Nevada Among Top 10 States For Low Federal Regulatory Burdens

    For once, Nevada is near the bottom of a list we wouldn’t want to top. A new report from the Mercatus Center at George Mason University ranks the Battle Born state 42nd in the U.S. for the negative impact of federal regulations on the state’s economy.

    The federal regulation and state enterprise (FRASE) index enlisted by Mercatus ranks the 50 states and the District of Columbia according to how federal regulations affect each state’s economy. Although federal mandates apply in the same way in all states, each state’s economy includes a unique mix of industries. As a result, federal policies that target specific sectors of the economy can and do affect states in different ways.

    Nevada was in either 50th or 49th place among states from 2003 to 2008, climbed up to 39th in 2012, then dropped to 42nd in 2013. Nevada’s FRASE score for 2013, the last year for which data is available, is 0.83, putting the state below the average for federal regulatory impact. The chart below shows Nevada’s scores for the last 10 years:

    Historical FRASE Ranks and Scores for Nevada

    FRASE

    Source: Mercatus Center

    One of the reasons for Nevada’s desirable score is that the accommodation (hotel/motel) industry has relatively few federal restrictions and makes up a significant portion of the state’s economy. The accommodation sector makes up 12. 4 percent of the state’s total private sector value, well above the national average of 0.9 percent, but the industry has only 1,538 federal restrictions (as measured by FRASE), well below the median of 6,165 for a given sector.

    Retail and mining, two of Nevada’s top 5 industries, both have above-average regulation and economic impact. Mining regulations are the greatest contributor to Nevada’s FRASE score.

    The state’s top industry, real estate, is 0.7 points below the national average in terms of economic share. With a regulatory burden just below median at 6,014 federal restrictions, this sector does not have a significant impact on Nevada’s score.

    The two figures below provide an easily comprehensible snapshot of Nevada’s largest industries, as a percentage of private sector economic value, as well as a snapshot of the number of federal regulations for each sector.

    industires

    Source: Mercatus Center

    Note that Nevada’s fifth largest sector, covering professional, scientific, and technical services, has the highest number of federal mandates:

    Regional Findings

    The portions of the South and Midwest that make up “Middle America” are home to some of the highest regulatory burdens, driven primarily by the importance of, and restrictions on, resource extraction and energy development. The Mountain West fares far better as a region, with Nevada coming out on top.

    The figure below shows which states and regions have the highest and lowest regulatory burdens.

    visualization

    Source: Mercatus Center

    Other Western States

    California ranks 29th nationally, with chemical products manufacturing contributing the most to their score despite not being one of their top five industries. The state is also above the national average in regulation-heavy professional and technical services, but their massive real estate and computer products industries are restricted at levels very close to the median.

    Arizona fares slightly worse than Nevada, coming in 40th place. Utilities are the top contributor to their score, though like California this is not one of their top industries.

    Utah is ranked 31st, and while professional and technical services are the main factor, their credit intermediation industry stands out as a heavily-restricted and extra-weighted sector in the state.

    Colorado rounds out the region in 34th, driven by professional and technical services restrictions and a larger broadcast and telecommunications industry.

    Oregon is the only state in the West faring better than Nevada, coming in 46th place.

    Below is a graph showing the general trends in the FRASE index in the four U.S. census regions in recent years:

    trends

    Source: Mercatus Center

    A Brief History of Federal Regulation

    Over the past 80 years, the federal government has increasingly relied on regulations as its primary legal output. In 2014, Congress enacted 223 laws, while federal agencies issued 3,554 final new rules in the Federal Register.

    The most recent edition of the Code of Federal Regulations (CFR) contains more than 175,000 pages and one million individual restrictions that mandate or prohibit some activity. The number of federal regulatory restrictions has almost doubled since 1975, as shown in the following graph:

    Mercatus

    The most-regulated industries nationally are closely linked to energy, transportation, and fuel, along with finance and pharmaceuticals. Surprisingly, fishing also makes it into the top 10, as shown in the table below.

    NAICS

    Source: Mercatus Center

    Methodology

    FRASE uses RegData, a dataset that quantifies federal regulations by identifying individual regulatory restrictions in the CFR and estimating their relevance to different industries. FRASE weights the number of restrictions targeting each industry according to its importance to a particular state compared to the nation as a whole. If an industry contributes twice as much to the state’s economy as it does to the nation’s, the restrictions count twice as much.

    A FRASE index of 1 means that federal regulations affect a state at the same level they do the nation as a whole. A score higher than 1 means federal regulations have a higher impact on the state than on the nation, while a score below than 1 means they have less impact.

    Read the full report, glance over the methodology, and access the full RegData here.

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