STATEMENT
of the
Honorable Nydia M. Velázquez, Ranking Member
House Committee on Small Business
"Reducing Federal Agency Overreach: Modernizing the Regulatory Flexibility Act"
"Small businesses play a key role in creating new jobs. Today, we are going to examine how the rising regulatory burden may prevent them from generating these employment gains. As the latest studies show, the annual cost of regulations grew over the last decade to $1.75 trillion. This means that if every U.S. household paid an equal share of the regulatory burden, each would owe more than $15,000.
For many small businesses, the cost of regulatory compliance has become considerable. Firms with fewer than 20 employees pay more than $10,500 per employee in compliance costs -- a number 36 percent higher than their larger counterparts. The result is that many entrepreneurs are spending more on regulatory requirements than they are on building their businesses.
To address this issue, Congress passed the Regulatory Flexibility Act in 1980, giving small businesses greater influence in the regulatory process. The Act was designed to ensure that federal agencies consider the impact of its regulations on small entities.
Clearly, the RFA is working -- as regulatory costs were reduced by $15 billion in 2010 alone, according to SBA’s Office of Advocacy. In the last three years, the EPA and OSHA convened seven small business advocacy review panels, providing small firms with greater input regarding key environmental and occupational safety regulations.
Despite these successes, it is clear that the RFA could be working better. One area that needs improvement is the process in which agencies can certify that a rule has no significant economic impact on small businesses.
While agencies are required to provide a factual basis for such certifications, they often provide only a simple statement which dismisses the concerns of small firms. By doing so, small firms are often left out of process -- with little hope of their voice being heard.
Agencies also have been slow to review outdated regulations that remain on the books, yet which continue costing small businesses money. While the RFA requires agencies to periodically review existing rules, these requirements are vague and agencies often do not apply them consistently. As a result, these reviews have been much less effective than they could be.
Given the well-documented concerns and the evidence that lies before us, I think the question is not if we make improvements to the RFA, but rather how do we go about it. As we move down this path, the Committee should be cautious in two areas.
While the SBA’s Office of Advocacy plays an important role, simply giving them additional power is not the answer to all that ails the RFA. With only 46 employees, we have to be careful about creating a situation where we vest too much new authority in an entity that lacks the budget and manpower to execute such an expanded role. In these times of fiscal restraint, I am wary of heaping more responsibilities on an agency that is struggling to keep up with its existing work load. Let’s first see if Advocacy can handle the new tasks required under Dodd-Frank, which increases by 50 percent the number of agencies covered by the panel process.
In addition, any expansion of the RFA -- and in particular the panel process -- must be scrutinized. I whole-heartedly support efforts to rein in agencies that are insensitive to small businesses, but we cannot do so by simply grinding the regulatory process to a halt.
With this in mind, I look forward to today’s discussion on how RFA can best be modernized to meet small businesses’ needs.
Since its enactment over 30 years ago, the Regulatory Flexibility Act has played a critical role in reducing regulatory burden. We need to ensure the RFA system functions properly and correctly, as minimizing regulation will enable small businesses to do what they do best -- innovate, grow, and create the jobs our economy needs to move ahead.
I yield back the balance of my time."
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