Separation of Powers and the Politics of Administrative Rule Review

Abstract

In many states, agency rules are subject to review and possible veto by elected political officials in the legislative and/or executive branches. The consequences of this rule review authority are little understood. Using time-series cross-section data on state environmental compliance costs, this study investigates the impact that several types of administrative rule review procedures have on the stringency of state environmental regulation. The findings suggest that (1) both gubernatorial and legislative rule review powers are systematically associated with reduced environmental compliance costs, (2) legislatures controlled by the Democratic Party use rule review powers to reduce these costs less than Republican ones, and (3) the latter effect is observable only when legislatures have the power to amend or veto rules without the approval of the governor. These results indicate that rule review plays an important, but complex, role in shaping regulatory outcomes.

Keywords

legislative/executive interaction legislative politics bureaucracy executive politics environmental policy public policy regulatory policy policy implementation

The past four decades have witnessed a notable increase in the institutional capacity of governors and legislatures (Ferguson 2013; Squire 2007). This institutionalization has been driven in part by rivalry between the branches of government, as each seeks the upper hand in the ongoing struggle to shape the content of public policy (Bowman, Woods, and Stark 2010). Yet across the American states, significant variation remains in legislative and gubernatorial institutional capacity. Understanding how differences in institutional structure and capabilities translate into greater relative legislative or executive influence is foundational to understanding policy outcomes in the states (Krause and Woods 2014).

Differential institutional capacity has been shown to affect the relative power that legislatures and governors have over budgets (Barrilleaux and Berkman 2003; Dometrius and Wright 2010; Krause and Melusky 2012 )and legislation (Bowling and Ferguson 2001; Ferguson 2003). Less obviously, perhaps, variation in institutional capacity may also affect the amount of influence that legislatures and governors have on policy implementation, including the development of rules and regulations needed to put policy into action. There has been increasing scholarly recognition of the important role that administrative rulemaking plays in shaping the content of public policy, including several recent empirical assessments of attempts by legislators and executives to influence this form of bureaucratic policymaking (e.g., Balla 2000; O’Connell 2008; S. W. Yackee 2006). As Kerwin (2003, 266–67) notes, “politics permeates the rulemaking process.”

Although scholarly attention on rulemaking has been focused largely at the national level, state political officials often have broad powers to influence administrative actions that are largely unavailable to federal policymakers. In many states, legislatures have the authority to review, modify, or even veto current and/or proposed administrative rules. In recent years, there has been a growing tendency for states to grant governors similar authority as well (Grady and Simon 2002; Schwartz 2010).

These powers are the subject of a good deal of controversy. Observers decry them for politicizing administrative processes, and administrators generally feel that they negatively affect agency performance (Elling 1992). Some agencies have responded to the threat of legislative or gubernatorial vetoes by sharply increasing their usage of emergency rules, which are not subject to the usual rule review process (Gormley 1996).¹ Legislative veto of administrative rules often provokes separation of powers issues, which have resulted in constitutional challenges in several states (Tharp 2001).

Because most of the discussion of rule review authority has focused on legal and procedural issues, little is known about the political dynamics underlying the use of administrative rule review or its policy consequences. This study focuses on how variation in the capacity to amend or veto administrative rules empowers legislatures and/or governors to influence regulatory outcomes within the environmental policy arena. The results suggest that both legislative and gubernatorial rule review powers reduce the regulatory compliance costs imposed on industry, but that the former effect is conditioned by partisan control of the legislature. Institutional features of legislative rule review also appear to play an important role in determining the relative amount of legislative and gubernatorial influence on environmental regulation.

The Politics of Administrative Rule Review

Ambiguity in legislative statutes often affords administrative agencies substantial grants of policymaking authority.² This does not necessarily mean, of course, that elected political officials abdicate all control over the direction of policy. Scholars have documented an impressive array of mechanisms by which legislators and the executive may influence bureaucratic actions, including oversight hearings, budgetary changes, administrative reorganizations, and personnel appointments (e.g., Carpenter 1996; Moe 1985; Ringquist 1995; Wood and Waterman 1994).

A high percentage of these studies have been conducted at the national level, which has precluded attention to one of the most potentially important mechanisms of political control in many states: direct review and possible veto of agency rules by political officials. Although the Congressional veto was at one time the focus of some scholarly attention (Bruff and Gellhorn 1977; Craig 1983; Gilmour 1982; West and Cooper 1983), this attention declined abruptly following its invalidation by the U.S. Supreme Court in 1983.³ Despite Congress’ attempt to reassert its power to review agency rules with the passage of the Congressional Review Act of 1996, scholarly attention has largely focused on other mechanisms which may be used to constrain administrative authority.

At the same time, procedures for legislative and gubernatorial review of administrative rules have become an increasingly prominent feature of many state governments. Political officials in most states currently have some form of formal rule review mechanism (Schwartz 2010). Although states vary significantly in the specific powers that political officials are afforded, each of these states have an institutionalized mechanism specifying particular process and powers by which governors and/or legislators may review, modify, or veto agency rules.⁴ Administrative rule review thus comprises “the most aggressive, intrusive, and potentially effective means of holding rule makers accountable” (Kerwin 2003, 220).

Rule Review as an Instrument of Political Control of the Bureaucracy

A survey of the literature on political–bureaucratic relations suggests several possible consequences of the use of administrative rule review in the states. Much of the recent work on the subject has focused on its capacity to be used as a mechanism of political control of the bureaucracy. Gerber, Maestas, and Dometrius (2005), for instance, discuss how a legislature may use rule review powers as a mechanism of political control, and Huber, Shipan, and Pfahler (2001) find that legislative capacity to veto agency rules acts as a substitute for direct statutory control of administrative agencies, a finding that received individual-level empirical confirmation in a later survey of state legislators (Poggione and Reenock 2009). Recent survey-based studies have also found that agency administrators perceive greater legislative (Gerber, Maestas, and Dometrius 2005) and gubernatorial (Woods 2004) rule review powers to lead to the exercise of greater influence over agency rulemaking by these institutional actors.⁵ Although not tested directly, the clear implication of these works is that legislators and/or the governor use rule review as a means to achieve policy objectives that are consistent with their policy preferences, with Democratic political officials seeking to achieve liberal policy goals (e.g., more stringent regulation, in general) and Republican political officials using these powers to achieve conservative goals (e.g., laxer regulation).

Alternative Perspectives on the Politics of Rule Review

There are several alternatives to this view. As discussed at some length in Ethridge (1985), an older set of literature on political–bureaucratic relations may be divided into two fairly distinct camps: authors who suggest that rule review should enhance the stringency of regulation and those who suggest that it should diminish the regulatory stringency.⁶ Other work implies a somewhat different hypothesis: that the effects of rule review should vary depending on which institution holds rule review authority.

The first view holds that greater legislative (and implicitly gubernatorial) rule review authority will enhance the stringency of agency regulations by providing an institutional means to counteract subsystem politics. The lynchpin of this argument is that the broad delegation of authority to implementing agencies leads to relatively weak regulation due to their engagement in narrow, subsystem politics, which generally serves to benefit regulated interests (Kolko 1965; Ripley and Franklin 1986; Stigler 1971). Thus, a stronger external presence in administrative decisionmaking could prevent administrators from using their delegated authority in ways that benefit clientele groups (Lowi 1979). This argument suggests that effective rule review power powers must be situated in a manner that makes them structurally independent of the existing policy subsystem, such as a rule review committee with general jurisdiction over all agencies (Ethridge 1984). The governor, being outside the subsystem, is likely to satisfy this requirement as well. This perspective thus implies that both legislative and gubernatorial rule review powers should increase regulatory stringency.

The opposing perspective contends that rule review mechanisms serve to diminish regulatory stringency by creating opportunities for access to agency rulemaking that disproportionately favor regulated interests. Administrative rulemaking is a process that is governed by the technical expertise of specialist bureaucrats operating within a legal framework that is designed to ensure that the process is neutral, open to the public, and procedurally fair. Legislative committee hearings, however, are not subject to the same evidentiary or public participation requirements that govern administrative rulemaking hearings; thus, committee proceedings may not be as open or responsive as the hearings on which the administrative action was originally based (Bruff and Gellhorn 1977; J. Cooper and West 1988; McGarity 1991). Regulated groups have resource advantages vis-à-vis public interest groups (Chubb 1983), which enable them to continue to lobby for favored changes after their opponents’ resources have been exhausted at the agency level (Gilmour 1982). In short, rule review powers may decrease regulatory aggressiveness by serving as a mechanism that overrepresents regulated interests.

Empirical research that directly assesses the policy impact of rule review procedures has been limited, but on the whole it tends to support the latter view. Marcus Ethridge (1984; 1985) finds that restrictive regulatory proposals are more likely to encounter objection in rule review committees than less restrictive rules and that states with legislative committee rule review have environmental regulations that are less complex and less strict than those without such authority (Ethridge 1981). Similarly, a recent study also provides evidence that legislative veto powers reduce the stringency of environmental regulation (Daley, Haider-Markel, and Whitford 2007). Not all research, however, falls neatly in line with this perspective. Woods (2005) finds that, all else equal, agency directors report lower levels of interest group influence on agency rulemaking in states with stronger legislative and gubernatorial rule review powers, suggesting that they may serve to counteract the effects of subsystem policymaking (see also Reenock and Gerber 2008).

The effect of rule review powers may vary across political institutions. Some scholars suggest that legislative rule review powers will serve to decrease regulatory stringency due to legislative responsiveness to narrow, particularistic interests, while, by virtue of a broader geographic and electoral constituency, the executive may be responsive to broader interests (Sundquist 1981; West and Cooper 1989). Similarly, Barrilleaux and Berkman (2003) find that governors seek to distribute the benefits of public programs more broadly than legislators, a finding they attribute to differences in the actors’ institutional roles. Legislators, they argue, seek increased developmental spending targeted at their constituents, whereas governors seek more spending on redistributive programs whose benefits are dispersed statewide. This view suggests that legislative rule review powers should decrease regulatory stringency to provide particularistic benefits (in the form of reduced regulatory burdens) to clientele interests, whereas gubernatorial rule review powers should increase it to provide broader environmental amenities to the public at large. Despite the fact that a growing number of governors have been using regulatory review powers, however, extant studies of rule review powers generally have focused almost exclusively on legislative rule review. This exclusive focus on the legislature has left scholars unable to assess the possibility that there are variations in the impact of rule review authority across political institutions.

Governors in some states may also play a role even in the exercise of legislative rule review powers. Many legislative rule review processes require the governor to approve an action amending or nullifying a regulation. Thus, this study examines two important dimensions along which rule review capacity may vary: (1) whether the relevant executive or legislative branch institution has a formal rule review process that includes the capacity to modify or veto proposed rules, and (2) whether the governor has the power to block the rule review capability of the legislature. As discussed below, these two dimensions lead to a wide variety of observed institutional power configurations in the American states.

Administrative Rule Review Powers in the States

Legislative rule review procedures go back in a few states as far as 1939, when the first legislative veto system was enacted in Kansas (L. H. Levinson 1987). Widespread adoption, however, did not occur until the 1970s and early 1980s. Most commonly, legislative rule review mechanisms have been established through state administrative procedure acts (APAs), although some have been provided for in separate statutes. Momentum for adopting these forms of legislative oversight slowed considerably in the wake of the U.S. Supreme Court’s 1983 decision declaring the Congressional veto unconstitutional. Several state supreme courts followed suit, ruling legislative provisions to be a violation of the governor’s authority under the state constitution, whereas in others, rule review provisions were rescinded or altered via legislation or citizen initiative.⁷ The early 1980s were thus a tumultuous time for administrative rule review; between 1980 and 1985 alone, 17 states added, removed, or altered their legislative rule review powers, some more than once (L. H. Levinson 1987).

Legislative rule review powers vary from state to state in significant ways. For the purposes of this study, the important distinction rests on whether the legislature may act unilaterally to amend or veto rules, or whether gubernatorial concurrence is required.⁸ Legislative rule review thus falls into three categories: (1) states in which the legislatures lack rule review capability altogether, or in which a review process exists but does not empower the legislature to amend or nullify a rule; (2) states in which the legislature has unilateral amendment or veto capability; and (3) states in which the legislature must obtain gubernatorial approval to amend or veto a rule.

Although scholarship on administrative rule review to date has focused heavily on legislative review, some governors have institutionalized rule review capabilities as well. As the head of the executive branch, governors and their staffs always have at least a powerful informal role in the development of important regulations. Yet by the early 1980s, several states had created institutionalized gubernatorial rule review processes (L. H. Levinson 1982). Over time, the role of governors has been made much more systematic and routinized in many states, similar (although generally much less thorough and rigorous) to the role of the Office of Management and Budget in reviewing rules at the federal level since the Reagan presidency (Schwartz 2010).

Taken together then, there are six possible combinations of legislative and gubernatorial rule review authority along these two dimensions. Table 1 gives an overview of these power configurations and the states that fit into each category in 1994, the final year covered by this study.⁹

Table 1.

Legislative and Gubernatorial Rule Review Powers, 1994.

	No legislative rule review	Legislative rule review–No gubernatorial approval required	Legislative rule review–Gubernatorial approval required
No gubernatorial rule review	AZ CO DE MS NM OR RI TX	AL CT ID IL NJ	AR FL GA KY ME MO NH NC ND OH SC SD TN WI
Gubernatorial rule review	CA HI MA MN NE NY VA	IA KS MI NV OK VT VA	AK LA MD MT PA UT WA WV WY

In the top left corner are states with agencies that are relatively unconstrained in their rulemaking authority (at least as it pertains to powers of legislative and gubernatorial rule review). In these states, either there are no formal powers of rule review or the powers are advisory only. In the top center cell are states whose legislatures have the power to review agency rules and amend or veto them without gubernatorial concurrence, whereas their governors have no independent power of rule review. Then there are a set of shared powers configurations: (1) states in which the legislature must obtain gubernatorial approval to veto rules, but there is no independent power of gubernatorial rule review (top right); (2) states in which the legislature has the unilateral power to review and amend/veto rules and the governor has a similar set of formal powers (bottom center); and (3) states in which the governor has both the power to block a legislative rule review action and to take independent action to review agency rules (bottom right). On the bottom left are those states in which the governor has rule review powers, but there are no corresponding powers of legislative rule review.¹⁰ The table illustrates the wide variety of power configurations that exist between legislatures and governors as it pertains to oversight of administrative rulemaking. The analyses below seek to identify how these different types of rule review procedures interact with the state political environment to shape environmental regulation.

Data and Method

The objective of this study is to empirically assess how a state’s level of environmental regulation is affected by the institutional powers of administrative rule review available to legislatures and governors. Political officials may use these powers to amend or veto agency rules in ways that systematically affect overall regulatory stringency. Theory suggests that these officials will use their powers in ways that serve their policy preferences, with Republicans seeking to impose lower regulatory burdens on industry than their Democratic counterparts.

Dependent Variable

Environmental regulation is a concept not easily given to precise measurement. Regulatory stringency is operationalized here as the private costs of environmental compliance, which is a measure of the economic burden imposed by environmental regulation on manufacturing industry. This operationalization has several advantages for the present study. First, it provides an objective measure of environmental regulation that is comparable across states, rather than requiring a subjective of coding of specific regulations. Second, the measure captures the effects of a wide variety of environmental regulations, rather than regulation of one specific area, greatly enhancing the generalizability of the results.¹¹ Finally, it is precisely these economic burdens that are often most politically salient, and that industry seeks to reduce through its participation in the rulemaking process (J. W. Yackee and Yackee 2006).

Data on the private cost of pollution abatement come from Levinson’s (2001) industry-adjusted index of state environmental compliance costs. Levinson constructs the index from state-level data on manufacturing pollution abatement and control expenditures, which were compiled annually by the U.S. Census from 1977 to 1994. Levinson shows that the Census measure, however, is a poor approximation of environmental regulatory stringency due to the nonuniform distribution of industries across states. His adjusted measure accounts for differences in state industrial composition, such that it gives the average pollution abatement costs per dollar of state output if each firm in the state conformed to the national average for its industry. Environmental compliance costs in a given state are thus measured relative to other states with the same industrial composition. A value greater than 1 indicates that industries in the state spent relatively more per dollar of output on pollution abatement than did identical industries located in other states.¹² This measure has been utilized as a proxy for environmental regulatory stringency in a variety of other studies (Daley, Haider-Markel, and Whitford 2007; Fredriksson and Millimet 2002).

Independent Variables

The key independent variables are the institutional features of rule review in the states and political control of state institutions. For the purposes of this article, state legislative rule review powers were classified along two dimensions: (1) whether the legislature has a formal procedure to review agency rules that empowers the legislature to amend or nullify them (Legislative Rule Review, which is a dummy variable coded 1 if state legislatures have these powers), and (2) whether gubernatorial concurrence is necessary to take action on a rule (Legislative Rule Review–gubernatorial approval, which is a dummy variable coded 1 if the state has legislative rule review that requires gubernatorial approval, and Legislative Rule Review–no gubernatorial approval, which is a dummy variable coded 1 if the state has legislative rule review that does not require gubernatorial approval).¹³ For executive rule review, the data simply indicate the presence or absence of a formal executive branch rule review process (Gubernatorial Rule Review which is a dummy variable coded 1 if the governor has rule review powers).¹⁴ These procedures, along with political control of state institutions and their interaction effects are lagged one year to account for the time it takes for regulations to affect compliance costs.¹⁵

The key state political context variables are those representing party control of state government.¹⁶ Unified Republican Control is a dummy variable coded 1 if both legislative chambers are controlled by the Republican Party, 0 otherwise. Split Legislative Control is coded 1 if party legislative control is split.¹⁷ Unified Democratic control is the omitted reference category. The expectation is that higher levels of Republican legislative control will lead to lower environmental compliance costs. Republican Governor is a dummy variable coded 1 for Republican, 0 otherwise.¹⁸

Another important facet of a state’s political context is its interest group environment. The stringency of environmental regulation may reflect organized interest group pressures within the state. To capture these pressures, I use variables representing the relative number of manufacturing and environmental lobbying organizations in the state. Data for the number of organized Manufacturing Groups and Environmental Groups were compiled from lobbying registration rolls by Gray and Lowery (1996).¹⁹ They are operationalized as the number of each of these interest groups registered to lobby in the state as a percentage of the total number of interest groups registered in the state.²⁰

State economic conditions may also affect the political pressures facing state officials, with states in poorer economic climates facing greater political pressure to lower regulatory standards. Two measures are included in the analyses as indicators of state economic conditions. First, the state’s lagged Unemployment rate is included as a general indicator of the state’s overall economic circumstances.²¹ The second is the state’s Industrial Energy Price, calculated as the average cost per 1,000 British thermal units (BTUs).²² When input prices are low, industry will on average be more profitable; thus, government may be more likely to impose greater regulatory burdens on industry. Moreover, when input prices increase, firms may be spurred to generate process innovations that reduce pollution as a way to improve efficiency, thereby causing regulatory compliance costs to decrease (Hart and Ahuja 1996). Thus, energy prices have been found to be strongly associated with environmental compliance costs (Daley, Haider-Markel, and Whitford 2007).

Regulation is only one tool among several that governments have to deal with environmental problems. Rather than imposing regulatory burdens on industry, states may choose to “socialize the costs” of environmental protection through direct government spending (Williams and Matheny 1984). I account for Environmental Spending in each state by using the total state government spending environmental and natural resources per capita.²³ I also include a variable measuring state Wealth in the models, which is measured as gross state product, per capita. Wealthier states have greater fiscal capacity shift the costs of environmental protection from the private sector to the public sector (Feiock and Rowland 1990). Finally, environmental regulation may be more stringent in situations where pollutant emissions may have more serious human consequences, as where a greater number of people will be exposed. Population Density is therefore included, which measures average population per square mile. Descriptive statistics for the dependent and independent variables are reported in Table 2.

Table 2.

Summary Statistics.

Variables	M	SD	Minimum	Maximum
Environmental Compliance Costs	1.02	0.37	0.23	2.59
Legislative Rule Review	0.55	0.50	0	1
Gubernatorial Rule Review	0.40	0.49	0	1
Unified Republican Legislature	0.19	0.40	0	1
Split Legislature	0.19	0.39	0	1
Republican Governor	0.38	0.49	0	1
Wealth	16.86	5.84	6.5	35.58
Population Density	1.63	2.29	0.016	10.51
Unemployment	6.66	2.10	2.2	18.0
Manufacturing Interest Groups	0.02	0.01	0	0.06
Environmental Interest Groups	0.10	0.03	0.02	0.160
Industrial Energy Price	3.73	0.97	1.69	6.83
Environmental Spending	0.03	0.01	0.007	0.07

The data set consists of pooled observations from the contiguous American states (except for Nebraska, which is excluded due to its nonpartisan legislature) for the time period 1977 to 1994.²⁴ A pooled design is desirable in that it combines the inferential strengths of cross-sectional and time-series designs. Care must be taken in handling potential violations of ordinary least squares assumptions, however, as pooled models are likely to exhibit the estimation problems characteristic of both time-series and cross-sectional designs (Baltagi 1995). Specifically, diagnostic checks indicate that these data are stationary, but contain serial autocorrelation.²⁵ A Prais-Winston procedure with a panel-specific first-order autoregressive correction was used…”. All models also correct for panel-corrected standard errors to deal with heteroskedasticity across panels.²⁶

Results

Multivariate analyses of the effect of rule review on environmental regulation are reported in Table 3. The first column presents the results of the baseline model. The results indicate that legislative and gubernatorial veto powers are each associated with significantly lower environmental compliance costs, ceteris paribus. These results are consistent with the view that elected political officials systematically use rule review powers in ways that lower regulatory burdens on industry, irrespective of the institutional locus of rule review authority.²⁷

Table 3.

The Effect of Legislative and Gubernatorial Rule Review on Environmental Compliance Costs.

	(1)	(2)	(3)
Legislative Rule Review_t−1	−0.191***	−0.139***	−0.191***
Legislative Rule Review_t−1	(0.036)	(0.036)	(0.036)
Gubernatorial Rule Review_t−1	−0.060**	−0.046*	−0.089**
Gubernatorial Rule Review_t−1	(0.027)	(0.025)	(0.035)
Unified Republican Legislature_t−1	−0.099***	0.033	−0.108***
Unified Republican Legislature_t−1	(0.032)	(0.064)	(0.032)
Split Legislature_t−1	−0.019	0.005	−0.021
Split Legislature_t−1	(0.024)	(0.045)	(0.024)
Republican Governor_t−1	0.022	0.019	−0.002
Republican Governor_t−1	(0.019)	(0.019)	(0.025)
Unified Republican Legislature_t−1 × LRR_t−1		−0.226***
Unified Republican Legislature_t−1 × LRR_t−1		(0.073)
Split Legislature_t−1 × LRR_t−1		−0.038
Split Legislature_t−1 × LRR_t−1		(0.054)
Republican Governor_t−1 × GRR_t−1			0.066
Republican Governor_t−1 × GRR_t−1			(0.042)
Manufacturing Interest Groups_t	−3.411**	−3.012**	−3.312**
Manufacturing Interest Groups_t	(1.539)	(1.531)	(1.562)
Environmental Interest Groups_t	0.598	0.712	0.620
Environmental Interest Groups_t	(0.478)	(0.488)	(0.478)
Unemployment_t−1	0.019***	0.018***	0.018***
Unemployment_t−1	(0.006)	(0.005)	(0.006)
Industrial Energy Price_t	−0.038***	−0.035***	−0.038***
Industrial Energy Price_t	(0.013)	(0.013)	(0.013)
Wealth_t	−0.001	−0.002	−0.001
Wealth_t	(0.003)	(0.003)	(0.003)
Environmental Spending_t	4.660**	5.626***	4.821**
Environmental Spending_t	(2.095)	(1.999)	(2.082)
Population Density_t	−0.032***	−0.030***	−0.031***
Population Density_t	(0.006)	(0.006)	(0.006)
Constant	1.133***	1.060***	1.139***
Constant	(0.103)	(0.102)	(0.104)
Observations	799	799	799
R ²	.604	.628	.600

Note. Panel-corrected standard errors are given in parentheses; LRR = legislative rule review; GRR = gubernatorial rule review.

p < .1 **p < .05. ***p < .01 (two-tailed test).

Several control variables are also significant. Notably, unified Republican Party control of the state legislature is associated with decreased environmental compliance costs relative to unified Democratic control (the omitted reference category). Neither split legislative control nor party control of the governorship, in contrast, shows statistically discernable effects. The results are also consistent with the idea that regulatory stringency is responsive to organized interests in the external political environment. States with greater industry group strength, as measured by the relative number of manufacturing groups, impose lower compliance costs on industry, ceteris paribus. Other important determinants of compliance costs in Model 1 and most of the subsequent models include population density, unemployment rates, environmental spending, and industrial energy prices.

In the next two models, salient features of legislative and gubernatorial rule review powers are interacted with party control of state political institutions.

Significant coefficient estimates on these interaction terms would suggest that Republican political officials use rule review powers to diminish the stringency of regulation. The results of Model 2 indicate that the impact of legislative rule review powers is mediated by legislative party control, with clear differences emerging in their use between legislatures controlled by Republicans and those controlled by their Democratic counterparts. The interaction term between unified Republican legislature and legislative rule review is positive and significant, indicating that Republican legislatures with rule review powers impose significantly lower environmental compliance costs than Democratic legislatures with similar powers. The effect of rule review on compliance costs under unified Democratic legislative control is −.14, whereas the effect under unified Republican legislative control is −.36. Recall from Table 2 that environmental compliance costs are distributed with a mean of 1 and a standard deviation reduction of 0.37. In states with legislative rule review powers, unified Republican legislative control is thus associated with about a one standard deviation reduction in environmental compliance costs, ceteris paribus, whereas in states with unified Democratic legislative control, these powers are associated with less than half a standard deviation in these costs. Note, however, that legislative rule review powers have a reductive effect on regulatory stringency in both cases. Although partisan differences affect the magnitude of the impact, this evidence suggests that, on balance, legislators from both parties may use rule review proceedings as a mechanism to reduce compliance costs.

Does gubernatorial rule review evidence the same partisan dynamics? Model 3 assesses this question. The interaction effect is not significant, suggesting that the effect of party control of the governorship does not interact with gubernatorial rule review to influence environmental compliance costs. Thus, irrespective of partisan affiliation, the results suggest that gubernatorial rule review powers are associated with reduced environmental compliance costs. These results are consistent with the interpretation that governors of both parties are equally likely to use these powers to reduce the regulatory compliance costs faced by industry.²⁸

The next set of models assesses the effects of rule review under conditions when legislative rule review powers are shared with the governor versus when they are not. The results are presented in Table 4. The first column presents the results of Model 4, in which legislative rule review is broken down by whether gubernatorial assent is required to amend or veto administrative rules. The results suggest that rule review systems in which the legislature has independent veto power and those in which gubernatorial concurrence is required each lead to significantly reduced environmental compliance costs relative to states with no legislative veto power (the omitted reference category).

Table 4.

The Effect of Legislative Rule Review on Environmental Compliance Costs, by Type of Review.

	(4)	(5)	(6)	(7)
LRR–Gubernatorial Approval_t−1	−0.173***	−0.173***	−0.160***	−0.180
LRR–Gubernatorial Approval_t−1	(0.038)	(0.038)	(0.037)	(0.043)
LRR–No Gubernatorial Approval_t−1	−0.218***	−0.154***	−0.195***	−0.218***
LRR–No Gubernatorial Approval_t−1	(0.046)	(0.049)	(0.049)	(0.046)
Gubernatorial Rule Review_t−1	−0.063**	−0.072**	−0.041	−0.063**
Gubernatorial Rule Review_t−1	(0.027)	(0.028)	(0.027)	(0.027)
Unified Republican Legislature_t−1	−0.096***	−0.054	−0.056	−0.096***
Unified Republican Legislature_t−1	(0.033)	(0.040)	(0.047)	(0.033)
Split Legislature	−0.016	0.019	−0.041	−0.016
Split Legislature	(0.025)	(0.031)	(0.033)	(0.025)
Republican Governor_t−1	0.021	0.018	0.016	0.013
Republican Governor_t−1	(0.019)	(0.019)	(0.019)	(0.024)
Unified Republican Legislature_t−1 ×		−0.136**
LRR–No Gubernatorial Approval_t−1		(0.061)
Split Legislature_t−1 × LRR–No		−0.129**
Gubernatorial Approval_t−1		(0.057)
Unified Republican Legislature_t−1 ×			−0.146
LRR–Gubernatorial Approval_t−1			(0.095)
Split Legislature_t−1 × LRR–			0.076
No Gubernatorial Approval_t−1			(0.059)
Republican Governor_t−1 × LRR–				−0.018
Gubernatorial Approval_t−1				(0.040)
Manufacturing Interest Groups_t	−3.482**	−3.651**	−3.281**	−3.490**
Manufacturing Interest Groups_t	(1.576)	(1.567)	(1.667)	(1.575)
Environmental Interest Groups_t	0.605	0.499	0.737	0.607
Environmental Interest Groups_t	(0.472)	(0.468)	(0.515)	(0.472)
Unemployment_t−1	0.019***	0.018***	0.018***	0.019***
Unemployment_t−1	(0.005)	(0.005)	(0.005)	(0.005)
Industrial Energy Price_t	−0.037***	−0.035***	−0.033**	−0.037***
Industrial Energy Price_t	(0.013)	(0.013)	(0.013)	(0.013)
Wealth_t	−0.002	−0.002	−0.001	−0.002
Wealth_t	(0.003)	(0.003)	(0.003)	(0.003)
Environmental Spending_t	4.248**	4.287**	4.440**	4.230**
Environmental Spending_t	(2.100)	(2.109)	(1.940)	(2.086)
Population Density_t	−0.031***	−0.031***	−0.034***	−0.031***
Population Density_t	(0.006)	(0.006)	(0.006)	(0.006)
Constant	1.143***	1.145***	1.116***	1.144***
Constant	(0.103)	(0.101)	(0.108)	(0.104)
Observations	799	799	799	799
R ²	.613	.617	.611	.614

Note. Panel-corrected standard errors are given in parentheses; LRR = legislative rule review.

p < .1 **p < .05. ***p < .01 (two-tailed test).

Models 5 and 6 interact these variables with legislative party control. The results of Model 5 suggest that, consistent with expectations, legislative rule review when no gubernatorial approval is necessary has a significant interactive effect with both unified Republican legislative control and split legislative control. The effect of rule review powers under Democratic legislative control is −.17, whereas under split control it is −.30 and under Republican control it is −.31. Interestingly, there appears to be little difference between split control and unified Republican control, with each being associated with a reduction in environmental compliance costs of about half a standard deviation relative to unified Democratic control.

The results of Model 6 suggest that there is no statistically discernable interactive effect of either unified Republican or split legislative control when gubernatorial approval is required to veto rules. Taken together, the results of Models 5 and 6 indicate that the interactive effect between legislative party control and powers of rule review that were found in Model 2 occurs primarily in cases where the legislature may amend or modify rules without gubernatorial approval. These findings suggest that governors may use their powers to block the use of legislative rule review as a tool of legislative control of the bureaucracy.²⁹

The last set of models investigates whether this effect is further moderated by party control of the governorship. The intent in these models is to look at whether gubernatorial partisanship plays a role in whether governors block legislatures from using legislative rule review to achieve their policy preferences in cases where governors have the institutional capability to do so. Model 7 assesses whether the party of the governor interacts with legislative rule review in situations where gubernatorial approval is required. However, the hypothesized interactive relationship is not supported, casting further doubt on the contention that legislative rule review is affected by the policy preferences of the governor. Although the models indicate that legislatures are less able to achieve their policy goals through the mechanism of legislative rule review in cases where the governor has the institutional capability to block the legislature from amending or vetoing regulations, it does not appear that this is primarily the result of partisan disagreements between the legislature and the governor. Instead, it may be a function of institutional differences between the legislative and executive branches.³⁰

Conclusion

The relative institutional capacity of governors and legislatures should affect their ability to translate policy preferences into results (Krause and Woods 2014). One major feature of institutional capacity in the American states is powers of administrative rule review. This study investigates two major aspects of the relative rule review capacity of governors and legislatures: (1) whether the governor and/or legislature has the authority to amend or veto regulations, and (2) whether legislative authority to amend or veto these regulations requires gubernatorial approval.

The results of the empirical analyses indicate that legislative rule review gives legislatures an effective way to translate preferences into policy outcomes. The evidence presented here suggests that both Democratic and Republican controlled legislatures use rule review powers to reduce the compliance costs faced by industry, but that legislatures under Republican control legislatures reduce them significantly more than their Democratic counterparts. This effect, however, is tempered by the governor’s ability to block legislative rule review. In states where governors have this power, legislative rule review ceases to be an effective means of influencing agency behavior.

In contrast to the legislature, partisan effects were not found for the governor. All else constant, governors with rule review powers impose equivalently lower compliance costs on industry regardless of party affiliation. This implies that governors may have a different institutional role than legislatures, although the finding that there is uniform negative effect of rule review on environmental compliance costs across party lines for governors, but not legislatures, is the opposite of how this institutional role is commonly conceived (Sundquist 1981; West and Cooper 1989). It is worth noting that, generally speaking, executive branch review has expanded more widely and become much more intensive in the time period since these data ended, so it is possible that a study using more recent data may observe different effects.

On average, both gubernatorial and legislative rule review powers are associated with lower compliance costs, suggesting that legislators and governors who have the institutional capacity to review and veto agency regulations may use these powers to reduce the compliance costs imposed on industry. This finding helps resolve a key debate in the literature about the effect of direct participation by elected officials in agency rulemaking. The presence of rule review powers appears to give business a “privileged position” (Lindblom 1982), a means of shaping the content of regulation with an institutionalized bias in its favor. This comports with case study evidence which has generally found that most participants represent industry, and that the changes in rules generally benefit industry interests (Ethridge 1984; 1985).

On the whole, these findings indicate that rule review mechanisms may have significant effects on regulatory policy outcomes, but that the political dynamics that generate these effects appear to be more complex and nuanced than has often previously been assumed. Although discussion of rule review has generally been couched in terms of constitutional authority and procedure, this evidence suggests that these powers have substantial policy effects, which are worthy of much more systematic empirical attention. One avenue for future research may involve a focus on disentangling causal effects, by using methods designed to address possible endogeneity between institutions and policy outcomes. More generally, these results suggest the importance of further research on how institutional arrangements interact with the external political environment to produce policy outcomes. Such research promises to enhance our understanding of the impact of not only of powers of administrative rule review but of political institutions more generally.

Footnotes

Acknowledgements

The author thanks Kevin Fahey, Daniel Smith, and Susan Yackee for helpful comments, and Amanda Londo for help with data collection.

Author’s Note

A previous version of this article was presented at the Florida State University Colloquium on Regulation in the States sponsored by the DeVoe Moore Center, February 21, 2014.”

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes

Author Biography

Neal D. Woods is an Associate Professor of political science at the University of South Carolina. His research interests include public policy, public administration, federalism and intergovernmental relations, and state politics.

References

Anderson

Jerry L.

Poyner

Christopher

. 2013. “A Constitutional and Empirical Analysis of Iowa’s Administrative Rules Review Committee Procedure.” Drake Law Review 61:1–84.

Balla

Steven J.

2000. “Legislative Organization and Congressional Review of Agency Regulations.” Journal of Law, Economics, & Organization 16:424–48.

Baltagi

Badi

. 1995. Econometric Analysis of Panel Data. New York: Wiley.

Barrilleaux

Charles

Berkman

Michael

. 2003. “Do Governors Matter? Budgeting Roles and the Politics of State Policymaking.” Political Research Quarterly 56(4): 409–17.

Berry

William

Fording

Richard

Hansen

Russell

. 2000. “An Annual Cost of Living Index for the American States 1960-1995.” Journal of Politics 65:327–49.

Berry

William

Ringquist

Evan J.

Fording

Richard

Hansen

Russell

. 1998. “Measuring Citizen and Government Ideology in the American States: 1960–93.” American Journal of Political Science 42:418–37.

Bowers

James R.

1989. “Agency Responsiveness to the Legislative Oversight of Administrative Rulemaking: A Case Study of Rules Review in the Illinois General Assembly.” American Review of Public Administration 19:217–31.

Bowling

Cynthia J.

Ferguson

Margaret

. 2001. “Divided Government, Interest Representation and Policy Differences: Competing Explanations of Gridlock in the Fifty States.” Journal of Politics 63(1): 182–206.

Bowman

Ann O’M.

Woods

Neal D.

Stark

Milton R.

II . 2010. “Governors Turn Pro: Separation of Powers and the Institutionalization of the American Governorship.” Political Research Quarterly 63(2): 304–15.

10.

Bruff

Harold

Gellhorn

Ernest

. 1977. “Congressional Control of Administrative Regulation: A Study of Legislative Vetoes.” Harvard Law Review 90:1369–440.

11.

Carpenter

Daniel P.

1996. “Adaptive Signal Processing, Hierarchy, and Budgetary Control in Federal Regulation.” American Political Science Review 90:283–302.

12.

Chubb

John E.

1983. Interest Groups and the Bureaucracy. Palo Alto: Stanford University Press.

13.

Cooper

Joseph

West

William F.

1988. “Presidential Power and Republican Government: The Theory and Practice of OMB Review of Agency Rules.” Journal of Politics 50:864–95.

14.

Cooper

Philip J.

2007. Public Law and Public Administration. 4th ed. Belmont: Thomson Wadsworth.

15.

Council of State Governments. Various Years. The Book of the States. Lexington: Council of State Governments.

16.

Craig

Barbara Hickson

. 1983. “The Congressional Veto and Rulemaking.” Public Administration Quarterly 6:22–42.

17.

Daley

Dorothy M.

Haider-Markel

Donald P.

Whitford

Andrew B.

2007. “Checks, Balances, and the Cost of Regulation: Evidence from the American States.” Political Research Quarterly 60:696–706.

18.

Dean

Kenneth D.

1992. “Legislative Veto of Administrative Rules in Missouri: A Constitutional Virus.” Missouri Law Review 57:1157–231.

19.

Dometrius

Nelson C.

Wright

Deil S.

2010. “Governors, Legislatures, and State Budgets across Time.” Political Research Quarterly 63(4): 783–95.

20.

Ederington

Josh

Levinson

Arik

Minier

Jenny

. 2005. “Footloose and Pollution-Free.” Review of Economics and Statistics 87:92–99.

21.

Elling

Richard C.

1992. Public Management in the States: A Comparative Study of Administrative Performance and Politics. Westport: Praeger.

22.

Ethridge

Marcus E.

1981. “Legislative-Administrative Interactions as ‘Intrusive Access’: An Empirical Analysis.” Journal of Politics 43:473–92.

23.

Ethridge

Marcus E.

1984. “Consequences of Legislative Review of Agency Regulations in Three U.S. States.” Legislative Studies Quarterly 12:475–520.

24.

Ethridge

Marcus E.

1985. Legislative Participation in Implementation: Policy through Politics. New York: Praeger.

25.

Feiock

Richard

Rowland

C. K.

1990. “Environmental Regulation and Economic Development: The Movement of Chemical Production among States.” Western Political Quarterly 43:562–76.

26.

Ferguson

Margaret

. 2003. “Chief Executive Success in the Legislative Arena.” State Politics & Policy Quarterly 3:153–82.

27.

Ferguson

Margaret

. 2013. “Governors and the Executive Branch.” In Politics in the American States: A Comparative Analysis. 10th ed., eds. Gray

Virginia

Hansen

Russell

Kousser

Thad

. Washington, DC: CQ Press. Pp. 208–50.

28.

Fredriksson

Per G.

Millimet

Daniel L.

2002. “Strategic Interaction and the Determination of Environmental Policy across U.S. States.” Journal of Urban Economics 51:101–22.

29.

Frickey

Phillip

. 1985. “Constitutionality of Legislative Review of Administrative Rules: The Case of Minnesota.” Minnesota Law Review 70:1237–78.

30.

Gerber

Brian

Maestas

Cherie

Dometrius

Nelson

. 2005. “State Legislative Influence over Agency Rulemaking: The Utility of Ex Ante Review.” State Politics & Policy Quarterly 5 (1): 24–46.

31.

Gilmour

Robert S.

1982. “The Congressional Veto: Shifting the Balance of Administrative Control.” Journal of Policy Analysis and Management 2:13–25.

32.

Gormley

William

. 1996. “Accountability Battles in State Administration.” In The State of the States. 3rd ed., ed. Horn

Carl Van

. Washington, DC: CQ Press. Pp. 161–78.

33.

Grady

Dennis O.

Simon

Kathleen M.

2002. “Political Restraints and Bureaucratic Discretion: The Case of State Government Rule Making.” Politics & Policy 30:646–79.

34.

Gray

Virginia

Lowery

David

. 1996. The Population Ecology of Interest Representation: Lobbying Communities in the American States. Ann Arbor: University of Michigan Press.

35.

Hamm

Keith

Robertson

Roby D.

1981. “Factors Influencing the Adoption of New Methods of Legislative Oversight in the U.S. States.” Legislative Studies Quarterly 6:133–50.

36.

Hart

Stuart L.

Ahuja

Gautam

. 1996. “Does It Pay to Be Green? An Empirical Examination of the Relationship between Emission Reduction and Firm Performance.” Business Strategy and the Environment 5:30–37.

37.

Huber

John D.

Shipan

Charles R.

Pfahler

Madelaine

. 2001. “Legislatures and Statutory Control of the Bureaucracy.” American Journal of Political Science 45:330–45.

38.

Krause

George A.

Melusky

Benjamin F.

2012. “Concentrated Powers: Unilateral Executive Authority and Fiscal Policymaking in the American States.” Journal of Politics 74:98–112.

39.

Krause

George A.

Woods

Neal D.

2014. “State Bureaucracy: Policy Delegation, Comparative Institutional Capacity, and Administrative Politics in the American States.” In Oxford Handbook of State and Local Government, ed. Haider-Markel

Donald P.

New York: Oxford University Press. Pp. 363–93.

40.

Levinson

Arik

. 2001. “An Industry Adjusted Index of State Environmental Compliance Costs.” In Behavioral and Distributional Effects of Environmental Policy, eds., Carraro

Carlo

Metcalf

Gilbert E.

Chicago: University of Chicago Press. Pp. 131–55.

41.

Levinson

L. Harold

. 1982. “Legislative and Executive Veto of Rules of Administrative Agencies: Models and Alternatives.” William & Mary Law Review 79:113–15.

42.

Levinson

L. Harold

. 1987. “The Decline of the Legislative Veto: Federal/State Comparisons and Interactions.” Publius: The Journal of Federalism 17:115–32.

43.

Lindblom

Charles E.

1982. “The Market as Prison.” Journal of Politics 44:324–36.

44.

List

John A.

Sturm

Daniel

. 2006. “How Elections Matter: Theory and Evidence from Environmental Policy.” Quarterly Journal of Economics 121:1249–81.

45.

Lowery

David

Gray

Virginia

. 1997. “How Some Rules Just Don’t Matter: The Regulation of Lobbyists.” Public Choice 91:139–47.

46.

Lowi

Theodore J.

1979. The End of Liberalism. 2nd ed. New York: W.W. Norton.

47.

McGarity

Thomas O.

1991. Reinventing Rationality: The Role of Regulatory Analysis in the Federal Bureaucracy. Cambridge: Cambridge University Press.

48.

Moe

Terry M.

1985. “Control and Feedback in Economic Regulation: The Case of the NLRB.” American Political Science Review 79:1094–116.

49.

National Association on Administrative Rules Review. 1996. 1996-97 Administrative Rules Review Directory and Survey. Lombard, IL: Thomas Legal.

50.

O’Connell

Anne Joseph

. 2008. “Political Cycles of Rulemaking: An Empirical Portrait of the Modern Administrative State.” Virginia Law Review 94:889–986.

51.

Poggione

Sarah J.

Reenock

Christopher

2009. “Political Insulation and Legislative Interventions: The Impact of Rule Review.” State Politics & Policy Quarterly 9:456–85.

52.

Reenock

Christopher

Gerber

Brian

. 2008. “Information Exchange and Interest Group Enfranchisement through Agency Design” Journal of Public Administration Research and Theory 18: 415–40.

53.

Ringquist

Evan J.

1995. “Political Control and Policy Impact in EPA’s Office of Water Quality.” American Journal of Political Science 39:336–63.

54.

Ripley

Randall B.

Franklin

Grace A.

1986. Policy Implementation and Bureaucracy. Chicago: Dorsey Press.

55.

Rosenthal

Alan

. 1990. Governors and Legislatures: Contending Powers. Washington, DC: CQ Press.

56.

Schwartz

Jason A.

2010. “52 Experiments with Regulatory Review: The Political and Economic Inputs into State Rulemakings.” NYU School of Law: Institute for Policy Integrity Report No. 6. http://policyintegrity.org/files/publications/52_Experiments_with_Regulatory_Review.pdf

57.

Squire

Peverill

. 2007. “Measuring State Legislative Professionalism: The Squire Index Revisited.” State Politics & Policy Quarterly 7:211–27.

58.

Stigler

George

. 1971. “The Theory of Economic Regulation.” Bell Journal of Economics 2:3–21.

59.

Sundquist

James R.

1981. The Decline and Resurgence of Congress. Washington, DC: Brookings.

60.

Tharp

Stacey M.

2001. “Legislative Powers of Rules Review in the States and Congressional Powers of Rule Review.” Report to the Administrative Law Advisory Committee, Commonwealth of Virginia. http://codecommission.dls.virginia.gov/documents/alac/studies/2001/legrev1.pdf

61.

U.S. Department of Commerce, Bureau of the Census. Various Years. State Government Finances. Washington, DC: U.S. Government Printing Office.

62.

West

William

Cooper

Joseph

. 1983. “The Congressional Veto and Administrative Rulemaking.” Political Science Quarterly 98:285–304.

63.

West

William

Cooper

Joseph

. 1989. “Legislative Influence v. Presidential Dominance: Competing Models of Bureaucratic Control.” Political Science Quarterly 104:581–606.

64.

Williams

Bruce A.

Matheny

Albert R.

1984. “Testing Theories of Social Regulation: Hazardous Waste Regulation in the American States.” Journal of Politics 46:428–58.

65.

Wood

B. Dan

Waterman

Richard W.

1994. Bureaucratic Dynamics. Boulder: Westview.

66.

Woods

Neal D.

2004. “Political Influence on Agency Rule Making: Examining the Effects of Legislative and Gubernatorial Rule Review Powers.” State and Local Government Review 36:174–85.

67.

Woods

Neal D.

2005. “Interest Group Influence on State Administrative Rule Making: The Impact of Rule Review.” American Review of Public Administration 35:402–13.

68.

Woods

Neal D.

2008. “The Policy Consequences of Political Corruption: Evidence from State Environmental Programs.” Social Science Quarterly 89:258–71.

69.

Woods

Neal D.

2009. “Promoting Participation? An Examination of Rulemaking Notification and Access Procedures.” Public Administration Review 69:149–61.

70.

Yackee

Jason Webb

Yackee

Susan Webb

. 2006. “A Bias toward Business? Assessing Interest Group Influence on the U.S. Bureaucracy.” Journal of Politics 68:128–39.

71.

Yackee

Susan Webb

. 2006. “Assessing Inter-institutional Attention to and Influence on Government Regulations.” British Journal of Political Science 36:723–44.