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Financial Incentive

Under most state and federal forfeiture laws, most or all proceeds from forfeited property go to law enforcement coffers, often supplementing the budgets of the very agencies that seized the property and the prosecutors that secured its forfeiture. This arrangement risks biasing law enforcement priorities toward the pursuit of property over justice and enables agencies to self-fund outside normal legislative appropriations. Despite widespread concern over agencies’ financial stake in forfeiture efforts, recent years have seen little genuine reform.

Critics’ concerns are neatly captured by a 2018 ruling from a federal district court. The case involved a lucrative vehicle forfeiture program run by the city of Albuquerque—even after, and in defiance of, New Mexico’s 2015 reforms. Under the program, the city police department’s forfeiture unit seized cars from drivers suspected of DWI and pursued the cars through civil forfeiture, regardless of whether the driver owned the car. The program forfeited and auctioned thousands of cars, generating $11.7 million between 2009 and 2016—money used to fund the forfeiture unit itself without legislative oversight of spending. 1

This, the federal district court held, violates the U.S. Constitution’s guarantee of due process by encouraging law enforcement to pursue property instead of justice: “[T]he City of Albuquerque has an unconstitutional institutional incentive to prosecute forfeiture cases, because, in practice, the forfeiture program sets its own budget and can spend, without meaningful oversight, all of the excess funds it raises from previous years.” 2 This creates a “realistic possibility that forfeiture officials’ judgment will be distorted by the prospect of institutional gain” because “the more revenues they raise, the more revenues they can spend.” 3

In a similar example, under pressure from a class action lawsuit, the Philadelphia District Attorney’s Office and Police Department recently agreed to end their long-standing practice of self-funding from forfeiture revenue. 4 The city’s outsized forfeiture machine had once raked in $5.6 million annually from thousands of often small-dollar forfeitures. On average, the program’s revenue equaled nearly 20% of the DA’s annual budget. 5

Research suggests these examples are no aberrations. A 2019 study by Seattle University economist Brian Kelly examined thousands of law enforcement agencies participating in the federal equitable sharing program. The study found a strong and statistically significant link between weak economic conditions and property seizures. 6 The results indicate agencies seize more when budgets are tight, echoing earlier research finding financial incentives can influence law enforcement behavior. 7 Notably, the Kelly study examined both civil and criminal forfeitures, suggesting the financial incentive can distort priorities even under criminal forfeiture. 8

Unfortunately, most state and federal forfeiture laws provide ample incentive to pursue property, as shown in Figure 18. In 32 states and at the federal level, between 80 and 100% of forfeiture proceeds go to funds controlled by law enforcement—and little has changed since the second edition of Policing for Profit. Only one state, Florida, modestly reduced the financial incentive, dropping law enforcement’s share of proceeds from 85% to 75% as part of a larger reform package. 9

Figure 18: Financial Incentives in Civil Forfeiture Laws

Meanwhile, two states moved in the opposite direction: Colorado and Indiana. In 2018, Colorado increased law enforcement’s financial incentive from 50% to as much as 75% through the creation of the Law Enforcement Community Services Grant Program, which is funded by 25% of forfeiture proceeds. 10 Also in 2018, Indiana increased its financial incentive through a legislative amendment (followed by a state Supreme Court ruling). 11 Before 2018, law enforcement agencies were permitted by statute to deduct a portion of forfeiture revenue for case-specific “law enforcement costs.” 12 Any surplus was supposed to be deposited in the state’s common school fund, per the state Constitution, which stipulates that “all forfeitures” be sent to the school fund. 13 In practice, however, little forfeiture revenue went to schools; instead, law enforcement agencies kept most of the proceeds for themselves. 14

In 2016, forfeiture victims and taxpayers sued to stop that practice. They contended that both the practice and the statute allowing it violated the Indiana Constitution. 15 But in 2018, while the lawsuit was pending, the legislature doubled down, enacting a formula for distributing forfeiture proceeds. 16 Under the new statute, police, prosecutors and government-contracted contingency-fee lawyers can always keep the bulk of forfeiture revenue—up to 93%—for themselves. A majority of the Indiana Supreme Court upheld this law in 2019. 17 Previous editions of Policing for Profit credited Indiana forfeiture law as offering no financial incentive. However, given the state’s new law and the state Supreme Court’s ruling, this edition counts Indiana as having a 93% financial incentive.

Today, only six states 18 and D.C. bar law enforcement from using forfeiture proceeds. 19 Two of these jurisdictions, New Mexico and D.C., ended the financial incentive as part of comprehensive reforms in 2015 and 2014. 20 Others, such as Missouri and Wisconsin, have state constitutional provisions directing forfeiture proceeds to school funds. 21

However, as in Indiana, these safeguards can be skirted. Wisconsin has long permitted law enforcement to retain up to 50% of revenue from forfeited property for “expenses.” 22 When reformers proposed sending all proceeds to the school fund, law enforcement interests expressed outrage. Said the Eau Claire County sheriff: “What is the money used for in the School fund? What advantage is there for the District Attorney or Law Enforcement to make any seizures that all the proceeds revert to another agency?” 23 Underscoring the point, a fiscal impact statement declared, “Prosecutors indicated that the most significant fiscal impact would be on law enforcement agencies because agencies would have no financial incentive to seize property to support law enforcement activities.” 24 In the end, the expense loophole remained, and the Legislature merely insisted that agencies start documenting any expenditures from forfeiture revenues and verifying that they are legitimate expenses. 25

Similarly, Maine law directs all forfeiture proceeds to the state’s general fund, absent specific written approval from an executive or judicial official. 26 Yet investigative reports by the Maine Beacon indicate almost no proceeds are, in fact, being deposited in the general fund. 27 IJ’s research suggests agencies almost always request special approval to keep proceeds, and officials largely rubber-stamp requests.

Policing for Profit grades states on their laws—not practices that may undermine them. As a result, law enforcement’s true financial stake in forfeiture may be even worse than the picture painted here.

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