Over the past two weeks I published two separate blogs that
addressed different facets of Maryland’s economic health. Here I want to
address another one.
In Maryland Needs to Improve Its Fiscal Health,
published on July 9, I referenced a recently released
study from George Mason University’s Mercatus Center titled, “Ranking the States by Fiscal Condition.” The study concluded that Maryland presently ranks 37th among the 50
states with respect to its overall “fiscal health,” based on an assessment of
five separate measures of its fiscal solvency. I recognized that Governor Larry
Hogan has begun to take some positive steps to improve Maryland’s structural
budget deficit, and I urged the legislators to cooperate in a sustained effort
to restrain state spending.
In Maryland
Needs to Improve Its Regulatory Climate, published on July 11, I commended Governor
Hogan’s formation of a new Regulatory Reform Commission, tasked with examining
regulations to determine which ones are making it unnecessarily burdensome to
do business in Maryland. The establishment of the commission is a welcome step
for the focus it brings to the need for regulatory reform.
Now, Wayne H. Winegarden, Ph.D., Senior Fellow in Business & Economics with the Pacific Research Institute, has just released the 50-State Small Business Regulation Index. In a lengthy, detailed report, Dr. Winegarden compares all 50 states based on an assessment of fourteen different factors that impact a state’s regulatory environment on small businesses. Thus, the Index creates a common platform to compare each state’s regulatory burdens on small businesses. Each one of the fourteen regulatory components included in the Index may impact the economic performance of small businesses.
Now, Wayne H. Winegarden, Ph.D., Senior Fellow in Business & Economics with the Pacific Research Institute, has just released the 50-State Small Business Regulation Index. In a lengthy, detailed report, Dr. Winegarden compares all 50 states based on an assessment of fourteen different factors that impact a state’s regulatory environment on small businesses. Thus, the Index creates a common platform to compare each state’s regulatory burdens on small businesses. Each one of the fourteen regulatory components included in the Index may impact the economic performance of small businesses.
With a No. 1 ranking as the least burdensome and No. 50 as
the most burdensome, Maryland ranks poorly, overall, as No. 39. The report
shows the ranking for each state for each of the fourteen different components,
with some states ranking high with respect to some measures and low with regard
to others. For example, Maryland ranks close to the top (No. 10) with regard to
having a relatively favorable unemployment insurance rate but at rock bottom
(No. 50, shared by others) with regard to the following measures: right-to-work
state; alcohol control state; telecommunications regulations; and regulatory
flexibility. [Hopefully, Governor Hogan’s newly formed Regulatory Reform
Commission can improve Maryland’s performance regarding regulatory flexibility
and telecommunications regulations.]
Below are the fourteen specific components that comprise the
50-State Small Business Regulation Index,
along with a brief explanation for each ranking factor:
Workers
Compensation Insurance
The Index uses the workers compensation costs, adjusted for
industry composition, calculated by the Oregon Department of Consumer and
Business Services in 2014 to rank the 50 states with respect to the burdens
imposed by each state’s workers compensation program.
Unemployment
Insurance
The Index uses the estimated employer contribution rates as
a percent of total wages calculated by the U.S. Department of Labor for the
calendar year 2014 as a proxy for the burdens imposed by each state’s
unemployment insurance program on small businesses.
Short-term
Disability Insurance Requirements
The Index differentiates the five states that require small
businesses to purchase short-term disability insurance from the 45 states that
do not burden small businesses with these mandates.
Minimum
Wage Laws
The Index uses the prevailing state-wide minimum wage levels
to rank the states based on their prevailing minimum wage as of February 24,
2015.
Expanded
Family Medical Leave Act
As a proxy for the higher cost burdens on small businesses
in the states that expand the FMLA, the Index categorizes the expanded FMLA
benefits into one of ten key family leave categories as documented by the
National Conference of State Legislatures and the national partnership for
women and families.
Right-to-Work
Laws
The Index differentiates the 25 states that have
right-to-work laws from the 25 states without right-to-work laws.
Occupational
Licensing Laws
The Index incorporates three proxies for the stringency and
breadth of state occupational licensing requirements: (1) the number of job
categories that require a license; (2) the share of workforce that is licensed;
and, (3) the share of workforce that is certified.
Land
Use Regulations
The Index uses the Wharton Residential Land Use Regulation
Index (WRLURI), which is based on a nationwide survey of local land use control
environments, to measure the stringency of the land use regulations across the
states.
Energy
Regulations
The 50-State Index of Energy Regulations serves as a proxy
for the impact from each state’s energy regulations on small businesses’ cost
structure.
Tort
Liability Costs
Due to different state litigation environments, litigation
costs vary across the states. To capture the variation in the litigation
environment, the Index ranks the 50 states based on a tort liability survey
conducted for the Institute for Legal Reform by Harris Interactive Inc.
Regulatory
Flexibility
To assess the extent of relief from each state’s regulatory
flexibility program, the Index ranks the states based on two criteria: whether
the state implements a regulatory flexibility program, and if it does, the size
of the small businesses that qualify for regulatory flexibility.
Telecommunication
Regulations
To incorporate these regulations into the Index, changes to
each state’s telecommunication regulations were evaluated based on each
state’s: oversight of services; oversight of pricing; the existence (or
elimination) of quality standards; the existence (or elimination) of filing
pricing reviews; and, carrier of last resort requirements (a carrier required
to provide service to any customer in a service area that requests it at
prevailing rates).
Start-up
and Filing Costs
To capture these regulatory burdens across the states, the
Index relies on a comparative summary of the favorability of state laws.
Alcohol
Control States
The Index differentiates the 18 states that are alcohol
control states from the 32 states that are not alcohol control states.
* * *
Of course, not everyone will agree with the significance, or
the weight given, to each of the index components. But most will agree that, on
the whole, Dr. Winegarden’s comprehensive study, published by the Pacific Research
Institute, provides a good assessment of a state’s overall regulatory climate
for small businesses relative to other states.
And most will agree – or should – that with its ranking (No.
39) near the bottom of the states, Maryland has much room for improvement. In
order to attract and keep small businesses, Governor Hogan and the Maryland
General Assembly should focus on improving Maryland’s regulatory climate.