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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-

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.

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

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