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Study: Sunset provisions most important factor in improving state regulatory climate

Study: Sunset provisions most important factor in improving state regulatory climate

Idaho Freedom Foundation staff
June 18, 2012
Idaho Freedom Foundation staff
Author Image
June 18, 2012

Idaho's regulatory climate could be significantly improved through the addition of an automatic sunset provision that would rescind regulations unless specifically reauthorized through periodic legislative review, according to a study released by the Mercatus Center, a policy research group centered at George Mason University.

"Our results seem to suggest that these provisions, that force regulations to be reconsidered and prove their merit through time, are one of the most effective ways to help improve a state regulatory system," said economist and study coauthor Russell Sobel in an email Friday to IdahoReporter.com.

"By making regulations fight to stay in place, even if it is just to put them through the political battle necessary to be re-enacted individually instead of being pork-barrel legislated, sunset provisions force a re-evaluation of all regulations and tend to lessen the degree of regulation within a state," Sobel and economist John Dove concluded in their study. "This was the only variable both statistically and economically significant in all of our models and is our most robust result."

Although individual pieces of state legislation have often included sunset provisions, Idaho has no mechanism for triggering an automatic review of regulatory provisions. Even legislation that does come under piecemeal sunset review is usually reauthorized with little debate, according to a regulatory review by the Institute for Policy Integrity, used as a source of data in the Mercatus study.

"Several elements of Idaho’s regulatory review structure seem, at best, perfunctory," wrote Jason Schwartz, the institute's legal director. "For example, rules are more or less automatically extended under sunset review, fiscal impact statements are sparse, and the fuller economic impact statements are rarely requested. The process does not make the most of resources."

Schwartz further noted that in the reviews that it does undertake, Idaho's "legislature only rejects rules, and rarely uses its power to modify or calibrate rules. Few deadlines govern the review process, and both the legislative veto and the annual sunset are burdensome, potentially contributing to a proliferation of temporary rules to avoid review requirements. The legislature has no trouble shoehorning any policy objection into its 'legislative intent' criterion, and no standards govern the unofficial executive branch review. Lack of clear standards also makes it difficult for the public to track regulatory review decisions, especially for the executive branch."

The Mercatus study differentiates between two categories of regulation, "efficient" rules such as well-defined property rights and legal liabilities that may produce benefits outweighing their costs and "inefficient" rules for which costs clearly outweigh benefits. The latter may be passed for many reasons, such as catering to the political pull of special interest groups that benefit disproportionately from regulation that harms both their competitors and taxpayers. Other inefficient regulations may have been perceived as efficient by lawmakers who failed to anticipate an array of unintended negative consequences.

Sobel and Dove point out that "even if regulations are passed with the best of social intentions and careful consideration, there will be mistakes. This creates a need for a regulatory review process to identify and remove regulations that have unintended consequences, do not live up to their stated goals, or do accomplish their desired goals but in such a costly way that it does not justify the benefit (i.e., they are ex post economically inefficient)."

Another provision that would create a more efficient regulatory climate, according to the Mercatus study, is a requirement for consideration of alternative rules that could accomplish the same purpose at a lower cost to taxpayers.

"When legislators become aware of the impact of proposed regulations on their own budgets they apparently tend to regulate less," wrote Sobel and Dove. "We also find some limited evidence that reviews done through the legislative branch or an independent agency tend to also be more effective."

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