By Joanna C. Schwartz

For decades, scholars have debated the extent to which financial sanctions cause government officials to improve their conduct. Yet little attention has been paid to a foundational empirical question underlying these debates: When a plaintiff recovers in a damages action against the government, who foots the bill? In prior work, I found that individual police officers virtually never pay anything toward settlements and judgments entered against them. But this finding prompts another question: Where does the money come from, if not from individual officers? The dominant view among those who have considered this question is that settlements and judgments are usually paid from jurisdictions’ general funds with no financial impact on the involved law enforcement agencies, and some have suggested that agencies would have stronger incentives to improve behavior were they required to pay settlements and judgments from their budgets. But, beyond anecdotal information about the practices in a few large agencies, there has been no empirical inquiry into the source of funds used by governments to satisfy suits involving the police.

In this Article, I report the results of the first nationwide study to examine how cities, counties, and states budget for and pay settlements and judgments in cases against law enforcement. Through public records requests, interviews, and other sources, I have collected information about litigation budgeting practices in one hundred jurisdictions across the country. Based on the practices in these one hundred jurisdictions, I make two key findings. First, settlements and judgments are not always—or even usually—paid from jurisdictions’ general funds; instead, cities, counties, and states use a wide range of budgetary arrangements to satisfy their legal liabilities. All told, half of the law enforcement agencies in my study financially contribute in some manner to the satisfaction of lawsuits brought against them.

Second, having a department pay money out of its budget toward settlements and judgments is neither necessary nor sufficient to impose a financial burden on that department. Some law enforcement agencies pay millions from their budgets each year toward settlements and judgments, but the particularities of their jurisdictions’ budgeting arrangements lessen or eliminate altogether the financial impact of these payments on these agencies. On the other hand, smaller agencies that pay nothing from their budgets toward lawsuits may nevertheless have their very existence threatened if liability insurers raise premiums or terminate coverage in response to large payouts.

63 UCLA L. Rev. 1144 (2016)