Regulatory Reform Bills Introduced

March 15, 2017

On March 8, Senator James Lankford (R-Okla.) introduced the Small Business Regulatory Flexibility Improvements Act (S.584) to require federal agencies to analyze the full impact of a proposed regulation on small businesses during the rulemaking process. The bill is cosponsored by Senators John Hoeven (R-N.D.), Chuck Grassley (R-Iowa), who is chairman of the Judiciary Committee, and Jim Risch (R-Idaho), who is chairman of the Small Business Committee.

Senator Lankford also introduced a package of other regulatory improvement bills: The Early Participation in Regulations Act of 2017 (S.579); the Better Evaluation of Science and Technology (BEST) Act (S.578); the Truth in Regulations Act of 2017 (S.580); and the Providing Accountability Through Transparency Act of 2017 (S.577).

The total annual cost of the federal regulatory burden on the American public has ballooned to nearly $2 trillion and continues to grow each year. Unfortunately, small businesses disproportionally face higher annual regulatory costs of $11,724 per employee per year, which is significantly above the regulatory cost facing large firms. Their ability to operate efficiently and free of unnecessary regulatory burdens is critical for small businesses ability to compete and create jobs.

According to our recently released 2017 NSBA Regulations Survey, on average small-business owners are spending at least $12,000 every year on regulations, and nearly one-in-three spends more than 80 hours each year dealing with federal regulation. The impact of regulatory burden cannot be overstated, according to the NSBA survey, more than one-third of small businesses have held off on business investment due to uncertainty on a pending regulation, and more than half have held off on hiring a new employee due to regulatory burdens.

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.

NSBA supports S. 584 as it works toward alleviating some of the overwhelming and unnecessary regulatory burdens disproportionately borne by small businesses. In NSBA’s letter of support, we stated: “the Small Business Regulatory Flexibility Improvements Act, which will provide effective, meaningful assistance to America’s small businesses, is an excellent step in the right direction. As proven by the NSBA survey, small businesses are being inundated with rules that affect the very existence of their business and in order to strengthen the barrier between small firms and damaging government regulations, there is an urgent need to greatly reduce regulatory complexity, streamline the web of federal, state and local regulations, and adhere to plain language statutes.”