Sonntag tackles business regulations

Though he may be retiring at the end of his term next year, State Auditor Brian Sonntag is not scaling back his efforts to improve the performance of state government. This includes how government interacts with the economic engine necessary to provide the revenues to fund vital core functions: private enterprise.

This is why Sonntag and his team are in the process of an important review of the state's regulatory environment. As noted by a March 2011 report:

The complexity of Washington State’s regulatory system creates costs for governments and businesses alike. Not only are there many regulations, but many requirements change every year or two based on new legislation or state agency amendments to existing rules. The Office of the Code Reviser reports that in 2009 alone, state agencies proposed more than 14,000 pages of new or revised rules.

In addition, regulations can impose unequal burdens across businesses, resulting in an unfair playing field. For example, ineffective enforcement can give an advantage to businesses that knowingly ignore their regulatory responsibilities. Many regulatory costs to business are fixed, with larger firms able to spread those costs over a greater number of employees, meaning that small businesses bear a disproportionate part of the regulatory burden. A 2007 Department of Revenue study on the business survival rate in Washington found that “taxes and costs of complying with government regulations are factors that contribute to business failure because most small businesses are not profitable in the early years.” (BSSUG, 2007)

Improving the effectiveness of Washington’s regulatory regime through streamlining, clear rule writing, reducing the administrative burden, and other innovations will benefit businesses, state government and taxpayers in general. Clear, fair and efficient regulations will keep Washington competitive in the global economy.

Here is an October 14 email from Larisa Benson, Director of Performance Audits, describing their regulatory review effort:

I’m writing to give you an update on a series of regulatory reform performance audits that we initiated earlier this year.  Last week we published on the State Auditor’s Office website an inventory of nearly 1,400 business permits, licenses and inspections administered by 26 state agencies.  The inventory provides baseline information that will serve as the foundation for several upcoming audits.  The inventory’s 26 Excel spreadsheets—one for each regulatory agency—can be accessed at http://www.sao.wa.gov/EN/Audits/PerformanceAudit/Pages/RegReform.aspx
 
In compiling the information from agency websites to populate the inventory, we identified several opportunities for the state to improve the way it communicates important regulatory information to businesses.  We are planning to issue a report and recommendations to address those opportunities in December.  Here are some of the highlights of what we identified:

• For businesses and government, time is money.  Businesses tell us they often must spend significant time looking for information about state rules and regulations that affect them or waiting for regulatory decisions.  Often, they contact agency staff for clarification or more information.   The result is higher costs for all parties.

• The state has several central websites designed to help businesses understand what permits and licenses they need to obtain, but neither those sites nor the agencies’ sites allow a business to fully understand what is required from them or how long the process could take.

• The business sections of regulatory agency websites lack a common look and feel, making them difficult for businesses to navigate.

Our report will include several recommendations to help state agencies improve their websites to provide critical information for businesses in a more user-friendly way.

Development of the inventory has been a large undertaking.  We could not have completed it without the help of many staff members in the 26 agencies that administer state business regulations.  We very much appreciate their help and hope the inventory proves valuable to them as well as to state policy-makers, public interest groups and businesses.

Each inventory spreadsheet contains details about the agency’s business permits, licenses and inspections, including the purpose, fee and where the application is available.  The inventory also identifies supporting state laws or administrative rules, and, when available, the time required by the agency to process applications.

Senior Performance Auditor Deborah Stephens is leading this project, and you may contact either of us directly if you have questions or suggestions about the inventory or the upcoming audits.

I had an opportunity to meet with staff at the Auditor's office this morning to discuss their plan. Currently there are five performance audits in the hopper:

1. Agency efforts to streamline their administrative rules
2. Agency permit process time
3. State regulations in excess of federal regulations and the value added for the extra regulation
4. Agency inspection process and coordination amongst agency inspections
5. Effectiveness and opportunities for improvement for the state's one-stop portal for business regulations

As noted by Indiana Governor Mitch Daniels at WPC's annual dinner last week, one of the best things state regulators can do is change the perception of their role from "adversary" to "facilitator" of state businesses. Here are Daniels' thoughts on what businesses should be able to expect from state regulators:

One is consistency and predictability. I'm not running a department where we expect something of A and expect something different of B. We're going to get rid of that.

The second thing quickness. Time is money is not a figure of speech. To everybody that works for us, until they were sick of it, I always said we would move at the speed of business, not the speed of government.

And I said, lastly, we want you to be collaborative, not punitive. I said these folks that you regulate are not the enemy. They are your neighbors and their success is a good thing. For all the reasons that I mentioned a minute ago, we want you to go and tell them what they need to do to get in compliance with whatever you’re enforcing, and 99-point-X percent of them are going to do that. Your job is not to lurk around in the bushes looking and waiting for them to mess up and jump out and nab them.

And I said that tiny minority that color outside the lines, we will throw the book at them. But you know we are going to measure how long it takes to get a permit out of your department and everywhere else, and we're going to make that a lot shorter in a few years. And it is.

Attendees at WPC's September 2011 Small Business Conference offered these thoughts on regulatory reform:

1. Review environmental regulations to ensure that Washington rules don't exceed federal regulations
   
   
2. Legislature should not grant general rule making authority to agencies, but rather be specific about rules to be put in place
   
   
3. Legislature should listen to and follow up on State Auditor Office reports on regulatory reform (tie)
   
   
4. Sunset provisions for regulations (tie)

Based on number three, it looks like Sonntag is already building strong support for his efforts to improve the state's regulatory climate to help unleash the entrepreneurial spirit of Washingtonians.