North Carolina should require elected leaders to vote on new rules and regulations that would have a “major” impact on jobs, the economy, and consumer prices. That’s just one of the ideas the John Locke Foundation‘s new book sets out for lawmakers considering the next round of regulatory reform.
First in Freedom: Transforming Ideas Into Consequences for North Carolina also details reforms that would open the state’s regulatory process, boost public input, reduce burdens for small businesses, and help weed out bad rules in the future.
“The regulatory climate in North Carolina has improved over the past couple of years, but the journey to a freer, less-burdensome regulatory environment is far from over,” said Jon Sanders, JLF Director of Regulatory Studies. “North Carolina’s regulatory process is still internally biased toward increasing regulation, a bias that is imposing significant burdens on business and hampering economic recovery.”
Future reforms should follow a handful of basic principles, Sanders said. “Open the rule-making process to the public,” he said. “Set up procedures for identifying beneficial rules and discarding the rest. Establish guidelines for selecting regulations only when they are necessary. Limit regulations’ negative impact.”
Sanders offers detailed suggestions tied to each principle. He also offers case studies of unintended negative consequences tied to existing rules and regulations. Topics range from auto insurance to occupational licensing to mercury emissions.
The state ought to take a “Hippocratic” approach to rules, Sanders said. “The Hippocratic Oath in medical ethics urges doctors to ‘First, do no harm,'” he said. “A more common expression of the same principle is ‘If it ain’t broke, don’t fix it.'”
With that idea in mind, North Carolina lawmakers should consider a state-level version of the federal Regulations from the Executive in Need of Scrutiny Act, or REINS, which passed the U.S. House in 2011, Sanders said. “Adopting the REINS principle in North Carolina would require legislation that would define a ‘major rule’ based on its projected negative annual economic impact, impact of significant cost and price increases on consumers, or other nontrivial negative economic impacts.”
Once the term “major rule” is defined, the General Assembly would be required to consider a vote to approve any major rule a state agency proposes, Sanders said. Without approval from the House and Senate and the governor’s signature, the rule would die. Even a positive vote would limit the agency to proceeding with the proposed rule under the state’s rule-making process.
First In Freedom also recommends extending 2011 legislation that put in place a “no more stringent” law for North Carolina environmental policy. Sanders would extend the concept to all state agencies. None could adopt, on its own, stricter regulations than its federal counterparts. Stricter regulations would require legislative approval.
“The issue is accountability,” he said. “Making a major, structural change to the state’s laws is the province of elected representatives in the legislature, not unelected bureaucrats, however well-intentioned.”
Along with accountability, Sanders stresses transparency for rules and regulations. Specific ideas include detailed, searchable online spending reports for all state agencies, mandatory online posting of legislative bills 72 hours before the first vote, and more user-friendly state agency websites.
The effort to maintain good regulations, while eliminating the rest, requires a series of reforms, Sanders said. First In Freedom recommends strengthening the role of the 10-member Rules Review Commission, giving the Office of State Budget and Management greater oversight over proposed regulations, enhancing the use of cost-benefit analysis in making rules, and ensuring that more rules face a periodic review after they are enacted.
“A thorough cost-benefit analysis should apply to new rules and during reviews of current rules,” Sanders said. “Having agencies list stated objectives and outcome measures for their rules also would allow a second level of scrutiny to be applied, as the agencies would be required to check whether the rules are meeting those objectives and outcomes.”
To lessen the negative impact of new rules, Sanders recommends expanding a 2011 change in the appeals process involving alleged rules violations. That change affected environmental agencies. It ought to apply to all state agencies, Sanders said.
Lawmakers also can limit the negative impact of new rules on small businesses by adopting “flexibility analysis,” Sanders said. Adopted at the federal level and in many states, this tool requires regulatory agencies to consider the impact of their proposals on the small businesses that are responsible for four out of five new private-sector jobs created in the state.
Sanders labels regulatory reform as critical to the state’s economy. “A state’s economic climate is helped by good rules that give a clear picture of the legal framework for conducting business in the state,” he said. “But the economic climate is harmed when rules appear arbitrary, multiply and compound, persist after practical obsolescence, and work more to help the regulating agencies than to benefit consumers and businesses.”
Copies of First in Freedom: Transforming Ideas Into Consequences for North Carolina are available at the John Locke Foundation’s online store.