Wisconsin Supreme Court settles political dispute over settlement funds

MADISON, Wis. (CN) — The Wisconsin Supreme Court has ruled in favor of Democratic state Attorney General Josh Kaul in a political dispute between his office and the Republican-controlled state Legislature over state revenue from legal settlements.

After Kaul was elected in 2017 but before he took office, the Legislature passed a package of lame duck laws aimed at shifting much of the newly elected Democrat’s powers to the Republican-controlled Joint Committee on Finance.

One of those laws was a catch-all rule requiring Kaul to “deposit all settlement funds into the general fund.”

Kaul interpreted the brief statute to mean that he can deposit settlement funds into any subaccount within the general fund. The Legislature argues it intended him to deposit them into the “general purpose revenues” account within the general fund.

The Legislature sued Kaul, claiming he was intentionally avoiding legislative oversight. The circuit court agreed with Kaul, but an appellate panel later sided with the Legislature.

The state’s high court settled the beef on Friday, handing a legal victory to the attorney general.

“When the Legislature wants to direct both that money is to be deposited into the general fund and that it must be credited somewhere specific, it knows how to do so,” Justice Rebecca Dallet wrote for the majority. She said relevant state law does not “restrict where the attorney general may credit money he deposits within the general fund.”

The state Supreme Court justices grilled both sides for more than two hours in March. At the time, they seemed frustrated not only with the Legislature for leaving money unspent in the general fund but also with the attorney general for his broad reading of the statute governing such funds.

On Friday, Dallet found the plain text of the law to be undoubtedly clear. Unless or until the law is clarified, Kaul is well within his authority to credit the revenue within the general fund as he sees fit, she said.

“This simple, declarative sentence identifies a class of state money (‘settlement funds’) and imposes a single, narrow restriction on where that money must be deposited," Dallet wrote in an 11-page opinion. “It says nothing whatsoever about where that money may or must be credited after it is deposited.”

The majority centered its reasoning around the difference between “deposit” and “credit,” the latter of which isn’t mentioned in the brief statute.

When a state agency receives money on behalf of the state, it must place that money into a “fund” within the state treasury, according to Friday’s opinion. Budget statutes refer to this action as “depositing.”

There are two funds: the segregated fund, where money is directed by law for specific purposes, and the general fund. Revenue deposited into the general fund must be either designated as “general purpose revenue” or for a specific account within that larger, catch-all fund. The latter action — the designation within a specific account — is known as “crediting.”

The Legislature argued before the justices that Kaul is required to credit uncommitted settlement funds into the general purpose revenue fund. However, it left those instructions out of the lame duck law.

To find in favor of the Legislature, the court would have to conflate “credit” and “deposit” and impose new restrictions, Dallet reasoned. Friday’s opinion scolds the appellate court for doing just that.

Since the Legislature controls money in the general fund, the dispute largely came down to power and politics.

Kaul prevailed in his countersuit against the Legislature in June 2025 when the Wisconsin Supreme Court overturned one of the lame duck laws, finding it violated the separation of powers.

That law had shifted the power of approving state settlements from the attorney general to the Joint Committee on Finance, controlled by state Republicans. The court said the Legislature could establish the scope of Kaul’s litigation power but could not execute those powers itself.

In addition to the primary issue, the high court asked the parties to brief whether the attorney general can treat settlement funds as “proceeds from services” for the purposes of crediting them to a corresponding account.

Dallet asserted in Friday’s opinion that, following oral arguments, the justices could not reach a majority mandate on that issue. The issue was dismissed as “improvidently granted,” or dismissed as it never should have been accepted.

Justice Brian Hagedorn threw that explanation into question in his dissenting opinion, where he concurred on the primary question but bashed the majority for tossing aside the additional issue.

He asserted a majority of justices in fact agreed on the proper interpretation of the statute but disagreed simply on how to style the mandate.

“The court’s inability to come together leaves the parties with no clarity about how to conform their actions to the law. It is most unfortunate that the court — even while we agree — cannot produce an opinion effectuating our agreement,” Hagedorn said.

“The Republican-led legislature’s attempt to cut funding for [the Wisconsin Department of Justice] through litigation has failed,” Kaul said in a statement to Courthouse News. “This is a win for the vital work that DOJ does to protect the public.”

The Legislature did not immediately respond to a request for comment.

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