The regulatory landscape varies substantially between U.S. states. In addition to having a great impact on how citizens live and work, the extent of state regulations has far-reaching implications for the vibrancy and efficiency of economies overall. But what are the most regulated states? And which are the least? Until recently, it was hard to get a definitive answer because state administrative codes are incredibly long and complex.
Traditionally, attempts to quantify state regulatory restrictions relied on proxies like page counts of regulatory codes and budgets of regulatory agencies. But in 2019, researchers at the Mercatus Center at George Mason University launched the State RegData project to gain a better understanding of the reach of state-level regulation in the United States by directly measuring regulatory restrictions. Using QuantGov, the team’s open-source machine learning and text analysis platform, researchers analyzed state regulatory codes and ranked states in terms of the size, scope, and complexity of their regulations. They published two versions; State RegData Version 1.0 was released in 2019, and Version 2.0 in July 2020. In both versions, the regulatory codes of Arkansas, Hawaii, New Jersey, and Vermont were not analyzed due to limitations on data availability. In State RegData 2.0, Alaska and Connecticut were not analyzed.
In this article, we’ll review the results from the State RegData project and take a look at the No. 1 least and most regulated states in America.
State RegData Version 2.0 finds average state has 135,000 regulations
According to researchers, it would take about 23,000 hours, or more than 11.5 years, to read every word of every state regulatory code for the states analyzed. Overall, the analysis found the average state has 135,000 regulatory restrictions in its administrative rules. For comparison, Canadian provinces averaged about 29,400 restrictions in 2019, and Australian states averaged about 27,000 restrictions. The number of regulatory restrictions was determined by counting the number of command words (i.e., “shall,” “must,” “may not,” “required,” and “prohibited”) in the regulatory codes.
Researchers determined that California was the most heavily regulated state in the country, while Idaho was the least. In terms of changes to the number of regulations between State RegData versions 1.0 and 2.0, Idaho and Missouri made the most progress in cutting regulations. Idaho saw a 37% reduction in regulatory restrictions between the 2019 and 2020 analyses, and Missouri saw a 30% reduction. On the other end of the spectrum, Maryland saw a 13% increase in regulatory restrictions, and New Hampshire saw an 8% increase.
The most regulated industry classification in the country was administrative and support services (NAICS code 561), which includes industries such as employment services, collection agencies, and telephone call centers. Cumulatively, researchers found an estimated 387,007 restrictions in these industries across the states analyzed. The second most regulated sector was professional, scientific, and technical services (NAICS code 541).
Researchers also looked at the complexity of state regulations, which was a new addition to State RegData Version 2.0. Complexity measures included the average sentence length (in number of words) in a code or section of code; Shannon Entropy, which is a measure of the amount of information contained in text; and the number of conditional terms. Arizona had the least complex regulations, with about 12 words per sentence, while New York had the most complex regulations, with about 42 words per sentence.
Top Five Least Regulated States by Number of Restrictions (2020)
According to the RegData 2.0 analysis, the least regulated states in America were:
- Idaho – 38,961
- South Dakota – 43,521
- North Dakota – 52,385
- Montana – 59,788
- Nevada – 64,265
Idaho takes over South Dakota as least regulated state in America in 2020
In State RegData Version 1.0, Mercatus researchers ranked South Dakota as the least regulated state, with Idaho coming in at #4. However, when their follow-up study was released in 2020, Idaho took the top spot of least regulated state in America. The change in ranking came because Governor Brad Little, who was sworn in at the beginning of 2019, took direct aim at cutting red tape. Throughout his first year in office, Little issued two executive orders – the Red Tape Reduction Act and Licensing Freedom Act – which helped the state cut or simplify 75% of regulations. In 2020, he followed up with two executive orders that forced an annual review of regulations and consolidated 11 separate agencies into a new Division of Occupational and Professional Licenses.
Top Five Most Regulated States by Number of Restrictions (2020)
According to the RegData 2.0 analysis, the most heavily regulated states in America were:
- California – 395,608
- New York – 296,296
- Ohio – 274,470
- Illinois – 273,989
- Texas – 263,369
California named most regulated state two years in a row
With 395,608 regulations on the books in 2020, California was ranked America’s most regulated state in both State RegData Versions 1.0 and 2.0. According to the Mercatus Center, it would take the average person about 1,176 hours — or more than 29 weeks – to read all 21.2 million words in the 2019 version of the California Code of Regulations (CCR). Based on State RegData Version 1.0 data, researchers found that the administrative and support services industry was the most heavily regulated in California, while the area of securities, commodity contracts, and other financial investments and related activities was least regulated. In terms of occupational regulations, the CCR contained 16,015 restrictions related to professional and vocational regulation at that time.
Quantity of regulations only part of the story
Of course, examining the volume of regulations in a state only tells part of the story. The Mercatus Center’s State RegData project is mainly concerned with the quantity of regulations and doesn’t take into account different types of regulatory instruments or attempt to measure the quality and effectiveness of regulatory restrictions. Nonetheless, having a comprehensive picture of the size, scope, and complexity of state regulations can be useful for policymakers as they try to identify where cutting unnecessary red tape might be possible.
