More red tape to cut in Nebraska

More red tape to cut in Nebraska

Yesterday, President Trump held a roundtable on regulatory innovations inviting governors from around the country to share what has been accomplished in their states.

Governor Ricketts participated.  He reported on the Nebraska Legislature’s work on occupational licensing reform and h
ighlighted LB898 from 2016, the “hair braiding bill” that exempted natural hair braiding from cosmetology licensing.  Before LB898 was passed, natural hair braiders in Nebraska were forced to get a cosmetology license at a cost of over $20,000 for 2100 hours of education – none of which covered natural hair braiding.  Removing this regulation meant that natural hair braiders did not have to go into debt to learn skills they would not use while forgoing lost income.

Next, Governor Ricketts highlighted his 2017 executive order which temporarily suspended rulemaking and required state agencies to review all existing and pending regulations.  He reported that regulatory burden decreased 59% for one agency. But what about the rest of the agencies?  Nebraska has approximately 80 of them.

Governor Ricketts went on to discuss process improvements – how 300 hours of agency time has been saved.  While process improvement programs such as Lean Six Sigma are noble, they do not cut or reduce regulatory burden for business owners, they just fast forward through it.  To illustrate my point, a process improvement may mean that while there is less time to process an application for an occupational license, the applicant still needs to meet educational and other requirements, fill out paperwork and pay mandatory fees.

According to research done by the Mercatus Center in 2017, Nebraska’s Administrative Code contained 100,627 restrictions. Regulations come with a price tag. A regulation needs to be promulgated and enforced, which requires people, processes, and systems in government agencies as well as in the businesses and organizations that are affected by the regulations.

In many cases, individuals and businesses needing to follow these regulations must hire lawyers or specialists familiar with relevant regulations to assure they are complying. This costs valuable resources and constitutes a hidden tax. Over the years, more and more regulations have been added, which has increased the complexity and cost of doing business and has ultimately hindered Nebraska’s economic growth.

The Beacon Hill Institute sought to identify the scope and cost of regulations in the state of Nebraska. In total, the regulations for which they were able to obtain a cost estimate totaled $473.8 million in 2016. This cost estimate was comprised of $302.3 million in fees, $63.3 million in appropriations and $110.03 million in compliance costs. However, after reviewing the Nebraska Administrative Code, it was felt that these figures represented a fraction of the total cost to the private sector.

Regulations impact the private economy through several channels. First, the money households and businesses spend on fees could be used to finance household consumption and saving. Also, the time and effort that households and businesses spend to comply with the regulations could be redirected to producing goods and services. These represent the opportunity costs of regulations in Nebraska.

Aside from costs, we must acknowledge that state regulatory reform has many natural opponents, especially industries who like their regulations because existing policies keep out their competitors. Excessive regulations allow special interests to control the process of creating new jobs and businesses. Everyone’s right to earn a living is important, and we especially need to make sure that those with less education and less access to capital are not denied the chance to become entrepreneurs.

We need to assure that future businesses and entrepreneurs don’t face obstacles that, over time, result in much less economic opportunity and creativity.  We’ve made some initial steps towards regulatory reform in Nebraska, but there’s a lot of red tape yet to be cut.

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