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State Regulatory Processes Are Ripe for Reform

How regulations are created, updated and challenged can make it easier — or harder — for citizens and businesses to weigh in on the rules that impact them. New research shows what states can do to improve their processes.

Fax machine
Some states still require communication with regulators via fax machine. States need better processes for reviewing outdated regulations. (Shutterstock)
Want to open a bacon-processing plant in California? Better buy a fax machine. That’s right: A California regulation from 2005 still requires swine slaughterhouses to provide a working fax number for their annual registration with the state. Texas requires them too: A 2001 regulation mandates that horse racing managers communicate strictly via fax or face gambling violations. And since 2003, North Carolina has required financial advisers to have a fax on hand to communicate with state regulators.

It's no secret that state regulations play a major role in our everyday lives — dictating what we can eat, creating paperwork and record-keeping hurdles, and often increasing the cost of living. It’s not just about what the rules require: State laws dictate how to create, update, and when necessary, challenge regulations. Good process can make it easier for citizens to participate when state bureaucrats make and enforce new rules.

Since process matters so much, we ranked all 50 states on whether their regulatory processes encourage accountability, responsiveness and transparency. Our research focused on codified regulatory processes, emphasizing statutes over executive reforms, since those laws won’t change when a new governor arrives. We looked at four key metrics:

Sunset provisions require agencies to regularly review and revise existing regulations to ensure that they are still needed. Old regulations that require audio tape recorders at meetings, submitting multiple copies of reports or — yes — communicating via fax machines stay on the books because no one evaluates the burdens of yesteryear, even as they increase costs for everyone. Regulatory sunsets can keep outdated and potentially harmful regulations off the books.

Cost-benefit analysis requirements ensure that regulators balance regulatory burdens with benefits to citizens. Regulators shouldn’t be able to ignore costs and inflate benefits, especially for long-standing regulations. Often one sector of the economy or small businesses bear disproportionate burdens. Agencies need to clearly articulate their analysis, make it available to the public and revise it to show that the benefits exceed the costs before finalizing any regulations.

• Opening up a court “venue” lets citizens challenge bad regulations in their local courts, not only in the state capitol. Regulators shouldn’t get a home-field advantage when their own regulations are on trial. States should make it easy for individuals and businesses to challenge agency rules that violate the law, are issued without necessary analysis or don’t reflect the legislature’s intent. Easing venue restrictions improves citizen participation in government.

Independent review of proposed regulations protects citizens from unaccountable bureaucrats and ensures that the state’s agencies follow the regulatory process requirements. States can install a statewide regulatory clearinghouse in the governor’s or attorney general’s office with authority to enforce regulatory best practices. This shifts a portion of the burden of proof to the promulgating agency and away from regulated citizens, businesses and other entities.

As would be expected, each state scored higher in our rankings on some metrics and lower on others. When the metrics were combined into composite scores, Colorado ranked as the top state for regulatory practices, followed by Arizona, Kentucky, Utah and Arkansas. Delaware came in last, trailing Washington, Pennsylvania, Louisiana and Wyoming. Overall, states with statutes that give citizens more power to participate ranked highest.

Even states with some good processes in place could greatly benefit from continued reform. Some high-ranking states demonstrate effective regulatory reform by combining policies in complementary ways. A state with independent review, for example, can further improve its regulatory landscape by adding sunset, cost-benefit or court venue provisions.

Many states have areas of strengths and weaknesses. Nevada, for example, has implemented limited sunset provisions in the form of periodic review requirements. Agencies review their rules every 10 years and submit those reviews to a legislative council. However, the rules do not automatically expire and the criteria for those reviews is not outlined. Additionally, the state heavily restricts venues and lacks comprehensive cost-benefit requirements.

In Missouri, regulations are periodically reviewed every five years but do not automatically expire. The public can comment and agencies can submit reports on obsolete rules along with proposed changes, but there is no requirement or authority for the agency to make changes and there is no triggering of a follow-on cost-benefit analysis. Introducing an authoritative independent review and tying cost-benefit analysis to the periodic review would let Missouri’s regulatory reform efforts shine.

The fax machine burden is but one of many stemming from long-standing regulations. Regulations impose burdens on businesses and citizens in the name of harm reduction, fairness or safety. However, many regulations fail to provide the benefits their authors anticipate while at the same time unnecessarily burdening employers and innovators. States can ease these burdens through procedural reforms. Our report gives them a road map.

Matthew Nolan is the regulatory policy manager and Jonathan Wolfson is the chief legal officer and policy director at the Cicero Institute, which advocates for state-level policies that restore liberty, accountability and innovation in governance.

Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
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