Saturday, May 2, 2015

Regulatory Reform Bills: North Carolina’s Sausage Style of Lawmaking

“Laws, like sausages, cease to inspire respect in proportion as we know how they are made.”-- John Godfrey Saxe, The Daily Cleveland Herald, March 29, 1869

I must admit that I love both good sausage and good law.  But in both cases, there is just too much temptation to the makers.  And the source of the temptation is profit.  Sausage makers can squeeze more profit by adding in fillers to their product.  Lawmakers attract more campaign contributions when they lard up their products with special interest provisions.  The only restraint on either is transparency in their process.  While sausage makers must list their ingredients on the label; lawmakers write their own rules about how the laws get made.

Regulatory reform had become a popular political issue in the election of Ronald Reagan, and had become bipartisan when Bill Clinton endorsed the same ideas.  There was a bipartisan consensus that when government regulations became too burdensome on business, they were counterproductive to society.  And so, North Carolina began reviewing, streamlining and updating its regulations in earnest, regulation by regulation. 

The N.C. General Assembly created a vehicle for this process in 1995, the Joint Legislative Administrative Procedure Oversight Committee.  This Administrative Procedure Oversight Committee’s charge was to eliminate overlapping, conflicting and unnecessary rules. To do this work, they have assistance from the Rules Review Commission, an appointed body with a professional staff which meets monthly to review all rules.  Both the RRC and the Committee have been at this work for over twenty years, so you would think they would have eliminated all the wasteful, red tape in state government.  And you would be right.  In fact, the work is so routine now that this Administrative Procedure Oversight Committee has not even met this year, at all.  The reason they do not meet is that the Rules Review Commission now controls the rulemaking process and has reigned in the agencies almost to a standstill.

In fact, what is now being called “regulatory reform” is not review of agency rules, but creation of loopholes to general laws themselves.  Regulatory Reform is a brand now and not a principle.  In fact, the changes they are making in the name of regulatory reform make the laws more confusing, increase overlap and do not streamline anything.  The statute books keep getting bigger and more complicated each and every session.
The only industry which benefits from this exercise is the lobbying industry, which has mushroomed to help clients put loopholes in existing laws under the Trojan horse bills known as the annual Regulatory Reform Act.  These bills throw together a hodgepodge of unrelated subjects and label them regulatory reform.  In 2013, the bill faltered for being too larded down with these provisions.  In 2014, some version of it passed both houses but its final form was actually decided by a Conference Committee

In 2015, we see the same bad pattern forming again, with the bill getting larded up with unrelated provisions which could never pass on their own. Reforms which have no public benefit, but which help out a narrow class of interests are especially favored in this process.  Bad ideas somehow get new life when they are tacked on to the regulatory reform vehicle, even ones which were rejected when considered on their own merits.

But the General Assembly can make good reform ideas into law if it wishes to do so.  For example, in 2013, the N.C. General Assembly considered amendments to the laws controlling large scale transfers of water from one river to another called Interbasin transfers.  The bill went through a full committee hearing in both the House and Senate.  Several editions were created to fine tune the concepts and the process took four months from the first bill draft to its final passage.  You can argue that the final version of SB 341 was not the best law, but it was carefully crafted and was debated on its merits without unrelated fluff and stuff added in.  It reflects the considered will of the current crop of elected officials on the subject of Interbasin transfers.

Then along comes the Regulatory Reform bill of 2014.  The Senate version of the Regulatory Reform bill contained a section dealing with Interbasin Transfers which appears to have been designed to benefit a single project, the transfer of water from the Roanoke River to the Neuse and Tar Rivers.  This provision amending the law of Interbasin Transfers was added in the Senate Finance Committee.  A careful Senator may have noted that the law of Interbasin transfers had been thoroughly debated the previous session and a comprehensive bill with compromises and debate had resolved all important questions.  But said careful Senator was not on the Senate Finance Committee, which decided to bury the amendment on page 31 of the 62 page long committee substitute.  In fact, burying the significance is the point of the regulatory reform bill process.

Just look at the scope of subjects covered in the Senate’s substitute: Lottery Commission oversight; regulation of fertilizer application; small business owners acting as lawyers in OAH; community college beer-brewing courses; the Bonner Bridge; ADA access to swimming pools; eliminating air quality monitors; venomous snakes; low flow toilets; protecting business owners from penalties for violations they discover through audits; inlet hazard areas; landscape contractor licensing; and pesticide use to control moles.  These changes range from major and controversial rewrites of state policies to obscure topics.  And this is by design.  It is impossible for a part time legislature with limited staff to read and digest all the changes they are asked to support or oppose in these bills.  In fact, the temptation is for any legislator to add on her favorite hobby horse by tacking on amendments.  The House’s version was drastically different in terms of substance, but strikingly similar in mixing the obscure with the unpopular.

This design is just an ambush style of lawmaking.  It favors lobbyists over people.  It favors special interests over the public interest.  It favors Conference Committee members over everyone else.  In the end, the Regulatory Reform Act of 2014’s contents were decided by the eight conferees: Tim Moore, Paul Stam, Tim Moffitt, Thom Tillis, Paul Tine, Trudy Wade, Tom Apodoca and Harry Brown.  This process subverts democracy, empowers lobbyists and lumps together completely unrelated subjects.

In addition, the process produces incomprehensible laws.  The normal process of vetting laws, making amendments and reviewing drafts to improve wording no longer occurs except in leaked drafts between lobbyists with little time for proofreading much less substantive analysis.  In the 2014 Regulatory Reform Act, the new loophole provision on the Interbasin Transfers contained a blatant error in stating the law: it applied the loophole to transfers and withdrawals approved by the Army Corps of Engineers.  The problem is that the Army Corps of Engineers does not approve transfers or withdrawals, the State of North Carolina does.  So the loophole only created confusion instead of clarity.  A bad piece of gristle ended up in the legislative sausage, and the quality control functions were not there to catch the error.

Worse than erroneous laws, are unpopular legal changes which get made under the Regulatory Reform Brand when they could not pass as freestanding bills.  The 2015 bill is every bit as bad as the 2014 bill and is poised to be heard next week.  North Carolinians support the Renewable Energy and Energy Efficiency Portfolio Standard (REPS) by wide margins.  Coupled with tax credits, this provision has helped bring down the cost of solar energy just at the time that we are seeing the long term costs with coal power come home in the form of coal ash lagoon leaks. 

Of course, special interests associated with the coal industry does not want solar to advance.  So they tried to enact a repeal or scale back of the REPS by passing a bill dealing with that subject, HB 681.  They could not get the votes to even get that bill out of Committee.  So what did the coal industry advocates do?  They amended the 2015 Regulatory Reform Act with the same type of language.  Former Duke Energy employee, Rep. Mike Hager made the sausage this time around, cutting a deal which allowed his defeated bill HB 681 to survive under the Regulatory Reform Brand.

It does not have to be this way.  Back in the late 1990’s, the General Assembly’s staff began pioneering a process to bring together experts on issues to work out compromises while bills were being drafted.  These experts represented different interests.  Their debates allowed staff to write laws that made sense to read and were easier to understand.  The process was called 605 Process, named after the large meeting room where these groups met.  The laws which came from the 605 Process were still sausage, but they were sausage with a known list of ingredients made in the light of day.  I want 605 Process back.

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