December 8, 2017

Zooming in on State's Rules and Regs

James Broughel

Research Fellow

Garrett Ballengee

Executive Director, Cardinal Institute for West Virginia Public Policy

What’s holding back West Virginia’s economy in recent years?

Depending on who you ask, the Environmental Protection Agency, foreign competition, the opioid epidemic and an antiquated, growth-stifling tax code might come up.

However, another answer may be hiding in plain sight.

An innovative tool known as State RegData, developed by the Mercatus Center at George Mason University, points toward a new suspect in the war on West Virginia’s economy: the West Virginia Code of State Rules.

Though a relative unknown to the public, the Code of State Rules is where West Virginia’s state regulations reside. It is a regulatory behemoth that dictates and directs nearly every aspect of the state’s economy, from health care services to manufacturing to education.

The CSR could be considered a form of regulatory carbon monoxide — invisible and unnoticed until it is too late.

There is no doubt that the CSR contains some valuable regulations. We all want safe workplaces and a clean environment. But states tend to add layers and layers of new regulations on top of outdated ones written for another era, creating a convoluted mess.

The online CSR contains thousands of historical regulations that are no longer even active. Even the most diligent business can have trouble understanding which rules apply and which don’t.

Putting RegData’s microscope on the CSR reveals that it contains 8.4 million words. It would take an ordinary person about 12 weeks to read it all. The CSR includes 125,700 regulatory restrictions (words like “shall,” “must” and “required”), casting a light on just how many prohibitions West Virginians must comply with on a daily basis.

Research from the Mercatus Center estimates that federal regulation is slowing U.S. economic growth by about one percentage point a year. That may not sound like a lot, but last year West Virginia’s economy contracted by about one percent. An additional point of growth would get the state’s economy moving in the right direction again.

The state Legislature understands that the growth of regulation is a problem if left unchecked. In 2016, it passed, and the governor signed, a law requiring new rules to expire (or “sunset”) after five years unless they are reauthorized.

The sunset law is a good first step, but it could use a few tweaks. First, it only applies to new regulations. Most rules already on the books will never expire unless they are modified at some point. This may discourage regulators from updating outdated rules, because it means more work for them down the road.

Second, rules from the state Department of Environmental Protection are exempt from the new sunset provisions. Environmental rules are critical, but it’s also critical that they are periodically reviewed to ensure they are working. Two divisions within the DEP — the Division of Water and Waste Management and Division of Air Quality — oversee about 9,000 restrictions between them. These restrictions need reviewing and updating, just like any other in the CSR.

Additional reforms could supplement — and strengthen — the new sunset law. One example is placing a hard cap on rulemaking. This is the successful approach taken in British Columbia, Canada, in the early 2000s.

For each new requirement added, an old one was removed, and sometimes two. This way the code stayed at a manageable size, and, like sunset provisions, a cap encourages careful review of regulations. But all agencies should have to comply with the cap, and all rules should be reviewable.

British Columbia has experienced an economic resurgence in recent years, suggesting reforms could boost growth.

Other states could also serve as a model. Kentucky’s Red Tape Reduction initiative has resulted in hundreds of regulations repealed or targeted for repeal. Missouri, Nebraska, and Illinois are also actively reviewing their codes, putting red tape in the cross hairs.

As West Virginia continues to build on recent legislative successes, the state must continue to grapple with the complexity and size of its regulatory code.

Regulatory reform does not generate many headlines, but it could go a very long way toward reversing West Virginia’s trend of economic death by a thousand — or in this case — 125,700 cuts.