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VIEWPOINT: Regulators need to consider small-business impact |
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By Jim Henderson For the Sioux Falls Business Journal
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Tuesday, 10 July 2007 |
Under the thumb of overzealous taxation and centralized regulation from an uncaring and distant government, the founders of our nation decided to take action. Today, after years of feeling some of the same frustrations and neglect, small businesses are taking action as well.
Another revolution is taking hold as small-business owners are demanding an end to one-size-fits-all regulations and arcane rules that can stifle innovation, hard work and creativity.
Excessive federal regulatory burden is a real problem for small business, as research by the Office of Advocacy of the U.S. Small Business Administration shows.
Small businesses with fewer than 20 employees annually spend $7,647 per employee to comply with these regulations, compared with the $5,282 spent by larger firms. That is a 45 percent greater burden just to comply with federal mandates, and it does not count costs associated with state and local regulations.
Any small-business owner will tell you that a major part of the regulatory burden comes from state government. However, not every state requires its regulators to be sensitive to how their mandates affect small business.
That reality prompted a movement to create regulatory flexibility.
My office drafted model legislation that mirrors the federal Regulatory Flexibility Act. That act requires agencies to analyze the economic impact of a proposed regulation on small business and to consider less-burdensome alternatives that still accomplish the regulatory goal.
Since the introduction of the model legislation, 37 state legislatures have considered regulatory flexibility legislation, and 21 states have implemented regulatory flexibility via executive order or legislation.
Colorado provides an example of how regulatory flexibility can inject common sense into state rule-making.
There, restaurants can reseal a bottle of wine and allow a diner to take it home. A Colorado agency wanted to mandate the use of commercially manufactured stoppers and sealable containers. The rule affected more than 4,000 businesses, and together would have cost them $1.7 million to $3.3 million to comply.
Using the process in the regulatory flexibility act, the Colorado Department of Regulatory Agencies asked for more economic analysis.
The proposal was changed to allow restaurants to simply re-cork the bottles and place it in a sealed bag.
That’s common-sense regulation.
Has this regulatory flexibility revolution reached South Dakota?
Yes, it has, and in a big way. In 2004, Jerry Wheeler, the former executive director of the South Dakota Retailers Association, heard about the model legislation and saw the need for it.
His members were adversely affected by rules that the South Dakota Department of Revenue and Regulation had adopted without any input from the small businesses that had to comply with the rules. Wheeler went into action drafting a bill.
The 2005 Legislature adopted and Gov. Mike Rounds signed into law legislation that directs state agencies to not only analyze the impact of their rule changes on small businesses but also to consider alternatives that may be less burdensome.
Critics of a flexible approach to regulation claim that small-business economic analysis may require additional work by state agencies. But regulatory flexibility is a good government practice that helps agencies meet regulatory goals, encourages common-sense regulations and keeps our small businesses competitive.
Henderson is regional advocate for the Office of Advocacy of the Small Business Administration
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