Washington State small business employers might soon experience reduced regulatory burdens under a House bill which has now passed both chambers. On Friday, May 7, the State Senate approved HB 1120 unanimously one week after favorable public testimony in the Senate Ways and Means Committee. Proponents argue the measure would hold state agencies more accountable when complying with the Regulatory Fairness Act (RFA), and reduce compliance costs for small businesses.
On March 2, the House also unanimously approved the bill. Last month, representatives from business associations testified the bill would alleviate hardships placed on small businesses by those agencies, and promote more job creation.
Reforming State Agency Rulemaking
During Friday, April 7 Senate floor executive session, State Sen. Mark Miloscia (R-30) told colleagues that “small business(es)…are the lifeblood of our state and we have to get it right. We have an office in the executive branch called the Office of Regulatory Innovation and Assistance…to help agencies and small businesses together make sure we have a good (rulemaking) process and rules we develop are beneficial to small businesses, to the agencies, and to the needs of the state.”
He added that under the bill, “what we do is tweak the process and make sure that this office helps mitigate the cost to small businesses when able and provide assistance to those agencies developing rules to make sure those…regulations are done correctly.”
State Sen. Dan Hunt (D-22) also rose in support of the measure and praised State Rep. Norma Smith (R-10) for tackling the important issue of regulatory reform.
HB 1120 “gets into this swamp and tries to make some sense out of it and help small businesses as well as state government, and she has done a wonderful job in helping to clarify and straighten out these issues,” he said.
According to the bill report, RFA requires state agencies to create a small business economic impact statement (SBEIS) if they adopt a rule that would “impose more than minor costs on businesses,” or if they are directed to do so by the Joint Administrative Rules Review Committee (JLARC).
Avoiding Unfair Impacts To Small Business
The SBEIS is required to weigh whether the rule would have a “disproportionate impact” on small firms, and include an estimated number of jobs created or lost under the regulation, and either measures taken to reduce compliance costs for those businesses, or a reason for not doing so.
However, a December 2016 SAO performance audit determined that agencies cited incorrect exemptions under RFA for nearly half of rules filed affecting business in 2014 and 2015. Also, out of 331 proposed rules in that time frame, agencies claimed only 8 percent were more than a minor cost to business, and 54 percent were less than minimal impact.
Under HB 1120, the Office of Regulatory Innovation and Assistance would act as the guiding body between state agencies and small businesses, assist those offices operating under RFA, and provide resources as needed. Also, an agency would be required to reduce regulatory costs for business when they lack the proper calculations to prove a disproportionate impact.
After June 30, 2020, SAO is required to review agency compliance with RFA in a follow-up performance audit.
How To Create An Even Playing Field
One week prior to passage and in front of the Senate Ways and Means Committee, stakeholders on both sides of the conversation testified HB 1120 would level the playing field for small businesses.
During public testimony Gary Smith cited a 2010 study prepared for the Small Business Administration as reasoning for the bill’s passage. He is Executive Director of the Independent Business Association.
“The regulatory cost to businesses in the U.S. is now $1.75 trillion…the regulatory cost to a small business to comply with government regulations is 36 percent higher for a small business than a larger firm. It is really important to reduce the cost of regulations,” said Smith.
State agencies are in strong support of the bill as a way to better understand business needs moving forward, according to Sheri Sawyer, Senior Policy Advisor for Government Relations for Governor Jay Inslee’s Office.
“We think this bill will go a long ways to help small businesses navigate through Washington’s regulatory environment and also provide some much-needed tools and resources for state agencies so that they can better comply with the Regulatory Fairness Act,” she told the committee.
Also in agreement was Patrick Connor, Washington State Director for the National Federation of Independent Business. He told the committee SAO’s audit incentivized agencies to bring forward proposals to improve their resources for complying with RFA.
“We believe the appropriation in this bill will adequately allow the SAO to come back and review again in a couple years to make sure that additional set of tools is available and being properly used so that small businesses are adequately protected through the rulemaking process,” he added.