Wisconsin's Collectivist Bureaucracy: Part III

Conservatives' Attempt to REIN in Government

In 2017, conservatives across the state cheered the passage of the REINS Act (Regulations from the Executive in Need of Scrutiny), a law designed to make administrative rule-making much harder and to give the legislature active oversight of executive branch rule promulgation.

That would only make sense because rule promulgation, as a matter of definition, exists only to implement legislative intent as expressed through democratically enacted statutes. Rulemaking must always depend upon a grant of power or authority from the legislative branch to the executive.

For years, however, Wisconsin’s bureaucratic Colossus had thwarted the legislature using both macro-political and micro-political means. To cite just one example, for decades the state Department of Natural Resources (DNR) brandished a broad interpretation of the state’s Public Trust doctrine—often rubber-stamped by progressive Dane County judges—as a way to foreclose most development in northern Wisconsin, while micro-politically pursuing often-changing interpretations of its own rules and state statutes to box in and punish property owners at the local level.

With the REINS Act, conservatives saw hope. For one thing, the law included several important reforms of the rule-making process. One provision requires state agencies to perform economic impact statements for each proposed rule and, if the implementation and compliance costs exceed $10 million over two years, the agency must halt its promulgation of the rule, either until it modifies it enough to meet the threshold or until the legislature passes and the governor signs a bill authorizing promulgation anyway.

Most recently, the DNR announced it could not move forward with PFAS rules for groundwater standards because of the dollar threshold, and, over time, the public and the media have considered the $10-million threshold to be the most important component of the law.

But there is another component, too, a provision allowing the legislative joint rules review committee (JCRAR) to indefinitely object to any rule for certain statutorily defined reasons, including a failure to comply with legislative intent, whether it costs $10 million or not. That sweeps major policy rules into REINS jurisdiction, in addition to more industry-oriented regulations that impact business bottom lines. When the JCRAR issues an indefinite objection, the rule cannot take effect unless a bill authorizing promulgation is enacted into law. That creates an active legislative approval process for any rule the legislature wishes to apply it to, and it’s a far cry from the passive review process the legislature operated under prior to the REINS Act enactment.

Before, the JCRAR could only temporarily object to a rule, known as a regular objection, but, in that case, the Legislature has to introduce legislation that prohibits the rule from passing. If it does not do so, or if the bill isn’t enacted, the objection lapses at the end of the legislative session and the agency can promulgate the rule. That passive review process—allowing rules to be promulgated unless objected to and the objection upheld by legislative enactment rather than requiring affirmative legislative approval of major rules after objection—gave state agencies the upper hand in rule-making, especially with a Democratic governor, who would likely veto any bill passed to kill an executive branch rule. The flip from passive review to the need for active approval created a new day in state rulemaking.

For what it’s worth, the suite of JCRAR objections is now being challenged as unconstitutional—that will be taken up in another article—and the state Supreme Court, led by a 4-3 progressive majority, has agreed to take up an original action. In grave danger is the ability of the legislature to indefinitely object to a rule, a cornerstone of the REINS Act’s muscle.

Whatever happens in the Supreme Court case, it’s worth dissecting the rule to date, especially its effectiveness in curbing the larger ambitions of Wisconsin’s administrative state. Gauging the rule’s effectiveness seven years in can help plot a roadmap for further reforms to “rein” in the bureaucracy, whether this specific law stands or not.

A Positive Force for Change, or Not Fully Used?

Some critics of Wisconsin’s administrative state have been mildly critical of lawmakers’ use of the REINS Act, even while acknowledging that Wisconsin is one of the few states in the nation with a REINS-like law. A 2021 report by James Broughel and Adam Hoffer, “Wisconsin Regulation in Focus,” by the Wisconsin Institute for Law and Liberty (WILL), put it this way:

The report also chided the JCRAR for not being aggressive enough: “Moreover, the Wisconsin REINS Act and the ability of the JCRAR to indefinitely object to regulations are potentially strong tools for legislative oversight of executive agencies, but these tools are not being utilized to the extent they could be.”

That might be harsh, or maybe legislators have since then begun to explore their new powers. Either way, state Rep. Adam Neylon (R-Pewaukee), a co-chairman of the JCRAR, says he believes the law has worked as intended and has given the legislature a better look at what the administrative state is up to.

“It has been very effective,” Neylon said in an interview with the MacIver Institute recently. “Some of the nuts and bolts of it have brought more transparency into the system, where now we can have a public hearing at the beginning of the process. I think that’s been very helpful and impactful for being able to have people that come in and testify.”

Neylon also says some of the law’s tools haven’t actually had to be employed because they do act as a deterrence, a point the WILL report found to be unclear:

Neylon also says that the committee is careful in using the law’s tools—such as the ability to order an independent economic impact analysis (EIA) if the agency EIA is suspect—because it could invite a challenge over an issue that more or less is a meaningless gesture. Neylon said lawmakers need to pick their battles, and, if a rule comes in and it looks to cost $10 million or more but no one is loudly complaining about a lower agency estimate, especially impacted industries, it requires careful decision-making.

“If people that are impacted by the rule aren’t pushing back on it, then you don’t want to trigger this independent economic analysis to benefit nobody and then test even that power for something that’s symbolic,” he said.

Scott Manley, the executive vice president of the Wisconsin Manufacturers & Commerce, the state’s largest business association, agrees that the very existence of the REINS Act establishes a deterrence. While the JCRAR might not have exercised their right to conduct independent EIAs, Manley said they were prepared to do so on PFAS standards before the DNR acknowledged exceeding threshold costs, and he pointed also to a proposed revision of the DNR’s runoff pollution management standards (NR151) where deterrence worked and the agency withdrew the proposed rule.

“In fact, with respect to the NR 151 rule, the co-chairs of the JCRAR sent a letter while that rule was still under consideration over at DNR, saying, ‘Don’t play games with the cost estimates here. We’re watching what you’re doing,’” Manley said. “And so it wasn’t the committee voting to request an independent EIA, but it was about as close as we’ve ever gotten. And it resulted in the agency pulling the rule back.”

The $10 Million Threshold

Those few instances aside, as the WILL study suggested, it can be hard to nail down the law’s effect in discouraging costly regulations, but the REINS Act has had some significant and measurable successes, too, the most notable obviously being the agency’s notification to the legislature in late 2023 that it was stopping its rule promulgation for PFAS groundwater standards because the expected cost would easily top $10 million.

The department’s revised estimate was $16,608,810 in the first year, $16,740,850 in the second year, and a total of $33,349,660 in the first two years.

“As required by state statutes, the DNR has stopped work on this proposed rule and has notified the state legislature,” the department announced. “The state legislature will need to grant the DNR authority to continue the rulemaking process for setting PFAS standards...”

That set off a massive tug of war between the GOP-controlled legislature and the Evers administration that is not yet settled, but in so doing the REINS Act did its job. Still, while the cost of the PFAS rule might have been too obvious to do anything but halt rule promulgation, the cost of many other proposed rules are not so clear, and that has led state agencies to lowball their fiscal estimates.

“There have been instances that I have seen with my own eyes, you read it and you’re like, ‘there’s no way this is less than 10 million,’” Neylon said. “They’re specifically saying this [number] because they know the REINS Act and they’re doing this on purpose.”

Sometimes the lowball estimates are egregious and absurd, Manley says, and he points to the aforementioned proposed revision of NR151 as an example of that.

“This rule would have been incredibly consequential,” he said. “In this particular change, the DNR was attempting to put significant regulations on all types of farming activity to reduce nitrates. And so one of the things that they said in this rule is that you could not spread manure in Wisconsin between, I think it was, the dates of September 1 and maybe April or May.”

Of course, Manley said, cows don’t stop defecating after September 1, so it was going to require many farmers, and dairy farmers and pork producers in particular, to probably double the size of their manure pits.

“Then you’ve got all kinds of problems for the crop growers because now all of a sudden they can’t have manure spread on their fields after September 1,” he said. “And so it was just kind of a crazy rule.”

And the DNR’s estimated cost of implementation and compliance was just as crazy, Manley said: “It won't shock you to learn that the DNR had come up with a incredibly low ball estimate of $972,000 per year that it would cost statewide.”

For its part, Manley said, WMC did its own detailed analysis and came up with a much different number: between $340 million and $1 billion...

Ultimately, Manley said, the UW-Madison weighed in with its own estimate, which was lower than industry assessments but still well above the REINS Act threshold. That report pegged costs at between $20 million and $43 million a year and likely about $27 million a year to pay for developing the rule’s nutrient management plans.

The DNR then withdrew the rule, though they never acknowledged their cost estimate was wrong, opting instead to say they couldn’t get the work done within the period of time allowed after scope statements are approved.

“And so I think they were embarrassed,” Manley said. “They withdrew the rule. I think they said, ‘Hey, we’re just probably not going to get under the 30-month timeline.’ But the reality is they had their pants pulled down. And they knew it.”

See Ma, No Cost at All

An attempt by the Department of Safety and Professional Services (DSPS) to write a new commercial building code also met with stiff resistance over that agency’s fiscal impact estimate, which led to JCRAR indefinitely objecting to the rule. That rule objection is now one of the major issues in the case before the Supreme Court.

The goal of the proposed rule was to align Wisconsin standards with those of the 2018 and 2021 suite of codes developed by the International Code Council, including the International Building Code, the International Energy Conservation Code, the International Mechanical Code, the International Fuel Gas Code, and the International Existing Buildings Code.

But the WMC’s director of tax, transportation and legal affairs, Evan Umpir, wrote a September 26, 2023 letter to the JCRAR eviscerating the agency’s EIA as insufficient and highlighting only one side of the cost-benefit analysis: “This rule, while only 54 pages in length, will adopt hundreds if not thousands of pages of standards and changes by incorporation at an unknown cost to businesses and, ultimately, consumers, making our state less competitive for new construction,” Umpir wrote.

Incredibly, Umpir continued, the agency’s EIA’s estimated implementation cost to businesses and individuals was $0, which Umpir said was beyond the pale:

The EIA for the most recent code update even acknowledged that there would be some costs as a result of the rule’s adoption, Umpir wrote.

Umpir noted that, with limited exceptions, Illinois, Iowa, Michigan and Minnesota had not generally updated to the 2021 codes and in some instances even the 2018 codes, and Wisconsin would sacrifice competitiveness by increasing the cost of doing business.

“This is especially true given the high interest rates which are making commercial construction more expensive than it has been more than a decade,” he wrote. “Wisconsin taking a lead to adopt two tranches of updates without an adequate understanding of the full cost effect on the building construction industry would be ill-advised.”

Umpir also observed that that there was nothing in statute or code prohibiting a design or construction firm from conforming to a higher standard that what was currently required, nor anything preventing a customer from requesting that a building be designed and constructed at the 2018 or 2021 codes’ standards.

Playing Games

There are other ways agencies play games with the $10 million threshold, Manley said.

For example, the Natural Resources Board—when some Scott Walker appointees were still on the NRB— actually killed some of the the DNR staff’s proposed PFAS changes because of agency smoke and mirrors, in particular their attempt to shift compliance and implementation costs to future years.

“Basically what the DNR did is, they played these games and they’d say there might be $40 million worth of costs in the first two years, but we’re going to amortize those costs over a 20-year period because we think that the businesses or the local governments that are going to incur those capital costs are going to take out a loan to pay for them,” he said.

Using that logic and assumption, the DNR proffered that the cost was not really $40 million over two years, but actually $2 million or $4 million per year, Manley said.

“That’s the same the same as saying you don’t have a $350,000 home, you have a $2,000 per month home,” he said.

But that’s not the way the REINS Act is written, Manley asserted.

“They don’t have any authority to amortize costs at all,” he said.

Manley said it would good for lawmakers to clarify some of the aspects of the REINS Act related to how DNR or other agencies calculate costs “because you don’t get to amortize costs over a 20 year period like a mortgage.”

Then, too, Manley said, the agency will claim they have to incur such costs because of federal mandates.

“The other thing that they’ll say is, ‘oh, well, we think these standards are part of what’s required under the Clean Water Act or the Clean Air Act or the Federal Wetland Law,’” he said. “And so it’s really not their rule that’s driving the costs, it’s really the federal law.”

But Manley says that’s not the case.

Aquatic Invasive Species

Speaking of alignment, in 2020, the DNR undertook a rule revision for controlling aquatic invasive species, primarily:

As the DNR itself stated, none of the activities regulated by the rule were state-mandated, though it acknowledged that a wide range of stakeholders would be affected.

But Manley says what the agency was really doing was making it impossible to chemically treat lakes to control aquatic invasive species and instead requiring exorbitantly expensive control methods that would impose enormous costs on property owners. In other words, the goals of agency’s management program aimed to really make management of invasive species impossible, especially with herbicide treatment.

“This is another great example that would have made significant, and I would argue severe and costly, changes to our aquatic plant management program in Wisconsin,” he said.

All totaled, the DNR estimated that the implementation of the rule would cost close to $1.3 million over five years, mostly paid by local governments, utility rate payers, and other public entities. The cost to businesses would be zero, the agency stated, because it was not directly placed on businesses.

But Manley said the rule would have imposed significant costs not entertained by the agency, especially to riparian property owners. For example, he said, in many cases, an expensive point intercept survey—an assessment of the entire aquatic plant community in a lake—would be needed just to get a permit. Those surveys are among the costliest of lake management tools because they are time- and labor-intensive and resource-heavy.

“It was like their whole point was, we can make this so expensive that lake associations and property owners just aren’t going to be able to afford it, so they’re not even going to bother,” he said.

Manley said WMC had worked with biologists and small business owners who do the chemical treatments, which he also said were safe.

“You can only use chemicals that are approved by the EPA as being non-harmful to other plants and to aquatic wildlife, so they’re safe by definition,” he said.

In its 2022 opposition to the rule before the Natural Resources Board, WMC representatives indeed pointed to a study concluding that, far from advocating a “hands-off” approach, herbicide treatments for lake management were critically important. Indeed, Manley said, that’s why the Legislature made the policy decision in the early 1980s to control aquatic invasive species because otherwise they would choke out the lakes.

“But we’ve got some really weird millennial radicals at the DNR who have taken control of the program, and they say really weird things, such as, if you get milfoil to spread enough, you could maybe even consider it to be a native plant because it’s dominant,” he said. “It’s actually crazy.”

In any event, Manley said WMC and stakeholders pushed back: “We said, ‘we’re probably talking about tens of millions if not hundreds of millions of dollars of costs and lost property value here.’ And they ultimately withdrew the rule.”

But here’s the kicker, Manley said: The agency is bringing the proposed rule back with almost the identical scope statement.

“And so they waited a couple years,” he said. “They withdrew it in August of 2022. They just announced a couple months ago that they’re going to take another run at it.”

A review of the two scope statements do show nearly identical proposals. Each would take an astounding 3,500 hours to develop, and each would have “moderate” economic impacts. The only difference is that the DNR this time states that “private property owners of wetlands, ponds and lake associations and districts will be responsible for the primary cost increases.”

In other words, it’s the same proposed rule, with the same onerous costs in store for property owners. What’s different is the composition of the Natural Resources Board.

“The scope statement is almost identical to the rule that they proposed, and the costs that they were going to impose on essentially riparian property owners and lake associations, who are the ones who primarily get these permits right now, were just astronomical,” Manley said.

The Real Value of the REINS Act

In the end, Manley and Neylon both say the REINS Act has obviously had an impact and helped curb the worst excesses of the administrative state. The exact scope of that success perhaps cannot be determined—it’s impossible to know how many rules were not promulgated because of REINS Act deterrence, and it’s also hard to know how many times, if a watchdog isn’t watching, the agency has successfully gotten away with lowball estimates or with claims that rule revisions require federal compliance when they really don’t, or successfully pitching that they are really just streamlining things.

Still, on some significant issues—the PFAS rules, commercial building codes and others— the law has accomplished what it was intended to accomplish. And it has had an even broader impact because it gives the legislature actual oversight, which it did not have with passive rule review.

“We have the ability with the REINS Act to now stand up to these type of rules that would’ve otherwise quietly been approved and in other states are,” Neylon said.

Not that there isn’t room for improvement or the need for further regulatory reform, Neylon said.

“There’s always room to improve,” he said.

For his part, Manley says keeping agencies honest on cost estimates is a big undertaking. Some critics say the $10 million dollar threshold is too high, but Manley says, while he would be happy to lower it, it would be enough if only agencies were honest.

“To be perfectly blunt and honest, that was the best we could get through the legislature,” he said. “And there were a lot of Republicans who didn’t love the idea of having to be in charge of rulemaking oversight and that, when agencies like the DNR crap out these terrible, expensive rules, they’d have to go on the record opposing them. So it is almost a miracle that we were able to get the thing done in the first place.”

Recalcitrant lawmakers aside, Manley says agency subversion remains the biggest obstacle to the REINS Act’s success.

“I think it’s really hard for the REINS Act to be effective when you have the bureaucracy that’s absolutely 100 percent working to thwart the REINS Act and use all sorts of accounting gimmicks to try and low ball these estimates,” he said.

Still, he says, the REINS Act might not be all that’s needed, but it has made a difference. There’s the PFAS rule, for one, and Manley says that, without the REINS Act, the aquatic invasive rule would likely have been promulgated the first time around and so would have many more expensive rules.

“I can say pretty confidently that, without the REINS Act dollar threshold, agencies just wouldn’t care if we said, ‘well, this is going to be really expensive,’” he said. “Now they have to care. And if they don’t, we’ve got another tool that’s part of the REINS Act that’s at the very end of the legislative review process. And that’s indefinite objection.”

That story—the impact of the indefinite objection and the peril it is in—is the next story in the series.