The corporate-funded American Legislative Exchange Council (ALEC) recently adopted and began promoting to state legislators its model "Regulatory Flexibility Act." The Act, which was drafted by the Bush Administration's Office of Advocacy of the U.S. Small Business Administration, would require all state agencies to develop economic impact statements and regulatory flexibility analyses for "any proposed regulation that may have an adverse impact on small businesses." The economic impact statements include projections of how many small businesses might be affected by the regulation and what the probable effect would be, the costs and skills needed for compliance, and any less demanding approaches that might achieve the same goal. The regulatory flexibility analyses present alternative approaches to minimize the regulation's impact on small businesses, including exemption from part or all of its requirements, weaker and more simplified reporting, extended deadlines for compliance, and standards based on performance instead of actual design or operations. This model bill is flawed in many ways. First, its definition of "small business" is questionable -- any "business entity, including its affiliates, that is independently owned and operated and employs fewer than 500 full-time employees or has gross annual sales of less than six million dollars." This definition is so broad that it could cover over 90 percent of U.S. businesses. The Act also places an unreasonable burden on state agencies. Opponents are concerned that the Act would institutionalize regulatory loopholes for small businesses, significantly slow the adoption of new environmental safeguards and weaken existing ones, and make regulation of large businesses more difficult. Moreover, this state-by-state approach may very well exacerbate the tendency of some businesses to play states off against each other in a "race to the bottom" with regard to environmental, labor, and other regulations maintaining citizens' quality of life. This likelihood is increased by the lack of a definition for what constitutes a significant economic impact on small businesses. A version of the Act was introduced in Wisconsin by Senator Robert Welch, chair of ALEC's Energy, Environment, Natural Resources, and Agriculture task force. Welch's "Small Business Regulatory Bill of Rights" (SB 100) passed the Senate last week but has been tabled in the Assembly. Similar bills have been introduced in ten other states.

Ran 9/29/2003