American Fed. Local 1647 v. Fed. Labor Relations

• Decision Date: 10 November 2004
• Docket Number: No. 03-4553.,03-4553.
• Citation: 388 F.3d 405
• Parties: AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO, LOCAL 1647, Petitioner v. FEDERAL LABOR RELATIONS AUTHORITY
• Court: U.S. Court of Appeals — Third Circuit

388 F.3d 405

AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO, LOCAL 1647, Petitioner v. FEDERAL LABOR RELATIONS AUTHORITY

No. 03-4553.

United States Court of Appeals, Third Circuit.

Argued: October 1, 2004.

Filed November 10, 2004.

Martin R. Cohen (Argued), Bala Cynwyd, PA, Counsel for Petitioner.

David M. Smith, Solicitor, William R. Tobey, Deputy Solicitor, David M. Shewchuk, Attorney (Argued), Federal Labor Relations Authority, Washington, D.C., Counsel for Respondent.

Before: ROTH and CHERTOFF Circuit Judges, and IRENAS,^* Senior District Judge.

OPINION OF THE COURT

CHERTOFF, Circuit Judge.

Petitioner, Local 1647 of the American Federation of Government Employees ("AFGE" or the "union"), proposed a contractual provision that would have allowed employees at the Tobyhanna Army Depot ("TYAD") to be reimbursed from the TYAD Army Working Capital Fund ("AWCF") for personal expenses they sustained as a result of cancelled annual leave. Respondent Federal Labor Relations Authority ("FLRA") held the proposal was nonnegotiable because it would require an impermissible expenditure of congressionally appropriated funds. The FLRA specifically rejected the AFGE's sole argument, which was that most of the money in the AWCF does not consist of appropriated funds because the AWCF is in large part financed through collections from customers to whom TYAD sells services. Petitioner sought review.

Resolution of this issue turns on the definition of appropriated funds. The question of when agency funds are defined as "appropriated" has important legal implications going to the heart of Congress' power to control the financial activities and expenditures of the Executive Branch.

For the reasons set forth in this opinion, we determine that AWCF's money is properly considered appropriated funds, and we will affirm the decision of the FLRA.

I.

TYAD is the Defense Department's largest full-service electronic maintenance and repair facility, and is located in Tobyhanna, Pennsylvania. Civilian employees are represented by AFGE. TYAD is financed by a defense working capital fund—the TYAD AWCF. Defense working capital funds like the AWCF are continually replenished with money paid by outside federal agencies and private businesses for the purchase of defense agency goods and services. Additionally, defense working capital funds receive direct annual appropriations from Congress when required. See, e.g., National Defense Authorization Act for Fiscal Year 2004, Pub.L. No. 108-136, § 302, 117 Stat. 1392 (2003).

In 2002, the union and TYAD management discussed a proposed amendment to their collective bargaining agreement that would have provided for reimbursements of any documented financial losses suffered by an employee because of a cancellation of annual leave. Under the proposal, an employee whose leave was cancelled by TYAD would be reimbursed for forfeited airline tickets, hotel deposits, and the like. The proposal specifically suggested that the reimbursement would be "from other than appropriated funds." This presumably referred to the assumption that AWCF revenues from services performed for other agencies and businesses were not appropriated funds, and therefore not subject to the legal requirement that "[a]ppropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law." 31 U.S.C. § 1301(a).

Ultimately, TYAD rejected the union proposal on the ground that it was inconsistent with the law, because payment of personal costs is not within the scope of TYAD's authorized appropriations.¹ The union appealed to the FLRA. Before the Authority, the AFGE conceded that the statute governing the TYAD AWCF does not authorize using appropriated money to reimburse employees for personal expenses lost because of government action. (App.3-4, 83-84.) But, the union argued, the AWCF is a revolving fund, meaning that its outflows of money are replenished by income from billings to the TYAD's customers. Thus, the union urged, although appropriated funds could not be used to pay for personal out-of-pocket losses, TYAD could draw on its sales revenues because these were not appropriated funds.²

The FLRA upheld the determination that the AFGE's reimbursement proposal was improper. The Authority reasoned that as a revolving fund the AWCF should be treated, as a matter of law, as an "on-going or continuing appropriation." (App.4.)³ Given the union's acknowledgment that the AWCF statute did not authorize appropriated funds to be spent for personal reimbursements, the FLRA concluded that the union's proposal would violate 31 U.S.C. § 1301(a), and therefore was not a proper subject for collective bargaining under 5 U.S.C. § 7117.

We have jurisdiction over this petition for review under 5 U.S.C. § 7123(a). We review the FLRA's decision under the standards of the Administrative Procedure Act. See 5 U.S.C. § 7123(c) (incorporating 5 U.S.C. § 706). Because the question here is whether the FLRA decision is an improper interpretation of statutes governing the AWCF, our review is plenary, and we follow the agency's interpretation only insofar as its reasoning is "sound." Ass'n of Civilian Technicians, Tex. Lone Star Chapter 100 v. FLRA, 250 F.3d 778, 782 (D.C.Cir.2001).

II.

A.

One of the fundamental powers lodged by the Constitution in the Congress is control over the expenditure of public money. The Appropriations Clause provides:

No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

U.S. Const. Art. I, § 9, Cl. 7.

For purposes of the appropriations power, public money is defined broadly. As Justice Story observed in his Commentaries, it includes "all the taxes raised from the people, as well as revenues arising from other sources." 2 Joseph Story, Commentaries on the Constitution of the United States § 1348 (3d ed. 1858), quoted in Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 427, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990). By law, public money includes money from any source such as taxes, customs and user fees, and other proceeds of government agency activities. See 31 U.S.C. § 3302 (Miscellaneous Receipts Act). The purpose of the Clause is to place authority to dispose of public funds firmly in the hands of Congress rather than the Executive. Richmond, 496 U.S. at 425-27, 110 S.Ct. 2465; Cincinnati Soap Co. v. United States, 301 U.S. 308, 321, 57 S.Ct. 764, 81 L.Ed. 1122 (1937). This not only allows Congress to guard against "extravagance," Story, supra, but hands the Legislative Branch a powerful tool to curb behavior by the Executive. See generally Kate Stith, Congress' Power of the Purse, 97 Yale L.J. 1343 (1988). Without congressional permission, therefore, no money may be paid by the Treasury. Richmond, 496 U.S. at 427-28, 110 S.Ct. 2465; Reeside v. Walker, 52 U.S. (11 How.) 272, 291, 13 L.Ed. 693 (1850) (alternate holding).

Congress itself may choose, however, to loosen its own reins on public expenditure. So, for example, although Congress ordinarily requires that appropriations be spent within a single year, it may also authorize appropriations that continue for a longer period of time. See Nat'l Ass'n of Reg'l Councils v. Costle, 564 F.2d 583, 587 & n. 10 (D.C.Cir.1977). Congress may also decide not to finance a federal entity with appropriations, thereby giving rise to what is described as a nonappropriated fund instrumentality or NAFI. See United States v. Hopkins, 427 U.S. 123, 125 n. 2, 96 S.Ct. 2508, 49 L.Ed.2d 361 (1976); 10 U.S.C. §§ 4779(b), 9779(b). NAFI entities are "arms of the [federal] government," Standard Oil Co. v. Johnson, 316 U.S. 481, 485, 62 S.Ct. 1168, 86 L.Ed. 1611 (1942), but their "monies do not come from congressional appropriation but rather primarily from [their] own activities, services, and product sales." Cosme Nieves v. Deshler, 786 F.2d 445, 446 (1st Cir.1986).

What distinguishes a NAFI from other federal entities that are financed through the normal appropriations process? Under the case law, the test is not simply whether the organization in question receives payments from its own activities, but whether the organization is "denied by the Government any use of appropriated monies." L'Enfant Plaza Props., Inc. v. United States, 229 Ct.Cl. 278, 668 F.2d 1211, 1212 (1982); see also Hopkins, 427 U.S. at 125, 96 S.Ct. 2508 & n. 2. Since the power to appropriate belongs to Congress, see Richmond; Cincinnati Soap, 301 U.S. at 321, 57 S.Ct. 764, Congress must make the decision whether to allow or deny a federal instrumentality appropriated funds. Congress may impose the restriction that the instrumentality be entirely self-supporting, without any appropriated funds, in which case it is a NAFI. See, e.g., Core Concepts of Florida, Inc. v. United States, 327 F.3d 1331 (Fed.Cir.2003) (Federal Prison Industries is a NAFI); Furash & Co. v. United States, 252 F.3d 1336 (Fed.Cir. 2001) (Federal Housing Finance Board is a NAFI). Or, Congress may direct an entity to be self sufficient, but leave open the possibility that appropriations may be applied. See, e.g., L'Enfant Plaza, 668 F.2d at 1212 (financial self-sufficiency does not establish NAFI where historically appropriations were received and are allowed under the statute for the future); Slattery v. United States, 53 Fed.Cl. 258 (Fed.Cl.2002) (FDIC Bank Insurance Fund is not a NAFI because Congress expressed willingness to appropriate funds, although it never has). Whether an agency or agency fund is a NAFI is determined by looking at the entirety of its financial wellspring, not by parsing its revenue stream to determine which moneys came from the Treasury and which from customer payments. Indeed, an entity is not treated as a NAFI even if all of its money flows from its own activities, and even if appropriated funds have...