To: Interested Parties
Fr: Richard M. Esenberg, President & General Counsel, Thomas C. Kamenick, Deputy Counsel & Litigation Manager
Date: May 1, 2017
Re: 2017 Amendment SSA1-SB15 – the REINS Act
State REINS Act Is Still Constitutional
Most of the explosion in the size of government over the last 100 years has come from growth in the regulatory administrative state. The vast majority of laws imposed on us are not passed by Congress and signed by the President (or, in the case of the states, the legislature and the Governor), but rather, are enacted by unelected bureaucrats. Those bureaucrats not only write such laws (often referred to as regulations or rules, but still having the force of law), they interpret them, enforce them, and even judge disputes about them. The effects of these regulations are mammoth, imposing, according to some estimates, over $1.8 trillion in costs on the American public annually.
This state of affairs has generated increasing concern. Without entering into a protracted discussion of the niceties of – and possible distinctions between – federal and state constitutional doctrine, passing laws is a legislative function and agencies possess rule-making authority only by “delegation” of that authority from the legislature. Democratic accountability – and a proper respect for the separation of powers – requires some measure of legislative direction of and control over the rule-making process. As the administrative state has expanded, it is less clear that this direction and control is present.
Those concerned with the potential damage this “fourth branch” of government may do to our economy and our constitutional democracy have proposed a variety of solutions. One that has been gaining in popularity is the REINS (“Regulations of the Executive In Need of Scrutiny”) Act. Generally speaking, the REINS Act requires congressional approval for any regulation that has a significant economic impact. Supporters have also been advocating for REINS Acts at the state, as well as the federal level.
In Wisconsin, the legislature has considered potential REINS legislation. This memorandum addresses Substitute Amendment 1 to SB 15. The Substitute Amendment tries to do a number of things. First, it attempts to tighten determination of whether a proposed rule is really authorized by the legislature. As a general matter, current law allows the Governor to do that, requiring a statement of the scope of the rule that must be approved by the Governor before rule-making can proceed. The Substitute Amendment would require submission of the scope statement to the Department of Administration for an early determination as to whether the rule is explicitly authorized by law. That determination would be reported to the Governor who will then approve or disapprove the scope statement.
The Substitute Amendment also requires that, if requested by either co-chair of the Joint Committee for Review of Administrative Rules (JCRAR), a preliminary public hearing must be held before rule-making can proceed. This is in addition to the public hearing required under current law for certain rules.
Significantly, under the Substitute Amendment (as with earlier versions of the REINS Act considered by the legislature), proposed rules with significant economic impact cannot be promulgated until a bill authorizing the rule is passed by both houses of the legislature and signed by the governor. It applies to proposed rules that have an economic impact of $10 million or more in implementation and compliance costs that are incurred by or passed on to businesses, units of local government, and individuals over a two-year period. If an economic analysis (by the agency or independently) shows that $10 million impact, the agency must halt work on the proposed rule and either (1) request a bill authorizing promulgation of the proposed rule; (2) modify the proposed rule to reduce its economic impact; or (3) withdraw the proposed rule.
The constitutionality an earlier version of the REINS Act has been called into question. On January 29, 2016, in response to a request from Representative Jocasta Zamarripa, the Legislative Council issued a memorandum concluding that AB 251, which contained similar provisions requiring legislative approval of a rule with substantial economic impact, was “arguably likely” unconstitutional. Senior Staff Attorney Anna Henning concluded that AB 251’s requirement that an agency stop work on proposed rule promulgation under certain circumstances “could be challenged as not meeting the constitutional requirements for bicameral passage and presentment of legislation.”
At the time, we opined that this opinion was almost certainly wrong. It would be wrong as applied to the Substitute Amendment as well. The following reiterates the view that we expressed then.
It is true that a bill cannot become law until it has passed both houses of the legislature (bicameralism) and been signed by the executive (presentment). Generally speaking, once an administrative rule becomes enforceable law, it cannot be “repealed” by a committee, one house, or even both houses of the legislature. Legislation to repeal a rule must be passed by both houses and signed by the executive. Martinez v. DILHR, 165 Wis. 2d 687, 699 (1992). Similarly, the U.S. Supreme Court has ruled that a unicameral congressional veto of agency action violates the requirements of bicameralism and presentment. INS v. Chadha, 462 U.S. 919 (1983).
But the Substitute Amendment, like former AB 251, is fully compliant with these requirements. The only action the legislature would take under the proposed law is having both houses pass a bill approving the rule and sending it to the governor for signature. That satisfies the bicameralism and presentment requirements. Moreover, it does not suspend or repeal an existing rule, but only halts a rule that is still in the promulgating (or “rulemaking”) process before it becomes law. Other experts reached the conclusion that a REINS-style law is constitutional for these same reasons.
All the Substitute Amendment does is add another step to the process of creating a rule. Chapter 227 already has 14 pages and 19,000 words laying out that process, including many steps an agency must complete before promulgating a rule. Because an agency’s authority to create law is a delegation of the legislature’s own law-making authority, the legislature can put nearly any safeguards it wants on that process. See Thomson v. Racine, 242 Wis. 591 (1943). The legislature has expressly reserved to itself the power to control the rule promulgation process and the power to delay or suspend a proposed rule. Wis. Stat. § 227.19(1)(b)3., 4.
None of the authorities cited by Attorney Henning address the question of whether the legislature can require agencies to obtain authorizing legislation before a proposed rule becomes effective. They merely affirm that an already enacted rule cannot be permanently suspended except by a subsequent rule or by an act of legislation that meets the constitutional requirements for bicameral passage and presentment. Furthermore, Martinez v. DILHR arguably supports the constitutionality of the Substitute Amendment, as it praised the involvement of the people’s elected representatives in the rule-making process:
As a matter of public policy, it is incumbent on the legislature, pursuant to its constitutional grant of legislative power, to maintain some legislative accountability over rule-making. Such legislative responsibility adheres to the fundamental political principle and design of our democracy which makes elected officials accountable for rules governing the public welfare. [The law allowing temporary suspension of already-promulgated rules] is carefully designed so that the people of this state, through their elected representatives, will continue to exercise a significant check on the activities of non-elected agency bureaucrats. Furthermore, the rule suspension process provides a legislative check on agency action which prevents potential agency over-reaching.
165 Wis. 2d at 701.
Finally, if Attorney Henning were correct, the current system of rule promulgation would be unconstitutional. The process already requires the governor to approve the initial scope statement before the agency may continue any work on a proposed rule. Wis. Stat. § 227.135(2). The Small Business Regulatory Review Board can halt a proposed rule until certain requirements are complied with. § 227.14(2g). A proposed rule cannot be scheduled for a public hearing until the Legislative Council signs off. § 227.15(1). The governor has absolute discretion to approve or reject a proposed rule. § 227.185. After gubernatorial approval, the proposed rule goes to the appropriate legislative committee, which may object, and the Joint Committee for Review of Administrative Rules (“JCRAR”), which may also object. §§ 227.19(4), (5). The rulemaking process is halted during this period until the JCRAR approves it or, if JCRAR objects, the legislature fails to pass (with the governor’s signature) a bill prohibiting the rule. §§ 227.19(5)(c), (e), (f), (6).
Thus, rulemaking may already be halted at many steps in the process. Some happen automatically as a matter of law, others happen at the discretion of government officials in the legislative or executive branch. This process is constitutional. The Substitute Amendment merely adds another stop – changing the default process for burdensome rules from passes-unless-the-legislature-acts to passes-only-if-the-legislature-acts. That change is constitutional as well.
President & General Counsel
Deputy Counsel & Litigation Manager
Wisconsin Institute for Law & Liberty
 See Memorandum from Richard M. Esenberg and Thomas C. Kamenick dated March 3, 2016.