February 22, 2010

RALEIGH — North Carolina falls well short of other states and the federal government in protecting people from burdensome government regulations. That’s the conclusion of the John Locke Foundation’s legal and regulatory expert, who recommends seven reforms in a new Policy Report.

Click here to view and here to listen to Daren Bakst discussing this Policy Report.

“Unelected and unaccountable bureaucrats and appointees regularly make major policy decisions that affect North Carolinians’ lives,” said report author Daren Bakst, JLF Director of Legal and Regulatory Studies. “They have the power to issue regulations affecting almost every facet of our lives, from the air we breathe to whether illegal immigrants may attend community colleges.”

North Carolina needs to put the brakes on unchecked regulators, Bakst said. “Protections need to be put in place to provide oversight over these government agencies so that their decisions represent the will of the elected legislature and not just the whims of the agencies,” he said. “Power in the hands of the unelected is inconsistent with our representative form of government.”

Bakst’s recommendations would help North Carolina catch up to other states’ regulatory policies, he said. “Most states and even the federal government are far ahead of North Carolina when it comes to proper controls on regulatory power,” he said. “This excessive regulatory power imposes great costs and hurts the state’s competitiveness.”

The first proposal calls on the General Assembly not to delegate an excessive amount of power to state agencies. “Unfortunately, many legislators often want to delegate away responsibility to agencies so they do not have to take on hot-button issues themselves and deal with the political repercussions,” Bakst said. “When legislation is drafted, the language should limit what an agency can do when implementing specific legislative provisions.”

The next two proposals target the Rules Review Commission, an existing 10-member group appointed by N.C. House and Senate leaders. The commission must approve new state rules before they’re finalized, but it is “expressly prohibited from evaluating the merits of regulations,” Bakst said.

“My second proposed reform calls on the General Assembly to give the RRC power to require that agencies have clear permission from the legislature — also known as statutory authority — to pursue a rule,” he said. “Agencies in the rule-making business are not likely to constrain their own power voluntarily. RRC oversight would help keep the agencies from overstepping the bounds set by elected lawmakers.”

The third reform would empower the Rules Review Commission to reject regulations that are inconsistent with the General Assembly’s intent.

“Even when an agency has statutory authority, it might take actions that the legislature likely never intended,” Bakst said. “For example, it’s hard to believe that the State Board of Community Colleges’ statutory authority to set admissions policies at community colleges across the state extends to decisions about admitting illegal immigrants. It’s unlikely lawmakers thought they were giving the Community Colleges board the power to set immigration policy.”

Bakst’s fourth reform would require agencies to conduct “cost-benefit analysis” of their proposed rules with proper oversight. “Cost-benefit analysis basically compares the costs and benefits of a proposed rule — in monetary terms — for all affected parties, not just the people or businesses targeted for a regulation,” he said. “For nearly 40 years, the federal government has used some form of cost-benefit analysis to review regulations.”

North Carolina’s version of cost-benefit analysis should include three components, Bakst said. “Rules should be rejected if costs exceed benefits,” he said. “Agencies should consider alternatives that would achieve the same objective as the proposed rule and select the alternative that imposes the lowest cost on society. Agencies also should select the least burdensome regulatory option.”

The fifth reform would require agencies to conduct what Bakst labels “small business regulatory flexibility analysis.”

“Congress approved this type of analysis at the federal level 30 years ago, and 35 states use it, too,” Bakst said. “Since small businesses are not in as good a position as large businesses to meet regulatory mandates, regulatory flexibility analysis helps ensure that agencies consider regulations that reduce the impact on small businesses.”

Bakst’s sixth reform calls on North Carolina to follow the lead of 32 other states in requiring a periodic review of regulations. “The passage of new laws or changes in technology can cause regulations to become outdated or unnecessary,” he said. “They also may prove to be ineffective at achieving their objectives. A periodic review helps address those problems.”

The final reform would prohibit state agencies from passing rules that exceed federal standards. “About one-third of the states have what’s called ‘no more stringent’ prohibitions that apply to at least some area of state law. This ensures that lawmakers, not bureaucrats, determine if North Carolinians should suffer a greater regulatory burden than citizens in other states.”

These reforms would improve agencies’ decision-making processes, restrain their power properly, and ensure that they implement laws rather than create them, Bakst said. “The North Carolina legislature should take action soon and develop a regulatory process that eases the burdens on business and the economy, is mindful of liberty and the democratic process, and remains attentive to achieving real social benefits.”

Daren Bakst’s Policy Report, “Regulating the Regulators: Seven Reforms for Sensible Regulatory Policy in North Carolina,” is available at the JLF Web site. For more information, please contact Bakst at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].