Regulatory Flexibility Revolution

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Under the thumb of overzealous taxation and centralized regulation from an uncaring and distant government, the Founders of our nation decided to take action. Today, after years of feeling some of the same frustrations and neglect, small businesses are taking action as well. From coast to coast, another revolution is taking hold as small business owners, their employees, and supporters are demanding an end to one-size-fits-all regulations and arcane rules that can stifle innovation, hard work, and creativity.

Excessive federal regulatory burden is a real problem for small business, as research by the Office of Advocacy of the U.S. Small Business Administration shows. Small businesses with fewer than 20 employees annually spend $7,647 per employee to comply with these regulations compared to the $5,282 spent by larger firms. That is a 45 percent greater burden just to comply with federal mandates, and it does not count costs associated with state and local regulations.


Any small business owner on Main Street will tell you that a major part of their regulatory burden comes from state government. However, not every state requires its regulators to be sensitive to how their mandates affect small business. That reality promoted a movement designed to create local regulatory flexibility. My office drafted model legislation for consideration by the states that mirrors the federal Regulatory Flexibility Act. That act requires agencies to analyze the economic impact of a proposed regulation on small business and to consider less burdensome alternatives that still accomplish the agency regulatory goal.

Since the introduction of the model legislation, 37 state legislatures have considered regulatory flexibility legislation, and 21 states have implemented regulatory flexibility via Executive Order or legislation. This year, 13 states have introduced legislation; Governors in Arkansas, Maine, Texas, and Washington signed regulatory flexibility legislation into law and the Hawaii, and Tennessee legislatures recently passed bills to improve their state statutes.

Colorado provides an example of how regulatory flexibility can inject common sense into state rulemaking.

There, hotels and restaurants can reseal and allow a customer to take home an open bottle of partially consumed wine. A Colorado agency wanted to mandate the use of commercially manufactured stoppers and sealable containers. The rule affected over 4,000 businesses, and together would have cost them $1.7 million to $3.3 million to comply.

Colorado is one of the states that has a regulatory flexibility system. Using the process in the state