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National analysts praise N.C. regulatory reforms

Experts suggest additional moves that could save each household in the state thousands of dollars annually in needless compliance costs

North Carolina was lauded for “impressive reforms” curtailing its regulatory burdens on businesses and individuals, and national policy analysts discussed methods of further reducing costly restrictions during a June 22 teleconference call.

“North Carolina has been a model for a lot of things,” said Patrick Gleason, director of state affairs at Americans for Tax Reform.

“They’ve enacted some of the more impressive reforms in the country on a host of things, from tax, and education policy, to regulatory reform,” Gleason said.

Regulatory reforms at the state level are vital as President Obama’s White House continues “looking to use the pen and the phone as often as they can,” and amid the backdrop of the Competitive Enterprise Institute’s research showing “the federal regulatory burden is now higher than the federal income tax burden,” Gleason said.

Jeff Warren, senior policy advisor to North Carolina Senate Leader Phil Berger, R-Rockingham, said regulatory reform “has become a major platform issue” since Republicans took majority control of the General Assembly in 2011.

While regulatory reform generally is viewed as a part of tax reform, “We’ve also had a parallel run on regulations that slow or arrest economic development, regulations that are confusing, outdated, duplicative, conflicting, [or] unnecessary,” Warren said.

“Every year we’ve done a signature regulatory reform package” in the Senate, Warren said. But this year’s legislative session ended before any compromise measure could pass the General Assembly.

Warren also said:

  • In 1994, the first year records were kept, there were 19,900 rules in the North Carolina administrative code. In 2011 there were 23,940 rules. “We’ve cut 2,500 of those and expect more cuts as we move forward.”
  • Many of the rules that were eliminated were environmental regulations that hamper development, but those are the measures for which Republican lawmakers “get pilloried in the media.”
  • Between 1900 and 1969, the state added an average of one occupational licensing commission every three years. From 1969 until 2008, the average was one every 10 months. The Republican-led General Assembly was “able to slash about 50 boards” in its first year of majority rule, and has eliminated roughly a dozen more since then. Eradicating those commissions and freeing entry into the market is difficult because the occupations with licensing requirements are loath to allow outsiders who may have fewer professional or educational credentials into licensed professions.

Jon Sanders, director of regulatory studies at the John Locke Foundation, said “the most important” reform North Carolina has passed is a sunset provision that requires the periodic review of regulations to ensure they are working as intended, and allows lawmakers to end those doing more harm than good.

About 6,225 rules, or one-third of the total, have been reviewed, and 690 are slated to be removed. Close to 2,000 are subject to re-adoption, which will require another round of vetting.  About 58 percent of the regulations will remain in the code.

Sanders said North Carolina needs a provision most states have that grants a small business flexibility in meeting regulatory mandates because those concerns often don’t have a large company’s financial means to hire a legal compliance staff.

Oliver Sherouse, regulatory studies analyst at George Mason University’s Mercatus Center, said British Columbia, a Canadian province with population about the same as Louisiana, is a model for successful regulatory reform that can be adopted in the United States.

From 2001 to today, British Columbia decreased regulatory restrictions by 43 percent. If a new regulation is passed, an existing one must be cut. The province went “from being one of the worst performers in the Canadian economy to one of the best,” Sherouse said.

British Columbia rose from 2 points below the national average on economic growth to 1.1 points higher than the national average. Its per-person disposable income increased from its previous position of 500 Canadian dollars below the national average, and the number of business incorporations is up about 50 percent.

Sherouse also said:

  • The Mercatus Center has completed a RegData project with software it developed, quantifying the number of regulatory restrictions in the U.S. administrative code. In 2010 there were more than 1 million individual restrictions. A similar study of all 50 states will be conducted in the coming year.
  • If the federal government had frozen the number of regulations at 1980 levels, there would have been $4 trillion more in the national GDP as of 2012, or $33,000 more per household.

Ben Wilterdink, director of commerce, insurance, and economic development at the American Legislative Exchange Council, which hosted the teleconference, said the organization is advocating its Regulatory Review and Recission Act as a model that can be adopted by the states, and tailored to meet their individual conditions and circumstances.

The model legislation requires a cost-benefit analysis of any regulation with an impact of at least $500,000 that might act as a barrier to entry into the market.

He likened it to a fiscal note that lawmakers often request to determine how much a tax measure or other program will cost. In this case, legislative staff could inform legislators the magnitude of a possible regulation’s economic impact at the front end of the debate to enable more-educated decisions about regulations to be made. The legislation also has a three-year post-mortem review allowing a governor to rescind a burdensome rule.

Editor’s note: This story was modified after it was originally posted.