BILL ANALYSIS Ó
AB 1033
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CONCURRENCE IN SENATE AMENDMENTS
AB
1033 (Eduardo Garcia)
As Amended May 2, 2016
Majority vote
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|ASSEMBLY: | 77-0 | (January 19, |SENATE: | 37-0 | (June 30, 2016) |
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Original Committee Reference: J., E.D., & E.
SUMMARY: Authorizes 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. Specifically, this bill:
1)Specifies that for the exclusive purpose 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.
2)Defines a small business as being independently owned and
operated, not dominant in its field, and having less than 100
employees.
3)Provides that the consolidated small business definition may
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be used in determining the number of small businesses impacted
within the overall economy, a specific industry sector, or
geographic region.
4)Requires that the use of the consolidated definition be
clearly identified by the state agency.
The Senate amendments exclude regulations adopted by the
Department of Insurance relating to insurance companies from the
provisions of this bill.
EXISTING LAW:
1)Finds and declares that it is in the public interest to aid,
counsel, assist, and protect the interests of small businesses
in order to maintain a healthy state economy.
2)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 that of the
executive branch of the 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.
3)Establishes basic minimum procedural requirements for the
adoption, amendment, or repeal of administrative regulations,
including assessing the potential adverse impact of an action
on California businesses and individuals with the purpose of
avoiding the imposition of unreasonable and unnecessary
regulations, reporting, recordkeeping, or compliance
requirements. Among other requirements, an agency is required
to prepare an economic impact assessment that evaluates the
following:
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a) The creation or elimination of jobs within the state;
b) The creation of new businesses or the elimination of
existing businesses within the state;
c) The expansion of businesses currently doing business
within the state; and
d) The benefits of the regulation on the health and welfare
of California residents, worker safety, and the state's
environment.
4)Defines a small business as:
a) Being independently owned and operated;
b) Not dominant in its field; 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.
5)Excludes from the definition of a small business 18
professional and business activities, including:
a) All financial institutions, investment advisors, and
security broker-dealers, as specified;
b) All insurance companies;
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c) All mineral, oil, or gas brokers;
d) All land developers;
e) All architects and building designers;
f) All nonprofit institutions;
g) All entertainment companies, including those engaged in
activities related to motion picture production, stage
performance, or a television or radio station;
h) All petroleum producers, natural gas producers,
refiners, or pipeline operators;
i) A utility, a water company, or a power transmission
company generating and transmitting more than 4.5 million
kilowatt hours annually;
j) A manufacturing enterprise exceeding 250 employees;
aa) A health care facility exceeding 150 beds or $1.5
million in annual gross receipts;
bb) Agriculture, where the annual gross receipts exceed $1
million;
cc) General construction, where the annual gross receipts
exceed $9.5 million;
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dd) Special trade construction, where the annual gross
receipts exceed $5 million;
ee) Retail trade, where the annual gross receipts exceed $2
million
ff) Wholesale trade, where the annual gross receipts exceed
$9.5 million;
gg) Services, where the annual gross receipts exceed $2
million; and
hh) Transportation and warehousing, where the annual gross
receipts exceed $1.5 million.
FISCAL EFFECT: None.
COMMENTS: Nearly 3 million firms in California have no
employees and 89.7% of firms with employees have less than 20.
Existing law requires state agencies adopting and amending
administrative rules to undertake an assessment of those rules'
impact on businesses, including small businesses. The statutory
definition of small business, however, hasn't been updated in
over a decade 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.
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This measure proposes the use of a more standardized definition
of small business, which could be utilized by a rulemaking
entity when developing the economic impact assessment. The
policy committee analysis includes information on the California
small business economy, state rulemaking practices, and studies
on the cost of regulations to small businesses.
Author's Statement: According to the author, "Although the
state has a vigorous public process that is designed to allow
the rulemaking agency to fully consider the comments,
suggestions, and economic impacts of proposed regulations on all
business - especially small businesses - state agencies rarely
hear from the broad range of small businesses that are
potentially affected. An intrinsic conflict within California's
rulemaking process is that businesses who may be most affected
have the least ability to monitor the broad range of state
rulemaking entities, recommend appropriate alternative
implementation models, or engage meaningfully in the often
complex and highly technical rulemaking proceedings.
"AB 1033 tries to streamline the economic assessment process by
providing greater transparency and accessibility to potentially
impacted small businesses. Without having a realistic process
for small businesses to participate, it is difficult for state
agencies to develop and adopt regulations that have flexible
implementation methods reflecting the limited administrative
capacity of small businesses, while still meeting the intended
policy standards.
"Given that nearly 3 million firms in California have no
employees and 90% of firms with employees have less than 20,
finding a means to address this challenge is important to the
state's economic growth."
Cost of Regulations on Business: There are two major sources of
data on the cost of regulatory compliance on businesses, the
federal Small Business Administration (SBA) and the Office of
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the Small Business Advocate (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 size
businesses. This research shows that small businesses continue
to bear a disproportionate share of the federal regulatory
burden. On a per employee basis, it costs about $2,400, or 45%
more, for small firms to comply with federal regulations than
their larger counterparts.
The first study on the impact of California regulations on small
businesses was released by the OSBA in 2009. This
first-in-the-nation study found that the total cost of
regulations to small businesses averaged about $134,000 per
business in 2007. Of course, no one would advocate that there
should be no regulations in the state. The report, however,
importantly identifies that the cost of regulations can provide
a significant impediment to the everyday operations of
California businesses and should therefore be a consideration
among the state's economic development policies.
Regulatory costs are driven by a number of factors including
multiple definitions of small business in state and federal law,
the lack of e-commerce solutions to address outdated paperwork
requirements, procurement requirements that favor larger size
bidders, and the lack of technical assistance to alleviate such
obstacles that inhibit small business success.
Analysis Prepared by:
Toni Symonds / J., E.D., & E. / (916) 319-2090
FN:
0003522
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