BILL REQ. #:  H-0327.1 

Read first time 01/25/2005.   Referred to Committee on State Government Operations & Accountability.

     AN ACT Relating to regulatory fairness for small businesses; amending RCW 19.85.020 and 19.85.025; adding new sections to chapter 19.85 RCW; creating new sections; repealing RCW 19.85.030, 19.85.040, and 19.85.050; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature finds that:
     (1) A vibrant and growing small business sector is critical to creating jobs in a dynamic economy;
     (2) Small businesses bear a disproportionate share of regulatory costs and burdens;
     (3) Fundamental changes that are needed in the regulatory and enforcement culture of state agencies to make them more responsive to small business can be made without compromising the statutory missions of the agencies;
     (4) When adopting rules to protect the health, safety, and economic welfare of Washington, state agencies should seek to achieve statutory goals as effectively and efficiently as possible without imposing unnecessary burdens on small employers;
     (5) Uniform regulatory and reporting requirements can impose unnecessary and disproportionately burdensome demands including legal, accounting, and consulting costs upon small businesses with limited resources;
     (6) The failure to recognize differences in the scale and resources of regulated businesses can adversely affect competition in the marketplace, discourage innovation, and restrict improvements in productivity;
     (7) Unnecessary regulations create entry barriers in many industries and discourage potential entrepreneurs from introducing beneficial products and processes;
     (8) The practice of treating all regulated businesses the same leads to inefficient use of regulatory agency resources, enforcement problems, and, in some cases, to actions inconsistent with the legislative intent of health, safety, environmental, and economic welfare legislation;
     (9) Alternative regulatory approaches which do not conflict with the state objective of applicable statutes may be available to minimize the significant economic impact of rules on small businesses; and
     (10) The process by which state rules are developed and adopted should be reformed to require agencies to solicit the ideas and comments of small businesses, to examine the impact of proposed and existing rules on such businesses, and to review the continued need for existing rules.

Sec. 2   RCW 19.85.020 and 2003 c 166 s 1 are each amended to read as follows:
     Unless the context clearly indicates otherwise, the definitions in this section apply through this chapter.
     (1) "Agency" means any state board, commission, department, or officer authorized by law to adopt rules or to determine contested cases.
     (2) "Industry" means all of the businesses in this state in any one four-digit standard industrial classification as published by the United States department of commerce. However, if the use of a four-digit standard industrial classification would result in the release of data that would violate state confidentiality laws, "industry" means all businesses in a three-digit standard industrial classification.
     (3) "Proposed rule" means a proposal by an agency for a new rule or for a change in, addition to, or repeal of an existing rule.
     (4) "Rule" means each agency statement of general applicability, without regard to its designation, that implements, interprets, or prescribes law or policy, or describes the organization, procedure, or practice requirements of any agency. The term includes the amendment or repeal of a prior rule, but does not include:
     (a) Statements concerning only the internal management of any agency and not affecting private rights or procedures available to the public;
     (b) Declaratory rulings; or
     (c) Intragency or interagency memoranda.
     (5) "Small business" means any business entity, including ((a sole proprietorship, corporation, partnership, or other legal entity)) its affiliates, that:
     (a) Is owned and operated independently from all other businesses((,)); and ((that))
     (b) Has fifty or fewer employees or has gross annual sales of less than six million dollars.
     (((2))) (6) "Small business economic impact statement" means a statement meeting the requirements of RCW 19.85.040 prepared by a state agency pursuant to RCW 19.85.030.
     (((3) "Industry" means all of the businesses in this state in any one four-digit standard industrial classification as published by the United States department of commerce. However, if the use of a four-digit standard industrial classification would result in the release of data that would violate state confidentiality laws, "industry" means all businesses in a three-digit standard industrial classification.))

Sec. 3   RCW 19.85.025 and 1997 c 409 s 212 are each amended to read as follows:
     (1) Unless an agency receives a written objection to the expedited repeal of a rule, this chapter does not apply to a rule proposed for expedited repeal pursuant to RCW ((34.05.354)) 34.05.353. If an agency receives a written objection to expedited repeal of the rule, this chapter applies to the rule-making proceeding.
     (2) This chapter does not apply to a rule proposed for expedited adoption under RCW ((34.05.230 (1) through (8))) 34.05.353, unless a written objection is timely filed with the agency and the objection is not withdrawn.
     (3) This chapter does not apply to the adoption of a rule described in RCW 34.05.310(4).
     (4) An agency is not required to prepare a separate small business economic impact statement under RCW 19.85.040 if it prepared an analysis under RCW 34.05.328 that meets the requirements of a small business economic impact statement, and if the agency reduced the costs imposed by the rule on small business to the extent required by ((RCW 19.85.030(3))) section 6(1) of this act. The portion of the analysis that meets the requirements of RCW 19.85.040 shall be filed with the code reviser and provided to any person requesting it in lieu of a separate small business economic impact statement.

NEW SECTION.  Sec. 4   A new section is added to chapter 19.85 RCW to read as follows:
     (1) Prior to the adoption of any proposed rule that may have an adverse impact on small businesses, each agency shall prepare a small business economic impact statement that includes the following:
     (a) An identification and estimate of the number of small businesses subject to the proposed rule;
     (b) A brief description of the projected reporting, recordkeeping, and other administrative costs required for compliance with the proposed rule, including the type of professional skills necessary for preparation of the report or record;
     (c) An analysis of the costs of compliance for businesses required to comply with the proposed rule adopted pursuant to RCW 34.05.320, including costs of equipment, supplies, labor, and increased administrative costs;
     (d) A statement of the probable effect on impacted small businesses, including lost sales and revenue;
     (e) A comparison of the cost of compliance for small businesses with the cost of compliance for the ten percent of businesses that are the largest businesses required to comply with the proposed rules, using one or more of the following as a basis for comparing cost:
     (i) Cost per employee;
     (ii) Cost per hour of labor; or
     (iii) Cost per one hundred dollars of sales;
     (f) A description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation or a reasonable justification for not doing so;
     (g) A description how the agency will involve small businesses in the development of the rule; and
     (h) A list of industries that will be required to comply with the rule. However, this list shall not be construed to preclude the application of the rule to any business or industry to which it would otherwise apply.
     (2) To obtain information for the purposes of this section, an agency may survey a representative sample of affected businesses or trade associations and should, whenever possible, appoint a committee under RCW 34.05.310(2) to assist in the accurate assessment of the costs of the proposed rule, and the means to reduce the costs imposed on small business.

NEW SECTION.  Sec. 5   A new section is added to chapter 19.85 RCW to read as follows:
     (1) Prior to the adoption of any proposed rule on and after July 1, 2005, each agency shall prepare a regulatory flexibility analysis in which the agency shall, where consistent with health, safety, and environmental and economic welfare, consider utilizing regulatory methods that will accomplish the objectives of applicable statutes while minimizing adverse impact on small businesses. The agency shall consider, without limitation, each of the following methods of reducing the impact of the proposed rule on small businesses:
     (a) The establishment of less stringent compliance or reporting requirements for small businesses;
     (b) The establishment of less stringent schedules or deadlines for compliance or reporting requirements for small businesses;
     (c) The consolidation or simplification of compliance or reporting requirements for small businesses;
     (d) The establishment of performance standards for small businesses to replace design or operational standards required in the proposed rule; and
     (e) The exemption of small businesses from all or any part of the requirements contained in the proposed rule.
     (2) Prior to the adoption of any proposed rule that may have an adverse impact on small businesses, each agency shall notify the joint administrative rules review committee of its intent to adopt the proposed rule. The joint administrative rules review committee shall advise and assist agencies in complying with the provisions of this section.

NEW SECTION.  Sec. 6   A new section is added to chapter 19.85 RCW to read as follows:
     (1) For any rule subject to this section, a small business that is adversely affected or aggrieved by final agency action is entitled to judicial review of agency compliance with the requirements of this section.
     (2) The right to seek review under this section ends one year from the date of final agency action.

NEW SECTION.  Sec. 7   A new section is added to chapter 19.85 RCW to read as follows:
     (1) Beginning July 1, 2009, each agency shall review all agency rules existing at the time of the enactment to determine whether the rules should continue without change, or should be amended or rescinded, consistent with the stated objectives of this chapter. If the head of the agency determines that completion of the review of existing rules is not feasible by the established date, the agency shall publish a statement certifying that determination. The agency may extend the completion date by one year at a time for a total of not more than five years.
     (2) Rules adopted after the effective date of this act shall be reviewed within five years of the publication of the final rule and every five years thereafter to ensure that they minimize economic impact on small businesses in a manner consistent with the stated objectives of this chapter.
     (3) In reviewing the rules to minimize the economic impact of the rule on small businesses, the agency shall consider the following factors:
     (a) The continued need for the rule;
     (b) The nature of the complaints or comments received concerning the rule from the public;
     (c) The complexity of the rule;
     (d) The extent to which the rule overlaps, duplicates, or conflicts with other federal, state, and local government rules; and
     (e) The length of time since the rule has been evaluated or the degree to which technology, economic conditions, or other factors have changed in the area affected by the rule.

NEW SECTION.  Sec. 8   A new section is added to chapter 19.85 RCW to read as follows:
     (1) The small business advocacy committee is created. The committee shall be comprised of seven members: (a) Two members of the house of representatives, appointed by the speaker of the house of representatives, from each of the two major caucuses of the house of representatives; (b) two members of the senate, appointed by the president of the senate, from each of the two major caucuses of the senate; and (c) three small business owners or their designees, appointed by the governor. The business owners, who shall serve two-year terms, shall make recommendations to the governor regarding their replacements at the end of their terms.
     (2) The small business advocacy committee is charged with reviewing small business economic impact statements. If a majority of the members find that a proposed rule will have an adverse impact on small businesses and the proposed mitigation by an agency is insufficient, the committee shall recommend that the joint administrative rules review committee hold a public hearing on the proposed rule.

NEW SECTION.  Sec. 9   The following acts or parts of acts are each repealed:
     (1) RCW 19.85.030 (Agency rules -- Small business economic impact statement -- Reduction of costs imposed by rule) and 2000 c 171 s 60, 1995 c 403 s 402, & 1994 c 249 s 11;
     (2) RCW 19.85.040 (Small business economic impact statement--Purpose -- Contents) and 1995 c 403 s 403 & 1994 c 249 s 12; and
     (3) RCW 19.85.050 (Agency plan for review of business rules--Scope -- Factors applicable to review -- Annual list) and 1989 c 175 s 74 & 1982 c 6 s 5.

NEW SECTION.  Sec. 10   This act does not affect any existing right acquired or liability or obligation incurred under the sections amended or repealed in this act or under any rule or order adopted under those sections, nor does it affect any proceeding instituted under those sections.

NEW SECTION.  Sec. 11   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 12   This act takes effect August 1, 2005.