Highlights
Introduction
Policymakers often rely on subject matter expertise outside of government. Indeed, academia, think tanks, and the research community broadly play an important role in shaping public policy with perspectives that are technically proficient and well-grounded in the relevant field. Ultimately, it is the policymakers that are accountable to the public, not the experts. In several fields, however, the line between outside expertise and policymaking has been blurred, if not outright erased. A paper released today by the Buckeye Institute, a nonpartisan research organization based in Ohio, examines four nongovernmental organizations (NGOs) that plainly veer into regulating without the transparency and accountability typically expected of governmental regulators. As the Buckeye study makes clear, these organizations potentially mask an inherent risk: undermining state sovereignty and public accountability.
The Trojan Horse: Hidden Risks in NGO-Led Regulation
The study offers valuable perspective on the history and evolution of NGOs that have been shaping state and federal policies for over a century. The National Association of Insurance Commissioners (NAIC) and the North American Securities Administrators Association (NASAA) are two such examples. While providing regulatory frameworks such as model legislation, these entities often bypass public scrutiny, allowing unelected bodies to wield disproportionate influence over public policy.
The state of Ohio, home to the Buckeye Institute, operates much like other states and relies on model regulations, such as those developed by the NAIC or NASAA. The state’s experience with these entities offers a worthy case study in the role such organizations play in the development of public policy. The study offers valuable insights into the challenges that can arise from reliance on policymaking NGOs. For instance, NASAA’s proposals to enhance regulations on securities brokers often conflict with federal standards, creating compliance hurdles. And notably, NAIC is a member of an international NGO, the International Association of Insurance Supervision (IAS), which has advocated for ESG and DEI policies in global insurance markets. Another recent example of the blurred lines between standard-setting, policymaking, and advocacy, saw NAIC advocating for certain federal health policies. The processes and deliberations of these organizations can often take place behind closed doors, and may advance narrow or parochial priorities out of step with broader state interests.
The Transparency Deficit
Given the reach and influence of these NGO’s, transparency remains a key issue. Unlike state agencies bound by sunshine laws and public oversight, NGOs operate with minimal disclosure. NAIC, for example, avoids filing IRS Form 990, a document that provides crucial financial and operational transparency for nonprofits. Similarly, it does not have to abide by the formal notice and comment requirements, such as the Administrative Procedures Act, that bind government agencies. This opacity enables NGOs to act outside of public scrutiny and leverage their influence in ways that might not align with public welfare.
Case Studies: Ohio’s Risky NGO Relationships
The Buckeye study offers a unique, state-level focus on policymaking NGOs in the state of Ohio. The examination observes a number of risks and deficiencies in the relationship between NGO policymaking and the public interest. The report notes several examples whereby NGOs overreached or failed to meet the standards of transparency and openness that government agencies abide by. Specifically, the report noted a recent example where the Ohio Department of Commerce’s Division of Securities, led by a commissioner who previously served as NASAA president, attempted to implement NASAA policies without submitting to the normal regulatory review process. A similar dynamic prevails with NAIC, where Ohio Department of Insurance (ODI) staff served on 22 NAIC committees. While this can provide a forum for shared expertise, it substantially blurs the line between the role of state regulators and an NGO. That line can be completely obscured given the opacity of NAIC’s internal processes. As the report notes, NAIC often conducts regulator-only sessions, which lacks the accountability that applies to state agencies. The report also notes other examples of NGO’s with significant regulatory reach that nevertheless commercialize products, such as the National Fire Protection Association (NFPA) that provides essential safety standards. Their model codes, such as Ohio’s electrical regulations, are not readily accessible without purchase from NFPA, creating barriers to public review and input.
Recommendations: Strengthening Oversight and Transparency
The Buckeye Institute report offers policy recommendations covering five aspects of NGO regulation in need of reform. Specifically the report calls on state policymakers to require:
A Cautionary Tale
NGOs can provide expertise and promote consistency across regulatory jurisdictions. However, their influence must not come at the expense of democratic oversight and accountability. Policymakers would do well to rigorously scrutinize rulemakings from NGOs. By implementing robust transparency measures and preserving legislative authority, states can reap the benefits of NGO collaboration without succumbing to its hidden costs.