Coordinated Rulemaking and Cooperative Federalism's Administrative Law.

• Author: Fahey, Bridget A.

ARTICLE CONTENTS INTRODUCTION 1323 1. COORDINATED RULEMAKING IN PRACTICE 1330 A. Medicaid and Coordinated Rulemaking: The Basic Template 1333 1. Rulemaking in Context 1334 2. Parameters 1336 3. Proposals 1337 4. Approvals 1341 B. Coordinated Rulemaking: Intragovernmental Variations 1343 1. The Clean Air Act 1345 2. Public Education 1347 3. National Highways 1349 4. Fusion Centers 1351 C. How Coordinated Rules Bind: Promulgation by Concurrence 1352 II. THE LAW OF COORDINATED RULEMAKING 1355 A. Existing Models 1358 1. States as Agencies 1358 2. Administrative Dual Federalism 1361 3. Picket-Fence Federalism 1362 B. Constitutional Law 1363 C. Positive Law 1366 D. Soft Law 1367 III. ADMINISTRATIVE PROBLEMS IN COORDINATED RULEMAKING 1369 A. Interpretive Deference 1371 B. Standards of Review 1375 C. Disclosure and Deliberative Process 1377 D. Nondelegation 1379 IV. THEORIZING COORDINATED RULEMAKING 1381 A. Interdependency in Federalism and Administrative Law 1381 B. Federalism's New Legal Ordering 1387 CONCLUSION: BEYOND COORDINATED RULEMAKING 1389 INTRODUCTION

"Cooperative federalism" is not just a model of federalism; it is a model of administration. (1) Many of our nation's largest regulatory programs--from government health insurance to pollution control to transportation, public education, social welfare, disaster relief, policing, immigration enforcement, and more--are administered jointly by federal and state bureaucracies. Scholars have critically evaluated how cooperative federalism advances policy goals, (2) whether cooperative federalism is consistent with federalism values (3) and democratic principles, and how the Constitution enables and constrains cooperative federalism. (4) But despite the scale and sweep of these programs, our understanding of how they work at a more basic administrative level is stubbornly thin. We have yet to conceptualize a cooperative administrative law for our cooperative federalism programs.

As this Article shows, however, our governments have, in practice, forged intricate forms of administrative coordination to bring cooperative programs to fruition. But that coordination is not centrally structured by the federal Administrative Procedure Act (APA) or its like; there is no cross-jurisdictional equivalent of the APA. Rather, the coordination I document in this Article has arisen organically over time, program by program and interaction by interaction. The practices that comprise cooperative federalism's administrative law exist, but we lack the terms and templates to recognize them.

This Article focuses on just one part of cooperative federalism's administrative law: the cooperative equivalent of binding legislative rules--the workhorse of administrative practice. (5) In the federal system, agencies enact legislative rules pursuant to the APA's straightforward notice-and-comment process. (6) In cooperative programs, I show that our governments have devised an alternative form of rulemaking, which I term "coordinated rulemaking." Distinctive and widely used, coordinated rulemaking stitches together federal and state agency action to produce rules binding on both those governments and the third parties they regulate. Because it crosses governmental boundaries, however, it has a legal logic, process, and form of "codification" that diverges from the more familiar legislative rulemaking familiar to observers of the federal administrative state. To take just one profound difference: I show that notice and comment, the process so central to federal rulemaking and a chief determinant of whether it is binding, is neither necessary nor sufficient to give coordinated rules the force and effect of law. Instead, coordinated rules are binding because of a logic distinct to the constitutional structure of federal-state interactions but not previously articulated, which I call "promulgation by concurrence." (7)

To see the unusual administrative form that coordinated rulemaking can take, consider Medicaid--not only one of the largest cooperative federalism programs but also among our nation's largest regulatory programs of any form. Some aspects of Medicaid are brought to fruition by federal or state regulations. But many of the binding rules that serve the function of regulations in the Medicaid context--the rules that shape the basic medical benefits to which millions of Americans are entitled-are not codified in either the Code of Federal Regulations or a state equivalent. Neither are they made through a process prescribed by the APA. Rather, they are agreed to by federal and state agencies in a more diffuse manner. (8) And only once they have achieved that concurrence do they become binding on the governmental counterparties to Medicaid's bargain and, more importantly, on the program's millions of beneficiaries and service providers. Those rules are, in turn, codified, but in an unorthodox location. Each state's Medicaid partnership with the federal government is initiated through an intergovernmental agreement--a treaty-like document between the federal government and each state--called the "Medicaid state plan." (9) Coordinated rules are codified as "addenda" to those state plans. Medicaid is not unique. Many other major and minor cooperative programs use a similar form of coordinated rulemaking to implement their joint programs. (10)

That coordinated rulemaking, and the cooperative administrative law that facilitates it, has largely escaped public notice is so striking that it presents a puzzle of its own. (11) One explanation might resist the premise: perhaps cooperative programs are more like nonbinding "political commitments" between nation-states, in which nations agree to work independently toward common objectives. Following that model, our governments would agree to shared goals but would then pursue those goals in separate state and federal administrative processes, each structured by that government's ordinary administrative law. This would be something of a limited-purpose reprise of the mostly defunct "dual federalism," in which the federal government and states are assumed to separately oversee discrete areas of jurisdiction. (12) As this Article shows, cooperative programs are not administered separately; they are administered, as federalism's general trends would predict, jointly and interdependently.

Part I provides an account of the mechanics of "coordinated rulemaking" across programs and, in so doing, refutes the idea that cooperative federalism has no administrative integration to document or theorize. The states and the federal government do not just align on policy objectives and pursue them separately. They also create bespoke and deeply integrated administrative structures to implement them.

These structures have been long visible in bits and pieces to the many scholars, agency officials, practitioners, and interested parties who routinely interface with individual cooperative programs. But they are surprisingly invisible in the aggregate. We lack a vocabulary that can capture legal similarities in cooperative programs that each use their own technical language and can bring conceptual precision to the administrative characteristics that are common across them. Cooperative programs are so dazzlingly complex--so institutionally sprawling, jurisdictionally intricate, administratively taxing, and fiscally demanding--that it is easy to see them as sui generous beasts. The goal of this account is to notice their common oddities and theorize their common logics.

By distilling patterns across diverse programs, Part I identifies a standard cross-governmental template that our governments use to jointly author a wide range of important legislative rules. First, the federal agency sets parameters within which it will approve a proposed state regulation; next, state agencies seize the pen and formulate specific proposals within those parameters; finally, the federal agency provides feedback and comments on those proposals and approves or disapproves them. (13) Once a state proposal is approved, it becomes binding not only on the governmental parties but also on the individuals and firms that the program regulates and serves. This final rule is importandy bilateral: it cannot be changed by one participating party and retain its legal status as a binding rule executing the shared program.

But the actions that crisscross governments--and form an intergovernmental process--do not tell the full story. How each government completes its respective tasks within that template--and what intragovernmental process they use--signif-icandy shapes coordinated rules and how they come to be. Scholars of federal or state administrative law might hypothesize that a state or federal agency completes its respective tasks within the cross-governmental template using that government's standard administrative process. As I show, however, the way they set parameters, draft proposals, and issue approvals is deeply shaped by the cooperative context and, as a result, frequendy takes its own unconventional administrative form. Strikingly, for instance, the internal administrative processes that state agencies use to formulate their proposed rules are routinely dictated by the federal government's parameters; the federal agency simply states that it will not approve a state's proposal unless it accords with the federal government's preferred administrative process. These internal processes show that cooperative federalism in fact begets a deep form of administrative integration. (14)

Seeing the use of coordinated rulemaking across a range of programs, in turn, reveals principles of administrative law that are peculiar to cooperative programs. Part I concludes by interrogating a question of great significance to legislative rulemaking: when and why coordinated rules become binding. (15) In ordinary federal administrative law, legislative rules gain the force of law because they have gone...