State governments can undermine opportunities for investment and job creation when businesses spend too much time or money on inefficient regulatory processes, or when new business projects get delayed because firms don’t understand how to comply with the rules. To address this challenge, state policymakers can focus on two types of reforms. First, they can improve the efficiency of regulatory systems so businesses can comply with the rules in a less costly and time-consuming manner. Second, they can partner with businesses to increase compliance as well as economic opportunity. Together, these changes form a powerful economic development strategy by making it quicker and easier for entrepreneurs to launch a new business or bring an innovative product to market.
Policymakers often focus their efforts on trying to reduce or eliminate requirements. Increasingly, however, they are finding that business leaders are less interested in eliminating regulations outright and more interested in getting help navigating the regulatory process and receiving timely and predictable regulatory decisions.
And businesses aren’t the only beneficiaries. When regulatory systems are functioning well, they help to maintain worker safety, protect public health, and minimize environmental pollution. They also create a more level playing field; businesses that make a good faith effort to play by the rules are not put at a disadvantage compared to competitors who take advantage of dysfunctional regulatory systems to cut corners—and costs.
In fact, improving how states regulate has the potential to be one of the most cost-effective approaches to boosting the economy. While tax incentives—states’ primary economic development approach—cost billions of dollars a year, the results are inconsistent; better regulatory administration, on the other hand, can make government more efficient, providing savings that states can use to lower taxes or to invest in more effective programs.
Examples of state regulatory reforms:
- Colorado improved the permitting process that identifies the routes that trucks carrying overweight or oversize loads must take. Not only does the new system save businesses time, but it also improves public safety, as the previous system sometimes directed vehicles on unsafe routes.
- In the course of administering regulations, Washington state helps small manufacturers select a location for a new facility, saving weeks of research and helping them open sooner.
- Vermont launched a targeted education campaign to help craft brewing entrepreneurs comply with rules and expand more quickly.
State forays into improving regulation by increasing efficiency and partnering with businesses are still in the early stages. For example, innovative reforms that have been piloted for only one permit process need to be adopted statewide. States are also just beginning to think about how to set clear goals for, and measure the progress of, improved regulation. However, policymakers looking for a win-win approach to economic development now have a wide range of inventive and proven ideas to emulate.