BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1098
                                                                  Page  1

          Date of Hearing:   May 15, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                  AB 1098 (Quirk-Silva) - As Amended:  May 1, 2013 

          Policy Committee:                              JEDE Vote:9-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill requires the Office of the Small Business Advocate  
          (OSBA) to commission a study regarding the costs of state  
          regulations on small businesses, as specified.   Requires the  
          study to be completed by January 1, 2015 and updated every five  
          years.

           FISCAL EFFECT  

          Estimated costs for completing a comprehensive study on  
          regulations is approximately $200,000.  

           COMMENTS  

           1)Purpose.   According to the author, California's small  
            businesses face certain challenges in meeting regulatory  
            requirements.  The author notes, small businesses are the  
            backbone of the state's economy, but the regulatory burdens  
            continue to be one of the major complaints of small  
            businesses.  Although state agencies are required to consider  
            the effects of adopted regulations on small businesses, state  
            agencies are not required to consider the cumulative cost  
            impact of regulation.  The author argues understanding the  
            financial effect of state regulations would help policymakers  
            reduce, or design more cost-effective regulatory approaches  
            that achieve desired policy objectives while placing fewer  
            burdens on the regulated industries.

           2)Background  .  The OSBA released a study on the impact of  
            California regulations on small businesses in response to AB  
            2330 (Arambula), Chapter 232, Statutes of 2006.  This first  
            state study found that total cost of regulations to the State  








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            of California was $493 billion.  Since small businesses  
            constitute 99.2 % of all employer businesses in California and  
            all of non-employer business, the regulatory cost, according  
            to the report, is shouldered substantially by small business. 

           3)Regulation adoption  :  Existing state law sets forth extensive  
            processes for the development and adoption of regulations,  
            including requiring the identification of potential adverse  
            impacts on businesses and individuals.  California law  
            specifically states that the purpose of the rulemaking process  
            is to avoid the imposition of unreasonable and unnecessary  
            regulations, reporting, recordkeeping, or compliance  
            requirements.  Businesses, however, have repeatedly complained  
            that California's regulatory process is expensive and overly  
            burdensome.  One of the criticisms of the process has been  
            that the Office of Administrative Law has no real authority to  
            ensure that the intent of the law is enforced because its  
            oversight is limited to a procedural review.  Other criticisms  
            have included that regulations are developed without adequate  
            regard to their cumulative impact or challenges faced by small  
            versus large companies. 

           4)Study funding  .  The bill states OSBA shall only begin the  
            study after determining sufficient funds are available from a  
            source other than the General Fund.  This option for funding  
            the study raises an issue because the source of funds could  
            include a donation from a source with a particular view or  
            position on small business regulatory issues.  

           5)Previous legislation  .
           
              a)   AB 1409 (V. Manuel Pérez) of 2012, would have modified  
               the state rulemaking process to require state agencies to  
               consider alternative small business compliance mechanisms.   
               This bill was held in the Senate Rules Committee on Rules.
                 
             b)   AB 1037 (V. Manuel Pérez) of 2011, would have increased  
               review of regulations for the impacts on small business.   
               This bill was held on this Committee's Suspense File. 

             c)   AB 2692 (Tran and V. Manuel Pérez) of 2010, would have  
               directed the California Small Business Board to examined,  
               the impact of licensing and permitting regulations on small  
               business startups.  This bill was held on this Committee's  
               Suspense File.








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           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081