Red Tape: When the Government Takes Away a Right & Sells It Back to You.

An Analysis of the British Columbia Model to Cut Red Tape – How They Eliminated 1/3 of all Regulations in 3 Years.

Wyoming is a society afflicted by distrust when it comes to taxes, an economy reliant on minerals, and government spending. Support for reducing regulation is broad-based as the general public supports such initiatives while lawmakers are concerned about revenue and the economy of our state. This should indicate a political priority and need for change.

In addition to the 104 million words contained in the U.S. Code of Federal Regulations ¹, Wyoming is also regulated on the state level. It is important to note that Wyoming law implicates many administrative regulations and penalties within many titles of Wyoming law. For example, Title 31 contains administrative regulations associated with motor vehicles, while Title 35addresses Public Health and Safety, and Title 11 addresses agriculture and livestock. Without even analyzing those embedded provisions, it is clear that at the very least, the Wyoming Administrative Code ("WAC") contains 99,566 restrictions and 5.4 million words that center around regulatory restrictions. This is determined through the algorithm developed by George Mason University wherein state regulations are targeted by a counting of phrases such as shall, must, may not, prohibited, and required. These phrases signify legal constraints or obligations and provide only the tip of the iceberg for a count in Wyoming.

Taking a snapshot view of only WAC, without delving into each individual code, concludes the startling result that it would take an individual 7 weeks ² to read the entire code to know what the government requires. The Wyoming business owner, large or small, must navigate these many requirements and restrictions in addition to the numerous federal regulations and requirements. Regulations, in many cases, provide unnecessary burden and insurmountable obstacles for small business owners. Many, may violate the law without even knowing.

The snapshot of WAC only, indicates that the Department of Workforce Services contains more than 33,500 restrictions and is the biggest regulator in Wyoming. ³ The Department of Environmental Quality falls in second with more than 14,000 restrictions. ⁴

A particular state's economy will include a unique mix of industries. Thus, regulation target specific sectors and this will impact economies in unique and individual ways. In the same way that the Dodd-Frank Wall Street Financial Reform Act of 2010 targeted the financial services sector, Wyoming's regulations can have a targeted impact on certain industries. Wyoming's economy is heavily dependent on the resource sector including mining, oil, and agriculture. This is strikingly similar to the economy in Canada's British Columbia ("BC") which has cut red tape significantly over the last through years and has a thriving economy as a result.

This paper will serve to analyze the "BC Model" and how its approaches and practices could be adopted in Wyoming. Successful implementation of this model could yield a thriving economy. Since BC's reform, the thriving economic condition is largely credited to business-friendly practices that were implemented. The support to reduce regulation was prevalent in BC as the public was very concerned about the economy and too much regulation was often cited as a significant contributor to BC's economic underperformance in the 1990s and the province had a reputation for regulatory excess. ⁵

Measurement and reporting, political leadership and putting constraints on regulators is an effective approach to controlling red-tape. The Canadian Federation of Independent Business members agree, with 83% of BC members supporting making the government reforms permanent by passing legislation. ⁶

While each of these initiatives has been successful at eliminating some unnecessary red tape, their long term prospect for achieving more regulatory accountability and transparency and controlling the inevitable demand for more regulation will have to stand the test of time.

BC has a small and open economy that is heavily dependent on the resource sector ⁷ although BC's resource dependence is lessoning as a result of emerging sectors like technology and tourism. In 2001, a new Prime Minister was elected. He ran on the platform of cutting regulation by 1/3 in 3 years. This change in government and policy direction, included substantial tax cuts ⁸ and a prioritization of regulatory reform. Upon these changes, BC experienced an economic turnaround with the most growth in business and job creation the region ever witnessed. The unemployment rate was cut in half, business creation and formation dramatically increased and business bankruptcies decreased by 50% over a ten (10) year period. The Gross Fixed Capital Formation improved while BC became very competitive within Canada in terms of tax, labor markets and regulatory policies.

The lucrative investment climate made BC an attractive market and demonstrated flexible labor markets and infrastructure. Business outlook and confidence saw an uptick as BC businesses were among the most optimistic in the country.

Mining has always been an important BC industry. This industry has suffered rise and fall throughout the decades. Nonetheless, it has held a pivotal role within the economy. According to the 2008 government-established mining task force, "The provincial government has taken many important steps – improving its tax competitiveness, streamlining regulatory requirements and investing in the province's geosciences mineral data collection and analysis – to enhance BC's reputation as an important mining jurisdiction, and industry has responded with record exploration levels and the opening of new mines in the recent period of economic growth." ⁹

After the cutting of red tape by 1/3 occurred in BC, the mining industry improved, rating third for exploration and deposit appraisal expenditures in all of Canada. Additionally, they experienced one of the fastest rates of growth in exploration spending among Canadian jurisdictions from 2002-2007.¹⁰ This significant upturn came after a 1998 survey indicated that BC's mining policies scored last out of 31 jurisdictions with a score of five (5) out of a possible 100 points.¹¹ An astounding 82% of respondents to the survey indicated that the then-existing state of the regulatory environment was a "strong" deterrent to investment.¹²

Another example within BC is the forestry industry, one of the provinces main economic drivers. This industry was burdened with a prescriptive forest practices code, widely cited as a deterrent to investment. Upon this feedback, the newly elected government received a clear mandate for change.

Cutting red tape allowed for a fruitful environment by which other sectors could grow and thrive. This promoted diversification of the economy – a notable strength Wyoming desperately needs. When government steps back and eliminates burden on business owners, diversification organically occurs. One clear example in BC is the technology sector. BC has a small but growing technology sector representing about 5.9% of the province's GDP and employs around 81,000 people or 4.3% of the workforce.¹³ The output growth in this sector averages at double the rate for the economy as a whole. In short, this sector simply outperforms the rest of the country in the last decade in the areas of employment and growth of goods and exports.¹⁴

The goal of deregulation was so important; it was the platform upon which the elected Prime Minister ran. The promise to reduce red tape by 1/3 in three (3) years is a testament to the public reaction to government regulation in a dying economy.

As a part of his cabinet, the Premier appointed a Minister of State Responsible for Deregulation. The Minister of Deregulation's only responsibility was regulatory reform. There had never been a minister responsible for regulation in BC ever before. This move coupled with the use of the term "deregulation" indicated the strong political priority.¹⁵

The Minister of Deregulation's first challenge was to develop a new regulatory policy, including the definition of a measure that would be used to determine the success of the government's commitment to reduce red-tape by one-third.

He rejected measures of regulation that had been used in the past in Canada by think tanks and academics. For example, the Minister decided not to simply count the number of regulations as each individual regulation can have literally thousands of requirements associated with it. Instead, "regulatory requirements" coming from legislation, regulation and policy became the accounting tool. A "regulatory requirement" is defined in BC's Regulatory Reform Policy as "a compulsion, obligation, demand or prohibition placed by legislation or regulation on an individual, entity or activity". This measure has the benefit of being broad enough to capture rules within policy that businesses and individuals must comply with. To understand how different this measure is from just counting regulations, consider that the Workers Compensation Act in BC included a mere nine regulations but this translated into 35,308 regulatory requirements.

Each ministry conducted its own count of all the regulatory requirements contained in statutes, regulations and policy and a central regulatory requirement count database, administered by the newly created Deregulation Office, was established for baseline and reporting purposes. The first government wide count revealed 382,139 regulatory requirements at the provincial level in BC.¹⁶

The framework for carrying out the government's regulatory reform commitment was approved by Executive Council on August 15, 2001, only three months after the election.¹⁷ A Regulatory Reform Policy was established including regulatory reform criteria by which all legislation, regulation and policy would be developed. The BC regulatory reform model addressed the quantitative and qualitative aspect of the provincial regulatory regime and most importantly was time-bound. The Regulatory Reform Policy applies to all proposed legislation, regulations and related policy.¹⁸ One of its virtues is that it is a very simple policy that can be easily understood by the general public. The entire policy, including definitions, a checklist, an exemption form, and an example is only seven pages long and written in very straightforward language.

The most important part of the new policy is the Regulatory Criteria Checklist. Ministers and heads of regulatory authorities must make sure that any proposed legislation and regulations are evaluated according to the regulatory criteria set out in the checklist. The criteria were also useful for reviewing existing legislation and regulations.

The Premier was clear that every Minister and head of regulatory authority was responsible and accountable for implementing the new regulatory reform policy with the requirement that each would sign the Regulatory Criteria Checklist declaring that the proposed new or amended legislation or regulation was developed according to the criteria. There would be no "regulatory gatekeepers" checking on the ministries. The Ministers would be responsible.

There are limited exemptions to using the criteria on the checklist such as changes that are non-regulatory in nature and changes that relate only to the procedures or practices of a court or tribunal. One more open-ended exemption is provided if "the special circumstances of the case, as identified by the responsible minister or head of the regulatory authority, make it impracticable to comply with the regulatory criteria."

The regulatory criteria checklist itself is very simple. It includes several questions in eleven different categories. The categories are: (1) Reverse Onus (2) Cost-Benefit Analysis (3) Competitive Analysis (4) Streamlined Design (5) Replacement Principle (6) Results-Based Design (7) Transparent Development (8) Time and Cost of Compliance (9) Plain Language (10) Simple Communications (11) Sunset Review/Expiry Principle. These criteria were agreed on after reviewing OECD principles for developing regulation. Each category has a yes/no check box next to it. If the answer to the questions in any category are "no", then an explanation must be attached.

At the end of the form, there is a box that asks how many regulatory requirements will be added and how many will be eliminated as well as what the net change will be. When the reform policy was first introduced in 2001, two regulatory requirements had to be eliminated for every one introduced. Since 2004, when the original target to reduce regulation by one-third was met, a target of no-net increase has been in place. Requiring regulators to consider the eleven criteria on the Regulatory Criteria Checklist put the onus on government to make the case that additional regulation is necessary and to reduce the total amount of regulation.

A signed copy of the regulatory criteria checklist or exemption form must be included with any legislation submitted for Executive Council review and any Order in Council that is being recommended by the responsible minister to the Executive Council to enact a regulation. Copies of the signed Regulatory Criteria Checklists and Exemption forms must be provided to the Regulatory Reform Office. In addition, the responsible minister or head of a regulatory authority must make the Regulatory Criteria Checklist available to the public, at no charge, on request.

In addition to following the regulatory reform policy, Ministers are required to identify priorities for regulatory review and simplification in their three-year regulatory reform plans. When regulatory reform was first introduced, the Minister of Deregulation and the Premier made it a priority for each minister to identify how the one-third reduction target would be met in his or her plans.¹⁹

There are three key factors that distinguish BC's regulatory reform. An unusual feature of the policy is decentralization where individual ministries determine their own regulatory plans and are responsible for achieving results and maintaining regulatory counts. This model creates ownership and buy-in for the reform across government. It also allowed the government to accomplish the reforms without adding a big new bureaucracy to administer it.

Measurement is another unique feature of the policy. BC is the first jurisdiction to create a baseline measure for tracking its success at regulatory reform. Although the regulatory requirement metric has its flaws, having a measure provides accountability, transparency, and measurable progress. Finally, BC's reforms have strong support from the Premier, the highest provincial political office. As a result, regulatory reform became a priority across government.

These three factors led to systemic changes in the way in which regulation was thought about in BC and are responsible for the success of the reforms.

The government has been able to leverage the resources of a small regulatory reform office, working with small businesses to develop and encourage further progress on regulatory reform.

The Regulatory Reform Office, which is currently part of the Ministry of Small Business, Technology, and Economic Development, is the office responsible for implementing and sustaining regulatory improvement in BC. The office currently has six full time staff assigned to the initiative. The budget for the Regulatory Reform Office is part of the Ministry of Small Business, Technology and Economic Development. The Treasury Board, government's central planning group chaired by the Minister of Finance, provides each ministry with a budget to work with and funding is allocated.

When the current reforms were introduced in British Columbia, each ministry was required to appoint a manager and director to oversee the reforms for the ministry. Before being given access to the database that allows for the update of regulatory counts, the director and manager had to go to the Regulatory Reform Office for training. This approach proved very effective and allows the small regulatory reform office to leverage its limited resources. While the office is made up of six people, they work with around forty different individuals from twenty ministries.

BizPal is a successful initiative involving all levels of government across Canada. BizPal is an online service that provides one-stop access to permit and license information for all levels of government. The main purpose of the program is to reduce document research time and help entrepreneurs start up a business faster. It saves business owners a considerable amount of time as research that once took seven hours has been reduced to 20 to 30 minutes.²⁰ BizPal is a partnership of all provincial and participating municipal governments. The partnership makes all decisions regarding the overall program, and the provinces make decisions with respect to the implementation and management of BizPal within their jurisdictions. The program was launched with a lead group of participating jurisdictions (BC, Yukon, and Ontario) in 2005 and continues to expand.

The Mobile Business License project is an example of cooperation between the provincial and local governments in BC to reduce regulation. The project began after Premier Campbell challenged municipal leaders to simplify licensing for businesses by eliminating the requirement to have a separate license for each municipality in which a business operates. Instead, a business would obtain one license, which would allow it to operate in any jurisdiction in the province.

The government is most active in seeking recommendations on how to improve the performance of certain sectors of the economy. To facilitate this, the government set roundtables to solicit advice and specific suggestions for improving economic competitiveness. A number of good suggestions have come from these groups.

For example, the Small Business Roundtable was set up in 2005 to consult with small business owners in the province and to provide advice to government on strategies to enhance small business growth and success. The Roundtable includes small business owners and representatives from small business organizations. It is chaired by the Minister of Small Business, Technology and Economic Development. The Roundtable provides advice to government and produces an annual report.

The BC Competition Council was also set up to review BC's competitiveness, identify barriers to economic growth and solutions to overcome them. The Council established Industry Advisory Committees for twelve sectors.

Regulation was an issue raised by five of the twelve sector specific advisory committees and identified as a priority. However, there were only three provincial recommendations in the report: (1) regulations requiring decisions should have specific, reasonable time limits; (2) regulations should be based on performance rather than the traditional prescriptive approach and (3) the cumulative impact of regulation on an industry should be considered whenever further regulations are proposed.

Regulatory reform in BC has been successful at achieving its objectives. The number of regulatory requirements eliminated at the end of three years was 37%, exceeding the one-third target. To date regulatory requirements have been reduced by around 43%. Political leadership from the Premier's Office has been critical. Once elected in 2001, he made reform a priority by appointing a Minister of Deregulation, and ensuring that it was a topic for discussion and scrutiny at all cabinet meetings.

The success of BC's reforms has influenced other provincial governments in Canada and the Federal government. The government of Newfoundland and Labrador followed the BC model by making a commitment to reduce red tape by 25% in four years, using regulatory requirements as a measure. The government of Nova Scotia has also set a reduction target, using a different measure, hours spent on paperwork. The Canadian government adopted the BC model by putting in place a one-year target to cut red-tape by 20%. In its announcements related to this project, the Federal government specifically said it was following BC's model.

While each of these initiatives has been successful at eliminating red tape, more regulatory accountability and transparency to control additional regulations will have to stand the test of time.

Regulatory reform had broad-based support, particularly from the business community, when it was introduced in 2001. The support was focused on the general idea that reducing red tape and streamlining regulation was necessary to improve economic conditions. Broad support for maintaining a reasonable regulatory climate was present in BC and could be present in Wyoming as well.

It is time for Wyoming to cut through the red tape of excessive and complex regulatory burdens that continue to be a hardship for our small and large businesses. While regulations, in some cases, can protect public interest, they can also stifle economic growth, impose excessive costs and impede the private sector unnecessarily. Once Wyoming commits to restraining runaway government and re-empowering citizens, industry will thrive and household incomes will rise.

¹ This was the count in 2016 as discussed by The Mercatus Center with George Mason University at https://www.mercatus.org/publications/snapshot-wyoming-regulation-2018.

² Assuming the reader spends 40 hours per week reading and reads at a rate of 300 words per minute. See Id.

³ Id.

⁴ Id.

⁵ https://www.mercatus.org/publications/snapshot-wyoming-regulation-2018.

⁶ Canadian Federation of Independent Business Mandate 212, November 2003. Of those with an opinion, 83% supported legislating the requirement for ministries to regularly report the number of regulations they oversee.

⁷ Including forestry, mining, oil, gas, and agriculture.

⁸ Income taxes were reduced by 25% across the board and the provincial sale tax on machinery production and corporation capital tax on non-financial institutions was eliminated.

⁹ Mining Economic Task Force Report, (2008).

¹⁰ https://www.mercatus.org/publications/snapshot-wyoming-regulation-2018.

¹¹ The Fraser Institute Survey of Mining Companies Operating in North America 1998/1999 edition. Recent editions of the survey show a much improved performance on all of the indicators discussed here.

¹² Id.

¹³ Id.

¹⁴ Finlayson, Jock. Profile of the British Columbia Information & Communications Technologies Sector, (February 2007).

¹⁵ The initiative is now referred to as "regulatory reform". "Deregulation" was substituted after the one-third reduction target was met. The department responsible has also gone through name changes. Initially it was referred to as the Deregulation Office, then the Regulatory Reform Office, and recently was rebranded Straightforward BC. For the purposes of this paper, it will be referred to as the Regulatory Reform Office.

¹⁶ August 2006 Quarterly Report as posted on the Straightforward BC website at: http://www.tted.gov.bc.ca/sfbc/Progress/Pages/QuarterlyReports.aspx

¹⁷ Government of British Columbia Regulatory Reform Policy (revised February 6, 2008).

¹⁸ This is important as much of the compliance burden of regulation for business is in policy rather than regulation.

¹⁹ The three-year plans for regulatory reductions are not made public. However, Ministries will often announce a review of a particular Act or set of regulations and ask for submissions containing suggestions from interested stakeholders.

²⁰ See Straightforward BC: Regulation Clear and Simple, Government of British Columbia.