BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: AB 1033 Hearing Date: 6/14/2016
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|Author: |Eduardo Garcia |
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|Version: |5/2/2016 Amended |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Arthur Terzakis |
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SUBJECT: Economic impact assessment: small business definition
DIGEST: This bill authorizes, with certain exceptions, a
state agency to use a consolidated definition of small business
when preparing the economic impact assessment for administrative
regulations proposed for adoption, amendment, or repeal.
ANALYSIS:
Existing law:
1)Requires a state agency proposing to adopt, amend, or repeal
specific administrative regulations to assess the potential
for adverse economic impact on California business enterprises
and individuals and to prepare an economic impact assessment,
as specified, that addresses, among other things, the creation
or elimination of jobs within the state.
2)Defines "small business" to mean a business activity in
agriculture, general construction, special trade construction,
retail trade, wholesale trade, services, transportation and
warehousing, manufacturing, generation and transmission of
electric power, or a health care facility, unless excluded and
that is both of the following: (a) independently owned and
operated; (b) not dominant in its field of operation; and, (c)
undertaking a business activity in agriculture, general
construction, special trade construction, retail trade,
wholesale trade, services, transportation and warehousing,
AB 1033 (Eduardo Garcia) Page 2 of ?
manufacturing, generation and transmission of electric power,
or a health care facility, unless specifically excluded.
3)Excludes from the definition of small business eighteen
professions and business activities, as specified.
4)Defines "major regulation" as any proposed adoption, amendment
or repeal of a regulation subject to review by the Office of
Administrative Law that will have an economic impact on
California business enterprises and individuals that exceeds
$50 million.
This bill:
1)Provides that for purposes of conducting an economic impact
assessment on a regulation having a business impact of less
than $50 million, a state agency may use a consolidated
definition of small business, as defined, in order to
determine the number of small businesses within the economy, a
specific industry sector, or geographic region.
2)Requires the state agency to clearly identify the use of the
consolidated small business definition in its rulemaking
package.
3)Provides that, for the exclusive purpose of undertaking the
economic impact assessment, a "small business" means a
business that is all of the following:
a) Independently owned and operated;
b) Not dominant in its field of operation; and,
c) Consists of fewer than 100 employees.
4) Excludes any regulation adopted by the Department of
Insurance that applies to an insurance company from the
provisions of this bill.
Background
Existing law requires state agencies adopting and amending
administrative rules to undertake an assessment of the impact on
businesses, including small businesses. According to the
author's office, the statutory definition of small business,
AB 1033 (Eduardo Garcia) Page 3 of ?
however, has not been updated in decades and includes 18 special
exclusions and/or modifications, making the overall assessment
framework overly complex and a de facto barrier to soliciting
public comments from potentially affected small businesses.
Given that the state's rulemaking process places the burden for
suggesting alternative implementation methods on the affected
businesses rather than the rulemaking state agency, it is
important that the economic impact assessment be clearly
understandable to a majority of California businesses. The
author's office states that this bill proposes the use of a more
standardized definition of small business, which may be utilized
by a rulemaking entity when developing the economic impact
assessment.
The author's office references studies indicating that small
businesses play an essential role in California's regional
economies and industry sectors, having generated an annual
payroll of over $204 billion in 2012. California has a higher
percentage of small businesses than the national average and
nearly 90% of all businesses have fewer than 20 employees. The
author's office emphasizes that the 20 employee threshold is
especially significant to job creation - such businesses create
jobs, generate taxes, and revitalize communities. In fact,
research undertaken by the U.S. Census Bureau and the Kauffman
Foundation has shown that net new job creation is reported to be
highest among businesses with fewer than 20 employees.
Prior/Related Legislation
SB 1176 (Galgiani, 2016) revises the definition of "small
business" and "microbusiness" for purposes of the Small Business
Procurement and Contract Act by increasing the dollar amount
threshold for a small business to $15 million and for a
microbusiness to $5 million and requires those dollar amounts to
be adjusted to reflect changes in the California Consumer Price
Index biennially. In addition, this bill revises the definition
of small business by specifying that, for purposes of public
works contracts, a small business means a business with 200 or
fewer employees and average annual gross receipts of $25 million
or less over the previous three years. (Pending in Assembly
policy committee)
SB 1140 (Moorlach, 2016) requires automatic repeal of a statute
that expressly or implicitly authorizes an agency to promulgate
regulations two years after the statute goes into effect, unless
AB 1033 (Eduardo Garcia) Page 4 of ?
the Legislature amends the statute to state its intent that the
statute not be repealed, or unless the statute was passed in
response to an emergency, as defined. (Failed passage in this
committee)
ACA 1 (Donnelly, 2014) would have amended the California
Constitution to require state agencies to submit all regulations
that have been approved by the Office of Administrative Law to
the Legislature for final approval. (Held in Assembly policy
committee)
SB 981 (Huff, 2014) among other things would have required the
review of existing regulations adopted prior to January 1, 2014
in order to reduce duplicative, obsolete, and ineffective
regulations. (Held in this committee)
AB 12 (Cooley, 2015) would have, until January 1, 2019, required
each state agency to, on or before January 1, 2018, review that
agency's regulations, identify any regulations that are
duplicative, overlapping, inconsistent, or out of date, to
revise those identified regulations, as provided, and report to
the Legislature and Governor, as specified. (Held on Senate
Appropriations suspense file)
FISCAL EFFECT: Appropriation: No Fiscal
Com.: No Local: No
SUPPORT:
None received
OPPOSITION:
None received