A REINS Act without legislative rule ratification won’t work

• Under a proper REINS Act with legislative ratification, if an administrative rule’s aggregate cost exceeds the threshold set in law, it would not take effect unless the legislature reviews it and votes to allow it
• The version of the NC REINS Act (House Bill 402) approved by the House, however, took out legislative ratification, opting instead to use the preexisting process of seeing if the legislature would vote to repeal a rule
• Unless the Senate restores legislative ratification, then even under this bill, the expensive rule would still inevitably take effect

On April 16, the North Carolina state House passed House Bill (HB) 402, the NC REINS Act (the acronym stands for “Regulations from the Executive In Need of Scrutiny”). As originally filed, the bill would be an important new regulatory reform as well as an excellent good-government reform. Unfortunately, the compromise version that passed had removed a critical portion and upended the bill’s promise. It can still be restored by the state Senate, however.

What is a REINS Act?

A REINS Act seeks to prevent executive rulemaking agencies (such as the Department of Environmental Quality or the Department of Health and Human Services) from going it alone and instituting rules that would impose deep costs on the state’s private sector. If an administrative rule exceeds a threshold amount of cost set by the act, then before the regulation could take effect, it would have to be approved by a vote of the General Assembly.

Florida has had REINS in the form of legislative rule ratification in place since 2010, and the process has earned the praise of regulators, legislators, and even the Florida Bar Journal. It causes regulators to work with legislators when they perceive the need for a costly regulation. Why that’s important for good government is discussed below.

Why would REINS be a good reform?

The key importance of REINS is that it restores lawmaking authority to the General Assembly when it pertains to state executive agencies promulgating expensive rules. Only legislators, who are popularly elected by (and accountable to) the voters in their districts, have the constitutional authority to make laws. Rules have the effect of laws, which is why rulemaking authority is delegated to the executive agency by the General Assembly — and only to the extent of executing a law the agency must enforce.

Agencies can easily exceed their authority, however, because legislators have too many other things to do. There is a process in state law already for the legislature to disapprove a rule. Doing so, however, requires passing a bill — which requires drafting it, getting it past committees, getting it approved by both chambers, and getting it signed by the governor (who as head of the executive branch is more likely to veto the bill than sign it). It’s a steep lift for an administrative rule, even for a rule that legislators oppose, when there are other pressing matters before them.

For this reason, institutional inertia tends to favor excessive rulemaking. A 2010 study from the John Locke Foundation found that the legislature disapproved only about one-tenth of one percent of agency rules introduced. While it’s hard to pass a bill into law, it’s virtually unheard of for an agency rule to be disapproved. The legislature needs help stopping expensive rules, and REINS could do so — if it’s done right.

A proper REINS Act would use institutional inertia against expensive rules instead of for them. REINS would prevent the expensive rule from taking effect unless it received approval from the General Assembly.

In other words, a proper REINS Act would require the legislature — elected representatives of the people — to ratify that yes, this expensive rule by bureaucrats — unaccountable to the people — is within our intent of delegating that rulemaking authority to the agency.

The reform hinges on what happens to a rule with significant economic impact. Must it wait for legislative ratification or not?

What did the version of REINS that passed the House take out?

The original version of the NC REINS Act would apply to rules with “an aggregate economic impact on all persons affected of at least one million dollars ($1,000,000) … in a 12-month period.” If so, it would require “ratification by the General Assembly” — specifically, the rule “shall become effective only if the General Assembly ratifies a bill to approve the rule” (emphasis added).

The version that passed the House, however, did away with legislative ratification. Instead, it would use a process already in place for a rule that receives 10 or more written objections and applies it also to a rule with at least a million-dollar aggregate economic impact. So the rule would be placed merely on a temporary hold. It would still become effective (either on “the thirty‐first legislative day or the day of adjournment of the next regular session of the General Assembly that begins at least 25 days after the date the [Rules Review] Commission approved the rule,” whichever comes earlier). The only way to stop a costly rule under this process, which we already have but rarely use, is if the legislature takes the time to vote to stop it.

In other words, the rule would inevitably take effect. It would take an act of the legislature to stop it.

What does the NC REINS Act need in order to work?

A proper REINS Act, which we have advocated for at the John Locke Foundation for years and which remains our top recommended regulatory reform, would require an act of the legislature to allow an expensive rule to become effective. The Senate should restore the legislative ratification provision that the House version took out.