Topic:
ADMINISTRATIVE REGULATIONS; EXECUTIVE AGENCIES; LEGISLATION; SMALL BUSINESSES;
Location:
ADMINISTRATIVE PROCEDURE ACT; SMALL BUSINESS;

OLR Research Report


June 18, 2008

 

2008-R-0361

REGULATORY FLEXIBILITY ANALYSES REQUIRED BY STATES

By: Mary M. Janicki, Director

You asked for a list of the states that require state agencies to prepare regulatory flexibility analyses for proposed regulations that impact small businesses.

SUMMARY

Federal law and 43 states, including Connecticut, require government agencies to prepare a regulatory flexibility analysis as part of their administrative rule-making process.

A regulatory flexibility analysis generally includes some or all of the following elements:

1. a definition of small businesses or a description of the classes of persons who probably will be affected by the proposed regulation or rule, including classes that will bear the costs of the proposed rule and classes that will benefit from the proposed regulation;

2. a description of the probable impact, including economic impact, of the proposed regulation;

3. the probable costs to the agency of the implementation and enforcement of the proposed regulation and any anticipated effect on state revenues;

4. a description of any alternative methods for achieving the purpose of the proposed regulation that were seriously considered by the agency and, if rejected, the reasons why; and

5. alternatives proposed to minimize undue negative or burdensome impacts on small businesses, if practicable.

The alternatives that an agency might be required to consider under a regulatory flexibility analysis include accommodations that would lessen the impact the proposed regulation is expected to have on small businesses, such as less stringent compliance or reporting requirements, different performance standards, or exemptions from some or all of a rule's requirements.

Connecticut's Uniform Administrative Procedure Act (UAPA) requires state agencies to prepare a regulatory flexibility analysis prior to the adoption of any proposed regulation.

FEDERAL LAW

Federal agencies are required to address the impact of agency rules on small entities under the Regulatory Flexibility Act (RFA) of 1980, as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996. The law (P.L. 96-354, 5 U.S.C. 601-612) requires an agency to:

determine, to the extent feasible, the impact of a rule on small entities, including businesses and all levels of government;

explore regulatory options for reducing significant impacts on a substantial number of these entities; and

explain the ultimate choice of its regulatory approach.

The 1996 legislation authorized the courts to review agency RFA compliance (P.L. 104-121).

OTHER STATES

Like Connecticut, in states that require a regulatory flexibility analysis, agencies must consider how they can reduce the impact of the rule on small businesses by adopting flexible, creative, or innovative alternatives. They can establish less stringent compliance or reporting requirements, schedules, or deadlines; consolidate or simplify compliance or reporting requirements; develop alternative performance standards; or completely exempt small businesses from all or part of a rule's requirements.

Table 1 lists the 43 states that include regulatory flexibility requirements in their state administrative procedures. In three of these states, the requirement is established through an executive order.

Table 1: States that Require Regulatory Flexibility Analyses

State

Citation

Alabama

41-22-23(g)*

Alaska

44.62.218

Arizona

41-1035 and 41-1055(B)

Arkansas

Exec. Order 05-04 and 25-15-302 & -303 (2007)

California

Gov. Code T. 2 11346.2(b)(3) and 11346.9(a)(5)

Colorado

24-4-103(2.5)

Connecticut

4-168a(b)

Delaware

T. 29 1040(a)

Florida

T. X 120.54(3)(b)

Georgia

50-13-4(a)(3) and (4)

Hawaii

201M-2

Illinois

5 Ill. Comp. Stat. 100 100/5-30(a)

Indiana

4-22-2.1-5

Iowa

17A.4A(2)(b)

Kansas

77-416(b)*

Kentucky

T. 3 Ch. 13A.210

Maine

T. 5, Pt. 18 Ch. 375 8052.5A

Maryland

State Govt. 10-124*

Massachusetts

Exec. Order 03-11, 2 and 5

Michigan

24.240

Minnesota

14.131*

Mississippi

T. 25, Ch. 43 25.43-3.105(2)(d) and (f)*

Missouri

T. 36, 536.300

Montana

2-4-405*

Nevada

T. 18, 233B.0608

New Jersey

52:14B19

New Mexico

Ch. 12, Art. 8, 14-4A-4(b)

New York

St. Admin. P Act 202-b

North Dakota

28-32-08.1

Oklahoma

T. 74 75-504(c)

Oregon

183.540

Table 1: -Continued-

State

Citation

Pennsylvania

T. 71, Ch. 4A 745.5(a)(12)

Rhode Island

42-35-3.3

South Carolina

1-23-270(D)

South Dakota

1-26-2.1(5)

Tennessee

4-5-402 (2007)

Texas

T. 10, 2006.002

Utah

63G-3-301

Vermont

T.3, Ch. 25, 832a and 838(c)(3)

Virginia

T. 2.2, Ch. 40, 2.2-4007.1(B)

Washington

19.85.030

West Virginia

Exec. Order No. 20-03

Wisconsin

Ch. 27 227.19(3)(e)

*Not specific to small businesses

Some states require agencies to determine a regulation's impact on small businesses or other groups or classes, but do not add the element of minimizing any adverse impact or developing a flexible alternative to a proposed regulation. In five states (Alabama, Kansas, Maryland, Minnesota, and Montana), the impact analysis is not limited to small businesses only.

States that have no regulatory flexibility analysis requirement are Idaho, Louisiana, Nebraska, New Hampshire, North Carolina, Ohio, and Wyoming.

CONNECTICUT

Since 1987, Connecticut's UAPA has required state agencies to consider how proposed regulations will affect small businesses and, where it is consistent with public health, safety, and welfare, to consider treating these businesses differently from larger ones (PA 87-359). A 1997 act named the process a “regulatory flexibility analysis” and required that it be included in the fiscal note agencies provide to the Regulations Review Committee (PA 94-179). OLR report 2004-R-0012 describes the history and legislative intent of both laws.

The law (CGS 4-168a and -168(a)) defines “small business” as one that has fewer than 50 full-time employees or gross annual sales under $5 million. But it allows agencies to use a significantly higher threshold – up to 500 full-time employees or the number allowed under federal regulations, whichever is less – if necessary to address problems specific to small businesses.

The UAPA includes the following methods agencies must consider to reduce the impact of proposed regulations on small businesses:

1. establishing less stringent compliance or reporting requirements, schedules, or deadlines for small businesses;

2. consolidating or simplifying compliance or reporting requirements;

3. establishing replacement design or operations standards with different performance standards for small businesses; and

4. exempting small businesses from all or part of a regulation's requirements.

Before adopting a proposed regulation that may have an adverse impact on small businesses, the agency must notify the Department of Economic and Community Development (DECD) of its intent to do so. DECD advises and assists agencies in their compliance efforts. An OLR report (2007-R-0012) covers the extent to which state agencies prepared regulatory flexibility analyses between 1997 and 2006.

MJ:ts