BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 2723 (Medina) - Administrative procedures: small business.
Amended: May 1, 2014 Policy Vote: GO 8-0; EQ 6-0
Urgency: No Mandate: No
Hearing Date: August 4, 2014
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 2723 would require state agencies adopting,
amending, or repealing regulations to consider the impacts on
sole proprietorships and small businesses when conducting an
assessment of the regulation's economic impacts.
Fiscal Impact:
Unknown, potentially significant impacts on state agencies
proposing regulatory changes that impact businesses.
Specifically, many state agencies would incur increased
costs to conduct a more rigorous assessment of a
regulation's economic impact to specifically determine the
impacts on small businesses and sole proprietorships.
(General Fund, various special funds)
Minor one-time costs to the Department of Finance, likely
in the range of $20,000 to $30,000, to update regulations
related to the preparation of economic impact assessments.
(General Fund)
The Office of Administrative Law (OAL) indicates that it
could absorb the bill's new requirements into its current
review of notices and initial statements. (General Fund)
Background: The OAL is responsible for reviewing administrative
regulations proposed by over 200 state agencies for compliance
with the standards set forth in the Administrative Procedures
Act (APA). Existing law requires state agencies proposing to
adopt, amend, or repeal any regulation to assess the potential
for adverse economic impact on California businesses and
individuals, as specified. Regulatory action must be based upon
adequate information regarding the need for, and consequences
of, proposed governmental action.
AB 2723 (Medina)
Page 1
Among other things, the APA requires a state agency to prepare a
"standardized regulatory impact analysis" for a proposed major
regulation, defined as having an economic impact of $50 million
or more, which is included in the initial statement of reasons
that is made available to the public for comment at the
beginning of the regulatory process. The APA also requires a
state agency proposing a non-major regulation to prepare an
"economic impact assessment" to assess the potential adverse
economic impact of the proposed regulation. These economic
assessments must determine whether and to what extent the
regulation would have on the creation of new businesses or the
elimination of existing businesses within the state, as well as
other factors such as jobs, the health and welfare of California
residents, worker safety, and the environment. Existing law
requires an agency to prepare and submit to OAL a final
statement of reasons with an adopted regulation that includes an
explanation setting forth the reasons for rejecting any proposed
alternatives that would lessen the adverse economic impacts on
small businesses.
Existing law defines a "small business" as a business activity
in agriculture, construction, retail or wholesale trade,
services, transportation and warehousing, manufacturing,
generation and transmission of electric power, or a health care
facility, except as provided, that is both independently owned
and operated and not dominant in its field of operation. Among
professional and business activities that are explicitly
excluded from the definition are landscape architects,
architects, and building designers, as well as nonprofit
institutions.
Proposed Law: AB 2723 would require state agencies adopting,
amending, or repealing regulations to consider the impacts on
sole proprietorships and small businesses when assessing the
economic impact of a proposed regulation on new business
formation or elimination of existing businesses. The bill would
also revise the statutory definition of "small business" to
include nonprofit institutions with 100 or fewer employees and
landscape architects, architects, and building designers with
less than 50 employees. Finally, the bill would require state
agencies to include specified information regarding the impacts
of a regulation on businesses of differing size in a notice of
proposed action.
AB 2723 (Medina)
Page 2
Staff Comments: According to data provided by the author,
businesses with no employees account for the largest component
of businesses in the state, and microbusinesses with fewer than
five employees represent approximately 93% of all California
businesses. This bill is intended to ensure that the costs of
regulatory impacts on the state's smallest businesses are
considered when state agencies prepare economic impact
assessments.
In the case of major regulations that impact specific groups
disproportionately, Department of Finance regulations currently
require state agencies to separately and explicitly identify the
impacts on those disproportionately affected groups. As such,
if a major regulation had a greater impact on sole
proprietorships than other types of businesses, the agency must
separately assess the impact on those businesses. This bill
would impact all agency regulatory activity that would have an
identified economic impact on businesses. In those cases, AB
2723 requires state agencies to segregate out the impacts on
small businesses, and sole proprietorships in particular, rather
than the comprehensive impacts on the creation or elimination
businesses in general. Some state agencies are likely to need
additional staff and resources to provide this level of economic
analysis. Overall costs to the state are unknown, but some
individual agencies that propose rulemakings that have an impact
on small businesses and sole proprietorships could incur costs
in the hundreds of thousands of dollars annually.