Let’s prepare for Utah’s future economy

This op-ed was published this week in the Salt Lake Tribune.

If COVID-19 has taught us anything, it’s that we need to be prepared to be nimble and flexible to unforeseeable changes and circumstances. Rather than being the exception, this adaptability should be the rule that guides our economy going forward.

Many businesses have had to quickly and fundamentally change the way they operate as a result of the pandemic. Restaurants, the travel industry, the gig economy, education and communications have all underdone serious changes to their business models. More impacts are still potentially to come.

During the last year’s ordeal, federal, state and local governments have waived more than 800 different regulations that were a burden to businesses. In the months that have passed since many of the regulations have been waived, the sky has not fallen, and consumers have still been protected — raising the question of whether some of those regulations were ever needed to begin with.

The reality is there are likely thousands more regulations across a variety of industries that are equally as burdensome to business, and which are discouraging (if not prohibiting) innovation that could help the economy recover more quickly.

The impact these restrictions (combined with COVID-19) have had on businesses cannot be understated. According to one survey, 60% of businesses that closed during the pandemic will never reopen again. As alarming as this development is, we must remember that the struggles small businesses experience with onerous or outdated regulation are nothing new.

Most of the time when we point to the triumph of a new business model over the status quo we fail to realize that the Ubers and Airbnbs of the world had millions of dollars of venture capital and a team of lawyers behind them to push forward. This is not the case for small business owners or startup companies with very limited resources who are unable to overcome antiquated business regulations.

The state must be forward-looking as we recover from COVID-19, and ensure we cultivate an economy that can allow small and large businesses alike to thrive for decades to come. That is where a “regulatory sandbox” can be both a useful and powerful tool.

A regulatory sandbox is a unique legal classification that allows for companies and regulators to identify potentially problematic laws or regulations and temporarily freeze enforcing the specific restriction for a limited period of time. And consumers would be protected, as this process only targets laws or regulations that would not impact public health or safety.

Utah is already familiar with regulatory sandboxes, as the state has a few of them. The Legislature has created ones for the financial technology industry as well as the insurance industry. Most recently, the courts introduced a legal services sandbox in order to reduce the burden on the provision of certain legal services. It’s time to build on this momentum to expand regulatory relief to entrepreneurs and innovators in any industry, rather than a select few.

This proposal provides two attractive solutions. In the short run, it can allow companies to demonstrate where there are unnecessary regulations that can be modified or removed, and empower businesses to adapt and thrive. In the long run, Utah would become a magnet for innovative companies looking to develop new and exciting products, potentially bringing higher-paying jobs and capital into the state.

This type of regulatory reform is poised to play a major role in the 2021 legislative session. House Bill 217, sponsored by Rep. Cory Maloy, has already been introduced — and Speaker Brad Wilson highlighted a regulatory sandbox in his opening remarks for the session. This, along with Gov. Spencer Cox’s executive order to reduce barriers to entry for businesses, shows a strong signal of the commitment of Utah’s leadership to move forward on this issue. HB 217, through an all-inclusive regulatory sandbox, aims to make regulatory reform a dynamic process and centerpiece of Utah economic development policy over the coming decade.

As states focus on recovering from COVID-19 over the following months and years, they will be exploring a variety of tools at their disposal to position their states as economic innovators. Empowering dynamic regulatory reform will be a critical part to ensuring that Utah bounces back from this economic downturn and reaches even greater heights.