Source: Ronald Reagan, Executive Order 12612—Federalism, Gerhard Peters and John T. Woolley, The American Presidency Project, https://www.presidency.ucsb.edu/node/251147.

By the authority vested in me as president by the Constitution and laws of the United States of America, and in order to restore the division of governmental responsibilities between the national government and the states that was intended by the Framers of the Constitution and to ensure that the principles of federalism established by the Framers guide the executive departments and agencies in the formulation and implementation of policies, it is hereby ordered as follows:... 

Sec. 2. Fundamental Federalism Principles

In formulating and implementing policies that have federalism implications, executive departments and agencies shall be guided by the following fundamental federalism principles:

• Federalism is rooted in the knowledge that our political liberties are best assured by limiting the size and scope of the national government.
• The people of the states created the national government when they delegated to it those enumerated governmental powers relating to matters beyond the competence of the individual states. All other sovereign powers, save those expressly prohibited the states by the Constitution, are reserved to the states or to the people.
• The constitutional relationship among sovereign governments, state and national, is formalized in and protected by the Tenth Amendment to the Constitution.
• The people of the states are free, subject only to restrictions in the Constitution itself or in constitutionally authorized acts of Congress, to define the moral, political, and legal character of their lives.
• In most areas of governmental concern, the states uniquely possess the constitutional authority, the resources, and the competence to discern the sentiments of the people and to govern accordingly. In Thomas Jefferson’s words, the states are “the most competent administrations for our domestic concerns and the surest bulwarks against anti-republican tendencies.”¹
• The nature of our constitutional system encourages a healthy diversity in the public policies adopted by the people of the several states according to their own conditions, needs, and desires. In the search for enlightened public policy, individual states and communities are free to experiment with a variety of approaches to public issues.
• Acts of the national government—whether legislative, executive, or judicial in nature—that exceed the enumerated powers of that government under the Constitution violate the principle of federalism established by the Framers.
• Policies of the national government should recognize the responsibility of—and should encourage opportunities for—individuals, families, neighborhoods, local governments, and private associations to achieve their personal, social, and economic objectives through cooperative effort.
• In the absence of clear constitutional or statutory authority, the presumption of sovereignty should rest with the individual states. Uncertainties regarding the legitimate authority of the national government should be resolved against regulation at the national level.

Sec. 3. Federalism Policy-Making Criteria

In addition to the fundamental federalism principles set forth in section 2, executive departments and agencies shall adhere, to the extent permitted by law, to the following criteria when formulating and implementing policies that have federalism implications:

• There should be strict adherence to constitutional principles. Executive departments and agencies should closely examine the constitutional and statutory authority supporting any federal action that would limit the policy-making discretion of the states, and should carefully assess the necessity for such action. To the extent practicable, the states should be consulted before any such action is implemented. Executive Order No. 12372 (“Intergovernmental Review of Federal Programs”) remains in effect for the programs and activities to which it is applicable.

• Federal action limiting the policy-making discretion of the states should be taken only where constitutional authority for the action is clear and certain and the national activity is necessitated by the presence of a problem of national scope. For the purposes of this order:

1. It is important to recognize the distinction between problems of national scope (which may justify federal action) and problems that are merely common to the states (which will not justify federal action because individual states, acting individually or together, can effectively deal with them).
   
2. Constitutional authority for federal action is clear and certain only when authority for the action may be found in a specific provision of the Constitution, there is no provision in the Constitution prohibiting federal action, and the action does not encroach upon authority reserved to the states.

• With respect to national policies administered by the states, the national government should grant the states the maximum administrative discretion possible. Intrusive, federal oversight of state administration is neither necessary nor desirable.
  
• When undertaking to formulate and implement policies that have federalism implications, Executive departments and agencies shall:

1. Encourage states to develop their own policies to achieve program objectives and to work with appropriate officials in other states.
2. Refrain, to the maximum extent possible, from establishing uniform, national standards for programs and, when possible, defer to the states to establish standards.
3. When national standards are required, consult with appropriate officials and organizations representing the states in developing those standards.

Sec. 4. Special Requirements for Preemption

• To the extent permitted by law, executive departments and agencies shall construe, in regulations and otherwise, a federal statute to preempt state law only when the statute contains an express preemption provision or there is some other firm and palpable evidence compelling the conclusion that the Congress intended preemption of state law, or when the exercise of state authority directly conflicts with the exercise of federal authority under the federal statute.
• Where a federal statute does not preempt state law (as addressed in subsection (a) of this section), executive departments and agencies shall construe any authorization in the statute for the issuance of regulations as authorizing preemption of state law by rule-making only when the statute expressly authorizes issuance of pre-emptive regulations or there is some other firm and palpable evidence compelling the conclusion that the Congress intended to delegate to the department or agency the authority to issue regulations preempting state law.
• Any regulatory preemption of state law shall be restricted to the minimum level necessary to achieve the objectives of the statute pursuant to which the regulations are promulgated.
• As soon as an executive department or agency foresees the possibility of a conflict between state law and federally protected interests within its area of regulatory responsibility, the department or agency shall consult, to the extent practicable, with appropriate officials and organizations representing the states in an effort to avoid such a conflict.
• When an executive department or agency proposes to act through adjudication or rule-making to preempt state law, the department or agency shall provide all affected states notice and an opportunity for appropriate participation in the proceedings.

Sec. 5. Special Requirements for Legislative Proposals

Executive departments and agencies shall not submit to the Congress legislation that would:

• Directly regulate the states in ways that would interfere with functions essential to the states’ separate and independent existence or operate to directly displace the states’ freedom to structure integral operations in areas of traditional governmental functions;
• Attach to federal grants conditions that are not directly related to the purpose of the grant; or
• Preempt state law, unless preemption is consistent with the fundamental federalism principles set forth in section 2, and unless a clearly legitimate national purpose, consistent with the federalism policy-making criteria set forth in section 3, cannot otherwise be met....