BILL ANALYSIS                                                                                                                                                                                                    Ó




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                                      CONSENT 


          Bill No:  AB 1033
          Author:   Eduardo Garcia (D) 
          Amended:  5/2/16 in Senate
          Vote:     21 

           SENATE GOVERNMENTAL ORG. COMMITTEE:  12-0, 6/14/16
           AYES:  Hall, Bates, Block, Gaines, Galgiani, Glazer, Hernandez,  
            Hill, Hueso, Lara, McGuire, Vidak
           NO VOTE RECORDED:  Berryhill

           ASSEMBLY FLOOR:  77-0, 1/19/16 (Consent) - See last page for  
            vote

           SUBJECT:   Economic impact assessment:  small business  
                     definition


          SOURCE:    Author
          
          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.









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          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,  
            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,








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             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,  
          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
          








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          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  
          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 Senate  
          Governmental Organization 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) 

          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 Senate Governmental Organization  
          Committee)










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          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:  (Verified 6/14/16)




          None received




          OPPOSITION:   (Verified6/14/16)


          None received

          ASSEMBLY FLOOR:  77-0, 1/19/16
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,  
            Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dahle, Daly, Dodd,  
            Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,  
            Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,  
            Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,  
            Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,  
            Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,  
            Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Rendon,  
            Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark  
            Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,  
            Wood, Atkins
          NO VOTE RECORDED:  Dababneh, Olsen


          Prepared by:Arthur Terzakis / G.O. / (916) 651-15306/15/16  
          17:24:40


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