Occupational Regulation - Office of the Legislative Auditor

EFFECTIVENESS OF OCCUPATIONAL REGULATION 75
While we raise these issues, we do not have definitive answers, but we think there
is some evidence to question whether our policy on financing is working well in
all cases.
Our survey of 48 agency and board managers responsible for occupational
regulation found seven managers’ top complaint was about inadequate staffing or
inadequate financial resources. There were other complaints about the high cost
of investigations and five managers complained about unlicensed practitioners.
Several people we talked with thought that regulatory fees alone should not be
expected to finance enforcement of laws against unlicensed practitioners, since
licensed practitioners were in a sense penalized for the behavior of unlicensed
practitioners.
It is difficult to
learn the cost of
occupational
regulation in
state agencies.
We found two indications that financing regulation through user fees causes
problems. First, licensing fees vary greatly in large measure because regulatory
financing must be substantially borne by those regulated. Table 3.7 presents a list
of the 40 highest licensing fees and the number regulated in each case. Small
occupations like hearing instrument dispenser, private detective, and podiatrist are
at the top of the list, and most of the 40 listed occupations represent occupational
groups of less than 1,000 people. Attorneys and physicians and dentists and other
health-related professions also have relatively high fees. There were over 21,000
licensed attorneys in mid 1998, for example, and they paid an annual fee of $207.
Table 3.7 shows, many lower paid professions pay as much or more in annual fees
even though they finance regulatory programs that are quite modest.
Second, when regulation is administered by a state department, it is difficult to
know whether the cost of regulation is recovered by fees, because departments
vary in how they categorize and report fee income and expenditures. Departments
in which occupational regulation is a relatively small part of department
operations do not account for regulatory revenues and expenditures in a way that
permits a reader of financial reports to understand the cost of regulatory programs
and whether the regulatory fees are reasonably close to regulatory expenditures as
required by Minnesota law. We reviewed data on fee income in the Departmental
Earnings Report published by the Department of Finance, but found it to be
inadequate as a source of data on the cost of occupational regulation. Because
many independent boards are essentially dedicated to occupational regulation, it is
easy to calculate the cost of their programs from regularly published tables,
however it is difficult to tell the degree to which fees finance regulatory programs
in state agencies, since the expenditure of fee income is not accounted for
separately and since there are administrative services that departments provide
that are not subject to any formal financial transaction.
ADMINISTRATIVE CONSOLIDATION
As noted in Chapter 2, Minnesota has a relatively large number of regulated
occupations and a large number of boards and agencies with regulatory
responsibility. Previous analysts have been concerned about the effect of this type
of organizational structure on administrative efficiency. For instance, the
Department of Administration report in the late 1970s summarized in Chapter 1
recommended that the independent boards be abolished and re-established as