Monday, July 13, 2015

Maryland Needs to Improve Its Regulatory Climate

Last week, my blog titled “Maryland Needs to Improve Its Fiscal Health” highlighted a new study from George Mason University’s Mercatus Center that determined Maryland ranks 37th among the 50 states with respect to its fiscal health. As I explained, the study examined five different measures of fiscal solvency in arriving at the overall ranking.
In the blog, I said last November’s election indicated that Marylanders recognized a change of direction was needed to improve Maryland’s fiscal health. And I stated that Governor Larry Hogan already has taken some positive steps to improve the state’s budgetary situation.
At the end of the week came the announcement that Governor Hogan has created a new Regulatory Reform Commission to examine regulations to determine which ones are making it unnecessarily burdensome to do business in Maryland. As Hogan said in announcing the new panel: “For years, over-burdensome and out-of-control regulations were making it impossible for businesses to stay in Maryland.”
It is not clear from the initial reports whether the commission will have any role beyond identifying regulations that it concludes are unduly burdensome or no longer necessary. But the establishment of the commission is a welcome step in any event for the focus it brings to the need for regulatory reform.
Not all regulations are bad, of course. Many serve important purposes, most especially those directly related to protecting public health and safety in carefully targeted ways. But all regulations impose costs upon those they affect, be they ordinary citizens or business. And, this is the important point: these regulatory costs – although “off-budget” – have the same economic effect as taxes.
So, just as reducing unnecessary spending is important to improving Maryland’s fiscal health, so too is eliminating unnecessary or unduly burdensome regulations. The positive economic effect that results from leaving more productive resources in the realm of the private sector is the same in both instances.
Governor Hogan’s new commission, primarily composed of representatives of business interests, might have benefitted – or still might – from inclusion of some academics and public policy advocates well versed in regulatory reform issues. Nevertheless, the Regulatory Reform Commission’s establishment represents another positive step in changing Maryland’s direction and countering its reputation as a state with an increasingly unfriendly business climate.
Finally, whether under the charge or the new commission or some other entity, the state should consider whether – beyond the identification of existing regulations targeted for elimination – more fundamental long-term structural regulatory reforms should be pursued. For example, should there be a “sunset” date for all new regulations requiring that they expire on that sunset date if they are not affirmatively readopted? Should there be a central entity within the executive branch to review regulations before they are promulgated to determine that the projected benefits outweigh the costs and they are not inconsistent with other regulations? Should there be some formalized retrospective review (“look back”) process to assess whether regulations are actually achieving their objectives in the most efficient manner?
Commendably, Governor Hogan has initiated a process to examine Maryland’s existing regulations so that those that are no longer unnecessary or which are unduly burdensome can be targeted for elimination, or at least modification. But in light of the costs imposed by unnecessary regulations – costs ultimately paid by all Maryland consumers – achieving fundamental structural regulatory reform should be the governor’s objective.