Regulatory Fairness Bill Could Have Legs

Auto repair shops, restaurants and other small businesses are especially prone to economic stress from Washington state agency rule-making. After a state performance audit revealed shortcomings in the way agencies follow the Regulatory Fairness Act, lawmakers are proposing some fixes. Photo: asanorthwest.com

Prospects could be better than average for a bipartisan House bill meant to ensure state agencies fully comply with the Regulatory Fairness Act (RFA). That law aims to protect employers from excessive economic impacts of rulemaking. HB 1120 was introduced by State Rep. Norma Smith (R-10), Ranking Minority Member of the House Technology and Economic Development Committee. The 13 other sponsors include the panel’s chair, State Rep. Jeff Morris (D-40), State Rep. Derek Stanford (D-1), and State Rep. Cindy Ryu (D-32).

Bipartisan Effort On Rule-Making Accountability

The new legislation’s basic thrust has also drawn support from the administration of Democratic Governor Jay Inslee. A workgroup he set up, comprised of state agency representatives and employer associations, met this week to address the bill. The measure responds to some of the findings of a December State Auditor’s Office (SAO) performance audit regarding frequent agency non-compliance with the RFA.

HB 1120 received a warm reception in committee during a January 18 public hearing, and comes on the heels of a session opening in which House Speaker Frank Chopp (D-43) gave strong voice to statewide economic development as a legislative priority – drawing praise from Republican House Floor Leader J.T. Wilcox (R-2).

Bill Creates Solid Footing For State Agencies

During public testimony at the committee meeting, small business advocates such as Gary Smith underscored the size and scope of the regulatory burden faced by smaller employers. Smith is the CEO and founder of Independent Business Association of Washington State.

“We estimated that when a small retailer, auto repair shop, or restaurant opens the door in the morning, they have about 100,000 state and federal regulations to comply with,” he added. “It’s an overwhelming task.”

The sentiment was shared by Patrick Connor, Washington State Director for the National Federation of Independent Business. He said the proposed legislation provides  “solid footing” for agencies to make better decisions around rule-making, and control costs for small businesses.

At the same time, the bill “isn’t about in any way eroding our goals about public safety,” State Rep. Norma Smith said. “It is about our government providing better customer service.”

She added that lawmakers are “looking for remedies that are going to make a difference for entrepreneurs and small businesses across the state.”

The December SAO audit found state agencies over a two-year period often ignored the potential financial impacts of proposed rules on small businesses, in violation of RFA. Passed in 1982, RFA mandates that state agencies calculate the impacts of a proposed rule on small businesses.

If more than minor costs are anticipated, the agency must release a Small Business Economic Impact Statement, or SBEIS, demonstrating whether or not the rule will have a disproportionate financial effect on smaller employers. If it does, that rule must include compliance cost mitigation.

RFA allows for certain exemptions to this rule, but the SAO audit found nearly half of exemptions made to the SBEIS requirement by state agencies were insufficiently justified. Of the 25 proposed rules did that include a SBEIS, only seven fully complied with the law.

Deepen Understanding Of Impacts

The proposed bill would direct the state Office of Regulatory Innovation and Assistance (ORIA) to oversee RFA compliance by agencies, and provide related resources. In the December audit, SAO noted that “few agencies give employees complete and accurate guidance or templates” on how to meet the law’s requirements.

Committee Vice Chair Shelley Kloba (D-1) told Lens that although she favors the increased accountability for state government, lawmakers also “need to make sure state agencies have the tools” to meet expectations.

ORIA would also oversee information sharing between state agencies and business associations so the agencies can deepen their understanding of how new rules can hurt small businesses. Gary Smith suggested ORIA maintain a list of business associations and keep in contact with them. It is something the state Department of Commerce has done in the past, but “that doesn’t occur much at all anymore,” he added.

Support from Inslee’s office boosts HB 1120’s prospects, although the governor’s initial 2016 supplemental budget and those of both legislative chambers proposed to once again raid SAO’s performance audit funding. Budget negotiations at the close of session last year ultimately restored part of the targeted monies, including enough to do the RFA performance audit which highlighted the problems the new bill seeks to address.

Workgroup Effort Lauded

Following a workgroup session Tuesday discussing the bill, Inslee Senior Policy Advisor Sheri Sawyer said she was “encouraged” by the discussion. She added she expects the bill to get full consideration in the legislative process, though she anticipates some changes. Mike Ennis, Director of Government Affairs on Transportation and Environment for the Association of Washington Business, also spoke highly of the workgroup, calling it “very valuable.”

The agency rulemaking process has come under attack by some state lawmakers, including Senate Ways and Means Committee Chair John Braun (R-20), who says it subverts legislative authority. In 2015 alone, 502 rules and 544 emergency rules were adopted. Sponsored by State Rep. David Taylor (R-15), HB 1005 seeks to eliminate the state rule-making process “except in certain specified instances.” The bill has yet to be referred to a committee.

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