Editor’s Notebook: Time to lighten the regulatory burden on Delaware businesses?

By Peter Osborne 

Over my first few months in this job, I’ve talked to a lot of businesses — large and small — and asked them a simple question: What keeps you awake at night?

For many, the answer is complying with onerous state and federal regulations.

Some might roll their eyes at that answer. But not the Mercatus Center at George Mason University. They’ve figured out a way to put a number on a macro view of the Delaware regulatory climate.

Mercatus has created an online platform for analyzing and quantifying state regulatory text. Called State RegData, the tool says that the 2019 Delaware Administrative Code (DAC) contains 104,562 restrictions and 6.7 million words. The average reader would need about nine weeks (at 40 hours per week) to get through the whole thing, Mercatus says.

For quick parenthetical context, regulatory restrictions were defined as instances of shall, must, may not, prohibited, and required, all words Mercatus argues can signify legal constraints and obligations. So it is a bit of an estimate.

So what Delaware industries would you guess have the highest estimates of industry-relevant restrictions?

If you guessed petroleum and coal products manufacturing (21,802), chemical manufacturing (20,754), and waste management and remediation services (19,265), you “win.” And those three represent 59.1 percent of the total of Delaware restrictions.

If you look at the top 10 chapter titles of the DAC, which are organized by the type of regulations they contain, you’ll find that most regulations are under Title 7 (Natural Resources and Environmental Control (30,523), followed closely by Title 16 (Health and Safety), with 27,334 regulations — for a total of about 55 percent in two sections.

Nationwide, we’re looking at an additional 1.1 million additional restrictions in the federal code and nearly 104 million words. And that doesn’t even take into the account of businesses that operate in other states like Maryland, Pennsylvania and New Jersey.

James Broughel, senior research fellow for Mercatus Center at George Mason, says his team has been building out the dataset for the past few years. He says Delaware’s 104,000-plus regulations are below the average of 137,000 state regulations, which I suppose is a bit of good news.

On the other hand, Delaware top three industries appear to have far more restrictions than many other states.

Studies like this are interesting but we probably need to get into the weeds to draw much in the way of conclusions. There is academic evidence that accumulated regulations can be a drag on economic, job and productivity growth, Broughel says, comparing it to the accumulation of pebbles blocking up a stream.

And that can ultimately hurt efforts to market the state as a good place to do business.

“Certainly within the pages [of the DAC] are some regulations that are needed and important and certainly within those pages are some that are either redundant, unnecessary, outdated, or technology has passed them by,” said Bob Perkins, executive director of the Delaware Business Roundtable. “The challenge for legislators and other government officials is to determine which of those regulations are necessary and which are not.”

The recently completed General Session included the introduction of H.B. 167, proposed in late May by Republican Charles Postles from Milford and Sen. David Wilson and eight other co-sponsors.  It would require state agencies to do cost/benefit analysis before implementing new regulations and complete a similar analysis on existing regulations within the next four years.  The bill apparently died in committee, but there’s always January.

Other states have been a bit more successful streamlining their regulations, Broughel says. 

• Rhode Island in 2016 passed a law to create a website to house its administrative code and set an expiration date for the entire code to encourage agencies to rules so they could move onto the website. In the process of doing this, they eliminated about 31% of their rule volume.
• In Idaho, the entire regulatory code was set to expire on July 1, 2019 and the state legislature did not pass it, leaving an update in the hands of a governor who had promised to streamline it. Broughel said the governor has removed about 900 pages of the code (about 11 percent) by eliminating 20 percent of the chapters and simplifying or modifying another 20 percent of the chapter.
• In 2018, Virginia passed the Regulatory Reduction Pilot Program, which requires agencies to produce a count of their regulatory requirement and chose the Department of Criminal Justice Services and the Department of Professional and Occupational Regulation — with 6,000 regulations between the two of them — to complete a 25% cut within three years.

“States that take the cost/benefit analysis route often don’t realize that analysis at the federal level is often done by professional economists and can take a year,” Broughel said. “They also need to consider extending this cost/benefit analysis beyond new regulations, because almost nobody ever goes back to look to see if the regulations are working. Sunset provisions can be useful to treat old regulations as new ones and trigger cost benefit analysis.

President Trump has made regulatory reform a top priority, which may explain why states have been more active in this area. Mercatus, which hopes to complete its analysis of all 50 states by year-end, plans to re-examine each state’s codes at least annually, meaning Delaware is looking at an update in 2020.

Let’s hope everyone works together to reduce the number — and the burden on Delaware businesses.