PMA's Testimony on Regulation Reform - House State Government Committee

Testimony before the

 HOUSE STATE GOVERNMENT COMMITTEE

 June 20, 2017

 

 Speaker K. Leroy Irvis Building

The Capitol

Harrisburg, Pennsylvania

PRESENTED BY:

 

DAVID N. TAYLOR

President

Pennsylvania Manufacturers’ Association

 

Good morning, Chairman Metcalfe, Representative Bradford, and members of the committee.  Thanks very much for allowing me to participate in this important discussion today.

I am David N. Taylor and I am the president of the Pennsylvania Manufacturers’ Association, the century-old nonprofit trade organization representing the people who make things here in our commonwealth.  Manufacturing is the engine that drives Pennsylvania’s economy, generating $82 billion in value every year, directly employing over a half-million Pennsylvanians on the plant floor, and that core manufacturing activity sustains millions of additional Pennsylvania jobs in supply chains, distribution networks, and through vendors of industrial services.

Because manufacturing is the sector that adds the most value, has the strongest spinoff effect on job creation, and is one of the largest contributors to Gross State Product at 12 or 13 percent, our leaders in Harrisburg should carefully consider how the decisions made in this Capitol affect this vital industry.

PMA’s mission is competitiveness.  We want it to be the smart business decision to invest, hire, and expand here rather than in one of our competitor states. The overall cost, complexity, and time burden of compliance with state regulations – including permitting – is a key factor that we consider to be coequal with taxes, lawsuit abuse, state spending restraint, and preparing a skilled workforce.

I would also add that I do not envy you legislators the challenges you face here in the final weeks before the end of the fiscal year.  To break free from the unwelcome choice between cutting government programs or taking more money from the taxpayers, Pennsylvania needs to spark the strong, sustained, broad-based economic growth that will increase earnings from employers and employees and yield higher tax revenues for the Commonwealth at current tax rates.

Improving Pennsylvania’s regulatory scheme and reducing the burden of compliance is a pro-growth action the General Assembly can take today without lowering collections to the Treasury, which makes today’s discussion of these bills especially timely.

Let me also please clear the floor by knocking down a few straw men:

  • No one is saying that there should be no regulations.  Obviously, our manufacturing employers and their loved ones live in the same 67 counties as every other Pennsylvanian. Public health, public safety, and preventing environmental disaster are undisputedly good and necessary things.
  • No one is saying that complying with necessary regulations should be without cost. Recognizing that an appropriate level of regulation is needed, Pennsylvania’s manufacturing employers accept that there will be a cost of doing business that will include regulatory compliance costs.  Our need is for those costs to be optimized so as not to be a drag on competitiveness.

The most helpful way of thinking about the regulatory burden is to consider it a hidden tax on growth and that keeping the burden within reasonable limits will require a deliberate, ongoing conscious effort.

One of the ancient philosophers said the laws should be few, and well-known. In America today, we live in a world that is almost the opposite of that, where federal and state regulations are so vast and pile up so quickly that it is impossible to understand all of the responsibilities that we are expected to meet.

Because compliance itself is the public good that results from regulation, the Commonwealth should be a partner in compliance.   When there are knowing, deliberate, willful violations of important regulations, punishment is appropriate.  But when someone staples instead of using a paper clip – or vice versa – some degree of latitude is in order.  We need for state government to end the “GOTCHA!” dynamic of fault-finding and imposing punitive fines and penalties and instead make assistance with compliance the primary goal.

Regulations should be based on sound science, proven effective, and subjected to an independent cost/benefit analysis. Before imposing additional burdens on the private sector, government should be required to prove that the benefits to the general public clearly outweigh the costs to the economy.

Existing regulations should undergo systematic review to take outdated regulations off the books. Placing sunset dates on new rules going forward would help institute that expectation of review in our state government’s operational culture.

Pennsylvania should institute a system of regulatory budgeting to set maximum limits on the total costs of compliance for the private sector.  In the business world there’s a saying, “show me what you measure and I’ll show you what you value.”  Today, state government doesn’t value the time, energy, effort, manpower, and money spent by employers in complying with regulations because the Commonwealth doesn’t even bother to calculate what those costs are, much less to put limits on annual increases in those costs.

State government also needs to show restraint by recognizing the law of diminishing returns.  Regulators should resist the impulse to tighten limits just because technologies have emerged to measure ever-smaller amounts of substances.   “Chasing the last molecule” of unwanted emissions is ruinously expensive, has miniscule benefits if any, and pits the mechanisms of regulatory enforcement against background levels found in nature, which is futile.

And, finally, I would recommend that the General Assembly reclaim powers that have been assumed by the regulatory agencies of the executive branch by requiring legislative approval of the costliest and most consequential new regulations.  If a new rule is necessary and worthwhile, it would win approval and, if not, it would go back to the agency to be reformed and resubmitted.

I want to thank the sponsors of the bills under discussion today as they closely match up with the priorities I have described.

To compete against the other industrial states and our international competitors, Pennsylvania’s decision-makers must undertake the rigors of regulatory review.  I understand that you are already very busy with the duties of your offices but the ever-growing regulatory burden can no longer be ignored. If we are going to achieve the economic growth, job creation, and higher wages that will fill the public coffers to meet urgent public needs, then the General Assembly must take ownership of measuring, reviewing, and reducing the burden of regulatory compliance on the private sector.

Thanks again for including me in today’s hearing and I will do my best to answer your questions.

 

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