Pennsylvania Red Tape Reduction: A Case Study

Executive Summary

People’s time is valuable, and governments should not waste it. Yet administrative burdens restrict access to a wide variety of public services, causing frustration and disappointment. Over time, rules and processes accumulate. Governments typically lack processes to identify when the burdens that result are excessive, or tools to reduce those burdens.

This is beginning to change. The federal government has recently taken important steps to reduce paperwork and improve the customer experience. State and local governments, who interact even more directly with citizens than their federal counterparts and must compete for business with neighboring states, are also striving to modernize and streamline administrative burdens.

This report examines Pennsylvania’s recent success in responding to concerns from citizens that it took too long for a business, nonprofit or individual to receive a permit, license or certificate they had applied for.

Under the leadership of Governor Josh Shapiro, Pennsylvania reformed the state’s permitting application process to provide Pennsylvanians with transparency, accountability, and a better overall customer experience. The governor’s team took the following specific steps:

Based on interviews with officials who led and participated in the efforts, this report provides an overview of how the Pennsylvania team turned permitting reform into a reality. Their success can be traced to four main components:

• A clear mandate for change: The governor issued an executive order detailing the reform agenda and provided continued visible support for change. This public support ensured that permitting reform gained the momentum necessary to overcome barriers to change, including the need to forge new channels of communication and coordination amongst multiple agencies.
• Actionable plans to allocate personnel, resources, and direction: The governor didn’t just expect burden reduction to happen within existing channels. Instead, the executive order created the Office of Transformation Opportunity, to be housed inside the governor’s office, and CODE PA, a public civic tech organization. Both new offices were responsible for working with agencies to catalogue and analyze existing processes, troubleshoot problems, generate solutions, and implement changes, such as the PAyback digital interface. The project involved intensive commitment by these units for a short period of time in creating the permitting reform, and longer-term commitments at the agency to maintain the reform. Within a year they went from collecting data with excel sheets to using software to estimate the percent of permits completed on time.
• Specific and realistic targets: The effort was not just a vague governmentwide performance initiative; it focused on specific performance problems. The state used new and existing data to establish targets for specific permits, which in turn allowed it to set appropriate deadlines and create the money-back guarantee. The targets were public, which motivated personnel to meet them, created accountability, and made it easy to communicate progress to the public and stakeholders.
• Permission to dive deep into existing processes: It’s easy to casually suggest that government employees should work harder or faster. It’s harder to take time to understand the granular processes by which permits are analyzed and issued, so that the process can move quicker without sacrificing the state’s interest in quality or legal compliance. Rather than speculate about potential problems or rushing to solutions, the governor’s team took extensive time working directly with employees issuing permits so they could identify specific bottlenecks and find ways to resolve them. In some cases this included hiring more staff, streamlining legal review, or solving technological problems. Having general counsels on board at the start of such problem solving efforts avoided unnecessary delays because of legal uncertainty about what was, and was not, allowed.

Introduction

Debates on the topic of permitting tend to be mired in the question of more versus less regulation. Business interests are more likely to argue for less while others, such as environmental groups, argue for more. Communities can reasonably argue about what is the appropriate level of regulation, but this is just one aspect of permitting. Another equally important aspect is whether a regulatory framework, once in place, occurs predictably, expeditiously and transparently. In simple terms, this means that those seeking a permit have good customer experience.

Shortly after assuming office, Governor Josh Shapiro gave state agencies 90 days to catalog 2,400 permits, certificates and licenses, and document how much time each took to process. Using the data provided by state agencies after this investigatory period, the agencies were required to set specific processing time targets for licenses and permits that created the regulations for the PAyback program.

Over the past year, the state has boasted of the success of PAyback and related reforms. Notable results include:

• Reduced time to receive an initial corporate license from eight weeks to two days.
• Reduced small business verification times at the Department of General Services from 15 days to 10 days.
• Reduced new teacher processing times at the Department of Education to 2-3 weeks.
• Eliminated a backlog of 35,000 Medicaid provider applications and renewals in six months.
• Eliminated a backlog of birth certificate amendment requests from 6,200 to zero.
• Reduced the backlog of applications at the Department of Environmental Protection by more than 90%.

In the year since it was created, PAyback has issued just three refunds.¹ In praising the reform, the Wall Street Journal editorial page remarked that the “threat of revenue loss was enough to put a spring in the step of sluggish bureaucrats, even before they lost any revenue.”

The key components of Pennsylvania’s success appear simple: the governor ordered agencies to set reasonable targets and meet them, or lose money. However, major structural reforms are never as simple as they appear. Thus, this report goes deeper into identifying the specific actions that Pennsylvania undertook to adopt its permitting reform, providing a guide to other state and local governments.

The Cost of Permitting Process Burdens

Pennsylvania had garnered a reputation for red tape when it came to administrative processes. Such delays were cited as a reason why businesses were not building new factories in Pennsylvania, or why hospitals could not meet staffing shortages. Businesses felt like there was no direct government contact to guide them through the bureaucracy. One state official who had previously worked for a municipal government noted that statewide processes were famous for lack of transparency. Businesses usually became resigned to the inevitable delays; it was, as he put it “the cost of doing business.”

In 2021, more than half of the nurses seeking licenses to work in Pennsylvania faced at least a three-month wait. At a time of chronic nursing shortages, during the height of the pandemic, some nurses simply found jobs in other states. There are valuable public health benefits to verifying that nurses are qualified – it should not, however, take three months. The time lost does not make the nurse more qualified, or the patient safer. But they do make it harder for the nurse to start work. It is, in the words of author Annie Lowrey, a time tax imposed by the government on the public.

This time tax can carry real financial costs. Delayed groundbreaking or business openings means money lost for the local community and the state treasury. It also saps public confidence in the government’s ability to facilitate basic transactions and processes.

The type of barriers that those interacting with the permitting process experienced are sometimes labeled administrative burdens, defined as an individual’s experience of policy implementation as onerous. They typically involve learning, compliance and psychological costs. In the context of permitting, learning costs requires being aware of specific requirements, how they apply to you, and how to satisfy them. These costs can be higher for applicants dealing with unfamiliar regulatory environments presented in complex and bureaucratic language. Compliance costs involve fees, the time involved in paperwork and documentation demands, as well as the time lost waiting for an outcome. Psychological costs involve frustration with the process, stress about the outcome, and uncertainty about when the process will be completed. While larger businesses will have specialized staff or legal help to deal with the administrative processes, individuals or smaller businesses experience those costs more directly.

A Clear Mandate for Change

Shapiro announced his commitment to permitting reform in his first week in office. Executive Order 2023-07 Building Efficiency in the Commonwealth’s Permitting, Licensing, and Certification Processes was signed on January 31st, 2023. The Order gave agencies 90 days to document their permitting process — the types of permits they provided, the relevant statutory guidance, the fee charged, and a recommendation for a target time by which permits should be processed. The order also specified that applications whose length exceeded the recommended target be issued a refund.

A key component to Pennsylvania’s success was Governor Shapiro’s willingness to use some of his political capital on permitting reform. Making the public bureaucracy more responsive involves fixing back-end administrative processes, rather than unveiling a compelling new policy. It also requires leaders to be willing to ask hard questions of agency leaders, which can sometimes ruffle feathers. But Shapiro saw solving such problems as essential to a broader economic development strategy and enabling greater labor force participation.

This specificity, and the support of the governor’s office, created a tangible framework to move forward. While the 90-day target for documenting all permits and their processing times was challenging, it was still achievable. The time-sensitive mandate propelled a reform that some aides suggested would have otherwise taken a year or longer. Cabinet secretaries understood they would have to either meet the deadline, or explain directly to the governor — in an in-person meeting in front of their peers — why they couldn’t. The visibility of the initiative also encouraged a sense of competition among cabinet officials. The mantra of “moving at the speed of business” was widely adopted among those working with the governor.

Gubernatorial leadership also mattered in resolving coordination problems across agencies. Coordination is a fundamental challenge for public agencies organized around the logic of one particular mission, but who must work with other agencies to achieve that or other missions. Individual agencies often struggle to manage such coordination problems without external pressure. Without that sense of pressure, delays are more likely to emerge.

A good example of a coordination challenge is in data sharing. Agencies might be unwilling to share data, and establishing data sharing agreements may take considerable time. One member of the governor’s team noted defensiveness about who owns the data, while another emphasized that it took time to communicate that “this is state data; this is not agency data.” Another noted that the work is challenging because it requires the co-operation of front line staff to collect and analyze the data, who might see little value in the work. But as agency leadership demonstrated their commitment to the reform, it mitigated resistance at lower levels.

Interagency task forces or policy czars working across agencies lack the influence of the governor or agency leaders in resolving such coordination problems. As agencies saw permitting reform as a leadership goal, they were more likely to overcome coordination problems, either in working with one another to solve problems, or in sharing data with the governor’s office. The governor’s coordination power extends beyond public agencies, since they can also convene private and nonprofit actors, and other levels of government.

Leadership prioritization of reforms is easier said than done. This is especially true for administrative reforms, where all too often a president, governor or mayor will declare a government reform commission, but then show little interest in the fruits of its labors. Governors can simply declare something to be a goal, but if they do not continually devote time to it, and emphasize its importance, it will be less likely to be viewed as a significant priority. Research on transformational leadership in the public sector emphasizes the centrality of leadership commitment of time, including time spent communicating their goals. Effective leaders not only set targets, but communicate directly with those responsible for delivering, and to the broader public about the public interest value of the reform. Shapiro did this, and any leader seeking to emulate his success would have to commit to doing the same.

Specific Plans to Allocate Personnel, Resources, and Direction

While the leadership of Governor Shapiro was essential to improving permitting reform, it alone was not sufficient. Officials realized they could not build an attractive digital front-end experience without first solving back-end problems. Accordingly, the governor also established new state capacities, and empowered leaders in charge of these offices. Governor Shapiro created two new units within the governor’s office: the Office of Transformation & Opportunity (OTO), and the Commonwealth Office of Digital Experience (CODE PA), and brought in outsiders to lead the new offices. OTO was led by tech entrepreneur Ben Kirshener. Bryanna (“Bry”) Pardoe had previously worked in digital service in the healthcare industry before she led CODE PA. These two units would come to play complementary roles in facilitating the reform.

OTO serves different functions, centered around economic development. These include identifying and reducing administrative bottlenecks that affect businesses interaction with the state, coordinating economic development and innovation strategy, developing a performance management system for the governor’s office, and providing a single point of contact for businesses on complex projects that require coordination across agencies.

The office remains relatively small — it started with three employees and now has ten. It performs its tasks in different ways. It has set up a one-stop shop concierge service for businesses to help them navigate different parts of the bureaucracy. For permitting, it collected information on types of permits and wait times, and oversaw the creation of targets, the PAyback website, and a business-friendly dashboard to track progress.

Outside of government, it served as a beacon to private sector actors that not only was progress being made, but that they had someone to contact to help them resolve their problems. This can include learning about incentives and opportunities for a particular type of business. For example, an agricultural biomanufacturer reached out to OTO to learn about incentives from different parts of the state government, as well as relevant resources at the federal and local level. It also includes managing permitting to meet with building timelines. An ultrasound manufacturer expanding its business in the state worked with OTO to receive an expedited construction stormwater permit to meet its groundbreaking deadline, while still including the mandatory 30-day public comment period.

Within government, OTO served as the governor’s emissary to agencies, the spear carriers for the permitting reform. They did the daily work of pushing agencies forward, and providing help for them to succeed. “You need someone to actually push the buttons and push the people and set up the meetings and make sure there’s progress being managed. And that’s where our role comes in. It’s kind of like the catch all for getting stuff done” according to Ben Kirshener. This role was especially important in getting different units to coordinate.

The first task for OTO was to make the challenge legible. The state was obviously involved in issuing licenses, permits and certificates. But how many? What was the process for each of them? How long did each take, on average? The state did not have the answers to those questions in a single place. And compiling this information was a bigger challenge than they anticipated: “brutal” and a “huge undertaking” according to those involved. Agencies did not have this information at hand, and where reporting was, at best, annual, meaning the data was not timely. Some agencies might require more flexibility with a tight deadline based on the number of permits it processed. The Department of State had 1,069 permits while the Department of Agriculture had one. Another factor is how digitalized the process is: the higher the proportion of digital permits the easier it is to pull reports relative to paper-based permits. Some agencies also have more experience in collecting and reviewing data, which makes it easier for them to account for their permitting processes.

Until the state understood the nature of the problem, they could not manage it to improve services. It turns out that 22 agencies oversaw 2,400 types of permits. OTO had primary responsibility for leading the process. They worked with agency liaisons, and the initial version of the data was “very manual” and “rudimentary,” typically relying on Microsoft Excel sheets. Nevertheless, moving quickly to generate some basic data generated a baseline upon which to build. One lesson is that a lot can be done without new technology in the short run, though this implies relying more heavily on manual effort. By late 2024, OTO had completed a second iteration of this process, with the goal of making the reviews annual. The second iteration was able to rely on software rather than excel reports, making it easier to run reports, and generate performance metrics like “Percent Completed On Time.”

CODE PA

CODE PA was created in April 2023, under another executive order from Shapiro. The office is an example of the growing role of civic tech in government. It mirrors the creation of offices like the U.S. Digital Service at the national level, and equivalent offices in states like New Jersey and Colorado. When CODE PA built PAyback, they had a team of seven, and had expanded to 46 employees at the time of this report.

In introducing the office, Governor Shapiro emphasized concepts that civic technologists bring to government. For example, the concept of “no wrong door” implies that people should be able to find what they want wherever they start their journey with government, rather than being shifted from one office to another. The role of offices like CODE PA is to get skilled technologists into government to modernize administrative processes that are increasingly digital and data-driven. Alongside their technological skills, civic tech is associated with a set of management practices that focus on change and reorganizing processes based on the principles of human-centered design. Civic tech in government often plays a firefighting rule — the U.S. Digital Service emerged from efforts to save the Obamacare website — but it is more effective when it is proactively brought into the design of new products. Once they had cataloged the status quo, OTO brought in CODE PA to build the digital refund process.

In-house civic tech expertise resolves shortcomings of relying primarily on contracted out technological services. Procurement processes can be slow and unwieldy when government wants to do something quickly. For the PAyback tool, the government did not have to set up a procurement process to hire an outside vendor, something which could have taken months.

“It would have been incredibly difficult for us to be able to manage that if it was a traditional IT shop balancing several other projects that weren’t able to take that dedicated focus, and really deploy a dedicated squad,” said Bry Pardo.

Another advantage of in-house expertise is that CODE PA was attuned to the goals and evolving demands of the governor’s reform, rather than treating it as a static contracting task. Such flexibility is often at odds with how governments design their procurement process, which encourages specifying what the final product looks like ahead of time, a practice that fails to reflect the reality that building good digital products is an iterative, agile process. CODE PA estimated it would also have cost more to hire an outside vendor, and taken longer to build the new digital interface. In-house civic tech capacity was therefore both quicker and cheaper in this case.

One aspect of civic tech is an emphasis on human centered design, which at its heart is a series of tools to take the user’s perspective on processes. For example, CODE PA pushed agencies to simplify the volume of data and number of fields being sought from applicants. When they built out the prototype of PAyback, CODE PA conducted focus groups with constituents on what they would like such a tool to deliver and employed user testing with each iteration.

CODE PA did not label their approach as “human centered design” but instead used a vernacular that civil servants related to: benefiting the people that they serve. This focus on the user experience mirrored efforts by OTO. They held listening sessions with chambers of commerce and industry groups to hear their concerns, and organized a local permitting conference in Harrisburg. Once they had data in place, they also created dashboards that reflect client experiences.

Specific and Realistic Targets

Creating Reference Points

Public organizations lack the equivalent of a natural bottom line of profitability. And so, they must rely more heavily on performance measurement systems. For such systems to be informative, they must be comparative. The answer to the question of “how well is this public organization performing?” will always be another question: “Compared to what?” The comparison requires some sort of reference point. Reference points tend to be either historical (how are we doing compared to the past), social (how are we doing compared to peers), or target-based (how are we doing compared to our goals).

For permitting reform, Pennsylvania went from no widely used reference points to track performance to developing historical comparisons and attaching visible targets to maintain and improve historical performance. For performance systems to take hold, creating performance data is not enough. Data needs to be used, which implies creating organizational routines of use, sometimes called learning forums or data driven reviews. Performance systems, if effective, can encourage agencies to create routines where they discuss the data, and seek to learn from it. Such regular data-driven reviews can flag performance outliers, seeking to learn from high-performing units, and improve lower-performing units.

The emphasis on measurable data encouraged the creation of agency-level dashboards. Ramez Ziadeh of the Department of Environmental Protection noted how the permitting reform had caused discussions of data on a weekly basis: “We show everybody what the numbers look like, how many applications are pending, how many in each different program area, in different regions.” The data allows supervisors to identify which reviews in their sections or regions are coming close to deadlines and prioritize those reviews.

Using Stretch Goals

Research on goal-setting finds that targets are effective in motivating greater effort, but especially if they are “stretch” targets — an improvement on the status quo, but realistic enough to be achieved. Unrealistic targets can become discouraging and encourage cheating.

Making Progress Visible

One challenge for public sector performance systems, even well-run ones, is that the public often fails to pay attention to the progress made. So, the designers of such systems must work to communicate successes. Shapiro’s speedy rebuilding of I-95 after its collapse represented a large and visible demonstration of government capacity in action, achieving an outcome that tangibly affected people’s lives in a way that beat public expectations. Permitting reform is less visible, but is consequential to people’s direct experiences of government, and is more tangible than many other types of reforms.

Unlike the federal government’s burden reduction initiative, Pennsylvania’s focus on benchmarks for a single but important policy domain made it easier to communicate progress that the public could understand. The refund promise also helped to communicate the impacts of the reform, sending “a signal to the public as well like trying to regain some of that trust we might have lost” said Orlando Olamonte, deputy secretary of policy and planning at the governor’s office of administration, while noting that PAyback is one the first thing that members of the private sector bring up in economic development discussion. “They’re like ‘Oh, we loved that money back guarantee.’ And it sounds so obvious now in hindsight.” The administration facilitated this communication with press conferences and press releases, engaging the governor and cabinet secretaries in public appearances when a significant milestone had been achieved.

Permission to Dive Deep Into Existing Processes

The new permitting performance system made it easier to identify problems, and the refund promise, along with the governor’s support, gave agencies strong incentives to make progress. But agencies still needed to engage in a process of solving the particular problems they faced to meet their goals. Much of OTO’s role was in working with agencies to fix broken processes behind the scenes, especially when the problem or solution involved multiple agencies.

An example of this type of problem solving came with business licenses. About 1,000 new requests were coming in each day, and the state had the capacity to review about 1,200 applications daily. The problem is that it also had a backlog of 21,000 applications, meaning that applicants faced delays of up to 8 weeks. The officials who oversaw the process identified the problem as simply finding enough staff, even on a temporary basis, to resolve the backlog. The solution was to temporarily reallocate civil servants from other agencies to help resolve the backlog. This raised coordination issues between agencies, and questions about whether it was possible to make such reallocations without violating civil service rules. OTO coordinated multiple agencies, budget and Human Resources staff and general counsels to facilitate the transfer. With an agreement in place, enough staff were on hand to eliminate the backlog over a weekend, turning an 8-week process for new applicants into a two-day wait.

Problem-solving worked in cases where agencies believed that they would not be punished for poor performance, but were willing to work collaboratively. OTO tried to facilitate these cultural traits. According to Ben Kirshener, “We came and we said, we are here to help…we didn’t come in and say we are the smartest guys in the room. We said we’re here to help you…What do you need to be better at your job? We are the resource people, but we don’t know what to give you unless you tell us what you need.” The governor’s office had to manage change while pushing agency officials beyond their comfort zone, asking them to collect and analyze data in new ways, and establish new performance metrics. One official noted that the change can be nerve-wracking, and much of their job involved “assuaging peoples’ fears about the outcome of this work, patiently answering questions about what we were doing and why, and generally coaching them through the various stages of the initiative. We really needed people to see us as a partner, not just the driver, of the project.”

To help identify the source of problems, OTO asked agencies to self-grade specific permit processes, and then focused on the ones with the largest problems. It also tried to identify the cause of the problem.

OTO found that most permitting problems fell into one of a handful of buckets: technology, legislative, regulatory or business process issues, and asked agencies what kinds of support in those areas would help the most. Based on agency input, OTO developed a report card for each agency they labeled “Permit Reform Summaries”, and offered options to solve the biggest problems agencies faced. In many cases, the source of the solutions also came from agency staff. “A lot of these agencies looked at the data and saw, ‘Oh my God, we can fix this.’ And they started fixing it” said Kirshener.

In some cases, this meant new staff. For example, where agencies had vacancies, OTO pushed the prioritization for hiring those with permitting responsibilities first. While agencies might reflexively emphasize staffing needs, part of the problem-solving conversations also meant challenging existing status quo approaches in ways that agencies might not normally do, pushing them to re-examine and re-engineer those processes.

Bry Pardo of CODE PA described it as, “The willingness to push and ask, why are we doing it this way? What value is this driving for us?…And so it’s building the relationship and the confidence in the agencies that they can do those things, but also putting that end user right at the middle of everything that we do.”

Agency staff report that being pushed to reexamine existing processes helped to identify unnecessary redundancies and steps in the review process, developing more responsive standard operating procedures as a result. Simply creating baseline data allowed conversations about improvements to happen. They also allow target improvements. One official noted that if a target for a specific permit is 30 days, and their average performance is 12 days, this allows a lowering of the target. But without baseline data, such assessments cannot be made.

Another partner in problem-solving was the Office of General Counsel. A barrier to government innovations are beliefs about what the existing law requires and prohibits. In many cases, such beliefs may be incorrect. OTO involved the Office of General Counsel from the governor’s office, and their counterparts in every agency. Many of the underlying laws were written for another era, leaving significant room for how they should be interpreted today. The Office of General Counsel emphasized the goal of the executive order, communicating the need for legal compliance, but also encouraged agency lawyers and other staff to look for innovative solutions, and to communicate questions on what was feasible. This made it difficult for anyone involved to claim that legal constraints prohibited permitting reform.

Conclusion

For Pennsylvania, continuing success on permitting reform will require dealing with long-run challenges, especially legislative and technological ones. The 2023/24 state budget allocated millions to modernize permitting processes and especially to help with antiquated technology in some agencies. In other cases, there are legislative questions about what functions need licenses, or whether some regulatory requirements can be relaxed. For example, the state legislature passed a law that removed regulations requiring hair braiders from having 300 hours of training. Another solution is expanding the use of interstate compacts, where a certification in one state is recognized by another.

Even with these long-run challenges, Pennsylvania has shown remarkable progress in a relatively short period of time, without major new investments but enabled by judicious capacity improvements, gubernatorial leadership, and problem-solving, to make the most of the new target and money-back guarantee system. Pennsylvania’s success builds a helpful roadmap for other states to follow as they strive to build a more responsive state government.

Best Practices for Policymakers Seeking to Reform Permitting in Their State:

• Ensure full commitment from the governor’s office to impart significant policy, process, and culture changes across agencies.
• Get the lawyers on board early. This could include legal teams for the state attorney general’s office, governor’s office, individual agencies, and so on. Engage legal teams early and often and encourage a spirit of inter-agency cooperation.
• Convene the governor and agency heads on a monthly basis for agency directors to report successes, review progress toward targets, and troubleshoot issues directly with the governor.
• Identify and quantify the existing status quo of permitting, licensing timelines.
• Set ambitious but achievable targets for improvement.
• Empower actors with enough capacity and support to lead the initiative. Encourage actors to surface resource gaps so the team can understand and address them.
• Identify agency level liaisons to help identify information and facilitate agency level discussions on how to improve.
• Encourage data-driven reviews in agencies to identify problem areas. When compiling data, think critically about what gaps exist in record keeping, what kind of metrics are needed moving forward, and what processes can ensure that data stays current and accurate.
• Publicize progress made, give credit to agency leaders.
• Lead with empathy, recognizing that change challenges cultural norms.

¹ Note, however, that refunds are not automatic and must be applied for. Presumably many more Pennsylvanians were eligible for reforms than actually applied and received them, so this metric is of limited usefulness in understanding the overall success of the program.