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Robert Gehrke: Utah takes big step on deregulation, but this first-of-its-kind move has me worried

This “sandbox” can allow businesses to bypass state laws.

(Francisco Kjolseth | The Salt Lake Tribune) Robert Gehrke.

One of the Big Ideas to come out of the 2021 legislative session was the creation of a “Regulatory Sandbox” — the first such experiment in the country.

The premise is this: Government regulations are bad. They stifle innovation and it would be a good idea to create a way to get around these meddlesome rules in order to spur new businesses and economic growth.

It is black tar Republican ideology, refined to its purest form. Gov. Spencer Cox touted the idea in his State of the State address, and House Speaker Brad Wilson embraced it in his remarks on the opening day of the session.

On top of that, it had the backing of the Salt Lake Chamber, Silicon Slopes and various smother-the-government groups.

Backers promised HB217the product of the libertarian Libertas Institute — would make Utah an “innovation incubator” and the “start-up state.”

Even with all of that heavyweight support, it’s a little surprising how easily it whizzed through the Legislature. Not only did it not have a single “no” vote, even from Democrats (there were actually Democratic co-sponsors), but not one lawmaker bothered to ask a single question about the bill at any point in the process.

The reason that’s so surprising is because, as written, this bill is incredibly broad. Here’s what it does: Any entrepreneur who feels like the government is hampering his or her business could petition the new Office of Regulatory Relief in the Governor’s Office of Economic Development to waive the requirement for up to two years.

It also provides a complaint process for businesses to file grievances about rules they feel are onerous or unnecessary.

It’s modeled after existing “sandboxes” intended to foster innovation — one for the insurance industry, one for the financial and technology sector (which no business has used since its creation in 2019), and one launched last year by the judiciary to encourage legal services providers.

I can see some real upside to the approach. A few years ago, Tesla Motors was prevented from opening a dealership in Utah because state law prohibited carmakers from selling automobiles directly to consumers, which is Tesla’s business model.

That got resolved after brutal battles in the Legislature, involving high-priced lobbyists and threats of lawsuits.

The sandbox could offer a better way to resolve those disputes based on data and not brute political force.

But this new sandbox could be truly massive because the scope is virtually limitless.

First, it doesn’t just deal with administrative rules. It would let an applicant get a waiver to actual state laws — contrary to a legal concept known as the “non-delegation doctrine,” which typically prevents legislative bodies from handing over lawmaking power to appointed boards, as this new law does.

Second, a business cannot seek a waiver related to the insurance or finance industry — remember they have their own sandbox to play in — and waivers cannot undermine public health or safety.

Aside from those loose guidelines, the only limit is one’s imagination.

Food and farming laws, professional licensing requirements, public education limitations, environmental rules, day care guidelines — just to name a few — could all be on the table.

It’s conceivable we could even start getting wine in the mail (but don’t hold your breath).

Applications for waivers would go to an 11-member advisory committee stacked with corporate interests — six representatives from business, three from state agencies that regulate business, and two members appointed by the House speaker and Senate president. That committee would recommend approving or rejecting the waiver.

A final decision would be made by the director of the Office of Regulatory Relief.

Maybe these applications will be groundbreaking, innovative and worthwhile. Maybe they won’t. The public won’t have much opportunity to weigh in.

That’s because portions of the waiver applications are exempt from Utah’s open records law. Worse, meetings of the advisory committee are explicitly exempt from the Utah Open Meetings Act — that means no public notice, no right to attend, no minutes, no recorded votes.

So what we potentially have, then, is an unelected bureaucrat deciding in secret whether to erase laws passed by the Legislature, with no real transparency or accountability to speak of.

Backers of the bill are already looking at expanding the sandbox to cover county and municipal governments, which is likely unconstitutional but could open the scope to a litany of zoning and development rules.

Remember how the billboard companies tried to get a law passed allowing them to convert any of their signs to digital billboards? It failed in the Legislature. But next time, why bother with the finicky Legislature? Go to the sandbox.

There is much to be said for outside-the-box — or inside the sandbox— ideas. Nobody wants dumb regulations that exist solely for the sake of having regulations. In fact, there has been an entire legislative committee — the Administrative Rules Committee — that has existed for years solely as a check on frivolous rules.

What we do want is rules and laws that serve to protect people, whether it’s their finances or health or environment or general well-being. It is, quite literally, the reason governments exist in the first place.

The risk we run with HB217 is that it turns that fundamental premise on its head and presumes the mission should be, first and foremost, to promote business — and in this instance to do so without even a semblance of transparency or accountability.

That’s not a trifling decision, one that — one would think — lawmakers should have thought even a split second about before handing over their basic constitutional responsibilities. They did not.

I hope my fears are misplaced and the sandbox is a place where everyone plays nice. But I’ll be watching it (to the extent I can). Because as innocuous as the term “sandbox” sounds, legislators have ceded an immense amount of unchecked power and, with it, a tremendous opportunity for businesses to make mischief.

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