If you’ve never heard of Identity Recovery Service contracts — insurance policies to cover a person’s costs in the event of identity theft — don’t feel bad; there are only two companies selling them in the entire state. One of those companies is based in Colorado, but conducts some of its business in Texas.
Still, in 2009 legislators decided the industry should be regulated in Texas. State law requires the cost of overseeing the business, estimated at $30,000 annually, to be paid by the licensees themselves, so the Department of Licensing and Regulation charges them $1 for each policy sold. Last year, the agency collected $5,048. In 2011, the figure was $714.
The licensing and regulation agency keeps tabs on 29 occupations and industries, including well-known professions such as electricians, cosmetologists and tow truck drivers. But it also oversees the state’s Legal Service Contract companies — all 12 of them.
Most people think of occupational regulation as protecting them against bad doctors and nurses, or untrained technical professionals such as engineers. Having the government keep watch can protect citizens from malpractice that could threaten public safety and even take lives. At the least, it guarantees a minimum set of skills and provides a method to remove bad apples from the profession.
Yet dozens of lesser-known jobs whose oversight is of less obvious merit command the attention and resources of government regulators as well. They range from boxing referees to massage therapists, lawn irrigation installers to hair-braiders.
In recent years, state legislators have passed laws requiring that more and more professions be subject to state oversight. In 2011, they created new licenses for those who apply eyelash extensions or who breed dogs and cats, among others. This year they have proposed laws that would have the government oversee sex businesses, pet dealers, foundation repair contractors and roofers. Those hoping to enter licensed fields must prove they are qualified — including, typically, passing criminal background checks — and pay regular licensing fees. Today, about a third of Texas’s workforce is covered by state occupational regulation, according to a 2008 legislative study.
Deciding a profession is no longer worth regulating has been another matter. Over the past dozen years, the licensing and regulation department has seen only four professions deregulated, each — such as talent agents — made functionally obsolete by the Internet.
Rep. Bill Callegari, R-Houston, a longtime critic of what he describes as overregulation of professions, recently introduced two bills to slow the tide. They would require officials to determine if regulation is genuinely necessary to protect the public’s “health, safety and welfare” before a new profession becomes state-licensed.
Callegari’s past efforts haven’t gained much traction. But supporting his crusade this time is a new study evaluating how Texas regulates its licensed professionals. Produced by the University of Texas-Dallas School of Management, the analysis released three months ago found a system that, in some ways, was arbitrary and occasionally unnecessary.
In instances, researchers found that the state’s oversight seemed set up more to protect professions from outside competitors than the public from any real danger. With some occupations, the violations the government overwhelmingly enforces are operating without a license — paperwork infractions created only by making the industry subject to government oversight in the first place.
And in many cases, the report concluded, the system simply made no sense. If public safety is the primary goal, for example, why would Texas require cosmetologists, who style hair, to receive more training than emergency medical technicians, who handle matters of life and death inside an ambulance? Why must barbers take continuing education classes or risk losing their license? And what, exactly, is the public danger of an interior or landscape design gone wrong?
A bad haircut
In 2008, while reviewing a proposal for a new building, Texas Department of Transportation workers ran across what seemed like a minor discrepancy. The state license number of one of the project’s outside architects didn’t match up with his name. The agency called the architect’s firm, Halff Associates, which launched its own investigation.
What the Richardson company discovered was startling — architect Michael Gonzalez had never been licensed, even though he’d been designing buildings in Texas for nearly two decades.
The Texas Board of Architectural Examiners moved quickly. A severe punishment was necessary, the state regulators argued, because of “the significant risk to the public” posed by having an unlicensed architect on the loose. In March 2010 Gonzales was fined $300,000, the largest financial penalty in the board’s history.
Yet a spokesman for the examiner’s board acknowledged that Gonzalez had never received a complaint against him. And even after Gonzalez was unmasked as unlicensed, no one from the oversight agency had reviewed his long track record of projects to make sure he hadn’t produced substandard or dangerous buildings.
In other words, not only was there no evidence that, as an unlicensed architect, Gonzalez had actually posed a “significant risk” to the public — state regulators couldn’t really demonstrate it, either.
The UT-Dallas study observed that even egregious violations in many licensed professions often don’t imperil the public: “Dissatisfied customers are free to take their business elsewhere, at little harm to themselves other than perhaps some wasted money.” For example, said Callegari, “If you get a bad haircut, you’re not going to go back for another one. What better way is there to take care of a business?” Existing laws already punish consumer fraud and broken contracts.
Other “professions have such low complaint or disciplinary numbers that the value of the current regulatory regime is questionable,” the report found. At least seven of all the Licensing and Regulation Department’s licensed occupations had not fielded a single complaint in recent years; four others regulated by the Department of State Health Services were complaint-free, as well. The state’s 1,256 licensed sanitarians — they generally perform health inspections — had generated a single complaint.
Even among professions in which government inspectors had uncovered violations, many were only administrative — practitioners either didn’t have a valid license or had not met continuing education requirements required by the state.
Bruce Ormand, owner of Austin’s A1 Partsmart and vice president of the Texas Automotive Recyclers Association, said Texas needs to regulate the automotive parts recycling business because, among other reasons, it can be exploited by money launderers. Yet over the past two years, 95 percent of the state’s disciplinary actions against automotive parts recyclers were simply because the person didn’t have the right Texas license.
Even the Department of Licensing and Regulation concluded several of its own programs could disappear without public consequence. Among others, it has suggested that lawmakers consider erasing its hair-washing regulations. “Currently, Texas is one of only five states that require a person to successfully pass an examination and pay a fee to become licensed to shampoo hair,” it noted in a 2012 report.
A spokeswoman for the department said that regulators haven’t seen much action among its two Identity Recovery Service companies, either. When lawmakers began licensing the industry, in 2009, they predicted about 400 complaints a year would keep investigators busy.
Since the occupation came under state regulation, however, the companies have an unblemished record — “No complaints, no disciplinary action,” said the spokeswoman, Susan Stanford.
Nail business ‘horror stories’
Once an occupation is licensed by the state, reversing the process can be an uphill battle. Over the years, the Sunset Advisory Commission staff has recommended de-licensing, or reducing oversight of barbers and cosmetologists no fewer than three times, commission executive director Ken Levine said.
Most recently, the 2004 sunset report on the state’s tonsorial regulation determined that “No evidence exists that the public has been seriously harmed by individuals practicing barbering or cosmetology, despite hundreds of documented cases of unlicensed activity.”
“Staff found that the agencies follow several practices that do not enhance health and safety in Texas, but instead waste the agencies’ limited resources,” the agency charged with promoting government efficiency found. When it recommended scaling back the regulation, however, barbers and cosmetologists packed the hearings, and the idea was scuttled.
“It was like taking their first born away,” recalled Callegari.
Indeed, the most vigorous support for government oversight typically comes from within a profession. Supporters say that’s because their industries are looking out for the public.
“It’s a fashionable idea to have less government,” said Daired Ogle, owner of Daireds Salon in Arlington, and a member of the state’s Advisory Board on Cosmetology. “But there are a lot of dangers doing what we’re doing — communicable diseases, sanitation. There are horror stories about what’s transpiring in the nail business.”
That said, “some occupational licensing programs offer clear advantages to members of the licensed profession, such as reduced competition and increased earnings,” the 2008 legislative report found. So “propositions — even suggestions — to terminate occupational licensing programs are typically met with strong resistance.”
Legislators are quick to hear from threatened licensees. In March 2011, Callegari introduced a bill that would remove state regulation of interior designers, weather modification, personnel services and talent agencies. By the time the bill was ready for a vote two months later, only personnel services companies and talent agencies remained in the bill, which eventually passed.
A PAC gets busy
It wasn’t the only time the interior design profession had risen to defeat an attempt to remove its government oversight. Although the profession has been regulated in Texas for two decades, such regulation has come under attack periodically for being unnecessary to protect consumers from any real danger.
“We are the most misunderstood profession,” said Donna Vining, executive director of the Texas Association for Interior Design. Designers don’t just select color schemes, she said, but also protect public health by creating interior plans that guarantee safety, such as inflammable materials: “If you walked into a structure, anything you see, feel, touch or smell is in our purview.”
The most recent assault came last year, when the Sunset Advisory Commission reviewed the Texas Board of Architectural Examiners, which includes interior designers. As its analysis was winding down, it became apparent the agency’s staff was leaning toward recommending that interior designing be deregulated.
The commission’s report came out in November 2012. It advised that regulating the profession was unnecessary: Of the 36 enforcement actions brought in the previous five years, it noted, “only one included a finding of incompetence in the practice of interior design … (which does) not show that interior designers pose a significant risk to the public health, safety or welfare.”
A hearing was scheduled for mid-December, during which the 12 sunset commission members — five state representatives, five senators and two public representatives — would decide on the agency’s recommendations. The commission’s decisions would be published in January.
The Texas Association for Interior Design Political Action Committee got busy. Reports filed with the Texas Ethics Commission show that over a two-week period at the end of November and the beginning of December 2012, the organization sprinkled $15,000 worth of contributions among 13 elected state lawmakers. Seven of the donations, of $1,000 each, went directly to individual sunset commissioners — five of whom had not previously received that PAC’s money.
An additional $3,000 was distributed to longtime industry supporters state Rep. Senfronia Thompson, D-Houston, and state Sen. Eddie Lucio Jr., D-Brownsville. In 2007, the two had sponsored companion bills that would have made the practice of interior design without a license a criminal offense.
State Rep. Todd Hunter, R-Corpus Christi, also received a $1,000 contribution from the PAC. State records show he is a director of his wife’s interior design company. State Sen. John Carona, R-Dallas, chairman of the Business and Commerce Committee, which hears pending sunset legislation, received $1,000, as well.
Licensed designers packed the Dec. 19 hearing to demand that the profession remain under state regulation. At the end of the meeting, commissioners voted to overturn the sunset staff’s recommendation and continue overseeing interior designers.
“YOU DID IT!!!!,” a news release sent that day to Texas Association for Interior Design members trumpeted. “All of our hard work over the past weeks has paid off.”
This story continues ongoing scrutiny of state regulatory agencies by Eric Dexheimer, a Statesman investigative reporter since 2006. His previous work has exposed how regulators have attempted to discipline licensed workers for their off-duty behavior, and in-depth articles on state oversight of the lottery, bingo and economic development trust funds.