M E M O. February 13, 2005
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1 M E M O February 13, 2005 TO: FR: RE: Section of Administrative Law and Regulatory Practice 2005 Midyear Meeting Attendees Kent Bishop, Research Consultant Utah Governor's Office of Planning/Budget Federal/State APA Comparison ~~~~~~~~~~ My purpose is to compare some Federal and State APA" characteristics of Administrative Rules, for the Interstate Compact APA Project. This presentation seeks to describe some differences between the federal APA and the 1981 Model State APA regarding administrative rulemaking functions, and make some recommendations to serve as a model for rulemaking provisions to become part of a proposed Interstate Compact APA. These observations are part of my proposal for an Administrative Procedure Act to service Interstate Compact entities. It is hoped these comments will be critically reviewed, since a significant concern in preparing this is that I have been unusually close to this issue for the past fouryears, and may have missed some important concepts or perspectives along the way. I- RULEMAKING FOR INTERSTATE COMPACTS By way of background, in recent years, some Interstate Compact agencies have become concerned that their rules may lack certain enforcement authority when compared with rules promulgated under state administrative rulemaking procedures. Since 1998, compact drafters working with the Council of State Governments, have began a deliberate practice of adopting Administrative Procedure Act [APA] rulemaking, signaling a change from traditional Interstate Compact rules based on common-law. Traditionally, Interstate Compacts have generated a separate body of regulatory law; creating policies, procedures, rules and regulations generally not subject to notice and comment rulemaking; or even formal codification. For example, the Interstate Compact for Adult Offender Supervision, was a re-drafting of the former Interstate Compact on Parolees and Probationers. The adult supervision compact has recently been adopted by most states, and provides for a rulemaking process that must conform with the "principles" of the federal APA. It is a reliance on federal APA procedure that I wish to take issue with here. A comparison of the provisions specified in the federal APA with similar provisions found in APA s used by most states, as well as state model acts, suggests problems, and significant gaps. I 1
2 have identified four functions that most states utilize which, if the federal APA was used, could possibly disadvantage some states. A reading of the federal APA shows a limited set of Administrative Rule provisions. Section 5-USC- 553.[ 4] on Rulemaking provides only the following: (a) This section applies, according to the provisions thereof, except to the extent that there is involved-- (1) a military or foreign affairs function of the United States; or (2) a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts. (b) General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law. The notice shall include-- (1) a statement of the time, place, and nature of public rule making proceedings; (2) reference to the legal authority under which the rule is proposed; and (3) either the terms or substance of the proposed rule or a description of the subjects and issues involved. Except when notice or hearing is required by statute, this subsection does not apply- (A) to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or (B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. (c) After notice required by this section, the agency shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose. When rules are required by statute to be made on the record after opportunity for an agency hearing, sections 556 and 557 of this title apply instead of this subsection. (d) The required publication or service of a substantive rule shall be made not less than 30 days before its effective date, except-- (1) a substantive rule which grants or recognizes an exemption or relieves a restriction; (2) interpretative rules and statements of policy; or (3) as otherwise provided by the agency for good cause found and published with the rule. (e) Each agency shall give an interested person the right to petition for the issuance, amendment, or repeal of a rule. By comparison, the 1981 Model State Administrative Procedure Act contains a more extensive set of public notice & comment rulemaking functions and methods, and is more comprehensive in scope and applicability. On pages of his text State Administrative Rulemaking, Prof. Arthur Bonfield discusses the circumstances of state and federal agencies and the differing legal environments of state and federal agencies, including information about the general approaches taken by each act, and their characteristics. 2
3 A brief comparison of basic rulemaking functions in the Federal APA, and the Model State Act, suggest the following general similarities & differences: -- Basic Rulemaking Provisions Federal APA MSAPA -- Agency to publish rules for public notice and comment: Yes Yes -- Agency statement of "general applicability" Yes Yes - Impact Analyses; i.e., Environmental, Family, etc.. Yes Yes -- Purpose - interpret or prescribe law or policy Yes Yes -- Interprets or prescribes organization & procedure Yes Yes - Parameters for Incorporation-by-Reference of Documents No Yes - Notice & Comment time-periods defined No Yes - Emergency Rulemaking Provisions defined No Yes - Procedure for Citizens to Request Hearing No Yes - Procedure for Citizens to Petition for new rules No Yes -- Agency statement of "particular applicability" Yes No - Exemptions of Interpretative Rules Yes No - Final Rules to be adopted with changes Yes No For our purposes here, lets examine four specific rulemaking functions which are not found in nearly as complete a form, or at all, -in the federal APA. 3
4 II- DIFFERENCES OF SOME RULEMAKING METHODS IN THE MODEL STATE APA FROM THE FEDERAL APA: These are: (1) Incorporation By Reference [IBR], (2) Emergency rulemaking, (3) Final Rules Adopted w/ Changes, and (4) Interpretative Rules. (1) INCORPORATION BY REFERENCE (IBR): The Incorporation-by-Reference function under the federal APA is guided by only a mention that an agency can incorporate a document; and if permission to do so is obtained from the Federal-Register staff. In this case, the Model State APA provides a more carefully delineated method, with more structure and some limits. Federal APA (1) Each agency shall separately state and currently publish in the Federal Register for the guidance of the public - (A..., B..., C..., D...,), and (E) each amendment, revisions, or repeal of the foregoing. For the purpose of this paragraph, matter reasonably available to the class of persons affected thereby is deemed published in the Federal Register when incorporated by reference therein with the approval of the Director of the Federal Register." [Section 5-USC-552(a)] [Emphasis Added] Model State APA "(c) An agency may incorporate, by reference in its rules and without publishing the incorporated matter in full, all or any part of a code, standard, rule, or regulation that has been adopted by an agency of the United States or of this State, another state, or by a nationally recognized organization or association, if incorporation of its text in agency rules would be unduly cumbersome, expensive, or otherwise inexpedient. The reference in the agency rules must fully identify the incorporated matter by location, date, and otherwise, and must state that the rule does not include any later amendments or editions of the incorporated matter. An agency may incorporate by reference such matter in its rules only if the agency, organization, or association originally issuing that matter makes copies of it readily available to the public. The rules must state where copies of the incorporated matter are available at cost from the agency issuing the rule, and where copies are available from the agency of the United States, this State, another state, or the organization or association originally issuing that matter." 4
5 As each state has enacted its own version of this function, some states have allowed "any" document to be incorporated, others have limited it to a list similar to what appears in the model act. And, some states have added other classes of documents, such as state implementation plans required under federal law. (2) EMERGENCY RULES: The federal APA lacks a detailed emergency rulemaking provision. What specifics of emergency-rule publication requirements do exist, are found in the Federal Register Act and implementing regulations. But even there, no structured procedure exists. Federal agencies generally rely on the general good-cause exception of regular filing procedures in the federal APA, as unnecessary, impracticable, or contrary to the public interest. Federal agencies are expected to be able to justify that for rules needing to become effective in less than 30- days. Applying this to Interstate Compact rulemaking, it is possible that the "unnecessary, impracticable, or contrary to public interest" may not address emergency conditions, and lead to confusion. For example, in some cases, emergency federal rules are published either as Final Rules, Interim Final Rules, Immediate Final Rules, or Direct Final Rules. The latter three names have developed through practice, and are not statutory. After seeking input from concerned groups, the Federal Register staff have attempted to set some standards of uniformity, but the courts have yet to rule definitively as to whether direct-final-rules are within APA procedural boundaries. Further, this issue could get more difficult if a Compact agency were to decide to not publish its rules in the Federal Register. This deficiency could directly impact a Compact, if rules must adhere to principles of the federal APA, as the OAS Compact does. To address that gap, Commissioners drafting the 1981 Model State APA provided a fairly structured emergency rulemaking procedure; to wit: [ 3-115] (2) A rule may become effective immediately upon its filing or on any subsequent date earlier than that established by subsection (a) if the agency establishes such an effective date and finds that: (i) it is required by constitution, statute, or court order; (ii) the rule only confers a benefit or removes a restriction on the public or some segment thereof; (iii) the rule only delays the effective date of another rule that is not yet effective; or (iv) the earlier effective date is necessary because of imminent peril to the public health, safety, or welfare. (3) The finding and a brief statement of the reasons therefor required by paragraph (2) must be made a part of the rule. In any action contesting the effective date of a rule made effective under paragraph (2), the burden is on the agency to justify its finding. (4) Each agency shall make a reasonable effort to make known to persons who may be affected by it a rule made effective before publication and indexing.... As a further example of "tweeking" the "emergency" function, some states provide for a separate review process of emergency rules. 5
6 (3) FINAL RULES ADOPTED WITH CHANGES: Under the federal APA, there can be significant differences between the published text of a "proposed" rule, and the un-published text of a "final adopted rule." Amended rules are able to become finalized without being re-published. This allows federal agencies significant latitude in choosing final language without public review. The down side is that citizens, and possibly interested parties, can be denied a timely access to essential regulatory information. By contrast, the 1981 State Model APA closed that "gap", by providing that a rule cannot be finalized if the text of the rule "substantially" varies from the proposed rule as contained in the initially published notice of proposed rule adoption. The model act provides the following parameters for changes: a- The extent to which all persons affected by the adopted rule should have understood that the published proposed rule would affect their interests; b- The extent to which the subject matter of the adopted rule or the issues determined by that rule are different from...the published proposed rule; & c- The extent to which the effects of the adopted rule differ from the effects of the published proposed rule had it been adopted instead. It is hoped that this resolves any such concerns by the public. Further, it is also assumed that those states which publish final rule text -generally have fewer constituent complaints or problems; though I have not seen research on that. (4) EXEMPTED-RULES: The federal APA exempts certain types of rules from its notice and comment procedure. The Act has identified those exemptions in the following way, as follows: (A) interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or (B) when the agency for good cause finds... that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. Because they were concerned that the federal APA ignores some important public notice interests, the drafters of the 1981 MSAPA assert that ALL rules, including interpretative, "substantive" and procedural, should follow the notice & comment procedure. They reasoned that: 6
7 "The term 'rule'... includes legislative and interpretative rules, as well as procedural and substantive rules.... The effect...is to open up to the public through the rule-making process the structural and procedural mechanisms through which agencies conduct their public business." This is of practical consequence, because it could directly impact interstate compact rules. By exempting interpretative rules of a compact agency, were it to act under the federal APA, it could result in a denial of public notice unless the compact entity found a reason to publish such a rule anyway. Contrast that with the 1981 MSAPA language, where NO such exemptions are provided. Admittedly, the MSAPA and many state APA s exempt other classes of rules, as explained herein. There is another area where states have chosen to give some direction to in their APA rulemaking procedures. One is "formal" and "informal" rulemaking. Formal rulemaking is typically limited to policies that require additional trial-type procedures. An Interstate Compact could expressly provide for rulemaking "on the record," after opportunity for a hearing. Or, a Compact agency engaged in informal rulemaking may want to provide for additional procedures beyond those established by an APA, or other applicable state statutes, or the Compact agency s own rules. SUMMARY: Given the above gaps or what might be called "limitations" of the federal APA, it is suggested that the federal act was never intended to provide a complete set of tools for states to employ individually, or for use in multi-state agreements. Given the experience of the states with both the 1961 MSAPA, and the 1981 MSAPA, it is proposed that the proposed new Administrative Procedure Act for Interstate Compacts use the more formal rulemaking structure which was specifically proposed in the 1981 MSAPA [and which was largely a carry-over from experience gained under use of the 1961 MSAPA, --rather than the lessstructured 1946 federal APA approach. ~~~~~ 7
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