Regulatory Budget Research Articles

Regulatory budgeting: A bad idea whose time has come?

Advocates of regulatory relief propose a budget that would annually cap regulatory costs. But emulating fiscal budgeting would be much more difficult than they envision. An arbitrary macrobudgetary constraint would have to be selected, and the potential scope of the regulatory budget would be vast. The process of regulatory budgeting would be very-time consuming, and could increase micromanagement by the Congress. Estimating regulatory costs would be challenging, and ignoring regulatory benefits would be unfair and inefficient. A preferable alternative to regulatory budgeting would be to expand the Government Performance and Results Act to include cost-effectiveness reviews for regulations.

Introduction to a symposium on regulatory budgeting

Introduction to a symposium on regulatory budgeting

Toward a Regulatory Budget

A regulatory budget would require the federal government to treat compliance costs incurred by the private sector as if they were incurred by the government, without requiring the government to actually assume those costs. For example, EPA could be given a regulatory compliance budget of say $80 billion in FY98. A regulatory budget would provoke an annual debate in Congress on the size of EPA's or OSHA's budget. Such a debate would force the proponents to weigh the benefits and costs of various regulatory programs, something now lacking in the political process.Interest in a regulatory budget reflects the slight gains in the quality of regulatory decision making resulting from mandatory regulatory review. It is now apparent that better information about the costs, benefits, and distributional consequences of regulation will not automatically improve regulatory decision making‐although it would not hurt.

Economic Determinants of Environmental Compliance

The widely accepted economic paradigm of corporate compliance with regu lation suggests that regulated parties engage in a cost-benefit analysis of com pliance. Under this paradigm, the measure of compliance will be determined entirely by the costs of compliance, weighed against the probability of being caught in violation multiplied by the consequences of being caught. This supposition is often made without empirical support. This paper presents an empirical analysis of compliance with United States air pollution control regulations. Compliance was obtained from an EPA data base, broken down both by state and by industrial source category, and was analyzed through regression analysis that utilized several economic explanatory variables. The results suggest that corporate ability to pay is a significant factor in explaining compliance. There is some evidence that higher costs reduce compliance, though not so directly as might be expected. Indeed, the results imply that companies may have a "regulatory budget" implicitly devoted to compliance, rather than performing a cost-benefit analysis of compliance with each individual regulation. These results raise ethical and financial issues for managers.

The rise of the regulatory state in Europe

Privatization and deregulation have created the conditions for the rise of the regulatory state to replace the dirigiste state of the past. Reliance on regulation ‐ rather than public ownership, planning or centralised administration — characterises the methods of the regulatory state. This study examines the growth of regulation in Europe, at the national and Community levels. It stresses the advantages of this mode of policy making, but also recognises its problems. It is suggested that political accountability can be ensured by a variety of substantive and procedural controls, among which judicial review is especially important. Executive oversight and co‐ordination may be improved by using new tools of public management like the regulatory budget or the regulatory clearing house.

EPA fares well among '86 regulatory budgets

Among the federal regulatory agencies, only one—the Environmental Protection Agency—fared well in the Administration's budget proposal for fiscal 1986 submitted earlier this month to Congress. Budgets for the other regulatory agencies that interact in one way or another with the chemical industry are either frozen at or cut from fiscal 1985 levels. Hazardous waste gets top priority in EPA's budget proposal. Funding for the Superfund program, which finances evaluation and cleanup of abandoned hazardous waste sites, would increase 45% from this year's budget to $900 million. Funding for programs aiming to curb future hazardous waste problems is slated to rise 26% to $236 million. In setting its 1986 Superfund budget targets, EPA is assuming that when Congress reauthorizes the law this year the taxes that finance Superfund will be set at a substantially higher level than they are now. And all of the financing will come out of industry's pockets. The Administration will not request ...

Formulation of Environmental Regulations

Introduction of environmental regulations can affect the cost and completion time of Civil Engineering projects. Discussion focuses on public policy issues associated with environmental regulations. The basis for prolulgating environmental regulations, economics of regulations, and the public view of environmental regulations are the issues presented. A number of substantive concerns about formulation and administration of environmental regulations are also discussed. Quantitative information regarding the effects of environmental regulations on productivity are presented. Procedural and substantive regulatory reforms, including an innovative approach for establishing a regulatory budget, are presented. Finally, it is postulated that problems associated with environmental regulations arise largely from two types of inefficiencies (allocative inefficiencies and X-inefficiencies). These inefficiencies are discussed and specific recommendations for minimizing them are presented.

Ways of improving the management of environmental risks

From the public's discovery of environmental quality in the late 1960s to the present, there has been increasing recognition that a more systematic approach is required to manage risks and to achieve the gains at low cost. Such a systematic approach must begin with risk identification, then go on to risk assessment, consideration of management options, a decision analysis of the options, and an examination of strategies for reducing loss. One of the most difficult aspects of environmental risk management is setting goals. There is a tendency to engage in rhetoric about zero risks and a pristine environment. However, moving toward more realistic goals requires consideration of what is an acceptable risk level. This level cannot be defined without knowing the benefits that come with the risk and the costs of reducing the risk. More generally, the criteria for selecting a risk management strategy include the residual level of risk, efficiency in reducing risk, equity, administrative simplicity, and public acceptability. A number of frameworks are currently used by U.S. regulatory agencies to manage risk: no-risk, risk-risk, technology-based standards, risk-benefit, cost-effectiveness, regulatory budget, and benefit-cost analysis. In specifying that an agency must use one of these frameworks, the U.S. Congress is implicitly specifying the goals for risk reduction. It appears to be easier for the U.S. Congress to specify a framework than a goal. Some of the nonregulatory means of managing risk include the market, and legal mechanisms. These risk management institutions have been effective and are a necessary part of any risk management program.

Presidential Oversight: Controlling the Regulators

In 1974, President Ford initiated a procedure by which the regulatory policies of federal agencies were subjected to systematic oversight. This activity continued with modest success through subsequent administrations. A substantial stiffening of oversight powers under President Reagan raises basic questions about the best means for performing effective oversight. Proposals for a so-called regulatory budget, within which each agency would be obliged to operate, could expand the oversight authority; but it is too exclusively cost-oriented. A more promising approach is to impose expiration dates on regulations, making them subject to renewal, and to reform the legislative mandates of the regulatory agencies.

Proposals for a Regulatory Budget

Proposals for a Regulatory Budget

OSHA after American Petroleum Institute: A Proposed Regulatory Budget

OSHA after American Petroleum Institute: A Proposed Regulatory Budget

Fighting Regulation: The Regulatory Review

Economic impact analysis, zero-base review, federal assumption of compliance costs, and the regulatory budget–these are a few of the institutional reforms intended to improve regulatory decision making. These review mechanisms are not panaceas. They insure increased scrutiny of government regulation and facilitate decision making in this area by providing the information needed to make decisions and attempting to see that it is used correctly.