The Federal Bureaucracy – Proposals for Reform by Congress Part 1

Restoring Congress’ lawmaking authority.

In previous essays we explored the vast extent of the federal bureaucracy’s regulatory power, which remains largely unchecked, for most practical purposes, even by the President.  In this series of essays, I’ll set out some potential reforms Congress might consider to restore Congress’ lawmaking authority as provided for by the Constitution.  (People reading this who work for Congress might be particularly interested in this series, which contain some technical proposals that perhaps only a geeky professional congressional staffer would love.)

Reform 1: Subject “regulatory dark matter” to greater process.

So-called  “regulatory dark matter” are guidance documents, memoranda, and even blog posts used by federal agencies to instruct regulated entities on what the agency considers the legally correct way of doing things.  These documents and materials don’t have the force of law and have not gone through the notice and comment procedures required by the Administrative Procedure Act, but in practical effect they make it clear to regulated entities that they better comply, or else risk adverse action by the federal agency issuing them.  One glaring example of the costs of failing to run a new rule through the notice and comment process is the joint “guidance” issued by the Department of Justice and the Department of Education during the Obama Administration stating their interpretation of Title IX to require, for example, men who self-identify as women to use women’s restrooms, locker rooms, and shower facilities, without the use of any screening criteria to prevent abuse.  On August 21, 2016, federal district judge Reed O’Connor held that, in issuing such “guidance,” the Administration “failed to comply with the Administrative Procedures Act by: (1) foregoing the Administrative Procedures Act’s notice and comment requirements; and (2) issuing directives which contradict the existing legislative and regulatory texts.”  As Harvard Law School Professor Jeannie Suk has written:

Whether or not the federal government acted unlawfully, it has now set in motion a potential Title IX collision course between its directives on sexual violence and on bathrooms … [T]here is also a growing sense that some females will not feel safe sharing bathrooms, shower rooms, or locker rooms with males.  And if a female student claimed that a bathroom or locker room that her school had her share with male students caused her to feel sexually vulnerable and created a hostile environment, the complaint would be difficult to dismiss, particularly since the federal government has interpreted Title IX broadly and said that schools must try to prevent a hostile environment.  This is not wholly hypothetical.  Brandeis University found a male student responsible for sexual misconduct for looking at his boyfriend’s genitals while both were using a communal school shower.  The disciplined student then sued the school for denying him basic fairness in its disciplinary process, and a federal court recently refused to dismiss the suit.

Continuing to have segregated bathrooms could also put schools in a bind on Title IX compliance.  According to the federal government, a transgender girl who is told to use the boys’ locker room, or even a separate and private stall, instead of the girls’ facility, has a claim that the school is violating Title IX.  A non-transgender girl who’s told she must share a locker room with boys may also have a claim that the school is violating Title IX.  But would she not have a similar claim about having to share with students who identify as girls but are biologically male?  Well, not if her discomfort and “emotional strain” should be disregarded.  But this week, in a letter, dozens of members of Congress asked the Attorney General and the Secretary of Education to explain why they should be disregarded.  The federal government is putting schools in a position where they may be sued whichever route they choose.  (Catherine Lhamon, the assistant secretary for Civil Rights at the Department of Education, declined to comment on this issue.)

The debate around which bathrooms transgender people should use has given rise to deeper questioning of why we even have a norm of gender segregation for bathrooms in the first place.  But a push to make those spaces open to all genders comes up uneasily against feelings of female sexual vulnerability and their effect on an equal education or workplace.  To make things more complicated, the risk of sexual assault and harassment of transgender females in male bathrooms is a salient reason for providing access to bathrooms according to gender identity, while many worry about transgender males being sexually bullied in male bathrooms.

The common denominator in all of these scenarios is fear of attacks and harassment carried out by males -- not fear of transgender people.  The discomfort that some people, some sexual-assault survivors, in particular, feel at the idea of being in restrooms with people with male sex organs, whatever their gender, is not easy to brush aside as bigotry.  But having, in the past several years, directed the public toward heightened anxiety about campus sexual assault, the federal government now says that to carry that discomfort into bathrooms is illegitimate because it is discrimination.  The sense that the Education Department has not looked down the road to consider the conflict is only confirmed by its penchant for announcing bold and controversial rules in letters, rather than through lawful processes.

Consequently, federal agencies shouldn’t be able to issue guidance letters that contain legal claims that haven’t gone through the regular notice and comment period resulting in the promulgation of official regulations.

Reform 2: Reduce the number of conflicting new rules handed down by federal agencies through the following potential reforms.

President George W. Bush issued an executive order that explicitly stated that the Office of Information and Regulatory Affairs (OIRA) in the U.S. Office of Management and Budget would review all significant guidance documents.[1]  The Obama administration later repealed President Bush’s executive order.[2]  That executive order could be reissued.

Another solution would be to label all guidance documents and policy memoranda as nonbinding.[3]  Already, the Office of Management and Budget’s “Final Bulletin for Agency Good Guidance Practices” warns against using words like “must” and “shall” in documents that are not subject to notice and comment.[4]  This reform would clarify the policy and reduce uncertainty, and allow people to use that label in court to get judges to dismiss enforcement actions against them when their conduct may violate the guidance, but not the underlying regulation.  Agencies could also be required to cite the statute or regulation that defines agency authority in the area the warning letter addresses.  This requirement could also pertain to agencies using social media to pressure or intimidate firms, such as when the Director of the Consumer Financial Protection Bureau used Twitter to put companies “on notice” about the Agency’s intentions to rein in allegedly deceptive practices.[5]  This policy would tell regulated parties that they can choose to ignore guidance documents and policy memoranda if they wish, so long as they comply with underlying regulations.

An additional labeling requirement could be to force agencies to cite in documents the statute or regulation that spells out the agency’s authority in the area where the agency is providing guidance.  This requirement would help in those cases where an agency’s legal authority to issue guidance is in doubt.  A stronger step would be to require notice and comment for all significant guidance documents.  A requirement to do a Regulatory Impact Analysis (RIA) could be mandated by legislation.  The Administrative Conference of the United States recommended a voluntary approach, but it could be made mandatory.[6]  Or, a Regulatory Impact Analysis could be required if OIRA’s Administrator requests it.  Agency guidance would become very much like Administrative Procedure Act “legislative” rulemaking, and this is precisely the point, since agency actions that have rule-like effects should be treated like rules and go through the usual procedures that agencies have followed for over three decades.

Also, all federal agency “guidance” should have to be published in the Federal Register.

Reform 3: Enact a statute providing that entities that don’t follow a federal agency’s (erroneous) interpretation of the law -- under threat of loss of federal funding -- that has not been judicially reviewed by the relevant Circuit Court only lose a limited amount of federal funds pending judicial review.

As Professor Michael Rappaport has written, regarding one particular example of the Office of Civil Rights in the Department of Education:

One of the areas of alleged lawlessness by the Obama Administration has been the Office for Civil Rights of the Department of Education (OCR).  OCR has been pushing the agenda of a rape culture on college campuses.  OCR has used guidances and “Dear Colleague” letters to effectively impose a series of questionable practices on colleges, such as depriving the accused of fair procedures.

There are numerous problems with this agenda.  Some of them are substantive, such as the muddying of the definition of consent.  Some of them are procedural, such as depriving the accused of procedural rights.  But a third set of problems are legal.  The problem is that the rules that OCR is imposing are questionable as a matter of law and have not been tested in the courts.

This is hardly an accident.  The Office strategically imposes these standards through guidances because it knows that it is much more difficult for the guidances to be challenged in court ahead of time.

Instead, OCR uses the threat of a loss of federal funds to force universities to conform to its wishes -- a threat that has worked even against the likes of Harvard University, one of the most powerful institutions in the country.  If the college does not conform to the Office’s interpretation of Title IX, the college risks losing large amounts of federal funds.

While the Office’s decision is subject to judicial review, if the college loses on judicial review, then the college can lose all federal funding.  For most colleges, this is a devastating result – one that they would not risk.  Therefore virtually all colleges cave, agreeing to the Office’s views. As a result, there are virtually no adjudications of whether OCR’s determinations are legal.  The risk of all federal funds being eliminated is simply too much for colleges to bear.

But there is a way to change the law that would allow judicial review without such a threat.  Congress should pass a statute that provides that when a college does not follow an OCR interpretation, and that interpretation has not been judicially reviewed by the relevant Circuit Court, the college will only lose a limited amount in federal funds, such as $5000.  In this way, OCR cannot coerce colleges into following its interpretation of the law without judicial review.

It is hard to see how one might oppose this reform – unless of course one believes that the executive branch should be able to operate without judicial supervision.  People who believe this should be forced to acknowledge it in public.

Reform 4: Provide for a regulatory budget process.

As Jeff Rosen has proposed, develop and apply a regulatory-cost budget, akin to the fiscal budget, that would provide both overall and agency-by-agency limits on the total amount of costs imposed by agency rules.  First, in November of each year, each regulatory-agency head could submit a report to Congress and the president detailing the actual costs of complying with all regulations under the agency’s purview in the preceding fiscal year, as well as the expected costs of compliance with all new or existing agency regulations in the upcoming fiscal year.  Second, the president would include with his annual fiscal budget submission a “regulatory budget for each agency,” containing “recommendations for the maximum costs of compliance.”  If the president’s budget called for a cut in the regulatory costs projected by an agency’s November report, the president would recommend specific actions to achieve those cuts.  Third, based on the agency reports and the president’s budget, the congressional budget committees would develop and Congress would vote on a concurrent resolution “to establish a regulatory budget for each agency which sets the maximum costs of compliance” for all rules in effect for the upcoming fiscal year.  An agency’s November report would simply include a comparison of the actual costs of compliance for the preceding year with the budgeted costs and provide a full explanation for any costs of compliance which exceeded the regulatory budget for such fiscal year.[7]

Reform 5: Require the Office of Management and Budget (OMB) to collect systematic revenue and expenditure data from across all federal agencies that catalogue the amount of money within the control of such agencies that is beyond Congress’ appropriations powers so Congress can understand exactly how much power over agency funds it has ceded to the agencies over the years, and act accordingly.

Congress has, by statute, allowed many agencies to self-fund programs, through user-, application- and other fees or forms of revenue collection.  Congress should re-evaluate the wisdom of putting the funding of so many federal agency programs beyond its control through appropriations.  Self-funding federal agencies and law enforcement programs might be ended by directing that penalties and settlements beyond what the agency spent to bring a case be deposited into the general fund where its disbursement can be controlled by the body constitutionally empowered to control it, namely Congress.

Reform 6: When agencies issue waivers for policies that have national implications or are significant in nature, these waivers might be required to undergo Office of Information and Regulatory Affairs (OIRA) review and potentially be accompanied by a benefit-cost analysis.

Agencies might also be required to seek public comments before issuing significant waivers.  This would help expose any potential political or partisan bias in the granting of waivers.

Reform 7: In light of the vast responsibilities handed to financial regulators by the Dodd-Frank Act, with hundreds of new regulations expected to be written, require agencies to make these decisions with the insights provided by thorough Regulatory Impact Analysis.

Presidents have asked independent regulatory commissions to follow the same requirements as executive branch agencies but have not made this request a binding legal requirement.[8]  Most of the federal financial regulators are considered independent agencies, as are the Federal Communications Commission, the Federal Trade Commission, and others, and they could be required to run their regulations through the Regulatory Impact Analysis process.

Reform 8: Require GAO to re-evaluate the economic impact of major rules issued three years earlier to determine their true economic impact, and contrast it with the federal agencies’ prior estimate to determine its accuracy.  If the economic impact was greater, the regulation would be invalid and Congress would have to enact it anew.

This potential reform would incentivize federal agencies to make more accurate economic impact statements.

Reform 9: Sunset regulations subject to congressional enactment.

As Ilan Wurman has proposed, require Congress to take an up or down vote on all new rules and regulations promulgated by federal departments and agencies and require current regulations to sunset after a period of time, at which point they would no longer be in effect unless they were enacted into law by Congress.  Similarly, Congress could enact a sort of “Rulemaking Enabling Act,” similar to the federal Rules Enabling Act that allows the federal judiciary to put in place its own rules for court procedure, subject to a veto by Congress.  Such a Rulemaking Enabling Act could provide, for instance, that whenever an agency or independent commission wants to make a new rule, it must submit the rule directly to Congress by a certain deadline.  Congress would then have three options for responding.  First, Congress could take no action, leaving the rule idle.  After seven months of inaction, the rule would take effect and become binding law, provided the president assents to it.  Second, Congress could pass a bill containing the rule, or an amended version of the rule; the president would then need to approve the bill for it to become law, in accordance with the ordinary legislative process described in the Constitution.  Third, Congress could pass a “resolution of disapproval,” which would effectively veto the rule, meaning it would not be presented to the president and would not become law.[9]

Reform 10: Require federal agency’s receipt of funds to be accounted for and appropriated by Congress.

Any agency fines, settlements, judgments, or generated revenue should be deposited into the general fund to be appropriated by Congress under Article I, Section 9, clause 7 of the Constitution. In addition, agencies collecting fines, making settlements or reaching judgments against defendants should make a detailed accounting of the amounts and circumstances of the funds they receive and deliver public reports to the authorizing and appropriations committees of jurisdiction.

Reform 11: Enact a statute that requires all consent decrees entered into by federal agencies to be subject to notice and comment requirements that federal courts must consider before approving such consent decrees under a “public interest” standard that would require the court to “satisfy itself of the settlement’s overall fairness to beneficiaries and consistency with the public interest.”[10]

This would allow parties affected by the proposed consent decree to argue it is not in the public interest and require federal courts to consider such comments in evaluating the proposed consent decree.

Reform 12: Require all adjudications of enforcement actions brought under federal agency rules to occur in an Article I or Article III court.

That way, one agency would not be making a rule, enforcing a rule, and adjudicating enforcement of the very rule it made.

Reform 13: Change the appropriations rules such that a president cannot spend federal funds for military (or other) purposes that have not been specifically approved for such purposes.

Today, Congress’ power of the purse is weakened because the President has many ways to evade Congress’ control over military and other appropriations, namely accounting loopholes to move funds Congress approved for one purpose to another which Congress has not approved.  In the case of the intervention in Libya, President Obama paid for that conflict entirely out of funds reallocated from other Defense Department accounts.[11]  As Harold Koh, President Obama’s own former Legal Adviser to the Department of State, has written:

[T]he President has developed over time a whole range of devices to exploit spending loopholes in the appropriations process.  When Congress grants the president statutory “drawdown” authority, he may withdraw certain funds simply by determining that such withdrawals are vital to the security of the United States.  Similar statutory provisions allow the president access to special and contingency funds based upon nebulous findings that the use of those funds is “important to the security of the United States” or “to the national interest.”  When given statutory “transfer” and “reprogramming” authority, the president transfer to one appropriations account funds initially appropriated for another or may reprogram appropriated funds within a single appropriation account, often without specific statutory authority.[12]

Congress could statutorily foreclose the use of such loopholes and maintain more statutory control over appropriations.

Reform 14: Restore earmarks within a more transparent and accountable system.

Congressional rule changes to ban earmarks were a response to abuses of the power of the purse by some in Congress, such as abuses in which line items were hidden within massive spending bills.  The practical effect of this earmark ban has been to transfer the power of the purse from the People’s House to the unelected federal executive bureaucracy, leaving many congressional constituents without Members who could effectively champion their cause.  To more fully restore the power of the purse to Congress, it should consider restoring earmarks so Members closest to the people can direct the use of the same funds they are constitutionally empowered to appropriate.  In addition, to encourage fiscal discipline and keep earmarks in check, the House could be required to consider under an open rule quarterly rescissions bills that allow any unobligated spending to be cut with a majority vote.  Such a process would give Members the power to direct spending, while at the same time obligating them to defend spending requests before the House and the public.

Reform 15: Require the methodology used by the Congressional Budget Office when scoring the effects of legislation to be transparent.

Official budget scorekeepers should “show their work” leading to their particular conclusions, following the scientific method that allows predictive models to be tested by others for accuracy.

Those are some of the potential reforms for restoring Congress’ lawmaking authority that came to seem reasonable to me during my over 20 years of working for Congress.

In the next essay in this series, I’ll present some additional reforms to help prevent abuses by the President and improve congressional oversight.

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[1] See Exec. Order No. 13,422, 72 Fed. Reg. 2763 (Jan. 23, 2007).

[2] See Exec. Order No. 13,497, 74 Fed. Reg. 6113 (Feb. 4, 2009).

[3] See Administrative Conference of the United States, Recommendation 92-2, Agency Policy Statements, 57 Fed. Reg. 30,103 (July 8, 1992).

[4] See https://www.gpo.gov/fdsys/pkg/FR-2007-01-25/pdf/E7-1066.pdf (at pages 3436-3437).

[5] See http://www.harvard-jlpp.com/wp-content/uploads/2010/01/Graham_Broughel_final.pdf (page 48).

[6] See Administrative Conference of the United States, Recommendation 76-5, Interpretive Rules of General Applicability and Statements of General Policy, 41 Fed. Reg. 56,769 (Dec. 30, 1976).

[7] See http://www.nationalaffairs.com/publications/detail/putting-regulators-on-a-budget.

[8] See Curtis W. Copeland, Economic Analysis and Independent regulatory commissions (Admin. Conf. of the U.S. Draft Report, 2013).

[9] See http://www.nationalaffairs.com/publications/detail/toward-constitutional-administration.

[10] United States v. Trucking Employers, Inc., 561 F.2d. 313, 317 (D.C. Cir. 1977).

[11] See John M. Donnelly, “Pentagon Seeks Authority to Shift Millions to Cover Libya Expenses,” CQ Today Online News (July 14, 2011), available at http://public.cq.com/docs/news/news-000003908296.html.

[12] Harold Koh, The National Security Constitution (1990) at 130-31 (citing L. Fischer, President and Congress: Power and Policy 110-32 (1972); Meyer, “Congressional Control of Foreign Assistance,” 13 Yale J. Int’l L. 69, 74-75 (1988)).