More Oversight for Administrative Agencies

By Timothy Sandefur
May 9, 2018

The Arizona Court of Appeals yesterday ruled that the state’s Board of Charter Schools violated state law by issuing “frameworks” to regulate charter schools, without following the required procedures for issuing rules. The decision has limited practical effect, because earlier this year the state legislature changed those procedure to exempt the Board, but on a deeper level, the case touches on some crucial issues about how administrative agencies operate.

Courts have been paying increasing attention to this subject recently, because of the way these agencies combine legislative, executive, and judicial powers, and often write and enforce law without meaningful democratic controls. As Chief Justice John Roberts recently remarked, “The Framers did divide governmental power in the manner the Court describes, for the purpose of safeguarding liberty. And yet…the citizen confronting thousands of pages of regulations—promulgated by an agency directed by Congress to regulate, say, ‘in the public interest’—can perhaps be excused for thinking that it is the agency really doing the legislating.” In fact, regulatory agencies are responsible for the vast majority of laws (they just call them regulations) that govern our daily lives. Between 2015 and 2017, Congress passed only 329 statutes—but federal agencies created 3,378 new regulations in the year 2015 alone. And that’s not counting what happens at the state level.

That’s why we have Administrative Procedure Acts, at both the state and federal level, which require agencies to at least go through a multi-step process of hearing public comments and recommendations whenever the agencies want to create a new regulation. That process at least provides a minimal level of protection against agency over-reaching. But for the same reason, agencies are often eager to find ways around that process—ways they can create new rules without saying so publicly, by calling rules something else, like “guidances” or, in this case, “frameworks.”

Beginning in 2012, the Board of Charter Schools did just that. It created a set of rules to regulate charter schools in Arizona. Whether those rules were a good idea or not isn’t at issue here—it’s the fact that the rules it passed didn’t go through the rulemaking procedures that the state’s Administrative Procedure Act requires. A group of charter schools sued, and we filed this friend of the court brief, pointing out the dangers of agencies avoiding their rulemaking duties.

It’s actually quite common for agencies to issue rules in these sneaky ways. The federal Department of Education issues a “guidance” document of some sort about once a day, including the controversial “Dear Colleague letters” that have been the subject of headline-grabbing lawsuits in recent years. One recent survey, seeking to count the amount of de facto rules at the federal level, concluded that it was impossible—there are just too many. And regulations (by whatever name they’re called) are especially burdensome for charter schools, many of which are small institutions with few resources to spare for regulatory compliance—often a full-time job. Some schools have been forced to hire professional management companies to deal with the regulatory burden.

The rest of Arizona’s education bureaucracy also prone to issuing regulations through this trick. Last year, the Department of Education issued a “handbook” for participants in the state’s Education Savings Account program, without any public input or oversight, that added restrictions on parents which had no legal foundation. For example, it limited parents to spending no more than $800 on uniforms, required that 60 percent of spending be on core academic subjects, and barred expenditures that “far exceeds” that of the basic curriculum…whatever that means.

In yesterday’s decision, the court agreed with us and ruled that the Board of Charter Schools should have followed the rulemaking procedures. Because the “frameworks” were “statements of general applicability” and because they were “intended to interpret and guide the implementation of state law,” they qualified as rules subject to the Administrative Procedures Act. Unfortunately, just before the decision was announced, new legislation was enacted which exempts the Board from the Act going forward. That’s an unfortunate outcome—but yesterday’s ruling will provide guidance to the state’s many other administrative agencies that they can’t just call rules by some other name in order to avoid their duties. The more transparency and public oversight of these fundamentally undemocratic agencies, the better.

Timothy Sandefur is vice president for litigation at the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation.