Rules Limp Off into the Sunset


John Hood Columnist


North Carolina is a national leader in conservative reform of state governance — a fact that, as you might expect, pleases conservatives and horrifies progressives in the Tar Heel State.

Most of the praise or blame, respectively, is directed at the series of tax reforms and reductions the General Assembly has enacted almost every year since 2011, the budgetary restraint that has accompanied those tax cuts, the expansion of parental choice and school competition in North Carolina education, and changes to our unemployment insurance and public assistance programs.

But our deregulation efforts deserve significant attention, too. North Carolina is one of only a handful of states with an institutional, systematic, and sustainable approach to weeding out the many costly, counterproductive rules that government imposes on our households and businesses.

It’s proper and necessary for the state to issue regulations, of course. While most disputes can be resolved and problems addressed through private initiative and voluntary agreement, some transactions affect people who aren’t parties to those transactions. If you and I conduct business in a way that creates dangers or nuisances for other people on their property, or within air or water resources held in common, government action may be necessary to confront us with the cost of such externalities.

For every legitimate and cost-beneficial regulation the state imposes, however, there is at least one other rule that either never made sense or is outdated. The stakes are high. The annual cost of state regulation in North Carolina, estimated at $26 billion in 2015, actually exceeds the annual cost of state expenditures for public schools, prisons, Medicaid, and other General Fund programs.

Over the last several years, the state legislature has targeted, revised, or removed a variety of specific regulations — most recently by nixing a plastic-bag ban on the Outer Banks that I wrote about a few weeks ago. Lawmakers should continue to do this. But if that was their entire strategy, it would take too long and leave too many rules intact that kill our jobs and reduce our wages. According to a forthcoming study by George Mason University’s Mercatus Center, North Carolina has more than 100,000 separate state regulations on the books.

Fortunately, the General Assembly has accompanied its annual legislating with the creation of an administrative process called regulatory sunset. Enacted in 2013, the law subjects large swaths of North Carolina’s regulatory code to periodic review by agencies and the state’s Rules Review Commission, which exists to ensure that regulators carry out legislative intent when they try to tell localities, businesses, or households what to do.

Remember that executive-branch agencies exist to enforce the law, not to make it. Their power to issue directives and compel compliance must be authorized by the General Assembly.

Through the sunset process, each rule gets a regular administrative review. Most will likely survive it. But some will be found to violate legislative intent, cost more than the value of any public benefit, or lag behind key changes in the field being regulated. The default rule is that such regulations will go away — they’ll ride (or perhaps limp) off into the sunset, as it were.

To date, nearly 12,000 state regulations have been reviewed under North Carolina’s new law. About 1,500 have already been eliminated from the code, while another 3,000 or so are awaiting a formal hearing and re-approval vote.

A few other states have experimented with similar reforms, but our state has been a pioneer in marrying the ongoing review of its administrative code with annual regulatory-reform bills that modify or excise major rules by legislative vote.

North Carolina conservatives are justifiably proud of this accomplishment. Conservatives in other states are justifiably envious and are trying to catch up. Everyone should remember, however, that regulatory reform is a long-term, highly complex process. The goal, once again, is not to eliminate all government regulation. It is to ensure that state power is used sparingly to create net benefits, not routinely to privilege special interests over the public good.

John Hood is chairman of the John Locke Foundation and appears on the talk show “NC SPIN.” You can follow him @JohnHoodNC.

John Hood Columnist
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