The Hill: Special interests should not control licensing board appointments

January 09, 2023 | By STEPHEN SLIVINSKI

In 2006, the North Carolina Board of Dental Examiners declared war on shopping mall teeth whiteners. They sent 47 cease-and-desist letters to operators of kiosks offering teeth whitening services. These kiosks were selling over-the-counter teeth whitening products and offering a chair for people to sit in and apply the products themselves. The dental board also convinced the state’s Board of Cosmetic Arts Examiners to issue similar letters. In 2007, the dental board began sending letters to shopping mall operators recommending eviction of the kiosks.

The message was clear: If you were offering teeth whitening services in North Carolina and were not a licensed dentist — which required at least a graduate dental degree from an accredited program and a license from the state — you might face government reprisal.

Yet none of this was actually in state law. The actions were motivated by an interpretation of the law by the North Carolina dental board, which was — like many licensing boards of various occupations — dominated by licensed dentists who were competing with the kiosk operators to provide teeth whitening services. These licensed dentists held a majority of the board seats, had an incentive to shut down their competition, and had the power delegated to them by the state government to do just that.

In 2015, the U.S. Supreme Court reprimanded the North Carolina Board of Dentistry and, by extension, all similarly dominated boards. It ruled that states that delegate enforcement of occupational licensing laws to a board dominated by “active market participants” could not claim legal protections, like antitrust exemptions, in lawsuits alleging the state was restricting marketplace competition.

This form of capture by special interests has existed as long as occupational licensing itself. Now, a new first-of-its-kind report by Pacific Legal Foundation has identified an additional and lesser-known form of licensing board control by these active market participants: They have the power to directly choose who sits on these boards in nearly half of all U.S. states.

Usually, members of state licensing boards are appointed by the governor or nominated by the governor and then confirmed by the legislature. State law often also requires that members meet certain qualifications for private sector seats, such as industry experience or holding an existing license in good standing.

However, in some states, the governor can only choose board appointments from a list of candidates provided by the professional associations of those “active market participants,” in the Supreme Court’s words, who have an incentive to drive competitors out of the market. In fact, some state laws explicitly name which of these special interests shall provide the lists. In some cases, the professional association holds an election open only to existing licensees and then the governor must rubber-stamp the winners. In some circumstances, the association that controls the board appointment doesn’t even represent a majority of the practitioners in the state.

The Pacific Legal Foundation study, titled “Choosing the Gatekeepers: How Special Interests Control Occupational Licensing Board Nominations,” looked at the licensing boards for 17 occupations that are licensed in all 50 states and found that, in 23 states, a governor must appoint who the active market participants choose for at least one board. Many states require this for more than one board. The selection of nominees is dictated by the trade association in Louisiana for at least 12 occupations, followed by Alabama (11), Mississippi (10), Kentucky (9), Oklahoma (8), Maryland (8) and North Carolina (8).

A legislative fix is possible: a simple bill that reiterates the power the governor possesses to appoint qualified individuals to these types of seats, just as they do for other areas of government. Such a law would not preclude a governor from seeking input from trade associations; it would simply not require the governor to choose those who are recommended by them.

Some states have already begun making these reforms. With the support of Oklahoma Gov. Kevin Stitt, state Sen. Julie Daniels and state Rep. Tom Gann sponsored legislation to end three of these unreasonable licensing board restrictions in the last legislative session, and they plan to continue such reform next year. Legislators in other states have heard about our study and the legislative success in Oklahoma and plan to introduce similar bills this year.

Restoring the proper separation of powers in this way can support democratic accountability and prevent licensing boards from running amok. It may not eliminate conflicts between entrepreneurs and licensing boards — the problem of regulatory board capture runs deep — but this simple reform would allow a more diverse set of opinions a seat at the table.

This op-ed was originally published at The Hill on January 09, 2023.