The Checks and Balances Letter: May 2019
From Ballotpedia
The Checks and Balances Letter delivers news and information from Ballotpedia’s Administrative State Project, including pivotal actions at the federal and state levels related to the separation of powers, due process and the rule of law.
This edition:
In this edition, we review a decision by the United States Court of Appeals for the Ninth Circuit upholding the constitutionality of the Consumer Financial Protection Bureau and an Office of Management and Budget memo that brings guidance documents under the purview of the Congressional Review Act.
At the state level, we highlight legislative inaction in Idaho that led to the repeal of the state’s entire regulatory code, a new law in Arizona making the state the first in the nation to recognize out-of-state occupational licenses, increased gubernatorial oversight over Oklahoma state regulations, and oral arguments in a Wisconsin case challenging the constitutionality of legislation approved during the state legislature’s 2018 extraordinary session (a type of special legislative session). As always, we wrap up with our Regulatory Tally, which features information about the 195 proposed rules and 280 final rules added to the Federal Register in April and OIRA’s regulatory review activity.
The Checks and Balances Letter
In Washington
Ninth Circuit upholds constitutionality of CFPB structure
- What's the story? A three-judge panel of the United States Court of Appeals for the Ninth Circuit upheld the constitutionality of the Consumer Financial Protection Bureau (CFPB) in a May 6 decision issued in CFPB v. Seila Law LLC. The CFPB was created in 2010 by the Dodd-Frank Act and was based on a model proposed by U.S. Senator Elizabeth Warren (D).
- The CFPB filed a petition with the United States District Court for the Central District of California to enforce the law firm’s compliance with the agency’s questioning and requests for documents concerning its telemarketing activities. The district court granted the CFPB’s petition and Seila Law LLC appealed the decision.
- Seila Law LLC argued that the firm did not need to comply with the CFPB’s requests because the agency is unconstitutionally headed by a single director who is only removable for cause—rendering the agency’s requests unlawful.
- The Ninth Circuit panel disagreed and affirmed the lower court decision, citing Humphrey’s Executor v. United States (1935) and Morrison v. Olson (1988) as controlling cases indicating “that the for-cause removal restriction protecting the CFPB’s Director does not ‘impede the President’s ability to perform his constitutional duty’ to ensure that the laws are faithfully executed.”
- Attorneys for Seila Law LLC and the CFPB had yet to comment on the decision as of May 9.
- The ruling is at odds with the June 2018 decision by Judge Loretta Preska of the United States District Court for the Southern District of New York in Consumer Financial Protection Bureau et al v. RD Legal Funding LLC et al. Preska held that the structure of the CFPB was unconstitutional due to its single director who is only removable for cause and is unaccountable to Congress or the president. Preska’s ruling is currently on appeal before the United States Court of Appeals for the Second Circuit. Read more about the decision in the July 2018 edition of Checks and Balances.
- The Ninth Circuit has jurisdiction over federal district courts in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. The Second Circuit has jurisdiction over federal district courts in Connecticut, New York, and Vermont.
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OMB memo subjects guidance documents to the Congressional Review Act
- What's the story? The Office of Management and Budget (OMB) issued a memo on April 11 affirming that the Congressional Review Act (CRA) applies to proposed rules and guidance documents, including those issued by independent federal agencies.
- The CRA requires agencies to submit rules to Congress before they go into effect. Congress can then pass a joint resolution of disapproval to reject a rule within 60 legislative days. The Office of Information and Regulatory Affairs (OIRA) assists Congress in prioritizing certain rules by deciding whether a rule qualifies as a major rule, meaning that the rule could result in large or adverse economic impacts.
- The OMB memo clarifies that guidance documents are within the CRA’s definition of rules because they may have practical effects on the public, even if they are not legally binding. Federal agencies issue guidance documents to explain, interpret, or advise interested parties about rules, laws, or procedures.
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In the States
Idaho legislature repeals entire regulatory code
- What's the story? Idaho’s entire regulatory code was effectively repealed as of July 1 after the Legislature failed to reauthorize the 8,200 pages of rules.
- Regulations in Idaho must be reauthorized each year.
- Lawmakers failed to do so by the end of what media outlets, including Boise State Public Radio, described as an acrimonious legislative session.
- Governor Brad Little (R) directed agencies to submit their rules to the Division of Financial Management by May 10 for temporary approval in order for the rules to remain in effect until the legislature reconvenes in January.
- Several state agencies, including the Oil and Gas Conservation Commission and the Idaho Lottery, planned to cut rules prior to submission pursuant to Governor Little’s Red Tape Reduction Act executive order. The order, issued in January, requires agencies to repeal, simplify, or justify two rules for each new rule issued—similar to President Donald Trump’s (R) Executive Order 13771.
- Approved rules will be published in a June 19 edition of the Idaho Administrative Bulletin, followed by a 21-day comment period.
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Arizona becomes first state to recognize out-of-state occupational licenses
- What's the story? Legislation signed into law by Governor Doug Ducey (R) on April 10 makes Arizona the first state to recognize out-of-state occupational licenses.
- The law requires Arizona state agencies to issue licenses or certifications to new residents who already hold corresponding licenses in another state. The law eliminates the requirement for new residents to fulfill state-specific training.
- New residents must have a current certification in the same discipline in another state and have no record of disciplinary action or loss of a license. Examples of occupations affected by the law include architects, geologists, physicians, nurses, contractors, and real estate agents.
- In his 2019 State of the State Address, Governor Ducey argued in favor of the law saying, “One-hundred thousand people will move here this year. There’s a job available for every one of them. Lots of them are trained and certified in other states ... let’s remember: workers don't lose their skills simply because they move to Arizona.”
- Opponents of the law, including the National Board of Certified Counselors, expressed concern that the law could harm members of the public by allowing professionals who have not met the minimum state requirements to practice in Arizona.
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Oklahoma governor issues executive order strengthening regulatory oversight
- What's the story? Oklahoma Governor Kevin Stitt (R) issued an executive order on April 16 that aims to strengthen gubernatorial oversight of regulations.
- The order requires agencies to submit a Rule Impact Statement in addition to the text of each proposed rule to the governor and relevant cabinet secretary. Prior to the order, agencies were only required to submit the text of the proposed rule for review by the governor and cabinet secretary.
- The Oklahoma Administrative Procedure Act requires agencies to issue Rule Impact Statements within 15 days of publishing notice of a proposed rule in The Oklahoma Register. Rule Impact Statements must include descriptions of the proposed rule, affected parties, and economic impacts, among other considerations.
- The governor and cabinet secretary each have the authority to disapprove of proposed agency rules after reviewing the text and Rule Impact Statements. An agency may adopt a proposed rule if the governor and cabinet secretary take no action after 45 days.
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Wisconsin Supreme Court hears oral arguments in case challenging 2018 extraordinary session
- What's the story? The Wisconsin Supreme Court heard oral arguments on May 15 in a case challenging the constitutionality of the legislature’s December 2018 extraordinary session and resulting legislation, which would make changes to administrative processes in the state. An extraordinary session is a type of special legislative session in Wisconsin that focuses on a specific topic and can be called by the legislature without the governor’s approval.
- A group of individuals and organizations, led by the League of Women Voters, filed the lawsuit in January 2019 seeking to void the legislation passed during the extraordinary session on the grounds that state lawmakers had convened the session in violation of the Wisconsin Constitution.
- The legislation at issue would change administrative procedures such as codifying the prohibition of judicial deference, new standards for agency guidance documents, and abolishing sue-and-settle practices, among others. Find out more about the legislation in the December 2018 issue of Checks and Balances.
- Justice Rebecca Bradley observed that the state legislature has convened in unchallenged extraordinary sessions for 40 years. Justices Daniel Kelly and Patience Roggensack noted the legislature’s statutory authority to set its own meetings and procedures.
- Justices Ann Walsh Bradley and Rebecca Dallet pointed to the lack of explicit language in the Wisconsin Constitution allowing for the state legislature to call an extraordinary session.
- Three other pending lawsuits challenge the extraordinary session and resulting legislation. A state lawsuit filed by Wisconsin union groups claims that the legislation violates the separation of powers by increasing legislative authority over executive branch actions. A federal lawsuit filed by advocacy groups, including Citizen Action of Wisconsin and One Wisconsin Institute, seeks to overturn changes to early voting procedures that were included in the legislative package. Lastly, a federal lawsuit filed by the Democratic Party of Wisconsin argues that the extraordinary session violates the U.S. Constitution's Guarantee Clause, which guarantees every state the right to a republican form of government.
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New study sheds light on unconstitutional regulations
The Pacific Legal Foundation has issued a new report titled “But Who Rules the Rulemakers?” that analyzes whether thousands of rules were properly issued by the Department of Health and Human Services during a 17-year period. Researchers found that 71 percent of the rules did not meet constitutional requirements.
The Pacific Legal Foundation provided the following summary of the report’s key findings:
- “But Who Rules the Rulemakers reviewed 2,952 final rules issued by the Department of Health and Human Services over a 17-year period.”
- “The report found that nearly 75% of these rules are unconstitutional because they were issued by low-level officials and employees with no authority to issue rules.”
- “The 2,094 unconstitutional rules we found have real consequences for individuals and small businesses.”
- “Among the thousands of rules issued without democratic controls by the Food and Drug Administration were 25 rules that each had an impact of $100 million or more.”
- “Each of the branches should act to rein in this undemocratic behavior—including striking down illegally issued rules and requiring senior appointees to take responsibility for rules issued by their agencies.”
- “But Who Rules the Rulemakers reviewed 2,952 final rules issued by the Department of Health and Human Services over a 17-year period.”
Click here to read the full report.
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Regulatory Tally
Federal Register
- The Federal Register in April reached 18,382 pages. The number of pages at the end of each April during the Obama administration (2009-2016) averaged 24,252 pages.
- The Federal Register included 195 proposed rules and 280 final rules during April 2019. The regulations included hydroelectric licensing rules, transportation industry drug testing standards, and the classification of the Bryde’s whale as an endangered species, among others.
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Office of Information and Regulatory Affairs (OIRA)
- OIRA’s April regulatory review activity included:
- Review of 44 significant regulatory actions. Between 2009-2016, the Obama administration reviewed an average of 47 significant regulatory actions each April.
- Recommended changes to 39 proposed rules.
- Approved one rule without changes.
- Agencies withdrew four rules from the review process.
- As of May 1, 2019, the OIRA website listed 101 regulatory actions under review.
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Footnotes
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