Virginia’s New Approach to Regulatory Modernization

July 18, 2023 at 1:00 PM ET

Regulatory modernization has been a topic of nationwide interest in recent months.  With its recently revised Circular A-4, the federal Office of Information and Regulatory Affairs has embraced an approach that could potentially lead to a massive expansion in the regulatory state.  At the same time, the Commonwealth of Virginia has been pursuing a very different approach.  Governor Glenn Youngkin issued an executive order, EO 19, which strives to reduce regulatory burdens by 25% while promoting more transparency in the process and better regulatory analysis.

This panel, which includes the Director and Deputy Director of Virginia’s Office of Regulatory Management as well as leading scholars in the regulatory space, will consider the reforms that Virginia is pursuing and examine whether and how they might work in other states and at the federal level.  They will consider the challenges and opportunities associated with regulatory economic analysis and a regulatory budget, look at how the Virginia reforms have fared over the last year, and explore what it might mean to implement similar reforms in other jurisdictions.

Additional Reading:

Reeve T. Bull, Virginia’s Model: The Commonwealth Leads the Way on State Regulatory Modernization, Washington Legal Foundation, July 13, 2023, available at: https://www.wlf.org/2023/07/13/publishing/virginias-model-the-commonwealth-leads-the-way-on-state-regulatory-modernization/

Transcript

Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.

[Music]

 

Sarah Bengtsson:  Good afternoon and welcome to this Regulatory Transparency Project webinar. My name is Sarah Bengtsson, and I am Associate Director of RTP here at The Federalist Society. Today, July 18, 2023, we are pleased to host a discussion on “Virginia’s New Approach to Regulatory Modernization.” Please note that as always all expressions of opinion on today’s program are those of the speakers. After the discussion, our panel will take audience questions, so please submit those questions into the Q&A function at the bottom of your Zoom window. 

 

Our moderator today is Anastasia Boden, Director of the Robert A. Levy Center for Constitutional Studies at the Cato Institute. Before joining Cato, Anastasia was a civil rights attorney at the Pacific Legal Foundation where she led the organization’s equality and opportunity program. She also co-created the podcast Dissed, which tells the stories behind infamous Supreme Court dissents. In the interest of time, I’ll stop there, but you can read the full and impressive bios for all of our speakers at regproject.org. Thank you all so much for joining. And now I will hand it over to you, Anastasia. 

 

Anastasia P. Boden:  Well, thanks, Sarah, and thanks for joining us, everyone. As someone who spent ten years representing entrepreneurs whose hopes had been crushed by unnecessary and anticompetitive regulations, Virginia’s project is very special to me. I know when you talk to these entrepreneurs it’s not always just one big policy that’s holding them back. It’s instead a thicket of overlapping and complex policies that makes their lives impossible. So I’m glad to see Virginia is trying to cut back that thicket. 

 

Today, I’m joined by three experts in the field who can talk about what Virginia is doing and how states can replicate that effort. And I’m hopeful that they will. First, we’ll hear from Andrew Wheeler, who’s the director of Virginia’s Office of Regulatory Management. He’s also the former administrator of the Environmental Protection Agency. Mr. Wheeler has dedicated his career to advancing sound environmental policies, beginning his career as a special assistant in the EPA’s Pollution Prevention and Toxics Office and later working as majority staff director and chief counsel of the Senate Committee on Environment and Public Works. 

 

Next, we’ll hear from Reeve Bull who’s the deputy director of Virginia’s Office of Regulatory Management. Prior to this role, he was the research director of the Administrative Conference of the United States where he worked on projects related to international regulatory cooperation, the use of science by administrative agencies, presidential review of agency rulemaking, and, very appropriately for today’s event, regulatory benefit-cost analysis. 

 

Last, we’ll hear from Caroline Cecot, an assistant professor of law at Antonin Scalia Law School at George Mason University, where she teaches administrative law, environmental law, and torts. In her research, she focuses on environmental and energy law in regulation, administrative law, and agency practice of cost-benefit analysis. 

 

For today’s event, first I will hand it to Director Wheeler and Reeve Bull who will outline Virginia’s Office of Regulatory Management. We’ll get some reactions from Professor Cecot, and then we’ll get into questions and answers. So please feel free to use that question and answer feature at the bottom of your screen. And I’m sure our panelists would love to hear what you have to ask. So with that, I’ll hand it over to Director Wheeler. 

 

Andrew Wheeler:  Thank you, Anastasia. I appreciate the opportunity to be here with all of you today, with my deputy Reeve by my side. And what we’re doing here in Virginia I think is very unique. First of all, Virginia was at the forefront of regulatory transparency back in the late 90s under Governor George Allen when they created the website virginia.townhall.gov where you can go and look at any of the regulations or guidance documents pending. And you use that website to comment. So the public can comment through that website. It was very innovative, but we didn’t do a whole lot since then to increase innovation. 

 

When Governor Youngkin came in last year, he looked at the status of our regulations in particular, and he was concerned — we have over 64, 65 depending on how you count them agencies that have the ability to promulgate regulations. Of those agencies, 22 were exempt from having their regulations reviewed by the Governor’s Office or by the secretaries. And it could go straight from the agency to the registrar without any further review. 

 

He was concerned about that. And under Virginia law, every governor is supposed to issue a new executive order within the first six months of their tenure to lay out the regulatory process for what will guide their administration. And what Governor Youngkin did last year was in his executive order, Executive Order 19, create our office, the Office of Regulatory Management, ask us to review all regulations. Whether the exempt agencies or nonexempt agencies, he wanted us to review all of them. He wanted us to take a look at the impact analysis — cost impact analysis for all regulations. And he also asked that the cost impact analysis apply to guidance documents, which I believe is a first. I’m not aware of any other states that require cost impact analysis for guidance documents. 

 

So when he set up our office, he was concerned about transparency and efficiency. The second aspect that he was concerned about is the length of time it took for a regulation from start to finish. It took on average three to four years for a regulation from start to finish. And part of that bottleneck of regulations, regulations were sitting in the Governor’s Office on average 241 days. And this is a statistic that goes back over a decade. This was not — this was in the first couple months of his administration. This was not during his administration, but on average it was taking regulations to be reviewed by the Governor’s Office 241 days. 

 

So when creating this office, he said I want transparency. I want all Virginians to know what the regulations are, what the guidance documents are, what the cost impact would be. And I want the process to move more efficiently. Since we were created, we started reviewing regulations last August on August 1. And our average since August 1 we’ve reviewed over 200 new regulations, and our average is 11.9 days to review a regulation compared to the 241 days over the previous decade. On guidance documents, we’ve reviewed over 80 guidance documents since February 1. And our average for guidance documents is 6.8 days. 

 

So we’ve transformed the process to be much more efficient and much more transparent in that all regulations are now reviewed and the cost impact analysis is available for the public. In addition, the governor also called for 25 percent reduction in regulatory requirements, not a reduction in regulations — in a hard number of regulations, but in regulatory requirements. And a simple aspect would be counting the number of shalls or musts in a regulation. And with that, I’m going to turn it over to my deputy, Reeve, who’s going to talk a little bit more about our cost impact analysis as well as our regulatory reduction requirements and how we’re going about counting those. Reeve?

 

Reeve T. Bull:  Wonderful. Thanks, Andrew, and thanks to all of you for joining us today. So as Andrew mentioned I’d like to cover two things, the regulatory economic analysis and then the regulatory reduction before turning it back over to Andrew to discuss our permitting work as well. 

 

So with respect to those two components, the way that I like to think about it is a well-functioning regulatory system needs to do two major things. One, it needs to review new regulations to make sure that they basically are as efficient as possible, that they do more good than harm. And then it also has to have a mechanism in place for reviewing existing regulations to determine if they still make sense, if they should remain on the books. And I think that we in Virginia have actually been innovators in both of those spaces. And what I’d like to do is just take a few minutes to sort of describe the innovations that we’ve achieved in both of those areas — achieved and are continuing to achieve because of course it’s an ongoing process. 

 

So starting with the new regulations, the key when an agency is considering a new regulation is to make sure it does more good than harm, that the benefits outweigh the costs. And in order to do that effectively it requires economic analysis. And this is something that actually the federal government has been doing for quite some time. It goes back at least to the 1980s, really earlier than that. It actually goes back arguably to the Johnson administration. But basically federal agencies for a lot of years have sort of developed a process for doing benefit-cost analysis. 

 

Now, we think in recent years, in the recent administration they’ve taken a few steps backwards with respect to the revised circulary forum, but the overall process generally is something that’s pretty widely accepted. What’s interesting, though, and what we found out is though this is very well established at the federal level, it was virtually nonexistent at the state level. There’re a handful of other states that do similar things. Rhode Island actually was one of the major states that we’d looked at in terms of when we were designing our process. Colorado and Washington have also done some work in this space. 

 

But really it was pretty unique. There are very few states that have actually done the sort of thing that we set out to do when we stood up this office. And in some sense that was a challenge because since the federal government has such a well-developed system for benefit-cost analysis — almost all of the agencies have economists on staff. Some agencies have very well-developed economic staffs. That’s not the case at all in Virginia. There may be a handful of agencies that do have an economist or two, but it’s relatively rare. 

 

So that was a challenge, but we also saw it as an opportunity. And I can sort of explain how partly because of that necessity we think the approach we’ve adopted is really quite innovative, is something that other states, I think, can and should adopt. And hopefully eventually it may be something influential for the federal government as well. 

 

So let me just sort of describe briefly how the system works. So first of all, as Andrew mentioned, we apply regulatory economic analysis to all of the regulations, as well as guidance documents that Virginia agencies issue. That’s quite a bit different than the federal government. The federal government, it’s limited under Executive Order 12866 to significant regulations and particularly economically significant regulations, which is sort of a small tranche that traditionally had more than $100 million in annual economic impact. It’s now $200 million in annual economic impact. Traditionally, that was about 1 to 2 percent of the regulations. It’s now presumably less or fewer because of the change. 

 

So you’re talking about a very, very small tranche of regulations that they’ll review, whereas we review everything. It’s across the board. And because of that and because the agencies don’t have economists on staff, we intentionally designed it in a way that we thought was much more streamlined. So if you look at what happens federally, it’s a relatively small percentage of regulation, but the regulatory impact analyses tend to be huge. You’re talking about multiple hundreds of pages in most cases. Whereas, if you take a look at our townhall website, our analyses are much, much shorter than that. It’s probably around like eight to nine pages on average, much, much shorter. And we intentionally designed the system in a way to promote that. 

 

So neither Andrew nor I is an economist, so as we were putting together the regulatory economic analysis manual that’s up on our website, we intentionally designed it in a way that would resonate with non-economists. And in particular we really placed the focus — and this is, I think, another difference vis-à-vis the federal government. We really placed the focus on sort of the foundational questions. So a regulatory economic analysis has four components: defining the problem, looking at the alternatives, looking at the benefits and costs of the alternatives, and then looking at some targeted effects on families, small businesses, and local governments. 

 

And as you might guess, at the federal level the focus really tends to be heavily on the benefits and the costs, calculating the benefits and the costs. And that’s an important component of what we do, too. But we really try to put the emphasis on those first two questions: is there a problem, and if so, what are the alternatives? And we actually ask the agencies to look at at least three alternatives: what they’re actually proposing, doing nothing, just leaving the status flow intact, and then at least one other option. And they are supposed to calculate out the benefits and costs of each of those and then explain why they chose the one that they did. 

 

And we think that this is much simpler, much more straightforward for the Virginia agencies to do. And I think another real benefit of it is that as a consequence of that it’s much more transparent. You can log onto the townhall website. You can find all of these, and even if you’re not an economist — we’re not economists. And they’re really pretty straightforward. It’s the sort of thing that a small business or a member of the public could click up and understand and hopefully could weigh in as well as part of the process. We think it makes it much easier to promote public participation, which we think is critically important. 

 

It’s actually really important at the state level because you get fewer comments, but the comments tend to be taken very, very seriously by the agencies. They often change the regulation in response to the comments. So our hope is that this makes it a lot more open, a lot more transparent, a lot easier for members of the public to then weigh in and provide the sort of information that agencies will find useful. So that’s the process for the new regulations. And take a look at our townhall website if you’re interested. It really sort of lays out the manual and then regulation by regulation, each of them has one of these forums. 

 

Let me take a few minutes also to discuss the process for the existing regulations, the older regulations. And here too we think that what we’re doing is really quite innovative. So just to sort of take a step back, so call retrospective review which is basically the process by which agencies look at the regulations they have on the books and decide if they still are needed, it goes back pretty far at the federal level. We actually did a project at ACUS, where I worked before, on retrospective review. And we found that it goes back at least to the Carter administration. 

 

But to be perfectly honest, it really didn’t produce a whole lot then, and it really didn’t produce a whole lot between him and the Obama administration, which was actually the most recent administration to put out an executive order on retrospective review. And I think the problem was it’s kind of an incentive issue. The agencies really don’t have much of a reason to upset their own handiwork. They tend to sort of look at the regulations and say, okay, this looks fine. We’re not going to change it. 

 

Incidentally, we had a similar process here in Virginia. Every four years the agencies are required by statute to do so-called periodic review where they review all of the regulations they have on the books. But if you take a look at the periodic reviews, traditionally similar to what you saw at the federal level where they say, okay, we looked at it. We still need this regulation. We’re not going to change it. 

 

So in the last ten years or so there’s been some innovation in this space. A lot of countries have adopted what’s commonly called a regulatory budget. The Trump administration did this via executive order. They had an Executive Order 13771 that imposed a so-called two for one requirement. For every one new regulation, agencies had to find two existing regulations to get rid of. A handful of other countries have done similar things: Canada, Australia, the UK. Most recently the European Union has done something like this. So those are increasingly common at the national level. 

 

At the state level, what’s much more common is actually a reduction target where states will say, okay, we want to try to reduce the number of regulations by X percentage. And ultimately Governor Youngkin in his Executive Order 19 did something somewhat similar to that. It is a target similar to the other states, a 25 percent reduction target. But there are a handful of aspects of it that we think make it unique, different from what any other state or even any other country has done and we think actually works quite well. It’s quite sophisticated in terms of the approach. 

 

So as Andrew mentioned, one of the first distinctions is that unlike a lot of the national regulatory reduction efforts, we don’t focus on the number of regulations. We focus on the number of requirements in regulations, which we think is a much better metric because you can easily see how you might have one massive regulation and two miniscule regulations. It’s kind of easy to game that system. Whereas focusing on the number of requirements is much more nuanced, and it ensures that there’s a genuine change in the overall regulatory burden. 

 

So that’s the first innovation. The second innovation is that we realized that there are ways to streamline regulatory burdens without necessarily striking musts and shalls. So an example we often give — and we can maybe get into more of a discussion with some other examples. But the one Andrew and I often like to cite is our Board of Barbers and Cosmetology reduced their training hours for new cosmetologists from 1,500 hours to 1,000 hours. 

 

So if you look at that, they haven’t gotten rid of a requirement. The requirement is still there, but they have substantially reduced the burden of the requirement. It’s now 33 percent less burdensome than it was because they substantially reduced the number of hours. So we’re giving agencies credit for that. If they’ve reduced a burden without necessarily striking it, we give them credit for the cost savings. 

 

And then one final thing we also do as part of that is we look at guidance documents as well. Hopefully, guidance documents should not include requirements. Unfortunately, they do in some cases, and we’re urging the agencies to move any requirements they have out of guidance documents into regulations. But another thing we’re looking at is just the overall length of the guidance documents. If you go on our website, you’ll see a lot of agencies have a lot of guidance documents. A lot of them are very long, and that can be difficult for especially businesses to navigate. Sometimes the guidance documents are even out of date or no longer applicable. So we’re urging the agencies to go and look at all of those and make sure that everything is up to date, that it’s written in the most streamlined way possible, and that it’s right sized in terms of the overall amount of guidance that agencies are issuing. 

 

The final thing that I’ll mention is we have a regulatory reduction guide that’s up on our website that sort of describes this overall process. And both the regulatory economic analysis manual and that guide we think are useful resources especially for other states to take a look at. We’ve chatted with people in other states, and there’s been some interest. And we think that these are the sorts of resources that would need to be modified to some extent, but other states could probably pick this up and do something similar to what we’re doing. And they wouldn’t have to reinvent the wheel because these resources are now in place. So let me stop there and turn it back over to Andrew. 

 

Andrew Wheeler:  Thank you, Reeve. So I’m just going to briefly highlight what we’re also doing on permitting reform and efficiency. So last year, we started a pilot at our Department of Environmental Quality called the Permitting Enhancement and Evaluation Platform or PEEP. And to think about this, think of a Gantt chart for each permit, and think about the tracking systems that are typically used by some of the mailing companies, FedEx, UPS, etc., where you can go online and track where your package is from where it was shipped, where it is in each of the steps until you finally receive it. We’re doing that for permitting as well. 

 

So we create a Gantt chart for each permit type that has a bar — it’s a bar graph, and it’s available on the dashboard at DEQ right now for all of the water permits as of this past December. And they are currently putting all the rest of their permits on the system as we speak throughout this year. Our office is taking this pilot and expanding it to five other departments. We’re expanding it to our Department of Conservation Resources, which handles a lot of the resiliency and water issues, as well as our Marine Resources Department, our Department of Energy, our Department of Transportation, and our Department of Health. Altogether, we’ve identified approximately, I believe, 300 permits across all of those agencies. And we’re working to build out the Gantt charts for each of those. And they’ll be available to the public so that you can go online and you can see where the permit is in each stage. 

 

And this is, I believe, very unique as far as other states are concerned. This has both a public function and a government function attached to it. The public function is the Gantt chart. You see it’s supposed to be in the first agency for 30 days. The second agency takes it over for 40 days, and it goes through each step of the process. And it has the date when the permit is expected to be decided, the decision date. If a permit gets delayed — that decision date which is shown by a red bar, that red bar stays in place, but the rest of the Gantt chart expands out. And a new deadline bar appears. So you can tell that this permit is late and that a decision has not been made. So if you are the applicant, you can see where it is, including if it’s been returned to you. 

 

At this point, the only people that we’ve found that are unhappy with this system are the contractors that applicants hire because sometimes the permits are returned back to the contractor, and the contractor likes to blame the state agencies for holding up a permit when in fact it’s sitting on their desk. We’ve had a few instances where a permitee has called the Department of Environmental Quality to ask where their permit is. The director has gone onto the dashboard and said let me see where it is. Oh, it’s with your agent. Your agent hasn’t responded to our questions. So this is an opportunity to provide more transparency. 

 

It’s also an opportunity to provide more transparency to the public because you can search the database to see what permits are currently being reviewed in your area code, for example — not your area code, your ZIP code for example. And over the course of my career, I’ve found that a lot of permits, a lot of projects that end up having a lot of opposition it’s partly because people don’t realize about the project until very late in the process. So this alerts people as soon as the permit is filed to all the permits that are going on in their area of the state. 

 

The second aspect that I wanted to just mention briefly is on the management side for internal processing. And this will hopefully lead to long term efficiencies in the process. The permit is assigned to a permit writer or analyst within each agency, each individual permit. That person gets an email generated by the system one week before the permit deadline saying you have one week to complete your review of this permit. They get another email the day before the deadline saying you have one day left to review this permit before the deadline. The day of they get another email. The day after, if they haven’t completed their work on the permit, they get an email saying this permit is now one day late. 

 

After a week, the manager gets an email saying this permit is one week late. After two weeks, the manager’s manager gets an email. And after three weeks, in the case of DEQ, the director of DEQ gets an automated generated email saying the following permits are now three weeks late. So this will hopefully turn into more efficiencies long term, and it fulfills Governor Youngkin’s goal of more transparency and more efficiency in all of our state actions that we do on behalf of the citizens of the commonwealth. And with that, I’ll turn it back to Anastasia. 

 

Anastasia P. Boden:  Well, thanks to you both. I was listening with interest to some of the other states that you’ve looked at, and I was just shocked to hear that you hadn’t looked at my home state of California for ideas about regulatory reform because we all know it’s a paradigm —

 

Andrew Wheeler:  Oh, we have. We have as a bad example. 

 

Anastasia P. Boden:  Well, Professor Cecot, you’ve obviously done a lot of thinking about regulatory reform and cost-benefit analysis, and we’d love to hear any reactions you have to Virginia’s program. 

 

Caroline Cecot:  Sure. Thank you, Anastasia, for the introduction. And I’m really happy to be here to talk about Virginia’s regulatory reforms. So as you heard, much of my research focuses on the practice and the judicial review of cost-benefit analysis, albeit usually on the federal level. So the federal government has had a requirement for agencies to do cost-benefit analysis for significant regulations since President Reagan’s executive order in 1981. And while the analysis at times still leaves much to be desired, just see the work of my frequent coauthor Robert Hahn and others, I’m ultimately a big supporter in the role that cost-benefit analysis plays in regulatory policy. 

 

I think the process of thoughtfully, comprehensively, and systematically considering both the costs and the benefits improves regulations and makes society better off. It’s difficult to prove this, though, to those who are skeptical of its role because it’s difficult to show what would happen in a world without the cost-benefit analysis for any given regulatory context. But there are anecdotes that suggest that the analysis makes a big difference. Christopher DeMuth, reflecting on his time as administrator of OIRA during the Reagan administration, described how the administration imposed a stricter standard for phasing out lead and gasoline, stricter than the one they had inherited and thought they would get rid of. And it was based on the results of a cost-benefit analysis. 

 

Oftentimes, market-based approaches have come under serious consideration because of expected cost savings that are revealed in a cost-benefit analysis. Reeve already mentioned one example, one anecdote regarding the regulatory requirement reduction aspect of the initiatives in Virginia, the training hours for cosmetologists. And I hope we’ll get more anecdotes, especially for the cost-benefit requirements because I think these are powerful concrete examples of what regulatory reforms like this can do and why they’re important. 

 

But putting aside anecdotes, Virginia in my mind has already made some significant advances in less than a year of having these kinds of initiatives and goals. So I’ll mention a few now. One is that one of the expressed goals of Governor Youngkin’s Executive Order 19 is the requirement to post all regulations and supporting analyses in a centralized database or website. And I’ve been told by Reeve that this website will provide easy access to all cost-benefit analyses as the agencies increasingly produce them going forward. 

 

So despite requiring cost-benefit analysis since 1981, the federal government does not have a centralized database of cost-benefit analyses. Instead, you have to go to individual dockets for regulations and then search for them, and there’s no easy filter for the cost-benefit analysis. And the names of the analysis are not consistent. 

 

So number two, Virginia also has plans for consistent presentation of the results of these analyses in an economic review form, at least that’s the name given to the analysis I should say. And I was looking at one of these earlier today, and it was very easy to understand, sort of almost a table format concisely summarized impacts. This seems simple, but presentation is important, at least if you want to reap the benefits of the regulatory transparency aspect that these analyses can bring. They have to be easy to understand if they’re supposed to be useful to bring out important comments or to have folks understand how this is effecting their lives. In this way, Virginia’s form sort of reminded me of UK impact analyses that have a concise cover letter summarizing impacts. 

 

The third thing I noticed already—and I hope we can talk more about this, and Reeve started to talk about this—is Virginia’s plan for improving analyses an regulations going forward through retrospective analysis and review. And this is another area where the federal government has not found much success despite a lot of talking about it across administrations. And then finally, Virginia also requires consideration of impacts to three groups: small businesses, local government, and families including low income families. And this is right on that forum. The federal analysis has done very little distribution analysis, especially analysis of cost burdens to low income groups. So Virginia’s experience here too might be helpful to the federal government. So according to a [2022] Mercatus report by James Broughel and coauthors there are many states that have CBA requirements, and there are many states that have some executive review. And as far as I know, the federal government has not found much to learn from these other experiences. 

 

Virginia seems different because the form and the organization of its review process to me seems more similar to the federal government than when I’ve looked at some of these other states. Virginia also has more ambitious goals and has a lot of momentum. The manual for conducting regulatory review just came out, for example. So the hope is that it could provide benefits that can go beyond Virginia’s borders, too, so a lot of promises. 

 

Here are a few concerns I have, and maybe they’re not concerns. Maybe they’re more questions that I hope we’ll get to discuss today in this format. So the first one is I guess my broadest concern. Cost-benefit analysis has often been associated with deregulatory goals, which sometimes limits its appeal from being broader. 

 

Done correctly, I don’t see the analysis as inherently deregulatory. It’s rather a tool for moving in the most net beneficial way from the status quo whichever direction that might be. These Virginia initiatives, though, were adopted in an executive order that also requires explicit regulatory requirement reductions. For Virginia’s reforms to be truly successful, they need to be able to withstand changing administrations with different priorities. And I’d love to hear how you both have thought about this. 

 

The second is more on the 25 percent reduction in the regulatory requirements. So when President Trump — Reeve, you mentioned President Trump’s Executive Order 13771. When President Trump directed agencies to adhere to a regulatory budget and eliminate two regulations for every new proposed regulation, I was pretty skeptical of the wisdom of the initiative. And I’d written about this, and my coauthor Michael Livermore, about how the initiatives did not seem likely to improve net benefits of regulations or even really decrease regulatory burdens among other things. 

 

So thinking about these two goals, you can imagine getting rid of a net beneficial regulation to me doesn’t improve anyone’s welfare. And also reducing extensive but maybe rarely used regulatory requirements might not do that much at all either. So in what ways is that regulatory reduction requirement, I guess, structured so that it prioritizes the significant net costly burdens and then becomes meaningful and beneficial in a way that could get bipartisan support? 

 

Now, the third one is a little different, and I was going to phrase it differently. It’s about the quality of the analysis and some other aspects. But given some things Reeve mentioned in his opening remarks and even just looking at one of these analyses, I’m going to phrase it slightly differently, possibly more controversially. But economists, so I think of a part of the benefits of the federal cost-benefit analysis requirements was getting more economists into agencies to help think through the tradeoffs and participate in designing regulations, brainstorming alternatives. 

 

So this seems to not be part of the goal at all here. And in fact maybe it’s almost created in a way to not require having more economists come into agencies. And I see the benefits of that, the streamlined approach you have taken and how beautiful and presentable it was. But is there some kind of a tradeoff here with the quality of analyses, which I think plays a large role in getting benefits from this? Or maybe said differently, do you think CBA will have as much beneficial effect without that aspect of it? 

 

And then the last one, this is a little nit-picky. I’ll just note this here, so your office has created this terrific regulatory economic analysis manual. It’s concise. It’s readable. You all can read it — this is to the audience. You all can read it after this webinar. And it touches a lot of the important points of undertaking analysis. But there were two things that stood out to me perhaps because my experience is in federal analysis and I’m familiar with some of the controversies on the federal level. 

 

So the first is I cannot help but notice that the analysis is required to be limited to the commonwealth of Virginia. So it says do not consider broader benefits and later costs created in the United States or the world. And I guess I understand in some sense. Virginia should probably not be adopting regulations that seek to mostly benefit, say, New York, California. 

 

But there is some value, I think, in calculating, say, costs that another state might bear in a decision Virginia might make or benefits for the matter, highlight potential for some mutually beneficial agreements among states. And I’m wondering if this was considered. I sometimes ask my students where they would place a smokestack if they were in charge of that decision for a state. And they always want to put it on the border of their state where the wind is blowing the pollutants off to another state. 

 

And then the second one from the manual, after briefly discussing the value of statistical life, which is used extensively in the federal government to value the benefits of reducing fatality risks, the manual states “You will likely rarely encounter regulations that require you to calculate the benefit of preventing premature death.” And this surprised me. At the federal level, such fatality risk reduction benefits make up the vast majority of benefits of regulatory action, and I’m wondering is this a state-federal difference? And what are most regulations doing if they’re not helping to manage risks that people otherwise face? And then I look forward to the conversation. Thank you. 

 

Anastasia P. Boden:  Well, those are such great comments, and they bring up so many questions that I would love to have answered. So maybe we can start with something I hadn’t thought about but that you brought up which is the role of economists and how differing opinions on their relative importance to this process and the goals of Virginia in particular of maybe reducing the role of economists and some difference of opinion on the merits of that proposal. So Reeve and Andrew, I offer you some time to respond to that and explain what the thinking is there. 

 

Andrew Wheeler:  Sure. First, we had to take a look at what we had as far as Virginia resources were concerned, and there are very few agencies that have any economists on staff. And we thought it would be very burdensome to require all of our agencies to start hiring economists. We do have a group of economists in our Office of Planning and Budget, and they do some analysis of some of the regulations, particularly some of the larger regulations. But what we wanted to have was a cost impact process that did not require an economist. 

 

And if you look across the country, very few states have a lot of economists on staff. We have part of an eye towards what would be useful other places around the country, other states. So we purposefully drafted the manual—and Reeve was the primary author of the manual—for the non-economist. But that also helps the general public. 

 

Yes, it’s useful — in having run the largest regulatory agency in the federal government, it is useful to have economists on staff. I had a whole office of economists at EPA. But as the professor mentioned, it’s hard for people to find those documents, and it’s also hard for the non-economist to understand the documents. You’re looking at a couple hundred pages of cost impact analysis at the federal level for a regulation. 

 

We wanted to have a manual that could be understood by the agency staff working on the regulations but also by the average Virginia citizen so that an average Virginia citizen can then go and look at the cost impact form, which is typically eight to ten pages. It’s easy to understand. If they have questions, they can go to the manual, which is only 20 pages long, and they can look at the manual and help them understand what the form says. And this is about transparency. And you have to remember the audience here is your average Virginia resident. It’s not law professors, and it’s not economists. It’s geared towards the average Virginian so that they can understand what the impacts of the regulations would be on their daily lives. 

 

Reeve T. Bull:  And I don’t really have too much to add. I think that’s precisely correct that there’s sort of a tradeoff. So I think, Caroline, you’re exactly right that there are definitely real benefits as Andrew points out to having economists on staff at the federal level. You get these very sophisticated analyses. But the drawback I think is the very one Andrew mentions. It’s sort of lack of transparency and the impenetrability, really, of some of these RIAs. 

 

I’m not an economist. I actually have no economic background, but I’ve spent a decent amount of time working in the space. And to be honest, when I pick one of these up I can’t understand it. It’s way over my head at the federal level whereas I think the ones at the state level that we’ve sort of innovated I think are actually pretty accessible. 

 

So we think there are definitely benefits. We’re of course not opposed to agencies hiring economists, and maybe eventually they will. It’s kind of a resource question as well. But I think there are some real benefits to the way that we designed it. And we certainly see the tradeoff at least for Virginia is working out well. 

 

Caroline Cecot:  So to paraphrase, if I may, economists did not pass the cost-benefit test, at least on the state level. 

 

Anastasia P. Boden:  That’s great. 

 

Andrew Wheeler:  You could say it that way. 

 

Anastasia P. Boden:  I wanted to move on to the regulatory reduction goal of 25 percent. As all three of you have referenced, the Trump administration had a similar program in place aimed at reducing the number of regulations on the books. I wanted to offer Caroline more time to expand on some of her perhaps critiques of the Trump administration’s approach. And I wanted to offer you both time to talk about how Virginia’s approach is different and improves upon that process and perhaps how we make sure that these changes are permanent. I’m very interested in making sure that if there are beneficial changes that a new administration doesn’t come in and backpedal on all of that. So I hand it over to you. 

 

Caroline Cecot:  So I’ll kick it off, but I’m not going to rehash some of the criticisms that I had of President Trump’s executive order because Virginia’s program seems pretty different and different in important ways. And Reeve started to talk about this, but I was skeptical about all the assumptions that had to be true or had to be made in order for the regulatory budget concept to really incentivize reduction of the net costly large regulations and then even more so for the two for one, which could have the perverse effect of stopping a deregulatory action unless there’s some kind of a requirement. It could delay getting rid of a really big one until later if you need it to bank in some way. So there’s a lot of things in the beginning especially that made it difficult to see how it would accomplish its goals. 

 

So the Virginia one is much more direct, 25 percent reduction of requirements. So I’m trying to think through some ways that this requirement could still be concerning in terms of meeting the benefits. Of course, not all requirements are completely pointless. So all are there hopefully but let’s be realistic. At least some, though, are there because they do some net good. And hopefully going forward with the cost-benefit requirement, that’s a larger group of those. So I’m just wondering how that’s thought about in this process of eliminating the requirements, whether they’re net costly, etc. 

 

And similarly, if we’re focused on the extensiveness of the requirements, you can imagine very extensive requirements that are almost rarely triggered, or they’re almost as in case of emergency. These are some — and it’d be easy to get rid of those and say, look, we’ve reduced all these requirements. But they’re rarely triggered. We don’t feel it on a day to day basis and also might have some unintended consequences. So my mind was just going there to think about how this will be thought of. 

 

I’ll just mention briefly — again, this isn’t exactly on this. But OECD has recently released a report which if I can find it, I’ll link it, somewhere about the experience in other countries about these kinds of burden reduction requirements, whether it’s regulatory budget or other types. And they talked about how for these to really be successful, there’s so many preliminary questions that are sort of similar to what I’m raising that have to be thought about. How are we counting what goes to this and having all this established upfront, etc.? So I’m just curious to learn more about the practical implementation of this requirement and the kinds of goals that the administration sees that it’s hoping to achieve. 

 

Andrew Wheeler:  Sure. First of all, our 25 percent reduction was based on a pilot here in Virginia in 2018 by the previous administration. And it was passed by our general assembly. All 40 state senators voted in favor of it. I think 98 out of 100 of the delegates voted for it. And this was to require all the agencies to count the number of requirements that they had on the books, and then it had two agencies, our labor agency and —

 

Reeve T. Bull:  The Department of Criminal Justice Services.

 

Andrew Wheeler:  Yes. They both were tasked with trying to reduce their requirements by 25 percent. So it was just a pilot with two agencies. Those two agencies, one reduced theirs by 29 and the other one by 21 percent. 

 

So I think there’s a very important distinction between the two for one in the Trump administration — and I implemented that at EPA, and I would say that we did the best job of all the agencies in implementing that. You have the two for one, but in ours, it’s not an either/or. You don’t have to look at it and say, okay, we can only do this, or we can only do that. It’s a goal of 25 percent. And as evidenced by the two pilots, one far exceeded, and one didn’t quite meet it. And while I certainly want all of our agencies to meet the 25 percent goal, I won’t be at all surprised if some agencies have an easier time and others have a harder time. 

 

And it was funny. When we first rolled this out, one of the state senators from the other party criticized this in the press saying this 25 percent is arbitrary and where did it come from? And luckily in the same article — and I didn’t know he had said that, but in the same article the reporter quoted me as saying this came from a bipartisan bill that all 40 members of the senate, including him, voted for. So there is bipartisan support for this concept in Virginia. So I hope that it will continue. And we saw legislation this past general assembly trying to codify this. And I expect to see more legislation over the next two years trying to codify this approach. 

 

And then one other example that I’ll just throw out there also from the cosmetology board is we had a requirement in regulation that if you opened a new beauty shop, barbershop, spa you had to have a restroom within your premises for the customers. And what we found and what the board found was that a lot of new businesses are opening in shopping malls. And there are public restrooms just down the hall from the operation. So by getting rid of that requirement, if there is another public restroom available within so many yards, it saves those small businesses between 10 and $15,000 on building a separate restroom. Also, they’re able to have a smaller footprint, and they’re able to use more of their footprint for more customer services. 

 

So that was a huge cost savings for small businesses. And that’s what we want to try to encourage. And I think the main thing whenever we sit down with agencies — we sit down with a number of our agencies one on one to talk to them about how to reduce requirements. We want them to be creative and think about what are the unnecessary burdens that may be on Virginians. 

 

And a lot of times it’s guidance documents. They’re piled one on top of the other. Old guidance documents aren’t revoked or rescinded. And so it’s cleaning out the regulatory closet to try to get rid of some of the things that are no longer pertinent. But we specified that they’re not to get rid of requirements for public safety or health or the environment, that those protections are important and we need to ensure that they remain. 

 

Reeve T. Bull:  I agree 100 percent, and I think one thing that I’m really heartened by as we proceed with this, because it’s relatively recent that we’ve rolled this out, is we’ve sat down with a number of different agencies. And they’re really excited about this. They’re really interested to look for innovative ways. 

 

And like the example Andrew gave of the bathrooms, another example is there was a requirement that a form had to be notarized when somebody was filing information in connection with childcare services. And that’s completely out of date. It’s very, very difficult anymore to find a notary public, and in this case they were actually low income families that were being directly affected by this. 

 

So the agencies are actually, I think, really, really interested. And from our experience so far we’ve found that there are a lot of things like this in the regulations that were perhaps well intended when initially adopted but just really aren’t necessary anymore. And the exercise is designed to try to really identify what those requirements are and to really streamline things in ways that still are of course protective of public health and safety but that identify some of these things that are really just a burden and are creating a burden on the public and then ultimately wasting the agency’s time as well to the extent that they have to spend their time looking at paperwork or doing things that are less productive than the other aspects of their job. 

 

One other thing I’ll just briefly mention is, Caroline, you had asked sort of how do we ensure that we’re not eliminating net beneficial regulations. And I think a real virtue of sort of how we’ve designed the process is since everything goes through the cost-benefit analysis, unlike at the federal level, any regulation or any action an agency proposes, including deregulatory actions, goes through that benefit-cost analysis. So we get a sense in any given case is this actually net beneficial. So I think that’s a real virtue of combining the regulatory streamlining with the economic analysis. 

 

Anastasia P. Boden:  This might be my hard hitting Tim Russert moment, but I’m wondering if you have had any unexpected difficulties in implementing this program or have suggestions for what states might do differently. And I think related to that was a really great audience question about suggestions for other states where either the executive is less motivated to act and so how do we get the legislature on board or even in states that are overall less motivated in the legislature as well. How do we bring them along? 

 

Andrew Wheeler:  Well, again, the 25 percent reduction target started as a pilot by our legislature, so legislatures can certainly take a lead role in this depending on the state of course. I can’t say that we’ve had — we’ve certainly had a number of questions that have come up on how you count requirements. And I would say that Reeve and I both have learned quite a bit in talking to our agencies and trying to walk through the different regulations where we’ve literally sat down with a couple agencies and just looked at the regulations and helped them count how many requirements are in the document. 

 

So there are certainly some things that we have learned, and it’s not clear cut. You have to have room for discussion. I don’t really want to emphasize the word “debate” too much here, but certainly discussion and education between the area experts, the agency experts on the topics and our office to make sure we agree on what is a requirement and what would count as a reduction. And I will say that in reviewing the regulations and the guidance documents through our office we have ended up giving more credit to agencies for reductions than they have claimed. A lot of them don’t think that something is a reduction. And we’ve had to explain, no, you’re reducing a burden. We will give you credit for a reduction. 

 

So that I guess was a surprise. I thought it might have ended up going the other way. I thought the agencies may have been trying to claim too many reductions, but if anything, I think the agencies are claiming fewer reductions than what we see. And we are trying to encourage them to be as creative as possible in coming up with how you reduce a regulatory burden on citizens. 

 

Reeve T. Bull:  I absolutely agree, and I think in some ways, Anastasia, sort of your two questions I see as being kind of connected in the sense that one of the things I’ve been struck by is sort of what Andrew has just mentioned. We put out this regulatory reduction guide that I think is very, very helpful. But what we’re seeing is a short 15 page guide really can’t anticipate every single permutation that agencies are going to encounter. So we’re getting a lot of these questions. They’re very good questions. The agencies are thinking about this very, very closely. And we’ve been able to work with them and come up with a good approach. 

 

And I think in that sense as other states are considering this—and I guess I’ll sort of put in a plug for our office or something like our office—I think it’s critical to have some sort of centralized leadership on this front. In a lot of the states that have done budgets they’ve not actually had a centralized office, and I think that’s been a real challenge. But I think agencies want to do a good job, but they need to sort of have an integrated system for actually deciding how they’re going to address these issues. So I think as other states consider it, whether it’s the legislature or the governor’s office, they really do need to consider whether they want to create something similar to our office. 

 

Andrew Wheeler:  I would say, though, that you don’t have to create a large bureaucracy or a large office to deal with this issue. We’re a four person shop, and we’re doing both on the regulatory side as well as the permitting. And we actually have other duties as well that we haven’t gotten into today. 

 

So it doesn’t take a large staff to do this and do this, I believe, effectively and appropriately. So if I were another state listening to this, I wouldn’t get discouraged about that. And we’d be more than happy to talk to any other state that is considering something like this. It doesn’t take a lot of staff, but it does take at least a couple of dedicated people so that there is somebody responsible for these reviews and who take the responsibility on. 

 

Anastasia P. Boden:  Well, there were so many great questions in the question and answer feature, and I wish we could get to them all. And of course I could talk about making life easier by deregulating for another hour or so. But I do want to get everyone out on time, so with that, I want to thank our panelists, thank everyone for joining. I hope we can talk about this more in the future and thanks to Federalist Society. And I will throw it back to Sarah. 

 

Sarah Bengtsson:  Thanks, Anastasia. I just want to thank all of our speakers for sharing your time and expertise with us today and to our audience, thank you for tuning in. You can find more of our content on our website at regproject.org or follow us on any major social media platform @fedsocRTP to stay up to date. Until next time, we are adjourned.

 

Reeve Bull

Director

Office of Regulatory Management, Office of the Governor of Virginia


Caroline Cecot

Assistant Professor of Law

Antonin Scalia Law School


Andrew Wheeler

Director

Office of Regulatory Management, Office of the Governor of Virginia


Anastasia P. Boden

Director, Robert A. Levy Center for Constitutional Studies

Cato Institute


Regulatory Process
State & Local

The Federalist Society and Regulatory Transparency Project take no position on particular legal or public policy matters. All expressions of opinion are those of the speaker(s). To join the debate, please email us at [email protected].

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