Improving Michigan’s Regulatory Environment

There is a general — and proper — understanding that reducing taxes can help stimulate Michigan’s lagging economy. But it is less often recognized that heavy-handed regulation can cause the same problems as high taxes. If businesses or consumers are forced to spend too much money to obtain a permit or to carry out their business, it is the same as taxing their money away — and sometimes worse, since they lose time as well.

A reasonable regulatory environment is critical to retaining and expanding jobs in Michigan. And make no mistake: Michigan has a well-deserved reputation as a difficult regulatory state, particularly when it comes to environmental requirements.

This matter has become urgent. The global marketplace in which Michigan firms now compete demands agility. Michigan automobile manufacturers and their suppliers cannot afford to wait longer to obtain an air emissions permit than it takes a Japanese manufacturer to bring a new car to market, as they did in the 1990s.

The state has made some attempts to improve its procedures, but the reforms have not kept pace with changes made in competing states. The governor and the Legislature could improve Michigan’s regulatory apparatus through the following actions, none of which would harm the environment:

• Adopt a law that prevents the Michigan Department of Environmental Quality from promulgating regulations that are more stringent than federal requirements without the approval of the Legislature. Federal requirements are extremely stringent, having been based on very conservative assumptions to protect the most vulnerable Americans from even unlikely threats. Michigan doesn’t need to inflate these standards, and it will become more competitive if it doesn’t.

• Pass a law that explicitly states that DEQ operating directives are not binding unless they are promulgated as regulations. DEQ directives are not subject to the same sunshine laws and public review as formal regulations, which must follow the Michigan Administrative Procedures Act. Nevertheless, many businesses are effectively compelled to comply with often-burdensome edicts out of fear of DEQ retribution.

• Require that the DEQ process air permits within six months. Manufacturers need new air permits whenever they make modest changes to their processes. A six-month deadline would add predictability to a routine procedure.

• Repeal the Air Toxics Program and rely on the federal Maximum Achievable Control Technology standards that are used by other states. Michigan’s early and aggressive regulation in this area has outlived its usefulness, particularly now that the federal government has promulgated the MACT standards. Michigan should not reinvent the wheel for every new air toxics permit.

• Return the wetland program to the federal government. The Army Corps of Engineers operates wetland programs in every state except Michigan and New Jersey. Adopting the federal program would put us on an even footing with other states and free Michiganians to follow a more streamlined federal wetland process.

• Reject the proposed Water Legacy Act, which would require permits to use groundwater. Of the Great Lakes states, only Minnesota requires groundwater permitting — a bad idea there, too, but more understandable given the semi-arid climate of its western region. Michigan already has ample means to protect its groundwater supply, and it cannot afford the regulatory nightmares that Minnesota’s groundwater permits impose on its economy.

Gov. Jennifer Granholm must play an additional role. No matter what laws she and the Legislature pass, the DEQ must operate in a fair, timely and consistent manner that assists, rather than obstructs, permit applicants in meeting environmental requirements. This demands top-down management. A “bottom-up” culture, in which DEQ personnel pursue personal agendas, is a blueprint for disaster.

Michigan’s regulatory policies, no less than its tax policies, have helped precipitate its economic decline by shackling entrepreneurship and killing jobs. Relieving the most unreasonable parts of its regulatory burden will do much to restore the state’s economic health, while preserving the state’s natural resources.

Russ Harding is senior environmental policy analyst for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.