Key N.C. regulatory reform advances with little fanfare

History is full of examples of failed government reforms. Sometimes those failures stem from government agents’ inability or unwillingness to translate legislative reformers’ ideas into action.

Much less common is the story of government implementing a proposed reform, seeing success, then returning to the reformers to ask for more work. That type of story deserves more publicity.

This column highlights one such story. It surrounds a key piece of House Bill 590.

With the not-quite-scintillating title “Amend Administrative Procedure Laws,” H.B. 590 cleared both the state House and Senate this year with unanimous votes. Gov. Roy Cooper signed it into law July 19. The measure generated little fanfare.

But part three of the bill amends an important element of the state’s ongoing campaign of regulatory reform. It’s known formally as “sunset with periodic review.” The idea is that state government regulations should go away (sunset) unless regulators can continue to justify their existence. An occasional (periodic) review of the regulation determines whether it should stay or go.

This concept is not new to North Carolina. Republicans pushed sunset with periodic review as part of the Regulatory Reform Act of 2013. But the reform as enacted that year did not require every state rule to undergo thorough vetting.

Faced with the prospect of subjecting as many as 20,000 existing state government rules to a significant degree of new scrutiny, lawmakers instead created a process that would allow many noncontroversial rules to remain in place.

The law required state agencies to assign rules to one of three categories. “Unnecessary” rules would be stripped from the books. Rules dubbed “necessary with substantive public interest” would be subjected to the full rule-making approval process. Rules labeled “necessary without substantive public interest” could stay in the books without any further review. Agencies would determine “public interest” based on comments or objections raised about the rule.

This skeptical observer worried at the time that the third category might help defeat the purpose of the new regulatory review. While agencies might agree to toss a few outdated rules, I assumed regulators would consider most rules to be both necessary and lacking public interest. It would not have surprised me to see 90% of state rules assigned to the category requiring no further scrutiny.

Actual results offered a pleasant surprise.

Jon Sanders, the John Locke Foundation’s director of regulatory studies, has tracked the numbers regularly over the years. As of July 22, Sanders reports that the state Rules Review Commission had applied the periodic review process to 19,361 rules. More than 2,000 rules (about 10%) have been scrapped. Another 5,500 (29%) returned to the rigorous rule-making process.

That means more than 11,800 rules (61%) have avoided significant scrutiny. Still, roughly two out of every five reviewed rules either disappeared or faced the hurdle of surviving formal reapproval.

This observer would be inclined to declare victory. Sunset with periodic review clearly makes a dent in N.C. government’s regulatory burden.

But the Rules Review Commission put forward a loftier goal.

In December 2016, after roughly three years of review involving almost 9,000 rules, commission chairman Garth Dunklin testified to a legislative oversight group. He told lawmakers the commission could assume a larger workload. He recommended scrapping the “necessary without substantive public interest” category. That change would force every state government rule to face additional scrutiny or head to the scrap heap.

“When 61 percent of the rules that are going through this process are staying in the code with no change, they’re not getting the full exposure to public comment or careful examination,” Dunklin said during his 2016 presentation. That “bothers us from a policy standpoint.”

“The concept there was to make agencies pick up and look at their rules, and examine their continuing usefulness and efficacy, expose them to the process of public comment that is a part of our rule-making process,” Dunklin added.

Two-and-a-half years after Dunklin’s plea, H.B. 590 follows through on his suggestion. Controversial or not, each rule will face new scrutiny on a regular basis. If they can’t withstand the review, they will go away.

That’s good news to Sanders, who describes this provision of H.B. 590 as the “top recommendation” in the John Locke Foundation’s list of policy positions linked to “red tape and regulatory reform.”

“It should at least ensure more rigorous oversight over rules that have come in for periodic review,” Sanders said. “The more streamlined the state’s administrative code is, the more it will promote faster economic growth.”

A reform producing that type of positive economic result deserves more publicity.

Mitch Kokai is senior political analyst for the John Locke Foundation.