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S. 758
STATUS INFORMATION
General Bill
Sponsors: Senators Hawkins, Mescher, Knotts, Kuhn and Reese
Document Path: l:\council\bills\ms\7018mm04.doc
Companion/Similar bill(s): 4130
Introduced in the Senate on January 13, 2004
Currently residing in the Senate Committee on Judiciary
Summary: Regulations, impact on small business, flexibility
HISTORY OF LEGISLATIVE ACTIONS
Date Body Action Description with journal page number
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12/2/2003 Senate Prefiled
12/2/2003 Senate Referred to Committee on Judiciary
1/13/2004 Senate Introduced and read first time SJ-12
1/13/2004 Senate Referred to Committee on Judiciary SJ-12
3/30/2004 Senate Committee report: Majority favorable with amend.,
minority unfavorable Judiciary SJ-8
3/31/2004 Scrivener's error corrected
4/29/2004 Senate Recommitted to Committee on Judiciary SJ-39
View the latest legislative information at the LPITS web site
VERSIONS OF THIS BILL
Indicates Matter Stricken
Indicates New Matter
COMMITTEE REPORT
March 30, 2004
S. 758
Introduced by Senators Hawkins, Mescher, Knotts, Kuhn and Reese
S. Printed 3/30/04--S. [SEC 3/31/04 3:41 PM]
Read the first time January 13, 2004.
To whom was referred a Bill (S. 758) to amend the Code of Laws of South Carolina, 1976, by adding Section 1-23-117 so as to provide flexibility in the promulgation of regulations that adversely impact small businesses, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended, by striking all after the enacting words, and inserting therein the following:
/ SECTION 1. The General Assembly finds that:
(1) a vibrant and growing small business sector is critical to creating jobs in a dynamic economy;
(2) small businesses bear a disproportionate share of regulatory costs and burdens;
(3) fundamental changes needed in the regulatory and enforcement culture of state agencies to make them more responsive to small business can be made without compromising the statutory missions of the agencies;
(4) when adopting regulations to protect the health, safety, and economic welfare of this State, state agencies shall seek to achieve statutory goals as effectively and efficiently as possible without imposing unnecessary burdens on small employers;
(5) uniform regulatory and reporting requirements impose unnecessary and disproportionately burdensome demands, including legal, accounting, and consulting costs, upon small businesses with limited resources;
(6) the failure to recognize differences in the scale and resources of regulated businesses adversely affects competition in the marketplace, discourages innovation, and restricts improvements in productivity;
(7) unnecessary regulations create entry barriers in many industries and discourage potential entrepreneurs from introducing beneficial products and processes;
(8) the practice of treating all regulated businesses as equivalent leads to inefficient use of regulatory agency resources, enforcement problems, and actions inconsistent with the legislative intent of health, safety, environmental, and economic welfare legislation;
(9) alternative regulatory approaches that do not conflict with the stated objective of applicable statutes are available to minimize the significant economic impact of regulations on small businesses; and
(10) the process by which state regulations are developed and adopted must be reformed to require agencies to solicit the ideas and comments of small businesses, to examine the impact of proposed and existing regulations on these businesses, and to review the continued need for existing regulations.
SECTION 2. Article 1, Chapter 23, Title 1 of the 1976 Code is amended by adding:
"Section 1-23-117. (A) This act may be cited as the 'South Carolina Small Business Regulatory Flexibility Act of 2004'.
(B) As used in this section 'small business' means a commercial retail service, or industry entity, including its affiliates, that:
(1) is independently owned and operated; and
(2) employs fewer than one hundred full-time employees or has gross annual sales of less than five million dollars.
(C) Before an agency submits to the General Assembly for review a regulation that may have a significant adverse impact on small businesses, the agency, if directed by the Small Business Regulatory Review Committee, shall prepare:
(1) an economic impact statement that includes the following:
(a) an identification and estimate of the number of small businesses in this State subject to the proposed regulation;
(b) the projected reporting, record keeping, and other administrative costs required for compliance with the proposed regulation, including the type of professional skills necessary for preparation of the report or record;
(c) a statement of the economic impact on small businesses in this State; and
(d) a description of less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation;
(2) a regulatory flexibility analysis in which the agency, where consistent with health, safety, and environmental and economic welfare, shall consider utilizing regulatory methods that accomplish the objectives of applicable statutes while minimizing a significant adverse impact on small businesses.
(D) The agency shall consider, without limitation, each of the following methods of reducing the impact of the proposed regulation on small businesses:
(a) establishment of less stringent compliance or reporting requirements for small businesses;
(b) establishment of less stringent schedules or deadlines for compliance or reporting requirements for small businesses;
(c) consolidation or simplification of compliance or reporting requirements for small businesses;
(d) establishment of performance standards for small businesses to replace design or operational standards required in the proposed regulation; and
(e) exemption of small businesses from all or a part of the requirements contained in the proposed regulation.
(E) A small business that is adversely impacted or aggrieved in connection with the promulgation of a regulation is entitled to judicial review of agency noncompliance with the requirements of this act. A small business may seek judicial review under this subsection on or after the date of final agency action.
(F)(1) Within five years of the effective date of this section, each agency shall review all agency regulations existing at the time of the effective date to determine whether to continue the regulations without change or amend or rescind them to minimize economic impact of the regulations on small businesses in a manner consistent with the stated objective of applicable statutes. If the governing authority of the agency determines that completion of the review of existing regulations is not feasible by the established date, the agency shall publish in the State Register a statement certifying that determination.
(2) Regulations which take effect on or after the effective date of this section must be reviewed within five years of the publication of the final regulation in the State Register and every five years after that to ensure that they minimize economic impact on small businesses in a manner consistent with the stated objectives of applicable statutes.
(3) In reviewing regulations to minimize their economic impact on small businesses, the agency shall consider the:
(a) continued need for the regulation;
(b) nature of complaints or comments received concerning the regulation from the public;
(c) complexity of the regulation;
(d) extent to which the regulation overlaps, duplicates, or conflicts with other federal, state, and local governmental regulations; and
(e) length of time since the regulation has been evaluated or the degree to which technology, economic conditions, or other factors have changed in the area affected by the regulation.
(G) An agency may promulgate an emergency regulation pursuant to Section 1-23-130, notwithstanding that the regulation otherwise would be subject to this section.
Section 1-23-118. (A)(1) There shall be established a Small Business Regulatory Review Committee within the South Carolina Department of Commerce. For purposes of this act, 'committee' means the Small Business Regulatory Review Committee and 'Department' means the South Carolina Department of Commerce.
(2) The committee must, in determining if a proposed permanent regulation has a significant impact on small businesses:
(a) direct the promulgating agency to prepare the regulatory flexibility analysis as set forth in Section 1-23-117(C)(1) no later than the end of the public comment period that follows the notice of proposed regulation, as provided in Section 1-23-110(A)(3); and
(b) request, at the committee's discretion, the Office of Research and Statistics of the Budget and Control Board to prepare a final assessment report, as provided in Section 1-23-115(B), of the proposed permanent regulation no later than the end of the public comment period that follows the notice of proposed regulation, as provided in Section 1-23-110(A)(3). The committee may request a final assessment report from the Office of Research and Statistics only in cases where the committee determines that information in addition to the agency's economic impact as provided in Section 1-23-117(C)(1) is critical in the committee's determination that a proposed permanent regulation has a significant adverse impact on small business. The Office of Research and Statistics:
(i) within the review and comment period, shall have sixty days to perform a final assessment report of the regulation on small businesses, if requested by the committee, and the promulgating agency shall have sixty days to complete a regulatory flexibility analysis; and
(ii) may request additional information from the agency. The sixty-day final assessment report deadline is tolled until the date on which the agency provides the requested additional information to the Office of Research and Statistics. The one-year deadline for submission of regulations to the General Assembly as provided in Section 1-23-120(A) shall also be tolled until such time that both analyses are prepared and presented to the committee.
(c) The committee shall submit to the promulgating agency, no later than thirty days after receipt of the regulatory flexibility analysis prepared by the promulgating agency and, if requested by the committee, no later than thirty days after receipt of the final assessment report prepared by the Office of Research and Statistics, a written statement advising the agency that a proposed permanent regulation has a significantly adverse impact on small business.
(3) Nothing in Section 1-23-118(A)(2) prohibits the committee from requesting a state agency to amend, revise, or repeal an existing regulation.
(4) Staff support for the committee shall be provided by the department. The department shall act only as a coordinator for the committee. The department shall not be required to provide legal counsel for the committee.
(B) The committee shall consist of eleven members, who shall be appointed as follows:
(1) five members to be appointed by the Governor;
(2) three members to be appointed by the President Pro Tempore of the Senate; and
(3) three members to be appointed by the Speaker of the House of Representatives.
(C) In addition, the Chairman of the Labor, Commerce and Industry Committee of the South Carolina Senate, the Chairman of the Labor, Commerce and Industry Committee of the South Carolina House of Representatives, or their designees, shall serve as nonvoting, ex officio members of the committee. During the committee review process, the director or his designee of the promulgating agency, upon request of the committee, shall be available for comment on the proposed regulation.
(D) Appointments to the committee shall be representative of a variety of small businesses in this State. All appointed members shall be either current or former owners or officers of a small business.
(E) The initial appointments to the committee shall be made within sixty days after the effective date of this act. The department shall provide a list containing the name and address of each appointee to the Governor, the President Pro Tempore of the Senate, the Speaker of the House of Representatives, and the Chairs of the House and Senate Labor, Commerce and Industry Committees.
(F)(1) Members initially appointed to the committee shall serve for terms ending December 31, 2005. Thereafter, appointed members shall serve for two-year terms.
(2) The Governor shall appoint the initial chairman of the committee from the appointed members for a term ending December 31, 2006, and shall appoint subsequent chairmen of the committee from the appointed members for two-year terms.
(3) The committee shall meet at the discretion of the chairman of the committee, except as provided in Section 1-23-119(C).
(4) A majority of the voting members of the committee shall constitute a quorum. A majority of the members of the committee present and voting shall be necessary to make any action of the committee valid.
(5) No appointed committee member shall serve more than three consecutive terms.
Section 1-23-119. (A) For promulgated regulations, the committee may file a written petition with the promulgating agency opposing all or part of any regulation that has a significant adverse effect on small business.
(B) Within sixty days after the receipt of the petition, the agency shall determine whether the impact statement or the public hearing addressed the actual and significant impact on small business or if conditions justifying the regulation have changed. The agency shall submit a written response of its determination to the committee within sixty days after receipt of the petition. If the agency determines that the petition merits the amendment, revision, or repeal of a regulation, the agency may initiate proceedings in accordance with the applicable requirements of the Administrative Procedures Act.
(C) If the agency determines that the petition does not merit the amendment, revision, or repeal of any regulation, the chairman of the committee shall promptly convene a meeting for the purpose of determining whether to recommend that the agency initiate proceedings to amend, revise, or repeal the regulation in accordance with the Administrative Procedures Act. The review shall be based upon the actual record presented to the agency. The committee shall base its recommendation on any of the following reasons:
(1) the actual impact on small business was not reflected in, or significantly exceeded, the final assessment report formulated by the Office of Research and Statistics, pursuant to Section 1-23-118(A)(2);
(2) the actual impact was not previously considered by the agency in its economic impact statement formulated pursuant to Section 1-23-117(C) or its regulatory flexibility analysis formulated pursuant to Section 1-23-118(A)(2); or
(3) the technology, economic conditions, or other relevant factors justifying the purpose for the regulations have changed or no longer exist.
(D) If the committee recommends that any agency initiate regulation proceedings for any reason provided in subsection (C), the committee shall submit to the Speaker of the House of Representatives and the President Pro Tempore of the Senate an evaluation report and the agency's response as provided in subsection (B). The General Assembly may subsequently take such action in response to the evaluation report and the agency's response as the General Assembly finds appropriate.
(E)(1) Notwithstanding any other provision of law, any agency authorized to assess administrative penalties or administrative fines upon a business may waive or reduce any administrative penalty or administrative fine for a violation of any regulation by a small business if:
(a) the small business corrects the violation within thirty days or less after receipt of a notice of violation or citation; or
(b) the violation was the result of an excusable misunderstanding of the agency's interpretation of a regulation.
(2) Subsection (E)(1) shall not apply when:
(a) a small business has been previously notified of the violation of a regulation by the agency pursuant to subsection (E)(1) and has been given a prior opportunity to correct the violation on a prior occasion;
(b) a small business fails to exercise good faith in complying with the regulation;
(c) a violation involves wilful or criminal conduct;
(d) a violation results in an imminent adverse impact to the public's health, safety, or the environment; or
(e) the penalty or fine is assessed pursuant to a federal law or regulation and for which no waiver or reduction is authorized by the federal law or regulation.
(F) The Governor, by Executive Order, or the General Assembly, by joint resolution, or the committee pursuant to this section, may request an agency to review its regulations to determine whether or not the regulations in question should be amended, repealed, or redrafted. The agency must respond to requests from the Governor or the General Assembly within ninety calendar days of receipt of such request.
(G) Sections 1-23-117, 1-23-118, and this section shall not apply to proposed regulations by an agency to implement a statute or ordinance that does not require an agency to interpret or describe the requirements of the statute or ordinance, such as state legislative or federally mandated provisions that do not allow the agency discretion to consider less restrictive alternatives. These sections do not apply to a federal regulation that has gone through the federal regulatory flexibility act, if the federal review process is the same or exceeds the requirements of these sections."
SECTION 3. Section 1-23-10(7) of the 1976 Code, as added by Act 507 of 1992, is amended to read:
"(7) 'Substantial economic impact' means a financial impact upon:
(a) commercial enterprises;
(b) retail businesses;
(c) service businesses;
(d) industry;
(e) consumers of a product or service; or
(f) taxpayers; or
(g) small businesses, as defined in Section 1-23-117."
SECTION 4. Section 1-23-120(A) of the 1976 Code, as last amended by Act 411 of 1996, is further amended to read:
"(A) All regulations except those specifically exempted under this section must be submitted to the General Assembly for review in accordance with this article, but no regulation may be submitted to the General Assembly more than one year after publication of the drafting notice initiating the regulation pursuant to Section 1-23-110, with the exception of those regulations requiring a final assessment report, as provided in Sections 1-23-117 and 1-23-118. A regulation submitted to the General Assembly for review may shall not be withdrawn or modified by the agency for any reason except upon written notification by a committee that the committee by majority vote cannot approve the regulation in the form submitted, as provided for in Section 1-23-125."
SECTION 5. Section 1-23-120(B) of the 1976 Code, as last amended by Act 231 of 2002, is further amended by adding appropriately numbered items at the end to read:
"( ) a copy of the economic impact statement, as provided for in Section 1-23-117(C)(1)(a).
( ) a copy of the regulatory flexibility analysis, as provided for in Section 1-23-117(C)(1)(b)."
SECTION 6. Upon approval by the Governor, this act takes effect January 1, 2005. /
Renumber sections to conform.
Amend title to conform.
Majority favorable. Minority unfavorable.
GREG GREGORY C. BRADLEY HUTTO
For Majority. For Minority.
EXPLANATION OF IMPACT:
Division of Research & Statistical Services
A review of this bill indicates the division will require an additional position (Program Coordinator) with salary and employer contributions in the amount of $44,353 from the General Fund of the State.
Department of Health & Environmental Control (DHEC)
DHEC reports that, based on data collected by the Department of Commerce, over 90% of all businesses in South Carolina meet the definition of "small business" as defined by the bill. Therefore, implementation would actually be the rule rather than the exception. Drafting new regulations and reviewing existing regulations would require a more detailed evaluation than is currently the case. Though it is difficult to precisely quantify the fiscal impact, DHEC estimates that Section 1-23-117(C)(1)(b) relating to the preparation of a regulatory flexibility analysis, will require two to five staff members anywhere from one week to six months. In addition, the requirements of Section 1-23-117(C)(1)(a) are similar to the requirements applicable to the promulgation of federal regulations. DHEC estimates that six to eight current employees will have to be trained to identify and adapt methods used by federal agencies to the additional requirements imposed by the bill. DHEC notes that while the additional workload placed on the agency may not result in new hires, it will divert staff effort from other agency responsibilities.
The Department of Labor, Licensing and Regulation
The Department of Labor, Licensing and Regulation indicates there will be no fiscal impact on the General Fund of the State, or on federal and/or other funds.
Approved By:
Don Addy
Office of State Budget
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 1-23-117 SO AS TO PROVIDE FLEXIBILITY IN THE PROMULGATION OF REGULATIONS THAT ADVERSELY IMPACT SMALL BUSINESSES, TO DEFINE "SMALL BUSINESS", TO REQUIRE EXAMINATION OF REGULATORY ALTERNATIVES, TO PROVIDE FOR REVIEW OF AN AGENCY DECISION IN THIS CONNECTION, TO REQUIRE REVIEW OF AGENCY REGULATIONS IN THE CONTEXT OF PROMOTING FLEXIBILITY IN PROMULGATING REGULATIONS THAT ADVERSELY IMPACT SMALL BUSINESSES, AND TO PROVIDE FOR EMERGENCY REGULATIONS; TO AMEND SECTION 1-23-10, RELATING TO DEFINITIONS IN CONNECTION WITH THE PROMULGATION OF REGULATIONS, SO AS TO INCLUDE "SMALL BUSINESSES" AND A REFERENCE TO SECTION 1-23-117; AND TO AMEND SECTION 1-23-120, AS AMENDED, RELATING TO GENERAL ASSEMBLY REVIEW OF REGULATIONS, SO AS TO REQUIRE AN AGENCY SUBMITTING A REGULATION FOR REVIEW TO ALSO SUBMIT THE DOCUMENTS AN AGENCY IS REQUIRED TO PREPARE PURSUANT TO THIS ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The General Assembly finds that:
(1) a vibrant and growing small business sector is critical to creating jobs in a dynamic economy;
(2) small businesses bear a disproportionate share of regulatory costs and burdens;
(3) fundamental changes needed in the regulatory and enforcement culture of state agencies to make them more responsive to small business can be made without compromising the statutory missions of the agencies;
(4) when adopting regulations to protect the health, safety, and economic welfare of this State, state agencies shall seek to achieve statutory goals as effectively and efficiently as possible without imposing unnecessary burdens on small employers;
(5) uniform regulatory and reporting requirements impose unnecessary and disproportionately burdensome demands, including legal, accounting, and consulting costs, upon small businesses with limited resources;
(6) the failure to recognize differences in the scale and resources of regulated businesses adversely affects competition in the marketplace, discourages innovation, and restricts improvements in productivity;
(7) unnecessary regulations create entry barriers in many industries and discourage potential entrepreneurs from introducing beneficial products and processes;
(8) the practice of treating all regulated businesses as equivalent leads to inefficient use of regulatory agency resources, enforcement problems, and actions inconsistent with the legislative intent of health, safety, environmental, and economic welfare legislation;
(9) alternative regulatory approaches that do not conflict with the stated objective of applicable statutes are available to minimize the significant economic impact of rules on small businesses; and
(10) the process by which state regulations are developed and adopted must be reformed to require agencies to solicit the ideas and comments of small businesses, to examine the impact of proposed and existing rules on these businesses, and to review the continued need for existing rules.
SECTION 2. Article 1, Chapter 23, Title 1 of the 1976 Code is amended by adding:
"Section 1-23-117. (A) This act may be cited as the 'Small Business Regulatory Flexibility Act of 2004'.
(B) As used in this section 'small business' means a commercial retail service, or industry entity, including its affiliates, that:
(1) is independently owned and operated; and
(2) employs fewer than one hundred fulltime employees or has gross annual sales of less than five million dollars.
(C)(1) Before an agency submits to the General Assembly for review a regulation that may have an adverse impact on small businesses, the agency shall prepare:
(a) an economic impact statement that includes the following:
(i) an identification and estimate of the number of small businesses subject to the proposed regulation;
(ii) the projected reporting, recordkeeping, and other administrative costs required for compliance with the proposed regulation, including the type of professional skills necessary for preparation of the report or record;
(iii) a statement of the probable effect on impacted small businesses; and
(iv) a description of less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation;
(b) a regulatory flexibility analysis in which the agency, where consistent with health, safety, and environmental and economic welfare, shall consider utilizing regulatory methods that accomplish the objectives of applicable statutes while minimizing adverse impact on small businesses. The agency shall consider, without limitation, each of the following methods of reducing the impact of the proposed regulation on small businesses:
(i) establishment of less stringent compliance or reporting requirements for small businesses;
(ii) establishment of less stringent schedules or deadlines for compliance or reporting requirements for small businesses;
(iii) consolidation or simplification of compliance or reporting requirements for small businesses;
(iv) establishment of performance standards for small businesses to replace design or operational standards required in the proposed regulation; and
(v) exemption of small businesses from all or a part of the requirements contained in the proposed regulation.
(2) Before an agency prepares the economic impact statement and the regulatory flexibility analysis, required by subsection (C)(1)(a) and (b) on a regulation that may have an adverse impact on small businesses, the agency shall notify the Division of Research and Statistical Services in the State Budget and Control Board of its intent to submit the regulation. The division shall advise and assist the agency in complying with the provisions of this section.
(D) A small business that is adversely affected or aggrieved by final agency action in connection with a regulation subject to this section is entitled to judicial review of agency compliance with the requirements of this section. A small business may seek that review during the period beginning on the date of final agency action and ending one year later.
(E)(1) Within four years of the effective date of this section, each agency shall review all agency regulations existing at the time of the effective date to determine whether to continue the regulations without change or amend or rescind them to minimize economic impact of the regulations on small businesses in a manner consistent with the stated objective of applicable statutes. If the head of the agency determines that completion of the review of existing regulations is not feasible by the established date, the agency shall publish in the State Register a statement certifying that determination. The agency may extend the completion date by one year at a time for a total of not more than five years.
(2) Regulations that take effect on or after the effective date of this section must be reviewed within five years of the publication of the final regulation in the State Register and every five years after that to ensure that they minimize economic impact on small businesses in a manner consistent with the stated objectives of applicable statutes.
(3) In reviewing regulations to minimize their economic impact on small businesses, the agency shall consider the:
(a) continued need for the regulation;
(b) nature of complaints or comments received concerning the regulation from the public;
(c) complexity of the regulation;
(d) extent to which the regulation overlaps, duplicates, or conflicts with other federal, state, and local governmental regulations; and
(e) length of time since the regulation has been evaluated or the degree to which technology, economic conditions, or other factors have changed in the area affected by the regulation.
(F) An agency may promulgate an emergency regulation pursuant to Section 1-23-130, notwithstanding that the regulation
otherwise would be subject to this section."
SECTION 3. Section 1-23-10(7) of the 1976 Code, as added by Act 507 of 1992, is amended to read:
"(7) 'Substantial economic impact' means a financial impact upon:
(a) commercial enterprises;
(b) retail businesses;
(c) service businesses;
(d) industry;
(e) small businesses, as defined in Section 1-23-117;
(e)(f) consumers of a product or service; or
(f)(g) taxpayers."
SECTION 4. Section 1-23-120(B) of the 1976 Code, as last amended by Act 231 of 2002, is further amended by adding appropriately numbered items at the end to read:
"( ) a copy of the economic impact statement as provided for in Section 1-23-117(C)(1)(a).
( ) a copy of the regulatory flexibility analysis, as provided for in Section 1-23-117(C)(1)(b)."
SECTION 5. This act takes effect upon approval by the Governor.
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