Bloomberg BNA: Witnesses Tell House Panel Agencies Fail To Measure Rules' Small Business Impacts
March 14, 2013
By Stephen Lee

Federal regulators are not paying enough attention to the needs of small businesses and are ignoring legal requirements to modify their rules accordingly, witnesses and House Republicans said during a March 14 hearing.
 
The hearing before the Small Business Subcommittee on Investigations, Oversight, and Regulations was convened to examine federal agencies' compliance with the Regulatory Flexibility Act (RFA), which requires federal agencies to weigh the effects of their regulations on small businesses and to mitigate them wherever possible.
 
“Small businesses are expected to adapt to be successful,” said Rep. David Schweikert (R-Ariz.), the subcommittee chairman, in a statement following the hearing. “Why can't the rules Washington levies against them do the same?”
 
Rep. Sam Graves (R-Mo.), chairman of the full committee, said his chief concern is how the Obama administration's regulatory agenda “is going to come crashing down on small businesses who bear a disproportional burden of compliance. The [Small Business Administration's] Office of Advocacy's role is to referee the rulemaking process and ensure small businesses have a voice; however, they are a referee without the ability to enforce penalties.”
 
Law Called ‘Check-the-Box Exercise.'
 
Carl Harris, a small building contractor in Wichita, Kan., and a national area chairman for the National Association of Home Builders, told the subcommittee that agencies view the act as “nothing more than a procedural, check-the-box exercise.”
 
Harris pointed to the Environmental Protection Agency's 2008 amendments to its lead renovation, repair, and painting rule, which sought to remove an opt-out provision from the rule and thereby doubled the number of homes subject to it.
 
In 2012, the EPA inspector general found that the agency had failed to use accurate data when estimating the amendments' costs, Harris said. EPA nevertheless did not convene a new small business review panel on the grounds that doing so would be “procedurally duplicative,” Harris said.
 
Problems Cited With Endangered Species Act
 
He also cited problems with the Endangered Species Act, which authorizes the U.S. Fish and Wildlife Service and the National Oceanic and Atmospheric Administration to bar the issuance of any federal permit, such as a building permit, if they determine that the proposed activity might lead to the “adverse modification” of critical habitat.
 
Those determinations hurt small developers and builders, Harris said. For example, in 2005 the Fish and Wildlife Service designated more than 800,000 acres in Southern California as vernal pools, estimating that the economic impact on residential construction could be more than $800 million.
 
At the same time, the Fish and Wildlife Service also said the RFA did not apply because there was not a substantial number of small entities that would be affected by the decision, Harris testified.
 
Marc Freedman, executive director of labor law policy at the U.S. Chamber of Commerce, told the subcommittee that agencies have resisted complying with the RFA, especially under the Obama administration.
 
“When an agency proposes a regulation, they're not saying, ‘Let's have a conversation about this issue,' ” Freedman said. “They're saying, ‘This is what we intend to put in effect unless there are some very good reasons that we overlooked why we cannot.' ”
 
Committee May Reintroduce Bill
 
After the hearing, a Committee spokesman said the Committee is considering reintroducing the Regulatory Flexibility Improvements Act, which would amend the RFA to require agencies to include indirect economic effects on small businesses when drafting their rules.
 
The bill passed the House in 2011, but it died in the Senate. 
 
On March 12, Sen. Marco Rubio (R-Fla.) introduced a pair of bills, the Regulation Costs to Small Business Act (S. 535), which would require the SBA to determine the total cost of federal regulations to small businesses, and the Regulation Costs to America Act (S. 536), which would require the Government Accountability Office to report on the total cost of all federal regulations.
 
“By requiring annual reports, we will have a sense of the cost of all the hurdles small businesses have to jump over and can determine just how excessive current regulations are on business owners,” Rubio said in a March 12 statement.
 
Law Professor Alleges Malfeasance
 
Witness Rena Steinzor, a law professor at the University of Maryland, told the panel that the SBA Office of Advocacy may have broken the law by consciously steering its resources away from helping small businesses and toward “pursuing the complaint du jour of the very large companies that call the shots at the American Chemistry Council, the National Association of Manufacturers, and the U.S. Chamber of Commerce.”
 
She pointed to two recent reports by the Center for Progressive Reform and the Center for Effective Government, which said the Office of Advocacy “systematically ignores the needs of small business and instead operates, largely in secret, as a loyal foot soldier in the big-business campaign against regulation.”
 
Steinzor, who also serves as president of CPR, called on the Government Accountability Office to investigate the Office of Advocacy.
 
Former Senator Defends SBA
 
Former Sen. Blanche Lincoln (D-Ark.), chairwoman of the National Federation of Independent Businesses' Small Business for Sensible Regulations Coalition, defended the SBA in a March 14 statement.
 
She said she is “proud that SBA believes, as most Americans do, that you need everyone's ideas to solve challenging problems. The recent attacks on SBA are being driven by special interests who want to preserve an unaccountable, overreaching regulatory system, rather than reform it for the benefit of the environment, working conditions, economic growth, and job creation.”
 
Meanwhile, in a Feb. 28 annual report, the Office of Advocacy praised the Obama administration for generally complying throughout fiscal 2012 with the Regulatory Flexibility Act.
 
Through its use of the statute, the Office of Advocacy saved small businesses $2.4 billion in first-year regulatory costs during fiscal 2012, the agency said.