States Push to Relax Education Rules in Bid for More Accountants

More than a dozen states are preparing to turn back the clock on licensing rules for accountants, bringing back standards common before the Enron era and the dot-com bubble.

Florida, Indiana, and Texas are among states preparing to revise state licensing requirements in a bid to broaden the pool of qualified accountants with a faster, cheaper path to earn their credential. Ohio, Virginia, and Utah have already adopted similar reforms.

The legislation takes aim at education rules that date back to the 1990s requiring CPA candidates to earn an additional year of college credits, delaying the start of their careers. The extra schooling, known as the 150-hour rule, was intended to combat increasingly complex tax and accounting rules.

But those rules are now seen as a barrier to entering the profession, reducing the number of candidates who qualify for a certified public accountant license. Unwinding them has become a rallying cry in the fight to attract future accountants and address what industry leaders call a talent crisis.

“It’s definitely a transformational moment for the profession,” said Emily Walker, vice president for advocacy and pipeline at the Virginia Society of CPAs. “To remain relevant, it needs to be able to evolve, to be responsive to the times. And the market is telling us that 150 wasn’t working and so it’s time to adapt.”

Leaders acknowledge that the revised requirements won’t be enough on their own to solve the profession’s recruitment struggles but they provide a practical starting point by trimming education costs to woo a more diverse, and larger pool of candidates.

All Hands

Retirements, a shrinking overall population of college students from which to recruit accounting majors, and competition from other fields have contributed to the contraction in the industry’s workforce. The number of graduates with accounting degrees has tumbled since its peak in 2015 while the industry shed 340,000 working accountants during the Covid-19 pandemic.

Ohio lawmakers recognized the risk to businesses and local governments’ financial management if not enough CPAs are available and backed the reforms, said Laura Hay, president and CEO of the Ohio Society of CPAs.

The state became the first to revise its education requirements in January, providing a new route to the license with a standard bachelor’s degree plus two years of work experience—a threshold once standard in the industry. Students who pursue a master’s degree will need just one year of on-the-job experience to qualify.

“This is an all-hands-on deck moment,” Hay said.

The industry needed more than three decades to convince lawmakers and regulators across the country to adopt the extended education requirement—starting with Florida in 1983 and ending with Colorado in 2015.

But states are poised to unwind that requirement much faster, with bills moving in at least 18 states, buoyed in part by bipartisan support for workforce policies that reduce barriers to employment. Efforts to reduce regulation in many states have also helped the bills to gain traction.

State associations representing CPAs have worked in tandem to advance legislation that expands education choices beyond the 150-hour requirement, providing candidates with more flexibility. That state-level push comes despite initial opposition from the profession’s largest trade group, which proposed an alternative solution last year. Under new leadership, the American Institute of CPAs now backs the reforms.

Feedback on the earlier proposal and the wave of state legislation both contributed to the organization’s decision to back the education reforms, Sue Coffey, CEO of public accounting at the AICPA, said in an email.

“It was clear from both the commentary and the consensus emerging at the state level that a bachelor’s degree and two years of experience were the preferred option for an additional pathway,” Coffey said.

Now the AICPA is focused on ensuring consistency across states and a quick rollout of reforms to ensure that CPAs can continue to practice across state lines, she said.

Accountants Adapt

The profession has already started adapting to a smaller workforce thanks in large part to technology developments like cloud computing and artificial intelligence that allow businesses and public accounting firms to do more work with fewer people.

Many accounting firms have also shifted work to off-shore service centers, tapping cheaper labor than US-based CPAs.

“These little reforms on the supply side, they can make a small difference. But they’re not going to address the underlying structural major shift that’s happening with demand,” said Andrew Sutherland, associate professor at MIT Sloan School of Management. “Technology has gotten better and better and there have been more ways to automate and replace accounting work.”

Despite the promise of AI and other technology, businesses will continue to need the skills and abilities of CPAs, said Adam Riches, CEO and founder of Netgain, an accounting tech company.

The skills required of modern accountants have evolved. They still must master the basics like analyzing financial statements, but their toolkit now includes data analytics, cybersecurity, even managing accounting systems.

“We are the cornerstone of strong businesses,” Riches said. “And we need to stop downplaying our roles.”

Despite the importance of revising state licensing standards, easing the education requirements alone won’t close the talent gap, the Ohio CPA group’s Hay said.

Pay remains a top concern, industry observers said. Junior staff, for example, should be compensated for working “horrendous hours,” said Susan Speirs, CEO of the Utah Association of CPAs.

“Salaries and culture and image are huge,” Speirs said. “That’s the next big thing that needs to be worked on. And that’s going to take all of us.”