Document 3eGb8zaGO3rEXrnZXMxRjwojn

March 7, 2025 Director Russell Vought Office of Management and Budget 725 17th St., NW Washington, DC 20503 Dear Director Vought, The undersigned, representing a broad coalition of statewide officials, state lawmakers and state and national organizations committed to the principles of federalism, write to express our strong support for President Donald J. Trump's Executive Order Unleashing Prosperity Through Deregulation, signed on January 31, 2025. This Executive Order (EO) is a pivotal step toward reducing unnecessary regulatory burdens and promoting economic growth. To maximize its impact, we urge the Office of Management and Budget (OMB) to strengthen the federalism review process as part of the EO's implementation. The federalism review process was first formally established under President Ronald Reagan's Executive Order 12612 (1987), which required federal agencies to assess the impact of regulations on state governments to ensure that federal action did not undermine state sovereignty. In 1999, President Bill Clinton replaced Reagan's order with Executive Order 13132, shifting the federalism review process from a strong safeguard of state authority to a more procedural consultation framework. While the new order maintained the concept of federalism review, it weakened enforcement by removing explicit constraints on federal agencies, making it easier for them to override state objections. Without meaningful enforcement mechanisms, agencies have frequently bypassed substantive state consultation, leading to the imposition of top-down federal regulations that place unnecessary burdens on states and grow the federal government. Executive Order 13132 is not the only safeguard ensuring that state voices are considered in the regulatory process. The Unfunded Mandates Reform Act requires agencies to assess the financial impact of federal mandates on state, local, and tribal governments, prepare cost estimates, and ensure meaningful consultation before imposing unfunded regulatory burdens. Executive Order 12866, "Regulatory Planning and Review," directs agencies to engage with state and local officials in the rulemaking process, assess cumulative regulatory impacts, and coordinate federal actions with existing programs. Similarly, Executive Order 12372, "Intergovernmental Review of Federal Programs," strengthens intergovernmental partnerships by requiring federal agencies to coordinate with state processes in reviewing financial assistance and regulatory programs. These statutory and executive directives ensure that federal agencies consider state priorities, preventing unnecessary regulatory burdens and reinforcing the balance of power envisioned in the Constitution. Federalism: The Best Defense Against an Expansive Federal Government 1 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022050 The United States was founded on a system that divides power between national and state governments, ensuring that policies reflect local needs while preventing excessively centralized control. A strong federalism review in the regulatory process is critical for: I . Preventing DC Regulatory Creep -- Federal agencies frequently expand their scope of authority beyond legislative intent, regulating matters that are best handled at the state and local level. 2. Creating a Natural Check on Future Administrations -- Protecting state and community authority makes it harder for future administrations to rapidly expand federal control. When state governments exercise more regulatory authority, they have institutional incentives to resist federal encroachment, reinforcing the constitutional balance. 3. Enhancing Fiscal Responsibility -- Federal regulations often impose unfunded mandates on states, increasing costs without providing necessary resources. Stronger federalism oversight ensures that regulations account for the financial strain placed on state governments, reducing wasteful spending and bureaucratic bloat. 4. Encouraging State-Led Innovation -- States are laboratories of democracy that can tailor policy solutions to their unique economic, geographic, and demographic circumstances. A reinforced federalism review would protect the ability of states to develop policies that work more efficiently and effectively than broad federal mandates. Recent Biden-era regulations illustrate how mandated federalism review have become little more than an afterthought, leaving states to challenge sweeping federal mandates in court rather than engaging in a meaningful consultation process upfront. The Environmental Protection Agency's (EPA) Waters of the United States (WOTUS) rule was a prime example of federal overreach, where the agency expanded jurisdiction over state-managed waters without clear statutory authority or a substantive federalism impact assessment. The Supreme Court's Sackett v. EPA decision (2023) struck down the rule after 27 states challenged it, arguing that EPA failed to consider state authority and imposed unlawful regulatory burdens.1 The Department of Health and Human Services (HHS) issued a rule requiring states to cover gender-transition procedures under Medicaid, despite conflicting state laws. Fifteen states sued, arguing HHS failed to conduct a federalism review and coerced compliance by threatening federal funding. In July 2024, a federal court blocked the rule nationwide, finding HHS exceeded its authority and ignored state concerns.2 The EPA's New Source Performance Standards for Greenhouse Gas Emissions rule followed a similar pattern, imposing compliance costs on states without proper consultation. West Virginia and 26 other states sued, arguing EPA ignored state-led environmental programs and unlawfully forced a federal energy transition. In October 'Sackett v. Envtl. Prot. Agency, 598 U.S. 651 (2023). 2 Tennessee v. Becerra, No. 1:24cv161 (S.D. Miss. July 3, 2024). 2 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022051 2024, the Supreme Court declined to stay the rule while the case was before the D.C. Circuit Court of Appeals, but noted the challengers had a strong likelihood of success.3 These examples underscore why a strong federalism review is not just a procedural formality but a necessary safeguard to prevent federal agencies from bypassing state authority. Without meaningful enforcement mechanisms, agencies will continue to treat federalism as an afterthought, forcing states into expensive and prolonged legal battles to protect their rightful regulatory authority. Recommendations for Strengthening the Federalism Review Process To enhance the effectiveness of the federalism review mandated by President Trump's EO, we propose the following actions: 1. Mandate Comprehensive Federalism Impact Assessments -- Agencies should be required to conduct detailed federalism impact assessments for all regulations affecting state governance. This should include an assessment of how the proposed federal regulation affects relevant state and local authorities, a justification for why the regulation should be overseen by a federal agency rather than state authorities, and an economic analysis of how the regulation shifts costs to state and local governments.4 2. Formalize State Consultation in the Rulemaking Process -- Agencies must engage in structured consultation with state officials before finalizing regulations. GAO reports have consistently shown that agencies lack standardized methods for involving states in regulatory decisions, leading to rules that fail to account for state-level expertise and realities.5' 6 3. Require Public Disclosure of Federalism Analysis -- Federal agencies should be required to publicly release their federalism assessments to demonstrate that their proposed actions do not unduly interfere with state authority. This would enhance transparency and allow states to challenge overreach before regulations take effect.? 4. Institute a Federalism Training Program for Agencies -- A lack of federalism literacy among federal officials contributes to regulatory expansion. Agencies should train 3 West Virginia v. EPA, No. 24A95 (U.S. Oct. 16, 2024) (litigation pending in D.C. Circuit). 4 U.S. Government Accountability Office. Implementation ofExecutive Order 12612 in the Rulemaking Process. GAO/T-GGD-99-93, May 5, 1999. Available at: https://www.gao.gov/assets/t-ggd-99-93.pdf. 5 U.S. Government Accountability Office. Federalism: Opportunities Exist to Improve Coordination and Consultation with State and Local Governments. GAO-20-560, August 2020. Available at: https://www.gao.goviassets/gao-20560.pdf. 6 Administrative Conference of the United States. Agency Proceduresfor Considering Preemption ofState Law. 2010. Available at: https://www.acus.govAlocument/aeencv-procedures-considerine-preemption-state-law. U.S. Government Accountability Office. Rulemaking: OMB's Role in Reviews ofAgencies'Draft Rules and the Transparency of Those Reviews. GAO-06-8, September 2005. Available at: https://www.gao.goviassets/gao-068.pdf. 3 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022052 personnel on federalism principles and require annual compliance reports on how they uphold state authority.8 5. Designate a Federalism Review Function within OMB --A dedicated function within OMB should ensure agency compliance with federalism requirements. This function would complement OIRA's cost-benefit analysis by ensuring that federalism concerns are fully considered in regulatory review, preventing rules that improperly preempt state authority.9 By reinforcing the federalism review process, the Office of Management and Budget can institutionalize protections against regulatory overreach and the unchecked expansion of federal authority. We urge OMB to issue detailed guidance to federal agencies, emphasizing the importance of federalism considerations in the regulatory process and ensuring agencies comply with President Trump's EO requirements. We stand ready to support OMB in implementing these reforms and look forward to working together to restore the proper balance of power, safeguard state authority, and promote economic prosperity by limiting federal intrusion into areas best governed by states. Sincerely, Coordinating Organization Tony Woodlief Senior Fellow Center for Practical Federalism at State Policy Network Statewide Officials Chris Brown Public Service Commissioner, Northern District Mississippi Wayne Carr Public Service Commissioner, Southern District Mississippi Andy Gipson Commissioner of Agriculture and Commerce Mississippi B U.S. Government Accountability Office. Federalism: Opportunities Exist to Improve Coordination and Consultation with State and Local Governments. GAO-20-560, August 2020. Available at: https://www.gao.gov/assets/gao-20560.pdf. 9 !bid 4 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022053 Rick Pate Commissioner of Agriculture and Industries Alabama Andrew Sorrell State Auditor Alabama Ryan Walters Superintendent of Public Instruction Oklahoma State Legislators Alabama Senator Will Barfoot Chair, Judiciary Committee Senator Lance Bell Chair, Fiscal Responsibility and Economic Development Committee Senator Chris Elliott Chair, County and Municipal Government Committee Senator Sam Givhan Vice Chair, Judiciary Committee Senator Dan Roberts Chair, Contract Review Permanent Legislative Oversight Committee Senator Shay Shelnutt Chair, Banking and Insurance Committee Senator Larry Stuffs Chair, Children and Youth Health Committee Representative Russell Bedsole Vice Chair, State Government Committee Representative Ron Bolton Member, Public Safety and Homeland Security Committee Representative Chip Brown Chair, Ports, Waterways and Intermodal Transit Committee 5 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022054 Representative Mack Butler Member, Constitution, Campaigns and Elections Committee Representative Danny Crawford Chair, Agriculture and Forestry Committee Representative Ben Harrison Member, Constitution, Campaigns and Elections Committee Representative Bill Lamb Member, Ways and Means General Fund Committee Representative Phillip Rigsby Member, Constitution, Campaigns and Elections Committee Representative Troy Stubbs Member, Commerce and Small Business Committee Representative Ernie Yarbrough Member, State Government Committee Arizona Representative John Kavanagh Chair, Appropriations Committee Florida Representative Dean Black Vice Chair, Education Administration Subcommittee Representative Monique Miller Member, Ways and Means Committee Idaho Senator Cindy J. Carlson Member, Education Committee Representative Jordan Redman Member, Environment, Energy and Technology Committee Indiana Representative Joanna King Deputy Speaker Pro Tempore 6 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022055 Iowa Senator Adrian Dickey Chair, Workforce Committee Senator Sandy Salmon Vice Chair, Veterans Affairs Committee Representative Barbara Ehardt Chair, Local Government Committee Kansas Representative Susan Humphries Chair, Judiciary Committee Representative Patrick Penn Chair, Legislative Modernization Committee Representative Sean Tarwater Chair, Commerce, Labor and Economic Development Committee Representative Barb Wasinger Chair, Administrative Rules and Regulations Joint Committee Representative Kristey Williams Vice Chair, K-12 Education Budget Committee Majority Caucus Chair Louisiana Representative Beryl Amedee Vice Chair, Education Committee Representative Gabe Firment Chair, Insurance Committee Representative Charles Owen Chair, Special Committee on Military and Veterans Affairs Committee Representative Mark Wright Majority Leader Maine 7 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022056 Representative Billy Bob Faulkingham Minority Leader Mississippi Senator Kevin Blackwell Chair, Medicaid Committee Senator Lydia Chassaniol Chair, Tourism Committee Senator Jeremy England Chair, Elections Committee Senator Joey Fillingane Chair, Judiciary B Committee Senator Brian Rhodes Vice Chair, Forestry Committee Representative Shane Aguirre Chair, Banking and Financial Services Committee Representative Lester Carpenter Chair, Military Affairs Committee Representative Jim Estrada Member, Banking and Financial Services Committee Representative Randy Rushing Chair, Municipalities Committee Representative Lee Yancey Chair, Business and Commerce Committee Representative Henry Zuber III Chair, State Affairs Committee Missouri Senator Brad Hudson Vice Chair, Education Committee Representative Sherri Gallick Chair, Economic Development Committee 8 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022057 Representative Alex Riley Majority Floor Leader Senator Nick Schroer Chair, Judiciary and Civil and Criminal Jurisprudence Nebraska Senator Kathleen Kauth Chair, Business and Labor Committee North Carolina Representative Jake Johnson House Deputy Majority Whip Ohio Representative Sarah Fowler Arthur Chair, Education Committee Representative Gary Click Chair, Community Revitalization Committee Representative Kevin Ritter Member, Finance Committee Oklahoma Senator Jerry Alvord Vice Chair, Business and Insurance Committee Senator Micheal Bergstrom Chair, Administrative Rules Committee Senator David Bullard Chair, Retirement and Government Resources Committee Senator Shane Jett Vice Chair, Administrative Rules Committee Senator Julie McIntosh, M.D. Member, Health and Human Services Committee Senator Dana Prieto Vice Chair, Select Agencies Committee 9 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022058 Senator Kendal Sacchieri Member, Appropriations Committee Representative Toni Hasenbeck Chair, Postsecondary Education Committee Representative Molly Jenkins Vice Chair, Administrative Rules Committee Representative Clay Stakes Vice Chair, Appropriations and Budget Select Agencies Subcommittee South Carolina Senator Tom Davis Chair, Labor, Commerce and Industry Committee Representative Travis A. Moore Member, Judiciary Committee South Dakota Representative Aaron Aylward Member, Local Government Committee Tennessee Senator Brent Taylor Vice Chair, Commerce and Labor Committee Representative Jody Barrett Member, Finance, Ways, and Means Committee Representative Clay Doggett Chair, Criminal Justice Subcommittee Representative William Slater Chair, Education Administration Subcommittee Texas Senator Bob Hall Chair, Administration Committee Representative Mark Dorazio 10 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022059 Member, Human Services Committee Utah Representative Kay Christofferson Chair, Transportation Committee Representative Ken Ivory Chair, Federalism Commission Representative Nicholeen Peck Member, Education Committee Representative Jorden D. Teuscher Chair, Rules Committee Virginia Delegate Nick Freitas Member, Finance Committee West Virginia Delegate Elias Coop-Gonzalez Member, Education Committee Delegate Daniel Linville Chair, Environment, Infrastructure and Technology Committee Wisconsin Senator Andre Jacque Chair, Natural Resources, Veteran and Military Affairs Committee State and National Policy Organizations Fred Birnbaum Director of Legislative Affairs Idaho Freedom Foundation and Idaho Freedom Action Erin Bendily Senior Vice President Pelican Institute Jen Brown President 11 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022060 Utah Citizens for the Constitution Jon Caldara President Independence Institute (CO) Cindi Castilla President Eagle Forum of Texas Blaine Conzatti President Idaho Family Policy Center David Cox Assistant Director Arkansas Family Council Wayne Crews Fred L. Smith Fellow in Regulatory Studies Competitive Enterprise Institute CJ Szafir President Institute for Reforming Government (WI) Wendy Damron President & CEO Palmetto Promise (SC) Tami L. Fitzgerald Executive Director NC Values Coalition Becky Gerritson Executive Director Eagle Forum of Alabama Paul Gessing President Rio Grande Foundation (NM) Jonathan Haines Executive Vice President Virginia Institute for Public Policy 12 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022061 Kimberly Hermann Executive Director Southeastern Legal Foundation. Cindy Honcoop President Eagle Forum of Washington Orlean Koehle President Eagle Forum of California Joseph G. Lehman President Mackinac Center for Public Policy (MI) Mandy Ludtke President & CEO Wyoming Liberty Group Carolyn McLarty, D.V.M. President Eagle Forum of Oklahoma Board Member, Eagle Forum (National) Gene Mills President Louisiana Family Forum Chuck Muth President Citizen Outreach Foundation Cole Muzio President Frontline Policy Council (GA) Richard Nelson Executive Director Commonwealth Policy Center (KY) Annette Olson Chief Executive Officer The John K. Maclver Institute for Public Policy, Inc. Justin Owen 13 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022062 President & CEO Beacon Impact (TN) Bobbie Patray President Eagle Forum of Tennessee Jackson Reese Executive Vice President California Policy Center Gayle Ruzicka President Eagle Forum of Utah Pete Sepp President National Taxpayers Union & NTU Foundation Stephanie Smith President/CEO Alabama Policy Institute Jim Stergios Executive Director Pioneer Institute (MA) Brenda Talent CEO Show-Me Institute (MO) Jameson Taylor, Ph.D. Director, Center for Governmental Renewal AFA Action Lynn Taylor President Virginia Institute Action John R. Toedtman Executive Director Caesar Rodney Institute (DE) Kristen A. Ullman President Eagle Forum (National) 14 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022063 Jeff Vanderslice Director, Federal Government Affairs R Street Institute Lucas Vebber Deputy Counsel Wisconsin Institute for Law & Liberty Jim Vokal Chief Executive Officer Platte Institute (NE) James Whitford Co-founder, CEO True Charity 15 Sierra Club v. OMB, Case No. 25-cv- 05732-LJC OMB 2025-825 OMBA317FY25825_000000504 SC_EVERSPLIT0022064