HOUSE BILL REPORT

SHB 2024

As Amended by the Senate

BYHouse Committee on Trade & Economic Development (originally sponsored by Representatives Walk, Cantwell, Schoon, Rasmussen, Doty, Winsley, P. King, Pruitt, Kremen, Wood and D. Sommers) 

Mandating regulatory fairness.

House Committe on Trade & Economic Development

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (9)

      Signed by Representatives Cantwell, Chair; Wineberry, Vice Chair; Kremen, Moyer, Rasmussen, Raiter, Tate, Walk and Youngsman.

House Staff:Bill Lynch (786-7092)

AS PASSED HOUSE MARCH 13, 1989

BACKGROUND:

The Regulatory Fairness Act requires agencies to reduce the impact their rules have on small business.  A small business is defined as an independent business entity with fifty or less employees with the purpose of making a profit.  An agency is required to prepare a small business economic impact statement whenever the adoption of a rule will have an economic impact on more than 20 percent of all industries, or more than 10 percent of any one industry.

A small business economic impact statement must analyze the costs of compliance for businesses required to comply with the provisions of the rule.  An agency must consider the costs of equipment, supplies, labor, and increased administrative costs in its analysis. An agency is also required to compare, to the greatest extent possible, the cost of compliance for small business with the cost of compliance for the 10 percent of firms which are the largest businesses required to comply with the rule.  The agency must use in its comparison of costs any one or any combination of the following factors: the cost per employee; the cost per hour of labor; or the cost per $100 of sales.

If a proposed rule requires the preparation of a small business economic impact statement,  then the agency must reduce the economic impact of the rule on small business whenever it is legal and feasible by: establishing different compliance or reporting requirements or timetables for small businesses; clarifying, consolidating, or simplifying the compliance and reporting requirements for small businesses; establishing performance rather than design standards; and exempting small businesses from any or all requirements of the rule.

The Federal Regulatory Flexibility Act and a number of similar state acts require agencies to ensure small business participation in the rule making process.  The State Administrative Procedure Act encourages agencies to solicit comments from the public on the subject of a possible rule, but there are no statutory requirements for agencies to notify small businesses of upcoming rule making proceedings.  It is suggested that agencies would be more aware of the impact their rules have on small business if the agencies would involve small businesses early in the rule making process.

The Federal Regulatory Flexibility Act and other state acts also require impact statements to contain a brief description of the compliance requirements of the rule and the kinds of professional services small businesses are likely to need in order to comply with the requirements. It is suggested that agencies would be more cognizant of the costs of compliance for small businesses if they included a similar description of the compliance requirements in the economic impact statement.

The Joint Administrative Rules Review Committee may review agency rules to determine whether they comply with legislative intent.  There is no provision in the law for the Committee to review a proposed rule to determine whether an agency complied with the requirements of the Regulatory Fairness Act.

SUMMARY:

An agency must assure that small businesses have been given an opportunity to participate in the rule making process when a proposed rule requires the preparation of a small business economic impact statement.  The agency must give notice of the proposed rule through any of the following methods: direct notification of known interested small businesses affected by the proposed rule; notice to business or trade associations; publication of a general notice of the proposed rule making in publications likely to be obtained by small businesses of the types affected by the proposed rule; and the appointment of a committee to comment on the subject of the possible rule making.

Small business economic impact statements must contain a brief description of the reporting, record keeping, and other compliance requirements of the rule, and the kinds of professional services that a small business is likely to need in order to comply with such requirements.

An agency is not required to prepare a small business economic impact statement if the agency files a statement that the rule is either being adopted solely for the purpose of conforming or complying with federal law or regulations, or the rule will have a minor or negligible impact.  The Business Assistance Center is required to develop guidelines for determining whether a rule has a minor or negligible impact, and may review agency rules to determine if an agency's findings are within these guidelines.

The Joint Administrative Rules Review Committee may review any rule to determine whether an agency complied with the Regulatory Fairness Act requirements.  The Committee shall conduct any review of a rule based upon the adequacy of the small business economic impact statement in the same manner that it conducts reviews of other rules.  The Business Assistance Center may advise the Joint Administrative Rules Review Committee on disputes involving agency statements that a small business economic impact statement is not required.

EFFECT OF SENATE AMENDMENTS:  The Business Assistance Center is directed to respond to complaints that agency rules unduly favor either for-profit or nonprofit businesses.

Any person may submit a written complaint to the Business Assistance Center outlining how a proposed or existing rule favors either for-profit or nonprofit businesses.

The Business Assistance Center may arrange meetings with interested parties and investigate complaints.  If the Business Assistance Center determines that there has been preferential treatment, it must request the agency to modify the rule.  If the agency does not begin remedial action within thirty days, the Business Assistance Center may refer the issue to the Joint Administrative Rules Review Committee.

Fiscal Note:      Requested February 22, 1989.

House Committee ‑ Testified For:    David Dougherty, Director, Business Assistance Center, Department of Trade and Economic Development; Sandra Granger, Business Assistance Center; Gary Smith, Independent Business Association.

House Committee - Testified Against:      Bob Dilger, Washington State Building and Construction Trades Council.

House Committee - Testimony For:    The bill allows for small business involvement early in the rulemaking process so that concerns can be addressed in initial drafting stages. The bill provides a dispute resolution mechanism without requiring the parties to go to court.

House Committee - Testimony Against:      Small business economic impact statements are very time consuming to prepare, and agency program people do not have the economic expertise to prepare them.  Small businesses can delay rules they oppose.

VOTE ON FINAL PASSAGE:

      Yeas 97; Absent 1

Absent:     Representative Hine.