NGOs wield immense influence in shaping regulations, often behind closed doors | Opinion

Pop quiz: Who makes the laws in your state?

You might be tempted to answer “state government” or “the state legislature.” And you’d be right — but only partially right.

A surprising amount of every state’s regulatory framework comes from private, unelected nongovernmental organizations or NGOs. And the result is a system that lacks transparency and, unsurprisingly, creates a lot of self-serving rules that benefit special interests rather than taxpayers.

In recent papers, both Ohio’s Buckeye Institute and Texas Public Policy Foundation examined the role NGOs play in rulemaking, each warning of the risks posed by these entities when left unchecked. Though the analysis focuses on their respective states, their findings align on a critical point: NGOs wield immense influence in shaping regulations, often behind closed doors, and without the accountability expected of public institutions.

That’s not the story the NGOs pitch, of course. These organizations often portray themselves as impartial experts, offering guidance to lawmakers on complex technical issues. And, indeed, their expertise is welcomed by thousands of legislators.

None of this suggests NGOs should be excluded from the rulemaking process. Their expertise remains indispensable, especially in technical fields where government agencies lack specialized knowledge. But NGOs must inform legislators, not replace them.

When regulatory powers are turned over to unaccountable groups with a rubber-stamp legislature, it’s a problem. And this isn’t only the case in Ohio and Texas, but in states across the country, including Missouri and Kansas.

For example, both Missouri and Kansas rely on the National Fire Protection Association for safety standards regarding hazardous materials, electrical wiring standards and the licensing of electricians. Those standards, while seeming benign, greatly impact costs. Who was involved in crafting those standards? Could it be individuals or organizations that would benefit directly from more onerous regulations? State legislators should not hand off those important decisions to unelected, unaccountable and unknown people.

The National Association of Insurance Commissioners claims to be the “standard-setting organization,” providing, “expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers.”

It’s no surprise that state regulators and the NAIC work closely together. But as Greg Lawson wrote in the Buckeye report, “NAIC’s non-transparent approach and lack of public or political oversight breed suspicion and should make policymakers,” hesitant to hand over so much power to a group that may prioritize other interests over public welfare.

In Florida, the Legislature simply adopted the NAIC’s Market Regulation Handbook wholesale. Alabama did the same for NAIC’s Financial Examiners And Market Conduct Handbook. Twenty states adopted NAIC standards on the use of artificial intelligence by insurers.

In a weird example of the tail wagging the dog, the NAIC also accredits state insurance departments after they evaluate them on a number of criteria, including organizational and personnel practices. For those following along: An unelected organization that benefits from complexity and gatekeeping not only recommends regulatory frameworks for states, but also accredits the very state insurance requirements tasked with enforcing those regulations.

It’s not quite a protection racket. But you could walk to one from here.

Both reports emphasize public transparency to ensure NGO-driven rules don’t overstep legislative intent or impose undue burdens on businesses and consumers. While states work to provide oversight, the authors recommend NGOs themselves adopt stricter disclosure practices such as annual reports detailing NGO funding sources, lobbying efforts and governance structures.

Most important: The public should be made aware of, and be involved in, the process by which NGOs develop their standards

In an 1819 Supreme Court case, Chief Justice John Marshall concluded, “The power to tax is the power to destroy.” But more than 200 years later, the power to regulate is also the power to destroy.

States should prohibit the automatic adoption of NGO-drafted rules. Voter-accountable lawmakers must scrutinize such proposals as rigorously as they would any state-generated regulation.

This story was originally published January 31, 2025 at 5:02 AM.