Regulatory Reform: Rationale and Principles

This post is part of the Regulatory Reform for the 21st Century City project.

In previous posts, we’ve outlined the different stages of the regulatory process and asked the question of why cities regulate in the first place. With the basics of regulation covered, what exactly does regulatory reform entail? This blog post will focus on the principles of regulations and the rationale for regulatory reform.

From ensuring that the food you buy at the supermarket meets safety standards to limiting greenhouse gas emissions from polluting the environment, thoughtful regulations protect the health and safety of citizens and counteract some level of market failure. When regulations fail to do this - or have not been revisited to account for technological advancements or modernization - there is a need for reform.

At all levels of government, regulatory reform efforts are in place. Even at the international level, organizations like the Organisation for Economic Co-operation and Development (OECD) have established regulatory reform programs and committees aimed at “helping governments improve regulatory quality…reforming regulations that raise unnecessary obstacles to competition, innovation and growth, while ensuring that regulations efficiently serve important social objectives.”

A common rationale for regulatory reform is to cut waste. In 2011, President Obama issued Executive Order 13576 - Delivering an Efficient, Effective, and Accountable Government. This Executive Order affirms President Clinton’s 1993 Executive Order 12866 which articulated principles that have largely governed federal regulatory analysis and review. As one example of his Campaign to Cut Waste, President Obama highlights how the federal government is attempting to break through the red tape created by the twenty different laws governing the sale of federal property. These laws have created a lengthy, bureaucratic process for selling vacant federal properties, resulting in government dollars paying for empty warehouses across the country. Included in the Executive Order is the directive to “simplify rules...and ensure that regulations are driven by real science.”

Another common rationale is to ensure regulatory relevancy. At the state level, regulatory reforms are conducted both at the point of origination and as part of a review process. Many states have passed laws, executive orders and initiatives related to ensuring relevancy in regulation. In 1977, Colorado passed the first sunset law in the U.S. which requires state agencies to be reviewed according to statutory criteria that determine whether an agency should be continued, modified or terminated. In 1985, Colorado also passed the sunrise law which examines whether or not there is a need to regulate a previously unregulated occupation or profession. Review schedules can be found extending as far out as 2027. In a similar vein, other states have established regulatory review commissions like Pennsylvania’s Independent Regulatory Reform Commission (1982) and New Jersey’s Red Tape Review Commission (2010).

One of the most important rationales of regulatory reform is ensuring that regulations solve a particular problem, rather than simply pose unnecessary barriers. Regulatory reform efforts at the local level often focus on assessing the impact of regulations on local economies as well as ensuring federal and state regulations are enacted properly. At the heart of regulatory reform at the local level is ensuring that regulations abide by principles rather than regulate indiscriminately. In 1991, then-Mayor Stephen Goldsmith of the City of Indianapolis attempted to address this by reviewing the city’s 2,800 pages of regulatory documents and forming the Regulatory Study Commission (RSC) with the goal of creating principles to guide regulation.

RSC’s key principles include:

  • Regulations should be used as a tool to achieve a policy objective only as a last resort
  • The use of regulations indicates a failure of all other means to achieve a policy objective
  • The cost of a regulation should be no greater than the benefit it creates for the community
  • Regulations must be simple, fair, and enforceable
  • Regulations must be written to insure the imposition of the minimum possible constraints upon businesses and individuals
  • Regulations must never exceed existing federal or states standards unless there is an overwhelming, compelling, and uniquely local reason for them to do so

These principles have become a standard for other city governments in reviewing their regulatory processes to help to ensure that citizens recognize not only what they cannot do but also why.

It is important to note that regulatory reform efforts at every level have the potential to undermine their intended effect and create unnecessary administrative burdens themselves. It is therefore necessary for agencies embarking on regulatory reform efforts to think beyond “regulating the regulations” and ensure that whatever mechanism they choose takes a critical yet pragmatic approach to regulatory review.

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