Executive Summary
Like taxes, state and local regulations have an enormous impact on the average citizen as well as on businesses, especially small business — the key to job creation in a vibrant economy. In many ways, regulations are a more onerous and hidden way than taxes for the state to take resources out of the private sector to accomplish what is at least a purportedly public objective.
As of late last year, the State of North Carolina had 20,313 rules in place, with the number growing each year. At least as measured by the number of pages of new rules published in the North Carolina Register, the amount of state regulation had been increasing at an alarming rate. From 1987 to 1994, the total number of pages of new regulations roughly doubled. Furthermore, the number of full-time positions at state regulatory agencies has grown by 60 percent over the past two decades.
While little data exist to estimate the financial cost of state regulations, we can reasonably expect it to be significant. By the year 2000, federal regulations will impose $721 billion in compliance costs, or nearly $6,000 per household. While taxes currently consume about 40 percent of the average family’s income — more than food, clothing, and shelter combined — regulation makes the total cost of government even higher. In 1995, the average American had to work full time until July 9 to pay the costs associated with taxation, deficit spending, and regulations. This means that 53 cents of every dollar earned was spent on government programs directly or indirectly.
Of course, the costs of regulation represent only one side of the ledger. Perhaps these costs are justified if the benefits, similarly quantified, exceed them. But available evidence would suggest otherwise. Environmental regulations in particular often cost far more than their benefits would justify. A recent Harvard study concluded that Americans incur opportunity costs of approximately $31.1 billion, 60,200 premature deaths, or 636,000 years of life lost every year in order to maintain our current inefficient pattern of regulation and risk reduction.
In 1995, the General Assembly adopted a regulatory reform measure to give the state’s Rules Review Commission increased oversight in the rulemaking process. While many critics have viewed this as an unwarranted and perhaps even unconstitutional one, it represents a valuable first step in regulatory reform. What policymakers need to do now is refine and expand this process as follows:
- Amend the statutory language creating the Rules Review Commission to define legislative intent more clearly.
- Use cost-benefit analysis and regulatory budgets to set reasonable priorities for government action.
- Provide the commission with a staff and budget commensurate with its important and challenging responsibilities.
- Sunset all new state rules after two years to allow an assessment of their real-life costs and benefits.
- Consolidate regulatory agencies with similar responsibilities.
- Require regulatory agencies to use the least restrictive and intrusive form of government intervention to achieve public objectives.
