Regulatory Streamlining in Pennsylvania Would Boost Opportunities for State Residents

Introduction

Good morning, members of the Senate Majority Policy Committee. My name is James Broughel and I am a senior fellow at the Competitive Enterprise Institute in Washington DC, as well as author of a recent report for the Commonwealth Foundations, titled “Cutting Red Tape in Pennsylvania.”¹

Today, I wish to address the issues of the regulatory burden in Pennsylvania, the need for holistic reforms rather than piecemeal changes, and the transformative potential of streamlining regulations for Pennsylvania’s economy.

Pennsylvania’s National Regulatory Standing Shows Room for Improvement

Pennsylvania’s regulatory code is extensive, with a total of 166,219 regulatory restrictions. These are instances of the terms “shall,” “must,” “may not,” “prohibited,” and “required,” in the Pennsylvania Code. This count places the state 12th nationally in terms of the sheer number of restrictions, about 22 percent more regulated than the average of state.² Such a vast number of restrictions can stifle innovation and hinder businesses from reaching their full potential.

A Systematic Approach Is Needed to Boost Growth

Addressing these regulations requires a holistic perspective rather than a rule-by-rule approach. By looking at the regulatory environment in the aggregate, the state can get a better handle on its overall regulatory burden, resulting in more impactful and longer-lasting improvements to the economy.

The economic repercussions of all these regulations are evident in the challenges faced by the business community. Pennsylvania loses about 361 businesses and 5,195 jobs annually due to the federal regulatory burden.³ State regulations impose burdens as well. If Pennsylvania were to reduce its regulatory requirements by 36%, I estimate the state could see an increase of $9.2 billion in GDP, which amounts to $1,760 per household and the equivalent of 180,000 new jobs each year.

Regulatory reductions of that size may sound ambitious, but the Canadian province of British Columbia achieved this goal by setting clear limits on the number of regulatory requirements it imposed, and the results were transformative. Cutting regulatory requirements by 36 percent corresponded with an additional 1 percentage point in annual growth in gross domestic product in the years following reforms.⁴

Bipartisan Solutions Are Available

I’d like to emphasize the bipartisan nature of this endeavor. Regulatory streamlining is a collective effort that should transcend party lines. This is evident from the fact that some of the most significant reforms in recent years took place in blue or purple states like Rhode Island and Virginia.⁵

The state of Rhode Island undertook a regulatory streamlining effort throughout the administration of Gov. Gina Raimondo, who is now serving as Commerce Secretary in the Biden administration. At the onset of her reforms, there were 1,387 active executive branch agency regulations. State agencies revised, consolidated, or eliminated 77 percent of the regulations in a matter of several years.

Virginia during the administration of Gov. Ralph Northam created a regulatory reduction pilot program that required two state agencies focused on occupational licensing and criminal justice services to create an inventory of their requirements and then to cut requirements by 25 percent from baseline levels.

Several years later, during the governorship of Glenn Youngkin, the pilot program was expanded to include nearly all executive branch agencies.

Pennsylvania Is Growing Less Competitive

If the two major parties work together, they can ensure that Pennsylvania remains competitive. There are promising signs on the horizon. Bipartisan legislation like the Fighting Chance Act would create a pilot program akin to Virginia’s, aimed at occupational licensing and criminal justice reform.⁶ Another bill being considered in the Pennsylvania Senate would expand the role of the legislature in authorizing and repealing regulations, as well as empower a new independent agency with authority to identify problematic regulations.⁷

Another potential area of bipartisan compromise is permitting reform, specifically the governor’s effort to catalog all permits, licenses and certifications,⁸ and this chamber’s efforts to create an online permit tracker.⁹ While wait times for permits have fallen in recent years, permit approval times still frequently exceed the 14-to-43-day limits set under Pennsylvania’s permitting-decision guarantee policy.¹⁰ Energy permits sometimes take 250 days or more, suggesting considerable room for improvement.¹¹

If Pennsylvania does not enact bipartisan reforms, however, the outlook for the state’s economy could be dire, as it falls behind the progress occurring in other states. Neighboring Ohio passed a law in 2019 requiring state agencies to produce an inventory of state regulatory requirements. In 2022, Ohio used the inventory data to set a statutory goal of reducing restrictions by 30 percent over three years. Without regulatory streamlining, Pennsylvania runs the risk of losing jobs, businesses and talent to its competitors.

Conclusion

I urge this committee to consider the benefits to the economy from regulatory streamlining, as well as lessons from other states that have taken proactive steps toward reducing unnecessary regulatory burdens. By doing so, Pennsylvania can unlock the full potential of its people and maintain competitiveness with states at the cutting edge of regulatory policymaking.

Thank you for your time and consideration.

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¹James Broughel, “Cutting Red Tape in Pennsylvania,” Commonwealth Foundation, September 2023, https://www.commonwealthfoundation.org/research/cutting-red-tape-pennsylvania/.

²Broughel, “Cutting Red Tape in Pennsylvania.”

³Dustin Chambers and Colin O’Reilly, policy brief: “The Regressive Effects of Regulations on Pennsylvania,” Arlington, VA: Mercatus Center at George Mason University, December 2020, https://www.mercatus.org/research/policy-briefs/regressive-effects-regulations-pennsylvania.

⁴Patrick McLaughlin and Bentley Coffey, Working Paper: “Regulation and Economic Growth, Evidence from British Columbia’s Experiment in Regulatory Budgeting,” Mercatus Center at George Mason University, June 1, 2021, https://www.mercatus.org/research/working-papers/regulation-and-economic-growth.

⁵James Broughel and Dustin Chambers, “Learning from State Regulatory Streamlining Efforts,” (Washington DC: National Governors Association, July 2022), https://www.nga.org/center/publications/learning-from-stateregulatory- streamliningefforts/.

⁶Senate Bill 259, Regular Session 2023-2024, https://www.legis.state.pa.us/cfdocs/billInfo/billinfo.cfm?syear=2023&sind=0&body=S&type=B&bn=259.       

⁷Senate Bill 726, Regular Session 2023-2024, https://www.legis.state.pa.us/cfdocs/billInfo/billInfo.cfm?sYear=2023&sInd=0&body=S&type=B&bn=0726.

⁸Gov. Josh Shapiro, Executive Order 2023-07: “Building Efficiency in the Commonwealth’s Permitting, Licensing, and Certification Processes,” January 31, 2023, https://www.governor.pa.gov/wp- content/uploads/2023/01/20230131_EO-2023-07_FINAL_Executed.pdf.

⁹Senate Bill 350, Regular Session 2023-2024, https://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?syear=2023&sInd=0&body=S&type=B&bn=350.

¹⁰Pennsylvania Department of Environmental Protection, Office of Program Integration, “Policy for Implementing the Department of Environmental Protection Permit Review Process and Permit Decision Guarantee,” November 2, 2012, https://www.dep.pa.gov/Business/ProgramIntegration/DecisionGuarantee/pages/default.aspx.

¹¹James Broughel, “Cutting Red Tape Could Add Billions To Pennsylvania’s Economy,” Forbes, September 20, 2023, https://www.forbes.com/sites/jamesbroughel/2023/09/20/cutting-red-tape-could-add-billions-to- pennsylvanias-economy/.