In the 1980s federal law was changed such that asset forfeitures could be put into the US Treasury's general fund. That was quickly changed back a few years later. My suspicion is that the Feds allow the states and agencies to keep it, as a cooperation enticement. It helped make for happy allies in the war on drugs and kept everyone on the same page. Bribe money, basically. If you don't want them to fight against (or ignore enforcement) the war on drugs as a concept, give them an economic incentive to cooperate. The sums used to be far more trivial (prior to the last decade), so the US Treasury likely didn't miss it.

Also agree it shouldn't exist, but if there were a general fund, it shouldn't go towards funding any government agencies even in a distributed fashion. Maybe credit it out to all tax payers?

If it gets credited out to taxpayers, I would expect any public pressure to get rid of civil asset forfeiture to disappear very quickly.

Essentially it would be credited to all taxpayers as less tax revenue would in principle be required but in reality it'd be a drop in the bucket, which is the point.

What would the point of suing the entity for punitive damages if you didn't see any of the money?

You’re suing for actual damages, for which you should receive restitution

No, you are suing for both. So removing the potential punitive will lower the incentive to sue. Especially for class action law suits.