Following her State of the State Address last week, Gov. Kay Ivey (R) issued an executive order aimed at reducing government “red tape” placed on Alabama’s citizens and businesses. Her goal is to reduce the number of regulatory restrictions contained in the Alabama Administrative Code by 25% over the next two years.
“Sometimes, the best thing government can do is just get out of the way and allow the people to handle their business,” Ivey said. “In many cases, government regulations that were necessary a decade ago have outlived their usefulness, and it’s time for that to change.” She concluded by saying she looks “forward to seeing its impact result in positive changes soon.”
Ivey’s effort to reduce red tape should be welcomed by citizens and the business community alike, for relieving regulatory burdens could significantly improve Alabama’s declining labor participation rate, making it easier to attract new businesses to the state. However, there are still several unknowns about Ivey’s proposal, particularly what types of regulations state agencies may target.
From now through the end of September 2023, agencies will formulate a list of existing administrative regulations. Those agencies will spend another six months developing a plan to consolidate and reduce those regulations. Reducing red tape would not actually begin until March 2024, and at that point, agencies would have a year to complete the process.
In other words, it could be nearly two years before citizens and businesses see any form of regulatory relief. Meanwhile, there will be a moratorium on adopting new agency-level restrictions.
Beyond the extended timeframe, Ivey failed to lay out any specific guidelines for what types of regulations should be targeted. That means that state agencies will have a large degree of discretion as they undertake the work. The result could either be a real effort to reduce the most burdensome regulations, giving citizens and businesses more freedom to operate, or it could simply mean that outdated regulations are repealed, bringing few significant changes to Alabama’s labor and business market.
As state agencies begin the process of rolling back red tape, where should they focus?
Alabama ranked 29th in the CATO Institute’s recent entrepreneur regulatory barriers index. While the state is slightly worse than average, there is room for improvement. Georgia topped the list and six other Southeastern states ranked ahead of Alabama. Only Louisiana and Tennessee ranked lower, coming in at 30th and 31st respectively.
One area identified for improvement is Alabama’s relatively high percentage of workers who require an occupational license, as well as higher than average licensing costs. According to CATO’s findings, 18% of Alabama’s workers must be licensed, and the average cost of that license is $416. In Georgia, only 14% of workers require an occupational license, and the costs are $100 cheaper on average.
For some Alabamians, occupational licensing presents a major barrier to entering the state’s labor force. A 2018 report from the Alabama Policy Institute found that the state licenses 151 occupations, with nearly half of those falling on low-income workers. In 2018 the costs of licensing and continuing education requirements were more than $400 million.
Occupational licensing is one reason Alabama ranks near the bottom of the U.S. in terms of labor participation rates. Ivey’s plan to reduce government regulations should include a complete review of currently required occupational licenses. If the goal of a license is not public safety, it should be repealed.
The CATO study also pointed to the state’s Certificate of Need (CON) laws as a barrier to entry into the medical field.
CON laws are regulations essentially requiring healthcare providers to prove to the Alabama Certificate of Need Review Board that a new or expanded medical service is needed. It can be a costly and time-consuming process and is sometimes used by existing providers to limit competition and promote an anti-free-market environment.
Originally implemented as a means to control rising healthcare costs, CON laws have restricted the supply of medical equipment and facilities, increasing costs. Repealing CON laws as part of the effort to reduce red tape would increase healthcare competition and lower the overall costs of care for Alabamians.
State government should only impose regulations when they serve as a legitimate means to ensure the health and safety of Alabamians. Thus, repealing regulations that limit citizens’ ability to enter the workforce and serve as impediments to doing business within the state is a worthwhile undertaking. If Ivey points her efforts in those directions, it will bring more economic freedom and prosperity to Alabama for years to come.
Justin Bogie serves as Fiscal and Budget Reporter for 1819 News. The views and opinions expressed here are those of the author and do not necessarily reflect the policy or position of 1819 News.
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