Warning: Regulatory reform could cost state

A member of a state board is urging a cautious approach to the Salt Lake Chamber’s push for regulatory reform that could affect Utah businesses.

Jerry Oldroyd, a member of the Governor’s Office of Economic Development (GOED) board, said at the board’s most recent meeting that he is concerned that conducting a cost-benefit analysis on every rule established by state agencies could be too costly and time-consuming.

The chamber in November released a 16-page report titled “The Cost of Doing Business: Improving Utah’s Regulatory System,” available at www.slchamber.com/costofdoingbusiness. Among other things, it recommends a “robust” cost-benefit analysis of major rules implemented by state administrative agencies. Bills passed by the Legislature often contain authorization for agencies to create rules related to the bill.

Michael Parker, director of public policy at the chamber, told the board that improving the rulemaking process by adding analysis of what rules cost Utah’s businesses is a vital step in keeping the state’s economy strong and competitive with other states. He acknowledged that there are many options available for improving the process and that the report was the springboard for discussing the best approach.

One option is putting a note on all bills that would indicate an initial belief that they are expected to have low, medium or high impacts on businesses. If an implemented rule were to exceed the expected impact, that could trigger a more-robust analysis, Parker said.

Oldroyd noted that most rules created from legislative measures are clarifications of existing rules.

“They’re relatively inconsequential, and to do a full-blown analysis of each one of those would be really expensive and a big use of staff time,” Oldroyd said.

“It seems to me that if there’s a fundamental shift in policy — for example, if there’s new regulation creating a new incentive or something like that — that that burden ought to be at the Legislature to do a cost-benefit analysis before they pass the statute. That would be the logical spot to do it, and then the rules could describe from that new statute basically how it conforms with the cost-benefit analysis of the Legislature. That would be a much better use of time, and it would at least make the Legislature look at what the hell they’re doing.”

Parker said that doing cost-benefit analyses during the Legislature’s general session “would be tough.” But Utah could establish a threshold. In California, he said, cost-benefit studies are conducted on legislation that has expected impacts over $100 million, based on initial analyses.

“Really,” Oldroyd said, “it’s going to require some kind of threshold because if you have every rulemaking [action] do an analysis like that, it’s going to ruin budgets.”

Parker said that Utah needs to determine what depth and scope is needed for cost-benefit studies. “The current code only requires agencies currently to do a stated impact, a qualitative statement of ‘there’s potentially an impact’ or ‘we can foresee an impact’ but there’s no requirement for them to do a substantive analysis of the potential impact,” Parker said. “That was a big concern for us.”

The chamber’s report says Utah’s regulatory structure “is becoming outdated as 21 states have adopted more robust analyses of their regulations.”

“Twenty-one states do it better than us,” Parker said. “We don’t know if what those 21 states are doing are worth the staff time, the fiscal cost to the state, the growth of government that it would take to do cost-benefit analysis on every single administrative rule, but we know there’s a better model than what we’re doing now.”

And such analyses are needed because “without the numbers in place, we don’t have a good way of putting our arms around the administrative state in our state and saying how much regulations are actually costing Utah businesses in aggregate,” Parker said.

Virginia is among the 21 states and “saw a monumental shift in the regulatory climate when they did it,” Parker said. Colorado likewise put in place a more-stringent small-business cost-benefit analysis requirement “and they feel like that’s unlocked a lot of entrepreneurial activity,” he said. “So we do have tangible examples in the other states that have done it, that it’s paying dividends for them.”

Parker added that having better cost-benefit analysis in place could help when Utah is recruiting businesses to the state. “I think a big thing for the [recruitment] team as they go out is, saying that we’re vigilant about regulations while we’re the best state for business is a big arrow in the quiver, to say we’re not taking it for granted, and so part of this [reform] is just making sure that we’re marketing to our strengths.”

The chamber report calls for better evaluation on the costs of Utah’s rules to individuals, businesses and the state’s economy; reforms that will stop unnecessary regulations; improvement in transparency and oversight of Utah’s rules; and achieving a national model through considering a more robust analysis on the costs and benefits of rules.

Among previous state regulatory reform efforts, the most recent came in 2011, when Herbert’s business regulation review found that 48 percent of Utah’s rules substantially affect businesses. More than 300 rules were modified or eliminated. In 2015, less than 3 percent of rules had a robust analysis about their potential cost to business, the chamber report states.