BILL ANALYSIS Ó
AB 1098
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ASSEMBLY THIRD READING
AB 1098 (Quirk-Silva)
As Amended May 1, 2013
Majority vote
ECONOMIC DEVELOPMENT 9-0 APPROPRIATIONS 17-0
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|Ayes:|Medina, Mansoor, Daly, |Ayes:|Gatto, Harkey, Bigelow, |
| |Fong, Fox, Linder, | |Bocanegra, Bradford, Ian |
| |Melendez, V. Manuel | |Calderon, Campos, |
| |Pérez, Weber | |Donnelly, Eggman, Gomez, |
| | | |Hall, Ammiano, Linder, |
| | | |Pan, Quirk, Wagner, Weber |
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SUMMARY : Requires the Office of the Small Business Advocate
(OSBA) to commission a study regarding the costs of state
regulations on small businesses, as specified. The study is
required to be completed by January 1, 2015, and updated every
five years. Among other conditions, the study is required to do
the following:
1)Parallel, to the extent feasible and practical, the study
conducted by the federal Small Business Administration (SBA).
2)Examine successful models from other states on, identifying
regulatory costs and developing potential alternative
approaches to meeting the same regulatory objectives with less
burden to small businesses.
EXISTING LAW finds and declares that there has been an
unprecedented growth in the number of administrative regulations
in recent years and that correcting the problems requires the
direct involvement of the Legislature, as well as the executive
branch of state government. Further, statute finds and declares
that the complexity and lack of clarity in many regulations put
small businesses, which do not have the resources to hire
experts to assist them, at a distinct disadvantage.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, implementation of the bill will cost approximately
$200,000.
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COMMENTS : This measure calls for an update to the 2009 state
study on the costs of state regulations on small businesses. In
hearings on the California economy held by the Assembly
Committee on Jobs, Economic Development, and the Economy (JEDE)
businesses have repeatedly testified that California's
regulatory process is expensive, overly burdensome, and that
less cumbersome compliance methods could deliver the same
regulatory objectives.
In making the case for a current study, the author notes that
the federal SBA has conducted similar studies in the past,
yielding important information that guides better contracting
and regulatory policies at the Federal level. The policy
committee analysis provides additional information on the role
of small businesses within the California economy, previous
federal and state studies, the state and federal rule-making
processes, and related legislation.
The role of Small Business within the California Economy:
Business owners, with no employees make up the single largest
component of businesses in California, 2.8 million out of an
estimated 3.5 million firms in 2010. As these businesses grow,
they continue to serve as an important component of California's
dynamic $1.9 trillion economy. Businesses with 99 or less
employees comprise nearly 98% of all businesses and employee
approximately 38% of all workers.
These non-employer and small employer firms create jobs,
generate taxes, and revitalize communities. In hard economic
times, smaller size businesses often function as economic
engines. In this most recent recession this trend continued,
with the number of nonemployer firms increasing from 2.6 million
firms ($137 billion in revenues) for 2008 to 2.8 million firms
($138 billion in revenues) for 2010. In the post-recession
economy, these businesses are expected to become increasingly
important due to their ability to be more flexible and better
suited to meet niche market needs.
However, their small size also results in certain challenges in
meeting regulatory requirements. A larger size business may
have the option of assigning one or more persons to learn about
new regulations, attend special classes to obtain
certifications, and pull together required paper work. Small
businesses, however, are more dependent on contracting for these
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specialized services, learning about new requirements from trade
association newsletters, and sometimes getting fined because
they were just not aware of a new rule. Understanding how
regulations financially affect small businesses is an important
component of understanding the California economy.
Small business studies : There are two major sources of data on
the cost of regulatory compliance on businesses, the federal SBA
and the state OSBA. For the last 10 years, the federal SBA has
conducted a peer reviewed study that analyzes the cost of
federal government regulations on different sizes of businesses.
This research shows that small businesses continue to bear a
disproportionate share of the federal regulatory burden. On a
per employee basis for firms with less than 20 employees, it
costs about $10,585, or 36%, more for small firms to comply with
federal regulations than their larger counterparts.
The impact of California regulations on small businesses was
unknown until 2009, when the study required by AB 2330
(Arambula), Chapter 232, Statutes of 2006, was published by the
OSBA. Although state agencies have been required to consider
the costs of adopted regulations on the California economy, in
general, and on small business specifically, state agencies have
historically failed to meaningfully undertake such an analysis,
and instead, have indicated that the need for the regulation was
an overriding state concern.
This first state study found that total cost of regulations to
the State 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 (averaging $134,123.00 per small business in
2007).
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
FN: 0000890
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