Iowa Should Look to Ohio in Advancing Pro-Growth Regulatory Reform

This article was published in Real Clear Policy.

Ohio passed a bill resulting in a 30 percent reduction of regulations by 2025 making Ohio’s businesses more competitive and spurring economic growth. Policymakers in Iowa should look to this as a model that further reform can be built upon.

Governor Kim Reynolds is prioritizing making Iowa’s economy more competitive. This year the Governor is focusing on reducing the regulatory burden in Iowa. In January, Governor Reynolds issued an executive order to begin to reform regulations in Iowa. In her Condition of the State address, she said that the intent of the executive order is to “begin the process of lifting this dead weight from our economy over the next four years.” In advancing regulatory reform, Iowa policymakers should consider Ohio’s successful efforts to eliminate burdensome regulations. Ohio serves as the gold standard for state regulatory reform.

The Mercatus Center at George Mason University provides a sense of how heavy the regulatory burden is, examining states’ regulatory regimes and finding that Iowa has the most regulations in the Plains Region. Governor Reynolds explains, “Over time, Iowa’s Administrative Code has ballooned to more than 20,000 pages and 190,000 restrictive terms. Many of these rules are unnecessary. Some are actually counterproductive, short-circuiting legitimate economic activity and making our state less competitive.”

While not every regulation is undesirable, too many will stifle an economy. In that sense, regulations can be considered a hidden tax. Regulations, just as with taxes, can hinder economic growth. Burdensome regulations harm economic growth by making it more difficult for businesses to operate and for people to earn a living.

The executive order issued by Governor Reynolds halts the expansion of regulations. Further, state agencies are required to review existing regulations to determine their relevance and economic impact to ensure that “existing rules — each and every one — are worth the economic cost,” as Governor Reynolds stated. “Only those that meet this standard will be reissued. The rest will be repealed. When it is all said and done, Iowa will have a smaller, clearer, and more growth-friendly regulatory system,” stated Governor Reynolds. Agencies have four years to complete the review process.

Although the Governor’s executive order is a step in the right direction, policymakers should look to Ohio’s regulatory reforms as a model for further reform. Ohio is now a national leader in regulatory reform when the legislature passed Senate Bill 9 in 2022. This law established a goal of 30 percent reduction in regulations by 2025 with the goal of making Ohio’s businesses more competitive and spurring growth in the Buckeye state. In addition, Ohio now requires every new regulation to be offset by two repealed and increased regulatory transparency.

This year, Governor Mike DeWine has proposed a “new plan that, when complete, will eliminate nearly one-third of the Ohio Administrative Code by targeting duplicative provisions, outdated sections, and unnecessary requirements.”  The “one-in, two-out” rule, combined with the 30 percent reduction, and creating an infrastructure for greater transparency and accountability is a strong approach to regulatory reform. By removing thousands of pages from the Ohio regulatory code, Ohio is making it easier for a business to be created and for small businesses to grow. Making it easier for businesses to understand and comply with regulations means businesses can spend more time on improving their business and serving customers more effectively. This is especially helpful for small businesses that do not have the resources to have lobbyists or compliance offers to work on their behalf.

Governor Reynolds’ executive order is not the first time she has addressed regulatory reform. This initiative continues the Governor’s program for regulatory reform. In 2020, Reynolds signed into law a historic occupational licensing reform, which allowed for universal recognition of out-of-state licenses, waived licensing fees for low-income individuals, and established a standard for a fairer process of review for licenses denied based on past criminal convictions.

These measures are reducing barriers to employment and recognizing residents’ right to earn a living. Making it easier to work in Iowa means that workers may choose to relocate to Iowa and know they can still pursue their chosen profession.  Ohio has also implemented occupational licensing reform that grants universal recognition. Research from the Knee Center for the Study of Occupational Regulation at the West Virginia University demonstrates that states that have enacted universal recognition and other licensing reforms leads to an increase in new workers relocating.

In 2019, Arizona became the first state to enact universal recognition and the Goldwater Institute has estimated that over 6,500 individuals have taken advantage of this opportunity. In addition, it is estimated that Arizona’s occupational licensing reform will increase the state’s GDP by $1.5 billion over 10 years and bring in thousands of additional workers. Both Iowa and Ohio are confronted with workforce challenges, and regulatory reforms will help not only increase economic growth but attract more individuals to fill workforce needs.

Last year Iowa led the nation with a historic tax reform measure that creates a 3.9 percent flat tax by 2026. In addition, Governor Reynolds has combined pro-growth tax reform with conservative budgeting. Lowering tax rates, limiting spending, and eliminating burdensome regulations is a formula for economic growth and will make Iowa even more competitive.

Governor Reynolds’ executive order on regulation is a step in the right direction of freeing Iowans from the burden of excessive regulations. More reform is needed to ensure that regulations serve a purpose rather than impeding business or the right to earn a living.

Rea S. Hederman, Jr. serves as the executive director of the economic research center and vice president of policy at the Buckeye Institute.

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