularly in Illinois.

The Census Bureau further estimates municipality population by tracking new housing unit construction and allocating the county-level population estimate into each town based on the average household size in the 2020 census. Based on this methodology,  Milwaukee city’s population fell by 2,200 in 2023 to a new low of 561,400. The most significant growth came in Oak Creek, which likely added about 1,100 new residents. Most of the remaining municipalities are estimated to have shrunk slightly.

Milwaukee’s decline of 2,200 is an improvement over its loss of 2,900 in 2022 and pandemic-fueled drop of over 10,000 in 2021. But Milwaukee’s rate of decline in 2023 was still tied with Rockford, Ill., for the worst among the region’s 15 largest cities.

Milwaukee’s rate of change since the 2020 census is second-worst, trailing only Chicago. Madison, on the other hand, had the highest rate of growth in 2023 and the second highest since the pandemic (after Fort Wayne).

table showing population trends for the 15 largest cities in selected midwestern states

Most of the 15 largest municipalities in Wisconsin have shrunk since the 2020 census, with the exceptions of Madison, Eau Claire, and Janesville. But all of these cities do show signs of improvement in 2023. Eau Claire has shown particularly robust growth, passing Waukesha to become the state’s seventh largest city in the latest estimates.

table showing population trends for the 15 largest cities in Wisconsin

By comparing Wisconsin with this set of neighboring states, I hope to better place our demographic situation in context. The bright spots in Wisconsin extend well beyond Madison. Many regions surrounding smaller cities like Eau Claire, Wausau, and the Fox Valley are doing quite well. The rural Northwoods is attracting enough migration to offset the natural decline of its aging population. Our rural communities are in a much healthier place than those of Illinois or Iowa.

Still, even if Wisconsin’s outlook seems better than Illinois’, Milwaukee nonetheless appears to be on the same trajectory as Chicago. In both, the population has fallen by about 3% since the pandemic began. The culprit is the same. The birth rate in each city is positive, but more people choose to move away than to move in.

Continue ReadingHow population is changing in Wisconsin and the Upper Midwest since the pandemic

Will Water Recycling Come to the Midwest?

Existing drinking water sources are under increasing strain due to overuse, climate change and other threats. Water recycling, also known as water reuse, may play a significant role in creating the sustainable cities of the future. Millions of people around the country are already being asked to drink recycled water, either indirectly (through a process in which treated wastewater is discharged to an environmental buffer such as groundwater or surface water and is later taken into the water distribution system) or even directly (when treated wastewater is immediately discharged into the water distribution system without an environmental buffer). At an April 10 conference sponsored by the Law School’s Water Law and Policy Initiative, several experts discussed the history and future of such technologies, and whether they are likely to emerge in Wisconsin or remain limited to the more arid parts of the county.

Noted author and journalist Peter Annin opened the event with a summary of his new book, Purified: How Recycled Sewage is Transforming Our Water. Annin described a significant water crisis facing many parts of the country, leading also to trouble in the production of food and energy, sectors long intertwined with water. Annin cited only two realistic options for “new” water supply­­­­—desalination and water reuse. Reuse is the far more sustainable option, he said.

Annin covered numerous historical case studies involving efforts communities have made to introduce recycled water into their water supply portfolios. Some were successful (Orange County), others less so (San Diego, at least at first). But Annin explained that careful examination of the United States Drought Monitor reveals that water shortages are not only a problem in the arid West. As a result, water reuse projects have been implemented or at least attempted in the more humid parts of the country too—in Norfolk, Virginia and Tampa, Florida, among other places.

In reviewing the lessons learned from all these efforts, Annin identified several keys to successful implementation of water recycling projects, including effective strategies for communicating with the public, rigorous monitoring of the water produced, and reliable technologies to ensure public safety.

In Wisconsin, at least so far, such technologies are more a matter of interest than necessity. “Nobody recycles water because it’s cool,” said Theera Ratarasarn, a panelist reacting to Annin’s presentation who is Chief of the Public Water Engineering Section for the Drinking Water and Groundwater Program at the Wisconsin Department of Natural Resources. Instead, they do it because they have no other choice; it is a last resort.  In Wisconsin, Ratarasarn said, “everywhere you look, you find water.”  Thus, he said, it isn’t necessary to resort to water recycling. In fact, it would run afoul of a Wisconsin legal requirement that the public drinking water supply come from “the best available source practicable.” As a result, Wisconsin regulators are more concerned about other pressing issues like PFAS, lead, and nitrate pollution.

Another panelist, Rachel Havrelock, who is Professor of English and director of The Freshwater Lab at the University of Illinois at Chicago, observed that most people are accustomed to “single-use water,” and this view drives our discomfort with water recycling. In fact, she said, water recycling more closely emulates nature and the multiple-use water cycle. In most places, she said, there is already de facto water reuse, with treated wastewater returned to surface water and soon thereafter reclaimed for drinking water treatment a short distance away. Havrelock’s team has proposed a separate water reuse-driven supply for agricultural and industrial purposes in Chicago and the surrounding areas. “We don’t need to drink recycled water here,” she said, but reuse can still make a big difference by reducing the load on the portion of the water supply that will be used for drinking. She cited a “groundwater emergency” in many parts of the Midwest. “Water reuse is part of climate change adaptation,” she concluded, and the “legal world is absolutely vital at this juncture” to regulate the practice.

Michael Duczynski, a research civil engineer with the United States Army Engineer Research and Development Center, confirmed that from the military perspective there are plenty of avenues for non-potable reuse. The military, he said, has large critical infrastructure needs at many of its installations around the world, including everything from cooling towers to data centers. The resilience of those installations—and of civilian communities— can be increased through water reuse options, he said. Duczynski described a new project through which the military is discerning the regulatory requirements for a spectrum of potential reuse applications spanning different levels of treatment, different end uses, and different jurisdictions. Employing some of these projects could save millions of gallons of water, he predicted.

Video of the full program is available here (click the “watch now” button).

Continue ReadingWill Water Recycling Come to the Midwest?