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The Regulation Diet: How to Slim Down a State’s Regulatory Climate

This week, JLF’s Jon Sanders published a research brief on North Carolina’s regulatory climate. Sanders examines the annual page count of the North Carolina Register for 2019 (pictured above). According to Sanders:

This is a handy indicator of regulatory activity we have used for many years

Pages in the North Carolina Register give a quick snapshot of the state’s regulatory activity that year. Published twice a month, the North Carolina Register gives information on agency rule-making, executive orders, proposed administration rules, contested case decisions, [etc.].

Sanders points to these numbers as a rationalization for periodic review:

This constant hum of regulatory activity is why sunset with periodic review is so important. As a regular cleanup of the state’s regulatory toolshed, periodic review has already been removing about one out of every 10 state rules examined.

But periodic review isn’t enough, because regulation is fraught with red tape and overregulation, which harm job creation and the state’s overall economic health. That’s why I favor a menu of reforms and good-government policies to ensure that the state’s regulatory environment is light, lean, up-to-date, and sensible.

Sanders includes a meal plan of options for state and local governments:

  1. Rules Throttle

A “rules throttle” would ensure legislative scrutiny of any administrative rule over a defined major cost threshold. It would be a strong, good-government reform. Any deeply impactful rule from bureaucrats should be debated and okayed by legislators accountable to the people.

  1. Occupational Licensing Reform

Getting a license involves significant costs in money and time (paying fees, paying tuition, time spend taking mandatory classes, time spent studying, paying sitting fees for mandatory exams, paying licensing fees, etc.). These costs fall hardest on the poor, even as occupational licensing affects many low-income jobs …

Two structural reforms of occupation licensing include the Occupational Licensing Consumer Choice Act and the Right to Earn a Living Act. Occupational Licensing Consumer Choice retains the consumer protection aspect of licensing while fixing its entry barrier problem. Right to Earn a Living upholds a standard of least restrictive regulation necessary to accomplish legitimate state interests in consumer protection.

  1. Small Business Regulatory Flexibility

Seeing that regulatory costs are higher on small businesses than big firms, most states and the federal government have adopted small-business regulatory flexibility to help mitigate this cost disparity. It lets agencies make common-sense adjustments to small businesses’ regulatory burdens, such as compliance and reporting requirements.

North Carolina, however, is one of only six states without some form of small business regulatory flexibility statute.

  1. Default Mens Rea

No one can be expected to know it all. Under the old common-law protection known as mens rea, guilt for law-breaking included not just a criminal act, but also a guilty mind (i.e., the intent to commit a crime, to do something you know is illegal)…

default mens rea statute would restore this protection when state code is silent over the penalty for breaking a rule. If legislators or agency rulemakers want strict liability for a violation, they would have to include it deliberately in the code.

  1. Regulatory Budgeting

The idea of regulatory budgeting is to trim the existing stock of rules over time by having agencies retire some number of old rules for every new rule.

  1. Stated Objectives and Outcome Measures

Even a well-considered rule poses the risk of unintended, unforeseen consequences. A rule that fails to work as intended could create winners and losers by how it actually works. 

Agencies should be mandated to include stated objectives and outcome measures for rules. That way, when the time for review arrives, the rule can be held accountable to its foundational purpose, not for any unintended, extraneous, isolated positive effects it has. Stated objectives and outcome measures would help make sure rules work as intended.

Read the full brief here. Learn more about regulatory reform in North Carolina here.

Brenee Goforth / Marketing and Communications Associate

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