David N. Taylor Testimony on Permitting Reform before the House Republican Policy Committee – March 22, 2023
Thank you, Chairman Kail and members of the committee.
I’m David N. Taylor, President & CEO of the Pennsylvania Manufacturers’ Association, the statewide not for profit trade organization representing the people who make things here in the commonwealth. I appreciate the chance to speak with you, and I thank the previous presenters for their very helpful testimony.
Manufacturing is the engine that drives Pennsylvania’s economy, adding $92 billion in value every year, directly employing over a half-million Pennsylvanians, and sustaining millions of additional Pennsylvania jobs through supply chains, distribution networks, and industrial vendors.
Because the manufacturing sector adds the most value, manufacturing jobs offer the best wages and benefits in the marketplace. The manufacturing process also has the strongest multiplier effect on job creation. Additionally, manufacturing employers are significant local taxpayers, sustaining the local tax base and funding important local services. As we all know, a community that loses its factory is a community facing significant decline. This is why Pennsylvania’s policymakers should be interested in the health of our manufacturing economy and how state policy decisions affect the competitiveness of our business environment.
The burden of regulatory compliance is a critical area of business competitiveness where Pennsylvania needs to improve. Governor Shapiro has spoken about the need for Pennsylvania to move at the speed of business, in addition to the importance of regulatory reform, so we are hopeful that slashing red tape and accelerating permits can become a point of bipartisan consensus.
The governor has also issued an executive order that application fees should be refunded when permits are not approved on time. This customer-focused view of government functions is a welcome change and we thank him for it, although it does not get quite as far as we need to go. After all, what the applicant really needs is the permit itself, because no productive activity can occur until after that state permit or license is in hand.
Many times investors are burning daylight and their limited capital waiting to get an OK from Harrisburg, endangering the planned projects and all of the jobs and economic dynamism that would come with them.
To get state government permitting on track, there are several things to be done:
- When applications are not reviewed within the legal time limit, those applications should be automatically “deemed approved” and issued to the applicant.
- Although I am told that there are specific liability complications that Pennsylvania will have to address first, many other states have contracts with third party vendors to undertake the review function for permits and licenses. If the vendor fails to keep up, the state then hires a new vendor to keep approvals current.
- Too often, state agencies continue to hike permit fees, allocate the money to other functions, and then cry poor when asked why permits are not processed in time. State agencies should be required to dedicate permit fees to permit processing until and unless there is no permit backlog and all permits are being processed by the legal deadline.
When it comes to the larger issue of regulatory reform, let me be clear that no one is saying there shouldn’t be rules; of course there should be. However, those rules should be based on sound science and should be subjected to a meaningful and independent cost/benefit analysis. In environmental compliance, the continuous ratcheting of standards to capture the last molecule of emissions pushes us past the point of diminishing returns. Under that dynamic, costs soar ever higher as any potential benefit grows ever smaller. This approach is wasteful, counterproductive, and contrary to good sense, especially when Pennsylvania has led the nation in reducing emissions.
To improve Pennsylvania’s approach to regulations and permitting, there are many opportunities I would urge lawmakers to consider:
- Because the public good that results from regulations is compliance, the state’s regulatory agencies should be partners in compliance. Of course, willful and deliberate abuses should result in fines and penalties, but Pennsylvania citizens and businesses that are attempting to comply in good faith should be corrected when they err, not punished. The “gotcha” mentality of state regulatory agencies is unhelpful and lawmakers should give them an attitude adjustment.
- In the absence of a Pennsylvania-specific reason, state regulations should not be allowed to be made stricter than federal regulations. The state regulatory agencies shouldn’t be allowed to turn the screws on the rest of us just because they feel like it.
- Rules that Pennsylvanians must obey should be issued ONLY by the proper Pennsylvania authority that is accountable to our citizens. No one has the right to outsource our sovereignty. It is absolutely unacceptable and borderline insane for us to allow legislatures or bureaucracies from OTHER STATES to impose rules on our people.
- Regulations should be reviewed on an ongoing basis to ensure that they are functioning as intended, are cost-effective, and are still necessary. Regulations that are found to be dysfunctional, overly expensive, or no longer needed should be revised or expunged. As it stands, state government only ever adds new rules, and no one ever goes back to see whether we still need them. An “Office of the Repealer” has been proposed in previous legislative sessions and I hope that concept is revisited soon.
- The total cost of regulatory compliance should be calculated and published annually. Furthermore, once that process is institutionalized, the General Assembly should establish a process of regulatory budgeting whereby new regulatory costs must be offset with regulatory reductions so that the process of compliance does not continue to increase without limit.
- Regulations that impose a significant economic cost on the citizenry should require approval by the General Assembly in order to go into effect. Governor Wolf’s attempt to impose an electricity tax by executive fiat is a perfect example of why this policy is needed. A threshold of a million dollars in costs might be appropriate for this purpose, although others might suggest a different trigger point. Regardless, the bureaucracy should not have the ability to impose unlimited costs on the public and the costliest rules should require legislative approval.
Beyond these potential changes in state law, I would also urge lawmakers to craft legislation in a manner that minimizes the discretion of the regulatory agencies. Too often, bills are approved that point toward particular policy goals but allow the bureaucracy great latitude in promulgating the specific rules with which the public must comply. Don’t give the bureaucrats the chance to misrepresent your legislative intent.
I want to close with a few observations. Oftentimes, the radical Green groups refer to our industrial employers as “polluters”, by which they mean that — despite the almost unlimited time, energy, effort, and money spent by those businesses to comply with the strictest DEP and EPA regulations – their emissions, while within legal tolerances, are above zero. This is an appalling slander of the productive sector by anti-production grievance groups that make nothing except noise, add no value, risk nothing, and employ no one except a handful of professional doomsayers. Zero emissions means zero industrial activity. No jobs, no wages, no benefits, no value added, no taxes paid.
These radical Greens celebrated when U.S. Steel was denied a critical permit to build a natural gas pipeline that was central to the $1.5 billion modernization plan for the Edgar Thomson Plant in Braddock and the Clairton Coke Works. Ultimately, that plan was pulled, meaning that our skilled tradesmen in western PA missed out on more than one million man-hours that they were not able to work. How many mortgage payments, trips to the grocery store, tuition payments, and utility bills would have been paid by the wages from that work, if only our working people had been allowed to do their jobs?
The ultimate irony is that U.S. Steel’s modernization plan would have REDUCED EMISSIONS, improving local air quality and making the Mon Valley Works more compliant with state and federal regulations.
That radical anti-production mindset has taken hold inside many of not all of our state regulatory bodies, which poses a direct threat to Pennsylvania’s prosperity and the material well-being of our people.
As lawmakers you have both the opportunity and the responsibility to rebalance the scales and defend the separation of powers.
On behalf of Pennsylvania’s manufacturing employers, I thank the committee for its interest in this important subject and I will do my best to answer your questions.