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Deeply rooted regulations choking biz

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By Richard S. Davis
Published:
"Doing business in Washington today means sifting through a complex maze of state and local laws and regulations."
That's not a small business owner at a local chamber of commerce lunch. It's from a new report by the state auditor, the first in a regulatory reform series.
The numbers are stark: "1,337 business permits, licenses and inspections administered by 26 regulatory agencies." In 2010 state agencies proposed 17,000 pages of rules and regulations, more than twice as many as 30 years ago. After Gov. Gregoire issued a limited moratorium on "non-critical rule-making" in 2011, the number fell to a not-exactly-comforting 13,000 pages.
State Auditor Brian Sonntag says that for as long as he's been in Olympia -- he was elected auditor in 1992 -- regulatory reform has been a perennial topic of conversation. The audit cites dozens of legislative bills and executive orders issued by Governors Lowry, Locke and Gregoire. He wanted to know what all the talk produced.
"We just wanted to see what's ... been attempted, what's been accomplished and lay that out for future administrations," he tells me. "For all the lip service, there's still a long way to go."
It's not really a surprise.
"You only have to listen to the ... people who are trying to wend their way through this maze ... [They find] for every step forward there's a step and a half backward," says Sonntag, who recalls the dictionary also defines an auditor as "one who listens."
Despite good intentions and serious efforts, the desired results have not materialized. The rising tide of regulation rolls in as state officials, like Canute, ineffectually order the sea to recede.
We live in a complex world. Much of that complexity stems from the red tape accompanying any attempt to address newly perceived problems. Despite efforts to streamline the system, the audit finds that state agencies have yet to achieve the sensible reform goals set out by governors and legislators since the early 1980s.
Instead of a "one-stop" shop for business licenses and permits, the state has three. And together they provide only a fraction of the necessary information. The primary licensing site makes available only 16 percent of all business licenses issued by regulatory agencies, including just two of the ten most-requested licenses.
There are plenty of reasons offered for failing to make the information available: the licensing requirements are too complex for easy automated handling; there's no need to tamper with something that's already working well; the agencies didn't want to deal with credit and debit cards; it costs too much to put all of the licenses online.
One solution: Require fewer licenses. The Institute of Justice reported last spring that Washington is the "19th most broadly and onerously licensed state, mostly because of the large number of occupations licensed." They looked at "low- to moderate-income" occupations -- barber, massage therapist, travel agent -- and found Washington tied for seventh place in the number of required licenses.
Licensing and regulation pose acute challenges for small businesses.
Years ago a corporate lobbyist told me regulation wasn't a problem.
"We have attorneys that deal with that," he said, without irony. Compliance was just another cost of doing business.
He erred by trivializing the problem -- the costs are substantial for all businesses -- but correctly recognized that large firms are better able to marshal the resources required to navigate the labyrinth. Small businesses may never clear the first regulatory barrier. Others face downtime and lost opportunity.
While the benefits of environmental protection and workplace safety may often justify the costs, strict cost-benefit analysis is too rarely applied as regulations are imposed. Business owners distinguish between "feel good" and "do good" regulation. Washington has an earned, but not necessarily enviable, reputation for often going beyond federal standards, imposing higher compliance costs with no demonstration of increased benefit. We should require justification, but that's a topic for another day.
Using the authority granted in 2005 when voters adopted the performance audit Initiative 900, Sonntag's highly-capable team has successfully tackled the first objective. We now have a comprehensive inventory of regulatory requirements exposing the challenges confronted by the regulated. Regulatory reform remains an unkept promise and an unrealized opportunity for economic growth.

Richard S. Davis is president of the Washington Research Council. His email address is rsdavis@simeonpartners.com.








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