It felt a bit like Christmas yesterday afternoon when we finally received the long overdue study on the impact of regulations on small businesses in California. And while the news wasn’t good, it also wasn’t a surprise, like opening a gift that you picked out for yourself.
We hear from our members over and over that regulations in California are strangling them. One thing that this study proves is that what we’ve been saying is true – it accurately portrays the totality of the problems that small businesses face in our state when it comes to regulations. Don’t misunderstand – some regulation is needed to have a fair and balanced market, but there needs to be a reality check about how regulations will affect small businesses. Just like the saying that there is no free lunch it is equally true that compliance with regulations, particularly for small businesses, does cost money.
California finds it self in the midst or on the way out of the worst recession in decades, but in this dark time we can more clearly see that actions we have taken to hamstring our small businesses, the economy, and state revenues. More and more leaders, including the Governor and a number of legislators, are calling for action to right the ship and get our economy back on course.
That is why NFIB co-sponsored SB 356 this year, which would have required agencies to determine the impact of new regulations on small businesses before they are put into place. Currently, California does not adequately address these issues prior to moving forward with proposed regulations. If the state’s job creators are to help jump start the economy, the impact to their bottom line needs to be considered.
The report indicates that the total cost of complying with regulations per small business in California is $134,122.48. In addition, regulations have less obvious, indirect costs such as money that otherwise would have been paid out in wages ($4,000) and the more than $57,000 not paid to state and local government in taxes. The most tragic number is the average loss of one job per small business. That seems very small except when you consider that California currently has more than 770,000 small employers. Do the math.
This study is a good start and much more work needs to be done. California needs a functioning system of evaluating the cost of regulations before they go into effect and the Legislature would be well served to analyze the compliance cost of proposed laws before they mandate businesses comply.
We start today a little wiser than we were yesterday, but with that understanding comes a greater responsibility to take appropriate action. California needs a plan for economic recovery and that plan must include a regulatory environment that understands the impact and cost of regulations on the businesses largely responsible for the California’s prosperity.