Regulatory Reduction Efforts in Ohio: Can It Work?

Jack McBreen

Associate Editor

Loyola University Chicago School of Law, JD 2023

Economist Michael Mandel analogized regulations to pebbles in a stream. If you drop one pebble into a stream, its individual effect is negligible. If you deposit a thousand pebbles into a stream, the flow of the water slows down. On the other hand, if you pour one hundred thousand pebbles into a stream, the stream’s flow can become blocked altogether. Researchers note that the amount of regulation in the U.S., both at the state and federal level, has grown steadily over the years. It is a process known as regulatory accumulation. Whether it involves regulating the fuel efficiency of cars, labels on food products or the number of beds permitted in a hospital, new rules are added every year. Yet, few, if any, regulations are ever taken off the books despite the fact that many become unnecessary or virtually obsolete. Some economists argue that overregulation has the effect of slowing economic growth and ultimately impacting the well-being of society. But the task is a difficult one: how does a government identify which regulations should be cut and who should lead the effort?

Ohio legislature passes bill to reduce the number of existing regulations.

On March 10, Republican Governor Mike DeWine of Ohio signed into law Senate Bill 9, a measure that will require state agencies to cut at least thirty percent of their regulatory restrictions over a three-year period. Once this goal is reached, it will become a ceiling on the number of rules permitted going forward. The impetus for this effort was a 2020 report published by the Mercatus Center at George Mason University which showed that Ohio was the third most heavily regulated state in the nation, exceeded only in its sheer number of regulatory restrictions by California and New York. (Illinois holds down the number four spot.) According to the study, the Ohio Administrative Code (OAC) contains 274,470 regulatory rules, and an individual would need at least twenty-one weeks to read all 15.2 million words of the OAC in their entirety. But the Mercatus Center didn’t utilize human readers. Instead, it relied on QuantGov, an open-source machine learning platform that analyzes state and federal regulatory text. To determine the number of regulatory restrictions, the QuantGov platform counted each time the terms “shall,” “must,” “may not,” “prohibited,” and “required” appeared in the regulations. Information was collected on forty-four states and the District of Columbia and used to create a dataset, referred to as State RegData. State RegData quantifies aggregate regulatory volume, industry-specific regulatory volume, and estimates of regulatory complexity. The average state has around 135,000 regulatory restrictions, although states vary considerably – from a low of 38,961 for Idaho to a high of 395,608 for California.

Opponents of the new law claim it is an impractical, simple-minded construct.

Proponents of the bill say an excess of regulatory red tape stifles the development of new and existing businesses and operates as a kind of sludge in the economic machine. Conversely, opponents argue that the thirty percent number is arbitrary and the study itself did not evaluate the context in which the words appeared or whether they were serving their stated purpose. They say the areas that will likely be weakened are consumer, environmental and public health protections and point out the bill does not require a cost benefit analysis before rules are rescinded. Moreover, some critics believe the bill is impractical because many of the regulatory restrictions, such as those related to utilities and health care, are not subject to agency discretion and their elimination will require changes to state or federal law. Finally, criticism has been directed at the Mercatus Center itself which has been described as a right-leaning think tank that has received funding from the Koch family foundation. The Koch brothers, Charles and his late brother David, are well-known for their sizeable donations to conservative and libertarian causes, including many that support lower taxes and less government regulation.

A success story in Rhode Island

In response to the criticism, supporters point to the example of Rhode Island. When Democrat Gina Raimondo was first elected governor of the state in 2015, she set a goal of reducing the number of regulations on the state’s books by fifteen percent. State agencies were charged with reviewing all regulations under their purview within a two-year period and either justifying a rule’s existence or eliminating it. Ultimately, 8,000 pages of regulations, or more than thirty percent of the total, were cut. Many of the beneficiaries of the streamlined regulations were small business owners. For example, prior to the program’s implementation, an ice cream parlor that served food needed two licenses to operate, one as a restaurant and one as an establishment that served ice cream. Now, the same business can operate under a single license.

Whether Ohio will achieve the same degree of success as Rhode Island and other states that have embarked on regulatory reform is yet to be determined. Ohio legislators have another bill in the works that would modernize the OAC by removing other outdated procedures, including ones that require communications by mail rather than electronic transmission or demand in-person hearings when remote hearings would be just as effective. Although the cumulative effect of these efforts won’t be known for several years, Ohio presents an interesting case study that other states might want to keep an eye on.