by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
In state rulemaking, there’s always a tension between the actual and practical extent of an agency’s authority to craft rules. State agencies have this power on loan from the General Assembly, which is the only body with the constitutional authority to produce laws.
Rulemaking is at its core a legislative (i.e., lawmaking) power. It makes sense for the legislative branch to delegate some power to these executive branch agencies so that they can implement or interpret the laws the legislature has passed. In so doing, legislators are putting subject-matter experts in charge of crafting the finer-detail rules of the big-picture laws they have passed.
A bill recently filed in the General Assembly is called “An Act to Update the Process for Legislative Review of Rules.” As a longtime advocate for a better process for legislative review of rules, I welcome the concept.
Nevertheless, the bill (House Bill 327 as filed) would make little practical change to the current process. What it would do is clarify the existing process and make it easier to find in the General Statutes. This process (currently in G.S. § 150B-21.3) allows for people to object to agency rules upon their adoption and sets a time by which a legislator may file a bill disapproving a rule, which must pass the legislature before the bill could be disapproved.
Legislative disapproval is the last line of defense against a proposed rule becoming permanent. The agency itself could choose not to adopt the rule after receiving public comments and fiscal information about it. Then the state Rules Review Committee (RRC) could object to it and the agency choose not to revise it. Finally, at least 10 North Carolinians could object to the rule, which would cause the rule to await potential action in the upcoming legislative session.
As difficult as it appears, however, nearly all proposed rules go on to become permanent, and very, very few are ever disapproved by the General Assembly. A 2010 study from the John Locke Foundation found that the legislature disapproved only about one-tenth of one percent of agency rules introduced.
Clarifying the legislative review of rules would be a good idea. But some rules are different from others. Some are minor, procedural things, whereas others can impose major costs in time and money on people and businesses.
For that reason I would urge legislators to add a way for them to review rules that pose significant costs to North Carolina’s economy and private sector. There’s a well-tested process out there already, and it’s been working in Florida for over a decade.
Under Florida’s process, known as legislative rules ratification, agencies must produce a “statement of expected regulatory cost” when the aggregate cost of a proposed rule would be $200,000 or more in the first year (i.e., a five-year cost of at least $1 million). Those cost could be direct and indirect costs to the private sector. Proposed guidance to agencies in determining those costs included three subcategories: costs on small businesses, adverse impacts across a broad array of economic measures, and costs of compliance. Any rule found to exceed that cost threshold would need legislative rules ratification.
If that last part sounds similar to North Carolina’s, let me explain the key difference. In Florida, unless a legislator drafts a bill and it passes the legislature, the rule does not go into effect. In North Carolina, a rule subject to legislative review is expected to take effect unless the legislature passes a bill to disapprove it. In Florida, it takes a bill to approve it.
The biggest hurdle in the process in both states is the high cost in time and effort involved in drafting and passing legislation. Agencies in North Carolina benefit from this cost by seeing very few rules ever disapproved. Even when legislators probably disagree with a rule, they often don’t have the time to mess with it. In Florida, agencies are forced to double-check with the legislature to make sure their costly rules still have the legislature’s blessing.
The Florida Bar Journal tells one of the great benefits of Florida’s legislative rules ratification: agencies and legislators work together on big rules. They have preliminary discussions over them, often resulting in potential controversies being ironed out beforehand and sometimes leading to rules not being proposed. They agreed to template bill language for rules ratification that results in the rule taking effect without being considered an enactment. The process has become “routine.”
Here is an example of legislative rules ratification at work over important but very expensive rules:
After a dozen nursing home residents in Hollywood, Florida, died in 2017 when Hurricane Irma left them without power in sweltering heat without air conditioning, Gov. Rick Scott favored new rules that would require nursing homes and assisted living facilities to have backup generators and three days’ worth of fuel on site.
The rules would cost nursing homes an estimated $125 million and assisted living facilities an estimated $244 million over five years.
The debate over the ratification bills (one for nursing homes and one for assisted living facilities) was contentious, the final outcome was not certain, and alternative proposals were also debated. Eventually, both ideas were ratified, and since then several facilities have been given extensions in meeting the mandate.
Let’s review the controversy and outcome. While the intent behind the rules was obviously to save residents from being endangered, the costs of such rules could have bankrupted some facilities, which would have resulted in some residents being endangered in other ways. Having the legislature discuss, debate, and even wrangle over those issue brought considerations and concessions that might not have otherwise been made under uncontested agency rules.
Such debate from their elected representatives over a potential major change is exactly what people should be able to expect.
North Carolinians would be well served by adopting Florida’s process for legislative rules ratification. It would affect only those few proposed rules per year that would have significant impact on people and the private sector. It would otherwise not supplant the state’s current legislative review of rules.
It would align agencies and the legislature over major rules. Perhaps more importantly, if there was disagreement between an agency and the General Assembly, it would favor the direct representatives of the people who hold constitutional lawmaking power, not unelected bureaucrats.