Spending Clause Standing

Authors

Edward Webre Plaut, University of Michigan Law School

Abstract

The Biden Administration’s American Rescue Plan Act allotted almost $220 billion to state, local, and tribal governments to help combat the COVID-19 pandemic. This money, the Coronavirus State and Local Fiscal Recovery Fund, gave recipients wide spending discretion to address their struggling economies. But the legislation had one key limitation: Recipients could not use the money to “directly or indirectly” cut their taxes. If a recipient violated this “Offset Provision,” the Department of the Treasury might recoup the funds.

Nearly two-dozen states alleged that the Offset Provision was unduly coercive and ambiguous, violating the Spending Clause. However, with no threatened recoupment looming, it was unclear whether the states had standing to sue at all. The five circuit courts that heard these cases did not reach consensus on the standing issue. Numerous opinions across six cases offered differing conceptions of “sovereign” injuries and applied Massachusetts v. EPA’s command for “special solicitude” to the state plaintiffs inconsistently.

The Offset Provision cases provide the first opportunity to study the intersection of the Spending Clause and state standing. With no precedent on when states can challenge congressional spending legislation, the cases navigated standing’s incoherent doctrine to craft new rules. The Offset Provision cases offer two novel categories of sovereign injuries-in-fact that states allegedly suffer in Spending Clause cases: the “Spending Contract” and “Tax Power” injuries. The former relates to an unconstitutionally ambiguous or coercive federal offer, while the latter describes an impermissible regulatory subject matter.

The Offset Provision cases define the terms of federalism’s future battleground. The Spending Contract and Tax Power injuries provide enterprising state attorneys general with the weapons to dismantle disfavored federal policy. Instead of adhering to standing doctrine’s core separation-of-powers principles, a majority of the involved circuit courts have enabled states to readily air their policy grievances in federal court. Because Congress increasingly relies on its spending power to pass legislation, when states can and cannot challenge federal policy has enormous implications for modern policymaking. When appropriate, Spending Clause standing doctrine should permit heightened scrutiny when a state unilaterally attempts to block a federal program.

Recommended Citation

Edward W. Plaut, Spending Clause Standing, 123 Mich. L. Rev. 1519 (2025).
Available at: https://repository.law.umich.edu/mlr/vol123/iss8/4