Last year Florida welcomed a new governor, Rick Scott, after he prevailed in the general election in the fall of 2010. Governor Scott's first official act was to issue Executive Order 11-01 suspending agency rulemaking and creating an Office of Fiscal Accountability and Regulatory Reform ("OFARR"). The Executive Order directed all gubernatorial agencies to immediately suspend rulemaking for new and pending rules. The order also specified that rulemaking would continue only after a review by OFARR and determination that the rules would not result in unnecessary regulatory costs or burdens. The Executive Order requested voluntary compliance by agencies not under the governor's supervision.
In an article appearing in this journal last year, I described the governor's Executive Order as part of an overview of Florida rulemaking. Since then, a case challenging Governor Scott's directives made its way to the Florida Supreme Court. The Supreme Court ruled against the governor, and he responded by issuing a subsequent Executive Order criticizing the court's decision. The Florida legislature then entered the dispute, passing legislation in the 2012 legislative session siding with the governor. This article summarizes the legal disputes arising from Executive Order 11-01 and culminating with the legislature's decision to resolve the issue through legislation earlier this year.
Agency Rulemaking Required:
Florida law defines a "rule" to include any statement by an agency that has general applicability and implements, interprets or prescribes law or policy.1 Rulemaking is not discretionary. Whenever a Florida agency develops a position that it intends to be one of general applicability, the agency is required by law to adopt the position as an administrative rule.2 The Florida Administrative Procedure Act ("APA") at Chapter 120, Florida Statutes, sets forth the process by which agencies must adopt administrative rules. This process entails publishing notice of a proposed rule's development; holding one or more workshops to solicit input from affected parties; publishing formal notice of the proposed rule; holding one or more public hearings; and providing certain windows during which affected parties may challenge the validity of the proposed rule.3
The formal process for developing, revising and adopting proposed rules serves several important public policy purposes. The rulemaking process ensures that affected parties are notified of positions Florida agencies intend to apply. This allows affected parties opportunities to provide feedback that might limit the adverse effects or unforeseen consequences of the rules. In addition, administrative rules provide public notice to potentially affected parties about conduct that is either allowed or prohibited. Rulemaking also fosters consistency in agencies' positions over time and across similarly situated parties. Although agency rulemaking is sometimes criticized as resulting from bureaucratic overreaching, rules can serve to level the proverbial playing field by fostering a well-publicized, consistent regulatory framework.
Rulemaking Affecting the Insurance Industry:
The insurance industry in Florida is governed by rules promulgated by several administrative agencies. The most widely recognized agency governing the industry in this state is the Florida Office of Insurance Regulation ("OIR"). The head of the OIR is the Commissioner of Insurance Regulation, who is appointed by the four-member Financial Services Commission ("FSC"). The FSC is composed of four constitutionally elected officials-- the Governor, the Chief Financial Officer ("CFO"), the Attorney General and the Commissioner of Agriculture. For purposes of rulemaking, the FSC is designated as the OIR's agency head.4 This means proposals to develop and adopt administrative rules originate from, and are made at the direction of, the FSC as a collegial body.
The Department of Financial Services ("DFS") also is a key participant in Florida's regulatory system. DFS is overseen by the state's CFO, and therefore is subject to the oversight and direction of a single individual. DFS is responsible for the licensing and discipline of insurance agents, agencies, adjusters; for some aspects of workers' compensation regulation; and for operating the state's division of rehabilitation and liquidation.
Several other agencies also can affect particular aspects of the insurance industry in Florida. The State Board of Administration ("SBA") administers the Florida Hurricane Catastrophe Fund ("FHCF"), which sells a form of reinsurance to residential property insurers. The SBA is a collegial body overseen by the Governor, CFO and Attorney General. The Agency for Health Care Administration ("AHCA") adopts rules that might affect health insurers, and AHCA is directed by a secretary appointed by the Governor.
Executive Oder 11-01 and Related Dispute:
Governor Scott's Executive Order 11-01 directed agencies under his control to suspend rulemaking while the newly created OFARR reviewed the rules to determine the impact of economic development.5 The governor campaigned on a platform of creating jobs, and he sought to keep administrative rules from unduly burdening businesses. The governor does not oversee some executive branch agencies, such as DFS, and he is just one member of a collegial body overseeing several others, like OIR and the SBA. Nonetheless, the governor requested voluntary compliance by the agencies that were not subject to his control. The governor's Executive Orders raised questions regarding the separation of powers between the executive and legislative branches of government. The governor is the administrative head of many agencies, but rulemaking authority must arise from a delegation from the legislature. This issue made its way to the Florida Supreme Court in the form of Whiley v. Scott, 79 So. 3d 702 (Fla. 2011). In this case, the petitioner sought to establish that Governor Scott exceeded his authority by directing agencies under his supervision to suspend rulemaking. In a 5-2 decision, the Supreme Court found that the governor indeed exceeded his constitutional authority. The Supreme Court accepted the case because it raised serious constitutional questions relating to the authority of the governor and the legislature relating to rulemaking. The Supreme Court found that the executive orders related to the governmental function of rulemaking, and in Florida the ability to promulgate rules is a derivative of lawmaking in that rules must implement a specific law and must be based on a legislative grant of rulemaking authority.6 The Supreme Court expressed concern with provisions in the executive orders inserting the Office of Fiscal Accountability and Regulatory Reform in the rulemaking process by requiring that it approve rules before they could be proposed. The governor, in essence, changed the Florida rulemaking process. The Supreme Court reasoned that the governor's actions then infringed on the legislature's delegation of rulemaking power.7 Two justices dissented and presented alternate analyses. These justices pointed to provisions of the Florida Constitution declaring that the governor is the head of the executive branch. Given that the executive orders were binding only on executive branch agencies, those executive orders had the effect of simply advising agencies under the governor's control that the governor would have an internal process for approving rules before the rules could be formally proposed. The dissenting justices argued that the executive orders were within the governor's authority to direct agencies under his control, and the majority's decision improperly limits the governor's ability to oversee the affairs of his own agencies. In the end, however, Whiley established that once the legislature has delegated rulemaking authority to an agency, not even the constitutional officer to whom the agency reports can alter its rulemaking process.
Executive Order 11-211:
Governor Scott responded to the Whiley decision by adopting Executive Order 11-211 clarifying the role of OFARR. The governor directed that his office and OFARR would continue to review the appropriateness of administrative rules and attempt to reduce unnecessary or burdensome regulations. In doing so, the governor voiced his disagreement with Whiley through a series of pointed "whereas" clauses establishing the background for his new order. Some of the background clauses set forth the following positions:
- Government must be held accountable for efficient and effective performance
- Continual review and assessment of existing and proposed regulations is necessary to ensure that the laws . . . are faithfully executed without unduly burdening the . . . economy and imposing needless costs and requirements. . .
- While agency heads and personnel bring expertise to a particular subject matter, they are not directly accountable to the electorate and do not necessarily have an incentive to take a systemic approach to regulatory problems, to budget constraints, or to the overall regulatory burden imposed by the State on Citizens and businesses.
- Review and oversight of agency rulemaking is encompassed by the Governor's powers and duties under the Constitution of the State of Florida to "take care that the laws be faithfully executed" and to serve as "the chief administrative officer of the state responsible for the planning and budgeting of the state."
- The majority opinion in Whiley:
- Failed to address and apply the plain meaning of . . . Article IV of the Constitution of the State of Florida, and thereby unreasonably restrains the power of the Governor with respect to the supervision of agency heads;
- Failed to address the implications of [court precedent];
- Failed to address persuasive caselaw from the United States Supreme Court and the highest courts of other states; and
- Failed to address the precedent set by dozens or executive orders issued by prior governors of Florida;
In adopting Executive Order 11-211, Governor Scott agreed with the dissenting opinions in Whiley that it is nonsensical for a constitutionally elected officer to lack authority to suspend or alter rulemaking by agencies under his direct supervision and ultimate control. Still, recognizing the impact of the Supreme Court's decision, the governor tailored his office's rulemaking review to the restrictions approved by the court.
Florida Legislature Changes Rulemaking Authority
Like the governor, Florida's Republican-controlled legislature sought to ensure that agency rulemaking would not impede economic recovery and growth. The legislature therefore passed House Bill 7055 in the 2012 legislative session. After Governor Scott signed the bill into law, it became known as Chapter Law 2012-116.
The new Chapter Law includes findings relating to the authority of the executive branch similar to those recited by Governor Scott in his preamble to Executive Order 11-211. The legislature found that Article IV of the Florida Constitution vests in the governor the supreme executive power and specific substantive powers. Among these powers are the review and oversight of agency rulemaking, which fall within the governor's broad powers and duties under the State Constitution to "take care that the laws be faithfully executed" and to serve as "the chief administrative officer of the state responsible for the planning and budgeting for the state."8
The legislature observed that many agencies of state government are administered by an officer "appointed by and serving at the pleasure of the governor." The legislature then directly criticized the majority opinion in Whiley for failing to address the plain meaning of the Florida Constitution and for failing to address implications of precedent and other executive orders.9
The new law specifies that the administration of any executive branch agency under the supervision of an officer appointed by and serving at the pleasure of the governor shall at all times remain under the constitutional executive authority of the governor and generally will remain subject to oversight, direction and supervision by the governor. The new law clarifies existing rulemaking provisions to provide that these agency heads, despite their executive authority over the departments they oversee, remain subject to the supervision and direction of the governor. The legislature then specified that laws governing Florida rulemaking do not limit or impinge upon the assignment of executive power under Article IV of the State Constitution or the legal authority of an appointing authority to direct and supervise those appointees serving at the pleasure of the appointing authority.10
In a letter to Florida Secretary of State Ken Detzner, Governor Scott signed HB 7055 into law. Governor Scott wrote that the Florida Administrative Procedure Act and other laws "were not, and could not have been, enacted with the intent or effect of limiting the gubernatorial powers inherent in Article IV of the Florida Constitution." The governor described HB 7055 as a "course correction" for the deviation in law created by Whiley.
The governor affirmed that his earlier Executive Order 11-01, which was followed by Executive Order 11-72, was intended to implement a centralized method for reviewing and approving rules promulgated by gubernatorial agencies. The governor considers this rulemaking review to have been an integral part of his duty as chief administrative officer of the state to ensure that Florida's laws are faithfully executed. The governor then pointed out that the Florida legislature has now agreed "in no uncertain terms that Whiley was wrongly decided" and Whiley is now a "dead letter." He went further to point out that under a proper reading of the Florida Constitution, the new law is unnecessary. He suggested that although he was willing to sign the bill into law to correct the Whiley error, he remains convinced his earlier Executive Orders were valid.
Conclusion:
The debate about executive branch control over Florida rulemaking has come full circle in barely over a year's time. Governor Rick Scott entered office in January 2011 with a pledge to create jobs and energize Florida's economy. His first official act was to suspend agency rulemaking, which served as both a symbolic and legal step to emphasize that he would not allow burdensome or unnecessary regulations to impede companies' ability to do business in Florida. His effort, however, started a year-long dispute over a governor's ability to influence rulemaking by administrative agencies he controls. Although on the surface one might expect that a governor clearly should be able to dictate the rulemaking practices of agencies he directly oversees, Florida law provided that agency rulemaking authority arose only from a delegation of power from the legislature. Oddly, this meant a governor would overstep his bounds by directing the agencies to suspend rulemaking or requiring them to have their proposed rules reviewed by his office. A Florida Supreme Court decision confirmed this to be the case, but the Florida legislature quickly responded by changing Florida laws relating to rulemaking. Thus, after a complicated, winding road, the Florida rulemaking process now allows an executive branch official to actively oversee and direct rulemaking activities at agencies under his or her control.
1. §120.52(16), Fla. Stat. (2010).
2. §120.54(1), Fla. Stat. (2010).
3. See generally, §§120.54-120.56, Fla. Stat. (2010).
4. §20.121(3), Fla. Stat. (2010).
5. The governor eventually signed Executive Order 11-72 superseding Executive Order 11-01, although the new executive order had a similar intent.
6. Whiley v. Scott,79 So. 3d 702, 708 (Fla. 2011).
7. Id. at 716.
8. See Chapter Law 2012-116.
9. Id.
10. Id.