This month, theaters will feature a live-action version of DreamWorks Animation’s beloved “How to Train Your Dragon.” The movie tells how a bright, young Viking named Hiccup surprises his village by befriending a dragon rather than killing it. In so doing, he completely revolutionizes how his village coexists with dragons.
Also this month, the North Carolina General Assembly is considering a way of coexisting with regulation. On June 4, the Senate Regulatory Reform Committee will take up House Bill (HB) 402, the NC REINS Act, a reform seeking to restore legislative control over expensive new rules.
In the movie, the dragon is called Toothless. It’s incorrect, but it makes for a great name. Toothless is not something we should want to call the NC REINS Act, however, but the version that passed the House would be just that.
Fortunately, there’s a way to make sure this reform has bite.
What is a REINS Act, and why would it be good for North Carolina?
What is the difference between laws and rules, also known as regulations? They act functionally the same, even though laws are made by legislators in the legislative branch of government and rules are made by bureaucrats in state agencies within the executive branch. The only branch of government that has the constitutional authority to make laws, however, is the legislature. How is it that executive agencies can create things that act just like laws?
The answer is why a REINS Act is necessary. Agencies can create law-like rules only with deferred lawmaking authority from the legislature. This delegated power is supposed to be limited to accomplishing an objective in legislation. Unfortunately, thanks to the vast difference between passing laws and creating rules, agencies can easily exceed their authority.
The General Assembly can disapprove a rule it believes oversteps bounds, but this requires passing a bill — drafting it, clearing committees, getting approval from both chambers, and securing the governor’s signature, which is unlikely since the governor may veto it.
The opportunity cost of this time to legislators is high, especially compared with such a low likelihood of success. For this reason, institutional inertia tends to favor excessive rulemaking. It’s easier for the General Assembly to do nothing, but inaction means the rule takes effect. A 2010 study from the John Locke Foundation found that the legislature disapproved only about one-tenth of one percent of agency rules introduced.
While it’s hard to pass a bill into law, it’s virtually unheard of for an agency rule to be disapproved. The legislature needs help stopping expensive rules, and REINS could do so — if it’s done right.
A proper REINS Act would use this opportunity cost against expensive rules instead of for them. Done correctly, REINS would prevent the expensive rule from taking effect unless it received approval from the General Assembly. It’ll still be easier for the General Assembly to do nothing, but now inaction means the rule cannot take effect.
In other words, a proper REINS Act would require the legislature — elected representatives of the people — to ratify that yes, this expensive rule by bureaucrats — unaccountable to the people — is within our intent of delegating that rulemaking authority to the agency.
Florida has had REINS in the form of legislative rules ratification in place since 2010, and the process has earned the praise of regulators, legislators, and even the Florida Bar Journal. It causes regulators to work with legislators when they perceive the need for a costly regulation. This produces the coexistence between legislators and regulation that best serves people.
What the NC REINS Act needs to succeed
Legislative ratification is key to the REINS Act’s ultimate success. The original version of the NC REINS Act would apply legislative ratification to rules with “an aggregate economic impact on all persons affected of at least one million dollars ($1,000,000) … in a 12-month period.” Specifically, the rule “shall become effective only if the General Assembly ratifies a bill to approve the rule” (emphasis added).
The compromise version of the NC REINS Act that passed the House, however, is lacking this legislative ratification. Instead, it would use the process already in place for a rule that receives 10 or more written objections, applying it also to a rule with at least a million-dollar aggregate economic impact. So the rule would be placed merely on a temporary hold but still become effective later. The only way to stop a costly rule under this process, which we already have but rarely use, is if the legislature takes the time to vote to stop it.
The fix is simple. If the Senate were to restore the original bill language, then the NC REINS Act would no longer be toothless. Legislators would again have a way to rein in the dragon of expensive overregulation.