Lankford Subcommittee Examines Impact of Federal Regulations on Small Business, Finds Reforms Needed

WASHINGTON, DC — The Homeland Security and Governmental Affairs Subcommittee on Regulatory Affairs and Federal Management, under the chairmanship of Senator James Lankford (R-OK), today held a hearing to examine the impact of federal regulations on small businesses. Specifically, the hearing focused on whether the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act are adequate to address small business regulatory concerns; and steps that Congress and the new Trump Administration should take to ensure that small businesses are able to contribute to the rulemaking process in a more meaningful way.

The Regulatory Flexibility Act (RFA) was signed into law in 1980 to require federal agencies to assess the impact of their proposed regulations on small businesses, small localities, and nonprofits. The Small Business Regulatory Enforcement Fairness Act (SBREFA) was signed into law in 1996 to strengthen the RFA by giving the courts jurisdiction to review agency compliance with the RFA, among other things.

“Small businesses are a vital part of our economy, as they create the majority of new jobs,” said Lankford. “It is important that the federal government eliminate unnecessary regulatory burdens on small businesses, because it stifles creativity, job growth, and local economies. Today’s testimony conveyed the importance of the new administration to reevaluate existing and proposed regulations and ensure that they not restrict small business growth. Today’s testimony also suggested that Congress should pursue reforms to the Regulatory Flexibility Act and Small Business Regulatory Enforcement Fairness Act that close loopholes and ensure that agencies conduct meaningful assessments of how their proposed rules will impact small businesses.”

According to the Small Business Administration, there are 28 million small businesses in the United States which account for 55 percent of all jobs and 66 percent of all new jobs since the 1970s. According to the National Association of Small Businesses, regulatory burdens are consistently listed among the top concerns for small businesses. Federal regulations often disproportionately impact small businesses because regulatory compliance is compounded due to limited resources. According to the American Action Forum, a 10 percent increase in cumulative regulatory costs results in a loss of more than 400 small businesses.

Notable Comments from Witnesses:

Jerry Hietpas, President of the Action Safety Supply Company in Oklahoma City, said, “We recognize the need you have to provide oversight and how you are held accountable to the taxpayers for their resources you commit on their behalf to build and maintain our National Transportation System. You must be able to assure yourselves that good value is received in exchanged for the investment made. Sometimes it seems that as you implement the laws, compliance with the regulations that govern the process carry a higher value than the collection of meaningful data, achieving lower costs or a higher quality end result.”

Karen Harned, Executive Director of the Small Business Legal Center at the National Federation of Independent Businesses said, “Overzealous regulation is a perennial concern for small business. The uncertainty caused by future regulation negatively affects a small-business owners’ ability to plan for future growth…

“When followed correctly, SBREFA can be a valuable tool for agencies to identify flexible and less burdensome regulatory alternatives. However, these last 20 years have also exposed loopholes and weaknesses in the law that allow federal agencies to act outside of the spirit of SBREFA when it comes to small business regulation…

“Regulatory reform is needed to ensure that SBREFA protections are expanded to other agencies, indirect costs of regulation on small business are taken into account, and judicial review is available early enough in the process to make a difference.”

Rosario Palmieri, Vice President for Labor, Legal, and Regulatory Policy for the National Association of Manufacturers said, “New regulations are too often poorly designed and analyzed and ineffectively achieve their benefits. They are often unnecessarily complex and duplicative of other mandates. Their critical inputs— scientific and other technical data—are sometimes unreliable and fail to account for significant uncertainties. Regulations are allowed to accumulate with no real incentives to evaluate existing requirements and improve effectiveness. In addition, regulations many times are one-size-fits-all without the needed sensitivity to their impact on small businesses.”

CLICK HERE to view the full hearing video and opening statements.