For years, we’ve heard that regulations overly burden small business. But, how much does regulation really cost small business? To answer that question, in 2006 Governor Arnold Schwarzenegger signed a bill that mandated a study on the cost of regulation on small business in California. AB 2330, authored by Assemblyman Juan Arambula (I-Fresno), required the Office of the Small Business Advocate to commission a study on the cost of state regulations on small businesses and report back to the Legislature by October 1, 2007.
That was not a typo: October 2007. It’s August 2009, so where’s the study?
The study has been completed. It was finished and delivered in December 2008 due to a delay in awarding the contract because of a vacancy in the Small Business Advocate’s office. The report was done by Sanjay Varshney, the Dean of Business Administration at Cal State, Sacramento and Dennis Tootelian, Director of the Center for Small Business at the same school.
So where is it?
Varshney and Tootelian have long track records on studying public issues. They recently completed a study for General Services on the value for small business receiving state procurements, and finished a study on the Cost of AB 32 on Small Business, which you can find on the Small Business Action Committee website. So it would be interesting to learn what they have to say about the effect of state regulations on small business.
Results of the study could have an important impact on the small business community. The study was designed to examine successful models from other states on identifying regulatory costs and developing potential alternative approaches. The study could offer recommendations on the regulatory cost burden.
No study on small business regulatory costs has been conducted in California. The U.S. Small Business Administration has been analyzing costs of federal regulations since 1995. The update issued on September 19, 2005, found that “small businesses continue to bear a disproportionate share of the federal regulatory burden.”
That report noted that the cost of federal regulations on firms with fewer than 20 employees is $7,647. For small manufacturers this figure is at least double the compliance cost for medium-sized and large firms.
Information in the California study could lead to changes in the regulatory process and help small business prosper and create jobs.
But we won’t know until we learn what the study says. Better to get the study out late than never. But it’s starting to feel like never.