Michigan needs to move quickly to reduce the regulatory burden on businesses in order to improve the state’s economy. One means of doing this is to eliminate the excessive use of "guidance directives" by regulatory agencies.
Guidance directives are declarations of policy issued by state agencies that circumvent the formal rulemaking process. Although guidance directives are not legally binding, they are commonly used to force the regulated community to conform to the political will of agency personnel.
This tactic is commonly employed in particular by the Michigan Department of Environmental Quality. It is not uncommon for staff-level employees of MDEQ to issue directives with minimal oversight by supervisors. These directives often impose significant costs on both businesses and individuals with virtually no input from the Legislature or the regulated parties.
As director of MDEQ in the mid-1990s, I witnessed such regulatory abuse. In one instance, an agency employee was preparing to issue a guidance directive that would have classified silica (a natural component of sand) as toxic. Such an action would have effectively reclassified all Michigan beaches as contaminated areas. When this came to my attention, I intervened and prevented implementation of the directive.
Originally, guidance directives were intended only to clarify regulatory policy for agency staff. However, a recent review of the MDEQ Web site revealed more than 90 pages of guidance on just one type of environmental assessment.
Many businesses are reluctant to challenge guidance directives for fear of retribution by agency staff who oversee their operations. Fighting an agency over guidance directives could result in permit delays, while the costs of litigation are a drain on the bottom line.
On the other hand, complying with a guidance directive can be costly. The Michigan Administrative Procedures Act spells out the formal process by which agencies are to promulgate legally binding rules. While the act is not without its problems, it does provide opportunities for public input through hearings, comment periods and legislative review. Guidance directives sidestep the administrative process entirely.
Efforts are underway at the federal level to address the problem of guidance masquerading as regulation. The U.S. Office of Management and Budget, for example, issued a bulletin that limits the use of guidance in lieu of rulemaking by federal agencies. Some of the major OMB strictures imposed on federal agencies include the following:
Significant guidance documents (that have an effect on the economy of $100 million or more) must be approved by senior agency officials.
Guidance documents shall not include mandatory language such as "shall," "must," "required" or "requirement" unless these words are describing a statutory or regulatory requirement.
Agencies are required to make guidance documents available to the public in electronic form.
A public comment process for significant guidance documents is required.
Although these reforms are a step in the right direction, they still provide too much discretion to agencies.
At the state level, the Michigan Legislature should act quickly to prohibit state agencies from issuing guidance directives that have the practical effect of regulations. Lawmakers should also declare existing guidance documents to be null and void within 18 months of issuance — the time it typically takes to formally promulgate a rule.
Eliminating "government by guidance" would send a positive signal to job providers. There’s no excuse for continuing this regulatory burden on Michigan businesses when even the massive federal bureaucracy has gotten the message.
Russ Harding, a former director of the Michigan Department of Environmental Quality, is senior environmental policy analyst with the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.