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Regulatory reform

Most state governments, and even the federal government, have far better controls over the regulatory power of government agencies and commissions than does North Carolina. These controls are critical because unelected and unaccountable state officials make major decisions affecting almost every facet of our lives.

When there is excessive regulatory power, North Carolina suffers because it imposes great costs on its citizens and businesses and hurts the economic competitiveness of the state. All too often, the agencies ignore the will of the legislature in granting them regulatory power and instead regulate as they please.

Key Facts

• Regulations are agency-created rules that help to implement or interpret enacted legislation.
• In a 2005 John Locke Foundation survey of more than 600 North Carolina business leaders, regulatory burden was ranked as the second most important factor reducing the state's economic competitiveness (only North Carolina's tax burden ranked higher).
• About 81 percent of N.C. business leaders said that the cost of most government regulations exceeded their benefits.
• North Carolina has something called the Rules Review Commission (RRC) to review regulations and make sure agencies are not exceeding their authority. The RRC's power is, however, very limited.

Recommendations

1. Give the RRC more power to challenge statutory authority. The RRC should review rules to make sure they are "clearly within the authority delegated to the agency by the General Assembly." In addition, to define what "clearly within the authority" means, the law should clarify that clear statutory authority exists when no reasonable argument can be made that statutory authority does not exist.
2. Require cost/benefit analysis of regulations. For nearly 40 years, the federal government has required agencies to conduct cost/benefit analysis. North Carolina does not require this approach. The RRC should provide oversight in connection with the cost/benefit analysis. If the costs of new regulations exceed the benefits, then the regulations should be rejected.
3. Require that alternatives be considered. As the federal government does, North Carolina agencies should be required to seek out alternatives to proposed regulations. As stated in President Reagan's Executive Order 12291, "the alternative involving the least cost to society shall be chosen."
4. Reduce the costs of complying with regulations. As stated in President Carter's Executive Order 12044, regulation should be approved if "the least burdensome of the acceptable alternatives has been chosen."
5. Require regulations to achieve a clearly stated purpose. Each agency should identify, in specific terms, what goals are being met by adopting the regulations. Regardless of what costs and benefits are identified, if the regulations do not achieve their stated purpose, the RRC should reject the regulations.
6. Require agencies to consider the unique needs of small businesses. To address the differences between small businesses and larger businesses, agencies should be required to consider regulations that reduce the impact on small businesses (see the U.S. Small Business Administration's model legislation below).
7. Require periodic review of regulations. Thirty-two states have periodic review of regulations, and the Small Business Administration recommends it as well. The passage of new laws or changes in technology can cause regulations to become outdated or unnecessary. Therefore, agencies should, as in Tennessee, have the burden to justify the continued existence of their regulations.
8. Prohibit agencies from passing regulations that exceed federal standards. According to the Environmental Protection Agency (EPA), about one-third of all states have a law that prohibits agencies, at least in some areas, from exceeding federal standards.