One of the most significant pro-jobs bills passed this year was the Regulatory Reform Act of 2013, which takes great strides to unshackle North Carolina’s job creators of all sizes and industries from an increasingly complex and costly regulatory system. This regulatory reform effort is a continuation of significant efforts in 2011 and 2012 to streamline regulations and create a more efficient, lean system. In his recent op-ed in the Fayetteville Observer, Jon Sanders, director of regulatory studies at the John Locke Foundation, discusses the Regulatory Reform Acts and their critical importance to not only your bottom line, but the overall business climate and economic growth of our state. Read his full article below.
Reforms offer solutions to North Carolina’s Runaway Regulations
Saturday, September 07
By Jon Sanders
Last year, a conference of the N.C. Chamber of Commerce heard a remarkable vision statement. The speaker was Republican state Senate leader Phil Berger, and he described the new GOP majority’s plan for ongoing regulatory reform.
“The 2011 General Assembly passed Regulation Reform I, the 2012 short session would pass Regulation Reform II, Regulation Reform III would pass in 2013, and reforms would continue,” Berger said, “until regulations in North Carolina are lean, fair, equitable and help rather than hurt citizens, taxpayers and business.”
That’s an ambitious goal, but also one that shows a clear-eyed approach to governing. An unchecked regulatory structure has been a key impediment to North Carolina’s return to full employment.
Regulations are unseen taxes clouding the state’s climate for entrepreneurship and growth – taxes on time, forcing businesses to divert man-hours from productive activities into fussing with paperwork and keeping up with the fickle whims of bureaucracy. Time is money, after all. Those hassles, along with the ever-growing, costly threat of running afoul of one arcane rule or another, are enough to make some entrepreneurs throw their hands up in frustrated resignation and discourage others from choosing to start an enterprise here.
Research consistently shows links between burdensome state regulations and negative economic effects. Indeed, studies of state regulatory burdens were more likely to find negative economic effects than studies of state tax burdens, as a recent John Locke Foundation analysis of two decades’ worth of peer-reviewed academic research on state economic growth found. Empirical data and anecdotal evidence of business leaders’ complaints against cumbersome, even counterproductive, rules have proven the need to rein in the regulatory leviathan.
The previous session of the General Assembly produced the Regulatory Reform Acts of 2011 and 2012. RRA ’11 (passed over Gov. Bev Perdue’s veto) barred state environmental rules from being stricter than federal rules and made it clear that a decision to subject North Carolinians to more stringent environmental regulation than they otherwise would face belonged to the legislature, the elected representatives of the people, not to unelected, unaccountable bureaucrats.
RRA ’11 also issued guiding principles for new state rules. For example, they must be expressly authorized by (not inferred from) federal or state law, accompanied by a deliberate attempt to reduce burdens on regulated parties, and reasonably necessary to implement. They must have a sound scientific, technical and economic basis and must achieve the regulatory purpose in a cost-effective, timely manner. The act also required agencies to provide cost estimates for many kinds of rules, along with at least two alternatives to any proposal with “substantial economic impact” (over $500,000).
RRA ’12 made several technical changes. Importantly, it required certification that new rules proposed by the governor’s Cabinet agencies and Council of State departments adhered to the new state rulemaking principles before they could be published.
The most significant provision in this year’s Regulatory Reform Act involved a sunset provision with periodic review. Under this reform, all regulations are slated to expire (“sunset”) after 10 years if they are not reviewed by their originating agency.
RRA ’13 laid out a thorough, three-tiered review process. Under periodic review, rules that have become moot, unnecessary or indefensible come to an immediate end. Noncontroversial rules that state agencies consider necessary are automatically reauthorized. Regulations that agencies consider necessary but that attract controversy must go back through the rules adoption process as if they are proposed new regulations.
Sunsetting was the only state rules review process shown to have a “robustly statistically significant” effect in reducing a state’s regulatory burden, according to a 2012 study by the Mercatus Center of George Mason University. Importantly, that study found the impact of sunset provisions to be economically significant, as well. Introducing this reform to North Carolina is a vital step toward improving the state’s climate for job creation through a leaner, more efficient regulatory environment.
The journey isn’t complete. In their ongoing pursuit, reform-minded legislators should consider such ideas as small business flexibility analysis, a state version of the REINS Act being debated by Congress, and other sunrise provisions. Paring back and restructuring the state’s occupational licensing (under study now because of RRA ’13) should also feature prominently.
Jon Sanders is director of regulatory studies at the John Locke Foundation.