When the feds don’t regulate … will the states?

Legal scholars and lawmakers are still trying to come to grips with the potential long-term consequences of all of the Supreme Court decisions that came out of the term that ended earlier this year. In some cases, the impact has been immediate — those involving abortion and presidential immunity, for instance.

But it’s going to take a while before we understand the impact of another landmark ruling from earlier this year – Loper Bright Enterprises v. Raimondo, which we’ve talked about on this program as the case that overturned what’s known as the Chevron deference.

That decision shifts power away from federal regulatory agencies and into the hands of the courts and Congress, but it will likely also change the balance of power between the federal government and the states.

With the Chevron Deference overturned, there’s a general sense that rulemaking by federal agencies in Washington will likely slow down, as government bureaucrats work to make sure any new regulations meet the new, stricter legal standard.

“Congress… now needs to potentially take a closer look at the way that they’re creating laws and agencies need to take a closer look at whether they have regulatory authority,” said Leah Dempsey, a partner at the law firm Brownstein. In the meantime, she said, “The states will probably try to step in and fill whatever gaps that they think might be there.”

Dempsey said in many areas this is already happening. For example, when it comes to regulating medical debt—  while the Consumer Financial Protection Bureau works through the process of figuring out a nationwide regulation, a number of states have come up with their own rules.

But a state-by-state approach can create its own problems, according to Bill Kramer, vice president of policy at the company Multistate, which helps organizations do state and local government advocacy.

“If 50 states all decide to go their own way, you have a patchwork of policy making that’s very difficult to comply with,” he said. Kramer said even one state changing a rule can change the way businesses everywhere else operate, giving the example of the pork industry.

In 2018, California started requiring pork producers to give sows bigger pens, and the pork industry argued that would force farms outside the state to change the way they do business. The case went all the way to the Supreme Court in 2023, and the high court let California’s law stand.

“If the people that we raise pigs for and work with have to make changes for another state, you know that’s going to have additional costs for them and additional regulations,” said Lori Stevermer, president of the National Pork Producers Council, which brought the case. “So let’s say another four or five, 10, 20 states put in different regulations. Now, all of a sudden, our product… has to adhere to those different regulations.”

California isn’t the only state with an economy big enough to trigger national changes, according to Bill Kramer at Multistate.  

“I mean, Texas obviously has the size of an economy that would do something like this,” he said,  “I think Florida, New York, Illinois. There’s states that have a large enough ecosystem and economy that can move the needle on these things. But even if a small state makes a change, it could potentially influence the rest of the country.

So we may end up with groups of states with differing regulatory systems filling in gaps while federal regulations are tied up in the courts. Which means people hoping to shape policy, may need to step up their efforts at the state level. 

“I do think that this is going to put a lot of people on notice that they’re going to have to be much more technically proficient,” said Ken Nahigian, co-founder of the Balancing Act Project, a group that’s been advocating for a rollback of federal agencies’ regulatory role. “I think a lobbyist will be better. Trade associations will be better, and then legislators are going to have to be much better.” Particularly state legislators, who are likely to have a lot more on their plates in a post-Chevron environment.