Hogan’s Had It with Burdensome Regulations

July 14, 2015

Lemonade for sale? Not without a permit.

Last week the Economist featured a story about two young girls in Texas who set-up a lemonade stand to raise money for a father’s day gift.  They were in business for about an hour before the police shut-down their operation because they hadn’t secured a peddler’s permit nor did they submit to a food safety inspection.  Zoey and Andria Green learned at the ripe old ages of seven and eight just how hard it can be to start a small business in America.

Executive action in Maryland

Texas isn’t the only state restricting entrepreneurship with questionable regulations.  Last week, Maryland Governor Larry Hogan announced the establishment of a new Regulatory Reform Commission to combat what he called, “over-burdensome and out of control regulations…making it impossible for businesses to stay in Maryland.”

In the four page Executive Order, Governor Hogan laid out the key areas on which the Commission will focus its regulatory review and analysis including (but not limited to):

  • Transportation
  • Environment and land use
  • Health care
  • Business occupations and licensing
  • Banking and financial services
  • Capital formation
  • Insurance
  • Labor and employment
  • Agriculture
  • Tourism

Governor Hogan appointed two Commission co-chairs and 10 additional members.  Lieutenant Governor Boyd Rutherford will serve as an ex officio Commission member.  The Commission membership includes mostly Maryland business owners, executives and attorneys, and one member affiliated with the University of Maryland.

The Commission will conduct a top to bottom review of all regulations on the books in Maryland in an effort to understand which ones are outdated, inefficient and overly burdensome.  Governor Hogan cited pleas from citizens as the top reason for establishing the Commission and said it will hold its meetings publicly in all regions of the state to garner input from Maryland’s citizens.

Bigger hurdles beyond state regulations

Maryland is one of the toughest states for businesses to flourish.  In 2014, Maryland received a D+ from the Economist with regard to business-friendly regulations, (much worse than the lemonade watch dog, Texas, which received an A+).  But with the United States ranking 46th for starting a business in 2015, down five spots from 41st in 2014 according to World Bank data, Maryland’s problems won’t be solved at the state line.  Many of the regulations hindering small businesses in Maryland and around the country emanate from Washington.  According to Small Businesses for Sensible Regulations, federal regulations are the leading cause for the U.S. productivity growth rate plummeting to nearly half of its historical rate, dropping from an annual average rate of 2.5% since 1948 to 1.1% since 2011.

The bottom line:

Hogan was wise in making input from the public a central part in the regulatory review process.  The regional public meetings will go far to allow Maryland consumers and business operators feel like they have a seat at the regulatory reform table.

However, the fact that the Commission membership is heavily weighted toward the business community has received criticism from some in the state, and could undercut adoption of its recommendations.  Input and buy in from affected citizens, researchers, interest groups and government officials is likely to be crucial to the reform’s success.

A thorough review and analysis of Maryland’s regulations will highlight areas for improvement and pave the way to better regulatory efficiency in the state, which should be a win for all concerned. 

Perhaps Governor Hogan’s executive action will encourage a nationwide conversation on regulatory reform.  States are the laboratories of democracy, and successful reforms in Maryland could energize regulatory reform efforts at the national level.