Key points:
While regulation is necessary in some cases to protect health, safety and the environment, the accumulation of thousands of regulations has been shown to stifle economic growth and substantially increase the cost of doing business.
In particular, regulations with words and phrases such as shall, must, may not, prohibited and required can signify legal constraints and red tape obligations for businesses and residents.
Frontier Institute’s 2020 Montana Recovery Agenda noted the 2019 Administrative Rules of Montana (ARM) contained 60,086 of these such restrictions and 4.7 million words. It would take an individual about 263 hours, or nearly seven weeks, to read the entire 2019 ARM.
As of 2020, Montana had the second-most regulatory restrictions per capita among its regional neighbors, trailing only Wyoming and well ahead of Colorado, Idaho and Utah.
Frontier Institute utilized two sources to assess the status of Montana’s regulatory burden in 2022. The first source was State RegData, developed by researchers at the Mercatus Center at George Mason University, which provides a platform for quantifying and analyzing each state’s regulatory text using machine learning. State RegData’s most recent update provided counts of total regulatory restrictions in surrounding states for 2022.
The second source was internal metrics for Montana’s regulatory burden provided directly by Governor Gianforte’s office in response to a Frontier Institute data inquiry. Data provided was current as of March 2022. Frontier Institute utilized these internal metrics to analyze Montana’s regulatory burden in an effort to obtain the most accurate information possible for 2022.
As of March 2022, Montana’s ARM contained 59,427 restrictions compared to 59,821 in 2021, a decrease of .66%.
Figure 1 compares this change to regulatory activity in Montana’s neighbor states:
Figure 2 details each state agency’s share of Montana’s total regulatory burden in March 2022. DPHHS, DEQ and DLI impose nearly half of all regulatory restrictions:
State Agencies regularly take actions to modify, repeal or add new rules containing restrictions.
Figure 3 allows users to compare the total restrictions imposed for 2021 and 2022 by each Montana agency:
Figure 4 shows the percentage change in total restrictions imposed from 2021 to 2022 by each Montana agency:
The biggest increase occurred in regulatory restrictions imposed by the Department of Revenue. Between 2021 and 2022, the Department of Revenue increased its regulatory burden by 9%. This is an increase of 264 new regulatory restrictions over the last year. This increase is almost entirely due to rules necessary to implement the state's new recreational marijuana program, authorized by the Legislature in 2021.
One of the most impactful reforms of the year came from a revision to regulations governing apprentice programs proposed in Notice 24-21-385 from the Department of Labor and Industry.
Previously, employers sponsoring apprenticeships were required to have two skilled workers for every one apprentice. In a small business impact assessment, the Department of Labor and Industry said this mandated apprentice-to-journeyman ratio was particularly burdensome for small contractors in rural areas, where it is more difficult to recruit additional journeyworkers to supervise apprentices. MTDLI proposed revising the ratio, allowing one journeyman to supervise two apprentices at a time.
Now six months after the rule change was implemented, more apprenticeships were added in the first six months of 2022 than in 2018, 2019, and 2020 combined.
Frontier Institute anticipates the 2023 Red Tape Snapshot, covering 2022 – 2023, will show even larger reductions to Montana’s regulatory burden. Two factors will contribute to significant changes: additional red tape relief actions by the administration and the 2023 legislative session.
Gov. Gianforte’s Red Tape Relief Initiative is contributing to a significant reduction in Montana’s regulatory burden. Created by Gianforte in January 2021, the Red Tape Relief Initiative is driving a “top-to-bottom regulatory review of all state agencies” to identify and repeal “excessive, outdated and unnecessary regulations.”
The process for state agencies to propose, hold public hearings and eventually fully repeal regulations in ARM can take months, so there are large deregulatory actions that are not reflected in this most recent update because they were not implemented as of March 2022.
Rule notices indicate the Red Tape Relief Initiative continues to spur large reductions in Montana’s regulatory burden, which will be reflected in next year’s 2023 Red Tape Snapshot. For example, in a May 2022 rule notice, the Montana Department of Labor and Industry proposed repealing 27 rules in an effort to simplify, shorten, and clarify the administrative rules around nursing. Another MTDLI rule notice from June 2022 proposed repealing 29 separate rules.
The 2023 legislative session will also likely result in further red tape relief. Many of the rules identified for repeal or revision by the Gianforte administration will require legislation before being changed. The Administration has noted that it is preparing “clean up” legislation for the 2023 legislature, particularly focused on the occupational licensing in the Department of Labor and Industry.
Montana leaders should continue to focus on reducing the overall regulatory burden, targeting at least a 30% reduction in the total number of regulatory restrictions. Meeting this target reduction level would place Montana in line with the regulatory burden of neighbor states like Idaho, making Montana’s economy regionally competitive.
Once meeting the target reduction, Montana lawmakers should take steps to prevent the accumulation of harmful regulations in the future. This will require adding more accountability to Montana’s regulatory process.
Regulatory Budgeting
Lawmakers should consider implementing a regulatory budget, which would require every new regulation imposed to be offset with repealing a regulation. This would create an incentive for state agencies to evaluate tradeoffs when proposing new regulations and consider which regulations are truly necessary to protect health, safety and the environment.
Regulatory budgets can take many forms depending on the metric used. The Trump Administration successfully implemented a regulatory budget which capped the total economic costs of each federal agency’s regulations. Under the regulatory budget, regulators were tasked with evaluating the economic costs of each newly proposed regulatory action. Agencies had to ensure that new regulatory actions were accompanied by deregulatory actions to keep the total regulatory cost increase at zero or below. President Trump’s regulatory budget led to a substantial reduction in the growth of the U.S. regulatory burden, saving the public $50.9 billion in regulatory costs from 2017-2019.
Alternatively, Gov. Brad Little of Idaho implemented a simpler regulatory budget focused on the total number of rules. Little’s 2020 Zero-Based Regulation Executive Order mandated at least one existing rule is repealed or significantly simplified for every new or amended rule so “the net regulatory burden is decreased or neutral.” Thanks to the success of this regulatory budget, Idaho is now the least regulated state in the country.
Whether the metric used is regulatory costs, restrictions, words or something else, Montana lawmakers would be wise to implement an on-going regulatory budget to prevent the future accumulation of regulations.