Cost-effective strategies states can take to boost economic development

State government often undermines opportunities for economic development when there are too many inefficient regulatory processes.

Pew Charitable Trusts analyzed strategies states have used to help businesses launch and expand, including multiple practices adopted by Arizona agencies.

We were interested in helping states think about regulation in a new and different way,” Melissa Maynard, the author of the Pew report, said. “We found that improving how state agencies interact with businesses is a powerful and cost-effective economic development strategy.”

According to Maynard, governments can simplify regulatory processes that make it faster and cheaper for entrepreneurs to launch new projects.

“Sometimes processes haven’t been reviewed for years and years and years and there’s an economic cost,” she said. “One of the key steps is looking comprehensively at the process in question; bringing everyone together, having a conversation about where the challenges are, and then using some of the tools that have been common in the private sector.”

A growing number of states are now using this private-sector approach to streamline regulation, according to the report.

“Effective private-sector companies regularly review their production system to identify opportunities for improvement. Otherwise, inefficiency and waste can take up resources that could be better invested in quality, innovation, and expansion,” she wrote. “Regulatory processes are no different. When poor practices are allowed to calcify, there is an economic loss.”

Maynard cited Governor Doug Ducey’s approach to fixing regulatory issues.

In 2015, Ducey held a “Permit Blitz” which was a first step towards implementing a new process that showed “real change is possible.”

23 agencies participated and discussed issues that affected the efficiency of each of their permit processes.

The blitz resulted in24 projects implemented, demonstrating a 65.7 percent reduction in time to deliver services. Six projects in pilot, initial results of 67.5 percent reduction in time to deliver services. Three additional projects in pilot (pre-results) and seven additional future projects designed, with an estimated 59.1% reduction in time to deliver services.”

Maynard believes being proactive and interacting with businesses before a compliance issue occurs will help companies better operate, reduce the use of tax incentives, and can help the environment as well.

One example of that is the Arizona Department of Environmental Quality, which realized vehicles were leaking up to 22 gallons of gasoline a year from the time a leaky gas cap was discovered during inspection to the time it was fixed.

The department took it upon themselves to start replacing faulty gas caps at the time of inspection, saving businesses time and also creating a positive environmental impact.

In Arizona, approximately 40,000 vehicles come to emissions tests with faulty gas caps each year. Now, instead of failing the vehicles and requiring owners to spend time fixing the caps and returning for another test, the agency replaces the caps for free. The gas caps cost $5 per vehicle but replacing them prevents the vehicle from leaking up to 22 gallons of gasoline a year,” Maynard reported.

One of our key findings is that this has the potential to be a powerful economic development strategy and a cost-effective economic development strategy,” she said. “In fact, states spend many billions of dollars in tax incentives aimed at helping businesses launch and expand and those tax incentives have uneven results. This approach, by contrast, can actually save states money in many cases by helping government being efficient and adding value to what businesses are trying to do.”

To read the full report, click here.

Emily Richardson

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