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I think just the usual penalties of going oversize is fine as traditions, edicts and science are very important. Maybe you could add some stability penalties as well.
One thing you could do is that the administration decreases the penalties of empire size instead of the number. So empire size still affects other things like ease of infiltration. Then you could add a policy of the amount of monitoring done on the bureaucracy. More will increase their upkeep cost but decrease your vulnerability to spies.