Last week I looked into the proposed “rules throttle” in the conference report for House Bill 162. As I see it, it’s an intriguing reform proposal that just needs a little more clarity and little more accountability.

One part of the reform is a proposed prohibition against rules (or sets of rules) with a five-year projected cost of at least $100 million. This aspect is not a rules throttle but a rules limiter. It could also have unintended negative consequences, as Carolina Journal reported. For example, it would have blocked the K-12 Read to Achieve program, collecting immunization reports, and Unemployment Insurance Reform, among a few others.

So there’s a good case to eliminate the prohibition on $100 million+ rules. Mainly, doing so would not automatically green-light those rules. They would still be subject to the rules throttle.

The rules throttle would apply to rules (or sets of rules) with a five-year projected cost of at least $10 million:

  • The rule would have to receive certification of review and support by the relevant authorities of the originating agency, board, commission, etc. (either 60 percent of voting members of boards and commission, a member of the Council of State, or the governor).
  • The rule would be automatically subject to legislative review as if ten letters of objection to it had been received and a bill disproving the rule had been introduced — i.e., triggering the statutory obligation for legislative review.

There is still the problem that very few of the rules subject to legislative review actually receive such review. A 2010 study by the John Locke Foundation showed that about seven out of every eight (87.5%) rules subject to legislative review never even received a vote. They were therefore allowed to go into effect at session’s end.

The reason is simple: legislators have only so much time in a session and hundreds of bills to sort out. The incentives structure works against them choosing to review a potentially major administrative rule, even if they would like to. But that invites agency overstep — producing rules to implement legislation that exceed what the legislature intended with it.

The good news is, there aren’t that many rules (or sets of rules) that would need additional legislative review. If just the rules throttle had been in place in 2011, it would have subjected only 31 rules (or sets) to legislative review. That is not a taxing amount spread across six years.

The challenge is to find a way to double-check that major rules are consistent with legislative intent without hamstringing the legislature, incentivizing legislative indifference, and frustrating agency rulemaking.

Legislative rule ratification in Florida

The solution may already be on the books in Florida. In 2010, over Gov. Charlie Crist’s veto, Florida legislators amended the state Administrative Procedures Act to require proposed costly rules to receive ratification from the legislature. (It did not apply to emergency rules nor to adopting federally imposed standards.)

The threshold set by Florida lawmakers to trigger legislative review (see section 120.541(2) in the law) was if the agency’s estimate of a proposed rule’s regulatory costs exceeded $1 million within five years of implementation. Practically, that meant a $200,000 first-year cost, and the agency’s statement of economic analysis was to see whether the rule would produce that cost directly or indirectly in at least one of three areas:

  • Economic growth, private sector job creation or employment, or private sector investment
  • Business competitiveness (including across state lines), productivity, or innovation
  • Increase of regulatory costs, including transaction costs

If it would, then (see 120.541(3)):

the rule shall be submitted to the President of the Senate and Speaker of the House of Representatives no later than 30 days prior to the next regular legislative session, and the rule may not take effect until it is ratified by the Legislature.

Notice that this Florida rules throttle, known as legislative rule ratification, would not automatically repeal a rule that wasn’t ratified — that is, if no one brought a bill forth to ratify it which passed. Without ratification, the rule would still be adopted but would not take effect. It would stay that way till it was ratified.

The Florida rule throttle’s triggering threshold seems very low compared with the one proposed for North Carolina. Someone here might expect the Florida legislature to be flooded with rules to review, but that is not the case at all. I think the explanation is that the states estimate regulatory costs differently — North Carolina basically requires aggregate impact, whereas an economic analysis would take opportunity costs into account.

Agencies and legislature working together

How is the Florida rules throttle working? A Florida Bar Journal review of it in 2015, “Legislative Rule Ratification: Lessons from the First Four Years,” is quite positive. The review found:

  • the legislature has taken up agencies’ ratification requests “with due deliberation”
  • “legislative rules ratification has become routine”
  • “Few rules … have required legislative ratification”
  • the legislature “has moved with dispatch either to ratify the rule submitted or determine not to proceed”

Another strong positive rings forth in this review. The Florida rules throttle increased communication between administrative agencies and legislature. They worked together to create a model bill template for ratifying a specific rule (or set of rules), they opened preliminary discussions of rules that would likely need ratification (including possible controversies surrounding them), and they stayed in communication during the introduction and consideration of ratification bills.

Given that the rationale of a rules throttle would be to ensure that the agencies produce rules to implement legislation consistent with the intent of the legislature in passing it, that is a very welcome outcome.