(May 10, 2006) The California Chamber of Commerce is supporting legislation that requires the Office of Small Business Advocate to commission a study of the cost impacts of state regulations on California small businesses.

The Chamber believes that AB 2330 (Arambula; D-Fresno) is vitally important to California small business owners because the burden of “one-size-fits-all” regulations almost always falls most heavily on them.

The bill is scheduled to be heard in the Assembly Appropriations Committee on May 17.

Unnecessary laws and regulations can easily damage the vitality that businesses add to the state’s economy. Laws and regulations have consequences, sometimes directly at odds with the intentions of the policymakers. Worse, an overly burdensome regulatory environment can quash the entrepreneurial spirit that motivates many small business owners in California.

Small Business Creates Jobs
Of the 3,320,977 small businesses in California, more than 960,000 are minority-owned and more than 871,000 are women-owned, according to the U.S. Small Business Administration (SBA).

The agency’s most recent figures show that small business creates 65 percent or more of net new U.S. jobs and generates more than 50 percent of the U.S. non-farm private gross domestic product.

Regulatory Burden
Unlike larger businesses, small businesses don’t have the luxury of a full-time regulatory compliance staff. In fact, no fewer than three major studies completed recently show that regulatory mandates and costs have a disproportionate impact on small businesses. These reports include:

• Joseph Johnson’s A Review and Synthesis of the Cost of Workplace Regulations (August 2001);
  
• Tom Hopkins/Mark Crain’s study on The Impact of Regulatory Costs on Small Firms (October 2001);
  
• Mark Crain/Joseph Johnson’s Compliance Costs of Federal Workplace Regulations: Survey Results for U.S. Manufacturers (December 2001).

In addition, a September 2005 report prepared for the SBA by researchers at Lafayette College, The Impact of Regulatory Costs on Small Firms, states, “small businesses continue to bear a disproportionate share of the federal regulatory burden,” and finds that the annual cost per employee for firms with fewer than 20 employees is $7,647, compared to $5,282 spent by firms with more than 500 employees.

Studies also have shown that the disproportionate cost impact of regulations on small business is far higher at the state level. A 2004 report by researchers at the Pacific Research Institute found California to have the highest regulatory burden to economic freedom in the country.

Key Vote

AB 2330 passed the Assembly Jobs, Economic Development and the Economy Committee, 6-0, on April 18.

Ayes: Arambula (D-Fresno), Houston (R-Livermore), Baca (D-Rialto), Canciamilla (D-Pittsburg), Garcia (R-Cathedral City), Liu (D-La Cañada Flintridge).

Action Needed

The Chamber believes AB 2330 provides a positive process to ensure state regulatory agencies know the true impact their rules or regulations have on California small businesses.

The Chamber is urging businesses to contact their Assembly representatives and members of Assembly Appropriations to voice support for AB 2330.

See the Chamber's position letter

Staff Contact: Julianne Broyles