Today, the Government Accountability Office (GAO) issued a six-page ruling determining that the December 2021 “Pollack memo” urging Federal Highway Administration employees to encourage states to use their highway formula money for projects that align with progressive policy aims was actually a “rule” under the Administrative Procedure Act and that it activates the Congressional Review Act, which could set up a veto showdown between Congress and the White House next year.

The Pollack memo, issued December 16, 2021, describes itself as a mere “guidance” document that directed FHWA employees to encourage state and local highway funding recipients to prioritize certain types of projects, and that “Consistent with this Policy, FHWA will implement policies and undertake actions to encourage—and where permitted by law, require—recipients of Federal highway funding to select projects that improve the condition and safety of existing transportation infrastructure within the right-of-way before advancing projects that add new general purpose travel lanes serving single occupancy vehicles.:

The fact that some of the language in the memo seemed cut-and-pasted from a Democrats-only bill in the House of Representatives that was rejected for inclusion in the bipartisan infrastructure law caused Republicans in Congress, and red state DOTs, much heartburn, and put AASHTO, which represents both red-state and blue-state DOTs, in a bind. It was all that any Republican legislators wanted to talk about whenever high-level DOT officials testified in Congress in 2022. By late April 2022, Secretary Buttigieg had his response down pat: “If it is ever your impression that a specific project that is otherwise lawful that a state seeks to pursue with formula dollars is in any way being unreasonably or unnecessarily delayed or discouraged by the Department, I would want to know that right away, and we can discuss it, because anything that is lawful with formula funds is something that the states should be free to pursue.”

But DOT was consistent in stating that the Pollack memo was only a low-level guidance document. Republicans disagreed, and Sen. Shelley Moore Capito (R-WV) in February 2022 asked GAO, the arbiter of such things, for an official determination. That came today.

A rule under the APA

GAO says that the memo meets the APA’s three-pronged test to be considered a “rule:”

1. “the Memo is an agency statement, as it is a memo from senior leadership to agency offices on actions employees should take”
2. “it is of future effect, as it provides guidance for projects to be funded by the Act.”
3. “it proscribes policy, as it announces a preference for certain types of projects and instructs agency employees to encourage funding recipients to select these types of projects.”

FHWA claimed that “the Memo is not a rule because it is an internal document that does not impose a new requirement or change the underlying federal-state relationship established in law; instead, FHWA contends that it does nothing but restate longstanding statutory and regulatory requirements.”

But GAO disagreed, citing a December 17, 2020 precedent where GAO “determined that when an agency [HUD] provides extra information to aid with statutory compliance, the agency has done more than restate the law; it has implemented law…Here, FHWA went beyond simply restating existing legal requirements; it expressed a policy preference in the Memo and took steps to implement that preference. Thus, as in [the HUD decision], the Memo meets the APA definition of a rule.”

(Ed. Note: The fact that GAO issued this HUD precedent two days after the Pollack memo was released should defuse critics of the FHWA and DOT lawyers who allowed Pollack to release the memo. As obvious as the case may seem today, it wasn’t that obvious when FHWA released the memo.)

Also a rule under the CRA

GAO then went on to determine whether or not the memo meets the separate criteria as a rule for purposes of the Congressional Review Act, which was yet another three-pronged test:

1. “the Memo is not a rule of particular applicability, as it applies to all potential grantees for all potential projects.”
2. “it is not a rule of agency management or personnel. While the Memo is addressed to agency officials and provides instructions to agency personnel, its main focus is the potential projects of potential grantees and other funding recipients. Thus, it goes beyond merely relating to agency matters and does not qualify for the exception.”
3. GAO determined that the rule had a “substantial effect on the rights or obligations of non-agency parties.” FHWA had argued that “because the Memo does not bind funding recipients, as they are free to choose to fund any projects that are legally permissible under IIJA.” GAO disagreed, citing the HUD precedent (above) and a 2019 Federal Reserve precedent where GAO “determined that several Federal Reserve memoranda to bank examiners outlining matters to search for during bank examinations were rules.” GAO summed up thusly: “FHWA admits the purpose of the Memo is to get funding recipients to select projects FHWA prefers…Thus the agency is taking active steps to encourage funding recipients to alter their behavior, and these changes would be taken at the behest of FHWA. When an agency rule actively attempts to induce the regulated community to take preferred steps, the rule has a substantial impact on the regulated community and does not qualify for the third CRA exception.”

What next? 

The fact that GAO ruled the memo to be a rule under the APA just means that next time, DOT lawyers will probably have to insist that such a guidance document be subjected to the APA notice-and-comment process before going out to the public.

But the fact that GAO has ruled that the memo is subject to the Congressional Review Act means there will be more immediate real-world consequences. Because the CRA activates a Congressional “fast track” process that can force a Senate vote on a joint resolution overturning the Pollack memo next year. And, since the House will be in Republican hands next year, such a Senate-passed resolution would get a House vote as well, and if it passes both chambers, would force a public veto showdown with President Biden.

The next step is for Senator Capito (or some other Senator) to submit the GAO ruling in the Congressional Record for printing, which could happen as early as today. Under the CRA, this starts a clock where, after 20 calendar days, 30 Senators can sign a petition to discharge a Senate committee from consideration of a joint resolution disapproving the Pollack memo (which Capito today said she will be introducing).

Once 30 Senators submit the petition and the committee is discharged, any Senator can make a non-debatable motion to take up the resolution, and if that gets a majority of the Senate (51+ votes), the resolution comes to the floor right that second for up to 10 hours of debate, no amendments, and then a final vote by the same, filibuster-proof majority.

All 49 Republicans Senators seem likely to vote for such a resolution, and several Democratic Senators might vote “aye” as well (Joe Manchin (D-WV) seems a given, one can never tell where Senator Sinema (I-AZ) is at these days, and people from states like Montana, Ohio, and Pennsylvania are in cycle in 2024).

Should the joint resolution pass the Senate, it would then go to the House, where Transportation and Infrastructure chairman-in-waiting Sam Graves (R-MO) said today “While I hope the Administration will rescind the flawed approach, I am prepared to work with my Senate colleagues to utilize the CRA if necessary to overturn this rule.”

If the House and Senate both pass a CRA resolution overturning the Pollack memo, then President Biden would be forced to veto the resolution, because enactment of a CRA resolution doesn’t just overturn the rulemaking, it sows the earth with salt. The CRA says that if a rule is overturned via CRA resolution, then not only is that rule dead, but the agency is forever barred from issuing any rule in “substantially the same form” as the overturned rule unless specifically authorized in a new law enacted by Congress. Then we would have to see if two-thirds of the originating chamber would support a veto override, and if they did, then the other chamber would have to vote by a similar margin.

So the lowly FHWA “non-binding guidance document” of December 2021 may wind up being the subject of President Biden’s first veto, and first veto override attempt, in January or February 2023.