Legislative Testimony for LB857: Require state agency review of rules and regulations
Good afternoon Chairman Brewer and members of the Government, Military and Veterans Affairs Committee. My name is Nicole Fox, and I am Director of Government Relations at the Platte Institute. I am here today to testify in support of LB857. Thank you, Senator Lowe, for sponsoring this bill.
According to research done by the Mercatus Center in 2017, Nebraska’s Administrative Code contains 100,627 restrictions.[i] Of the 21 states Mercatus had researched as of 2017, Nebraska ranked second highest per capital at 52.4 regulations per 1000 people.
Regulations come with a price tag. Their promulgation and enforcement require people, processes, and systems in government agencies as well as in the businesses and organizations affected by those regulations. Individuals and businesses needing to follow these regulations find themselves needing to hire lawyers familiar with relevant regulations to assure they are complying. This constitutes a hidden tax.
According to a Competitive Enterprise Institute 2017 report, federal regulations alone added nearly $14,800 annually to American household budgets through hidden taxes.[ii] While Nebraska cannot control regulations at the federal level, it can control its own.
While the Platte Institute applauds the proactive approach some occupational licensing boards have taken to update burdensome regulations, this is not the case for all of them. Additionally, several bills have been introduced during this current legislative session that will result in new regulations for many agencies.
The Beacon Hill Institute sought to identify the scope and cost of regulations in Nebraska. The regulations for which they were able to obtain a cost estimate totaled $473.8 million in 2016. This cost estimate included $302.3 million in fees, $63.3 million in appropriations and $110.03 million in compliance costs.[iii] However, after reviewing the Nebraska Administrative Code, it was felt that these figures represented a fraction of the total cost to the private sector.
An important factor not considered in their calculations was the impact regulations have on the private economy. Many opportunity costs come into play. The money households and businesses spend on fees could be used to finance household consumption and saving. The time and effort that households and businesses spend to comply with regulations could be redirected to producing goods and services.
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. We need to assure that future businesses and entrepreneurs don’t face obstacles that, over time, result in much less economic opportunity and creativity.
In June of 2019, the Platte Institute released a new report with suggestions for regulatory reform in Nebraska.[iv] In that report, we covered regulatory reform options, including a comprehensive sunset provision with periodic reviews. North Carolina[v] and Rhode Island[vi] have passed this type of legislation resulting in 12 and 31% reductions respectively in their regulatory burden.
Additionally, in Idaho, regulations must be reauthorized by the Idaho legislature annually. Without this reauthorization, the state’s regulations expire. After adjourning for the 2019 session, the state underwent a “regulatory reset.” The Legislature failed to pass a rule-reauthorization bill. As a result, for each rule requested to stay in place, it had to be justified.[vii] In December of 2019, Governor Little announced that Idaho surpassed South Dakota in becoming the least-regulated state in the country by cutting and simplifying 75 percent of its regulatory rules.[viii]
LB857 would require each state agency to review its rules and regulations 10 years after they become effective, beginning in 2021 through 2028. This review includes a report to the Clerk of the Legislature that must cite each rule or regulation's statutory authority and assess whether it is accomplishing its statutory purpose or needs revision. We support this idea.
A one-time review of only new rules or regulations has a limited scope, and we feel the need to suggest strengthening this idea. Ideally, the addition of a sunset provision to this review has the potential to significantly reduce regulatory burden. At a minimum we suggest requiring ongoing periodic review like LB299 passed in 2018. This law requires review of occupational regulations to be completed every five years "and every five years thereafter.” We hope the committee takes this into consideration.
While some regulation will always be essential, regulatory policy should not unnecessarily pose barriers that impede the state’s economic growth.
Thank you for the opportunity to testify today. I’m happy to answer any questions.
[i] James Broughel, “A Snapshot of Nebraska Regulation in 2017,” Mercatus Center, July 2017. https://www.mercatus.org/publications/regulation/snapshot-nebraska-regulation-2017.
[iii] Paul Bachman and David Tuerck, “The Cost of Regulation in the State of Nebraska,” The Beacon Hill Institute, April 2017. https://s3.amazonaws.com/platteinstitute-org-wp-uploads-live/uploads/2020/05/The-Cost-of-Regulation-in-the-State-of-Nebraska.pdf.
[iv] Jon Sanders, “Nebraska REINS Act: A Good Government Way to Provide Oversight of Major Regulations,” Platte Institute, June 2019. https://www.platteinstitute.org/research/detail/nebraska-reins-act-a-good-government-way-to-provide-oversight-of-major-regulations.
[v] Jon Sanders, “A Regulatory Reform That’s Working: Sunset Provisions with Periodic Review,” John Locke Foundation, August 17, 2017. https://www.johnlocke.org/update/a-regulatory-reform-thats-working-sunset-provisions-with-periodic-review/.
[vii] James Freeman, “The Great Idaho Do-Over,” Wall Street Journal, May 16, 2019. https://www.wsj.com/articles/the-great-idaho-do-over-11558027019.