John Locke Update / Research Brief

Regulatory Reform in 2019: A Good Start But Much More to Do

posted on in Law & Regulation, Rights & Regulation
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Republicans made many changes when they came into the majority of the General Assembly, but one of their most important is one of the least known. That is their dedication to fighting red tape and loosening the grip of overregulation. They have passed annual regulatory reform bills since 2011.

Regulation’s costs aren’t obvious. They’re usually not quantifiable like taxes and fees, but they’re no less real. Reducing red tape boosts the state’s economy by making it easier to do business. To a state’s business climate, unnecessary regulatory burdens are like barnacles on a ship’s hull or a load of bricks in a car trunk. They create drag without adding anything good.

So setting (and keeping) a goal of reducing red tape is beneficial. Last week the state Senate began considering Senate Bill 553, the Regulatory Reform Act of 2019.

The current version under discussion (edition 2) would make several changes in different areas. Among other things, it would make a slight adjustment in the codes governing drinking fountain and water closet requirements, repeal the landfill ban for discarded computer equipment and TVs, add aquaculture uses to the list of allowable uses of a flood hazard area without a permit, and clarify the process for determining the suitability of a site for septic tank placement. It would also raise the current limit on public employees benefiting from public contracts from $40,000 to $60,000.

That section repealing the landfill ban for discarded electronics, which would leave the issue for local governments to decide, has gotten the bill pulled from the Senate Rules Committee.  It’s a momentary setback for a bill that should make its way to the Senate floor soon.

The bill would require a couple of interesting studies as well. One study would have the state Department of Environmental Quality report on how it could expand express permitting into different areas. Bureaucratic foot-dragging on permits is another way the regulatory process slows economic growth without producing anything of worth in return.

Another would direct all occupation licensing boards in the state to report by year’s end on whether there are online or other options to meet the boards’ continuing education (CE) requirements, how many there are, and what they cost in comparison with the boards’ present options. It is a good idea insofar as it would make it easier for licensees to pursue mandatory CE. It doesn’t require a rethink of the underlying CE requirement, or going deeper, of the licensure itself.

Finally, the bill would allow some freedom from real estate licensing constraints in selling timeshares. A timeshare salesperson would no longer be required to hold a real estate broker license under exemptions set forth in General Statutes Chapter 93A-2(c)(1). Of interest here is the exempt salesman’s disclosure requirement, as listed in state law:

When a person conducts a real estate transaction pursuant to an exemption under this subdivision, the person shall disclose, in writing, to all parties to the transaction (i) that the person is not licensed as a real estate broker or salesperson under Article 1 of this Chapter, (ii) the specific exemption under this subdivision that applies, and (iii) the legal name and physical address of the owner of the subject property and of the closely held business entity acting under sub-subdivision e. of this subdivision, if applicable. This disclosure may be included on the face of a lease or contract executed in compliance with an exemption under this subdivision.

What makes that interesting? Because the idea of requiring full disclosure to consumers when a practitioner is exempt from a license is a kindred spirit to a new, intriguing reform of occupational licensing known as the “Occupational Licensing Consumer Choice Act.”

Knowing that North Carolina law already provides a way for consumers to choose a nonlicensed service professional in one area ought to make it easier to expand that freedom in other licensed fields.

And that’s the thing. The bill makes several nibbles at reform, but there are plenty of big bites left.

Significant reforms still to be made

As the last decade has shown, tackling red tape isn’t done in a year. So even with the annual reforms, there are no doubt countless practical fixes left to be made — and several large reforms still waiting.

  • Periodic review tweak. Have all rules either sunset or be reviewed every ten years. Eliminate the “third bucket” in which rules get re-upped without review.
  • Rules throttle/legislative rules ratification. If an agency proposes a rule that would exceed a certain cost threshold, the rule could not take effect unless it received an affirming vote in the General Assembly. Rules have the same practical force as laws, but they are made by bureaucrats who aren’t accountable to the voters. Legislators are the lawmaking branch of government, and having a final say over deeply impactful rules would serve the principle of good government.
  • Occupational licensing consumer choice. See above for a state precedent. It would allow a service professional in a field licensed in North Carolina to retain their right to earn a living even without an occupational license by providing consumers with a non-license disclosure prior to agreeing to do work. Consumers could then knowingly choose someone whose professional credentials in a state-licensed profession would include many other things, including another state’s license, but not a state license.
  • Small business flexibility analysis. North Carolina is one of the few states that lack this common-sense feature. It lets agencies adjust regulatory burdens for small businesses, such as compliance and reporting requirements, recognizing that they more burdensome on small business who can’t afford to hire compliance staff.
  • Default mens rea. Where the code is silent, a default mens rea statute would restore the crucial, common-law protection against leveling criminal penalties against someone for breaking a rule or law unknowingly and without meaning to.

As we have discussed in our policy position on Red Tape and Regulatory Reform, some other reforms worth considering include regulatory budgeting, having stated objectives and outcome measures, implementing strong cost/benefit analysis, and applying the no-more-stringent laws to other state agencies (not just environmental agencies).

Jon Sanders is an economist studying state regulations, that spreading kudzu of invasive government and unintended consequences. Serving as Senior Fellow of Regulatory Studies and also Research Editor at the John Locke Foundation, Jon gets in the weeds of all… ...

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