Christmas may be over, but it appears that the Grinch is alive and well in Sacramento and throughout the State of California – and he brings with him a bagful of regulations and mandates for small business owners.

I hear consistent reports from the small business community, both in San Diego and around the state, that the regulatory climate here is a major deterrent to growth and success. And yet the legislative bodies and the numerous agencies continue to promulgate new layers of regulations and fees. There seems to be no interest in improving the state’s business climate, and we see almost daily the departure of businesses of all sizes.

For several years now I’ve set out a wish list of legislative changes that would benefit not only the small-business community, but the entire population of California. These are by no means the only ideas, but they are the ideas that keep coming to mind when I am asked what I would hope to see happening in Sacramento.

Reform of Proposition 65

The Safe Drinking Water and Toxic Enforcement Act of 1986, better known by its original name of Proposition 65, requires the State to publish a list of chemicals known to cause cancer or birth defects or other reproductive harm. This list has grown to include approximately 800 chemicals since it was first published in 1987.

Reflecting the law of unintended consequences, Prop 65 requirements have spawned an avalanche of predatory lawsuits and increased the cost of doing business throughout the state. The Prop 65 warning signs are, at this point, nearly meaningless to small business owners and customers alike – not the intent of the law, either. We all agree that the legislation needs to be reformed, but the proposals of recent years would only make the situation even worse than it is now. For example, when you purchase a new car today, you will find a Prop 65 warning plastered on the window of the driver’s door. I doubt that anyone buying a new car is going to be in any way deterred by this sign, yet it certainly adds to the cost of the vehicle. While the individual sign may cost only pennies, the overall requirement is certainly not small and the final cost will certainly be passed on to the consumer.

California vs. The Rest of the Country

California has regulations in place that are substantially identical to federal regulations but that require totally different paperwork, beyond what is required elsewhere.  For example, the 200-mile off-shore area requiring low-sulfur fuel for shipping is valid throughout U.S. waters, but in California affected vessels are required to submit additional paperwork or face penalties.  This makes no sense, except for the agencies that collect the penalties.  What about requiring that any proposed legislation that requires unique permitting and fees in an area already covered by federal rules be required to prove that there is some compelling reason or significant difference from the federal regulations and permits required?

Fines vs. Fees

In recent years, I’ve seen agencies stall the permit process and then turn around and fine the applicants for not getting permits for various reasons, including conflicting requirements from other agencies. I have two wishes in this situation.

First, implement a requirement that any new legislation be fully studied to identify and resolve conflicts with other existing or proposed legislation or staff-generated regulations.  This should include conflicts with federal regulations as well as state regulations.

Second, implement a rule that agencies with the power to impose fines for whatever reason must pass those fines on to the General Fund.  If they can generate more revenue from legitimate fees than from fines, they are more likely to actually get their jobs done in a timely manner.  This benefits the entire business community by ensuring their permit applications get handled properly, and potentially benefits the General Fund when fines are issued.

Overlapping Jurisdictions

If local agencies or federal agencies are already in place to either provide services or to protect something (consumers, the environment, etc.), require that any proposed new — or even an existing — agency be required to show why it differs in its objectives and methods.  If there is no substantial difference, then the existing agency would be dissolved, and the proposed new agency would not be created. This is particularly relevant in San Diego where at one time I counted at least a dozen different agencies, at all levels of government, claiming jurisdiction over San Diego Bay, with numerous cases where one agency’s requirements were in direct opposition to those of another.

I know there are many other ways to tame the regulatory tiger and create a more favorable business climate in California. These are a few of particular interest to me, but the over-arching question is, “When can we start the process?” Then perhaps someday small business owners won’t feel like the Whos in Whoville, full of uncertainty and fear, and that the government Grinch will, at last, find its heart and do good for the people.


For more than 70 years, the National Federation of Independent Business has been the Voice of Small Business, taking the message from Main Street to the halls of Congress and all 50 state legislatures. NFIB annually surveys its members on state and federal issues vital to their survival as America’s economic engine and biggest creator of jobs. NFIB’s educational mission is to remind policymakers that small businesses are not smaller versions of bigger businesses; they have very different challenges and priorities. Learn more at