of Professions by Interstate Compact
regulation of various professions by the individual states
has resulted in nonharmonious licensing standards, impeding
individuals licensed by one state from practicing in sister
states. This problem has become more serious in the practice
of public accountancy because of the increased need for
accountants to travel to many states to serve clients with
multistate locations. More recently, however, federal legislation
has raised issues regarding professional standards rather
than licensing issues. When Congress enacted the Sarbanes-Oxley
Act of 2002, it created the Public Company Accounting Oversight
Board, granting it federal authority to establish auditing
standards for public companies. Questions subsequently have
arisen about commensurate authority for auditing standards
for private entities.
state regulatory standards for the accounting profession
may be established on a regional or national basis by five
nonjudicial methods. Each state legislature may enact (1)
a reciprocity statute providing that a professional licensed
by a sister state with identical standards automatically
will be licensed; (2) the Uniform Accountancy Act drafted
by the National Conference of Commissioners on Uniform State
Laws; (3) a statute authorizing the head of a concerned
state regulatory body to sign an interstate administrative
reciprocity agreement with counterparts in other states;
(4) an interstate compact; or (5) a federal-state compact.
Congress, of course, may enact a complete or partial preemption
statute based upon its constitutional power to regulate
commerce among the several states. These same methods could
also achieve uniform auditing standards, but the first two
would be at a disadvantage because they would require such
standards to be separately legislated, whereas the other
methods could create a nonlegislative mechanism (in the
form of a commission with the authority to promulgate regulations)
to make them. This article focuses on interstate compacts
and federal-state compacts because they offer advantages
in dealing with both the licensing and the standards problem.
I, section 10 of the United States Constitution grants states
the authority to enter into an “agreement or compact
with another state” with the consent of Congress.
The constitution contains no restrictions on the subject
matter of a compact and is silent about the process by which
states may enter into compacts, with the exception of the
required consent of Congress. The United States Supreme
Court (359 U.S. 275 at 285) opined in 1959 that an interstate
compact is a “contract” protected by the Constitution’s
contract clause forbidding a state legislature to enact
a “law impairing the obligation of contracts.”
A compact may involve parts or all of two states or all
50 states, as well as the Commonwealth of Puerto Rico, the
District of Columbia, United States territories, and Canadian
provinces. As examples, the Interstate Compact on Juveniles
has been enacted by all 50 state legislatures, and the Interstate
Compact on Education has been enacted by 48 state legislatures,
the District of Columbia City Council, and the legislatures
in three territories. Many other compacts have been enacted
by a smaller number of states, and a significant number
of compacts have been enacted by only a single state legislature.
Negotiation and Ratification Process
process of enacting a compact involves three steps: negotiators
reaching an agreement on a tentative compact; enactment
of the compact by concerned state legislatures; and congressional
grant of consent if the compact is political in nature (see
below). Political obstacles typically arise during each
step, even for relatively simple compacts established or
proposed in the past, and may become an insurmountable obstacle.
negotiations. Gubernatorially appointed members
representing their state on joint commissions negotiated
and drafted all interstate compacts until 1930. The advantages
of this method include the prestige of the commission, staff
assistance, and the ability to continue negotiations over
a substantial period of time. This method has been supplemented
with other approaches, as illustrated by the proposed Interstate
Insurance Product Regulation Compact, which was drafted
by the National Association of Insurance Commissioners (NAIC),
and the Nurse Licensure Compact, which was drafted by the
National Council of State Boards of Nursing.
critically examine each draft compact provision and seek
to include only provisions perceived to be acceptable to
their respective state legislatures. Individual negotiators
may raise major administrative, financial, substantive,
and technical issues that must be resolved. Unanimity must
be reached on each issue, often an extremely difficult task,
before the compact can be submitted to each concerned state
compact proposing creation of only a study commission charged
with developing recommendations to solve a specific problem
or of a commission financed entirely by user fees generally
involves a limited financial commitment by each compacting
state and may not encounter serious legislative opposition.
One or more legislative leaders in each state, however,
may inform negotiators that the compact will not be enacted
unless it is amended to authorize specified forms of gubernatorial
or legislative oversight. Fears that political checks on
the activities of the proposed compact commission could
impair its functioning provide additional impetus for prolonged
negotiations. In addition, governors may instruct negotiators
to ensure that their states’ political interests are
surprisingly, state legislators may redebate many of the
issues addressed by compact negotiators. If the latter fail
to keep in close contact with legislative leaders or the
governor, the legislature may reject the compact bill or
the governor may veto it. Negotiators also may be instructed
to renegotiate certain contentious compact provisions.
establishment of a compact also may be delayed or complicated
by political concerns. The process of obtaining the approval
of each state legislature can be lengthy because each statute
must be identical to statutes enacted by the other states.
There are many examples of prolonged delays prior to the
enactment of an interstate compact by all concerned state
legislatures. Five years were required to secure the necessary
enactments for the Atlantic States Marine Fisheries Compact,
which became effective in 1942. The Illinois, Indiana, Michigan,
Minnesota, and Wisconsin state legislatures enacted the
Great Lakes Basin Compact in 1955, but enactment was delayed
in Pennsylvania (1956), New York (1960), and Ohio (1963).
implementation also may be delayed or prevented if one or
more of the concerned states make participation contingent
upon specified other states enacting the compact, as illustrated
by the Ohio River Valley Sanitation Compact. The party state
legislatures or the compact also can make its execution
conditional upon Congress initiating specific actions. Furthermore,
a compact may not be self-executing and a governor may decide
not to execute it. The 1936 New York State Legislature enacted
a non-self-executing compact—the Interstate Compact
for the Supervision of Parolees—and it was not executed
for eight years because of the refusal of Governor Herbert
H. Lehman to execute it.
consent is not required for all compacts. In 1845, the New
Hampshire Supreme Court (17 N.H. 200) rejected the argument
that an 1819 New Hampshire statute and an 1821 Maine statute
authorizing construction of a bridge over navigable waters
(the Piscataqua River) without congressional consent violated
the compact clause of the U.S. Constitution. The court opined
that no constitutional provision precluded each of the two
states from authorizing the erection of a bridge to the
middle of the river.
1893, the U.S. Supreme Court, in Virginia v. Tennessee
(148 U.S. 503 at 520), specifically held such consent is
required only for a compact tending to increase “the
political power or influence” of the party states
and to encroach “upon the full and free exercise of
federal authority.” An interstate compact regulating
accounting clearly would not be a political compact requiring
the consent of Congress for execution.
United States Steel Corporation challenged the constitutionality
of the Multistate Tax Compact on the ground that it lacked
congressional consent. In 1978, the Supreme Court (434 U.S.
452 at 473) upheld the compact’s constitutionality
by declaring it did not “authorize the member states
to exercise any powers they could not exercise in its absence.”
types. Most compacts are submitted to Congress
for its grant of consent, but a small number of compacts
have been executed without such submittal and grant of consent.
Congress can grant its consent prior to (permissive) and
subsequent to (ratifying) enactment of a compact by the
concerned state legislatures. In addition, Congress is free
to grant consent-in-advance for each compact entered into
by states or blanket approval in advance for all compacts
relating to a specific subject.
Supreme Court, in 1823’s Green v. Biddle (21
U.S. 1), noted the U.S. Constitution places no limitations
on the duration of consent, and consent statutes typically
do not contain a sunset clause. Chief Justice Charles Evans
Hughes opined in 1937 (302 U.S. 134 at 148) that Congress
may impose conditions in granting its consent. In granting
consent, Congress typically reserves the right to “alter,
amend, or repeal” its consent to a compact and always
reserves its authority over navigable waters.
Franklin D. Roosevelt in 1939 vetoed a bill granting consent-in-advance
to states to enter into compacts relating to Atlantic Ocean
fishing on the ground that their provisions were too general.
Two years later, he disallowed the Republican River Compact,
but in 1943 he signed a bill granting the consent of Congress
to a modified compact (57 Stat. 86).
consent effects. Does congressional consent
convert an interstate compact into federal law? The Supreme
Court has changed its answer to this question. The Court
opined in 1938 (304 U.S. 92) that such consent does not
make a compact the equivalent of a U.S. treaty or statute.
In 1940, however, the Court (310 U.S. 92) held that an interstate
compact approved by Congress involving a federal question
is subject to the Court’s review.
1981, the Court (449 U.S. 433) issued a momentous decision
opining that congressional consent makes a compact federal
law in addition to state law. U.S. courts since 1874 (87
U.S. 590) had been required to apply the interpretation
of a concerned state law by the highest court in the state.
The reversal of this precedent allowed the court to interpret
the concerned Pennsylvania statute and disregard its interpretation
by the Pennsylvania Supreme Court. The U.S. Court of Appeals
for the District of Columbia Circuit in 1997 opined: “While
the Compact [Washington Area Metropolitan Transit Compact]
may be treated as a federal law, it does not follow that
the Commission is a federal agency government by the Administrative
Procedure Act.” (129 F.3d 201 at 204)
a public authority created by an interstate compact with
congressional consent cloaked with immunity from suit in
federal court by the Eleventh Amendment to the U.S. Constitution?
The Supreme Court (513 U.S. 30) in 1994 answered this question
in the negative, explaining that the Port Authority Trans-Hudson
Corporation is a self-financing entity and that subjecting
it to suit in the U.S. District Court does not place a burden
upon either the New Jersey or the New York treasury.
proposed Interstate Insurance Product Regulation Compact
would establish a commission funded entirely by fees paid
by insurance companies when filing products and apparently
would not be cloaked with Eleventh Amendment immunity from
suit. Nevertheless, it is improbable the commission would
be sued, because its functions would be limited to the establishment
of regulatory standards and
the acceptance of filings by insurance companies.
federal statutes containing inconsistent provisions invalidated
by the grant of congressional consent to an interstate compact?
Courts would probably hold that such consent repeals conflicting
federal statutes. What effect would a new congressional
statute with conflicting provisions have on an interstate
compact previously granted consent by Congress? The conflicting
provisions in the consent would be repealed, with the exception
of any vested rights protected by the Fifth Amendment to
the U.S. Constitution.
grant of consent suggests that Congress may enforce compact
provisions, but enforcement in practice usually is left
to courts. The validity of a compact may be challenged in
state or U.S. court. Similarly, an individual or a state
may bring suit to enforce the provisions of a compact. The
Eleventh Amendment forbids a U.S. court to consider a suit
in law or equity against a state brought by a citizen of
a sister state or a foreign nation. A citizen, however,
can challenge a compact or its execution in a state or U.S.
court against an individual or in a proceeding to prevent
a public officer from enforcing a compact. A suit brought
in a state court could be removed to the U.S. District Court
under provisions of the Removal of Causes Act of 1920 (41
Stat. 554) on the ground that the state court “might
conceivably be interested in the outcome of the case.”
party to an interstate compact have occasionally filed an
original suit in the Supreme Court seeking an interpretation
of one or more compact provisions. For example, Kansas filed
a suit against Colorado in an attempt to resolve disputes
pertaining to the Arkansas River Compact. In 1955, the Court
(514 U.S. 669) ruled unanimously in favor of Colorado. Kansas
continued its disagreement with Colorado by filing another
original suit against Colorado. The Supreme Court (533 U.S.
1) in 2001 rejected Colorado’s contention that a special
master’s recommendation of a damages award for Colorado’s
violation of the compact was barred by the Eleventh Amendment
on the grounds that the damages were losses suffered by
individual Kansas farmers.
compact amendments are subject to all the procedural requirements
required for the original enactment of the compact, including
enactment by each state legislature, approval of each governor,
and consent of Congress and approval of the president if
the original compact received such approvals.
U.S. Constitution (Article I, section 10) delegates authority
to Congress to revise state statutes levying import and
export duties, but does not delegate similar authority to
Congress to revise interstate compacts. Congress, nevertheless,
withdrew its consent to a Kentucky-Pennsylvania Interstate
Compact stipulating the Ohio River would be kept free of
obstructions. The Supreme Court in Pennsylvania v. Wheeling
and Belmont Bridge Company (50 U.S. 647) opined in
1855 that the statute was constitutional under the supremacy
of the laws clause of Article VI and that approval of a
compact by Congress does not restrict its power to regulate
the compact. A similar opinion was rendered by the court
in 1917 in Louisville Bridge Company v. United States
(242 U.S. 409). It held that Congress may amend a compact
in the absence of a compact provision specifically reserving
to Congress authority to alter, amend, or repeal the compact.
It is apparent that a congressional statute terminating
a compact is not subject to the U.S. Constitution’s
Fifth Amendment’s due process of law guarantee, because
this protection is extended only to persons.
an interstate compact be terminated? Yes, with the exception
of interstate boundary compacts. Other types of compacts
typically contain a termination provision. The Colorado
River Compact, for example, allows termination only by unanimous
agreement of the member states. Several compacts stipulate
that a state desiring to terminate the compact must provide
advance notice, typically 60 days, before the effective
date of its withdrawal.
Florida State Legislature on several occasions withdrew
from and subsequently rejoined the Atlantic States Marine
Fisheries Compact; in 1995, the Virginia General Assembly
enacted a statute withdrawing from the compact on the ground
that fishing quotas for Virginia were too low. The Maryland
General Assembly withdrew from the Interstate Bus Motor
Fuel Tax Compact in 1967 and the National Guard Mutual Assistance
Compact in 1981.
is no provision in international law for citizens of a nation
signatory to a treaty to be involved in its termination.
The U.S. Supreme Court in 1838 applied this principle in
Georgetown v. Alexander Canal Company (37 U.S.
91 at 95–96) by opining that citizens whose rights
would be affected adversely by a compact are not parties
to a compact and hence are not involved directly in terminating
compacts can be classified as bilateral, multilateral, sectional,
and national. Twenty-five specific types of compacts, administered
by a compact-established commission or by departments and
agencies of member states, have been enacted, each dealing
with a different issue (see the Exhibit).
interest groups seeking to discourage congressional exercise
of its preemption powers are primarily responsible for the
establishment of regulatory compacts. These groups argue
that a compact obviates the need for national government
regulation since formal interstate action has solved a major
number of new regulatory interstate compacts has declined
since 1965, attributable to Congress exercising more frequently
its powers of preemption to remove regulatory authority
completely or partially from the states. New York Governor
Nelson A. Rockefeller promoted the Mid-Atlantic States Air
Pollution Control Compact, which was entered into by Connecticut,
New Jersey, and New York in the mid-1960s. Congress did
not grant its consent to the compact and followed President
Lyndon B. Johnson’s advice to enact the Air Quality
Act of 1967 (81 Stat. 485) preempting state responsibility
for air pollution abatement. In 2001, Congress failed to
act upon a bill extending congressional consent for the
Northeast Dairy Compact.
compacts may be administered by a commission or by departments
and agencies of party states.
commissions. Each interstate compact declares
that its commission is a body corporate and politic, and
an instrumentality of the compacting states. The Potomac
River Fisheries Compact is regulatory, traceable in origin
to a 1785 compact between Maryland and Virginia which created
a commission to regulate “all species of finfish,
crabs, oysters, clams, and other shellfish,” issue
licenses, and impose fees. This compact appears to be successful.
1953 bistate compact, consented to by Congress (67 Stat.
541), established the two-member Waterfront Commission of
New York Harbor, which achieved its goals of eliminating
organized crime and corruption within a short period of
time. This compact is the only one granting a commission
the power of taxation; its budget requests submitted to
each governor became effective unless either the New Jersey
or the New York governor vetoed or reduced an item within
state legislatures enacted the Ohio River Valley Water Sanitation
Compact, which received congressional consent (54 Stat.
752) in 1940 but did not become effective until 1948 because
of delays in its enactment by other concerned state legislatures.
The compact’s drafters assumed the commission would
appeal to the courts to enforce its regulations, but there
has been no need for judicial enforcement. This compact
is credited with converting one of the most polluted rivers
in the country into one of the cleanest.
Interstate Environmental Compact (formerly the Interstate
Sanitation Compact) was enacted by the New Jersey State
Legislature and the New York State Legislature, granted
congressional consent (49 Stat. 932) in 1935, and enacted
by the Connecticut General Assembly in 1941. The unique
feature of this regulatory compact is its inclusion of specific
water-quality standards for two classes of water. The compact
commission during its early decades concentrated on the
construction and improvement of wastewater treatment facilities,
and achieved major successes.
without commissions. Member state departments
and agencies administer 34 interstate compacts, including
many service provision ones. Two motor vehicle compacts
are in effect regulatory. The Driver License Compact requires
each of 45 party states to report each conviction of a driver
from another party state for a motor vehicle violation to
the home state licensing authority. The compact directs
the home state to treat the reported violation as if it
occurred in that state. The
licensing authorities of party states are required to determine
whether an applicant for a driver’s license has held
or currently holds a driver’s license issued by another
party state. A savings clause authorizes a party state to
apply any of its other statutes relating to a driver’s
license and stipulates that the compact does not affect
any driver’s license cooperative agreement between
a party state and a nonparty state.
state legislatures enacted the Nonresident Violator Compact,
which seeks to ensure that nonresident drivers answer appearance
tickets or summons for moving violations. The New York State
Legislature did not enact the compact, but did authorize
the Commissioner of Motor Vehicles to execute the compact.
The Nonresident Violator Compact, like the Driver License
Compact, requires each member state to report each conviction
for a motor vehicle violation to the home state licensing
authority. The purpose of this compact is to ensure that
nonresident motorists are treated in the same manner as
resident motorists and that their due-process-of-law rights
are protected. Drivers failing to respond to an appearance
ticket or summons will have their license suspended by the
issuing state. Both compacts have been successful.
type of compact—the federal-interstate compact—became
effective in 1961 when four state legislatures—Delaware,
New Jersey, New York, and Pennsylvania—and Congress
enacted the Delaware River Basin Compact, establishing a
commission with broad water allocation powers subject to
a provision that the commission may not alter a 1954 U.S.
Supreme Court water allocation decree without the consent
of the party states. An identically worded Susquehanna River
Basin Compact became effective in 1971 upon enactment by
Congress. Both compacts are considered to be successful
in achieving their respective goals. Congress subsequently
enacted the Alabama-Coosa-Tallapoosa River Basin Compact
and the Apalachicola-Chattahoochee-Flint River Basin Compact.
one exception, compacts entered into under the U.S. Constitution
until 1900 dealt with the establishment of boundary lines.
The 1921 Port of New York Authority Compact was the first
to create a commission, and within a relatively short period
of time it universally was recognized as a successful compact.
Subsequent experience with compacts reveals that they possess
great potential as a mechanism for facilitating regional
and national cooperation by states seeking to achieve a
wide variety of goals.
compact can be national in scope, but the prospects of persuading
every state legislature to enact a draft compact are not
good, based upon experience to date. Greater success might
be achieved by the enactment of several regional interstate
regulatory compacts on a given subject tailored to the particular
needs of each region, with the possibility that future negotiations
might lead to a merger of two or more regional compacts.
the promoters of a regulatory compact seek to persuade all
state legislatures to enact the compact, an opt-out procedure,
such as found in Article VII, section 4 of the Insurance
Product Regulation Compact (drafted by the NAIC), will facilitate
its enactment. The cost of such an opt-out procedure, however,
may be considerably less regulatory uniformity, thereby
increasing the threat of congressional enactment of a statute
preempting state authority over part or all of the regulatory
field, including the authority of an interstate compact
flexibility of a regulatory compact will be enhanced if
it grants the administering commission relatively broad
discretionary authority to adopt and revise bylaws, thereby
avoiding the need to amend the compact and the attendant
need to obtain all necessary approvals, legislative and
gubernatorial, for each amendment.
controversies can be avoided by including in a regulatory
compact sunshine provisions and a requirement that the commission,
in promulgating rules and regulations, must follow the procedures
contained in the Model State Administrative Procedures Act,
drafted by the National Conference of Commissioners on Uniform
State Laws, or by directing the commission to include in
its bylaws similar administrative procedures.
conclusion, the process of negotiating compacts to resolve
complex issues is typically very time-consuming and on a
number of occasions has not been successful. Prospects for
enactment of a regulatory compact also will decrease should
a statewide elected official, particularly the attorney
general, object to a draft compact.
Zimmerman, PhD, is a professor of political science
at Rockefeller College, State University of New York at Albany.