The corporate-funded American Legislative Exchange Council (ALEC) recently adopted and began promoting to state legislators its model "Regulatory Flexibility Act." The act, which was drafted by the Bush Administration's Office of Advocacy of the U.S. Small Business Administration, would require all state agencies to develop economic impact statements and regulatory flexibility analyses for "any proposed regulation that may have an adverse impact on small businesses." The regulatory flexibility analyses present alternative approaches to minimize the regulation's impact on small businesses, including exemption from part or all of its requirements, weaker and more simplified reporting, extended deadlines for compliance, and standards based on performance instead of actual design or operations. This model bill is flawed in many ways. First, its definition of "small business" is questionable -- any "business entity, including its affiliates, that is independently owned and operated and employs fewer than 500 full-time employees or has gross annual sales of less than six million dollars." This definition is so broad that it could cover over 90 percent of U.S. businesses. The act also places an unreasonable burden on state agencies. Opponents are concerned that the act would institutionalize regulatory loopholes for small businesses, significantly slow the adoption of new environmental safeguards and weaken existing ones, and make regulation of large businesses more difficult. Moreover, this state-by-state approach may very well exacerbate the tendency of some businesses to play states off against each other in a "race to the bottom" with regard to environmental, labor, and other regulations maintaining citizens' quality of life. This likelihood is increased by the lack of a definition for what constitutes a significant economic impact on small businesses. Rather than protect real small businesses, this is an effort to undermine the rules and regulations that protect the public and the environment. Versions of this legislation were introduced in ten states in 2003 and at least eight states in 2004, including CA, NE, KS, MO, TN, PA, SC, and OK. For more information, see the ALEC Watch on ALEC's Regulatory Flexibility Act.

Ran 6/14/04