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.[1]
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[2]. 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.
State RegData, developed by researchers at the Mercatus Center at George Mason University, provides a platform for quantifying and analyzing each state’s regulatory text using machine learning.[3] State RegData’s most recent update shows little change in Montana’s regulatory burden from May 2020 to May 2021, as measured by total regulatory restrictions contained within ARM.
As of May 2021, Montana’s ARM contained 59,882 restrictions compared to 59,788 in May 2020, an increase of .16%.[4]
Figure 1 compares this change to regulatory activity in Montana’s neighbor states:
Figure 1 shows Montana’s regulatory burden grew much slower from 2020-2021 than regional neighbors like Idaho, Wyoming and the Dakotas. However, Montana continued to carry the second-highest regulatory burden regionally in the first half of 2021. With 72,345 restrictions on the books, Wyoming was the only neighbor state with more regulatory restrictions than Montana. On the other hand, North Dakota had 54,367 restrictions, South Dakota 46,561 and Idaho 39,077.
Figure 2 details each state agency’s share of Montana’s total regulatory burden in May 2021. 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 2020 and 2021 by each Montana agency:
Figure 4 shows the percentage change in total restrictions imposed from 2020 to 2021 by each Montana agency:
The biggest change occurred in regulatory restrictions imposed by the Office of the Governor. Between 2020 and 2021, the Office of the Governor reduced its regulatory burden by nearly 80%. However, this only amounts to a reduction of 188 restrictions due to the agency’s small size.
A majority of restrictions repealed by the Office of the Governor stem from Notice 14-7[5], which went into effect on July 14, 2020. Notice 14-7 repealed 50 separate rules pertaining to the energy regulation in an emergency. In the rule notice, the Department of Environmental Quality said many of the rules were duplicative and unnecessary, referring to emergency powers already authorized in other areas of Montana code.
Frontier Institute anticipates State RegData’s 2022 update, covering May 2021 – May 2022, will show major changes to Montana’s regulatory burden. Two factors will contribute to significant changes: the 2021 legislative session and Gianforte’s Red Tape Relief Initiative.
The 2021 Montana Legislature passed major reforms which repeal regulations, especially in health care. Many of these bills took effect in the latter half of 2021 and have since triggered sizable rule changes. For example, HB 231[6] ended Montana’s Certificate of Need program for all health care facilities except nursing homes and has led to the simplification of 13 separate rules, eliminating numerous restrictions.[7]
Additionally, the governor’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.”[8]
The process for state agencies to propose, hold public hearings and eventually fully repeal regulations in ARM can take months, so the vast majority of the Red Tape Relief Initiative’s impact is not reflected in the current update of State RegData.
However, rule notices indicate the Red Tape Relief Initiative has already led to large reductions in Montana’s regulatory burden, which will be reflected in the upcoming 2022 State RegData update.
For example, Notice 24-16-379 from the Department of Labor and Industry in December 2021 proposed to amend six rules, repeal 27 rules and adopt nine new rules.[9] The Department cited alignment with the Red Tape Relief Initiative in its reasoning for the proposed change and said the rules had not been revisited or amended in over a decade.
Another notice from the Department of Fish, Wildlife and Parks in November proposed to amend at least 25 rules and repeal 17 to eliminate “outdated and unnecessary language”.[10] The department noted that this was the first time a comprehensive review of this chapter of regulations had even been completed.
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[11], 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.[12]
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.”[13] Thanks to the success of this regulatory budget, Idaho is now the least regulated state in the country.[14]
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.
[1] https://www.mercatus.org/publications/regulation/impact-regulatory-growth-operating-costs
[2] https://files.frontierinstitute.org/wp-content/uploads/2020/12/Montana_Recovery_Agenda.pdf
[3] https://www.quantgov.org/state-regdata
[4] Patrick A. McLaughlin, Jonathan Nelson, Thurston Powers, Walter Stover and Stephen Strosko, State RegData 3.0 (dataset), QuantGov, Mercatus Center at George Mason University, Arlington, VA, 2020
[5] https://rules.mt.gov/gateway/ShowNoticeFile.asp?TID=9919
[6] https://frontierinstitute.org/frontier-institute-statement-in-support-of-hb-231/
[7] https://rules.mt.gov/gateway/ShowNoticeFile.asp?TID=10680
[8] https://frontierinstitute.org/frontier-institute-applauds-gov-gianfortes-first-executive-order/
[9] https://rules.mt.gov/gateway/ShowNoticeFile.asp?TID=10724
[10] https://rules.mt.gov/gateway/ShowNoticeFile.asp?TID=10664
[11] https://www.mercatus.org/publications/regulation/regulatory-budgeting-solution-accumulation-regulatory-errors
[12] https://www.reginfo.gov/public/pdf/eo13771/EO_13771_Final_Accounting_for_Fiscal_Year_2019.pdf
[13] https://gov.idaho.gov/wp-content/uploads/sites/74/2020/01/eo-2020-01.pdf
[14] https://komonews.com/news/local/idaho-is-the-least-regulated-state-new-study-says