Federal regulations a burden on state governments

We often see reports about how much government regulations cost businesses and individuals, but a new analysis from the American Action Forum, a center-right think tank headed by former Congressional Budget Office Director Douglas Holtz-Eakin, illustrates another aspect of federal regulations: how much these unfunded mandates affect state and local governments.

Last month these pages reported on the Competitive Enterprise Institute’s latest “Ten Thousand Commandments” report, which estimated the total federal regulatory burden, or “hidden tax,” at $1.9 billion in 2014. Federal agencies issued 3,554 regulations last year, at an average cost of approximately $15,000 per household and about $10,000 per employee for businesses.

But the regulatory burden is not limited to the private sector. “Regulation of industries or businesses tends to receive a majority of the coverage, but the mandates placed on cash-strapped states and local governments can result in far more profound impacts,” the AAF report states. “Since President Obama took office, his regulations have added $35 billion in unfunded regulatory costs and at least 75 million paperwork burden hours on state and local governments.”

Even these figures are likely understated, as the federal government often claims regulations impose no unfunded mandates on states — even when they clearly do — and only regulatory paperwork burdens that exceeded 1 million hours were included in the AAF report.

The 86 unfunded mandates imposed on state and local governments in 2010, primarily the result of the passage of both the Affordable Care Act and the Dodd-Frank financial reform law that year, were “easily a modern record,” the AAF analysis notes.

All these regulations require state and local governments to “employ a small army’s worth of compliance personnel just to handle the paperwork, to say nothing of other capital costs,” AAF contends.

It pains us to think of all the productive things taxpayers would have done with those billions of dollars and millions of hours, had governments not forced them to spend their money navigating red tape and pushing paper.