Click here to view and here to listen to Daren Bakst discussing this Spotlight report.
RALEIGH — Gov. Beverly Perdue has taken a step in the right direction on regulatory reform for North Carolina. That’s the initial reaction from the John Locke Foundation’s top regulatory expert, who pushes even stronger reform measures in a new Spotlight report.
“The governor’s executive order on rulemaking and regulation appears to be a good first step in trying to address the unfriendly regulatory climate in North Carolina,” said report author Daren Bakst, JLF Director of Legal and Regulatory Studies. “Much of its success will depend on how it works in practice. Success also depends on whether the office put in charge of the reform process ensures that agencies follow the executive order’s requirements.”
Perdue’s Oct. 21 order applies to all Cabinet agencies and all other executive bodies that report to her. It does not cover agencies such as the N.C. Department of Public Instruction that are led by the other elected members of North Carolina’s Council of State.
“North Carolina’s regulatory environment is poor, especially in comparison to other states,” Bakst said. “This state does not mandate cost-benefit analysis for new rules or a periodic review of regulations. It does not adjust regulations for small businesses.”
Bakst’s report examines how well Perdue’s order addresses those problems. He also offers suggestions for improving the executive order.
“The order does several good things to reduce excessive regulation,” Bakst explained. “It mandates cost-benefit analysis for regulations. It requires agencies to identify alternatives to regulation. It creates an annual review process of existing regulations to determine if they should be reformed, expanded, or repealed.”
“The executive order requires agencies to support their regulations with sound data,” Bakst added. “To ensure that agencies do what is expected of them, the order calls on the state Office of Management and Budget to provide necessary oversight.”
There’s also room for improvement, Bakst said. “In examining the executive order’s statement of principles and agency requirements, I found that parts of the order are drafted in an overly vague manner,” he said. “This vague language could allow agencies to wiggle out of important requirements.”
“There’s also an important omission: The order does not include protection for small businesses from one-size-fits-all regulation,” Bakst added. “While 35 states and the federal government adjust regulations to meet the unique needs of small businesses, the governor’s executive order does not address this issue.”
Bakst identifies another shortcoming. “The executive order does not protect North Carolinians against agencies exceeding their statutory authority in creating rules,” he said. “Agencies often push the envelope.”
“This was made clear in the case of the State Board of Community Colleges issuing recent regulations on whether illegal immigrants could attend North Carolina community colleges,” Bakst explained. “While the board clearly had power to develop regulations connected to admissions, it’s highly doubtful that the legislature, when delegating admissions power to the board, wanted it to make major policy decisions on an issue such as immigration.”
When the plain language of a statute does not mandate that an agency take action and the intent of the legislature points to not taking action, the agency should not issue rules, Bakst said. “The executive order should have provided more constraints on agencies in publishing rules with questionable legal authority.”
True regulatory reform requires more than just an executive order from the governor’s office, Bakst said. “The legislature must take action next year and apply many of the principles from the executive order to all state agencies,” he said. “The legislature would need to amend the state’s Administrative Procedure Act, which governs rulemaking in the state. The governor should make this recommendation.”
The time has come for regulatory reform, Bakst said. “Most states have recognized the problem of excessive regulation, especially on businesses, but the North Carolina legislature has failed to do so,” he said. “It is time that North Carolina welcome businesses with sensible regulatory policy instead of scaring them away with red tape.”
Daren Bakst’s Spotlight report, “Perdue’s Regulatory Executive Order: A Step in the Right Direction,” is available at the JLF Web site. For more information, please contact Bakst at (919) 828-3876 or dbakst@johnlocke.org. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or mkokai@johnlocke.org.