In December 2012, the Administrative Conference adopted Recommendation 2012-8, Inflation Adjustment Act. This recommendation addresses three anomalous provisions of the Federal Civil Penalties Adjustment Act of 1990 (the Inflation Adjustment Act), which was amended in 1996 to require agencies to make initial inflation adjustments to civil monetary penalties as well as quadrennial adjustments thereafter.[1] Recommendation 2012-8 asks Congress to revisit the statutory framework for inflation adjustments in light of these distortions. 

Over the course of the project, several Conference members asked about the cumulative impact of these distortions on civil monetary penalties collected by the U.S. Government.[2]  Unfortunately, the fiscal impacts of distorted inflation adjustments under the Inflation Adjustment Act are difficult to determine. First, as discussed in the previous blog post, there are serious gaps in public information about agency civil monetary penalty assessments and collections; and second, as set forth below, there is a trend towards agency discretion in assessment of civil monetary penalties. 

Variable penalties and agency discretion:  Even if the previously identified data gaps could be resolved—such as for a small sample of agencies with excellent penalty reporting practices, like the Environmental Protection Agency, the Federal Railroad Administration, the Federal Energy Regulatory Commission, the Office of the Comptroller of Currency, and several others— it would still be extremely difficult to determine the impact of inflation adjustments.  Conference staff took a closer look at twelve agencies with enforcement data that seemed sufficient to render them practicable case studies and found that:

• Agency penalties are often fixed at a congressionally specified minimum and/or maximum amount, with agency discretion to determine precise assessments.  For instance, such variability is common in regulatory penalties for violations of laws administered by the Environmental Protection Agency.[3]
• Congress frequently provides agencies with settlement, negotiation, or mitigation authority.  For example, 30 U.S.C. § 1719(g), authorizes the Secretary of the Interior to “compromise or reduce civil penalties” assessed as part of federal royalty management and enforcement on a case-by-case basis.[4]

These basic findings are consistent with the results of Colin Diver’s 1979 report to the Administrative Conference on Agency Assessment and Mitigation of Civil Monetary Penalties, which found that “fixed-penalty statutes are increasingly giving way to variable-penalty statutes…” and that Congress had authorized agencies to mitigate or compromise almost 80 percent of the nearly 350 civil penalties then in force.[5]  In 1979, 57 percent of these civil penalty statutes specified fixed penalty amounts[6]; anecdotal evidence from the twelve agencies examined in-depth indicates that this percentage might well be even lower today.

Agencies often publish policies generally explaining their penalty calculation practices, and the discretionary choices contained therein (as the Conference urged them to do in Recommendation 79-3, based on Professor Diver’s report).[7]  However, the twelve agencies reviewed rarely provide the public with online access to specific information about discretionary adjustments in individual cases, much less in a standard or aggregated fashion that would make case studies of the fiscal impacts of inflation adjustments to civil monetary penalties feasible.