Small Business and the SBA Office of Advocacy – An Overview

1. Small Business and the SBA Office of Advocacy – An Overview Bruce Lundegren Assistant Chief Counsel Office of Advocacy U.S. Small Business Administration (202) 205-6144 bruce.lundegren@sba.gov

2. Overview of Presentation • The SBA Office of Advocacy – The Federal Watchdog for Small Business • The Impact of Small Business on the Economy • Overview of the Regulatory Process (Administrative Procedure Act and Executive Order 12866) • The Regulatory Flexibility Act • The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996 • Executive Order 13272 • OSHA’s Regulatory Agenda – What’s on the Horizon?

3. SBA Office of Advocacy – The Federal Watchdog for Small Business • Created in 1976 as an independent voice for small business • Headed by the Chief Counsel for Advocacy • Oversee agency compliance with the Regulatory Flexibility Act (1980) • requires federal agencies to assess the impact of their regulations on small business and consider less burdensome alternatives • Added small business consideration to the rulemaking process • Agencies prepare IRFA and FRFA (or certify)

4. The Impact of Small Business on the Economy • Small businesses are the key to the nation’s well being • Firm with fewer than 500 employees • Represent 99.7 percent of all employer firms • Employ about half of all private sector employees • Pay 43 percent of total U.S. private payroll • Have generated 65 percent of all net new jobs over the past 17 years

5. The Impact of Small Business on the Economy • In 2008, there were 27.3 million total small businesses • Of these, 6 million were employers • Accounted for 49.6 percent of U.S. private sector jobs • In 2009, real GDP growth in U.S. increased by 0.7 percent, while private sector employment decreased by 5.5 percent

6. The Impact of Small Business on the Economy • Business ownership is becoming more inclusive in the U.S • Minority-owned businesses numbered 5.8 million in 2007, and increase of 45.6 percent over 2002 • Woman-owned businesses totaled 7.8 million in 2007, a 20.1 percent increase since 2002 • Businesses showed signs of stability and improvement over 2009

7. The Cost of Regulation & the Burden on Small Business • Study by Nicole and Mark Crain shows annual cost of regulations $1.75 trillion (2008) • Disproportionate impact on small business • Per Employee = $10,585 < 20 employees v. $7,755 = 500 + employees (36 percent more) • Economic = $4,120 < 20 v. $5,835 + 500 • Environment = $4,101 < 20 v. $883 + 500 • Tax = $800 < 20 v. $517 + 500 • OSHA & Homeland Security = $610 < 20 v. $520 + 500

8. An Overview of the Regulatory Process • The Basic Framework: The Administrative Procedure Act • Requires federal agencies to publish proposed rules for public comment (“notice and comment” rulemaking) • Great deference is given to federal agency decisions • Courts overturn only if “arbitrary and capricious” • Has been changed by Executive Order and RFA requirements • OSHA rules must address significant risk and be technologically and economically feasible

9. White House Review of Regulations: OIRA and Executive Order 12866 • White House (centralized) review of agency rules began in the Nixon administration and have become increasingly sophisticated • President Reagan first required formal cost-benefit analysis in 1981 • Current manifestation is Executive Order 12866, signed by President Clinton in 1993 (remains in effect) • Applies to significant regulatory actions (> $100 million) • Requires agencies to prepare a “regulatory impact analysis” • assess aggregate costs and benefits, consider feasible alternatives, avoid duplication, choose the most cost-effective alternative

10. White House Review of Regulations: (Continued) • Centralized review conducted by OMB’s Office of Information and Regulatory Affairs (OIRA) • OIRA Administrator is Cass Sunstein • Meets with interested stakeholders • President Obama issued Executive Order 13563 (supplements and reaffirms EO 12866; retrospective review of regulations) • OIRA also established government-wide standards for Information Quality, Peer Review, Risk Assessment, and the use of Guidance Documents

11. Regulatory Flexibility Act of 1980 • Applies to rules that must undergo notice and comment rulemaking under the APA or any other statute • Agencies must determine whether the rule, if promulgated, would have a “significant economic impact” on a “substantial number of small entities” • Small entities include small businesses, small non-profits, and small governmental jurisdictions

12. Regulatory Flexibility Act (Continued) • Threshold Question: Will the rule, if promulgated, would have a “significant economic impact” on a “substantial number of small entities”? • If no, agency head may so “certify” and no further analysis is required • If yes, agency must prepare and publish for comment an Initial Regulatory Flexibility Analysis (IRFA)

13. Initial Regulatory Flexibility Analysis (IRFA) • Reason action is being taken • Objectives of the proposed rule • Description and estimate of the number of small entities impacted • Estimated compliance requirements • Duplicative, overlapping, or conflicting rules • “Significant” alternatives considered (e.g., different compliance or reporting requirements, simplification, performance standards, exemption, etc.)

14. Final Regulatory Flexibility Analysis (IRFA) • Need for and objectives of the rule • Description and estimate of the number of small entities impacted • Issues raised by public comment • Assessment of those issues and changes made to proposed rule as a result • Steps the agency has taken to minimize impacts on small entities (consistent with objectives) or why alternatives were not selected

15. RFA (Some Other Issues) • Use SBA Small Business Size Standard • Direct v. Indirect Impacts • RFA is procedural, not substantive • Final action subject to judicial review • Advocacy can file “amicus curie” briefs

16. Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) • OSHA, EPA (and now the CFPB within the Federal Reserve) must convene Small Business Advocacy Review (SBAR) Panels before proposing certain rules • Agencies must issue compliance guides for small business • Allows for judicial review of agency compliance

17. Executive Order 13272 • Strengthened the RFA by • requiring agencies to issue RFA compliance policies • notify Advocacy of upcoming rules • address Advocacy’s comments with specificity; • Requires Advocacy to • Issue RFA compliance guide • train agencies on RFA compliance • Report to Congress and OMB

18. SBA Office of Advocacy • Cost savings from 2002 - 2008 = over $50 billion • Legislative Priorities • Review existing regulations - §610 - allow public petitions • Improve SBREFA process - 120 days • Consider indirect impacts - reasonably foreseeable effects

19. OSHA’s Regulatory Agenda – What’s on the Horizon? • Injury and Illness Prevention Program (I2P2)* • Review/Look-back of OSHA Chemical Standards • Occupational Exposure to Crystalline Silica • Improve Tracking of Workplace Injuries and Illnesses • Cooperative Agreements • Hazard Communication (GHS) • Combustible Dust** • Injury and Illness Recording and Reporting Requirements - Musculoskeletal Disorders (MSD) Column**

20. MSHA’s Regulatory Agenda – What’s on the Horizon? • Respirable Crystalline Silica • Notification of Legal Identity • Proximity Detection Systems for Mobile Machines in Underground Mines • Proximity Detection Systems for Continuous Mining Machines in Underground Mines • Patterns of Violations

21. Thank you! • Questions/Comments/Discussion? • Contact Info: Bruce Lundegren Assistant Chief Counsel Office of Advocacy U.S. Small Business Administration (202) 205-6144 bruce.lundegren@sba.gov