Briefing Report: Executing Regulatory Reform

Wednesday, May 11, 2011

"After having thus successively taken each member of the community in its powerful grasp and fashioned him at will, the supreme power then extends its arm over the whole community. It covers the surface of society with a network of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate, to rise above the crowd. The will of man is not shattered, but softened, bent, and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd." - Alexis de Tocqueville 1

The People Have Spoken

Recognizing the voter dissatisfaction with obstructive bureaucratic policies that otherwise interfere with private enterprise and stymy economic recovery, governors of both parties across the country have been taking a serious look at their own state's regulatory morass and are directing top to bottom reviews of the rulemaking processes. They understand Winston Churchill's critique, "If you have ten thousand regulations you destroy all respect for the law." So, b etween January 2010 and February 2011, six state governors issued executive orders to suspend or severely restrict their state's rulemaking authority with the general caveat that regulations that affect public health, public safety and security, among other things, would be exempted. President Barack Obama (D) also got into the regulation review mood when he released Executive Order 12866 (January 18, 2011) to consider and better justify a regulation's economic costs, to choose the alternatives with the least amount of impacts, to specify performance objectives and to tailor its regulations to impose the least burden on society. The following is a quick summary of initial orders.

Arizona, Governor Jan Brewer (R), EO 2010-04, 2010-13: Establishes the Commission on Privatization and Efficiency to examine each state entity's constitutional, statutory and practical functions to determine which powers, duties and responsibilities can be either eliminated, streamlined, consolidated or outsourced.

Florida, Governor Rick Scott (R), EO 11-01(January 4, 2011): Suspends all rulemaking and requires the comprehensive review of all rules and regulations by the newly created Office of Fiscal Accountability and Regulatory Reform. Requires agencies to prepare a cost-benefit analysis, risk and job impact assessment and to identify all forms of fraud, waste and abuse and investigate fiscal mismanagement.

New Jersey, Governor Chris Christie (R), EO 1, 2, 3, 41 (January 20, 2010): Orders all proposed regulations and rules frozen and suspended for a period of 90 days. Creates a Red Tape Review Group which to review certain rules, regulations and processes that are a burden on New Jersey's economy. Requires the Review Commission to review existing administrative rules and regulations to analyze their impact on job creation, economic growth, and investment in New Jersey and conduct a series of public hearings throughout the state.

New Mexico, Governor Susana Martinez (R), EO 2011-001 (January 14, 2011): Suspends all proposed and pending rules and regulations under the authority of the Governor. Forms a small business-friendly task force and establishes a 90-day review period for all proposed and pending rules.

Nevada, Governor Brian Sandoval (R), EO 2011-01 (January 3, 2011): Freezes all proposed regulations until January 1, 2012. Orders that each regulatory body complete a comprehensive review of the regulations subject to its enforcement, including those regulations the regulatory body wishes to become effective following the freeze. Requires an assessment of how each regulation or set of regulations is consistent with a specified set of regulatory priorities which will lead to a report detailing the findings and proposals for regulations that may be repealed or modified by December 31, 2011.

Washington, Governor Christine Gregoire (D), EO 10-06 (November 17, 2010): Suspends non-critical rule development and adoption that applies to all cabinet agencies and boards, commissions and other agencies that report to the Governor through December 31, 2011. Directs the Office of Financial Management to publish guidelines identifying circumstances in which rule making may proceed. Invites all other elected officials, institutions of higher education, agencies, boards, commissions and other entities with rule making authority to follow the requirements of the order.

Such action is not without precedent in California. Governor Pete Wilson issued several executive orders in the 1990's which addressed the need for regulatory reform, including: W-127-95, W-131-96 and W-144-97. Each of these sought to root out, modify or repeal onerous or unneeded regulations. Contrary to those that are opposed to such reviews, there were no environmental or health catastrophes as a result, but nothing was really improved, either.

Those without an Executive Order

To see if the effects of administrative procedures regulatory reform, a recent CATO study took a closer look at what New Jersey's regulatory fixes look like over the last two decades, where regulatory review is a consistent process exercised by the executive office. The authors concluded: "[P]rocedural control of bureaucratic agencies is unlikely to be particularly effective, if the New Jersey example is representative." Such reviews of the regulatory reviews revealed a trend, "Delegations of rulemaking authority to unelected officials, once given, are hard to rescind or control afterward." They determined that if the legislature had the ability to ratify a regulation before it gets moving, than that would be most effective in fixing problematic regulations, rather than a comprehensive review of those regulations and their impacts.

Recognizing the limits of an executive order, there are other states moving beyond the simple platitudes and pursuing regulatory reform legislatively at the urging of their governor like Texas, Washington and Wisconsin. Most of the proposed changes require an economic cost/benefit analysis, a discussion on jobs impact throughout the private sector and streamlining state government by consolidating or suspending non-critical state agencies. With California enduring an economic slump unrivaled since the Great Depression, perhaps it is time to ask why the state bureaucracy continues to grow at a rapid pace, inverse to its economic growth.

Recently, several California legislators have attempted provide some checks and balances on the state's bureaucratic machine and scale back the behemoth with little success. Indeed, there have been nearly a dozen significant bills heard in committee over the last few weeks that would have done any number of things, including:

  • Requiring state agencies to conduct a top-to-bottom review of their rulebooks with the goal of reducing duplicative, obsolete, and ineffective regulations;
  • Expanding the criteria so that state agencies would perform more rigorous economic assessments for any major rule or revision;
  • Enacting sunsets on all newly enacted regulations with a process for re-adoption by the agency prior to sunset only after a public hearing process;
  • Affirming the availability of required new technologies and procedures necessary for implementing the regulations;
  • Requiring state agencies to notify the Legislature if the estimated cost of a new regulation exceeds $10 million and subsequently delaying implementation of such regulations for one year.

All of these bills were killed by Democrats and state employee unions in committee, with the explanation that these changes were too drastic and/or costly and the proposals may compromise Californians' health and safety. As an alternative, committee members offered up a competing bill which, though similarly requiring a comprehensive review of regulations, is likely to put a sunset on reform rather than actually reform regulatory processes.

Consider When Deliberating

Institutionally, individual agencies are less likely to scrutinize their own regulations with much objectivity, and in fact, may be likely to burden the stakeholder process with more precision and prescription in the name of streamlining, unintentionally stripping away valuable flexibility for unique circumstances. Internal scrutiny alone (without outside assistance) may very well embolden a bureaucracy that sees little need for reform, rather than restrict it to its inherent duties. All should be conscious of Pournelle's Iron Law of Bureaucracy: In every bureaucracy there are two types of people, those dedicated to the goals of the agency and those dedicated to the bureaucracy itself. The second kind inevitably gains control of the bureaucracy. Always. Regulatory processes that ignore the need for active, public and transparent legislative review so that state agencies are not fatally enamored with themselves are likely to suffer debilitating effects of becoming estranged from their purpose and the people they are supposed to serve.

Since the Legislature is clearly not serious about finding substantive reform - unlike what produced the Office of Administrative Law and our current regulatory procedure in the 1970's - then perhaps it is up to Governor Jerry Brown to take action based upon a commitment he made to restrain regulations on the campaign trail. Last year he said, "As Governor, I will…Fully utilize the Office of Administrative Law - an office I created as Governor to reign in regulatory excess. I would reinvigorate the office and provide the leadership needed to ensure that new regulations stick to the clear intent of a law and do not go beyond what is reasonable. As for existing regulations, I would target for review those rules that are slowing down projects, proving to be onerous or otherwise impeding economic growth."2

If Governor Brown were to use the EO as a tool to suspend, modify and/or streamline the regulatory process, the legislature should stand ready codify a process that is bound by a constitutional standard. Any and all regulatory process should be explicitly authorized and controlled by specific statutory guidelines, transparent and open to the public process, necessary for the public health and safety and cost-effective to the state and private enterprise. Any regulation worth its weight needs to have a useful life that guarantees some certainty, but does not perpetuate timely rules into abject perpetuity.

 

For more information on this report or other Environmental Quality issues , contact Lance Christensen, Senate Republican Office of Policy at 916/651-1501.

1Democracy in America, Vol. 2, Section 3, Chapter VI
2 Governor Brown's Campaign Site