When Regulators Come Knocking

Date: February 22, 2017

Editorial by NFIB/Colorado State Director Tony Gagliardi

Colorado lawmakers would do the state a service to read the results from a national small-business poll on regulations released February 15 by the National Federation of Independent Business.

The information is especially timely given what Senate Bill 1, currently in the state’s House of Representatives, would do to help lessen one concern small-business owners have that, in an indirect way, could aid in a better employment environment for Colorado.

NFIB’s poll slices and dices over 22 questions the extent and effect regulations are having on every state’s top employers and job-generators—Small-business owners. Among the finding for policymakers to consider are:

  • About 28 percent of small employers cite compliance costs as their largest regulatory issue followed by 18 percent citing the difficulty of understanding what they must do to comply. Seventeen percent find the extra paperwork required as their biggest issue. The balance of the results includes time delays regulations cause, limits placed on actions you want to take, and other reasons.
  • All levels of government contribute to the regulatory compliance burden … But the main culprit for half of small employers is the federal government. Thirty percent find regulations promulgated at the state level most burdensome while 15 percent are most impacted at the local level.
  • One-third of small employers have had a government official enter their place of business to inspect or examine their records and/or licenses or otherwise check on their compliance with some government requirement.

It is this last result that Senate Bill 1 seeks to alleviate some worry. According to the legislative counsel’s analysis of SB 1, “When an agency determines that a small business has committed a minor violation of a rule, instead of imposing a fine, the agency is required to notify the small business in writing of the violation, including the steps to cure the violation, and give the small business 30 business days to cure the violation.”

It is important to note here that interactions with government over regulatory matters are not always a bad or adversarial experience. Under the poll’s Interactions with the Regulators section, it found only one in 10 small employers who have been fined. Of the 41 percent who have reached out to talk with someone at a government agency, 19 percent were very satisfied with their experience, and another 50 percent were generally satisfied.

What NFIB’s poll and Senate Bill 1 highlight more than anything is the importance of policy. As SB1’s author, Sen. Tim Neville, put it, “Asking agencies to work cooperatively with businesses on compliance issues puts out a shingle for the state that says, ‘we will work with you, we want you here, and we aren’t going to automatically slap you with a big fine if you’re making diligent efforts to play by the rules.”

On the importance of good policy, the poll points out two things every policymaker should remember before getting lost in the weeds of specifics:

  • Few if any regulatory agencies consider the overall costs of all regulations on firms when considering their own. Each agency acts as is if there is no limit to the amount of money that firms can collectively spend on compliance; there is no coordination, no priorities set.
  • Unlike tax policy, which broadly impacts all firms in much the same way, regulations are administered by a myriad of government agencies, at different levels of government impacting sometimes very narrowly defined types of businesses. Thus, it is difficult to construct a comprehensive approach to easing the burden. However, the better policy makers understand the impact of regulations on small-business owners, the more able they will be to lessen the burden.

Senate Bill 1 is no threat to any elected official’s political supporters. The Colorado House should expedite its journey to the governor’s desk.

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NFIB/Colorado State Director Tony Gagliardi

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