BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2330
                                                                  Page  1

          Date of Hearing:   April 18, 2006

                                Juan Arambula, Chair
                   AB 2330 (Arambula) - As Amended:  April 6, 2006
          SUBJECT  :   Small businesses: impact of state regulations.

           SUMMARY  :   Requires the Office of the Small Business Advocate  
          (OSBA) to commission a study on the costs of state regulations  
          on small businesses.  Specifically,  this bill  :  

          1)Requires the study to parallel, to the extent feasible and  
            practical, the study conducted by the federal Small Business  

          2)Requires the study to examine successful models from other  
            states, identifying regulatory costs and developing potential  
            alternative approaches to meeting the same regulatory  
            objectives with less burden to small business.

          3)Requires the study to make recommendations on how California's  
            regulatory process can more effectively assess a regulation's  
            impact on small businesses, including cumulative impact, and  
            methods for developing policy-appropriate alternatives.

          4)Requires the OSBA to convene a small business advisory  
            committee to provide advice on the development of the report.   

           EXISTING LAW  

          1)Establishes the OSBA, within the Governor's Office of Planning  
            and Research, for the purpose of advocating for small business  

          2)Finds and declares that it is in the public interest to aid,  
            counsel, assist, and protect the interests of small business  
            concerns in order to maintain a healthy state economy.

          3)Requires the OSBA to report to the Legislature, every two  
            years, on the efforts of the state in assisting minority and  
            other small business enterprises, and make recommendations on  
            how to strengthen minority and other small business  


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          4)Requires the OSBA to annually report to the Governor and the  
            Legislature on the activities and recommendations of the OSBA.

          5)Establishes the Office of Administrative Law as the entity  
            with purview of the state's regulatory process, including  
            assessing the impact of proposed regulations on small  
            businesses and consideration of reasonable alternatives that  
            would lessen identified adverse impacts. 

          6)Defines small business to mean a business with activities in  
            agriculture, general construction, special trade construction,  
            retail trade, wholesale trade, services, transportation and  
            warehousing, manufacturing, generation and transmission of  
            electric power, or a health care facility that has revenues  
            under certain specified thresholds, is independently owned and  
            operated, and not dominant in its field of operation for the  
            purposes of state regulatory actions.  Existing law excludes  
            from the definition of small businesses a(n):

             a)   Financial institution, including securities broker-deals  
               and investment advisers;  

             b)   Insurance company, either stock or mutual;  

             c)   Mineral, oil, or gas broker;  

             d)   Subdivider or developer;  

             e)   Landscape architect, an architect, or a building  

             f)   Nonprofit institution;  

             g)   Entertainment activity or production, including a motion  
               picture, a stage a television or radio station, or a  
               production company;  

             h)   Utility, a water company, or a power transmission  
               company generating and transmitting more than 4.5 million  
               kilowatt hours annually;  

             i)   Petroleum producer, a natural gas producer, a refiner,  
               or a pipeline;  


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           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           1)Small business and state regulations  :  According to the  
            author, regulatory burdens and costs continue to be a major  
            concern for small businesses.  For the last ten years, the  
            federal Small Business Administration has conducted a study  
            that analyzes the costs of federal government regulations on  
            businesses. This research shows that small businesses continue  
            to bear a disproportionate share of the federal regulatory  
            burden.  On a per employee basis, it costs about $2,400, or 45  
            percent, more for small firms to comply with federal  
            regulations than their larger counterparts. 

            The impact of California regulations on small businesses is  
            unknown.  Although state agencies are required to consider the  
            costs of adopted regulations on the California economy, in  
            general, and on small business, specifically, state agencies  
            are not required to consider the cumulative impact of  
            regulations.  The author argues that the cumulative impact of  
            state regulations must be analyzed in order to fully identify  
            the role of regulations on small businesses.    

           2)Past studies not completed  :  In 2002, the OSBA was  
            substantially enhanced through the enactment of AB 505  
            (Wright), Chapter 1059, which relocated the OSBA to the  
            Governor's Office, created a small business task force, and  
            required the task force to conduct a study on issues of  
            concern to small businesses.  The study was required to be  
            released on or before May 1, 2002. This study, however, was  
            never released and the task force no longer exists.   
            Similarly, the required annual report to the Governor and  
            Legislature regarding OSBA activities and recommendations is  
            not known to have been submitted in the past several years. 

            This bill takes a different approach to adding supplemental  
            reporting requirements by recognizing the limited capacity of  
            the OSBA and requiring the report be prepared by another  
            entity, under the direction of the OSBA.  Further, the bill  
            requires that a more focused, action-oriented, report be  
            provided to the Legislature that addresses implementation  
            strategies as well as costs of state regulations on small  


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           3)Duplicative of existing requirements :  Opponents of the bill  
            raise concerns that the bill is unnecessary and duplicative of  
            the AB 505 (Write) report from 1999.  The issues addressed in  
            this bill, opponents state, should be part of that study and  
            not an entirely separate report.  The author, in amending the  
            bill on April 6, 2006, has tried to more clearly differentiate  
            the purposes and outcomes of the two documents.  Opponents  
            remain in opposition.

           4)Background on California small business  :  Small businesses  
            comprise more than 90% of all businesses in the state and  
            employ more than half of the workers in California.  There are  
            an estimated 3.3 million small businesses in California, which  
            contributed $137.5 billion to the state's economy in 2003,  
            based on the federal definition of a small business meaning a  
            firm with fewer than 500 employees.  In 2004, 117,000 new  
            small businesses opened while 143,000 closed their doors.  

           5)Technical amendments  :  The author may want to extend the  
            deadline for completion of the study.  To the extent the OSBA  
            will be commissioning the study and not preparing it  
            internally, an additional three months may be appropriate.   
            Further, the author may want to address the cost of  
            commissioning the study.


          California State Controller Steve Westly (sponsor)
          Automotive Aftermarket Services, Inc.
          California Association for Local Economic Development (Caled)
          California Chamber of Commerce
          California Manufacturers and Technology Association
          California Metals Coalition
          California Small Business Association 
          California Chamber of Commerce
          Greater Fresno Area Chamber of Commerce
          Lumber Association of California and Nevada
          National Federation of Independent Business
          Palm Desert Chamber of Commerce
          Simi Valley Chamber of Commerce and Visitor Center
          Small Business Action Committee (SBAC)
          Small Business California (SB-Cal)


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          State Farm Insurance Companies
          Tulare County Chamber of Commerce

          American Federation of State, County and Municipal Employees,  
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Labor Federation, AFL-CIO
          California Teamsters Public Affairs Council
          Engineers and Scientists of California
          Professional & Technical Engineers, Local 21
          Strategic Committee of Public Employees, Laborers' International  
          Union of North America
          Unite Here!
          United Food and Commercial Workers Union, Western States Council

          Analysis Prepared by  :    Toni Symonds / J., E.D. & E. / (916)