NCSL Comments on State Laws Impacting National Economy and Interstate Commerce

NCSL Comments on State Laws Impacting National Economy and Interstate Commerce

Re: Department of Justice Docket No. OLP182, "Request for Information on State Laws Having Significant Adverse Effects on the National Economy or Significant Adverse Effects on Interstate Commerce."

To Whom It May Concern:

On behalf of the National Conference of State Legislatures, the nation's voice for states in the federal system, we respectfully submit this comment in response to Department of Justice Docket No. OLP182, "Request for Information on State Laws Having Significant Adverse Effects on the National Economy or Significant Adverse Effects on Interstate Commerce."

NCSL is the bipartisan organization representing the legislatures of our nation's states, territories, commonwealths and the District of Columbia. Our mission is to ensure that states have a strong, unified voice in the federal system as well as to advance the effectiveness and independence of state legislatures and foster interstate cooperation.

The Department of Justice's position that certain state regulations may negatively affect interstate commerce, along with its stated intent to preempt state laws and regulations where feasible, raises concerns regarding collaborative federalism and the 10th Amendment. This approach also appears to overlook principles outlined in Executive Order 13132 on Federalism, exceeds the established bounds of federal authority according to Supreme Court precedent, and does not adequately respect the state-federal relationship. As such, NCSL urges the Department of Justice to withdraw this Request for Information.

Tenth Amendment Issues and NCSL Member-Driven Policies

The Tenth Amendment is clear: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." This foundational principle underscores the importance of state sovereignty and the decentralized nature of our federal system. By allowing states to enact their own regulations and laws, we ensure that government is more responsive and adaptable to the needs of the citizens of our nation.

For 50 years, NCSL has established cordial and collaborative relationships with federal agencies to ensure that federal regulations harmonize with state prerogatives. It is inappropriate for a federal agency to issue a Request for Information, rulemaking or final regulation that seeks to contravene the 10th Amendment and step into the shoes of duly elected state legislators to preempt state authority. NCSL's member-driven cornerstone policy is our Federalism Policy Directive that recognizes "the Tenth Amendment is the cornerstone of constitutional federalism and reserves broad powers to the states and to the people." Our federalism policy states our strong belief that "states should not be undercut through the regulatory process," and that it is unacceptable for unelected federal agency officials "to exercise legislative authority through regulation that preempts the decisions of the elected legislatures of the sovereign states." Additionally, the thread of cooperative federalism is woven into every NCSL Standing Committee policy area. Below are some examples of our bipartisan standing committees' policy positions:

Budgets and Revenue Standing Committee-The Budgets and Revenue policy seeks to preserve the ability of state and local governments to adopt fair and effective tax systems and discretion to tax certain revenue sources. This includes authorizing states with sales and use taxes to require interstate sellers to collect and remit those taxes. Furthermore, NCSL opposes any federal policy or interpretation that stops states from taxing businesses that have a strong economic or digital connection to the state. NCSL urges Congress and federal agencies not to expand outdated limits on state tax authority, including refraining from creating new exemptions or refining established definitions and to respect the rights of states to manage their own tax systems.

Banking and Financial Services and Insurance Standing Committee-The Banking and Financial Services policy reflects NCSL's position that states retain sovereignty in financial services regulation. NCSL has opposed any federal preemption of state legislative or regulatory authority in financial services.

Children, Families and Human Services Standing Committee-NCSL's childcare policy supports states retaining regulatory, licensure and operational oversight of childcare facilities. Any regulatory requirements imposed by the federal government should serve as a floor and not a ceiling and not restrict state flexibility in determining how childcare facilities should function.

Education Standing Committee- The State-Federal Partnership in Postsecondary Education policy maintains that the federal government should not unduly preempt state laws on student loan servicer oversight and instead engage in collaborative federalism with states around providing consumer protections to borrowers.

Elections and Redistricting Standing Committee-The Elections Administration policy reaffirms the Elections Clause of the Constitution granting states the authority to regulate the time, place and manner of elections. It urges Congress to be an equal partner with states when considering elections legislation and opposes unfunded federal mandates. NCSL helped draft the Help America Vote Act of 2002, which led to the creation of the U.S. Election Assistance Commission. To preserve state authority over election administration, the Commission was intentionally not granted rulemaking authority.

Health Standing Committee-The Health AI policy advocates for federal-state collaboration on health AI standards and against federal preemption of state AI legislation. The Principles of Federal Health Insurance Reform support states' ability to regulate health insurance and provide oversight on insurance matters. NCSL opposes any proposals that would expand the preemption of state laws and regulations beyond those already established in existing federal laws.

Labor and Economic Development Standing Committee-The Labor and Employment policy urges the federal government not to preclude or preempt states from adopting stronger approaches to workplace safety than exist in federal regulations.

Law and Public Safety Standing Committee-The Criminal Justice policy urges Congress and the administration to adhere to fundamental principles of federalism and to avoid federalizing state crime policy and substituting federal laws and regulations for state and local policy decisions in criminal and juvenile justice.

Natural Resources, Energy and Environment Standing Committee-The Environmental Federalism policy directive supports a state-federal partnership in environmental protection. Federal standards should set clear goals but allow states broad discretion in how to meet them: "The federal government should adopt performance-based standards which prescribe the end to be accomplished and leave the means of obtaining the end up to individual states." NCSL's National Energy Policy emphasizes cooperative federalism, advocating for consultation with states and providing them flexibility in meeting federal minimum standards. The policy also expresses opposition to federal preemption of state laws and regulations related to the approval and siting of energy facilities.

Technology and Communications Standing Committee-The Artificial Intelligence policy strongly opposes any attempt by Congress, federal agencies or the administration to preempt state laws or undermine state authority over AI policy. The Internet and Electronic Commerce policy opposes blanket state preemption in federal data privacy and security legislation and supports the establishment of strong federal baseline standards that allow states to adopt additional protections tailored to their constituents' needs.

Transportation Standing Committee-The Autonomous Vehicles policy supports state authority to regulate autonomous vehicle testing and operation, and the Motor Carrier Regulation policy supports state regulation of intrastate commerce.

Executive Order 13132 Requires Respect for State Authority

The Request for Information ignores the careful agency-state balance of Executive Order 13132. This executive order is rooted in the belief that issues not national in scope are best addressed by the level of government closest to the people and reaffirms the 10th Amendment. It requires federal agencies to have an internal process in place for "early, meaningful and timely input" from state and local officials or their national associations. Agencies cannot assume preemption powers unless clearly authorized by statute in order to safeguard against unjustified federal overreach. The executive order also discourages interim final rulemaking as a means to circumvent state consultation and requires agencies to produce a federalism impact statement in the preamble to any rule that is published in the Federal Register. The Department of Justice's effort to gather state regulations and request enabling legislation, allowing unelected officials to override these rules without adequate consultation, raises concerns regarding the respect afforded to an entire level of democratically elected government. NCSL urges the Department of Justice to withdraw this unprecedented and broad attempt to undermine state authority.

Supreme Court Precedent Defers to States on Federalism Grounds

Over the years the Supreme Court has opined many times on the importance of federalism and respect for state government. As Justice Louis Brandeis wrote over 90 years ago: "It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country." New State Ice Co. v. Liebmann, (1932).

Agencies themselves do not inherently possess preemptive power. They must be expressly authorized by Congress to preempt state law through enabling legislation, and the courts have consistently exercised presumptions in favor of state sovereignty. In New York v. United States, (1992) the court reaffirmed this precept and held, "the Constitution divides authority between federal and state governments for the protection of individuals." The court has also established boundaries on the federal government's Commerce Clause powers to hold that those powers should not be exercised without a compelling need to do so. United States v. Lopez, (1995). Recent case law has further constrained agency regulatory authority. The court recognized the negative practical effect that federal overreach under the dormant Commerce Clause would have on states in our global economy, and that such overreach would "cast a shadow over laws long understood to represent valid exercises of the States' constitutionally reserved powers." National Pork Producers v. Ross, (2023).

In National Pork Producers, the court appropriately determined that we exist within an interconnected national marketplace; ruling otherwise would potentially invalidate numerous statutes, including those related to state income tax, environmental protection, securities regulation, quarantine procedures, inspection protocols, franchise operations and tort law, among others. Such laws may exert significant influence on commerce beyond state boundaries. This case highlights the necessity of maintaining a judicious balance that strengthens the explicit protection of civil liberties enumerated in the Constitution. In Loper Bright Enterprises v. Raimondo (2024), the court eliminated automatic agency deference under the Chevron Doctrine. Agencies must have a clear congressional delegation of preemptive authority and a rational basis for the decision to preempt. By preserving regulatory authority, states are equipped to adapt and innovate in response to evolving societal requirements with greater assurance.

NCSL Bipartisan Membership Concerns

Our bipartisan membership has expressed concerns that recent federal actions, including this Request for Information attempt to undermine state governments' decision-making authority and create significant challenges to state-level policymaking that protect our citizens. Our members have raised concerns that the federal government does not pay close enough attention to the state impact of their decisions. State laws and regulations are foundational to America's economic and social infrastructure. States use their "police powers" to regulate health, safety and welfare in ways that support local economies without obstructing national markets.

State level regulation also enhances global competitiveness. When states adopt forward-looking policies, such as those promoting innovation or workforce readiness, they help U.S. businesses meet international standards and compete more effectively abroad. Consumer protection laws at the state level guard against unfair, deceptive, or abusive practices, empowering individuals to seek redress and promoting trust in the marketplace. These laws often go beyond federal protections.

Finally, state laws foster innovation and resilience. Whether through targeted tax incentives, regulatory sandboxes, or disaster preparedness frameworks, states create environments where new ideas can flourish, and communities can recover more quickly from economic or disaster related shocks. Instead of looking for ways to undermine state authority, the Department of Justice should defer to states when federal regulations subvert valid state interests.

Conclusion

It is a suitable role for the federal government to encourage innovation by states, not to preempt state laws and regulations to appease private interests. As NCSL's longstanding federalism policy states, our country's founders did not contemplate a perfect union, but rather a more perfect union, meaning there must be room for policy experimentation and different methods of self-government at the state level. That is why the administration and Congress must allow state flexibility to shape public policy. Creative solutions to public problems can be achieved more readily when state laws are accorded due respect. Moreover, states are inherently capable of moving more quickly than the federal government to innovate, respond, correct errors observed in policy and be more sensitive to public needs.

In conclusion, supporting states' rights and their ability to enact regulations and laws unique to their citizens is essential for maintaining a responsive, innovative, and diverse system of governance. We urge the Department of Justice to recognize and uphold the principles of state sovereignty in the regulatory process. We respectfully request that the Department of Justice engage in meaningful consultation with states prior to rulemaking and support policies that empower states to govern in a manner that best serves their residents.

NCSL stands ready to discuss these issues further. You may contact NCSL staff Susan Parnas Frederick (susan.frederick@ncsl) for more information.

Sincerely,

Marcus C. Evans Jr.
NCSL President
Illinois House of Representatives

Barry Usher
NCSL President-Elect
Montana State Senate

Bob Duff
NCSL Vice President
Connecticut State Senate

Wayne A. Harper
NCSL President Emeritus
Utah State Senate

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