LABI Logo Get Involved

Small Business Has Big Community Role

February 9, 2015

By: Stephen Waguespack

Small businesses make a big impact at home.

There are more than 424,000 small businesses in Louisiana, employing more than 892,000 people. In fact, small businesses make up more than 97 percent of Louisiana’s employers, providing jobs to more than half of the state’s private workforce in 2012. Small business is the backbone of our communities and their contribution to Louisiana’s economic growth is all too often over looked and taken for granted.

Instead of looking for ways to make it easier to help them grow their business and expand their investment in our communities, government continuously throws new mandates and restrictions on top of them, making their community-enriching mission that much more difficult. Whether it is the disincentives for hiring full-time workers found in Obamacare, the ever-increasing litigation fears resulting from our litigious society or the constant threats to impose market manipulating impacts on job creation that would result from a national minimum wage increase during this recession, small businesses are used to having government take steps to complicate their business plans every step of the way.

In addition to their tremendous impact here in Louisiana, small businesses also make a large impact on the national economy. According to the U.S. Census Bureau, there were over 28 million small businesses employing 55 million workers, or about half of all private sector employees. These firms are responsible for 59 percent of all net new jobs from 2010 through 2013, yet they are disproportionately impacted by compliance burdens associated with regulation. A recent study found that small businesses pay $11,724 per employee per year in regulatory compliance. Their ability to operate efficiently and free of unnecessary regulatory burdens is critical for their ability to compete and create jobs. According to the National Association of Manufacturers (NAM), the total cost of federal regulations in 2012 was $2.028 trillion (in 2014 dollars).

Federal regulations continue to strangle and stifle small business and there is an effort afoot to help reduce some of this burden. H.R. 527, the Small Business Regulatory Flexibility Improvements Act of 2015 is bipartisan legislation, which would help alleviate unnecessary regulatory burdens placed on small businesses. According to NAM, it would reform the regulatory process to ensure that all federal agencies appropriately consider the impact of their rules on small businesses across America. As a result, federal agencies would issue smarter regulations that minimize inefficiencies and unnecessary burdens while still protecting public health, worker safety and the environment.

This Act would improve and modernize the Regulatory Flexibility Act (RFA), a 1980 law that requires federal agencies to transparently account for the impact of regulation on small businesses. However, each agency interprets important terms in the existing statute in widely divergent ways and is able to avoid the RFA’s requirements as Congress intended. This bill would streamline and make uniform those determinations of when the RFA would apply to a rule.

Despite limited adherence by federal agencies to the RFA’s provisions, the RFA has yielded billions in savings for small businesses. In fiscal year 2014, the U.S. Small Business Administration’s Office of Advocacy reported compliance cost savings of $4.8 billion for small businesses. Over the past ten years, the small business compliance cost savings due to the RFA is greater than $90 billion. These savings were derived from a small number of regulatory alternatives that were less costly to small businesses. If all federal rules with small business impacts included the type of analysis required by this legislation, the savings could be significantly higher and our regulatory system could more efficiently meet our objectives.

Many rules that have significant impacts on small entities are not covered by the RFA because the small businesses adversely impacted are not directly regulated entities. The Act would require agencies to consider the true impact of their rules on the regulated community. It also would give the Office of Advocacy additional authorities and require it to establish standards for conducting a regulatory flexibility analysis during the rulemaking process. H.R. 527 improves transparency and ensures that agencies thoughtfully consider the impact of regulations on small businesses.

The House of Representatives passed H.R. 527 last week by a vote of 260-163. It now heads to the Senate for consideration.  Hopefully, consensus will be found around the simple notion that we should be doing everything we can to help small businesses continue to carry out the fundamental role they play so well:  making a difference each and every day in the communities in which they live.