ADMINISTRATIVE & REGULATORY LAW NEWS
News From The States
Regulatory reform at the federal level has dominated discussions of administrative law during the past two years, but while Congress ultimately shied away from major reform legislation, some states have been more active. Whether the state experience has lessons for federal administrative law or lessons for other states is open to question. At the ABA Annual Meeting in Orlando, the Section hosted a program on regulatory reform in the states. In this issue of the News we are condensing those presentations to inform our readers who were not able to attend that meeting of some new departures, some new ideas.
Close Encounters of the Administrative Kind:
California's Office of Administrative Law
by Michael Asimow(1)
California's rulemaking process includes virtually every bell and whistle known to mankind. CA Gov't Code §§11340-11359 (West Supp. 1996) (hereinafter "GC"). Nearly every rule adopted by nearly every agency, (2) must be approved by an executive branch agency known as the Office of Administrative Law (OAL). OAL has 30 working days to approve or disapprove. An agency can appeal an OAL disapproval to the Governor but such appeals are rare (about one a year) and seldom successful.
OAL functions primarily as a surrogate reviewing court: it reviews rules for necessity, legality, and procedural compliance. Under the "necessity" standard, OAL must find that the record demonstrates the need for a rule by substantial evidence. GC §11349(a). This closely resembles the standard for judicial review. GC §11350(b)(1). Under the "legality" standard, OAL must approve the agency's legal interpretation. OAL also serves as the state's English teacher: every rule must meet the standard of "clarity," meaning that rules can't be written in double talk or must be understandable by the public.
OAL resolves almost all disputes through a negotiation process--the "close encounters" of the title. If the rule is unclear, OAL helps the agency to redraft it. If the necessity standard can be satisfied by a better explanation or justification, the agency can supply it. Only about 7% of rules submitted to OAL are disapproved (although some are withdrawn before disapproval).
Unlike the 1980's, when the agencies viewed OAL with fear and loathing, the relationship today is surprisingly warm. Agency staff members view OAL reviewers as cooperative and find the process of OAL review constructive. This turnaround is a tribute to strong leadership by OAL's director and to an improvement in the experience and training of agency staff members responsible for rulemaking. Paralegals used to handle the rulemaking chores; no more. A slightly more cynical explanation for detente is that OAL has been defanged by substantial cuts in its budget. OAL's checking process does not contribute much to ossification--although California's rulemaking process as a whole is far too complex, the OAL review process consumes relatively little time.
OAL's efforts produce more clearly written rules and may well forestall costly and inefficient judicial review. OAL is very popular with the private sector and thus contributes to the legitimacy of the rulemaking process. Contrary to the opinion I held a few years ago, I think OAL works well and is a model that could be emulated in other states.
However, the statute should be amended to make clear that, under the necessity standard, OAL cannot require factual support for those provisions of a regulation that are truly political compromises or judgment calls. The statute should also be amended make clear that OAL must accept any reasonable agency legal interpretation.
OAL's review process is very different from that of the Office of Information and Regulatory Affairs in the Office of Management and Budget under Executive Order 12866. OIRA reviews only significant rules, not all of them. Its task is to coordinate efforts by different agencies and to assure that regulations implement rather than undermine the President's program. And it is committed to an efficiency-based methodology.
OAL, on the other hand, is politically and substantively neutral. It functions as a mini-court and English teacher, not as a political actor or enforcer of a particular regulatory methodology.
What can federal administrative lawyers learn from OAL? Probably, that it wouldn't work at the federal level. The federal rulemaking process is sufficiently ossified so that it would be unwise to pile on a new checking process. And if you have to choose between OAL's surrogate judicial review model or OIRA's political coordination and control model, I conclude that OIRA's function is the more important of the two.
Florida's 1996 Revised APA
by Jim Rossi(3)
Although in recent years many states have been flirting with regulatory reform, few have gone as far as Florida towards adopting major changes from the status quo. In Spring 1996, Florida adopted a revised Administrative Procedure Act (APA), the first massive overhaul of Florida's APA (Chapter 120, Florida Statutes), since its initial adoption in 1974.
Many of the provisions in the 1996 APA revisions are particularly harsh for agency rulemaking and thus seem to contradict 1991 amendments to Florida's APA. Florida's APA was amended in 1991 to require agencies to use rulemaking when making statements of general applicability and future effect, to the extent "feasible and practicable". In other words, when making statements of general applicability and future effect, agencies in Florida are presumptively required to use rulemaking: agencies bear the burden of showing that it is not "feasible" or "practicable" to promulgate a rule. Thus, as this provision explicitly states, in Florida "[r]ulemaking is not a matter of agency discretion." Following the addition of the presumptive rulemaking mechanism, agencies in Florida have experienced a large growth in the number of rules promulgated, making this provision the subject of rigorous debate in the last couple of years.
The major substantive provisions in the 1996 Florida APA revisions were meant to implement two basic goals: flexibility and accountability. Flexibility is given lip-service by the addition of a novel new provision meant to authorize agencies to grant waivers to regulation in a broader range of circumstances. This waiver provision modifies some previous Florida case law, which limited the granting of waiver to those rare cases where an agency had expressly provided for waiver of regulations in published rules, or where agencies met a heightened burden of explanation. The new provision, however, goes further than merely authorizing agencies to grant waivers. It also requires an agency to grant a waiver, upon application, where the applicant has shown that: 1) waiver of the rule will still allow the purpose of the underlying statute to be achieved; and 2) application of the rule would create a substantial hardship or would violate principles of fairness. The extent to which administrative law judges and courts will defer to agency determinations of statutory purpose and hardship or fairness on review is unclear. If these institutions do not defer to agency determinations, this is not a flexibility provision at all: rather, it goes from one extreme -- no waiver -- to another -- mandatory waiver. Although the waiver provision is a novel addition to Florida's APA, the accountability provisions of the 1996 revisions promise to have a much more significant impact on agencies by making rulemaking an extremely difficult task to implement. One remarkable new legislative accountability provision, echoing section 627 of S. 343 (the Dole regulatory reform bill), states that "no agency shall have the authority to adopt a rule only because it is reasonably related to the purpose of the enabling legislation and is not arbitrary and capricious, nor shall an agency have the authority to implement statutory provisions setting forth general legislative intent or policy." The 1996 revisions to the Florida APA set up a procedure for legislative review of all existing rules exceeding this authorization and, failing new legislation, provide for their repeal by 1999.
Rulemaking is made even more difficult by the adoption of provisions in the 1996 APA revisions meant to ensure direct accountability to the regulated community. Two mechanisms are likely to significantly impact rulemaking: a new cost assessment provision, and the abolition of deference for proposed rules. Both of these mechanisms rely on the shifting of burdens to agencies to make agency decisionmaking more accountable.
The new cost assessment provision replaces a previous cost/benefit analysis equirement in Florida's APA. In contrast to previous law, Florida's 1996 APA revisions shift to an agency the burden of presenting rationales for rejecting a proposal for a lower-cost alternative to regulation submitted by a challenger. Upon the submission of such a proposal, the new provision requires an agency to prepare a cost assessment showing that there are no "less costly alternatives that substantially accomplish the statutory objectives", including the alternative of no rule. Grounds for challenging rules on appeal are amended in the 1996 revisions to reflect this new standard.
Another provision in the 1996 revisions to Florida's APA abolishes the high level of deference Florida courts have historically given to proposed rules. Under prior law, persons could challenge regulations before they became effective at the Department of Administrative Hearings prior to a judicial appeal. The burden, however, was on the person challenging a rule; there was a presumption of validity to the rule. Under the new provision, proposed rules are no longer to be presumed valid. New rules are not presumed invalid, but an agency now bears the burden of proving a proposed rules's rationality in response to each objection raised by a challenger.
Because the 1996 Florida APA revisions also allow for attorney's fees in rule challenge proceedings, the costs to agencies of proposing new rules in Florida have risen significantly. Despite these efforts to hamper rulemaking, the 1996 revisions retain the presumptive rulemaking mechanism that was added to Florida's APA in 1991. Consistent with the 1991 presumptive rulemaking amendment, however, the 1996 reforms continue to take away agency discretion.
It remains to be seen whether the objectives of the Legislature -- flexibility and accountability -- will in fact be achieved. In the 1996 Florida APA reforms, it appears that advocates of flexibility in administrative process have lost out to those who would like mandatory relief from regulation, even where regulation is socially beneficial. Likewise, advocates of accountability, by sharply limiting agency discretion, may have lost any opportunity to allow agencies to set regulatory agendas and to act responsibly in promulgating rules.
[A recent law review article (Stephen Maher, The Death of Rules: How Politics is Suffocating Florida, 8 St. Thomas L.Rev. 314 (1996)) provides an interesting history of Governor Lawton Chiles' crusade against rulemaking that preceded the legislative changes. Ed. note]
Of Babies and Bathwater--
Washington's Experiment with Regulatory Reform
by William R. Andersen(4)
In 1995, the Washington legislature adopted a so-called regulatory reform bill (ESHB 1010, Chap. 403 1995 Washington Laws). The bill had features such as:
The legislature appropriated approximately $10 million for the first two years to help agencies comply with the new requirements.
In the first full year of operation, no rules have gone through a complete cycle of proposal, consideration, promulgation, enforcement and judicial review, so it is not yet possible to measure the effect of the bill with any precision.
Rulemaking volumes, however, are sharply down in busy rulemaking agencies subject to the act. The reduction seems to be caused by a combination of (1) the time required to train staff to use the new procedures, (2) the additional time and cost of the procedures themselves, (3) uncertainty about how strictly courts will interpret the requirements of the bill. No one can say if some or all of the slowdown in rulemaking volume will be ermanent.
There is anecdotal evidence that rules especially likely to be slowed or deferred altogether are rules whose benefits are most difficult to measure.
There is anecdotal evidence that agencies are exploring techniques other than rulemaking--such as use of guidelines, interpretive rules and adjudications--as methods of formulating new policy.
The increased intensity of the scope of judicial review has not been tested in the courts yet, but the shadow cast by the new provisions is evident in the day to day work of the agencies, adding no doubt to the reduction in rulemaking volume.
One unsuspected side-effect of the regulatory reform bill: providing agencies with funds and political support for improvements in the regulatory process has spurred efforts to simplify rules, to eliminate conflicting and duplicative rules, and to increase interagency coordination. These may be more substantive and durable reforms than can be achieved by the more politically visible features of the bill.
1. Professor of Law, UCLA Law School. Email: firstname.lastname@example.org. The author is a consultant for the California Law Revision Commission which is currently considering revisions of the rulemaking provisions of California's Administrative Procedure Act. The Commission has not yet taken action on any matters relating to rulemaking. The opinions expressed are solely those of the author, not those of the Commission, its members, or its staff.
2. This includes guidance documents such as interpretive rules, bulletins, or guidelines. See Michael Asimow, "California Underground Regulations," 44 Admin. L. Rev. 43 (1992) (by subjecting guidance documents to rulemaking procedure, their flow has dried up).
3. Assistant Professor, Florida State University College of Law.
4. Professor of Law, University of Washington Law School
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