Achieving Efficient Government and Regulatory Reform in Maryland
by
Randolph J. May * and Michael J. Horney **
[Below are the Introduction and Summary, the first section concerning restructuring Maryland's executive agencies, and the Conclusion to this latest FSF Perspectives. A PDF version of the complete Perspectives, with footnotes, is here.]
Introduction and Summary
Commendably, in July 2015, Maryland Governor Larry Hogan announced that he had established a Regulatory Reform Commission with the goal of streamlining government, stimulating economic activity, and creating jobs. Shortly thereafter, Free State Foundation President Randolph May wrote:
[J]ust as reducing unnecessary spending is important to improving Maryland's fiscal health, so too is eliminating unnecessary or unduly burdensome regulations. The positive economic effect that results from leaving more productive resources in the realm of the private sector is the same in both instances.
In December 2015, the Commission released its first report analyzing ways state government can improve Maryland's business climate by eliminating unnecessary and burdensome regulations and creating more efficient "customer service" processes.
The Commission held six regional meetings throughout Maryland to learn from local business leaders and interested citizens concerning how the state government can improve Maryland's regulatory environment and, thereby, its overall economy. The Commission traveled to Central Maryland (Baltimore City), the Capital Region (College Park), Northern Maryland (Havre de Grace), Western Maryland (Hagerstown), Southern Maryland (Waldorf), and Eastern Maryland (Cambridge).
The Commission's December 2015 report contains statements from a handful of business leaders and gives examples showing how unnecessary and burdensome regulations have harmed local businesses and Maryland families. The most important part of the report, though, is the section on policy and procedural recommendations that Maryland officials should consider. Surely, some recommendations are easier to implement than others, and some will be subject to more controversy than others. But taken together, or even considered separately, they can have a positive impact on Maryland's entrepreneurs and consumers if they are implemented.
Here are the Report's recommendations:
- Restructure State Government and Implement Regulatory Reform
- Create a One-Stop Shop for Business Licenses and Permits
- Adopt Electronic Documentation and Online Filings
- Streamline the Review Process
- Consolidate Occupational Licenses
- Reduce Fees and Payment Frequency
- Expand Minority and Disadvantaged Business Opportunities
- Review and Revise Vineyard and Food Truck Requirements
- Improve State Procurement Processes
- Improve State Procurement Processes
In the body of this paper, we summarize and comment on the recommendations contained in the report. And, in the process of doing so, we also offer some important suggestions of our own, for example, regarding a proposal for restructuring Maryland's state government. All the while, the summary and our own comments will stay within the report's framework.
The Commission's Policy and Procedural Recommendations
Restructure State Government and Implement Regulatory Reform
In its report, the Commission suggests that the Hogan Administration "consider a comprehensive review of Maryland's state government structure and organization, eliminate duplicative responsibilities and functions, and look for opportunities to re-organize in order to bring Maryland into the 21st century." The Commission's report explains that "since Governor Marvin Mandel's effort to reorganize and restructure Maryland state government over 45 years ago, state government has expanded to a point where it is causing significant harm to the ability to foster economic growth."
Restructuring the state government is, of course, a major undertaking. But in our view it is necessary for Maryland, after proper study, to undertake a major reorganization. Having several agencies duplicate functions, and in the process issue overlapping regulations, leads to ineffectiveness and inefficiencies that waste taxpayer money and increase compliance costs for entrepreneurs and citizens. While consolidation in and of itself does not always make processes more efficient, consolidation often helps improve government administration by eliminating overlapping, redundant functions and regulations that exist across multiple agencies and regulators.
The Commission's report does not offer specific recommendations for the restructuring it urges. We think consolidating Maryland's twenty different departments within the executive branch is an important place to start. Of course, there are various ways to accomplish such consolidation, and we recognize that the pros and cons of various proposals must be considered. Below is a working proposal for consolidating and reorganizing Maryland's departments. It takes into account the presumed functions of the departments and the services they are supposed to provide. Under our working proposal shown in the table below, the number of departments would be reduced from twenty to eight.
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Old Departments
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New Departments
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Department of Aging
Department of Disabilities
Department of Health and Mental Hygiene
Department of Human Resources
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Department of Social Services
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Department of Business and Economic Development
Department of Housing and Community Development
Department of Planning
Department of Transportation
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Department of Economic and Community Development
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Department of Juvenile Services
Department of Public Safety and Correctional Services
Department of State Police
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Department of Public Safety
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Department of Agriculture
Department of Environment
Department of Natural Resources
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Department of Agriculture and Natural Resources
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Department of Budget and Management
Department of Information Technology
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Department of Budget and Management
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Department of Education
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Department of Education
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Department of Labor, Licensing, and Registration
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Department of Labor, Licensing, and Registration
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Department of Veterans Affairs
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Department of Veterans Affairs
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Consolidation along these lines would enable streamlining the bureaucracy and administrative processes and eliminating duplicative responsibilities. But in and of itself, such restructuring would not erase the burdensome regulations that have accumulated over many decades.
In a July 2015 blog, Free State Foundation President Randolph May suggests two very important process reforms that could improve the regulatory environment in Maryland going forward. First, he suggests that the state government create a "sunset" date for all new regulations, requiring the regulations to expire if they are not affirmatively readopted by the sunset date. Under Maryland's current statute, each state agency is required to review its regulations every eight years (with a few exceptions). But, due to market, technological, and other changes, not all regulations continue to serve their intended purpose for eight years, or even much less. For example, recently adopted legislation to regulate ridesharing in Maryland may not be consistent with transportation market developments or technological changes in 2023.
With "sunset" requirements, state agencies would have to prove that the expiring regulation should be renewed. Currently, the state agencies do the exact opposite. They analyze an existing regulation that, in any event, is not set to expire automatically in order to determine if it should be overturned. State agencies have little incentive to jettison existing regulations, even if they no longer serve a purpose. Not only would doing so decrease the agency's responsibilities, but it also might decrease the agency's future budget. And although currently the regulatory reviews must be approved by the Joint Committee on Administrative, Executive, and Legislative Review (AELR), there is no mandatory cost/benefit analysis included in either the responsible agency's review or the AELR's approval.
With that in mind, Mr. May's second recommendation is to establish a central entity within the executive branch to review regulations before they are promulgated. The primary functions of this executive branch entity would be to determine if a regulation's projected benefits outweigh projected costs and to ensure that the proposed rules are consistent with other outstanding regulations. Similar to the federal government's Office of Information and Regulatory Affairs (OIRA), this executive agency would be staffed with economists and lawyers to analyze the economic and legal ramifications of all proposed rules.
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Conclusion
We commend Governor Hogan for initiating efforts to reduce or eliminate overly burdensome or outdated regulations in Maryland. Establishment of the Governor's Regulatory Reform Commission is a good start. We also commend the Commission for a solid report offering some initial recommendations for improving the regulatory environment in the Free State. It is possible to get rid of legacy regulations that no longer, if ever, serve their intended purpose, or to reduce their burdens, while still protecting public health and safety and consumers. Likewise, it is possible to streamline government processes and administration without compromising those objectives. To be sure, implementing sensible regulatory reform and making government operate more efficiently should not be a partisan issue. Rather, this is simply a matter of working hard to achieve "good government."
We hope these policy and procedural recommendations of the Governor's Commission, along with our own suggestions presented here, will be carefully considered in what should be a concerted and widely accepted effort to create a more attractive business climate, promote more entrepreneurial activity, and increase economic growth in Maryland.
* Randolph J. May is President of the Free State Foundation, an independent free market-oriented think tank located in Rockville, Maryland.
** Michael J. Horney is a Research Associate of the Free State Foundation.
Read the complete
Perspectives, with footnotes,
here.
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