There is a large body of evidence that reducing state-level economic regulations can lower business costs, increase competition and employment and improve per capita personal income and gross state product.

State regulations that researchers have studied include banking, trucking and occupational licensure. Among their findings:

• In the quarter of the states that still restrict branch banking, deposits are lower, access to banking services is limited and interest rates are higher.
• Intrastate shipping rates declined almost 15 percent when Florida deregulated the trucking market, and the cost of shipments below 10,000 pounds in California and Nebraska would fall 30 percent if they deregulated.
• Restrictions on the practice of medicine, such as requiring U.S. citizenship, prohibiting advertising or not accepting licenses from other states, result in higher prices and fewer health care providers.

Research confirms that state regulation can also increase the cost of employing workers, increasing unemployment rates. Thus

• During the 1980s, 12 states set minimum wages above the federal level, reducing overall teenage employment by an estimated 1 to 3 percent for each 10 percent increase in the minimum wage.
• A 1 percent increase in workers' compensation rates causes employment to decline by 0.1 percent.
• In three states that mandated health insurance benefits for maternity, relative wages and employment of married women of child-bearing age declined.
• States that have adopted "wrongful termination" laws restricting employers from firing employees "at will" have reduced employment between 2 and 5 percent.

Restrictive economic regulations make an economy less efficient, and thus lower employment and the standard of living.

Source: Robert Krol and Shirley Svorny, "Can State-Level Deregulation Affect Economic Well-Being?" Jobs & Capital, Fall 1995, Milken Institute for Job & Capital Formation, 1250 Fourth Street, Second Floor, Santa Monica, CA 90401, (310) 998-2600.

Rent control, by which government sets an artificial ceiling on increasing tenants' rent and thereby destroys housing markets, is finally in retreat.

For example, after the earthquake in Santa Monica, Calif., many property owners were denied emergency loans from the Federal Emergency Management Agency, which felt the city's restrictions would prevent them from making enough rental income to pay back the loans.

However, since a California decontrol law went into effect on January 1, 1996, Santa Monica's bond rating has improved and builders expect a booming market.

• In the past two years, New York and Massachusetts have also moved to either restrict or completely eliminate rent control.
• Today, 30 states preempt local jurisdictions from enacting any form of rent control.
• In another 15 states, no localities exercise rent control, despite the absence of a statewide ban.

Studies show that as few as 10 percent of the tenants in rent-controlled housing are poor. Yet the poor suffer because public housing projects are the only low-cost housing built in rent control cities, and landlords let existing properties fall into squalor, since they can't afford the cost of maintenance and repair.

Source: Greg Smith, "Rent Control Losing Ground to Free (202) Market," FYI, January 31, 1996, American Legislative ExchangeCouncil, 910 17th Street, NW, Fifth Floor, Washington, DC 20006.

Washington state has taken significant steps to reform the state's regulatory procedures. Reform legislation passed in 1995 includes these provisions:

• Administrative rules must conform with legislative intent and have a definite purpose.
• The effects of rules and alternatives to them must be evaluated, and the least burdensome alternative selected.
• A rule's probable benefits must outweigh its probable costs.

The legislature also adopted a property rights initiative requiring public entities to evaluate the effects of their regulations on the value of private property, and to reimburse property owners for the devaluation of their property due to regulations. However, Washington state voters overturned this measure in a November 1995 referendum.

Source: Elaine Ramel Davis, "Washington State Regulatory Reform: Accomplishments and Comparisons," Washington Institute for Policy Studies, P.O. Box 24645, Seattle, WA 98124, (206) 938-6300.