Commentary

Understanding the importance of sunset provisions

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According to the American Legislative Exchange Council Center for State Fiscal Reform, Maine is currently ranked 44th in the nation in terms of its “economic outlook.” A 2022 analysis conducted by WalletHub ranked Maine’s economy 44th as well, with the state coming in at 36th for “economic activity,” 34th for “economic health,” and 42nd in terms of “innovation potential.” U.S. News and World Report has ranked Maine as one of the least business-friendly states in the country. The Small Business and Entrepreneurship Council released an analysis of state policy environments in 2019 and found that Maine had created one of the top 10 most unfriendly business climates in the nation.

The Consequences of Over-Regulation

It has been demonstrated that excessive regulations have a negative impact on both entrepreneurship and employment growth. A 2017 study that analyzed more than 10 years worth of data found that intense regulatory environments had a “negative effect on new firm creation and employment growth.” Studies have shown that imprudent regulatory policies can make for an environment that is inhospitable to businesses and employees alike by increasing the barriers to entry, thereby stifling job creation and reducing opportunities for entrepreneurial expansion.

Not only is this “regulatory overload” burdensome for business owners and prohibitive for prospective entrepreneurs, but it also defeats the purpose of having regulations in the first place. As of 2018, Maine’s regulatory code contained 8.1 million words, meaning it would have taken the average person 449 hours to read the code in its entirety. Research has shown that over-regulation is distracting in dangerous workplaces, reduces overall compliance, and incentivizes “passing inspections rather than…improving safety.”

Reducing the state-imposed regulatory burden is an important step that Maine must take on the road toward becoming a safe, healthy, economically-thriving, and business-friendly state.

Overview of Sunset Provisions

Sunset provisions are clauses embedded in legislation that cause regulatory boards and agencies to automatically expire after a given length of time unless positive action is taken to extend their lifespan, thereby forcing them to undergo review on a regular basis.

A 2016 study, which undertook an extensive analysis of regulatory management procedures in all 50 states, found that sunset provisions are “the single most important policy” when it comes to reducing a state’s overall regulatory burden. The authors explain that “by making regulations fight to stay in place, sunset provisions force a reevaluation of all regulations and tend to lessen the degree of regulation within a state.”

Furthermore, sunset provisions are seen as an important tool for Legislatures looking to assert themselves against “an executive branch that often dominates state government.” When an agency faces the very real possibility of termination, it logically follows that there would be a greater willingness to entertain both substantive and procedural requests from the legislative branch. Consequently, under effective sunset provisions, agencies’ agendas are “no longer executive dominated,” but rather “a negotiation between the executive and the legislature.”

Sunsetting and Review in Maine

Currently, Maine’s relationship with sunset provisions is limited. “Programs and agencies” are subject to sunset provisions on an “ad hoc” basis if the Legislature deems the measure appropriate.

While Maine has implemented a procedure for regularly reviewing, and even potentially terminating, agencies, it is not considered to be a sunset provision. Known as the State Government Evaluation Act, this statute requires a “periodic review of agencies and independent agencies of State Government…to evaluate their efficacy and performance.” Based on the results of this review, “the committee of jurisdiction may recommend to the Legislature that any independent agency be terminated.”

Whereas under sunset provisions inaction leads to elimination, taking the path of least resistance under Maine’s State Government Evaluation Act allows for the status quo to be perpetuated.

Texas: A Model

One state with an extensive sunset review process is Texas. Generally speaking, state agencies in Texas are “automatically abolished” on the “Sunset review date” set by the Legislature unless a bill is passed to extend its operation, typically for a period of twelve years. The Sunset Advisory Commission is fundamentally tasked with answering the question: “Is the agency still needed?” If an agency is no longer necessary, “the Commission recommends abolishing the agency or transferring its functions to another agency with similar responsibilities.” On the other hand, if the Commission finds that an agency should not be eliminated, it issues a report recommending “ways to make the agency more effective and efficient.” Since 1985, Texas has seen a return-on-investment of $18 for every $1 that has been appropriated to the Commission.

Implications for Maine

Of course, what works well for one state will not necessarily work well for another, but this should not stop Maine from taking inspiration from Texas and other states which have successfully made use of sunset provisions.

According to a report by the Mercatus Center of George Mason University, excessive regulations are associated with increased rates of poverty and greater income inequality. In fact, it was estimated that, between 1997 and 2017, Maine’s regulatory burden caused 21,340 people to fall below the poverty line and increased income inequality by 3.55%.

That said, it is essential to remember that not all regulation is without merit. There are plenty of regulations, and accompanying regulatory agencies, that serve a critical role in keeping Mainers healthy and safe. For every rule or regulation, there must be an agency to enforce it. With such a large volume of regulations through which to wade, however, the chances are greater that bureaucrats will allow those which are actually serving an important and effective purpose to fall through the cracks.

This is why implementing a clear and thoughtful sunset review process is so crucial. By trimming away unnecessary and burdensome regulations, while simultaneously making state agencies more efficient and cost-effective, Maine would likely become more business-friendly–it currently ranks 46th according to U.S. News and World Report–as well as more affordable, particularly for lower-income individuals. 

A Path Forward

Although it will undoubtedly take time and effort, Maine should begin the process of transitioning to a thorough sunset-based review process. With the State Government Evaluation Act, the basic infrastructure is already in place to conduct the requisite evaluations. Therefore, efforts can be focused on improving the program evaluation reports and recommendations, as well as on the actual implementation of sunset dates and procedures.

As of now, Maine statutes seem to place greater emphasis on taking stock of agencies’ performance and finances as opposed to actually issuing recommendations for improving upon these metrics. Consequently, the Legislature should update Title 3, Chapter 35 to explicitly expand the responsibility of a given “committee of jurisdiction” to issue recommendations for an agency’s improvement as well as to include extensive guidance for doing so. Section 325.012(a)(3) of the Texas Sunset Act may provide an effective model for such an alteration:

“In its report on a state agency, the commission shall:…make recommendations to improve the operations of the agency, its policy body, and its advisory committees, including management recommendations that do not require a change in the agency’s enabling statute.” In addition to the issuance of recommendations, the imposition of sunset dates will give those elected to represent the interests of Mainers a greater say in the regulations that govern their lives, as “termination is the threat that makes the other changes possible.”

Although the people working in state agencies undoubtedly have a great deal of expertise in their respective fields, legislators were elected for a reason, and increasing their ability to influence state agencies will help push Maine’s regulatory environment in the right direction. Furthermore, imposing automatic sunsets will change the frame of reference under which state agencies operate. The current system insinuates that, except in extraordinary circumstances, agencies will operate insulated and unaltered in perpetuity; adding sunset provisions would change the default.

About Libby Palanza

Libby Palanza, born and raised in southern Maine, is a senior at Harvard College studying Government with a focus on American Politics. She is an active member of the Harvard Institute of Politics and has held leadership positions in several campus organizations. She is currently a Public Policy Intern at Maine Policy Institute and looks forward to pursuing a law degree in the future.

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