Governors Target Rules at Businesses’ Behest

By: - February 23, 2011 12:00 am

Business groups have long been asking governors for a reprieve from government regulations that they say impede economic growth. “In the middle of a recession, the last thing that government needs to be focused on is finding new ways to regulate businesses,” says Adam Babington, vice president of government affairs for the Florida Chamber of Commerce.
Newly elected Republicans, who won their elections with business backing, are intent on keeping their promises to try to rebalance the regulatory climate in favor of business. In fact, they’re putting it ahead of just about everything else on their agendas.
With their oaths of office just uttered in January, three new governors — Florida’s Rick Scott, Nevada’s Brian Sandoval and New Mexico’s Susana Martinez — all decided on the same first official act as governor: Each issued executive orders to freeze new state regulations. Tennessee’s Bill Haslam soon followed with a regulation freeze of his own. In Maine, Paul LePage’s first legislative proposal was a sweeping overhaul of environmental rules. John Kasich’s first executive order in Ohio sought to blunt the effects of new regulations on small businesses. Kansas Governor Sam Brownback set up a new office to repeal outdated regulations.
Democrats also are getting in the act. North Carolina Governor Bev Perdue said in her state of the state speech that her administration had identified 900 unnecessary regulations for elimination. President Obama announced a similarly focused review of federal regulations in January.
They’re targeting thousands of new regulations written each year by state agencies and other state rule-making bodies who turn instructions they receive from state legislatures and the federal government into concrete policy. They write rules on everything from the environment, to public health to workplace safety. Generally, the bureaucrats writing these rules toil in obscurity, approving regulations without attracting attention from top elected officials or the press. Suddenly, they’re the center of attention.
Some of these early actions to monitor this work are mostly symbolic. The everyday rule-making of government isn’t generally grinding to a halt. Still, sympathy has shifted toward companies that want more discretion to conduct business as they please and away from environmentalists and consumer advocates who favor stricter rules. Governors and legislatures are deciding that they’ve given bureaucrats too much discretion to determine the details of rule-making, and they’re taking that power back for themselves.

Rethinking regulations

If there’s been one place to watch the debate over regulations play out over the last few weeks, it’s Maine. There, LePage not only committed to altering the rule-making process going forward, he also proposed a wholesale rethinking of the state’s existing environmental regulations.
His 63-item draft bill included measures big and small, such as repealing a new rule governing the installation of culverts; guaranteeing that 3 million acres of land in rural Maine would be open for development; and replacing Maine’s stringent air and water standards with more permissive federal rules. Perhaps LePage’s most controversial idea was to block a ban on the use of Bisphenol-A, a chemical linked to cancer, in children’s products. LePage said the environmental ideas were just a first step: A similar overhaul of labor regulations would come later.
The governor sold the proposal as necessary to fix a regulatory climate that he said — and Maine business groups say — is stifling the private sector. “We need to find a balance,” says Adrienne Bennett, a LePage spokesperson. “There are some things through rules and regulations that are impeding business growth in the state.”
But the reaction was fierce. Environmental groups mobilized a coalition to block the changes. Hearings on the concepts were crowded with opponents, who pressured the legislature’s narrow Republican majorities not to act on the ideas. “The reform proposals are really meant to gut any regulation at all,” says State Representative Robert Duchesne, the ranking Democrat on the newly created Regulatory Fairness and Reform Committee. “It’s a real business lobbyist wish list.”
While they support regulatory reform, even business lobbyists in Maine note that one of the state’s best selling points is its pristine environment, protected by these rules. Last week, LePage backed down, at least temporarily, offering a new proposal without many of the most controversial ideas. He says he intends to bring back all 63 items later.
Like in Maine, not all early campaigns against regulations are proving potent. That’s also true in states that have frozen regulations. Governments write so many rules — many of which are routine, non-controversial or required by federal law — that it would be difficult to block them all, even for a short time.
In Nevada, for example, Sandoval issued a year-long regulation freeze. But John Walker, executive secretary of the State Environmental Commission, says that it won’t substantially alter the state’s environmental rule-making. “The governor’s executive order provides pretty good latitude on regulations that deal with public safety, public health and the pursuit of federal funds,” Walker says. “From our position, it’s pretty clear that we’re by and large exempt unless there was a major state initiative that didn’t have any federal counterpart.”

Considering impact


LePage’s second proposed regulatory reform emphasized a different strategy. Before new rules could win approval, they would require a “jobs impact analysis” to measure effect on employment.
Analyzing the impact of regulations is a popular idea this year. In Ohio, Kasich has ordered that agencies evaluate the impact of every new regulation on small businesses. Colorado Governor John Hickenlooper, a Democrat, suggested that every new rule come with a regulation impact statement measuring its costs to businesses. During Sandoval’s regulation freeze, Nevada agencies have to determine both the enforcement costs of regulations and their effects on businesses. In Kansas, Brownback’s Office of the Repealer will be charged with determining whether the benefits from regulations are worth the burdens they impose.
The pitch for this approach is that it’s simply common sense: Before governments make new rules, they should know what the impact may be.  Many states already have procedures for evaluating the economic costs of proposed regulations, but critics contend that the reviews are often perfunctory or unevenly applied. On the other hand, some environmentalists and consumer advocates are nervous that economic analysis will be used as an excuse to delay or defeat rules that make sense. 

A case study of new oversight of regulations is playing out in Florida, where regulators have targeted rogue pain clinics that they say are “pill mills.” These clinics, critics say, prescribe powerful medications such as OxyContin and Vicodin with no questions asked, leading to addictions and overdoses. The new rules would require inspections of pain clinics, force them to meet accreditation standards and mandate that they give all patients drug tests. Fighting the worst clinics has been a top priority of many of the state’s top elected officials, including Attorney General Pam Bondi.

But the Florida legislature passed a new law in November over the veto of outgoing Governor Charlie Crist to conduct new economic reviews of regulations. A review of the pain clinic regulation said it will cost government agencies and businesses around  million a year to comply.
In Florida, elected officials, not bureaucrats, will decide whether that’s worth paying. The new law says that the legislature votes on any rule that will cost businesses $1 million or more over 5 years. With the legislature not set to reconvene until next month, the new regulations are blocked for now.

Several other states could be heading in the same direction, with the same tension between lawmakers and agency personnel a common theme. Mike Kopp, Colorado Senate’s minority leader, supports a bill that also would give legislators a final vote on rules. “In Colorado, the legislature adjourns and then as a result of the bills that are passed, the rule makers go to work drafting rules,” Kopp says. “While there may be hearings and input garnered from the businesses that will be affected, those businesses lose a critical voice in the process.” 

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Josh Goodman

Josh Goodman helps lead research on fiscal management and place-based economic development programs as part of Pew’s state fiscal health project. Goodman has served as a primary author for Pew studies that examine how states should evaluate tax incentives and maintain budget discipline when implementing those incentives.