When the long arms of Gramm-Rudman-Hollings reached out last month, they missed grasping the "judgment fund," an obscure government account that dispenses from $250 million to $500 million a year but is exempt from the budget-balancing law.
The fund, now 30 years old, is one of a rare species in government spending -- a permanent appropriation. It has no ceiling and no fiscal year strictures, and no one has to go to Congress every year to ask that money be appropriated.
The judgment fund "is a doorway into the general fund of the Treasury," said attorney Bob Centola, whose employer, the General Accounting Office, holds the keys that open the door.
The fund is tapped when a federal court -- or an agency, by negotiated settlement -- finds that Uncle Sam is liable for monetary damages. If the Federal Aviation Administration is found liable in a plane crash, or if the Office of Personnel Management is found to owe back pay, the agency turns to the fund. The Justice Department certifies to the GAO that a judgment is final; GAO reviews it and certifies to the Treasury that a check should be drawn on the judgment fund.
"We have paid a class [action] consisting of the entire federal judiciary," Centola said. "We've paid attorney fees to the Ku Klux Klan."
Sharon S. Green, GAO's chief of claims adjudication who administers the fund, said, "If they win, they win."
"We don't make judgments," Centola added, "we just pay 'em."
Green said her office handles an average of 3,000 judgment fund cases a year. They have ranged from a payment of $10 for a plaintiff's court costs to the record $278 million paid New Mexico to resolve a tax-liability dispute. At issue was whether federal contractors had to pay the state's gross receipts tax from 1969 to 1983; the Supreme Court ruled that they did. The $278 million check from the judgment fund did not include interest.
For decades, federal agencies had to seek specific appropriations to pay judgments every time the government lost or settled a suit. In 1956, at GAO's behest, Congress created the judgment fund so damages could be paid without further congressional action. In 1977, a $100,000 judgment ceiling was removed.
"This is an indefinite appropriation," Green said. "The money's always there."
But some agencies are excluded from the fund. The U.S. Postal Service and the Internal Revenue Service pay their own judgments; government corporations do not use the judgment fund, and land condemnations in general are not handled by the fund.
The GAO also can use the fund to collect money owed the government. "Say that you get hit by a government vehicle, sue the government and win, and we're aware that you have an unpaid student loan," Centola said. "We now have some way to collect that outstanding student loan."
In 1983, the judgment fund had a record year, paying a total of $507 million. "That was because of New Mexico," Green said.
Other large payments include $105 million paid in 1980 to the Sioux Nation of Indians for 7 million acres that the government ceded to the Sioux in 1868 for a reservation, but took back in 1877 after gold was found in the Black Hills. The original sum at issue was $17 million; most of the $105 million judgment was 5 percent interest on $17 million dating to 1877.
According to Centola, another large judgment fund check was $80 million issued to the Klamath Indians in a land condemnation case.
Since February 1984, the judgment fund has been making payments to the estates of the 153 victims of an air crash near New Orleans. A Pan American World Airways 727, taking off from Moisant Airport, crashed on July 9, 1982; a lawsuit named the FAA as well as Pan Am, citing inadequacies in the system by which pilots are alerted to the possible presence of wind shear. Centola said that under a negotiated settlement, the United States is pay-ing half of the liability and Pan Am's insurer is paying the balance. So far, $24 million has been paid from the judgment fund.
Centola said Green's office soon will begin processing $25 million in payments to 8,800 members of the federal Senior Executive Service (SES) whose pay cap for two years was set too low.
The hundreds of millions of dollars that the judgment fund pays out each year could be only the tip of an iceberg of unknown dimensions. The judgment fund, Centola said, "does not represent all judgments against the government."
"No one in the government has any idea of the total amount that's paid out per year in court judgments," he said.