Legislative Brief

Research Services Division The Administrative Rules Process After EO 2005-1

Introduction
Administrative rules, as found in the Michigan Administrative Code, its Annual Supplements, and the Michigan Register, are a little-known aspect of the legislative process. Rules are often necessary to carry out the intent of acts passed by the Legislature. Without rules, the Michigan Compiled Laws would be unmanageably large due to the need to explain often quite technical details. The Administrative Procedures Act of 1969 (APA), 1969 PA 306, provides the mechanism for the Legislature to authorize the executive departments to implement the purpose of Public Acts. In 2000, the Michigan Supreme Court ended a five-year controversy over the Legislatures role in promulgating rules. Anticipating this ruling, in 1999 the Legislature enacted a package of bills after negotiations with Governor John Engler. Public Acts 262 to 264 placed the Legislature's role in promulgating rules within our Constitution's limits. As a result of these changes, the rule-promulgation process now emphasizes early active involvement by the Legislature instead of the formal ability to disapprove rules (which critics had called a legislative veto). Further changes in the process were made by the Legislature in the 2003-2004 session. Governor Jennifer Granholm issued Executive Order No. 2005-1 in January 2005 that transferred certain duties to the Department of Labor and Economic Growth (DLEG). Highlights
The APA, 1969 PA 306, provides the mechanism for the Legislature to authorize the executive departments to implement the purpose of Public Acts. Public Acts 262 to 264 of 1999 placed the Legislature's role in promulgating rules within our Constitution's limits. Executive Order No. 2005-1 transferred certain executive duties to DLEG. JCAR is the legislative body and SOAHR is the executive body involved in the rules promulgation process. JCAR has 15 session days from receipt of the rule package to review the proposed rule and object. Notice and participation procedures of the APA may be set aside when the preservation of the public health, safety, or welfare is at stake. Persons may appeal decisions in a court of law after exhausting administrative remedies, or, if injury may result by exhausting these remedies, request immediate judicial review.

Rule Drafting Review

Executive departments and agencies draft proposed rules on authority the Legislature provides. Two entities, one in the executive branch and one in the legislative branch, are at the heart of the process of reviewing proposed rules: The Joint Committee on Administrative Rules, known as JCAR (pronounced jay car), is the legislative committee established by the APA to review proposed administrative rules. The committee consists of five members from the House of Representatives and five members from the Senate. Each chambers five-member contingent consists of three members from the majority party and two from the minority party. JCAR may hire staff, which is supervised by the Legislative Council Administrator. The State Office of Administrative Hearings and Rules, SOAHR, created by Executive Order 2005-1, within the Department of Labor and Economic Growth, assumed the APA processing functions of the former Office of Regulatory Reform (ORR), effective March 27, 2005. The

April 2005

Volume 2, Issue 9

Office of Regulatory Reform was created by Executive Order 1995-6 within the Executive Office of the Governor, which itself assumed the functions of the Attorney General under the process established in the APA prior to the controversy. In September 2002, the Office of Regulatory Reform was transferred to the Department of Management and Budget (DMB) by Executive Order 2002-11.

Legislating the Current Process

In 1999, the Legislature enacted revisions to the APA, placing the Legislature on firm constitutional ground in its role in the rules process. (For information on the constitutional controversy and the former process, please see "The Administrative Rules Process," Legislative Topics No. 12, November 2000). Early involvement by the Legislature when departments and agencies draft rules is now emphasized at the expense of the former power to approve or reject proposed rules. A package of bills enacted as 1999 PAs 262 to 264 did the following: Placed ORR within the Department of Management and Budget. (Prior to the effective date of the acts, Executive Order 2000-1 placed ORR back in the Executive Office. As noted above, in 2002 the Governor returned ORR to DMB.) Authorized ORR to prescribe procedures and standards for processing rules. Revised the Legislatures and JCARs roles in the process. This was the heart of the dispute in the latter half of the 1990s. JCAR can no longer approve or disapprove proposed rules. JCAR still reviews proposed rules but may only temporarily halt the filing of rules so that a bill may be introduced to reject the proposed rules. Established procedures for adopting a standard form contract. Required agencies to give notice of guidelines to ORR and JCAR. Transferred responsibility for publishing the Michigan Register and annual supplements to the Michigan Administrative Code from the Legislative Service Bureau (LSB) to ORR. In 2003, the Legislature established in 2003 PA 53 that the Michigan Administrative Code on the ORR's website is the official version of the rules and allows the printing of various rules publications rather than requiring printed versions. In 2004, Public Act 23 of 2004 required electronic transmittal of proposed rules and public hearing notices. A change in the process was made with 2004 PA 491. Among the technical changes in rules processing is an effective increase in the amount of time the Legislature has to consider a proposed rule and object to it. Instead of having 21 calendar days to consider and object to proposed rules, the Legislature has 15 session days. A session day is defined to mean a day in which both the Senate and House of Representatives convene in session.

In the 2003-2004 Legislative Session, further amendments were made by the Legislature.

The Current Rule-Making Process

The rule-making process under the APA and EO 2005-1 has many steps. It is a dual process in which SOAHR and the Legislature/JCAR exercise responsibilities (legislative responsibilities are italicized): 1. An agency submits a Request for Rulemaking (RFR) to the SOAHR, which forwards a copy to JCAR. JCAR sends JCAR members and members of the appropriate standing committees a Notice of Request for Rulemaking. 2. SOAHR then approves or disapproves the RFR or requests additional information. SOAHR sends a list of approvals and disapprovals to JCAR on a weekly basis. JCAR sends JCAR members a copy of Weekly Request for Rulemaking Update.
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3. SOAHR reviews draft rule language it receives and may grant approval to the agency to proceed to a public hearing, deny approval for a public hearing, or request changes or clarifications to the draft rules. If approval for a public hearing is granted, SOAHR sends a copy of the approved draft rules to JCAR and the agency submits the draft rules to SOAHR and the LSB Legal Division for informal approval. LSB examines the rules for proper form, classification, and arrangement. JCAR will send to JCAR members and to members of the appropriate standing committees a Notice of Proposed Rules. 4. The promulgating department or agency must complete a Regulatory Impact Statement (RIS) that assesses the economic impact of the rule. The RIS must be filed with SOAHR at least 28 days prior to the public hearing. 5. The agency schedules a public hearing and provides notice to SOAHR, which in turn forwards a copy of the public hearing notice to JCAR within seven days of receipt. JCAR sends JCAR members and members of appropriate standing committees a Notice of Public Hearing. JCAR may meet to consider the proposed rule, take testimony, and provide the agency with JCARs informal response to the proposed rule. 6. The agency holds a public hearing. JCAR staff may attend the public hearing. Following the public hearing and any changes to the proposed rules, the rules are submitted to the LSB Legal Division for formal approval as to proper form, classification, and arrangement. 7. The agency prepares a rules package for JCAR that includes a transmittal letter, a public hearing report containing a synopsis of the comments in the public hearing records, and a description of any changes made in the rule as a result of the hearing, a copy of the rule, LSB and SOAHR certification, and a RIS. The package must be delivered by SOAHR to JCAR within one year after the last public hearing on the rule. JCAR sends copies of Proposed Administrative Rule to JCAR members, appropriate standing committee members, the Senate and House Fiscal Agencies, and central staffs of the Senate and House. This information includes a JCAR rule analysis, a copy of the proposed rule, the agency public hearing report, a Regulatory Impact Statement, and agency and SOAHR transmittal letters. JCAR has 15 session days from receipt of the rule package to review the proposed rule and object by filing a Notice of Objection approved by a majority of each houses committee members (a concurrent majority). A Notice of Objection may only be made if one of the following conditions exists: The agency lacks statutory authority for the rule; The agency exceeded the statutory scope of its rulemaking authority; There exists an emergency related to the public health, safety, or welfare that would warrant disapproval; The rule conflicts with state law; A substantial change in circumstances has occurred since enactment of the law upon which the proposed rule is based; The rule is arbitrary or capricious; or The rule is unduly burdensome to the public or to a licensee licensed by the rule.

8. If JCAR decides to hold a hearing on the rule or if a Notice of Objection is filed, the agency will make staff available to answer questions about the rule. If a Notice of Objection is adopted within the 15-day period for JCAR consideration, the JCAR chair, the alternate chair, or any JCAR member shall cause bills to be introduced in both houses of the Legislature simultaneously. The bills must rescind the rule upon its effective date, repeal the statutory provision under which the rule was authorized, or stay the rules effective date for up to one year. The Legislature then has 15 session days to consider the bills. If a bill is enacted by the Legislature and presented to the
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Governor within the 15-session-day period, the rules do not become effective. If the Governor vetoes the bill, the rules may be filed immediately and shall take effect 7 days after filing unless a later effective date is indicated in the rule. If a bill is defeated in either house and the vote by which the bill failed is not reconsidered, the rules may be filed and shall take effect immediately unless a later date is specified within the rule. If a bill is not adopted by both houses within the time period, the rules may be filed and shall take effect immediately unless a later date is specified within the rule. 9. If no Notice of Objection is filed, SOAHR may immediately file the rule with the Office of the Great Seal. The rule shall take effect immediately unless a later date is indicated in the rule. JCARs review period expires at this point.

Exceptions to the Rulemaking Process

The notice and participation procedures of the APA may be set aside when the preservation of the public health, safety, or welfare is at stake. The department or agency must determine that an emergency exists, and the Governor must concur. The rules take effect the day they are filed with the Office of the Great Seal and can remain in effect for no more than six months. The rules may be extended another six months by the Governor. Emergency rules are published in the Michigan Register. Another exception eliminates the public hearings and much of the review process for the promulgation of Michigan Occupational Safety and Health Act (MIOSHA) rules substantially similar to federal rules. The federal government requires states to adopt safety and health standards at least as strict as federal standards within six months of the effective date of the federal standards. Other rules exempt from objection by JCAR and consideration by the Legislature include rules describing an agencys organization and operations, amendments or rescissions of rules that are obsolete or superseded, or an amendment to make obviously needed corrections.

Administrative and Judicial Adjudication

Provisions of the APA ensure that a persons rights under Article I, Section 17 of the State Constitution are protected. Chapter 4 of the APA contains provisions to protect individual rights through an adjudication process under which persons may appeal the actions of departments or agencies in a contested case hearing. Because these contested case hearings are quasi-judicial (that is, a judicial-type function carried out by an executive branch department or agency), persons may, after exhausting all administrative remedies available within a department or agency, appeal decisions in a court of law, usually a circuit court, pursuant to Article VI, Section 28 of the State Constitution. When a person may be injured by pursuing administrative remedies, a person may request judicial review prior to exhausting administrative options.

Conclusion
The administrative rules process is a complicated, little-known, but vital element in the operation of state government in Michigan. The dispute over the constitutionality of JCARs role was finally settled by legislative enactment in 1999 and a Michigan Supreme Court ruling in 2000. Michigan has administrative procedures that incorporate a formal rule-making process, adjudication, and judicial review that is open to public scrutiny, input, and appeal. Although the Legislatures role is smaller now than before 1995, the Legislatures active role in this process provides an opportunity to ensure that the Legislatures intent when it passes laws is not undone by executive branch departments and agencies.

Prepared byBrian J. Dunn

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