Report recommends greater regulatory freedom for businesses

The R.I. Office of Regulatory Reform has released a report outlining key findings and recommendations from period three of the Regulatory Reform Initiative to analyze all state-agency regulations and their impact on Rhode Island’s small businesses. More

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Report recommends greater regulatory freedom for businesses

COURTESY R.I. OFFICE OF REGULATORY REFORM
AS PART OF THE third phase of its review of state agency regulations, the R.I. Office of Regulatory Reform instituted a new model for defining a regulation’s small-business impact. Above, the first pie chart illustrates the profile of regulations submitted through phase two, under the old model which only assessed a regulation's direct impact, and the second chart illustrates the profile of regulations submitted through phase three, which used the new model assessing direct, indirect and decision-based impact.
Posted 3/20/14

(Updated, 3:09 p.m.)

PROVIDENCE – The R.I. Office of Regulatory Reform has released a report outlining key findings and recommendations from period three of the Regulatory Reform Initiative to analyze all state-agency regulations and their impact on Rhode Island’s small businesses.

The initiative began in 2012 after state lawmakers ordered agencies to analyze all existing regulations within four years, a timeline Gov. Lincoln D. Chafee accelerated to 480 days. The first of four review phases ended at the close of 2012, and the last is scheduled to end this summer.

Now three-quarters of the way through the Regulatory Reform Initiative, the ORR has to date received 1,223 regulations for review, or 77 percent of the 1,588 total regulations on file with the Secretary of State. Of the 1,223 regulations received, 180 were exempt from review, the ORR said.

During the first two review periods, the ORR defined regulations with “small-business impact” as only those regulations requiring applicable businesses to comply in order to operate. As part of the third review phase, the office instituted a new model for defining a regulation’s small-business impact, which categorizes each regulation according to four different impact types:

  • Direct Impact: Regulations requiring applicable businesses to comply in order to operate

  • Decision-Based Impact: Regulations triggered by a business decision related to “opting-in” to a program

  • Indirect Impact: Regulations impacting another entity which in turn impacts a small business

  • No Impact: Regulations with no direct, decision-based or indirect impact on small businesses

Under the new model, the ORR has identified 837 regulations that affect small businesses in Rhode Island of the 1,223 regulations submitted for review to date. Of the 837 identified, 504 have a direct impact on small businesses, while 163 have a decision-based impact and 170 have an indirect impact, the ORR said.

The state agencies that submitted the regulations for review have recommended the repeal of 29 regulations to date, 10 of which have completed the repeal process and were removed from the Secretary of State’s file. An additional 66 regulations have been identified for amendment and 21 regulations were identified as regulations for which agencies can provide special accommodations for small businesses.

A major focus of the third review phase was to begin building toward a comprehensive outline of Rhode Island’s regulatory landscape and update the ORR’s regulatory reform recommendations.

“Small businesses are critical to Rhode Island’s economic prosperity. They are engines of growth and innovation, contributing significantly to the local economy,” the ORR wrote in its report. “Failure to recognize the scale and resources of regulated industries can adversely affect marketplace competition, innovation and productivity. This failure can create barriers to business entry, discouraging entrepreneurship and ultimately hindering the state’s economy.”

The ORR’s recommendations include eliminating statutes that exempt certain business types from the ORR’s review, improving accessibility, encouraging lawmakers and small businesses to participate in the reform process, and mapping the state’s regulatory environment.

During its review of state regulations, the ORR “has found no up-to-date map of state government,” the report stated, and the office is currently developing an interactive, Web-based system map to make it easier to identify duplicate, conflicting or overlapping regulations.

The newest addition to the ORR’s recommendations concerns the state’s attitude toward regulation, which according to the ORR can be counterproductive and ineffective.

“Regulation should focus on achieving the desired results,” the ORR writes. “Business leaders have shared with the ORR that they could achieve regulatory goals more efficiently and effectively. They argue that some entities seem more concerned with following specific rules, rather than achieving results.”

Consequently, the ORR said, Rhode Island should shift away from “command-and-control” regulation and toward “performance-based” regulation that holds businesses accountable while allowing them greater flexibility in choosing the best means in achieving the desired results.

During the final phase of the Regulatory Reform Initiative, the ORR will complete review of the remaining regulations submitted, update and solidify its recommendations, and identify the state’s next steps in the regulatory reform process.

To view the complete report, visit www.omb.ri.gov.

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