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F I S C A L I M P A C T R E P O R T
SPONSOR Lujan, B
DATE TYPED 03/18/05 HB 869/aSFC
SHORT TITLE Small Business Regulatory Relief Act
SB
ANALYST Ford
APPROPRIATION
Appropriation Contained Estimated Additional Impact Recurring
or Non-Rec
Fund
Affected
FY05
FY06
FY05
FY06
$100.0 -300.0
See Narrative Recurring General Fund
$50.0 -200.0
See Narrative Recurring Various Other
Funds
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates SB 842
Relates to: HB 705, SB 711
SOURCES OF INFORMATION
LFC Files
Responses Received From
Attorney General (AGO)
Corrections Department (NMCD)
Economic Development Department (EDD)
Energy, Minerals and Natural Resources Department (EMNRD)
Environment Department (NMED)
General Services Department (GSD)
Public Education Department (PED
Regulation and Licensing Department (RLD)
SUMMARY
Synopsis of SFC Amendment
The Senate Finance Committee amendment to House Bill 869 makes several changes to the
membership of the small business regulatory advisory commission. First, it reduces the number
of commission members appointed by the governor from 7 to 5 and increases the number ap-
pointed by the speaker of the house and the president pro tempore of the senate from 1 each to 2
each. Second, the amendment specifies that each commission member must be from a different
geographic region of the state. Third, it strikes the ability of the governor to appoint a chairper-
son of the commission and instead grants that authority to the members of the commission. Fi-
pg_0002
House Bill 869/aSFC -- Page 2
nally, the amendment strikes the commission members’ power to select a vice-chairperson.
Synopsis of Original Bill
House Bill 869 enacts the Small Business Regulatory Relief Act, makes related findings and
definitions, creates the small business regulatory advisory commission (the commission), allows
the commission to review rules and make recommendations to agencies, requires certain rules to
be provided to the commission for review, requires all state agencies to review existing rules for
their impact on small business, and requires all agencies to review new rules every 5 years.
Findings and Definitions: House Bill 869 makes a number of findings related to the unique na-
ture of small businesses and the potentially damaging impact of state rules on the success of
small businesses.
The bill establishes several definitions, including defining “small business” as a business entity,
including its affiliates, that is independently owned and operated and employs 50 or fewer full-
time employees. The bill defines “agency” as every department, agency, board, commission,
committee, or institution of the executive branch of state government.
Small business regulatory advisory commission: The bill creates the commission to consist of
nine members, 7 appointed by the governor and one each appointed by the speaker of the house
of representatives and the president pro tempore of the senate, who are current or former small
business owners. The commission is administratively attached to the EDD, which shall provide
staff for the commission. The commission may provide agencies with input regarding proposed
rules, consider requests from small business owners to review rules, review rules promulgated by
an agency to determine if the rule places an unnecessary burden on small business and make rec-
ommendations to the agency to mitigate adverse effects, and provide an annual report to the gov-
ernor and legislature, including recommendations and evaluations of agencies regarding regula-
tory fairness for small business. (It is important to note that the bill’s use of the word “may”
means that the commission is not actually required to do any of these tasks).
The commission is specifically barred from interfering with, modifying, preventing or delaying
an agency or administrative enforcement action, intervening in legal actions, or issuing subpoe-
nas to witnesses to testify or produce documents.
Agency review of rules: By July 1, 2010, each agency shall have reviewed all of its existing
rules to determine whether the rules should be continued without change or should be amended
or repealed to minimize the economic impact of the rules on small businesses. Rules adopted
after the effective date of the Act shall be reviewed every five years to ensure that they continue
to minimize economic impacts on small businesses.
Prior to adoption of a proposed rule that may have an adverse effect on small business, an agency
shall provide a copy of the proposed rule to the commission at the same time as persons who
have requested advance notice of rulemaking. Prior to adoption of a proposed rule that the
agency deems to have an adverse effect on small business, the agency shall consider regulatory
methods that accomplish the objectives of the applicable law while minimizing the adverse ef-
fects on small business.
pg_0003
House Bill 869/aSFC -- Page 3
Significant Issues
The basis of the bill, as established in the findings, is that small businesses may be dispropor-
tionately impacted by state regulations and thus, the state should be more acutely aware of the
impact its rules may have on small businesses.
The bill requires each agency to provide a proposed rule to the commission if the rule would ad-
versely impact small business. The bill provides little guidance as to how an agency should
make this determination. What level of impact warrants review by the agency. The bill leaves
the determination to the individual agency. If agency inattentiveness to the needs of small busi-
nesses is truly a problem as the findings suggest, then this provision may not be particularly ef-
fective.
Several agencies have noted that the bill adds another layer to an already-lengthy and cumber-
some rule-making process. NMED notes that the trend in New Mexico, as exemplified in the
Governor’s Performance Review, is to streamline government, but this bill creates a new com-
mission and charges state agencies with performing extensive reviews.
NMED and EMNRD have both raised issues that may question the effectiveness of the commis-
sion. NMED notes that the state may be required to adopt specific rules under programs dele-
gated from the federal government. In these situations, agencies may not be able to adopt rec-
ommendations from the commission without risking the continued delegation of the program.
EMNRD notes that the commission members may lack the technical expertise necessary to ef-
fectively review rules in specific industries, such as oil and gas or mining.
RLD writes that the commission review could have the unintended consequence of putting the
agency’s dual missions of consumer protection and business/economic development out of bal-
ance and potentially in conflict.
The bill establishes an extensive requirement when a more targeted approach may accomplish
the same goals. (See “Alternatives.”)
FISCAL IMPLICATIONS
House Bill 869 would likely result in recurring costs to the general fund, as well as to any special
funds supporting specific boards, commissions or agency activities.
The bill requires every state agency to review existing rules by July 1, 2010 and to review new
rules every five years. There are hundreds of agencies subject to this bill, some of which would
be more significantly impacted than others. The bill may also lengthen the rule-making process.
It is difficult to know how many agencies will require additional resources to conduct ongoing
review of their rules.
The initial implementation of the bill may require additional resources to agencies and/or require
agencies to shift resources. As agencies incorporate implementation into their processes, the
costs of implementation are likely to diminish.
In addition, the EDD will also incur costs to provide staff support to the commission, the total
impact of which would depend on how active the commission is. Commission members will be
pg_0004
House Bill 869/aSFC -- Page 4
uncompensated and will meet upon call of the chairperson. They may require extensive staff
support to review proposed rules, consider requests from small businesses, and provide reports to
the governor and legislature.
ADMINISTRATIVE IMPLICATIONS
The bill would result in additional administrative requirements for all agencies to implement the
ongoing rule review process and to determine if new rules pose a burden to small businesses.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
This bill duplicates Senate Bill 842. The bill is similar to House Bill 970. The bill relates to
House Bill 705 and Senate Bill 711 which require legislative hearings on rule adoptions by
boards, commissions or agencies.
TECHNICAL ISSUES
The definition of small business is based on the number of full-time employees but does not ac-
count for any part-time employees.
ALTERNATIVES
It is possible that the cost of the bill could be reduced while maintaining effectiveness if the bill
were more targeted to problem areas. For example, specific boards, commissions or agencies
with extensive impacts on small businesses could be required to review their rules while other
agencies could be exempt. Or the commission could establish a process to identify, perhaps by
soliciting input from the small business community, those rules or agencies that are particularly
burdensome. These options would save every agency from reviewing every rule while still tar-
geting rules that hurt small businesses.
EF/yr:lg