SCOTUS upholds Consumer Financial Protection Bureau funding structure

By

Ballotpedia staff

The Checks and Balances Letter delivers news and information from Ballotpedia’s Administrative State Project, including pivotal actions at the federal and state levels related to the separation of powers, due process, and the rule of law.

This edition: 

In this month’s edition of Checks and Balances, we review the Supreme Court’s decision to uphold the funding structure of the Consumer Financial Protection Bureau (CFPB); state challenges to the Biden administration’s new Title IX rule; the Supreme Court’s decision to take up cases concerning a U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) rule and judicial review of certain immigration decisions; and the Federal Communications Commission’s (FCC) decision to restore net neutrality rules.

At the state level, we take a look at legislation in Kansas to enact a state-level REINS Act; oral argument before the Wisconsin Supreme Court in a case challenging legislative vetoes; and the North Carolina Supreme Court’s decision to take up a case challenging judicial deference practices in the state.

We also highlight the start of a multi-issue series of policy briefs on administrative reform and constitutional governance from The C. Boyden Gray Center for the Study of the Administrative State. We wrap up with our Regulatory Tally, which features information about the 157 proposed rules and 300 final rules added to the Federal Register in April and OIRA’s regulatory review activity.

In Washington

SCOTUS upholds Consumer Financial Protection Bureau funding structure   

What’s the story?

The U.S. Supreme Court on May 16, 2024, held 7-2 in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited that Congress statutorily authorizes the Consumer Financial Protection Bureau (CFPB) to draw money directly from the Federal Reserve System. The court ruled that the CFPB’s funding structure therefore does not violate the appropriations clause of the U.S. Constitution. 

Industry groups had sued the CFPB after the bureau issued a rule aiming to enforce disciplinary action against certain payday lenders. A three-judge panel of the United States Court of Appeals for the Fifth Circuit rejected the challenge to the rule but held that the CFPB’s funding structure, which flows from the Federal Reserve rather than through explicit congressional appropriations, violates the appropriations clause. 

The Supreme Court found that the CFPB’s funding structure satisfies the definition of a congressional appropriation. “The Bureau’s funding statute contains the requisite features of a congressional appropriation,” wrote Justice Clarence Thomas in the majority opinion. “The statute authorizes the Bureau to draw public funds from a particular source … And, it specifies the objects for which the Bureau can use those funds—to ‘pay the expenses of the Bureau in carrying out its duties and responsibilities.’”

Justice Samuel Alito authored a dissenting opinion, joined by Justice Neil Gorsuch, arguing “that the Appropriations Clause demands legislative control over the source and disposition of the money used to finance Government operations and projects,” and that the CFPB’s funding mechanism through the Federal Reserve limits congressional oversight of the bureau’s policies. 

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Republican-led states challenge new Title IX regulations 

What’s the story?

Attorneys general in more than 20 Republican-led states have filed lawsuits aimed at blocking the Biden administration’s new Title IX rule, arguing that the rule exceeds the Department of Education’s authority and conflicts with state laws. 

The rule, published on April 29, amends Title IX regulations to expand bans on sex-based discrimination in schools to include gender identity and sexual orientation. The rule also included requirements that schools use students’ preferred pronouns and allow students to use bathrooms aligned with their gender identity instead of their biological sex. 

One of the lawsuits —filed on May 7 by the states of Arkansas, Missouri, Iowa, Nebraska, North Dakota, and South Dakota—argues that the rule “will gut the very athletic opportunities that Title IX was designed to provide; destroy the privacy protections women and girls currently enjoy in restrooms, locker rooms, shower facilities, and overnight accommodations; preempt numerous State laws; silence and threaten with investigation any student, faculty member, or administrator who doesn’t share the Department’s view of sex; and deny federal funding to any school or university that doesn’t adhere to those views.”

Arkansas Governor Sarah Huckabee Sanders (R) also signed an executive order on May 2 prohibiting public school districts in the state from enforcing the new rule. The order directs the state’s Department of Education “to provide specific guidance on how to enforce the rights of Arkansans to equal opportunity, free speech, due process, and privacy under the U.S. Constitution, Title IX, and state law, despite the Biden administration’s unlawful administrative rule. At no point should Arkansas law be ignored.”

The new regulations are scheduled to take effect August 1, 2024. 

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SCOTUS takes up challenges to ATF rule, judicial review of immigration decisions  

What’s the story?

The United States Supreme Court in April 2024 agreed to hear two cases in the 2024-2025 term concerning a U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) rule and judicial review of certain decisions made by immigration officials. 

SCOTUS on April 22 agreed to hear Garland v. VanDerStok—a case challenging the ATF’s authority to issue a rule regulating firearm parts kits, which the agency refers to as ghost guns. Gun owners and advocacy groups challenged the 2022 rule, arguing that the ATF did not have the statutory authority under the Gun Control Act of 1968 to issue the rule. The U.S. Court of Appeals for the Fifth Circuit affirmed the lower court’s ruling to block enforcement of the rule, arguing, “Because Congress has neither authorized the expansion of firearm regulation nor permitted the criminalization of previously lawful conduct, the proposed rule constitutes unlawful agency action, in direct contravention of the legislature’s will.”

The court on April 29 also agreed to hear Bouarfa v. Mayorkas—a case concerning whether an individual can obtain judicial review of a revoked visa petition based on nondiscretionary criteria. Amina Bouarfa, a U.S. citizen, filed a lawsuit in the U.S. District Court for the Middle District of Florida to review the U.S. Citizenship and Immigration Services’ decision to revoke her husband’s visa, which the agency had previously approved. The lower court dismissed the case, arguing that courts do not have congressional authority to review discretionary decisions made by immigration officials. The case was appealed to the U.S. Court of Appeals for the Eleventh Circuit, which affirmed the lower court’s decision. 

Garland v. VanDerStok and Bouarfa v. Mayorkas were appealed to the Supreme Court, which agreed to hear the cases in the October 2024-2025 term. 

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FCC votes to reinstate net neutrality

What’s the story?

The Federal Communications Commission (FCC) on April 25, 2024, voted 3-2 along party lines to restore net neutrality rules. 

The FCC first implemented net neutrality regulations in 2015 under the Obama administration, which considered internet service providers a public utility and prohibited them from blocking or slowing web traffic or providing paid internet fast lanes. Under the Trump administration in 2017, the agency voted 3-2 to repeal the rule and issue a new rule that would not regulate internet service providers as public utilities.  

A group of Republican lawmakers sent a letter to the FCC on April 23 opposing the drafted order, arguing that it “circumvents the text of the Communications Act of 1934 and would inflict serious damage on the competitive U.S. broadband industry.”

FCC Chairwoman Jessica Rosenworcel expressed support for the agency’s decision, arguing, “Every consumer deserves internet access that is fast, open and fair. … That is common sense,” according to The New York Times. 

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In the states

Kansas enacts state-level REINS Act

What’s the story? 

The Kansas State Senate voted 27-12 on April 29, 2024, to override Governor Laura Kelly’s (D) veto of House Bill 2648—a bill to require legislative approval of administrative rules with implementation and compliance costs of $1,000,000 or more over a five-year period. 

The bill is a REINS-style state law, which is a legislative proposal modeled after the federal Regulations from the Executive in Need of Scrutiny (REINS) Act. It is designed to increase legislative oversight of administrative agency rulemaking by requiring legislative approval of agency regulations with certain financial or economic impacts before the regulations become effective. 

Elizabeth Patton, the Kansas state director of Americans for Prosperity, released a statement arguing that the “vote to override the Governor’s veto is a triumph for common sense and accountability in government. This action will stimulate economic growth, encourage entrepreneurship, and create more jobs across our state.”

Kelly wrote in her veto message on April 12 that the act “would insert bureaucratic red tape intended to legislatively interfere with the timely implementation of necessary and important rules and regulations. Many of these regulations are for the protection and safety of Kansans.”

Kansas is the second state to enact a REINS-style state law in 2024. Indiana signed Senate Bill 4 into law in March to require legislative approval of rules with implementation and compliance costs of $1,000,000 or more over a two-year period. Ballotpedia has identified two other states in which REINS-style state laws have been enacted. Florida enacted a law with similar provisions to the REINS Act in 2010 and Wisconsin enacted a version of the REINS Act in 2017. 

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Wisconsin Supreme Court hears oral argument in case challenging legislative vetoes

What’s the story? 

The Wisconsin Supreme Court on April 17, 2024, heard oral argument in a case challenging the use of legislative vetoes to block land conservation purchases in the state.

Legislative vetoes, in the context of administrative law, refer to resolutions by a legislative body that invalidate an action by the executive branch. Some state governments allow for legislative vetoes in certain cases, but the extent of the authority varies. Wisconsin, among some other states, authorizes the state legislature to veto executive branch actions through the enactment of a statute. 

Governor Tony Evers (D) filed a lawsuit in October 2023, arguing that the use of legislative vetoes by the Republican-led state legislature violated the state constitution and the separation of powers “by creating more and more ‘legislative vetoes’ through which legislative committees comprised of only a few members of the full Legislature are enabled to operate outside of the ordinary lawmaking process to impede, usurp, or obstruct basic executive branch functions.”

Misha Tseytlin, the attorney representing Republican lawmakers in the lawsuit, argued that Evers, “would have this court overturn how our state government has functioned for almost a century, ever since the beginning of the modern administrative state,” according to Wisconsin Public Radio.  

Justice Jill Karofsky countered Tseytlin’s arguments, claiming, “Maybe they’ve been wrong for the last century and we shouldn’t double down on how wrong this is.” Justice Rebecca Bradley questioned arguments made by Assistant Attorney General Colin Roth that, in her view, would authorize the legislature to delegate power to state agencies, but not to legislative committees. Bradley questioned whether such arguments would “jeopardize the entire administrative state in the state of Wisconsin,” according to Wisconsin Public Radio. 

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North Carolina Supreme Court takes up case challenging judicial deference practices

What’s the story? 

The North Carolina Supreme Court agreed to hear a case challenging judicial deference practices in the state and address the question of when North Carolina courts should defer to agency interpretations of rules and regulations promulgated by the agency.  

Mitchell v. The University of North Carolina Board of Regents concerns a former university professor, Alvin Mitchell, who argued that the university did not follow proper procedures when firing him. An oversight board and trial court upheld the university’s decision to fire Mitchell before the case was appealed to the North Carolina Court of Appeals. The state court ruled in the university’s favor, granting deference to the university’s interpretation of its procedures. 

Mitchell’s petition to the state Supreme Court argued, “Deference is an abdication of the judicial authority to the administrative state, in violation of the guarantee of separation of powers,” according to The Carolina Journal. 

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The Gray Center announces new 2024 policy brief initiative 

The C. Boyden Gray Center for the Study of the Administrative State announced an initiative to publish a multi-issue series of policy briefs on administrative reform and constitutional governance throughout 2024. The first issue was published in April on the topic of government personnel. Co-executive Director Adam White wrote in a letter announcing the initiative: 

We’ve invited the authors to foster serious thought from the ground up: What is the goal of a particular regulatory framework, what are the problems we currently see, and what are some solutions?

And we’ve asked them to give concrete solutions: proposals for legislation, executive orders, regulatory changes, best practices, and litigation. And they will highlight cautionary tales along the way.

Today we are sending you their first batch of papers, focusing on the future of government personnel. Ron Cass considers the proper role and limits of civil service protections in agencies that have been delegated immense policymaking powers. Philip Howard explains how public sector unions’ consolidation of power affects constitutional self-government and the rule of law. And Kevin Kosar charts a course for Congress to rebuild its own capacity, by restaffing itself to carry out its constitutional responsibilities.

Want to go deeper? 

  • Click here to read the policy briefs included in the Gray Center’s first issue of the series 

Regulatory tally

Federal Register

Office of Information and Regulatory Affairs (OIRA)

OIRA’s April regulatory review activity included the following actions:

  • Review of 99 significant regulatory actions. 
  • Three rules approved without changes; recommended changes to 93 proposed rules; three rules subject to a statutory or judicial deadline.
  • As of May 1, 2024, OIRA’s website listed 86 regulatory actions under review.
  • Want to go deeper? 

Every month, Ballotpedia compiles information about regulatory reviews conducted by OIRA. To view this project, visit: Completed OIRA review of federal administrative agency rules