Montana ‘Small Business Impact Act’ goes into effect
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HELENA — One of the Montana Chamber of Commerce’s key accomplishments from 2013 Legislature was the enactment of the Small Business Impact Act (Senate Bill 139 - Sen. Ed Walker - Billings) to require state agencies to analyze how proposed rules and regulations impact small businesses in the state. The House and Senate supported the amended version of the bill and Governor Steve Bullock signed it into law on April 26, a couple days after the Legislature adjourned. The new law goes went into effect last week.
“For Montana in particular, small business is the engine that drives our state economy,” Glenn Oppel, Government Relations Director for the Montana Chamber of Commerce, said. “Small business routinely identifies regulatory compliance as one of the most frustrating and costly aspects of running a business.”
According to a September 2010 Small Business Administration (SBA) study on the “Impact of Regulatory Costs on Small Firms,” the cost of complying with regulations for businesses in the U.S. is $1.75 trillion annually. The study highlighted the fact that small firms face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms.
“Small firms generally do not have in-house counsel and human resource staff to guide them through the red tape,” Oppel said. “Staff for a small business is focused on making a profit to stay in business, pay current employees, and hopefully hire more.”
Requiring agencies to look at the impact of regulations on small businesses is nothing new. A similar requirement at the federal level — the Regulatory Flexibility Act (RFA) — was signed into law by President Jimmy Carter in 1980. Since the SBA began calculating the economic impact of the RFA in 1998, the law is estimated to have saved small entities (and the U.S. economy as a whole) about $215 billion without undermining the broad public purposes of regulations. Seeing the success of the federal RFA, more than 40 states have adopted similar approaches to assessing the impact of rules and regulations on small business.
Specifically, Senate Bill 139 creates an affirmative duty for state agencies to determine if a proposed rule will “significantly and directly” impact small business, defined as firms with 50 or fewer employees. If the agency determines there is no impact, it must publish the determination but is not required to conduct an impact analysis. If a significant and direct impact is identified by the agency, the agency must prepare a “small business impact analysis” that: 1) identifies the class or group of small business probably affected; 2) states the probable direct and significant impacts; 3) describes alternative methods of regulation to minimize adverse effects while still achieving the purpose of the proposed rule; and 4) provides documentation for estimates, statements, and descriptions for information in the small business impact analysis. The agency must publish the small business impact analysis with the proposed rule.
“Like the federal law and laws in numerous states, the Small Business Impact Act will protect Montana’s small businesses from ill-advised and often costly regulations while still ensuring that the public health and welfare are protected,” concluded Oppel. “The resources that would otherwise go to complying with regulations will go to expanding business and creating new jobs.”
While Senate Bill 139 went into effect last week, it contains a provision that sunsets the program after two years. The Montana Chamber will monitor the program closely to demonstrate its success at protecting small businesses in the state with the hope of making the Small Business Impact Act is a permanent requirement for state agencies.
