Forfeiture Laws, Policing Incentives, and Local Budgets

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When de facto policies allow police to keep the assets they seize, they seize more. When local governments offset the value of those seizures in the budget allocations, the police seize less.

Federal drug-related civil forfeiture law dates back to the Comprehensive Drug Abuse Prevention and Control Act of 1970. Since then, the authority of law enforcement agencies to seize assets has expanded greatly. This practice, known as drug-related civil asset forfeiture, has been a source of considerable controversy, because the legal hurdles for forfeiture are lower than for criminal conviction, and because those subject to seizures can find it difficult to recover their property, even when they are found not guilty of related criminal charges.

For some localities, forfeitures have become a major revenue source for local police and prosecutors. Thus, law enforcement agencies may be motivated not only by the desire to deter crime, but also by the added incentive of potential proceeds from anti-crime policing. However, the reaction of local governments to these laws highlights a fundamental problem in the use of incentives to solve problems in the provision of public goods in a federal system. When several levels of government are involved in the provision of public goods, they may have competing goals and constraints. In the case of forfeitures, while the states may have introduced incentives to induce anti-drug policing, county governments also have jurisdiction over police policy and police budgets. The counties have the ability to adjust their allocations to police, in effect undoing the incentives created by the state.

In Finders Keepers: Forfeiture Laws, Policing Incentives, and Local Budgets (NBER Working Paper No. 10484), authors Katherine Baicker and Mireille Jacobson find that local governments indeed capture a significant fraction of the seizures that police make by reducing their other allocations to policing. This undermines the statutory incentive created by seizure laws. Local governments are more likely to do this in times of fiscal distress. The police, in turn, respond to the real net incentives for seizures, once local offsets are taken into account, not simply to the incentives set out in statute. Thus, a simple analysis of the effects of asset forfeiture laws, as they appear on the books, provides only a limited or even a distorted view of the effects of these policies.

More generally, these findings imply that the effectiveness of federal and state laws using financial incentives to influence agents' behavior is limited by the ability of local governments to divert funds to other uses. Ignoring this yields a misleading picture of the responsiveness of local agents to incentives and of the effectiveness of federal and state policies. Understanding the financial incentives faced by each agency and each level of government involved in the budget process is a crucial component of designing policies to affect the provision of public goods.

In their analysis, Baicker and Jacobson use data from several different sources, including information that they collected on the value of seizures made by police agencies through five individual state statutes. They also use publicly available data on forfeitures through the Department of Justice for all continental states, as well as local government spending, crime, and other variables.

-- Les Picker