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Under the Microscope
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Steve Adams is the New England Regional Advocate for the Office of Advocacy of the U.S. Small Business Administration. He is the direct link between small business owners, state and local government agencies, state legislators, small business associations, and SBA's Office of Advocacy. Contact Steve Adams at (617) 565-8418 or stephen.adams@sba.gov
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Reducing the impact of federal regulations, By Steve Adams
Small business owners bear the brunt of federal business regulations. Each year, the smallest businesses pay $7,647 per employee to comply with federal regulations. That is 45 percent more per employee than their larger competitors pay. To help control this small business impact, in 1980, Congress adopted the Regulatory Fairness Act (RFA). Central to the RFA is the requirement that federal agencies consider how to minimize the impact of new regulations on small businesses.
The RFA at work
By following the RFA when issuing new regulations, federal agencies saved small businesses more than $7.2 billion in foregone regulatory compliance costs in 2006. That is only the first-year difference between the compliance costs of the proposed regulations, and the compliance costs after choosing an alternative approach minimizing the small business burden.
After listening to the voice of small business, regulators were able to avoid one-size-fits-all approaches that disproportionately burden America's entrepreneurs. For example, the Occupational Safety and Health Administration (OSHA) finalized a rule designed to reduce the permissible exposure of hexavalent chromium in work places. After considering the concerns of small businesses, OSHA established a limit and exceptions that improve the protection of workers while taking into account the ability of small businesses to achieve the optimal limit. The modifications to the proposed rule adopted by OSHA avoided $520 million in regulatory costs to small businesses.
But is the RFA enough?
In 1979, the cost of federal regulations was estimated at $100 billion, a fivefold increase over the 1970 total. By 2004, those costs had ballooned to an estimated $1.1 trillion. This is more than nine percent of U.S. gross domestic product.
In response, the Office of Advocacy of the Small Business Administration has launched a new initiative to help lighten the regulatory load, and businesses can help. The Office of Advocacy is the small business representative in Federal agency regulatory decisions. Our Regulatory Review and Reform (r3) initiative encourages federal agencies to reduce the burden of existing regulations by reviewing existing rules for their impact on small business.
The r3 steps in
When the federal Regulatory Flexibility Act was passed, it required agencies to look back at existing regulations periodically to see if they had become outmoded or obsolete and thus were having an undue impact on small business. However, a recent assessment by the Government Accountability Office (GAO), the Congressional watchdog agency, found that agency implementation of reviews often suffers from a lack of clear standards, insufficient public participation, and inadequate communication of the results to stakeholders. Through r3, Advocacy will offer agencies training on how to conduct look-back reviews of existing regulations. Equally important, Advocacy will be soliciting recommendations from the small business community on rules to review, and providing public updates on the status of agency reviews.
Get involved
This program offers the business community an opportunity to address outdated or ineffective rules. For example, independent service stations in New England are spending thousands of dollars each year to maintain an EPA-required system to prevent gasoline fumes from escaping into the atmosphere when cars are refueled. At the same time, most automobiles on the road today are equipped with in-car systems to capture these fumes. The two systems are not compatible. In fact, the two systems work at cross purposes. Still, EPA has not revised the rule. So, Massachusetts gas stations are spending a lot of money to meet an obsolete EPA requirement that seems ripe for review and potential reform.
Other New England industries are surely facing similar circumstances. So, we encourage small business owners to nominate federal regulations needing review and reform through the r3 Web site at www.sba.gov/advo/r3. By making their voice heard in this process, small business owners can begin to do something about the disproportionate regulatory costs imposed on them.
Steve Adams is the New England Regional Advocate for the Office of Advocacy of the U.S. Small Business Administration. He is the direct link between small business owners, state and local government agencies, state legislators, small business associations, and SBA's Office of Advocacy. Contact Steve Adams at (617) 565-8418 or stephen.adams@sba.gov.
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