Mar 08, 2017
WASHINGTON, DC – Senator James Lankford (R-OK) today introduced the Small Business Regulatory Flexibility Improvements Act to require federal agencies to analyze the full impact of a proposed regulation on small businesses during the rulemaking process. The bill is co-sponsored by Senators Chuck Grassley, who is chairman of the Judiciary Committee, and Jim Risch, who is chairman of the Small Business Committee.
“Small businesses are responsible for nearly two-thirds of the job growth in America, so it is important that Washington fully analyzes regulatory impacts on small businesses before a rule is finalized,” said Lankford. “This bill is desperately needed because federal agencies frequently use loopholes in the process to avoid the full economic analysis of a proposed regulation on small businesses. The Small Business Regulatory Flexibility Improvements Act will ensure that the needs and priorities of small business are fully taken into account early in the rulemaking process.”
“Washington bureaucrats don’t fully understand the degree to which new regulations increase costs and uncertainty in the business world,” said Risch, noting that federal regulatory agencies estimate that the cost of complying with their own regulations is nearly $108 billion annually. “We need stronger controls to limit what D.C. agencies can do to stifle growth, and this bill will ensure appropriate analysis occurs before a new regulation is implemented.”
“Small businesses feel the brunt of regulations that aren’t considered carefully enough out of Washington, DC,” said Grassley. “If we’re hurting small businesses, we’re hurting job creation and we’re hurting a large number of employees in this country. We have to apply common-sense here. So I’m glad to co-sponsor this bill, which makes critical improvements to the rulemaking process. It requires agencies to take a much closer look at how proposed regulations might impact small businesses, and gives small businesses a stronger voice at the table before rules are finalized. Reducing unnecessary burdens on our nation’s small businesses should be one thing that all of us can agree on.”
According to the National Federation of Independent Business’ Small Business Problems and Priorities, “unreasonable government regulations” ranks as the second largest problem for small businesses. Due to limited resources, small business ability to comply with new federal regulations are much more difficult than larger companies. According to the American Action Forum, a 10 percent increase in cumulative regulatory costs can result in a five to six percent fall in the number of businesses with fewer than 20 workers. That translates to a loss of over 400 small businesses in an industry. Meanwhile, those same regulations are associated with a two to three percent increase in businesses with 500 or more workers.
This bill would force agencies to analyze the total impact regulations have on all small businesses, and closes loopholes used by agencies to avoid compliance with the Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement and Fairness Act (SBREFA) of 1996.
The RFA of 1980 requires federal agencies to assess the impact of proposed regulations on "small entities." Under the RFA, agencies, including independent agencies, must prepare a regulatory flexibility analysis for rules deemed to have a “significant economic impact on a substantial number of small entities.” However, the RFA failed to define “significant economic impact" or "substantial number of small entities," leaving agencies with broad discretion to decide when regulatory flexibility analysis requirements are triggered.
The SBREFA of 1996 amended the RFA to create additional requirements agencies must follow when promulgating rules that impact small entities, however deficiencies in both of the RFA and SBRFA left small businesses burdened by massive, one-size-fits-all regulatory schemes.
Agencies are frequently able to work around RFA and SBREFA requirements by: (1) considering only the direct economic impacts of proposed rules; (2) not including tribes as a small entity; (3) exempting IRS regulations; (4) requiring small business review panels of only three agencies; and (5) allowing agencies to sign off on rules as having “no significant economic impact” without detailed analysis.