Legislatures, Courts, and Statutory Control of the Bureaucracy across the U.S. States∗

How do state legislatures use statutory language to control policy implementation by state agencies? In this paper, I consider the extent to which the decision of how best to control bureaucratic policymaking is strategic in regards to the broader political context in which a legislature finds itself. Specifically, I examine the extent to which legislatures anticipate the likely actions of state courts in crafting their policymaking directives to bureaucrats in a specific policy area and time period. Previous literature (e.g., Huber, Shipan and Pfahler (2001)) has argued that the legislative use of statutory language to control bureaucrats varies with the availability of nonstatutory methods of control, but it does not explicitly consider the role of state courts. My hypotheses are derived from a simple formal model of executive-legislative relations and my expectations are such that the degree of statutory control should increase only when a state legislature’s preferences are sufficiently different from the executive’s and when nonstatutory controls, i.e., the extent to which state supreme courts are likely to overturn agency action, in that state are neither too high nor too low. This counterintuitive expectation is supported when I test hypotheses using the original Huber, Shipan and Pfahler (2001) data on the number of words added to a state’s Medicaid laws from 1995-1996. These findings are important in that they support a general model of legislative policymaking and elucidate the importance of state-specific capacities in shaping executive-legislative relations at the subnational level. Literature in public administration and political science has long recognized that unelected bureaucratic agencies can significantly affect federal policymaking. For example, the cultivation of a reputation for neutral expertise can allow federal agencies, such as the USDA, FDA, and OSHA (Carpenter, 2001, 2010; Huber, 2007), to autonomously determine the contours of federal policy within jurisdictional limits. Even when agencies cannot directly affect the legislative content of policy in this way, much research (Epstein and O’Halloran, 1999; Huber and Shipan, 2002, e.g.,) has confirmed that political principals often have an incentive to delegate policymaking authority to the bureaucracy. Students of state politics are beginning to take notice of bureaucratic policymaking and to assess the extent to which these characteristics of legislative-executive relations hold at the subnational level. As the roles of state bureaucracies have become more important, the field has paid closer attention to the conditions, theorized at the federal level, under which they can affect policy (Potoski, 1999; Teske, 2004; Kim and Gerber, 2005; Poggione and Reenock, 2009). In a forthcoming chapter on policy delegation across the states, Krause and Woods (2012) review recent literature on the subject and conclude that in order to better understand bureaucratic politics at the subnational level, scholars should begin with truly comparative state-level theories, rather than simply applying those theories generated at the national level. The key weakness in exporting these theories is that they do not adequately account for variations in relevant capacities. In particular, Krause and Woods (2012) seek to build a framework centered on the relative institutional capacities of the state legislatures, governors, and bureaucracies. At a fundamental level, the current paper joins Krause and Woods’s attempt to provide an institutional explanation for the diversity of executive-legislative relationships that we observe across the U.S. states. In particular, I assess the institutional determinants of the amount of statutory discretion that state legislatures delegate to state agencies. The theoretical approach holds that variation in both legislative capacity and the likelihood of exogenous ex post monitoring by the courts should condition the legislature’s strategic delegation of policymaking authority. In so doing, I add state judicial branches to Krause and Woods’s matrix of state-level institutional variables to consider in studying subnational policy delegation. 3 The key contribution of this paper is a demonstration that state legislatures impose statutory language meant to limit agency discretion according to the unique pattern predicted by the policymaking model presented herein. I reanalyze Huber and Shipan (2002)’s data on statutory discretion in Medicaid policy across 48 states in 1995-1996 and find that legislatures likely anticipate the actions of state courts when they craft their policymaking strategies. This is an important contribution because it adds an additional “separation of powers” nuance (de Figueiredo Jr., Jacobi and Weingast, 2008) to the extant literature on substitution effects between ex ante and ex post strategies (Bawn, 1997; Huber, Shipan and Pfahler, 2001; Huber and Shipan, 2002; Gailmard, 2002). To preview the main insight of this paper, I demonstrate that state court activism, as a form of nonlegislative, nonstatutory policy control is, as expected, nonlinearly related to statutory control, with the latter increasing when state court activism is neither too high nor too low. In the next section, I briefly review the literature on the institutional design of bureaucratic agencies, focusing specifically on the conditions under which legislatures delegate policy authority to agencies. I then derive unique nonlinear predictions from a general model of legislative policymaking and formulate empirical hypotheses, with an emphasis on the mechanism by which I expect nonlegislative, nonstatutory factors, such as the activism of state courts, to affect statutory discretion across states. Next, I operationalize the key theoretical variables and construct the appropriate nonlinear empirical models to test these expectations, including the specification of a number of nonparametric Generalized Additive Models (GAM). The fourth section presents the results of the different model specifications, demonstrating broad support for the insights of the theoretical model, and the final section concludes with a discussion of contributions, shortcomings, and implications for future work. Variation in Legislative Policymaking Strategies According to Black’s Law Dictionary, discretion (in this sense) is “4. A public official’s power or right to act in certain circumstances according to personal judgement and conscience, often in 4 an official or representative capacity” (Garner, 2006). Especially when considering the “representative” nature of this definition, it is intuitive to consider this power to be constitutionally in the purview of legislatures in separation of powers systems. Indeed, under a strict separation of powers interpretation of the Constitution of the United States, delegation of discretion from Congress to executive agencies is to be avoided unless “Congress prescribes an intelligible principle to guide an executive agency in making policy” (Garner, 2006, p.362), which is to say that Congress can only delegate when they do so without granting much or any discretion. In constitutional law, this is known as the non-delegation doctrine1, but the practical realities of modern government lead this principle to be mostly ignored. Legislatures (Congress and U.S. state legislatures) do in fact give great discretion to administrative agencies to implement policy that may or may not reflect the will of the legislature. The structure of this problem is precisely what makes it amenable to the principal-agent approach taken in this paper. This general approach is not foreign to the study of executive-legislative relations. Contesting claims that legislative grants of administrative discretion implied administrative dominance (and concomitant legislative impotency) (McConnell, 1966; Lowi, 1969; Niskanen, 1971; Offe, 1972; Putnam, 1975; O’Connor, 1978; Peters, 1981; Aranson, Gellhorn and Robinson, 1982; Rourke, 1984), McCubbins and Schwartz (1984), and McCubbins, Noll and Weingast (1987, 1989) argued that legislators, as the principals, can alter bureaucratic incentives with statutory language. That is, although legislators need to delegate, they can maintain some degree of control over what their administrative agents do with their delegated discretion. This literature draws on descriptive accounts of the federal Administrative Procedures Act of 1946 (Davis, 1978; Shapiro, 1982; Bonfield, 1986; Gellhorn, 1986) to argue that procedural requirements (stipulated in APAs or in individual statutes) can help to reign in potentially discretion-abusing bureaucrats through the “politics of structural choice” (Moe, 1990). In addition to procedural limits on discretion, scholars have proposed that legislators can limit discretion more directly, by controlling the specificity of the legislation meant 1“The principle (based on the separation-of-powers concept) limiting Congress’s ability to transfer its legislative power to another governmental branch, esp. the executive branch” (Garner, 2006, p.362).