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S. Hrg. 115–87 

IMPROVING SMALL BUSINESS INPUT ON FEDERAL 

REGULATIONS: IDEAS FOR CONGRESS AND A 

NEW ADMINISTRATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY AFFAIRS AND FEDERAL 

MANAGEMENT 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

JANUARY 19, 2017 

Available via http://www.fdsys.gov 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

RON JOHNSON, Wisconsin, Chairman 

JOHN MCCAIN, Arizona 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JAMES LANKFORD, Oklahoma 

MICHAEL B. ENZI, Wyoming 

JOHN HOEVEN, North Dakota 

STEVE DAINES, Montana 

CLAIRE MCCASKILL, Missouri 

THOMAS R. CARPER, Delaware 

JON TESTER, Montana 

HEIDI HEITKAMP, North Dakota 

GARY C. PETERS, Michigan 

MAGGIE HASSAN, New Hampshire 

KAMALA D. HARRIS, California 

CHRISTOPHER R. HIXON, Staff Director 

MARGARET E. DAUM, Minority Staff Director 

LAURA W. KILBRIDE, Chief Clerk 

SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL 

MANAGEMENT 

JAMES LANKFORD, Oklahoma, Chairman 

JOHN MCCAIN, Arizona 

ROB PORTMAN, Ohio 

MICHAEL B. ENZI, Wyoming 

STEVE DAINES, Montana 

HEIDI HEITKAMP, North Dakota 

THOMAS R. CARPER, Delaware 

MAGGIE HASSAN, New Hampshire 

KAMALA D. HARRIS, California 

JOHN CUADERES, Staff Director 

JAMES MANN, Professional Staff Member 

ERIC BURSCH, Minority Staff Director 

ANTRELL TYSON, Minority Counsel 

KATIE DELACENSERIE, Subcommittee Clerk and Committee Archivist 
(III) 

C O N T E N T S 

Opening statement: Page 

Senator Lankford .............................................................................................. 1 

Senator Heitkamp ............................................................................................ 2 

Senator Risch .................................................................................................... 4 

Prepared statement: 

Senator Lankford .............................................................................................. 33 

Senator Heitkamp ............................................................................................ 35 

Senator Shaheen ............................................................................................... 37 

WITNESSES 

THURSDAY, JANUARY 19, 2017 

Rosario Palmieri, Vice President Labor, Legal, and Regulatory Policy, National Association of Manufacturers ................................................................... 9 

Jerry Hietpas, President, Action Safety Supply Company ................................... 11 

LaJuanna Russell, President and Founder, Business Management Associates, 

and Member of the Board, Small Business Council for Small Business 

Majority ................................................................................................................. 13 

Karen R. Harned, Executive Director, Small Business Legal Center, National 

Federation of Independent Businesses ............................................................... 14 

ALPHABETICAL LIST OF WITNESSES

Harned, Karen R.: 

Testimony .......................................................................................................... 14 

Prepared statement .......................................................................................... 68 

Hietpas, Jerry: 

Testimony .......................................................................................................... 11 

Prepared statement .......................................................................................... 58 

Palmieri Rosario: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 39 

Russell LaJuanna: 

Testimony .......................................................................................................... 13 

Prepared statement .......................................................................................... 65 

APPENDIX 

Statement for the Record from Kari Warberg Block ............................................ 78 

Letter from U.S. Chamber of Commerce ............................................................... 81 

Memo from Owner-Operator Independent Drivers Association ........................... 84 

Letter from Credit Union National Association .................................................... 87 

National Small Business Regulations Survey ....................................................... 92 

Responses to post-hearing questions for the Record from: 

Mr. Palmieri ...................................................................................................... 109 

Mr. Hietpas ....................................................................................................... 121 

Ms. Russell ........................................................................................................ 123 

Ms. Harned ....................................................................................................... 125 

(1) 

1The prepared statement of Senator Lankford appears in the Appendix on page 33. 

IMPROVING SMALL BUSINESS INPUT ON 

FEDERAL REGULATIONS: IDEAS FOR 

CONGRESS AND A NEW ADMINISTRATION 

THURSDAY, JANUARY 19, 2017 

U.S. SENATE, SUBCOMMITTEE ON REGULATORY, AFFAIRS AND FEDERAL MANAGEMENT, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:06 a.m., in 

room SD–342, Dirksen Senate Office Building, Hon. James 

Lankford, Chairman of the Subcommittee, presiding. 

Present: Senators Lankford, Heitkamp, Tester, and Peters. 

Also present: Senator Risch. 

OPENING STATEMENT OF SENATOR LANKFORD1

Senator LANKFORD. Good morning, everyone. Welcome to today’s 

Subcommittee hearing titled, ‘‘Improving Small Business Input on 

Federal Regulations: Ideas for Congress and a New Administration.’’ 

In the 115th Congress, the Subcommittee looks to continue our 

examination of the Federal regulatory process, as we look for solutions to increase transparency, accountability, and efficiency. Today 

we look at how Federal regulations impact small businesses and 

whether agencies should be required to take more seriously the impact on small businesses during the rulemaking process. 

According to the Small Business Administration (SBA), there are 

28 million small businesses in the United States which account for 

55 percent of all jobs and 66 percent of all new jobs since the 

1970s. 

Despite the importance of this sector for our economy, small business owners continually tell me they do not feel that Washington 

hears their voice. The annual Federal regulatory burden is huge— 

nearly $2 trillion—and the burden falls disproportionately on small 

businesses. 

A recent study by the American Action Forum found that every 

10 percent increase in cumulative regulatory costs results in a loss 

of more than 400 small businesses. As regulatory costs rise, small 

businesses disappear. Agencies do not draft rules with the intent 

to close small businesses, but, unfortunately, that often ends up 

being the result. 
2 

1The prepared statement of Senator Heitkamp appears in the Appendix on page 35. 

One way to avoid unnecessary burdens on small businesses is to 

have real, meaningful consultation with stakeholders. Currently, 

agencies are required to consider the regulatory impact on and consult with small business entities pursuant to the Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement 

Fairness Act (SBREFA). The only place you will ever hear that 

being referred to is probably this Committee. 

However, in reality, agencies do not generally take into account 

the views of small businesses. During today’s hearing, we will discuss ideas to address this problem to ensure that agencies truly 

consider the effects of rules on small business sectors of our economy. When entrepreneurs open their own businesses, their goal is 

to provide for their family and serve their community by offering 

a product or service. Each moment a small business spends trying 

to understand and comply with overly burdensome Federal regulation is time that is not spent growing their business. 

This past December, the National Federation for Independent 

Businesses (NFIB) reported a 38 percent jump in small business 

owners’ belief that the economy will improve. According to the 

NFIB’s index, small business optimism increased by 7.4 points in 

December, up to 105.8, up from November’s 98.4. It is the largest 

month-over-month index change since it began in 1986. In fact, 

members’ perceptions that business conditions will improve, especially in the area of regulatory burden, accounted for 48 percent of 

the month’s increase. 

We have the opportunity to implement changes that would make 

it easier for small business owners to participate in rulemaking 

and truly have their concerns considered. We must turn their optimism into a reality. I look forward to discussing ways to deliver 

these results for small businesses today with our witnesses. 

With that, I would like to recognize Ranking Member Heitkamp 

for her opening remarks. 

OPENING STATEMENT OF SENATOR HEITKAMP1

Senator HEITKAMP. Thank you, Mr. Chairman. I look forward to 

working with you on this Committee in another Congress. Our 

Subcommittee was busier last Congress than, quite honestly, many 

full committees, and I am sure we will have two more productive 

and bipartisan years ahead of us on this Committee. 

Small business plays a crucial role in our Nation’s economy and 

the overall prosperity of our country. The vast majority of businesses across our country are small businesses. Small businesses 

are especially critical in my State of North Dakota. Ninety-six percent of business in North Dakota is small. These small businesses 

are the backbone of our economy, and they are a primary source 

of job creation. I am proud to represent North Dakota small business in Congress on this Committee but also with Chairman Risch 

on the Small Business Committee. 

There is a reason why I am on both of these committees: because 

along with agriculture and energy, small business is the economic 

engine that makes North Dakota work. So it has been my privilege 

to travel across my State and visit a wide variety of small busi-
3 

1The statement submitted by Ms. Block appears in the Appendix on page 78. 

nesses that call North Dakota home and to visit and hear about 

their needs and their concerns. 

From Main Street bricks-and-mortar retailers in Grand Forks 

and Grafton to cutting-edge innovators in the unmanned aircraft 

systems industry like Packet Digital in Fargo to oil field service 

businesses in Minot, North Dakota needs to listen and hear these 

concerns and react here in Washington to the problems that we 

hear. 

So it is absolutely critical that Congress always be willing to 

work to ensure small business can prosper. Congress must seek out 

the policies that help small business innovate and thrive. I am 

proud that on the Small Business Committee I have been a strong 

advocate for small business and startups in our country in more 

rural States like North Dakota because we know that innovation 

does not just happen in our country’s biggest cities or biggest 

States. That innovation must be fostered and promoted if we are 

going to be successful in rural America, and I think one thing we 

learned in this election is rural America feels left behind. There is 

a reason for that, and we are here to represent, along with my 

friend Senator Tester from that State to the west of me, Montana— 

it is a big place. It is between me and Senator Risch, that wide 

open space of greatness called ‘‘Big Sky Country.’’ Anyway, we digress. But I think it is fairly critical that Congress makes sure policies do not unfairly or certainly unintentionally hamper small business. 

I want to just tell you that we had hoped that we would have 

a fantastic businesswoman from North Dakota who could appear in 

this Committee. Because of timing, she could not. I would like to 

ask the Chairman to allow me to submit her comments for the 

record.1

Senator LANKFORD. Without objection. 

Senator HEITKAMP. Thank you. 

Kari Warberg Block owns EarthKind in Bismarck. They are a 

pest control developer and designer and a biomanufacturing pioneer. I had hoped to get her out here. She could not make it. But 

when I talk to her about the Federal regulatory process, you get 

a simple answer that is difficult to turn into action, but it must be 

turned into action. She talks about needing more common sense 

from agencies, more small business smart from agencies, more understanding, more outreach, and more feedback. I hear that from 

every small business person that I talk to, and it usually starts 

with, ‘‘They just do not get it. They just do not get what they are 

doing and the impact it is having on me.’’ 

People want to innovate. They want to invest the profitability 

back into the business and not into another bean counter that is 

going to satisfy yet another bureaucrat. So to me, that is one of the 

key questions that we have to tackle in this space. How do we 

make sure that agencies engage in a way that small businesses 

need and that include protecting the ability of agencies to promulgate fair and well-analyzed rules in a timely fashion? So much of 

the discussion in this area has focused on the importance of considering the impact of regulations on small business. 
4 

1The prepared statement of Senator Shaheen appears in the Appendix on page 37. 

I am going to say something that I say often here: that until we 

actually in the Federal Government sit down and have a conversation with our counterparts in State and local government, we will 

not tackle the problem of overregulation. 

We opened up a portal called ‘‘CutRedTape,’’ and frequently, the 

comments that we get do not necessarily apply to the Federal Government. They apply to a State or a local overreach or inconsistency between State and local regulations. I would say that I would 

put that on my top issue of concerns for small business today in 

America, is not only navigating the Federal Government and being 

worried about the ‘‘I gotcha’’ regulation that you did not know 

about, but having to harmonize and deal with various levels and 

wondering where is the productivity in that. You are expected to 

be as efficient and productive as you can be to survive. The government should be as efficient and productive as they can be. 

And so I look forward to hearing from our witnesses on that 

topic. I would ask that you if you do have comments on how we 

can better coordinate, State and local regulation, I would appreciate hearing those as well. 

And, finally, for the record, it is great to see the Chairman here, 

Chairman Risch, but I also have a statement from the Ranking 

Member of Small Business, Jeanne Shaheen, and would ask that 

that be submitted for the record.1

Senator LANKFORD. Without objection. Before we proceed to our 

witnesses, I would like to ask unanimous consent for Senator 

Risch, the Chairman of the Senate Small Business and Entrepreneurship Committee, be allowed to join this hearing and give a 

brief opening statement. Without objection. And Senator Shaheen, 

a member of that Committee, submitting everything for the record. 

Glad to be able to have her submission and absolutely have unanimous consent to be able to do that as well. 

You are recognized, Chairman Risch, and glad that you are here 

joining us. 

OPENING STATEMENT OF SENATOR RISCH 

Senator RISCH. Chairman Lankford, thank you so much for having me here today. Thank you so much for having this hearing. We 

are going to be pursuing our Committee’s goal, by working together 

as we pursue these really important matters. 

As the Chairman of the Small Business and Entrepreneurship 

Committee, I appreciate the opportunity to work with you and with 

everyone on this Committee on what I think is the most important 

thing that we can do in Congress to help small businesses. 

I also can put this in very succinct terms from what I hear from 

my small business owners in Idaho and, for that matter, around 

the country, and that is, they put it in these terms: ‘‘Government, 

get out of the way.’’ That is what they tell me. And, of course, they 

are talking about the regulatory structure in America today more 

than anything. 

I have had opportunity to work with a very robust Committee, 

the Small Business Committee. Senator Shaheen and I have been 

very close on Foreign Relations and a lot of other committees, and 
5 

I have no doubt that we are going to work together very well and 

have worked together very well. Her predecessor, Chairman, I have 

worked with also; it was a very bipartisan effort. 

We hear a lot in the news these days about how polarized things 

are here. This is one of those issues that never gets any attention 

that brings Republicans and Democrats together. This is not an ‘‘R’’ 

or ‘‘D’’ issue. This is an issue that is a bipartisan issue. 

The excessive regulatory burdens our Nation’s entrepreneurs face 

are crippling their growth and operations. Every time they turn 

around, there is another rule of compliance mandate from the Federal Government, and what the bureaucrats do not understand or 

do not care about is the degree to which these regulations increase 

costs and uncertainty in the business world. This is the most profound thing I guess I am going to say. Washington, D.C., is not the 

real world. 

As a former small business owner myself, I can tell you that 

many of the people writing these regulations are grossly insensitive 

in regards to how a real business is run and how to make a payroll 

and figure out how to grow the business. 

What makes matters worse many times is these regulators seem 

more interested in collecting fines than actually resolving the underlying issues. This varies from agency to agency. Some are not 

bad at all at it, and they are actually trying to do what the agency 

is supposed to do. 

And if I can digress for just a moment, the story I will tell is 

when I was in business, when I was practicing law, I would have 

clients come in and they would say, ‘‘Well, you know, the Environmental Protection Agency (EPA) wants to come around and look at 

our place.’’ And I would say, ‘‘If the EPA wants to come around, 

you tell them no. You tell them to go get a warrant before they set 

foot on your business. And if they do, I can tell you, it is going to 

cost you thousands of dollars for me when the fines are negotiated 

at the end of the day.’’ 

In my own small business, the fire inspector from Boise, Idaho, 

would walk into my place—the fire chief with the fire inspector— 

and he would say, ‘‘Jim, how are you doing? We are here to look 

your place over and make sure that things are in good shape and 

if we get a fire started we can put it out.’’ You know what I told 

him? ‘‘Absolutely. Come on in.’’ And he would come through, and 

he would go through it, and then he got into the disaster area, 

which was in the basement. And he would come out, and he would 

say, ‘‘Well, I got a list here of things that need to be done.’’ And 

I would look at that, and I would say, ‘‘Yes, we can get that done. 

You say you want me to do this. How about if we do it like this?’’ 

‘‘Yes, yes, no problem. Why don’t you work on this and we will be 

back in about a month.’’ 

He would come back in a month, and again, we would be pretty 

close but not there. This guy, I was not worrying about him levying 

a fine. You know what I knew about that guy? I knew that his job 

was to see that if my place caught fire, that he was going to be able 

to put it out, and also it was his job to see fires did not start. 

That is what we need out of the Federal Government. The EPA 

should walk onto the place and say, ‘‘Our job is to clean up the air 

and water. How can we work on doing this together?’’ They do not 
6 

1The statement submitted by the National Small Business Association appears in the Appendix on page 92. 

get that. When this person walks in, they are the enemy. They are 

the enemy. What kind of world do we live in when people who are 

supposed to be doing a certain job become the enemy, when the 

government is the enemy of small business? It is wrong. 

What frustrates me is that we all agree the importance of small 

business is to our economy. They make up 54 percent of the private 

sector economy and 99.7 percent of all employers and create about 

70 percent of all new jobs. But when it comes to helping those 

small businesses survive, grow, and hire, Washington, D.C., has 

been tone deaf. 

Federal regulatory agencies estimate the cost of complying with 

their own regulations to be $108 billion annually. Small businesses 

bear a larger-than-average proportion of that cost as their cost to 

comply with those regulations is 36 percent higher than larger 

firms. Now, this just makes sense. If the Federal Government 

walks into General Electric corporate and they say, ‘‘Here is a new 

regulation,’’ they say, ‘‘Go down there to the Department of Regulations,’’ and they have an army of lawyers, they have an army of 

consultants, they have an army of compliance officers. When they 

walk into one of my constituents who fixes lawn mowers in his garage and says, ‘‘Here is a form. It is 36 pages long, and this has 

to be done by 5 o’clock tomorrow night,’’ it sets this guy completely 

off. 

And so it is just common sense that it is much more difficult for 

a small business person to comply than it is for big businesses. 

The National Small Business Association (NSBA) released their 

2017 regulation survey yesterday, which I asked to be included in 

the record,1 Mr. Chairman, and we will submit that. 

Senator LANKFORD. Without objection. 

Senator RISCH. This staunchly bipartisan organization, which 

has been around for 80 years, reports the following, and this is just 

a summary: More than one-third of small business owners have 

held off on business investment due to the uncertainty on pending 

regulation. And if anybody does not believe this, find a small businessman and say, ‘‘Hey, how you guys doing with the Affordable 

Care Act (ACA)? Everything OK here?’’ And be prepared for about 

an hour lecture on them not understanding what it is all about. 

More than half have held off on hiring a new employee due to 

regulatory burdens. The average small business owner is spending 

at least $12,000 a year on regulations; 14 percent of small business 

owners report they spend more than 20 hours per month on Federal regulations. And when asked which areas of regulations are 

most burdensome, the Federal Tax Code and the Affordable Care 

Act were the top two. The Internal Revenue Service (IRS), the Department of Labor (DOL), and EPA are the most difficult agencies 

to work with when it comes to regulatory burdens and compliance, 

according to NSBA members. 

We have to give our country’s small businesses a break. They 

need relief. In my view, the only way to ensure that the Federal 

Government, under either Democrat or Republican leadership in 

the White House stops beating up on small businesses through new 
7 

rules and mandates, is to enact meaningful regulatory reform. We 

have talked and talked and talked about it, and we really need to 

get at it. 

The Committee that I now chair, the Small Business Committee, 

has jurisdiction over one entity in the Federal Government that I 

think is one of the most important, and that is the Office of Advocacy, which is an office within the SBA. It is an independent arm 

of the SBA charged with reducing the burdens that Federal regulations and other policies imposed on small entities, monitoring Federal agency compliance with the Regulatory Flexibility Act and assisting regulatory agencies during all stages of the rulemaking development process to mitigate the potential impact of rules on 

small businesses. 

Unfortunately, the views of the Office of Advocacy have been ignored more often than not, and this is an agency that I have done 

my best to try to make much more robust than what it is. It is supposed to be independent. It is supposed to get the Federal bureaucrats by the throat when they are rulemaking and say, ‘‘Look, let 

me tell you what this is going to do to small business. Stop. Think 

about this.’’ 

Let me give you an example of that. The Small Business Office 

of Advocacy disputed the finding by the EPA and U.S Army Corps 

of Engineers (USACE) that the rule would not have a significant 

impact on a substantial number of small entities, and that is the 

rule dealing with the Waters of the United States. Those of you 

from ag States, can you imagine a Federal agency—the EPA and 

the Army Corps of Engineers—finding that this would not—that 

the Waters of the United States proposed rule would not have a 

significant economic impact on small businesses? I mean, to me 

that is a poster child for the nonsense that goes on. 

Despite the Office of Advocacy’s finding that the rule was improperly certified and recommending the agencies withdraw the 

rule and conduct a Small Business Advocacy Review Panel before 

proceeding any further with the rulemaking, obviously EPA 

brushed them aside and ignored that input. 

Under the Regulatory Flexibility Act, when an agency finds a 

proposed rule will have a significant impact on a substantial number of small entities, it must evaluate the impact, consider the alternatives, and in the case of the EPA, convene a Small Business 

Advocacy Review Panel to consider the input of the Office of Advocacy in the small business community. By certifying that the rule 

would not have a significant economic impact, the EPA and the 

Corps effectively shut them out of the rulemaking process and 

turned their backs on small businesses. And that is why regulatory 

reform is so important. Just an example. 

The Federal Government should not be allowed to ignore small 

businesses. We need strong controls to limit what Washington, 

D.C., bureaucrats of any Administration, Republican or Democrat, 

can do to stifle small businesses. I hope that we are able to come 

together this year and pass common-sense reforms that keep the 

Federal Government from playing fast and loose with our Federal 

regulatory system. 

As part of our reform efforts here in Congress, we have to bolster 

the Office of Advocacy and give it more authority when regulatory 
8 

1The letter submitted from the U.S. Chamber of Commerce appears in the Appendix on page 

81. 

agencies ignore small business impacts. I applaud the U.S. House 

of Representatives for passage of the Regulatory Accountability Act 

and the Small Business Regulatory Flexibility Improvements Act 

last week. And I look forward to working with this Committee on 

similar reforms so that we can limit the ability of Federal agencies 

to impose new regulatory costs on small business. 

I would like to submit for the record a letter from the U.S. 

Chamber of Commerce,1 which I just got, which also congratulates 

the House on the passage of those bills and urges the Senate to expeditiously consider regulatory reform legislation. I would ask that 

be put in the record. 

Senator LANKFORD. Without objection. 

Senator RISCH. Despite my frustrations about the anti—business 

climate here in Washington, D.C., I am extremely confident in 

America’s entrepreneurs who are innovative and tenacious. If they 

were not tenacious, they would not be around today. And they provide robust economic growth when we give them the chance to do 

so. After all, America’s greatness comes from those millions of 

hardworking small business entrepreneurs, not from the government. 

Thank you for the opportunity to join you here today. I look forward to working with you in the weeks and months ahead to pass 

these much needed reforms. 

Senator LANKFORD. Thank you, Chairman Risch. 

Senator HEITKAMP. Thank you. 

Senator LANKFORD. At this time we will proceed with testimony 

from our witnesses. Let me do a brief introduction. Then we will 

have a swearing-in time period as well. 

Rosario Palmieri is vice president for Labor, Legal, and Regulatory Policy at the National Association of Manufacturers (NAM). 

Prior to joining NAM, Mr. Palmieri worked for several years at the 

U.S. House of Representatives on the Committee of Oversight and 

Government Reform and the Committee on Small Business. He is 

a native of Pittsburgh, Pennsylvania, a graduate of American University, and American University’s Washington College of Law. 

Jerry Hietpas is president of Action Safety Supply Company, 

headquartered in Oklahoma City, Oklahoma—the center of the 

world. Action Safety Supply is a family owned and—operated business that has been a subcontractor and contractor working on 

roads, streets, bridges, airports, and highways in Oklahoma since 

1975. 

LaJuanna Russell is the founder and president of Business Management Associates (BMA), a business process and human capital 

management firm in Alexandria, Virginia. She is also a member of 

the Board of Directors of the Small Business Council for Small 

Business Majority, a national small business advocacy organization. Ms. Russell is a graduate of Virginia Tech and George Washington University. 

Karen Harned is the executive director of the National Federation of Independent Business Small Business Legal Center. Prior 

to joining NFIB, she worked as an attorney here in Washington 
9 

1The prepared statement of Mr. Palmieri appears in the Appendix on page 39. 

and for Senator Don Nickles of Oklahoma. She graduated from the 

University of Oklahoma and George Washington University National Law Center. She is from Tulsa, Oklahoma. So we are disproportionately represented by Central Time today. I just want everyone to know that, center of the universe. [Laughter.] 

I do want to thank our witnesses today for your preparation. It 

is very difficult to get on to Capitol Hill right now with all the security perimeters, and so we appreciate not only your preparation 

but your tenacity to actually get here. 

It is the custom of this Subcommittee that we swear in all witnesses that appear before us. If you do not mind, I would ask you 

all to stand and raise your right hand to be sworn in. 

Do you swear the testimony you will give before this Subcommittee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. PALMIERI. I do. 

Mr. HIETPAS. I do. 

Ms. RUSSELL. I do. 

Ms. HARNED. I do. 

Senator LANKFORD. Thank you. Let the record reflect the witnesses all answered in the affirmative. You may be seated. 

We will be using a timing system and microphone system. I explained that before we began to everyone at the table. I appreciate 

everyone. There will be about a 5-minute time period allotted for 

your opening statement, and, obviously, what you have submitted 

already written will be entered into the permanent record as well. 

So I would ask you to go ahead and begin. Mr. Palmieri, you are 

up first. 

TESTIMONY OF ROSARIO PALMIERI,1 VICE PRESIDENT LABOR, 

LEGAL, AND REGULATORY POLICY, NATIONAL ASSOCIATION 

OF MANUFACTURERS 

Mr. PALMIERI. Thank you, Chairman Lankford, Chairman Risch, 

Ranking Member Heitkamp, and Senators Tester and Peters. It is 

an honor to testify before you today about this important topic. 

Manufacturers employ nearly 12 million Americans and support 

18 million jobs in this economy. Manufacturing has the highest 

multiplier effect of any sector. And to retain manufacturing momentum and return to net manufacturing job gains in this country, 

we need both improved economic conditions but also improved Government policies. 

Manufacturers believe regulation is critical to the protection of 

worker safety, public health, and our environment. We believe 

some critical objectives of government can only be achieved through 

regulation, but that does not mean our regulatory system is not in 

need of considerable improvement and reform. 

Regulations are often unnecessarily complex, duplicative, and ineffectively achieve their benefits. Excessive regulatory changes and 

uncertainty impose high costs, especially on small businesses, and 

small businesses, as we have heard, bear a disproportionate burden 

of regulation because the often high fixed costs of compliance are 

not subject to economies of scale. That is why today’s hearing and 
10 

the implementation of the Regulatory Flexibility Act are so important. 

Unfortunately, agencies are not anxious to analyze the impact of 

their regulations on small business. A recent study showed that between 1996 and 2012, fewer than 8 percent of rules were subject 

to RFA analysis by our Federal agencies. And although we had 

hoped that is because agencies made excellent decisions about 

which rules had those impacts, let me share a quick list of some 

of the most expensive EPA rules: EPA’s greenhouse gas limits on 

power plants, National Ambient Air Quality Standards for ozone, 

Boiler MACT, and Waters of the U.S. rule. EPA certified that in 

each of these they would not have a significant economic impact on 

a substantial number of small entities. 

Each agency defines that phrase for itself and decides which 

rules to conduct analysis on. Last year, the SBA’s Office of Advocacy saved small businesses more than $1.6 billion in first-year 

regulatory costs and since 1998 has saved more than $130 billion. 

Imagine what could have been accomplished if fewer rules could 

evade these requirements. 

Lawmakers have universally supported the RFA’s provisions, but 

Congress needs to strengthen the law and close loopholes that 

agencies use to avoid its requirements. Among the reason for the 

small number of regulations requiring a regulatory flexibility analysis is the exclusion of the indirect effects of regulation. If an agency can claim that it is not directly regulating small entities either 

because it is regulating further up the supply chain or just regulating governments, it will not conduct the analysis. But this was 

not the original intent of the RFA, and one of the original authors, 

a Democratic Senator from Iowa, clearly stated that the scope included both direct and indirect effects. 

Unfortunately, the courts disagreed and found indirect effects to 

be outside the scope of the RFA, and this one change in the RFA 

would bring many of the rules most costly to small businesses 

under the act’s framework and result in significant cost savings for 

small businesses. An example of an entire class of regulations exempted from the RFA because of this decision are Clean Air Act 

rules establishing National Ambient Air Quality Standards. Despite the fact that even the EPA acknowledges these rules often 

cost hundreds of billions of dollars to implement, no small entities 

are directly affected by these rules—simply because the Clean Air 

Act only directly regulates States which, in turn, regulate small 

businesses. This simple clarification to the law would have significant benefits to our small business economy, all the while ensuring 

the continued strong protection of air quality. After all, the RFA 

only requires the analysis of small entity impacts; it does not dictate how an agency will design its regulation. Since the RFA was 

modeled on the National Environmental Policy Act, its consideration of effects is also helpful to understanding the intent of the 

authors of this law. NEPA’s implementing regulations define the 

term ‘‘effect’’ to mean ‘‘direct effects’’ and ‘‘indirect effects,’’ which 

are caused by the action and are later in time or further removed 

in distance but still reasonably foreseeable. 

The House has already passed legislation, as we heard, which 

would close many of these loopholes. The NAM encourages the Sen-
11 

1The prepared statement of Mr. Hietpas appears in the Appendix on page 58. 

ate to take action on similar provisions to ensure vital improvements to the RFA are achieved in this Congress. The House legislation importantly also addresses regulatory lookbacks through improved Section 610 of the RFA. 

While we have appreciated this Administration’s efforts on retrospective review, they have not resulted in significant cost savings 

or a change in culture in Federal agencies. To truly build a culture 

of continuous improvement and thoughtful retrospective review, 

different incentives are needed. To incentivize high-quality reviews, 

Section 610 must be reformed to clean up outdated or unnecessary 

regulatory accumulation. 

I appreciate the opportunity to testify today on behalf of manufacturers around the country, and I applaud you for holding today’s 

hearing. 

Senator LANKFORD. Thank you, Mr. Palmieri. Mr. Hietpas. 

TESTIMONY OF JERRY HIETPAS,1 PRESIDENT, ACTION SAFETY 

SUPPLY COMPANY 

Mr. HIETPAS. Thank you, Senator. I really enjoyed the opening 

comments by the Senators. One of the things that people in the 

rest of the world think is that folks in Washington just do not get 

it. I can assure you what I heard this morning in the opening statements and the opening comments has completely disputed that 

kind of thinking process. You folks get it, and you understand. And 

so I want to encourage you to, first of all, never give up, never give 

in, press on, because we are on the same page. 

The comments that I have submitted, my written comments do 

a really good job of identifying the problem. We do not really need 

to spend a whole lot more time identifying the problem with your 

understanding of the problem. What we really need to focus on is 

the solution. And so I am going to take my comments in that general direction based upon just one more little story that identified 

the problem but also worked through a solution. 

One of the things that we do in Oklahoma, other than the temporary traffic control for road construction and all the cool blinker 

signs and those kinds of things, we put up guardrail but we also 

stripe the roads. And one of the contracts that we have with the 

Department of Transportation (DOT) is a requirements contract 

that, when they come up, we have to bid on this thing. It is an annual contract with renewals that can take it to 3 years, a year at 

a time. 

What we do is, when the Department identifies some striping 

that needs to be done in a given area, they will issue a purchase 

order for that work, and we go do it. In order for that work to be 

scheduled, the Department of Transportation in the fall of the preceding year goes out and drives their sections of roadway—each division traffic engineer does that—and identifies roadways where 

the striping is starting to break down and come apart and does not 

clearly identify or delineate the traffic lanes or do a good job for 

nighttime drivers. And so they will identify these pieces. They accumulate the number of feet of stripe. That comes up with a dollar 

figure, and they submit all of these things to the Federal Govern-
12 

ment for the funding assistance that they use. So this is done in 

the fall of the year. 

In the following spring of the year, they start issuing these purchase orders against these projects that have all been submitted 

and approved and the funds approved. Well, the comptroller’s office 

is the one that does all of the funding solutions for the different 

using departments. They get these funds and tell Oklahoma Department of Transportation (ODOT), the transportation side, go 

ahead, go to work, we are ready. And so they issue the purchase 

orders. 

Well, in western Oklahoma, we had a series of roads that needed 

to be striped. They issued the purchase order, and we went out and 

met with the local people, got ready to start to do the work, and 

they said, yes, all of these are ready except for this one section of 

roadway. What is going to happen with this section of roadway, 

there is an expansion coming on. We have some widening, and a 

section of it is going to be overlaid. And so rather than stripe that 

section now, let us just hold off until the fall when that construction work is done, and we will put the stripe on the new surface 

rather than striping it now and covering that all up and wasting 

those dollars. 

That makes total sense. That is what we want to do. We want 

to do things that make sense. And so we go out, and we do that 

work. And, gosh, I think it was about September or October that 

we get called into a meeting that was being held by the traffic division to complain about the vendor—us—because we just were not 

prosecuting this work quickly enough and these things were being 

held open. We had numerous projects like this that were being held 

open. They are saying, ‘‘What the heck is going on?’’ ‘‘We have a 

problem with this vendor. We need to get them out of here and get 

a different vendor because they are not completing this safety improvement work.’’ 

Well, when the division traffic people came in and sat down with 

us, they discovered that the dollars that were being hung up and 

the work that was not being finished is the work that we were 

holding off waiting for this overlay work so that we would not just 

waste these dollars. We had scheduled it to where it made sense. 

And so what happened is when we got all the people in the room, 

we found out from the comptrollers that if this work is not finished, 

the Federal Government closes out on these dollars. These dollars 

have to be sent back into the pool, and we lose those funds. A little 

bit of communication, they do the kind of paperwork, and it does 

not happen anymore. So we have undertaken the responsibility 

that if this happens, we just contact the comptroller’s office. 

Now, why didn’t we before? We did not know about it. Neither 

did the division guys out on the roadway know about it. And the 

comptroller did not want to talk to us because we are a vendor of 

the traffic division, and so they did not want to step on their toes. 

And so that one little fix, putting everybody in the room, got this 

thing done. I encourage you to figure out a way to get everybody 

in the room so that we can work our way through the regulations 

and make sense. 

Thanks for the opportunity. 

Senator LANKFORD. Thank you. Ms. Russell. 
13 

1The prepared statement of Ms. Russell appears in the Appendix on page 65. 

TESTIMONY OF LAJUANNA RUSSELL,1 PRESIDENT AND 

FOUNDER, BUSINESS MANAGEMENT ASSOCIATES, AND MEMBER OF THE BOARD, SMALL BUSINESS COUNCIL FOR SMALL 

BUSINESS MAJORITY 

Ms. RUSSELL. Good morning, Chairman Lankford, and good 

morning, Ranking Member Heitkamp. Thank you so much for allowing us all to come in this morning and provide our views. 

It is wonderful to hear everyone’s different perspective, and, of 

course, here I am with just another one for you to consider. As you 

mentioned, I own a firm that is like a management consulting firm. 

We provide services to primarily Federal Government customers, 

and we are located right here in the Old Town area. So I hear that 

often, too, when I go outside of this area, that you are in D.C. We 

hear it every day. We get it. And sometimes others are like, ‘‘You 

guys are a bit too much for us.’’ But we understand. 

So I started my business in 2005 because I was doing some consulting work, and I wanted to do more. And I think that is when 

every entrepreneur really gets started. They want to do more, 

right? They have a fire or desire to take that thing, whatever that 

thing is, that they were doing that they found that they love. I can 

do more with that. I can make it bigger, better, stronger, faster. I 

can innovate. And that is what we started our businesses to do. 

And we never consider that there will be law, right? There are 

going to be rules; there are going to be regulations; there are going 

to be laws. There are going to be things that we have to follow. We 

do not quite consider that. We might not make plans for that all 

of the time. But sometimes I realize that half of them are necessary. Sometimes they work well to help and support small businesses, to level the playing field, to give us opportunity that we 

may not have gotten before. And so I want to take my testimony 

into that direction in terms of, yes, there needs to be some reform, 

definitely. This is a very nuanced kind of situation where I would 

love to see the Federal Acquisition Regulation (FAR) changed into 

a more common-sense and common-language document that we can 

all utilize. That is a simple example. 

But there are acquisitions—or, excuse me, there are regulations 

that have been really helpful in supporting small businesses. One 

of them is actually the financial reforms and looking at DoddFrank and assisting small businesses to have a really better playing field when it comes to large businesses. I think for us when we 

look at the regulations that have really supported us, it is those 

that actually have also some level of accountability built in, when 

we are the level playing field with the large businesses, that they 

can have accountability so that someone is watching out to make 

sure that everyone is doing what they are supposed to do. 

For my business, it also means increasing opportunities for contracting with the Federal Government and making sure we have 

support once we begin to grow. Amazingly, once a small business 

expands out of its SBA designated small business size standard— 

and sometimes that is only $7 million—then we are out in the 

woods, so to speak, without additional support or understanding or 
14 

1The prepared statement of Ms. Harned appears in the Appendix on page 68. 

regulation on how we can grow more and get beyond the small 

business standard. 

We also want to compete further in the health care system, and 

I know that that is an interesting topic for us today, but I believe 

that the new regulations surrounding ACA have been helpful to 

small businesses. It has been crucial to helping more small businesses and self-employed entrepreneurs gain access to comprehensive and affordable health coverage. Many provisions of the health 

care law have been key to making health insurance more accessible 

and affordable, and for me it has helped my business as well. We 

try really hard to provide great health insurance and to pay the 

majority of the cost. We actually pay 80 percent for individual 

health insurance, and because of our premiums—and after ACA, 

the premiums have been lowered or maintained. We have actually 

been able to maintain that and offer an additional 20 percent for— 

not only the 80 percent for the individual and then 20 percent for 

the family to ensure that we have full coverage. 

I know that prior to that, some small businesses were unable to 

provide health insurance for their constituents or for their employees, and I think that that is a very important thing. A healthy 

workforce is a stable workforce, and a stable workforce is going to 

continue to produce. And a producing workforce is going to continue to grow the economy. When you look at the number of small 

businesses that are promoting securing the economy and the Nation, enabling some level of health insurance for those small businesses is an important thing. 

So when you consider the number of Americans that have small 

businesses and employ the workforce and the huge impact, we have 

to change some of the regulations, and we have to ensure there are 

effective mechanisms to receive small business input. I think that 

is essential. But our economy does depend on it. 

Thank you. 

Senator LANKFORD. Thank you. Ms. Harned. 

TESTIMONY OF KAREN R. HARNED,1 EXECUTIVE DIRECTOR, 

SMALL BUSINESS LEGAL CENTER, NATIONAL FEDERATION 

OF INDEPENDENT BUSINESSES 

Ms. HARNED. Thank you, and thank you, Chairman Lankford 

and Senator Heitkamp, for having me here today. 

On behalf of the National Federation of Independent Business, I 

appreciate the opportunity to testify on reforms that would improve 

small business input in the Federal rulemaking process. 

Since January 2009, ‘‘government regulations and red tape’’ have 

been listed among the top three problems small business owners 

face, according to NFIB Research Foundation’s monthly Small 

Business Economic Trends survey. And in our latest report, analyzing December 2016 data, small business owners cited regulations as the second biggest impediment to expanding their business, second only to taxes. 

Small businesses bear a disproportionate amount of the regulatory burden as compared to the large corporations. And it is the 

small business owner, not a team of compliance officers, who is 
15 

charged with understanding new regulations, filling out required 

paperwork, and ensuring the business is in compliance with new 

Federal mandates. 

Every hour a small business owner is spending complying and 

understanding the Federal regulation is one less hour that she is 

spending servicing her customers or planning for future growth of 

her company. 

During my nearly 15 years at NFIB, I have heard countless stories from small business owners struggling with a new regulatory 

requirement. To them, the requirement came out of nowhere, and 

they are frustrated that they had no say in its development. That 

is why early engagement in the regulatory process is key for the 

small business community. 

It has been two decades since the enactment of the Small Business Regulatory Enforcement Fairness Act. These amendments to 

the Regulatory Flexibility Act may not be well known to the average American, but they have positively impacted small business 

owners and their customers in every State across this country. 

SBREFA has been instrumental in tamping down the one-sizefits-all mentality that can be found throughout the regulatory 

state. When followed correctly, it can be a valuable tool for agencies 

to identify flexible and less burdensome regulatory alternatives. 

However, these last 20 years have also exposed loopholes and 

weaknesses in the law, and it allows Federal agencies to act outside of the spirit of SBREFA when it comes to small business regulation. 

NFIB supports reforms that would expand SBREFA’s reach into 

other agencies. Each agency should be required to comply with 

SBREFA, and Small Business Advocacy Review (SBAR) panels 

should be convened before every economically significant rule is 

promulgated. SBAR panels allow an agency to walk through a potential proposal with small business owners, either in person or on 

the phone, receive feedback and other input for those that will be 

directly impacted by regulation, much like what Jerry was mentioning earlier. 

NFIB also supports legislation that would account for the indirect cost of regulation on small business. Federal agencies are 

quick to proclaim the benefits of their proposals, but they decline 

to analyze and make publicly available the indirect costs to consumers. Whether a regulation mandates a new manufacturing 

process, sets a lower emission limit, or requires implementation of 

new technology, the rule is going to increase the cost of producing 

goods and services. These costs will be borne on small business consumers that purchase them and should be included in the calculation when agencies analyze the costs and benefits of new regulatory proposals. 

NFIB supports legislation that would allow for judicial review of 

RFA compliance during the proposed rule stage. Under current 

law, an agency determination that a rule does not significantly impact a substantial number of small entities may occur years before 

the rule is finalized. Small businesses must wait until the rule is 

promulgated before legally challenging it. Unless a court stays enforcement of the rule, small businesses must comply with it while 

the battle over its certification is fought in court. This system im-
16 

poses unnecessary costs and regulatory burdens on small businesses and it is inefficient. 

NFIB also supports reforms that would waive first-time paperwork violations, require agencies to conduct more vigorous costbenefit analysis, end Chevron deference, provide for third-party review of RFA analyses, codify Executive Order (EO) 13563, and increase agency focus on compliance assistance. Finally, work still 

needs to be done to ensure agencies comply with the letter and the 

spirit of SBREFA. 

Small businesses are the engine of our economy. Yet over the last 

several years, the crushing weight of regulation has been a top reason preventing them from growing and creating jobs. NFIB looks 

forward to working with this Congress to pass regulatory reforms 

that would improve current law and level the regulatory playing 

field for small businesses. 

Thank you for inviting me to testify here today, and I look forward to answering any questions you may have. 

Senator LANKFORD. Thank you all for being here, and thanks for 

your testimony on where you are. 

The Chairman and I, and Ranking Member will defer on this for 

our questions on the end. Senator Peters, would you like to be able 

to ask some questions initially? 

Senator PETERS. That would be great. Thank you, Mr. Chairman 

and Ranking Member Heitkamp for that. 

Senator LANKFORD. Thank you. 

Senator PETERS. And to our witnesses, thank you for your testimony here today. It is important for us to have a thorough review 

of regulations to make sure that small businesses have the opportunity to be successful. But I think all of you would agree that it 

is also a very careful balancing act, and the fact, as Mr. Palmieri 

mentioned, from your association you realized that regulations are 

important in areas of workplace safety, workplace health, and the 

list goes on. And my experience in working with a lot of small businesses and being in private business for 20-plus years is most employers want to do that. And, in fact, they like the fact that the 

regulation is in place so that as they are good actors, they want 

to make sure everybody else is a good actor as well; otherwise, you 

have to compete with companies that are taking shortcuts and are 

actually hurting perhaps their employees in dealing with safety 

and health. And then that puts them at a competitive disadvantage, and then you get a race to the bottom. So we have to have 

those types of regulations in place. 

But having said that, there are a lot of crazy regulations as well 

out there that we need to fix. I was involved with one as a Member 

of the House. I come from Michigan where the auto industry is big. 

Auto dealers are an important part of that, and they had forms 

that they had to have customers fill out to confirm that their automobile met the Clean Air Standards and had the catalytic converters. It was something that was put in in the 1970s. And the 

automobile coming off the assembly line has all that now. It is not 

necessary to have that paperwork, and so we worked to get rid of 

that. And, unfortunately, it actually took an act of Congress to get 

rid of paperwork that auto dealers forced their customers to sign, 

which was just added work and problems. 
17 

So we have to strike that balance, and I know that is what this 

Committee is all about, trying to do that. And I have heard some 

testimony, and I would like some more specifics, similar to the specific that I had with the piece of paper for the auto dealers. I have 

heard broad issues of concerns with taxation. Taxation is obviously 

beyond the scope of this Committee. I understand people have 

issues with the IRS. Issues with the Affordable Care Act have come 

up. And I am going to ask you a question, Ms. Russell, later about 

that. But as far as specifically now, and particularly, Mr. Palmieri, 

with manufacturers, that is incredibly important to me, especially 

small manufacturers, which is the lifeblood of Michigan. We have 

got our big manufacturers, but it is the supply networks, smaller 

manufacturers. 

If you were to prioritize them, what are a couple things that we 

should be thinking about in this Committee where we might have 

to intervene and have an act of Congress, like I did to help auto 

dealers smooth their process and save money for their customers? 

Are there a couple specifics? And I am going to ask Ms. Harned as 

well—you have heard countless stories—if there is something that 

is just specific to small business that really is an example of what 

is outrageous. 

Mr. PALMIERI. Well, I mean, I think the challenge in identifying 

that one specific crazy item that affects small business is that for 

many of our small businesses, what they tell us is it is not that 

one item, it is not that last rule; it is the accumulation of all of 

those rules, the 650 major regulations from this Administration, 

the 500-plus from the last Administration, and the thousands and 

thousands of restrictions that they face on each stage of their production process. 

And so for us certainly the Congressional Review Act, there will 

be rules that will come up before the Senate and House that are 

negatively impacting manufacturers at all stages or increase the 

cost of energy for small businesses or others that will be immediate 

priorities. There is a list of challenges that we identified with the 

last Administration’s rules, everything from overtime to the black 

listing rule to others that are at the tops of the lists of manufacturers. 

But what we hope to do as well is to identify ways where we cannot repeat the mistakes that we have so far, and that on a rule like 

the Waters of the United States rule we do that analysis up front: 

we look at those small business impacts; we consider less costly alternatives. We can only do that if Congress passes reforms of the 

Regulatory Flexibility Act legislation. 

Ms. HARNED. Right. I would agree with Rosario. It really is for 

the small business owner the death by a thousand cuts or ten thousand cuts when it comes to regulation. It is that cumulative burden. 

One of the biggest rules, though, that is most problematic for 

NFIB members right now still out there is the overtime rule. That 

is by far and away one that we have heard the most from them 

on since it was finalized, and we would want to see that eliminated 

if at all possible. 

But when it comes to regulatory reform more generally, Rosario 

is right. You have so many regulations that are already on the 
18 

books, and small business owners may not even know about that 

they are out of compliance. In fact, most of the time they do not. 

They do not until the inspector shows up. And if an inspector, to 

Senator Risch’s point, comes to their business, they are going to 

look for and try to find a violation, and chances are they are going 

to be able to find one. And that is really the cultural change that 

I also think we would like to see at the agencies, one, again, that 

is more on how do we help you comply with the law as opposed to 

let us do a ‘‘gotcha’’ game once we get there, because small business owners do want to do right by their customers and their community. It does not help their business, which is typically advertised by word of mouth, if they are known as that bad person that 

is out there trying to pollute the waters or do all of these things 

that are harmful for our society. And they want to comply, but they 

cannot possibly be expected to understand and know all of the 

thousands of rules that may apply to their different businesses. 

Senator PETERS. Right. Well, I understand that I am running out 

of time, lots of questions, but—and I understand there is a layer 

of many different regulations in place. But it is also helpful to identify some of those that we can try to fix. If you are dying by a thousand cuts and we can eliminate some of those cuts, that is better 

than keeping the whole thousand in place. And so having that kind 

of information is something I am willing and I know my colleagues 

here are willing to look at specifics as well that impact many small 

businesses, whether it is a flower shop or a hardware store on 

Main Street or a small manufacturer that is a third-tier manufacturer making parts for the auto industry or aerospace. You know, 

I want to work with you on that and look for specifics so we can 

make those kinds of fixes, because making those kinds of individual fixes then highlights the broader problem that will allow us 

to work in a more comprehensive way as well. 

So my staff will be following up with all of you to try to identify 

some of those things that we can be actively engaged in and try 

to help. Thank you. 

Senator LANKFORD. Thank you, Senator Peters. 

Senator Heitkamp? 

Senator HEITKAMP. Thank you, Mr. Chairman. You know, we are 

the Committee that looks at the thousand cuts. That is our job 

here, and to look at how we can, in fact, create a system where you 

have a feeling like—or that you actually have had input on the 

front end, which is one of the issues that we heard this morning, 

which is it is like input and then this rulemaking takes forever, 

and it leaves this great deal of uncertainty, which causes a retraction in people’s willingness to expand as they are waiting to find 

out what is that going to look like at the end, and so the chilling 

factor of pending rules on business development. 

But I want to get at two points because, again, we are the bigpicture folks here. I know I say that word funny because I am from 

darn near Canada. Anyway, so let us talk about retrospective or 

retroactive review. 

Senator Lankford and I have been working on this issue. We 

have been talking about doing it on major rules, making sure that 

we have embedded within major rules a process for lookback so 

that we actually—not only do you have that process available, but 
19 

you as small business owners commenting can help fashion what 

that retrospective review is going to look like. 

Mr. Palmieri, you mentioned the need for improved retrospective 

review in the small business space. Do you have specific ideas 

about how we can improve the 610 review process and how we can 

get at—every Administration comes in and says, ‘‘We are going to 

reinvent government. We are going to get rid of all these rules.’’ 

And you saw it in the Clinton Administration, with some success, 

and then it just kind of—it is like yeast. It just starts blowing up 

again. People punch it down, but we never quite get at stopping 

that cycle of the growth. 

And so I am curious about retrospective review and how we 

should be doing it differently and if you are aware of the work that 

we have been doing on retrospective review. 

Mr. PALMIERI. Absolutely aware of the work you both have been 

doing. You are leaders on regulatory reform, and we look to you. 

And certainly your legislation on planning for retrospective review 

we think is very important, and we are supportive of that legislation. 

As far as improving the process overall, I think the challenge 

that most Administrations, Republican and Democratic Administrations alike, have faced is that they try to do it alone; they try 

to do it without Congress. And when they try to do it without Congress, when they direct their agencies, ‘‘Go and look for all the regulations you can fix,’’ it is fix on your own. Right? So as soon as 

they run into a statutory requirement, they say, ‘‘Well, we cannot 

touch this rule because it is required by statute.’’ Or, ‘‘If we tried 

to reform or undo or change, we would need to go to Congress 

first.’’ And so that ends their discussion. 

So unless there is a combined Congressional-Administration discussion that results in a final product, either the Administration 

being required to send you a package of legislative reforms to implement those changes from retrospective review or, like Senator 

King and Senator Blunt, with the Regulatory Improvement Act, a 

commission-based approach where the two entities are working together and there is clearly a legislative package that will come to 

you, we will never realize the full benefits of retrospective review. 

And then certainly in my testimony and other places, much more 

thoughtful people than me have suggested—please. 

Senator HEITKAMP. I do not mean to interrupt, but I am really 

intrigued by this idea that we then—anyone who has kind of 

watched these hearings that the Chairman and I have had know 

that I hit on this all the time, that we have a real fun time as 

Members of Congress beating up on the bureaucrats. But the bureaucrats, feel many times like, wait a minute, you guys are the 

ones who wrote these rules, or you know that this has been a problem. Let us take Waters of the United States. We have been in and 

out of the Supreme Court on Waters of the United States, back and 

forth, for 30 years. Isn’t it time for Congress to legislate and say 

this is the lane? As long as we are just letting EPA and the Court 

decide, they are going to spill out, then the Supreme Court comes, 

and then they spill out, and we do not get any certainty to American business. 
20 

So I want to ask you about this idea of submitting a legislative 

package, the regulators saying, ‘‘Look, we think this is crazy. We 

do not want to do this, but we have to do it because it is a mandate, and we do not want an Inspector General (IG) report. We do 

not want a Government Accountability Office (GAO) report on this. 

Here is your list of legislative fixes that we can all agree.’’ 

Has that ever been done? Or, has that ever been embedded in 

any regulatory reform package that you are aware of? 

Mr. PALMIERI. Not that I am aware of. 

Senator HEITKAMP. It is a really good idea. It is a really good 

idea. And I wonder, as we kind of move forward, to think about 

that, because I totally agree with you. It is like talking over each 

other and pointing fingers, and we get nothing done. It is just an 

excellent suggestion. Thank you so much. 

Ms. Harned, could you offer any insights for us in this lane as 

well? 

Ms. HARNED. Well, yes. I would agree with Mr. Palmieri that, 

regulatory—and you and Senator Lankford, retrospective review is 

critical because we have so many laws on the books that are not— 

or regs on the books that are not needed anymore, but you do have 

the statutory backup. And one of the things I would say also, over 

the last decade or so, we are seeing so many of the laws that are 

coming out of Congress that are giving the agencies even more authority and have much more ambiguity throughout that, which lets 

the bureaucrats make all of the decisions in the end. And we really 

think that we need to go back and especially tailor the legislation 

that is coming out of Congress at the beginning that really is getting your intent into the agencies’ hands so that they really have 

a very clear road map of what they are looking at going in. That 

has not been happening. The Affordable Care Act actually is a 

great example of that, as are a number of acts. 

And so that would be one other thing I would add, is that there 

just needs to be more clarity in the drafting in the beginning when 

new mandates are going to go into effect. 

Senator HEITKAMP. That presupposes that this is not done on 

purpose. We all know this is purposeful. It is like we cannot deal 

with that, it is too contentious, we are going to send it over there 

and then make judgments about the decisions they make on either 

side, depending upon who is in charge. That is no way to legislate. 

That is absolutely ignoring our constitutional responsibility. I totally agree. 

I want to get at the other issue that I think is critical, which is 

State and local regulation and the intersection between State and 

local regulation, because we have not quite had a discussion here 

about that, and whether any of you on the panel can offer some 

suggestions on how we can institutionalize better coordination, better dialogue, more opportunities for you to better understand how 

all of this works together, and we will start with you, Ms. Russell. 

Ms. RUSSELL. Thank you. That is actually a very interesting 

topic for my company. We are about 100 employees, and we cover 

about 15 States. And every single State is completely different. Everything we do when it comes to taxes or human resources (H.R.) 

or whatever within that State and for those individuals, it varies. 

And so it is a tough question for us because, of course, we have the 
21 

Federal rules and regulations, the Department of Labor, and then 

we have those things that each State is mandating. 

We have actually had to run separate payrolls sometimes because of one State needing it this way or one State needing that 

way, in different formats or timing. And that would be something 

awesome if we could get every State on the same page. How do we 

do that? Right? Every State is run differently; every State is governed differently, and their individuals from that perspective. And 

that would be extremely helpful, I know, for small businesses looking at the State level, when you are looking over multi-states for 

employment. 

Senator HEITKAMP. Not to interrupt because I want to hear from 

everyone, and we run kind of a loose ship here. If I can just offer 

a couple more? 

You look at the Uniform Commercial Code, which was designed 

to create—for all of these various jurisdictions to come together and 

say here are commercial rules so that it is easier to do business 

across borders. So it is a great model, but now we have kind of— 

with all of the business interaction and with more multi-state businesses, we do not have something that is similar to that on payroll. 

We do not have something that is similar to that on other kinds 

of, the Occupational Safety and Health Administration (OSHA) regulations where you can feel comfortable if you are in compliance in 

Oklahoma that you are going to be in compliance in North Dakota. 

And, I am a big believer in the Tenth Amendment. I came out of 

State government. And so I am not someone who says that there 

should be mandates here, but I think there is a great interest that 

I have in trying to incentivize States to coordinate better, to try 

and create opportunities for regional businesses, so that those 

small businesses can grow. 

So I guess, in Oklahoma, what do you see from your perspective? 

Does your business, Jerry, go regionally, or are you just in the 

State of Oklahoma? 

Mr. HIETPAS. We have done business in other States. We actually 

have an office in Topeka, Kansas, which is the northern annex of 

Oklahoma. [Laughter.] 

But my perception of your question, and reshape me if I am 

headed in the wrong direction, but my understanding of the question is how do States perceive what is required of them of the Federal law and the regulations that they put in place in order for us 

to meet and for them as well to meet the Federal law. 

What we see on our side of the deal, we have, of course, in our 

mainstay the Manual on Uniform Traffic Control Devices, which is 

a Federal document, part of Title 47, so that signs and barricades 

and the methodology is uniform across the United States. But each 

State, first of all, adopts that as their basic, but every regulation 

they put in place beyond that is their perception of what it takes 

in order to meet the Federal law. 

We find the same thing with our compliance in the Davis-Bacon, 

and part of my submitted testimony has to do with how do we determine wage rates. Well, in Oklahoma, it is done a certain way 

so that we have like 9, 10, or 11 different wage rates based upon 

regions just so that Oklahoma’s version of compliance with the 

Davis-Bacon wage law for fair wages for the construction employ-
22 

ees makes sense. It is different for us when we go to Kansas. We 

have their perception of that same law where we are doing our certified payroll reports. 

And so each State I believe is doing their best to come up with 

their own regulations and their own operations in order to, from 

their perception, meet the requirements of the Federal law. I do 

not know if there is a way that we can get the folks together and 

say, OK, what we really need from you at the Federal level is this 

kind of information in this kind of a format, and that would, in my 

opinion, cause uniformity at least in regions, but very possibly all 

the way across the entire country. 

Senator HEITKAMP. That is a great specific example of what I am 

getting at, but, again, we are up here, we are not the Commerce 

Committee that deals with the transportation issues. So we are trying to figure out how we put opportunities in place to have that 

discussion and maybe have a greater collaboration with State and 

local entities about what we are hearing here about regulation, either implementing Federal programs or just—payroll is a great example. I mean, every State is going to have a different kind of requirement. They may have different safety requirements beyond 

what OSHA has, and you have to know all of that. And there has 

to be—in North Dakota, we implemented one-stop shopping so that 

we could get all of—whether it workers’ comp and unemployment 

and, when I was tax commissioner, registration for sales tax, retail 

licensing. 

So we tried to consolidate where people would go, but, you look 

at the different definitions of employer, there is just a classic example. Maybe we have one here for the IRS, one here for OSHA, one 

here for all of the other provisions, and all of that creates compliance costs. 

And so, Mr. Palmieri, can you offer anything on State and local 

regulation? 

Mr. PALMIERI. Sure. I mean, I think one place to look for feedback on this issue is offices of kind of State economic development 

entities, because the best ones are focused not just on providing 

extra resources or whatever, but helping a business, a manufacturer or other that wants to build a new facility to go through the 

permitting process in their State. And they can identify for you, 

here are the things that we have improved in our State and made 

easier than maybe another State, but here is the Federal overlay 

of things that still make it more difficult for us to help a business 

build a new facility, increase jobs, or retain jobs in a State. And 

I think that would be one place to go. 

I would say at a minimum the Office of Advocacy in SBA had a 

program for a number of years where they were encouraging States 

to adopt their own regulatory flexibility laws, so actually being advocates at the State level because of exactly what you have identified for reforms to make State regulation more small business 

friendly as well. 

Senator HEITKAMP. Before we populate the States with that 

model, we need to make sure that the Office of Advocacy gets listened to here in Washington, DC. 

Just one last comment, and then I will yield back to the Chairman. 
23 

Ms. HARNED. Yes, thank you, Senator Heitkamp, for the question. We have actually a very active member in Texas who really 

points up the issue quite well. He has been very much—he is in 

partnership with the Texas safety and health organization down 

there. They have inspected his business. He has strong workers’ 

comp insurance. That person has inspected his business. And I 

have spoken to him and even the commission down there, and I 

said, well, if somebody—you go in and you say this business is 

good, they have taken care of everything we had, if we had any 

concerns. What does that mean at the Federal level? Basically 

nothing. And that really is something that I think we should fix. 

We need to eliminate the number of boxes that business owners 

need to check. They need to be able to know, hey, OK, I checked 

this box, I am good, and not worry that there is somebody who is 

going to come around the corner the next day and say, oh, but you 

are not because you have not gotten my box checked. 

There has to be more collaboration in that area, I think, to minimize the burden on them and the people that are coming to them 

with different requests and concerns. 

Senator LANKFORD. All right. So how do you do that? Because 

that is something I hear commonly from different companies. I will 

talk to some manufacturing location or some business, and they 

will say, ‘‘Hey, the inspector for XYZ entity just left.’’ And I will 

go, ‘‘Great. How did it go?’’ ‘‘It went terrific. Next week I have a 

different inspector that is coming in from a different group, and I 

understand 3 weeks from now, we just contacted that a different 

inspector is coming in.’’ 

All of them have their own silo. All of them have their own requirement to be able to check things off. Each of them carries with 

them the opportunity to be able to do a fine for someone or to be 

able to step in and help. How do you coordinate all those? 

Ms. HARNED. Well, I think maybe, this is just some thoughts I 

have had, that the Federal agencies can try to create these strategic partnerships, work with the State and—at a minimum, start 

with the State organizations and see are we good here, is there 

even an issue in the State? Is this State doing—and at least giving 

them—— 

Senator LANKFORD. In environmental law areas, EPA often delegates to in our State the Department of Environmental Quality, 

and it says here are all the standards and things that we are looking for. The State can do this. If you add additional requirements, 

you are welcome to, but this is the minimum standard. And so then 

that State entity would sign off on that. They would do the inspections. And if the State has signed off on it, then the Federal Government would accept that. Is that the model you are proposing? 

Ms. HARNED. Well, I do not want to speak formally for NFIB on 

that because we would want to discuss that more internally, but 

I do think that you need to find a solution where you are getting— 

you are having less boxes that need to be checked. And to me, that 

idea is starting to get you there. 

Senator LANKFORD. OK. Mr. Hietpas, how many pages of regulations do you think your business has to comply with? Have you 

ever dared to guess at how many pages of requirements you have? 
24 

Mr. HIETPAS. Absolutely not. Just this little packet right here 

represents just the payroll section. And it is not all of it. It is just 

the highlights. No, I do not think I could pay someone full-time 

that could sit down and read it and complete the process within a 

year. 

I think more typically than anything, we find out about the regulations after we violate one, and go—— 

Senator LANKFORD. You mean you do not have a full-time employee that is reading the Federal Register every day? [Laughter.] 

Mr. HIETPAS. Thank goodness not. That would be a difficult position to keep filled. 

Senator LANKFORD. Yes, it would, actually. I do fear that at 

times agencies do believe, ‘‘I posted that in the Federal Register. 

Every small business in America should have seen it.’’ 

Mr. HIETPAS. I am absolutely convinced that you are correct and 

that that is the common belief. Your solution that you offered, as 

you started this question, makes a lot of sense to me. And I can 

appreciate that Karen cannot speak because she has a thousand 

voices behind her. I get to speak for one, with an understanding 

of knowing about the road construction community and the subcontractors that back that up, that if we had the State authority, 

knowing what it takes to check all the Federal boxes, we can talk 

to them, we can figure out what pieces are missing. And if we run 

into an issue like I did with my example that I did in my testimony, we can sit down and get that worked out pretty quickly and 

quickly come into compliance. We do not want to sit and battle 

Federal regulations. We have other things to do. 

So knowing what to do, do it right the first time, and moving on 

just makes a ton of sense, and it is easy for us to employ folks to 

go to work at that point. 

Senator LANKFORD. OK. Ms. Russell, you have a comment on 

that? 

Ms. RUSSELL. I did. Thank you. It would be interesting—and, of 

course, the innovation part starts to come out. It would be interesting if we really were able to sit down and understand State to 

State to State what is it so different that you are requesting that 

is not already requested at the Federal level. I do not know if that 

kind of analysis has ever been done, get all of the State—he was 

mentioning—the economic development individuals in one room or 

four rooms if you want to do something like that and work through, 

well, what is so different from Oklahoma to Kansas in that area? 

We have to look at one area at a time. What is so different? Is 

there a way that we can consolidate that at least into one form? 

You have those neighboring States that have the same industry 

that could potentially have one form. That is a start. Now let us 

take that one form and see how far we are from Federal. That is 

one start. 

Senator LANKFORD. OK. Mr. Palmieri, there has been some conversation about two different terms that Congress put into statute 

back in 1980: ‘‘significant economic impact’’ and ‘‘substantial number of small entities.’’ Those have never been defined, and they just 

kind of sit out there. Is there a need to get some sort of definition 

and to get some sort of clarity on those? 
25 

Mr. PALMIERI. I think there is. Certainly, each agency defines for 

itself what those words are today. It gets some assistance on compliance from the Office of Advocacy. But the Office of Advocacy is 

not in control. It does not have the authority it needs to be able 

to identify across the government what those words mean. And so 

whether it is through rule-writing authority for them, kind of, 

again, the National Environmental Policy Act (NEPA) model, The 

Council on Environmental Quality (CEQ) wrote the rules that everybody lives by and all agencies live by, as opposed to each agency 

deciding for itself what a ‘‘significant economic impact’’ would 

mean. I think that would go a long way. 

If you look at the legislative history, back in 1980, they felt we 

did not really have a grasp of the regulatory system at that point, 

so it was hard for them to put into statute stronger language. 

Clearly, I think we are in a better place. We have resources, people 

who know how agencies evade these rules when they should not 

and what it means. I think we are in a much better place to give 

someone the authority to define these terms, whether it is Congress or advocacy. 

Senator LANKFORD. Let us just take the Office of Advocacy. Is it 

in the right spot? And does it have the authority that it needs? 

Mr. PALMIERI. It does not have the authority to write governmentwide rules to define those terms. It can provide guidance, but 

unless you amend the law, they do not have the authority to do 

that. And even if they did, agencies would not listen to them. 

Senator LANKFORD. So take the model of the Office of Management and Budget (OMB) and the Office of Information and Regulatory Affairs (OIRA), and if there is a significant rule that is being 

promulgated, OIRA has a responsibility to be able to check it, come 

back. They have an internal back-and-forth to be able to do that, 

but that is a requirement that is set into place by the Administrative Procedure Act (APA). That model does not seem to exist. Every 

agency just determines on its own this is not significant or this 

does not really reach a significant number of groups, and so I do 

not have to talk to anyone. I just put it out there, and the Office 

of Advocacy can raise their hand or can write a letter but really 

cannot force someone to say let us sit down and talk about that. 

Mr. PALMIERI. So right now it depends on the relationship between OIRA and the Office of Advocacy. If there is a strong cooperative relationship there, OIRA can be an enforcer of those rules. In 

different times and in different administrations, there have been, 

you know, clear relationship Statements, a memorandum of understanding, but to us I think as we are talking about rewriting the 

law, it is a perfect opportunity to give that authority to advocacy, 

to be able to put themselves in a position to answer definitively for 

the government when someone is doing that or not. Certainly, they 

have the ability to define that on the judicial review side. Why not 

have them do it up front? 

Senator LANKFORD. Go ahead. 

Senator HEITKAMP. I was thinking maybe Advocacy belongs at 

OMB and not at SBA. 

Mr. PALMIERI. Well, so it is an independent entity. 

Senator HEITKAMP. Right. 
26 

Mr. PALMIERI. It just shares, space and resources. And where it 

sits would not matter to us as much, but I think if you talk to folks 

who work at Advocacy, there is probably something about being 

kind of a part of that. 

I have also seen proposals years ago of spinning off the Office of 

Advocacy and making it its own independent commission so that 

it was free of all agencies and had more independence. But to us, 

what is most important is that it has resources and authority because it does excellent work across Democratic and Republican Administrations and is the only voice sometimes that will raise its 

hand against the Administration’s priority, whether it is EPA or 

OSHA or others, and say, ‘‘We disagree.’’ And that is such an important voice to have in this process. 

Senator HEITKAMP. Right, I could not agree more. And when we 

are talking about taking that model and populating it in the 

States, we need to refine it here. Because I sit on the Small Business Committee, we hear from the Advocacy folks, and I think 

there is enormous frustration that they do great work, they point 

out all the problems, and it just falls on deaf ears because someone 

says, ‘‘We do not agree with you.’’ 

There needs to be a very strong message from Congress that 

these are our folks, these are our folks who are doing the watchdog 

work of Congress, making sure that we are not overly and unnecessarily burdening small business, or at least we have that perspective. 

So we are very interested in what we should be doing to reform 

or enhance or make that an entity that feels like, man—that the 

agencies feel like, man, we better find out what they are going to 

say, because there are going to be a whole lot of people up on Capitol Hill not happy if these folks say they were ignored. 

Senator LANKFORD. And years ago, Congress stepped in on what 

is now affectionately called the ‘‘SBREFA panels’’ and said there 

needs to be a gathering of individuals, much like what Mr. Hietpas 

was talking about earlier, make sure everybody gets in the same 

room to be able to have a conversation about its effect. The concern 

is those have not been effective, so I am interested in any kind of 

input. The design was to get more people to be able to talk about 

a rule before it is finalized to specifically talk about small business 

entities. It only affects EPA, OSHA, and the Consumer Financial 

Protection Bureau (CFPB). They are the only ones that are required to do it. Then the question is: Should this be expanded and 

should there be a great conversation happen on it? And I am open 

to anyone for input here. 

Ms. HARNED. Well, NFIB has long recommended that it be expanded to all the agencies. We think it is critical—— 

Senator LANKFORD. Independent and executive. 

Ms. HARNED. Absolutely. Again, as Mr. Palmieri was saying, so 

often Advocacy is the only small business representative at the 

table. If we can get other small business owners—again, it is easy 

to talk on the phone. These people do not necessarily have to come 

to town. But to actually get them to say what this will actually 

mean for their business is critical, and also ensuring that it is a 

true small business owner, and by that I mean small business is 

defined broadly, right? A business that has its own quality assur-
27 

ance officer, that is wonderful that it has the resources to employ 

that person. But we need to worry about the businesses that do not 

have that person and what their perspective is when these rules 

are being created. 

Senator HEITKAMP. So your perspective is some of the solutions 

that come out of Advocacy are geared toward businesses that may 

not really need that kind of assistance compared—or they do not 

reflect what is actually happening for truly smaller businesses? 

Ms. HARNED. Oh, I am sorry. I did not mean that for Advocacy. 

I meant on the Small Business Advocacy Review panels, where you 

do have a panel process. 

Senator HEITKAMP. OK. 

Ms. HARNED. Sometimes they are supplied primarily—— 

Senator HEITKAMP. They are populated by people who you think 

do not really understand what that is for the five-guy body 

shop—— 

Ms. HARNED. Correct. 

Senator HEITKAMP. There is no way he even has the ability to 

do payroll. He contracts all the business stuff out. He does not 

want to think about this, but all of a sudden he is stuck with some 

new rule on, what a spray tent will look like, and he is not represented or she is not represented. 

Ms. HARNED. Correct. And part of that also is, the time that it 

will take for the small business owner to participate and finding 

that person, right? But that is also where technology can be so beneficial so that it does not seem like such a cumbersome ask for 

them when the government is asking for their opinions, because I 

think that also would help get more engagement from that community in this process. 

Senator LANKFORD. OK. Fair enough. 

So there has been some conversation, I have heard several of you 

mention this as well, this issue about direct cost and indirect cost 

and trying to estimate what is the real effect on a small business 

as well. What are the recommendations that you have to be able 

to help correct this issue? And how can we really know the actual 

effect on a business? Mr. Palmieri. 

Mr. PALMIERI. So this is just an error in interpretation of this 

law, and so it is a simple fix, just to make clear that when we say 

‘‘significant economic impact,’’ that is direct effects and indirect effects. And we have to say it in the law; otherwise, agencies will 

never follow it. And so that small number of rules that ever get 

this small business impacts analysis, one of those reasons is because they get to say a whole suite of their rules will never meet 

that definition because they only have indirect effects. And we 

know for so many of our small businesses, they are not often the 

directly regulated entity. Right? So we are regulating their power 

supplier, we are regulating one of the larger businesses, and they 

are a subcontractor to that business. And so there are all sorts of 

reasons why small businesses are often not the direct intended target of the rule, but are the ones that are most affected or most disproportionately affected. And so just fixing that in law, making it 

very clear, ‘‘No, Congress means indirect effects also,’’ will solve 

this problem. 

Senator LANKFORD. Other comments on that? 
28 

Ms. RUSSELL. I would agree. Indirect, you are still expending resources, you are still expending money, you are still expending the 

time. Just because they would state it differently, it does not lessen 

the impact of the small business. 

Senator LANKFORD. All right. It is fascinating to me, the number 

of times that I will talk to an agency, and they will tell me, ‘‘This 

does not affect a small business because this is only a regulation 

that was designed for larger businesses.’’ And that does not seem 

to be in touch with the basic supply chain conversation, much less 

the actual effect that it is going to have in so many other ways. 

Let me ask you a question about implementation timelines. It 

was one of the many things that came up during many rules that 

are rolled out. Is there a need for a different implementation 

timeline on a new reg for small businesses versus large businesses? 

The best example here, Mr. Hietpas has already admitted he does 

not read the Federal Register every day. There is a compliance person that is researching that out for most large businesses, and 

down the hall there is a group of attorneys that are chasing that 

down. But for a small business, they typically will have an annual 

update from someone that they have hired or from someone from 

some organization that sends out information to them. 

Is there a different timeline needed to say large businesses, medium to large businesses, your implementation timeline is 6 

months, small businesses get a year to be able to implement that? 

And if so, can you think of examples? 

Ms. HARNED. Yes, thank you, Senator, and this is a critical issue. 

You see this not just in regulation. Quite frankly, you see it in just 

how the world works for a small business owners. You look at data 

on how long it took small businesses to really embrace even things 

like the Internet and, new technologies. They are always going to 

take longer than a large corporation to be able to understand and 

embrace and incorporate that into their business. So it is critical 

when it comes to regulation that implementation dates are extended for them because, again, they may not even know that the 

rule exists by the time it becomes effective. Meanwhile, the large 

corporation has already cleared the path and is in compliance, and 

you have to build in time for them to know the rule exists, understand what the rule means, and comply with it. And because of 

their limited resources, their limited manpower, it is going to take 

more time for small business owners. 

Senator LANKFORD. All right. Mr. Hietpas. 

Mr. HIETPAS. One more element that tags onto Karen’s statement is being able to build the costs in, figuring out what the cost 

is of compliance and building that in. We just started a project on 

I–235 in Oklahoma City to just take care of the railroad bridge 

widening of that particular roadway. The contract length is 430 calendar days. And so if a new regulation is put in play and we have 

6 months to comply, and because of certain elements of that regulation, it is going to add about $2,000, $3,000, $4,000 to that I–235 

project, I am stuck. That is just another investment in a compliance opportunity. 

The striping contract that I was talking about earlier was a oneyear contract with two opportunities for extensions, and those opportunities are based upon what happens to our costs. And so if our 
29 

costs escalate sharply, we do not extend the contract. We put the 

thing back out for rebid. So we sign up on the new one, have 6 

months to comply, and, again, we are stuck with the deal. 

So in many cases, a new rule will come down, the larger companies figure out what it is, and then those larger companies that 

hire me to do the work, I will go ahead and do the work. And like 

an example I put in my written testimony, here are all the new 

rules from the Housing and Urban Development (HUD). All we 

were doing was striping a section of roadway on a project that was 

funded with HUD dollars using State of Oklahoma specifications, 

working in the city of Moore. Did I anticipate that I was going to 

have my office staff work on the paperwork for 2 weeks in order 

to get paid? That was not included in that bid. 

But, it took us 4 hours to stripe the job and 2 weeks to do the 

paperwork in order to be paid. It was striping a roadway using the 

State standards on a road inside the State of Oklahoma. Everything was what we knew and understood. We just did not understand HUD’s set of rules. 

Now, I am not even completely convinced that HUD had all of 

those kinds of things. What I am convinced of is that the city of 

Moore, in anticipating what it would take in order to get all the 

qualifications met for the HUD funding for that particular roadway, that this was their interpretation of the paperwork. Again, 

legislating—getting people in the same room, figuring out here is 

what is produced, here is what we do, will this meet your standards, yes or no? And if not, what minor modification do we need 

to make in order to do that? I think that cuts through a whole lot 

of this stuff, but, unfortunately, we are talking with people at a 

local level—or at a lower level, and we have one of these buildings 

someplace where HUD’s main office is. Someone there said this is 

what it is going to take to comply with Congress’ intent of the law, 

and so the regulations are passed down so that they get their paperwork, and by the time it finally gets through, we have complied 

with the law, but we may have been able to do it with a lot less 

hoops to jump through. 

Senator LANKFORD. All right. With that same comment, Ms. 

Harned, you mentioned in your list, which was a very good list of 

practical ideas, the waiver for first-time paperwork violations. 

Walk through that. 

Ms. HARNED. Yes, this has been something, again, that NFIB has 

long advocated for because, again, small business owners do not 

necessarily know when they are out of compliance. Giving them the 

chance, letting them know that it is not going to be a ‘‘gotcha’’ 

game, that just because they get dinged on something, they are 

going to be given an opportunity to correct it. Then if they do not 

correct it, they are the bad actor that needs to be punished. But 

if they do not know that they are out of compliance with one of a 

thousand regulations, at least giving them a break on the first 

time, especially when it is not a big safety—not an imminent safety 

issue or something like that and a paperwork violation, we really 

think is the right thing to do. 

Senator LANKFORD. Mr. Palmieri. 

Mr. PALMIERI. We also support that legislation, and I would just 

say that your new Democratic colleague in the Senate, Senator 
30 

Tammy Duckworth, from Illinois, also introduced a version of that 

legislation when she was a member of the House. So we think 

there is a real bipartisan opportunity to address that and just to 

say again it is a focus on compliance assistance. What we are trying to get our small business to do is to be in compliance, to be 

aware of the rules before they get a $10,000 fine. And, unfortunately, I have had small businesses who have testified before this 

Committee who have told you that, they missed a signature on a 

form, and they got a $10,000 fine that took them months to negotiate, a reduction. But that is often the impression that is left 

about the relationship between small businesses and the Federal 

Government, is there is no outreach, there is no assistance, there 

is no education. It is do it right, or my only response is a big financial penalty. And it does not serve anybody’s ends. 

Senator LANKFORD. No, it does not. And Senator Heitkamp and 

I have talked about this before. There is a manufacturer in Oklahoma that did not submit the form about conflict minerals saying, 

‘‘We do not use conflict minerals,’’ which they do not. So because 

they did not submit the form saying they had nothing to submit, 

they were fined $100,000. A form that said, ‘‘We have nothing to 

submit, that is a $100,000 fine. And at some point, this looked rational to someone in D.C.? But it does not look rational to anyone 

else. 

Senator HEITKAMP. And here is another example: A contractor of 

mine had a project in San Francisco. It got stalled out for funding, 

and I think there was a disagreement about how they were going 

to do it. They had to file Davis-Bacon reports every week saying, 

‘‘I did not employ anyone,’’ for 2 years. You know, 104 reports saying, ‘‘I have nothing to report,’’ or they would have been fined. 

And so those are the things that I would hope, regardless of 

where you are on the political spectrum, we all could agree that is 

just crazy, that is just wrong. 

And so I think that in this area there is going to be some lowhanging fruit that will be really easy to work on, and then there 

is some systemic kinds of discussions, whether it is judicial review, 

which we go back on—I mean, we kind of know—— 

Senator LANKFORD. Which I am right on, by the way. 

Senator HEITKAMP. Yes, sometimes. [Laughter.] 

Guidance which we go back and forth on. I kind of try and explain to the Chairman that sometimes people need guidance, and 

that is very valuable. 

Anyway, but if you went and looked at low-hanging fruit, I think 

you had a great list. I think we are going to need to kind of examine that, Karen, and try and figure out how much of that would 

be easy to do. But we are really committed to listening, really committed to a system where people do not feel like there is an adversarial relationship in accomplishing the work of the people of this 

country. 

And so I just want you to know—I am going to have to scoot off 

here in a little bit because I have another appointment, but I want 

you to know that this is just a great beginning for our Committee, 

having you all here. I want to thank you for your input, thank you 

for your statements. And I look forward to continuing the dialogue 

about so many good ideas that have been advanced here. 
31 

Senator LANKFORD. Thank you. 

Any other final comments from any of our witnesses? 

[No response.] 

Senator LANKFORD. I do appreciate very much your testimony, 

both your written testimony and your oral testimony. We look forward to following up in the days ahead to be able to continue to 

gather practical ideas as we are trying to pull together, as Senator 

Heitkamp said, a practical list of legislative solutions to be able to 

move through this process. There is bipartisan agreement on those 

areas. Where there is bipartisan agreement, we should seize on it 

and be able to move and be able to see how much can be done to 

be able to help in this area related around a small business regulatory scheme. 

Before we adjourn, I would like to announce that on February 9, 

the Subcommittee will hold a hearing on the State of the Federal 

workforce entitled, ‘‘Empowering Managers: Ideas for a More Effective Federal Workforce.’’ 

That concludes today’s hearing. I would like to thank the witnesses again for their testimony. The hearing record will remain 

open for 15 days until the close of business on February 3, for the 

submission of statements and questions for the record. 

Thank you all again. This hearing is adjourned. 

[Whereupon, at 11:39 a.m., the Subcommittee was adjourned.] 

(33) 

A P P E N D I X 
34 

When entrepreneurs open their ovm business, their goal is to provide for their family and serve 

their community hy offering a product or service. I:~ach moment a small business spends trying 

to understand and comply with overburdensome fcdernl regulations is time that is not spent 

growing their business. 

This past December, the National Federallon for Independent Business reported a 38 percent 

jump in small business owners· belief that the economy will improve. 

According to The NfiB's index, small husincss optimism increased by 7.4 points in December to 

105.8, up from Novcmhcr's 98.4. It's the largest month-over~month index change since it began 

in 1986. 

In fltct, members' perceptions that business conditions will improve, especially in the area of 

regulatory hurden, accounted f{)r 48 percent of the month 1s increase. 

Vv'e have the opportunity to implement changes that would make it easier for small business 

owners to participate in rulemaking and truly have their concerns considered. We must turn their 

optimism into reality. 

I look forward to discussing ways to deliver these results for small businesses today with our 

\Vitncsscs. 

\Vith thElt, I recognize Ranking Member Heitkamp for her opening remarks. 
35 

Opening Statement of Ranking Member Heidi Heitkamp 

Subcommittee on Regulatory Affairs and Federal Management 

Improving Small Business Input on Federal Regulations: 

I de as for Congress and a New Administration 

Thursday, January 19,2017 

As Prepared 

Thank you Mr. Chairman. I look forward to working with you for another Congress. Our 

subcommittee was busier last Congress than some full committees. I am certain we will have 

two more years of productive and bipartisan work on our subcommittee. 

Small businesses play a crucial role in our nation's economy and overall prosperity. The vast 

majority of businesses across our nation are small businesses. 

Small businesses are especially critical in my state of North Dakota. Ninety-six percent of 

businesses in North Dakota are small. These small businesses are the backbone of North 

Dakota's economy and the prime source of job creation. I am proud to represent North Dakota's 

small businesses in Congress, on this committee and on the Small Business Committee, where I 

also serve. 

It's been my privilege to travel across my state and visit the wide variety of small businesses that 

call North Dakota home to visit and hear about their needs tirst-hand. From main street brick 

and mortar retailers in Grafton and Grand Forks to cutting edge innovators in the Unmanned 

Aircraft System industry, like Packet Digital in Fargo, to NewKota, an oiltield service business 

in Minot, North Dakota that specializes in steam heating frozen rig pipes the needs and 

concerns of these small businesses are as diverse as they arc. 

It is absolutely critical that Congress always be working to ensure small businesses can prosper. 

Congress must seek out policies to help small businesses im1ovate and thrive. I am proud that, 

on the Small Business Committee, I have been a strong advocate for small businesses and 

startups in our country's more rural states like North Dakota. Because we know that innovation 

doesn't just happen in our country's biggest cities and that we must foster and promote the 

innovative and entrepreneuri<tl ideas that are emerging in our heartland. 

It is also critical that Congress make sure its policies do not unfairly or unintentionally hamper 

small businesses. Unintended consequences are always something that must be carefully 

examined and considered -especially when working in the regulatory space. 

This is an important hearing. Small entities are often at a severe disadvantage compared to their 

larger peers when it comes to coping with and managing federal regulations. Small businesses 

often struggle to get the information they need to fully comply. And they want to comply. 
36 

That is one thing I hear when !talk to small business owners in North Dakota. They want to be 

good neighbors, good citizens. They want to produce safe products that their customers want to 

buy and they want to operate on a level playing field. 

One small business owner in North Dakota that I have gotten to know is Kari Warberg Block, 

who owns Earth Kind in Bismarck. They are a pest control developer, designer and biomanufacturing pioneers. I had hoped to get Kari out to Washington to testify at this hearing, but 

due to the late-breaking n<lture of this hearing that was not possible. I have a statement for the 

record from Kari that I'd like to submit at this time. When you speak to Kari about federal 

regulatory policies, you get a simple answer that is difficult to turn into action. She talks about 

needing more commonsense from agencies, more small business smarts from agencies, more 

understanding, and more outreach and feedback. 

I hear the same from small business owners all across my state. Kari says the solution is not 

fewer regulations, but better regulations and better compliance assistance. We need a less 

burdensome process that makes it easier for small businesses to connect with right people. 

To me that is one of the key questions we must tackle in this space- how do we make sure that 

agencies engage in the way that small businesses need, and that includes protecting the ability of 

agencies to promulgate fair and well-analyzed rules in a timely fashion? 

Much of the discussion in this area has focused on the importance of considering the impact of 

regulations on small businesses. We need to examine how to obtain meaningful input from small 

businesses in the regulatory process, and if improvements to the Regulatory Flexibility Act are 

needed to ensure federal agencies are responsive to the needs of small businesses. 

!look forward to hearing from the witnesses on that topic, as well as how we can bring smallbusiness North Dakota common-sense to the regulatory process. 

### 
37 

Statement for the Record 

Senator J eannc Shaheen 

Ranking Member, U.S. Senate Committee on Small Business & Entrepreneurship 

January 19,2017 

Chairman Lankford and Rm1king Member Heitkamp, l appreciate the opportunity to provide a 

statement on the Regulatory Affairs and Federal Management Subcommittee's hearing on ways 

to improve small business input on federal regulations. 

As the Rm1king Member of the U.S. Senate Committee on Small Business & Entrepreneurship, l 

appreciate the critical role that small businesses play in our economy, especially in rural 

communities across the country. In my home state of New Hampshire, small businesses make up 

96 percent of all employers. Nationwide, small businesses are responsible for two thirds of all 

job creation. 

As a fom1er small business owner, l have first-hand experience with the many pressures small 

businesses face, including access to credit, meeting payroll, the cost of health care m1d mm1y 

other challenges. Small business owners have enough to worry about: Our job should be making 

their lives easier, not harder. 

There is no question that poorly crafted regulations cm1 result in an excessive burden for small 

businesses. Unlike big compm1ies, small firms often don't have the time and resources to devote 

to understm1ding new rules or to figure out how to comply. 

At the smnc time, well-crafted regulations have the potential to encourage innovation and 

entrepreneurship, while addressing critical threats to public health, the environment and safety. 

For that reason, we need a regulatory process that works for all stakeholders - including 

America's small businesses. 

l mn very interested in looking at ways to improve the regulatory process so that federal agencies 

receive better input from small businesses, while also protecting the ability of federal agencies to 

promulgate fair rules in a timely fashion that protect the public, workers and the environment. 

One key to an ciTective regulatory process is to ensure that federal agencies comply with the 

Regulatory Flexibility Act (RF A), which requires them to work with the Small Business 

Administration (SBA) to conduct outreach and generate real input from small businesses. 

Congress has a responsibility to conduct better oversight to ensure that federal agencies m·e 

following this process and minimizing the regulatory burden of new rules on small businesses. 

I've also heard from small business owners that one of the most meaningful ways to help them 

with regulations is to ensure that our federal agencies- including the SBA- arc actively helping 

them comply. Enhancing federal outreach and assistance to small businesses will help level the 

playing field by making rules easier to understand m1d follow. 

W c also need to repeal outdated m1d duplicative regulations that no longer make sense and 

simply add to the regulatory burden facing small businesses. That's why I cosponsored Senator 
38 

King's Regulatory Improvement Act to identify antiquated, unnecessary regulations that no 

longer make sense and create an expedited process for Congress to review or repeal them. 

I appreciate the oppottunity to discuss potential reforms to the regulatory process. The goal of 

efforts to reform the rulemaking process should be to improve small business input and make 

rules easier to understand, without imposing additional mandates that will grind the regulatory 

process to a halt or threaten critical protections for the public, including many small businesses. 

!look forward to working my colleagues on the Homeland Security and Government Affairs 

Committee, including Senator Heitkamp, who also serves on the Small Business Committee with 

me and our Committee Chairman Risch, to improve the regulatory process for small businesses. 
39 

Manufacturers 

Testimony 

of Rosario Palmieri 

Vice President, Labor, Legal and Regulatory Policy 

National Association of Manufacturers 

before the Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

U.S. Senate 

on Improving Small Business Input on Federal Regulations: 

Ideas for Congress and a New Administration 

January 19, 2017 
40 

TESTIMONY OF ROSARIO PALMIERI, VICE PRESIDENT, LABOR, LEGAL AND REGULATORY POLICY OF 

THE NATIONAL ASSOCIATION OF MANUFACTURERS 

BEFORE THE 

SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL MANAGEMENT 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

U.S. SENATE 

JANUARY 19, 2017 

Chairman Lankford, Ranking Member Heitkamp and members of the Subcommittee on 

Regulatory Affairs and Federal Management, thank you for the opportunity to testify about 

federal regulations and how the rulemaking process impacts U.S. small businesses, particularly 

small manufacturers. 

My name is Rosario Palmieri, and I am the vice president of labor, legal and regulatory 

policy for the National Association of Manufacturers (NAM). The NAM is the nation's largest 

industrial trade association and voice for more than 12 million men and women who make 

things in America. The NAM is committed to achieving a policy agenda that helps manufacturers 

grow and create jobs. Manufacturers appreciate your attention to the regulatory burdens that 

are impacting their competitiveness and growth. In particular, we thank the chairman and 

ranking member for their efforts to improve our regulatory system. 

The subcommittee's attention to the requirements contained in the Regulatory Flexibility 

Act (RFA), the Small Business Regulatory Enforcement Fairness Act (SBREFA) and other 

statutes designed to increase agencies' sensitivity to regulatory effects on small businesses is 

important as the new Congress and the new administration examine ways to improve our 

regulatory system. Chairman Lankford and Ranking Member Heitkamp, your bipartisan efforts 

at regulatory reform during the last session of Congress were highly admirable, and 

manufacturers stand ready to work with you to continue that momentum so that reform can 

become reality. 

I. Manufacturing in the United States 

Manufacturing in the United States lost 2.3 million jobs in the last recession. Since then, 

we have gained back 822,000 manufacturing jobs. Yet, the sector has struggled over the past 

two years from global headwinds and economic uncertainties. Manufacturing employment 

declined by 45,000 in 2016, with essentially stagnant production growth. On the positive side, 

signs at year's end indicated that business leaders and consumers were more upbeat about 

activity in 2017, especially since the election. To ensure that demand and output improve this 

year, the United States needs not only improved economic conditions but also government 

policies more attuned to the realities of global competition. 

Manufacturing has the highest multiplier effect of any economic sector. For every $1.00 

spent in manufacturing, another $1.81 are added to the economy. In addition, for every worker 

in manufacturing, another four employees are hired elsewhere. In 2015, manufacturers in the 
41 

United States contributed $2.17 trillion to the economy (or 12 percent of GDP), and the average 

manufacturing worker in the United States earned $81 ,289 annually, including pay and 

benefits-27.4 percent more than the average nonfarm business worker. 

Nearly 95 percent of all manufacturers in the United States have fewer than 100 

employees, and the Small Business Administration (SBA) defines a small manufacturer as a 

firm with fewer than 500 employees. To compete on a global stage, manufacturers in the United 

States need policies that enable them to thrive and create jobs. Growing manufacturing jobs will 

strengthen the U.S. middle class and continue to fuel America's economic recovery. 

Manufacturers appreciate the subcommittee's focus on ways to reduce the regulatory burden 

imposed on small businesses. Unnecessarily burdensome regulations place manufacturers of 

all sizes at a competitive disadvantage with our global counterparts. 

II. The Cost of Regulatory Burdens Facing Manufacturers 

Because manufacturing is such a dynamic process, involving the transformation of raw 

materials into finished products, it entails more environmental and safety regulations than other 

businesses. The NAM issued a study1 on the expansive set of federal regulatory requirements 

that are holding manufacturers back. Manufacturers face 297,696 restrictions on their 

operations from federal regulations. Eighty-seven (87) percent of manufacturers surveyed as 

part of our study indicated that if compliance costs were reduced permanently and significantly, 

they would invest the savings on hiring, increased salaries and wages, more R&D or capital 

investment. Regulations impose real costs that impact a company's bottom line, so it is 

extremely important that our regulatory system be transformed so that we are effectively 

protecting health and the environment while minimizing and seeking to eliminate unnecessary 

burdens. Despite the acknowledgment of lawmakers of the problems with our regulatory 

system, things are getting worse. Ninety-four (94) percent of manufacturers surveyed said the 

regulatory burden has gotten higher in the last five years, with 72 percent reporting that the 

burden is "significantly higher." 

In September 2014, the NAM issued a report2 that showed the economic impact of 

federal regulations. The report found that manufacturers in 2012 spent on average $19,564 per 

employee to comply with regulations, nearly double the amount per employee for all U.S. 

businesses (see Figure 1). The smallest manufacturers-those with fewer than 50 employeesincurred regulatory costs of $34,671 per employee per year. This is more than triple that of the 

average U.S. business. 

1 NAM, 'Holding Us Back: Regulation of the U.S. Manufacturing Sector" (January 2017) http://www.nam.org/Dataand-Reports/Reports/Holding-Us-Back--Regulation-of-the-U-S--Manufacturing-Sector/ 

2 NAM, "The Cost of Federal Regulation to the U.S. Economy, Manufacturing and Small Business" (September 

2014 ), http://www. nam. org/Data-and-Reports/Cost-of-F ed erai-RegulationsiF ederai-Regulation-F uii-Study.pdf. 

2 
42 

Figure 1: Regulatory Compliance Costs per Employee per Year, 2012 (in 2014 Dollars) 

$40,000 

530,000 

S20,000 

510,000 

so All Firms < 50 Employees 50-99 Employees 1 00+ Employees 

~Manufacturers l1lll All u.s. Businesses 

The burden of environmental regulation falls disproportionately on manufacturers, and it 

is heaviest on small manufacturers because their compliance costs often are not affected by 

economies of scale (see Figure 2). Manufacturers recognize that regulations are necessary to 

protect people's health and safety, but we need a regulatory system that effectively meets its 

objectives while supporting innovation and economic growth. In recent years, the scope and 

complexity of federal rules have made it harder to do business and compete in an everchanging global economy. As a result, manufacturers are sensitive to regulatory measures that 

rely on inadequate benefit and cost justifications. 

In October 2013, the Manufacturers Alliance for Productivity and Innovation (MAPI) 

released an updated study3 that highlighted the regulatory burdens placed on manufacturers. 

The study found that since 1981, the federal government has issued an average of just under 

1 .5 manufacturing-related regulations per week for more than 30 years. Individually and 

cumulatively, these regulations include significant burdens imposed on manufacturers in the 

United States and represent real compliance costs that affect our ability to expand and hire 

workers. 

Manufacturers, particularly small manufacturers, know very well the importance of 

allocating scarce resources effectively to achieve continued success, which includes increased 

pay and benefits for employees. Every dollar that a company spends on complying with an 

unnecessary and ineffective regulatory requirement is one less dollar that can be allocated 

toward new equipment or to expand employee pay and benefits. Government-imposed 

inefficiencies are more than numbers in an annual report. They are manifested in real costs 

borne by the men and women who work hard to provide for their families. In a Federal Reserve 

Bank of Philadelphia report released last April, nearly 74 percent of manufacturing leaders in the 

region said that their state and federal regulatory compliance costs had increased over the past 

few years, with no one noting declines in this trend. In addition, they devoted 5.8 percent of their 

capital spending costs to regulatory compliance on average, more than what was spent on data 

and network security (4. 7 percent) or physical security (2.8 percent) 4 

3 MAP!, Growing Number of Federal Regulations Continue to Challenge Manufacturers (October 2013), 

http://www.mapi.net/blog/201311 0/growing-number-federal-regulations-continue-challenge-manufacturers. 

'Manufacturing Business Outlook Survey (Apri12016), Federal Reserve Bank of Philadelphia, 

www.philadelphiafed.org/manufacturing-BOS. 

3 
43 

Figure 2: Environmental Regulatory Compliance Costs per Employee per Year, 2012 

(in 2014 Dollars) 

All 

U.S. Businesses 

All 

Manufacturers 

s Other ~Environmental 

Manufacturers, 

< 50 Employees 

Agencies are failing in their responsibility to conduct analysis that would better assist 

them in understanding the true benefits and costs of their rules. Despite existing statutory 

requirements and clear directives from the president to improve the quality of regulations, 

manufacturers face an increasingly inefficient and complex myriad of regulations that place 

unnecessary costs on the public. Our regulations should be designed to most effectively meet 

regulatory objectives while minimizing unnecessary burdens. 

Ill. Regulatory Environment 

Our regulatory system is in need of considerable improvement and reform. New 

regulations are too often poorly designed and analyzed and ineffectively achieve their benefits. 

They are often unnecessarily complex and duplicative of other mandates. Their critical inputsscientific and other technical data-are sometimes unreliable and fail to account for significant 

uncertainties. Regulations are allowed to accumulate with no real incentives to evaluate existing 

requirements and improve effectiveness. In addition, regulations many times are one-size-fits-all 

without the needed sensitivity to their impact on small businesses. We can do better. 

Unnecessary regulatory burdens weigh heavily on the minds of manufacturers. In the 

NAM Manufacturers' Outlook Survey for the fourth quarter of 2016, 71.2 percent of respondents 

cited an unfavorable business climate due to government policies, including regulations and 

taxes, as a primary challenge facing businesses-up from 62.2 percent in March 2012. 

The federal government's own data reflect these challenges. According to the annual 

information collection budget, the paperwork burden imposed by federal agencies, excluding the 

Department of Treasury, 5 increased from 1.509 billion hours in fiscal year (FY) 2003 to 2.446 

billion hours in FY 2013, an increase of 62.1 percent (see Figure 3). In other words, federal 

5 The Department of Treasury's burden estimates include the Internal Revenue Service and account for 75 percent of 

the total federal public burden imposed. Treasury's burden increased from 6.590 billion hours in FY 2003 to 7.007 

billion hours (or 6.3 percent) in FY 2013. See Office of Information and Regulatory Affairs (OIRA), 'Information 

Collection Budget of the United States Government," https:llwww.whitehouse.gov/omb/inforeg_infocoll#icr. 

4 
44 

agencies-excluding the Department of Treasury-imposed more than 279,000 years' worth of 

paperwork burden on the American public in FY 2013." 

These are challenges to prosperity, job growth and competitiveness that federal 

regulators are placing on manufacturers and other businesses in the United States. For the 10 

years ending in FY 2013, federal agencies (excluding the Department of Treasury) added 

almost 82 million hours in paperwork burden through their own discretion. This is on top of the 

1.121 billion hours that non-Treasury agencies estimate was added because of new statutory 

requirements. 

Figure 3: Government-Wide Paperwork Burden, Excluding the Department of Treasury 

2,500 

2,000 

Burden 1 

·

500 

Hours 

(Millions) 1 ,OOO 

500 

0 

1984 

1980 

1988 

993 

1992 

i,062 2000 

1.205 

2010 

2006 

1980 1982 19841986 19881990 1992 1994 1996 1996 2000 2002 2004 2006 2008 2010 2012 

Fiscal Year 

Manufacturers appreciate the need for record keeping and paperwork essential to 

ensuring compliance with important regulatory requirements, but government-imposed 

regulatory burdens continue to increase despite advancements in technology and both statutory 

and executive branch directives that federal agencies minimize unnecessary burdens. 

As the modern federal regulatory state expanded, Congress grew increasingly 

concerned about the significant regulatory and paperwork burdens imposed on the public, 

particularly small businesses. In September 1980, the RFA was signed into law and requires 

federal agencies to thoughtfully consider small businesses and other small entities when 

developing regulations. If an agency determines that a regulation is likely to have a "significant 

economic impact on a substantial number of small entities," the agency must engage in 

additional analysis and seek less-burdensome regulatory alternatives. In addition to requiring 

improved regulatory analysis to better determine the small entity impact, the RFA attempted to 

improve public participation in rulemaking by small businesses. It also requires agencies to 

publish an agenda semiannually listing expected rulemakings that would impact small 

businesses and to conduct "lookback" reviews-required under Section 610 of the law-of 

regulations that affect small entities to identify rules in need of reform. 

6 In FY 2013, federal agencies excluding the Department of Treasury imposed the equivalent of 7.7 hours of 

regulatory burden for every person in the United States. In FY 2003, per-person regulatory burden was 5.2 hours 

annually. This demonstrates that the increase in regulatory burden is far outpacing population growth. Population 

estimates available from the U.S. Census Bureau, https:/lwww.census.gov/popesUdata/historical/2000s/index.htmL 

5 
45 

Despite the statutory requirements of the RFA and other reform measures, federal 

regulatory burdens continue to increase every year. Congress amended the RFA with passage 

of the SBREFA of 1996. Importantly, SBREFA requires the Environmental Protection Agency 

(EPA) and the Occupational Safety and Health Administration (OSHA) to empanel a group of 

small business representatives to help consider a rule before it is proposed. In recognizing the 

importance of the SBREFA panel process, the 111th Congress expanded this requirement to 

include the new Consumer Financial Protection Bureau when it passed the Dodd-Frank Wall 

Street Reform and Consumer Protection Act 

There have also been presidential directives aimed at improving the regulatory state. 

The NAM welcomed efforts by President Barack Obama to reduce regulatory burdens. The 

president signed executive orders, and the Office of Management and Budget (OMB) issued 

memoranda on the principles of sound rulemaking, considering the cumulative effects of 

regulations, strengthening the retrospective review process and promoting international 

regulatory cooperation. Unfortunately, these initiatives have yet to provide real cost reductions 

for manufacturers or other regulated entities. President-Elect Donald Trump has focused much 

attention on the challenges of our regulatory system. Manufacturers look forward to working with 

the new administration on substantive regulatory reforms that will support economic growth, not 

hold it back. 

Every administration over the past half century has introduced initiatives designed to 

reform the regulatory system. These past directives to reduce regulatory burdens were wellintentioned, but any benefits realized by those efforts have been subsumed by the 

unnecessarily burdensome regulations that federal agencies have been and are promulgating. 

Based on data from the Government Accountability Office, 7 650 major new regulations-defined 

as having an annual effect on the economy of at least $100 million-have been issued by the 

Obama administration through the end of 2016. During President Obama's two terms, a new 

major regulation was issued every 4.47 days. Manufacturers and other regulated entities have 

confronted nearly 20 more major regulations per year from the Obama administration (82 major 

regulations per year) than during the Bush administration (62 major regulations per year). Figure 

4 shows the major regulations issued per year since the enactment of the Congressional 

Review Act in 1996. 

7 U.S. Government Accountability Office, Congressional Review Act Overview, 

http:II\'IWW.gao.govllegallcongressional-review-actloverview. 

6 
46 

Figure 4: Major Regulations per Year, Through 2016 

100 

75 

50 

25 

Clinton 

Term 2 

Bush 

Term 1 

Bush 

Term 2 

Obama 

Term 1 

Obama 

Term 2 

Regardless of the political party in charge, these regulations include significant burdens 

imposed on manufacturers and other small businesses and represent real compliance costs that 

affect our ability to expand and hire workers. There are numerous examples that highlight the 

regulatory challenges that manufacturers confront (see Attachment A). The additional costs of 

these regulations are added to the already significant cumulative burdens of existing regulations 

imposed on manufacturers and other businesses. There is a failure within the federal 

government to truly understand the impact of regulatory requirements, such as paperwork and 

recordkeeping, especially on small businesses. 

IV. Reducing Regulatory Impediments 

Manufacturing in America is gaining momentum, but it could be much stronger if federal 

policies did not impede growth. If we are to succeed in creating a more competitive economy, 

we must reform our regulatory system so that manufacturers can innovate and make better 

products instead of spending hours and resources complying with inefficient, duplicative and 

unnecessary regulations. Manufacturers are committed to commonsense regulatory reforms 

that protect the environment and public health and safety as well as prioritize economic growth 

and job creation. 

Manufacturers support reform proposals to strengthen the RFA and to ensure regulators 

are sensitive to the burdens placed on small businesses. The RFA's requirements are 

especially important to improving the quality of regulations and have saved billions of dollars in 

regulatory costs for small businesses. In January 2016, the SBA's Office of Advocacy-an 

independent office helping federal agencies implement the RFA's provisions-issued its annual 

report indicating that it helped save small businesses more than $1.6 billion in FY 2015 in firstyear cost savings. Since 1998, the Office of Advocacy indicates that the RFA has yielded nearly 

$130 billion in savings for small businesses. Imagine the positive impact on regulations if 

agencies were not able to avoid the RFA's requirements so easily. 

a. Increase Sensitivity to Small Business 

7 
47 

The RFA requires agencies to be sensitive to the needs of small businesses when 

drafting regulations. Among a number of procedural requirements, agencies must consider less 

costly alternatives for small businesses and prepare a regulatory flexibility analysis when 

proposed and final rules are issued. Lawmakers have universally supported the RFA's 

provisions, but Congress needs to strengthen the law and close loopholes that agencies use to 

avoid its requirements. 

Unfortunately, agencies are able to avoid many important RFA requirements by simply 

asserting that a rule will not impact small businesses significantly. A recent analysis in the 

Administrative Law Review shows that agencies avoided the requirement of the RFA for more 

than 92 percent of rules issued between the fall regulatory agendas of 1996 and 2012-' 

Attachment A of my testimony outlines some of the most significant regulatory challenges 

currently facing small manufacturers, and most of those rules failed to conduct any small entity 

analysis or were deficient in significant ways. Among the reasons for this small number of 

regulations requiring a regulatory flexibility analysis is the exclusion of "indirect effects." One of 

the original authors of the RFA, Sen. John Culver (0-IA), intended that the scope of the RFA 

include direct and indirect effects.9 Unfortunately, the U.S. Court of Appeals for the D.C. Circuit 

in 198510 disagreed, and subsequent courts have found "indirect effects" to be outside the 

scope of the RFA. This one change in the RFA would bring many of the rules most costly to 

small businesses under the act's framework and result in significant cost savings for small 

businesses. Clear examples of an entire class of regulations exempted from the RFA because 

of this decision are Clean Air Act rules establishing National Ambient Air Quality Standards. 

Despite the fact that even the EPA acknowledges these rules often cost hundreds of billions of 

dollars to implement, no small entities are directly affected by these rules-simply because the 

Clean Air Act only directly regulates states which, in turn, regulate small businesses. This 

simple clarification to the law would have significant benefits to our small business economy, all 

the while ensuring the continued strong protection of air quality. After all, the RFA only requires 

the analysis of small entity impacts; it does not dictate how an agency will design its regulation. 

Since the RFA was modeled on the National Environmental Policy Act (NEPA), its consideration 

of effects is also helpful to understanding the original intent of the authors of the legislation and 

the Congress that passed the law. The NEPA's implementing regulations define the term 

"effect" to mean "direct effects" and "indirect effects," which are caused by the action and are 

later in time or further removed in distance but are still reasonably foreseeable.'' 

Over the past few years, the House has passed legislation-the Small Business 

Regulatory Flexibility Improvements Act-which would close many of the loopholes that 

agencies exploit to avoid the RFA's requirements, including the addition of indirect effects within 

the scope of the law. The bill has again been introduced as H. R 33 by House Small Business 

Committee Chairman Steve Chabot (R-OH). The NAM encourages the Senate to take action on 

similar provisions to ensure vital improvements to the RFA are achieved in this Congress. 

Agency adherence to the RFA's requirements is important if regulations are to be designed in a 

way that protects the public, workers and the environment without placing unnecessary burdens 

on small businesses. Through careful analysis and an understanding of both intended and 

unintended impacts on stakeholders, agencies can improve their rules for small entities, leading 

to improved regulations for everyone. 

8 See Connor Rasa, Agency Avoidance of Rulemaking Procedures, 67 ADMIN. L. REV. 65, 69, 99 (2015) (identifying 

only 1,926 rules out of 24,787 as having completed RFA analyses). 9 126 Gong. Rec. 21,456 (1980). 10 Mid-Tex Elec. Coop. v. FERC, 773 F.2d 327, 342-43 (D.C. Cir. 1985). 11 40 C.F.R. § 1508.8. 

8 
48 

b. Streamline Regulations Through Periodic Review. Section 610 

Section 610 of the RFA requires that agencies periodically review rules to determine 

significant impacts to small entities. The intent of Congress is clear: 5 U.S. C. §610(a) states, 

"The purpose of the review shall be to determine whether such rules should be continued 

without change, or should be amended or rescinded, consistent with the stated objectives of 

applicable statutes, to minimize any significant economic impact of the rules upon a substantial 

number of such small entities. " 

Through a thoughtful examination of existing regulations, we can improve the 

effectiveness of both existing and future regulations. Importantly, retrospective reviews could 

provide agencies an opportunity to analyze, revise and improve techniques and models used for 

predicting more accurate benefit and cost estimates for future regulations. 

For an agency to truly understand the effectiveness of a regulation, it must define the 

problem that the rule seeks to modify and establish a method for measuring its effectiveness 

after implementation. In manufacturing, best practices include regular reprioritizations and 

organized abandonment of less-useful methods, procedures and practices. The same mentality 

should apply to regulating agencies: the periodic review process should be the beginning of a 

bottom-up analysis of how agencies use their regulations to accomplish their objectives. 

The Obama administration strongly promoted the benefits of conducting retrospective 

reviews. Executive Order 13563 directs agencies to conduct "retrospective analysis of rules that 

may be outmoded, ineffective, insufficient or excessively burdensome, and to modify, 

streamline, expand or repeal them in accordance with what has been learned." Retrospective 

review of regulations is not a new concept, and there have been similar initiatives over the past 

40 years. In 2005, the OMB, through the OIRA, issued a report, titled "Regulatory Reforrn ofthe 

U.S. Manufacturing Sector." That initiative identified 76 specific regulations that federal agencies 

and the OMB determined were in need of reform. In fact, the NAM submitted 26 of the 

regulations characterized as rnost in need of reform. Unfortunately, like previous reforrn 

initiatives, the 2005 initiative failed to live up to expectations, and despite efforts by federal 

agencies to cooperate with stakeholders, the promise of a significant burden reduction through 

the review of existing regulations never materialized. 

To truly build a culture of continuous improvement, the periodic review process must be 

strengthened. The power of inertia is very strong. Without an imperative to review old 

regulations, it will not be done, and we will end up with the same accumulation of conflicting, 

outdated and often ineffective regulations that build up over time. These types of systems need 

to be reinforced throughout the government to ensure regulatory programs are thoughtful, 

intentional and meet the needs of our changing economy. 

As Michael Greenstone, former chief economist at the Council of Economic Advisers 

under President Obama, wrote in 2009, "The single greatest problem with the current system is 

that most regulations are subject to a cost-benefit analysis only in advance of their 

implementation. That is the point when the least is known, and any analysis must rest on many 

unverifiable and potentially controversial assumptions.'" 2 Retrospective review of existing 

12 Michael Greenstone. "Toward a Culture of Persistent Regulatory Experimentation and Evaluation," in David Moss 

and John Cisternino, eds., New Perspectives on Regulation, The Tobin Project, 2009, p. 113, 

http :1/lobinproject. org/silesnobin project.orglfiles/assets/New _Perspectives_ C h5 _Greenstone. pdf. 

9 
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regulations should include a careful and thoughtful analysis of regulatory requirements and their 

necessity as well as an estimation of their value to intended outcomes. 

c. Hold Independent Regulatory Agencies Accountable 

The president does not exercise similar authority over independent regulatory agencies, 

such as the Federal Communications Commission, the National Labor Relations Board (NLRB), 

the Securities and Exchange Commission and the Consumer Product Safety Commission 

(CPSC), as he does over other agencies within the executive branch. Independent agencies are 

not required to comply with the same regulatory principles outlined in executive orders and OMB 

guidance as executive branch agencies and often fail to conduct any analysis to determine 

expected benefits and costs. 

Independent regulatory agencies are required to comply with the RFA. Since 

independent regulatory agencies are not accountable to the OIRA nor do they participate in 

interagency review of their rules, accountability mechanisms to ensure executive branch agency 

compliance with the RFA do not exist for them. A stronger RFA is necessary because the courts 

are the only backstop to noncompliance by independent agencies. 

d. Enhance the Abilities of Institutions to Improve the Quality of Regulations 

The SBA's Office of Advocacy plays an important role in ensuring that agencies 

thoughtfully consider small entities when promulgating regulations. When Congress created the 

office in 1976, it recognized the need for an independent body within the federal government to 

advocate for those businesses most disproportionately impacted by federal rules. The office 

helps agencies write better, smarter and more effective regulations. We urge Congress to 

support this office and provide it with the resources it needs to carry out its important work. 

V. Conclusion 

Chairman Lankford, Ranking Member Heitkamp and members of the subcommittee, 

thank you for the opportunity to testify today and your attention to these issues. Manufacturers 

believe that reforms to strengthen the RFA are necessary to create smarter regulations and 

minimize unnecessary burdens imposed on small businesses and others. The regulatory 

system can be improved while still enhancing our ability to protect health, safety and the 

environment. 

In his January 2011 Memorandum on Regulatory Flexibility, Small Business and Job 

Creation, 13 President Obama established a goal "to eliminat[e] excessive and unjustified 

burdens on small businesses and to ensur[e] that regulations are designed with careful 

consideration of their effects, including their cumulative effects, on small businesses." However, 

that goal gets farther from our reach with the regulatory accumulation that businesses in this 

country face. Your attention to regulatory reform has created optimism among manufacturers 

and others that the admirable goal set by the president can be achieved. 

Manufacturers are committed to working toward policies that will restore common sense 

to our broken and inflexible regulatory system. Too many regulations that have significant 

effects on small businesses escape the RFA's requirements because unchallenged traditions 

enable agencies to exploit loopholes. The RFA must be strengthened to ensure all agencies 

'' 76 Fed. Reg. 3827 

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carefully consider unintended impacts and costs and are sensitive to the needs of small 

businesses. The NAM urges the committee to move forward with legislation expeditiously. Jobs 

and growth for small manufacturers depend on your efforts. 

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Attachment A: Regulatory Challenges for Manufacturers 

Compliance with the RFA is underlined for each rule where applicable. 

a. Existing Regulations 

Equal Employment Opportunity Commission (EEOC) Employment Information Report 

(EE0-1) Form Change (81 Fed. Reg. 45479, approved without change). The form change 

requires all employers with 100 or more employees to submit employee compensation data 

based on sex, race and ethnicity, categorized in 12 pay bands and 10 job categories. The 

administration believes this will encourage compliance with equal pay laws, and agencies will be 

able to target enforcement more effectively by focusing efforts where there are grave 

discrepancies. The expanded recordkeeping requirements-the EE0-1 Report would expand 

from 180 data cells to approximately 3,600-put a company at risk of publicly disclosing 

employees' private information, potentially exposing proprietary information of a company. 

Moreover, the form change violates the Paperwork Reduction Act-it is unnecessary and 

duplicative, and the agency failed to employ sound rulemaking principles that are outlined in 

Executive Order 13563. Information collections, even ones that institute vast, new regulatory 

programs, are not subject to the RFA. 

Federal Acquisition Regulatory (FAR) Council Rule/ Department of Labor (DOL) 

Guidance: Fair Pay and Safe Workplaces (Contractor Blacklisting, Implementation of Executive 

Order 13673) (81 Fed. Reg. 58562). The executive order and subsequent rule and guidance, 

which were published on August 25, 2016, could bar federal contractors from new work if there 

has been even an allegation of a labor law violation in the past three years. It would apply to 

contracts valued at $500,000 or more, and the final rule expanded the proposed reporting 

requirements to include subcontractors, which would impact small business. First and foremost, 

the president and the regulating agencies do not have the legal authority to make the regulatory 

changes outlined in the rule and guidance. By directing the DOL to develop guidance that will 

establish degrees of violations not included in the underlying statutes, the executive order 

significantly amended the enforcement mechanisms Congress established for these laws. In 

addition, the order and implementation disregard existing enforcement powers the 

administration already has through federal acquisition regulations and labor laws as well as the 

long-standing process by which suspension and debarment actions are taken. This process is 

set forth in the FAR and specifically in FAR Part 9.4. Each agency has the ability to determine, 

through the agency's suspension and debarment official, whether the government should refrain 

from doing business with a particular contractor because the contractor is not "presently 

responsible." Factors taken into account for making such a determination include whether there 

has been a finding of fraud committed on the contract and/or willful and serious violations of 

other U.S. laws. Furthermore, the agency official may consider whether the contractor has taken 

measures to remediate past bad actions or eliminated systemic problems from the past. Rather 

than improving upon these existing processes, the executive order would unnecessarily create 

additional burdens on contractors and further complicate an already complex contracting 

process. In October 2016, a nationwide injunction affected the majority of the rule. The ruling 

strongly affirms the NAM's arguments related to the First Amendment; due process; 

constitutional, arbitrary and capricious concerns; and other concerns raised in the complaint. 

DOL: Federal Contractor Paid Sick Leave Proposed Rule (81 Fed. Reg. 67598). As 

directed by Executive Order 13706, the DOL finalized its rule requiring all federal contractors 

and subcontractors to provide to employees seven days of paid sick leave annually, which can 

be used for personal illness as well as leave allowing for family care. This new mandate will 

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apply to any contractors' or subcontractors' employees working "on" or "in connection with" any 

new contracts, and there is no dollar or employee threshold for the requirement to apply. 

Furthermore, the days accrued will also carry over into the following year. There is a lot of 

confusion about this new mandate and how it will affect leave programs already in place at 

certain contractors and subcontractors. Manufacturers that already provide paid time may have 

to start tracking time in hourly increments if an employee is taking leave under the Family 

Medical Leave Act. 

DOL's OSHA: Improve Tracking Workplace Injuries and Illnesses (81 Fed. Reg. 29623). 

On May 12, 2016, OSHA published its final rule changing reporting requirements for employer 

injury and illness logs and permitting the agency to publish the information on its publicly 

accessible website. While the agency has the statutory authority to collect the information, the 

statute does not authorize OSHA to make the information publicly available. The rule presents 

privacy issues for employees as the information contained in injury and illness logs includes 

personally identifiable information, as well as other private information about individual 

employees. This information should not be available for public consumption. The employer 

reports also include information that is unrelated to work activity, which, without context, could 

mischaracterize a company's safety record. Finally, despite lacking statutory authority, OSHA's 

update would place companies in enforcement jeopardy if the agency determines that a 

requirement such as additional training or even reflective clothing is an "adverse action" in 

response to an employee injury report. In a supplement to the proposed rule, OSHA provided no 

regulatory text, but it suggested in the questions it posed that a mere posting of a company's 

safety record could be viewed by the agency as the company discouraging the reporting of 

incidents. The new requirements inject uncertainty and ambiguity into the workplace safety 

dynamic. Protections for employees from retaliation in response to injury reports were and are 

comprehensive and well-established and support company initiatives to improve the health and 

well-being of employees. Within the final rule, OSHA acknowledges. yet dismisses, 

commenters' assertions that the rule should have been subject to a small business review panel 

as required under the SBREFA of 1996. The rule imposes significant consequences, however, 

including reputational harm from publishing information that is often preliminary and does not 

reflect actual workplace incidents. 

DOL OSHA: Occupational Exposure to Crystalline Silica (78 Fed. Reg. 56274). OSHA 

finalized the crystalline silica rule on March 25, 2016, reducing by half the permissible exposure 

limits for crystalline silica and mandating extensive and costly engineering controls. It also will 

require employers to provide exposure monitoring, medical surveillance, work area restrictions, 

clean rooms and recordkeeping. The proposal is based on outdated data and would impact 

534,000 businesses and 2.2 million workers. The costs of this proposal could far exceed its 

benefits. An analysis by engineering and economic consultants estimated that the silica rule 

would impose $5.5 billion in annualized compliance costs on affected industries. Silica is 

perhaps the most common construction and manufacturing material in the world; it is a critical 

component in many manufacturing, construction, transportation, defense and high-tech 

industries and is present in thousands of consumer products. OSHA's estimate relies upon data 

from a SBREFA panel that examined a draft rule in 2003, more than 13 years ago. Since 2003, 

significant changes in the economy and technological advances made in personal protective 

equipment demonstrate that the proposed changes are unnecessary and overly burdensome. 

During the rule's comment period and until it was made final in late March, the NAM and other 

industry stakeholders repeatedly asked OSHA to convene a new SBREFA panel so the most 

current analysis of costs and other impacts could be considered. These requests were rejected. 

Manufacturers will now be faced with a new regulation that could force some of our members to 

shut their doors. 

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The DOL's Office of Labor-Management Standards: Interpretation of the "Advice" 

Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act 

(Persuader Rule) (81 Fed. Reg. 15924). On March 23, 2016, the DOL published its final 

persuader rule, which provides sweeping changes to the rules that administer the LaborManagement Reporting and Disclosure Act. The agency drastically expanded the definition of 

"persuader" activity on how employers can seek advice regarding labor-organizing activities and 

when an entity will have to disclose information to the department. Under the old rules, only 

those entities that had direct contact with employees regarding labor-organizing campaigns 

would have to disclose their activity to the DOL Under the new rule, however, even those 

consultants who have no face-to-face contact with employees and are educating employers on 

rights to organize and bargain collectively will have to report to the DOL as persuaders. The 

only exception to the new definition is if an entity or consultant is only giving advice to the 

employer (this would include lawyers). These changes would make it more difficult for 

manufacturers, especially smaller-sized manufacturers, to educate employees on union 

campaigns or to seek additional information on what is permitted for discussion under the law. 

During attempted RFA analysis, it was determined that economic impacts to small entities would 

follow; however, the department stated that it would not have significant impacts on a 

substantial number of small entities, and therefore, a full RFA analysis was unnecessary. In 

November 2016, a judge granted motion for summary judgment and entered an order for a 

permanent injunction with nationwide application. 

DOL's Wage and Hour Division: Defining and Delimiting the Exemptions for Executive, 

Administrative, Professional, Outside Sales and Computer Employees (81 Fed. Reg. 32391 ). 

On May 23, 2016, the DOL finalized its increase of the minimum salary threshold from $23,440 

to $47,776 for employees to be exempted from overtime pay pursuant to the Fair Labor 

Standards Act. Of significant concern to manufacturers, particularly small firms, is a provision 

that would automatically tie future salary threshold increases to the Consumer Price Index. 

Under certain estimates, the minimum salary threshold could be $70,000 in 2020. In November 

2016, a federal judge issued a nationwide injunction preventing the implementation of the rule, 

asserting that the department likely exceeded its statutory authority. 

EPA: Carbon Pollution [i.e., Greenhouse Gas (GHG)] Emission Guidelines for Existing 

Stationary Sources: Electric Utility Generating Units (80 Fed. Reg. 64662). The EPA finalized its 

much-publicized carbon pollution standard for existing power plants on October 23, 2015, 

setting first-of-their-kind performance standards for GHG emissions from existing power plants. 

The EPA's rule will fundamentally shift how electricity is generated and consumed in this 

country, effectively picking winners and losers in terms of both technologies and fuels. The rule 

also represents an attempt to vastly expand the EPA's traditional authority to regulate specific 

source categories by setting reduction requirements that reach into the entire electricity supplyand-demand chain. The requirements will be substantial, potentially costing billions of dollars 

per year to comply. Some studies estimate that compliance with the rule would cost well over 

$300 billion and cause double-digit electricity price increases for ratepayers in most states. 

Manufacturers are concerned about these potential costs and reliability challenges as electric 

power fleets are overhauled in compliance with the regulations. Manufacturers are also keenly 

aware that the EPA is using this regulation as a model for future direct regulations on other 

manufacturing sectors-meaning manufacturers could potentially be hit twice by GHG 

regulations. Interestingly, the EPA asserts that its final rule "will not have a significant economic 

impact on a substantial number of small entities." The regulation is currently stayed by the 

Supreme Court until litigation is resolved. Thirty-four senators and 171 members of the House 

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54 

filed a brief pointing out the many legal and policy shortcomings of the EPA's rules on February 

23, 2016, and currently 27 states are party to the legal challenge. 

EPA: Emission Standards for Industrial, Commercial and Institutional Boilers and 

Process Heaters (Boiler MACT) (78 Fed. Reg. 7138). In January 2013, the EPA published its 

final Boiler MACT (maximum achievable control technology) rule. The NAM and business and 

environmental groups filed legal challenges in a federal appeals court, and the agency received 

10 petitions for reconsideration, including one filed by the NAM that also requested 

reconsideration of related rules involving air pollutants for area sources (Boiler GACT, or 

generally available control technology) and commercial and solid waste incineration units. The 

EPA estimates that the MACT portion of the rule alone will impose capital costs of near $5 

billion, plus $1.5 billion more in annual operating costs. The NAM will continue to advocate 

achievable and affordable Boiler MACT regulations. While the rule itself has improved over time, 

there are still flaws and unsettled legal and regulatory issues that impose significant costs and 

uncertainty for manufacturers. In the final rule notice, the EPA expressed concerns over 

"potential small entity impacts." However, the agency determined that, since it had conducted 

regulatory flexibility analysis for a different but related rule, it did not need to conduct similar 

analysis for this extremely costly rule. 

EPA: National Ambient Air Quality Standards (NAAQS) for Ozone (80 Fed. Reg. 65292). 

On October 1, 2015, the EPA finalized a more stringent NAAQS at 70 parts per billion (ppb), 

from the previous standard of 75 ppb. More than 60 percent of the controls and technologies 

needed to meet the rule's requirements are what the EPA called "unknown controls." Because 

controls are not known, the new standard may result in the closure of plants and the premature 

retirement of equipment used for manufacturing, construction and agriculture. The proposal 

could reduce GOP by $140 billion annually and eliminate 1.4 million job equivalents per year. In 

total, the costs of complying with the rule from 2017 through 2040 could top $1 trillion, making it 

the most expensive regulation ever issued by the U.S. government. The previous standard of 75 

ppb-the most stringent standard ever-was never even fully implemented, while emissions are 

as low as they have been in decades and air quality continues to improve. The EPA itself 

admitted that implementation of the previous standard of 75 ppb, when combined with the 

dozens of other regulations on the books that will reduce ozone precursor emissions from 

stationary and mobile sources, will drive ozone reductions below 75 ppb (and close to 70 ppb) 

by 2025. The massive costs of a stricter standard-the most expensive regulation of all time, by 

a significant margin-were simply not necessary. As with GHG emission limits, the EPA states 

that the final rule "will not have a significant economic impact on a substantial number of small 

entities." 

EPA: National Emission Standards for Hazardous Air Pollutants: Area Source Standards 

for Nine Metal Fabrication and Finishing Source Categon'es (NESHAP 6X) (73 Fed. Reg. 

42978). The NESHAP 6X regulations became effective July 23, 2008, for new sources and July 

25, 2011, for existing sources. NESHAP 6X is an air taxies regulation on metal fabrication and 

finishing operations (i.e., welding). Among other requirements, NESHAP 6X requires ongoing, 

indefinite, quarterly visual emissions monitoring for welding operations and for abrasive blasting 

operations, even after months or years of "zero visible emissions" have been recorded. As one 

might expect, the EPA certified that the rule "will not have a significant economic impact on a 

substantial number of small entities." 

EPA: Standards of Performance for Greenhouse Gas Emissions From New, Modified, 

and Reconstructed Stationary Sources: Electric Utility Generating Units (80 Fed. Reg. 64510). 

On October 23, 2015, the EPA issued first-ever standards of perfonmance for GHG emissions 

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55 

for new fossil-fuel-fired electric generating units. The EPA inappropriately concluded that carbon 

capture and sequestration (CCS) is "adequately demonstrated" for utility-scale applications and 

its utilization is the basis for the mandated standard for all new coal-fired power plants. As a 

matter of fact, CCS has not been adequately demonstrated at the utility scale-making a 

standard that requires it for all new coal plants an effective ban on those plants. Manufacturers 

support an "all of the above" approach to energy, and the EPA's proposed regulations on new 

power plants would deselect a fuel source-coal-from the nation's future energy portfolio. 

Moreover, the manufacturers of CCS worry that the regulation will stifle investment in this 

promising but as-yet unproven technology. As with its other rules, the EPA asserts that its final 

rule "will not have a significant economic impact on a substantial number of small entities." 

EPA and the Army Corps of Engineers: Definition of "Waters of the United States" 

Under the Clean Water Act (80 Fed. Reg. 37054). On May 27, 2015, the EPA and Army Corps 

of Engineers finalized a rule to greatly extend federal jurisdiction of Clean Water Act programs 

well beyond traditional navigable waters to tributaries, flood plains, adjacent waters and vaguely 

defined "other waters." The rule gives federal agencies direct authority over land-use decisions 

that Congress had intentionally reserved to the states. Its vague definitions subject countless 

ordinary commercial, industrial and even recreational and residential activities to new layers of 

federal requirements under the Clean Water Act. For manufacturers, the uncertainty of whether 

a pond, ditch or other low-lying or wet area near their property is now subject to federal Clean 

Water Act permitting requirements is a regulatory nightmare, which can introduce new upfront 

costs, project delays and threats of litigation. As of October 9, 2015, the rule has been stayed 

nationwide by the U.S. Court of Appeals for the Sixth Circuit, pending resolution of litigation. 

When one considers the number of small manufacturers and farmers that this nule will impact, it 

is confounding that the EPA certified that the rule will not have a significant economic impact on 

a substantial number of small entities. 

Interagency Working Group on Social Cost of Carbon: Technical Support Document, 

Social Cost of Carbon for Regulat01y Impact Analysis. In May 2013, the administration 

increased its estimates of the "social cost" of emitting carbon dioxide (C02) into the atmosphere 

(i.e., social cost of carbon). As a result, the new estimates allow agencies to greatly increase the 

value of benefits of regulations that target or reduce C02 emissions. The process for developing 

the social cost of carbon estimates was not transparent and failed to comply with OMB 

guidelines and information quality obligations. Many of the inputs to the models were not subject 

to peer review, and the interagency working group that developed the new estimates failed to 

disclose and quantify key uncertainties to inform decision makers and the public. Despite wide 

public concern over the new estimates, agencies are using them to justify the costs of many of 

the costliest federal regulations. The OMB public comment period initiated at the end of 2013 

yielded significant concerns by stakeholders that have never been adequately addressed, and 

federal agencies continue to rely on the 2013 social cost of carbon estimates that were 

developed and finalized without any public participation. Guidance documents are not subject to 

the RFA. 

NLRB: Ambush Elections (79 Fed. Reg. 74308). On April14, 2015, the NLRB's "ambush 

elections" rule became effective. The new rule shortens the time in which a union election can 

take place to as little as 14 days and limits allowable evidence in preelection hearings. The 

NLRB provided no evidence supporting the dramatic change in policy. Business owners would 

effectively be stripped of legal rights ensuring a fair election, and those who lack resources, or 

in-house legal expertise, will be left scrambling to hastily navigate and understand complex 

labor processes. The compressed time frame for elections could deny employees the 

opportunity to make fully informed decisions about unionization. The rule also requires all 

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employers to turn over their employees' personal e-mail addresses, home and personal cell 

phone numbers, work locations, shifts and job classifications to union organizers. Employees 

have no say in whether their personal information can be disclosed, and the recipient of the 

personal information has no substantive legal responsibility to safeguard and protect workers' 

sensitive information. The rule also provides no restriction on how the private information can be 

used, and employees have no legal recourse to hold accountable an outside group that 

compromises this important private information. Surprisingly, the board determined that there 

would be no significant impact on small entities as the RFA would only reguire they determine 

the direct burden of compliance associated in cases of representation elections, and not that 

they consider the indirect cost associated with the rule impacting all companies that would hire 

legal advice to stay informed or ensure compliance. 

NLRB: Joint-Employer Standard (.Browning-Ferris Industries of California, Inc. (362 

NLRB No. 186)). On August 27, 2015, the NLRB issued a decision in the Browning-Ferris 

Industries, Inc. case, which redefines the 30-year-old joint-employer standard, calling into 

question what type of relationship one employer has with another. The previous standard 

deemed businesses joint employers only when they share direct and immediate control over 

essential terms and conditions of employment, including hiring, firing, discipline, supervision and 

direction. Now, however, manufacturers who contract out for any product or service with another 

company could find themselves in a joint-employer relationship triggering responsibility for 

collective bargaining agreements and other parts of the National Labor Relations Act The 

previous standard is one that all industries understood and had been operating with for more 

than 30 years. Due to the fact that there has been no change in circumstance in the business 

community, the change in this standard is unjustified. Manufacturers will now have to reanalyze 

all business relationships and how they do business in the future. NLRB adjudicatory decisions, 

even those with widespread effect on businesses, are not subject to the RFA 

b. Currently Proposed Regulations 

CPSC: Mandatory Standard for Recreational Off-Highway Vehicles (79 Fed. Reg. 

68964). In October 2014, the CPSC proposed a mandatory standard for recreational offhighway vehicles (ROVs) despite admitting that it had no evidence showing its proposed 

changes would improve safety. The proposal violates statutory requirements that the agency 

defer to voluntary standards and, when issuing mandatory standards, issue only performancebased criteria and not design mandates. The CPSC's insistence on a mandatory standard will 

compromise the mobility and utility of the vehicles in the off-highway setting for which they are 

intended, negatively impact safety by limiting research and innovation and harm consumer 

demand. The result of this agency action would be the loss of thousands of manufacturing and 

retail jobs. Industry analysis has shown that at least 90 percent of serious incidents with ROVs 

would not have been affected by the CPSC proposal, but were instead caused by operator 

actions. If the rule were to be finalized, the variety of products available to consumers would be 

greatly limited as many features would be illegal, and consumer demand for new vehicles would 

significantly decrease. In the CPSC's initial regulatory flexibility analysis, the commission found 

that the proposed rule "will not likely have a significant direct impact on a substantial number of 

small firms." However, the agency's analysis fails to consider dealers, other than those that 

would be considered "importers." 

CPSC: Voluntary Remedial Actions and Guidelines for Voluntary Recall Notices (78 Fed. 

Reg. 69793). In November 2013, the CPSC issued a proposed rule that would place significant 

burdens on manufacturers and retailers of consumer products and negatively impact the highly 

successful voluntary recall process. The proposed rule would make voluntary corrective action 

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plans and voluntary recalls legally binding, increasing enforcement jeopardy and legal 

consequences in product liability, other commercial contexts or in a civil penalty matter. The 

proposal would eliminate a company's ability to disclaim admission of a defect or potential 

hazard. The proposed rule would also empower CPSC staff to include compliance programs in 

corrective action plans. The CPSC lacks the statutory authority to proceed with binding 

regulations for voluntary programs. The success of our consumer product recall system is 

based on a strong cooperative relationship between the CPSC and the companies it regulates. 

The rule removes long-standing incentives for firms to proactively cooperate with the CPSC and 

could seriously threaten the Fast-Track recall program, which the CPSC itself highlights as a 

model of good governance and was implemented as a way to assist small firms to issue 

effective recalls. Small businesses that would be impacted by the proposed rule include 

manufacturers, importers, shippers, carriers, distributors and retailers. However, the CPSC 

failed to include an initial regulatory flexibility analysis in its proposed rule. 

c. Anticipated Proposed Regulations 

CPSC: Mandatory Standard for Table Saws (76 Fed. Reg. 62678). In October 2011, the 

CPSC initiated rulemaking procedures to establish mandatory safety standards for table saws. 

The rulemaking, in its current trajectory, would potentially seek to impose a standard that could 

only be achieved through the use of one claimed patented technology. Regulation should not be 

used to advantage one technology or one company over another. The Consumer Product 

Safety Act dictates when the commission can issue a mandatory standard: only upon a finding 

that an existing voluntary standard would not prevent or adequately reduce the risk of injury in a 

manner less burdensome than the proposed CPSC mandatory standard. Data used by the 

CPSC on alleged table saw injuries are questionable and outdated and not relevant to current 

voluntary standards. If the CPSC proceeds with a mandatory standard, such action would 

undermine the industry's incentive to develop new alternative table saw safety technology and 

would impose unnecessary and significantly increased costs on consumers. In issuing an 

advance notice of proposed rulemaking, the CPSC fails to even mention the costs to small 

businesses, such as carpenters and contractors, in its discussion on economic considerations. 

According to the Power Tool Institute, the CPSC's proposal would increase the cost of each 

benchtop table saw by approximately $1 ,000-four times the average price and an $875 million 

impact only for the benchtop category of table saws. Such a burden is not justifiable for do-ityourself or small contractor customers. Unfortunately, this rule making illustrates a trend at the 

agency where the CPSC has failed to conduct adequate cost-benefit analyses with its 

rulemakings and imposes prohibitive costs on manufacturers and consumers without accounting 

for the actual risks associated with the products. An advanced notice of proposed rulemaking is 

not subject to the RFA. 

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Written Testimony Presented Before the United States Senate 

Homeland Security and Governmental Affairs Subcommittee on 

Regulatory Affairs and Federal Management 

Hearing Titled 

"improving Small Business Input on Federal Regulations: Ideas for Congress and 

a New Administration" 

January 19, 2017 

My name is Jerry Hietpas. I am the President of Action Safety Supply Co. a road 

construction related services company located in Oklahoma City and Tulsa 

Oklahoma. Since our founding in May 1975 our company has continuously served 

the highway and infrastructure industry in Oklahoma. We are fortunate to have 

about 160 full-time employees working with us. 

We specialize in temporary traffic control devices and service, install guardrail, 

cable barriers, provide highway striping, impact attenuation devices, manufacture 

and install the permanent highway signs and sign posts including roadside 

highway guide signs and the overhead sign structures. We provide and maintain 

the temporary barriers that separate traffic during construction, the electronic 

changeable message signs and manufacture, install and maintain the radar trailers 

that monitor traffic speeds and volumes that provide the information that gets 

displayed on the electronic signs. 

Our company and employees are dedicated to making highway work zones as 

safe as possible for the road user and our customers, the highway contractors and 

state agency personnel as they work to improve and maintain our highway 

system. 

We recognize the need you have to provide oversight and how you are held 

accountable to the taxpayers for their resources you commit on their behalf to 

build and maintain our National Transportation System. You must be able to 

assure yourselves that good value is received in exchanged for the investment 

made. Sometimes it seems that as you implement the laws, compliance with the 

regulations that govern the process carry a higher value than the collection of 

meaningful data, achieving lower costs or a higher quality end result. 

In the interest of time, my testimony will focus on three areas today: 
59 

1.) The U.S. Department of Transportation, Federal Motor Carrier Safety 

Administration regulations as they apply to road striping trucks and truck 

mounted attenuators (crash cushions) with a small detour into hours of 

service regulations. 

2.) The minimum pay rates paid to highway workers on federally funded 

projects as required under Davis-Bacon Act and administered by the U.S. 

Department of Labor and what appears on the surface to be an arbitrary 

application of the regulations used to establish geographical areas oft he 

application of wages to pay. 

3.) A completely different type of wage, hours, trade and demographics data 

that was required on a recent Housing and Urban Development project 

where we did some striping on a relatively minor project and a discussion 

about additional documentation requirements during the last round of 

stimulus projects. 

US DOT Number Regulations 

The USDOT Federal Motor Carrier Division REQUIRES that a company obtain a 

USDOT number if it operates vehicles with a gross vehicle weight of 10,001 

pounds or more and the company transports hazardous materials. The company 

also must work in multiple states. Some states, such as Oklahoma, require that a 

company obtain a USDOT number even if it only does business in Oklahoma 

(Intrastate carrier). The primary purpose of the USDOT number is for tracking a 

company's safety record. 

We stripe roads with a type of epoxy marking material. While this material has 

lasted up to 10 years when properly applied on high-volume roads and Interstate 

Highways providing great cost vs. benefit value, it has one component in it that is 

caustic and is therefore listed as a "hazardous" material and requires the vehicle 

to carry placards. Our company must be listed as a Hazardous Materials Carrier 

HAZMAT) because of using these materials and is subject to all of the regulations. 

It makes sense. We all want our motor carriers, ESPECIALLY our HAZMAT carriers 

to be safe operators. Repeated accidents by a HAZMAT carrier will trigger 

increased inspections by enforcement authorities including stopping and 

inspecting vehicles with that US DOT number when seen traveling down the 

highway. 
60 

I mentioned our Truck Mounted Attenuator trucks. (TMAs) These vehicles by 

design must be 10,001 pounds or more to safely operate as an attenuator. The 

primary purpose of this "crash" truck is to follow slower moving operations (such 

as striping operations) and protect our employees from injury if a vehicle strikes 

our slower moving equipment. These trucks must carry our USDOT number. 

TMAs have a secondary use as well. When the permanent attenuator, such as 

those protecting bridge piers, are damaged in an accident, a TMA can quickly be 

deployed to take the place of the damaged attenuator until it can be repaired. 

This action keeps the bridge safe in case a subsequent accident occurs. We 

routinely respond to the Oklahoma Department of Transportation's (ODOT) 

requests to provide our TMA trucks to protect these damaged permanent 

attenuators until they are repaired. In this application, our trucks get hit. Many 

of the hits are hit and run but in some cases a wrecker is needed. If that were to 

happen, a reportable incident has happened. To make it easy to know when 

reports are needed and filed, enforcement people use the following criteria. If an 

accident requires a hearse, nurse or wrecker a reportable incident occurs. 

Because of the frequency of these accidents, our company a HAZMAT carrier, was 

identified as an unsafe carrier and was "flagged" and given increased 

enforcement. Our crews driving to or from a striping job were stopped and 

inspected on a daily basis. Countless crew hours were lost during these safety 

inspections that were simply caused because our TMA trucks were involved in too 

many reportable accidents. The only way to reduce the number of these 

accidents was to not respond to ODOT's requests and get out of that business. As 

of late, we only get stopped on the side of the road and inspected a couple of 

times a month. The inspections continue to cost us time and money. Inspectors 

concerned with complying with the process are costing us a lot of money. 

Davis-Bacon Wage Rates 

Attached to my testimony is a colored map of the State of Oklahoma. These 

colors correspond to the different minimum wage rates required to be paid to 

construction workers on federally funded projects in the various class codes and 

geographical areas ofthe state. The corresponding rates are color coded as well 

and attached for your reference. 
61 

HISTORY 

The Davis-Bacon Act of 1931 is a United States federal law that establishes the 

requirement for paying the local prevailing wages on public works projects for 

laborers and mechanics. It applies to "contractors and subcontractors performing 

on federally funded or assisted contracts in excess of $2,000 for the construction, 

alteration, or repair (including painting and decorating) of public buildings or 

public works". 

CURRENTLY 

The Davis-Bacon Act was entered into the United States Code as 40 U.S.C. §§ 

276a-276a-5, but has now been re-codified as 40 U.S.C. 3141-3148. The Act 

covers four main areas of construction: residential, heavy, buildings, and 

highway. Within these areas are further classifications, including craft positions 

such as plumber, carpenter, cement mason/concrete finisher, electrician, 

insulator, laborer, lather, painter, power equipment operator, roofer, sheet metal 

worker, truck driver, and welder. 

The agency responsible for collecting and disseminating the prevailing wage data 

is the Wage and Hour Division (WHD) ofthe United States Department of 

labor (DOL). The procedure "involves four steps: (1) planning and scheduling of 

surveys, (2) conducting the surveys, (3) clarifying and analyzing the respondents' 

data and (4) issuing the wage determinations." 

Planning and scheduling surveys: In the third quarter of each year, the WHO 

distributes a Regional Planning Survey Report, published by the F. W. Dodge 

division of the McGraw-Hill Information Systems, to regional offices. The regional 

offices then consider the types of construction planned as well as the age of the 

current wage determination. This analysis determines when and where surveys 

will be conducted. 

Issuance of surveys: WD-10 survey forms are sent to contractors and 

subcontractors along with a cover letter requesting information. letters and 

forms are also sent to members of Congress, trade associations, and building 

trade unions to solicit information from them. 
62 

Compilation of data: WHD analysts then review the returned forms for 

completeness, ambiguity, and inconsistencies. If the information received is 

deemed to be inadequate, the scope of the survey may be expanded. For 

example, if it is determined that relevant projects have not been completed 

recently, or that the area is inadequately represented, WHD may conduct 

telephone surveys to increase the robustness of data. 

Publication of data: Once compiled and analyzed, the wage determinations are 

made publicly available. 

The geographical areas determined by the US DOL are cumbersome and arbitrary. 

There are 9 different wage determinations that incorporate the 77 Oklahoma 

Counties. Although the statute does make it clear that we will have wage 

classifications and geographical areas, the USDOL fails to work with local entities 

to determine what might be the best process for the local departments and 

contractors. For instance, why have 9 areas when we could have 8 that over 

lapped with the current 8 ODOT divisions? When we asked this question, we 

were quickly informed that "things just don't work like that". In essence what has 

occurred is that contractors will simply pay the highest wage determination in 

order to not have to adjust their workers' pay downward if they happen to move 

that worker to a different territory. it is not uncommon for a single project to 

cross county lines requiring both sets of wage determinations be included in the 

contract documents. 

The Department and contractors certainly spends a significant amount of 

administrative time on every federal-aid project to verify that the contractor 

payrolls are in compliance. The numbers are not huge for the administrative 

burden, but with many federal-aid projects being worked on at any given time, 

the costs can quickly add up. 

A possible solution may be to establish a simple urban and rural area rate and 

require the Department of Labor to justify any proposed wage rate difference 

based on a factual comparative report that is specific to that worker classification. 
63 

HUD Project Wage and Data Issue 

The majority of our work is done on the state roadway system, on city streets or 

on county roads. We also work with our customers on military bases or airports 

when needed. We had the opportunity to do striping on a small city street 

project in Moore, OK. We did not know part of the funding was coming from 

HUD. The job would take our crew about four hours to complete. 

I have with me a 3/8-inch-thick stack of papers including the necessary forms that 

had to be completed, the instructions for filling out the forms, requirements for 

additional letters and certification requirements, request for demographic 

information on the individuals on the crew and a note from our payroll supervisor 

informing me she had to watch a 30-minute instructional video. All of this had to 

be completed prior to be able to make an application to receive payment for the 

work we did. 

Our customer told us after the fact that they were told the city was having 

difficulty getting someone to do this type of work for them. We both agreed that 

we understood why and it brought back to mind the old story I heard about the 

military having to pay $10,000.00 for a hammer. While I cannot testify if that 

story was true or not I CAN testify that after our experience working on and 

getting paid for the work on the HUD project, I have a better understanding why it 

is difficult for the city to find contractors to do the work. 

Additional Reporting for Stimulus Projects: The last stimulus projects (American 

Recovery and Reinvestment Act of 2009 ARRA) required separate reporting in 

addition to our regular Certified Payroll Report required under Davis-Bacon. It is 

identified as form 1589 and requires the number of employees used, the hours 

worked and payroll dollars involved. 

Our Davis-Bacon payroll reports are all computer generated because of the 

volume of reports needed and the data required. ARRA form 1589 was done by 

hand because of the temporary nature of the need and limited data required. 

We also did very few of these projects so the time impact to us was limited. My 

payroll supervisor estimated the additional reporting time she spent over the 

three-year period was about 300 hours. 
64 

Conclusion: 

Thank you for the opportunity you have granted me to come and testify before 

you today and for the willingness of the committee to hear the concerns of small 

business, our small business, how some regulations have a negative impact and 

increase costs. 
65 

STATEMENT FOR THE RECORD 

BEFORETHESENATESUBCOMM~EON 

REGULATORY AFFAIRS AND FEDERAL MANAGEMENT 

ON 

"IMPROVING SMALL BUSINESS INPUT ON FEDERAL REGULATIONS: 

IDEAS FOR CONGRESS AND A NEW ADMINISTRATION" 

LAJlJANNA RUSSELL 

FOUNDER & PRESIDENT- BUSINESS MANAGEMENT ASSOCIATES, INC 

Good morning Chairman Lankford, Ranking Member Heitkamp and members of the 

Committee. 

My name is LaJuanna Russell. I'm the founder and president of Business Management 

Associates, Inc. (BMA), a business process and human capital management firm with 

approximately 100 employees. I'm also a member of the Board of Directors and Small 

Business Coundl for Small Business Majority, a national small business advocacy 

organization. Thank you for allowing me to share my comments with you on the impact 

of federal regulations on small businesses. 

I founded my business in 2005 to continue the work I began during my consulting career 

and to provide jobs to those in need. As a small business owner, I'm all too familiar with 

the debate about the impact of regulations on entrepreneurs. I'm here to say this issue is 

much more nuanced than most realize. 

Most entrepreneurs start their businesses because they love doing "the thing" they are 

doing-and want to do it bigger, better and faster than anyone else. We are driven by an 

internal vision that is unlike most We believe we see the future and believe we know how 

to implement some of that future today. We know going in that there are some rules and 

regulations (tax law, Department of Labor regulations, etc.), but we do not anticipate the 

preponderance of acts, bills, laws and regulations that we must follow-that seemingly 

change daily. As a federal contractor, this is quadroupled when you consider the federal 

acquisition process. 

I, like the majority of small business owners, actually believe certain government 

regulations play an important role and are necessary for a modern economy. According 

to a poll conducted by Small Business Majority, 86% of small business owners agree. We 

also believe our businesses can live with regulation if it is fair and manageable ( 93% of 

those polled). 

In addition, nearly 8 in 10 small employers agree regulations are important in protecting 

small businesses from unfair competition and to level the playing field with big business. 

We do believe that govemment can play an effective role in helping us thrive-as long as 

the enforcement of regulations is at least as tough on large corporations as it is on small 

businesses. 

Although we may not see regulations as our No. 1 concern-generating sales and 

increasing revenues will always come in first-regulations do remain an issue that 
66 

consume time and resources. But it's important to note that most small businesses are 

more concerned with issues like demand and job creation. When Small Business 

Majority asked small business owners what they believe would do the most to create 

jobs, the majority cited eliminating incentives for employers to move jobs overseas. Next 

was cutting taxes and then increasing consumer purchasing power. As a small business 

owner and small business advocate myself, I can tell you that most small businesses are 

much more concerned with regulations at the local level, especially when you have 

employees crossing multiple states or jurisdictions. 

It should come as no surprise then that the vast majority of small businesses supported 

tougher regulations for the financial industry under the Dodd Frank Act. Small business 

owners believe Wall Street should be held accountable for the practices that caused the 

financial crisis and we do believe that tougher rules and enforcement will make this 

happen. Nearly six in 10 small business owners said that for far too long, Wall Street 

banks and financial companies wrote their own rules, leaving small businesses and 

consumers vulnerable and without protection. An overwhelming 84% of smll businesses 

support the Consumer Financial Protection Bureau, an entity formed by the Dodd Frank 

Act and designed to help prevent abusive lending practices by providing clear rules and 

oversight of financial companies. 

Dodd Frank assists in getting small businesses closer to a level playing field with big 

business. The next step is to get policies in place that ensure regulations are monitored 

and embed true accountability and consequences for large businesses. We must put 

policies in place that ensure small businesses, our nation's biggest job creators, have the 

environment to prosper. This involves implementing a tax code that actually benefits 

small business owners and closes tax loopholes that only benefit large corporations. 

Polling numbers speak directly to this point: go% percent of small business owners 

believe big corporations use loopholes to avoid taxes that small businesses have to pay, 

and 72% want to see tax loopholes that favor large corporations eliminated. 

For my business, it also means increasing opportunities for small businesses to contract 

with the federal government and ensuring we have support once we begin to grow. 

Amazingly, once a small business expands out of its SBA designated small business size 

standard (sometimes as low as $7million in annual revenue), we are immediately thrust 

into an environment where we are competing with large, billion dollar corporations. 

This ability to compete is even further highlighted by the need to ensure that there's a 

healthcare system in place that helps self-employed entrepreneurs, small businesses and 

their employees. In order to attract talent, small business mvners must be able to obtain 

and offer robust health coverage. 

The Affordable Care Act (ACA) has been crucial in helping more small businesses and 

self-employed entrepreneurs gain access to comprehensive and affordable coverage. 

Many provisions of the healthcare law have been key to making health insurance more 

accessible and affordable for small businesses like mine. In addition to the marketplaces, 

a multitude of cost containment provisions have gone into effect that are helping to 

lower costs and provide more stability throughout the system. At BMA, we offer health 

coverage to our employees and pay Bo% of their premiums. We've been able to continue 

offering robust health benefits because our healthcare increases have been much smaller 

than they were before the ACA was implemented. In fact, our increase in 2016 was only 

3%. 

Many small business owners struggled to offer health insurance to their employees prior 

to the ACA due to cost. The annual 20-30% increases were unbearable. Small Business 

Majority's opinion polling found that prior to the ACA, the majority of small business 

owners provided insurance to at least some of their employees, but of those who didn't, 
67 

70% said it's because they couldn't afford it. What's more, small businesses paid 18% 

more on average for health coverage than large companies andreceived fewer 

comprehensive benefits. 

New research released by the Department of Treasury last week found that one in five 

2014 marketplace consumers is a small business owner or self-employed, and that small 

business owners and self-employed individuals are nearly three times as likely to 

purchase marketplace coverage as other workers. This shows the extent to which the law 

is helping small business owners and self-employed entrepeneurs. 

When you consider the number of Americans that small businesses employ and the huge 

impact to the working class that we can have, it is absolutely critical to implement 

effective mechanisms to receive small business input when considering regulatory 

changes. Our economy depends on it and on us. 

Thank you again for the opportunity to comment on this today. 

Sincerely, 

LaJuanna Russell, Founder and President 

Business Management Associates, Inc 
68 

Statement for the Record of Karen R Harned 

Executive Director, NFIB Small Business Legal Center 

Before the 

U.S. Senate Committee on Homeland Security and Government Affairs 

Subcommittee on Regulatory Affairs and Federal Management 

Hearing on: "Improving Small Business Input on Federal Regulations: ideas for 

Congress and a New Administration" 

January 19, 2017 

National Federation of Independent Business (NFI B) 

1201 F Street, NW Suite 200 

Washington, DC 20004 
69 

Chairman Lankford and Ranking Member Heitkamp, 

On behalf of the National Federation of Independent Business (NFIB), I appreciate the 

opportunity to submit for the record this testimony for the Senate Subcommittee on 

Regulatory Affairs and Federal Management's hearing entitled, "Improving Small 

Business Input on Federal Regulations: Ideas for Congress and a New Administration." 

My name is Karen Harned and I serve as the executive director of the NFIB Small 

Business Legal Center. NFIB is the nation's leading small business advocacy 

association, representing members in Washington, D.C., and all 50 state capitals. 

Founded in 1943 as a nonprofit, nonpartisan organization, NFIB's mission is to promote 

and protect the right of its members to own, operate, and grow their businesses. NFIB 

proudly represents hundreds of thousands of members nationwide from every industry 

and sector. 

The NFIB Small Business Legal Center is a nonprofit, public interest law firm 

established to provide legal resources and be the voice for small businesses in the 

nation's courts through representation on issues of public interest affecting small 

businesses. 

Impact of Regulation on Small Business 

Overzealous regulation is a perennial concern for small business. The uncertainty 

caused by future regulation negatively affects a small-business owners' ability to plan 

for future growth. Since January 2009, "government regulations and red tape" have 

been listed as among the top-three problems for small business owners, according to 

the NFIB Research Foundation's monthly Small Business Economic Trends survey.1 

Not surprisingly then, the latest Small Business Economic Trends report analyzing 

December 2016 data had regulations as the second biggest issue small business 

owners cite when asked why now is not a good time to expand. 2 Within the small 

business problem clusters identified by the NFIB Research Foundation's Small 

Business Problems and Priorities report, "regulations" rank second behind taxesa 

Despite the devastating impact of regulation on small business, federal agencies issued 

4,084 rules in 2016- more than 11 each day4 In addition, according to the 

Administration's fall2016 regulatory agenda, government bureaucrats are working on at 

least 3,318 more. 5 

When it comes to regulations, small businesses bear a disproportionate amount of the 

regulatory burden.s This is not surprising, since it's the small business owner, not one of 

1 NFIB Research Foundation, Smalf Business Economic Trends, at p. 20, January 2017. fhromeextension:/!oemmndcb!dboiebfn!addacbdfmadadm/http://www.nfib.com/assets/SBET -Oecember~2016.pdf 

2 /d. 

Babson, The State of Small Business in America 2016, chrome~ 

extension://oemmndcbldboiebfnladdacbdfmadadm/httR;://wMv.babson.edu/executlve~education/custom~ 

programs/entrepreneurship/10k-small-business/Documents/go!dman-10ksb-report-2016.pdf; Crain, Nicole V. and Crain, W. Mark, 

2 
70 

a team of "compliance officers" who is charged with understanding new regulations, 

filling out required paperwork, and ensuring the business is in compliance with new 

federal mandates. The small business owner is the compliance officer for her business 

and every hour that she spends understanding and complying with a federal regulation 

is one less hour she has to service customers and plan for future growth. 

During my nearly 15 years at NFIB I have heard countless stories from small business 

owners struggling with a new regulatory requirement. To them, the requirement came 

out of nowhere and they are frustrated that they had "no say" in its development. That is 

why early engagement in the regulatory process is key for the small business 

community. But small business owners are not roaming the halls of administrative 

agencies, reading the Federal Register or even Inside EPA. Early engagement in the 

rulemaking process is not easy for the small restaurant owner in Norman, Oklahoma or 

small manufacturer in Bismarck, North Dakota. As a result, small businesses rely 

heavily on the notice-and-comment rulemaking process, small business protections in 

the Regulatory Flexibility Act (RFA), and internal government checks like the Office of 

Advocacy at the Small Business Administration (SBA) and Office of Information 

Regulatory Affairs (OIRA) to ensure agencies don't impose costly new mandates on 

small business when viable and less expensive alternatives to achieve regulatory 

objectives exist. 

It has been two decades since the Small Business Regulatory Enforcement Fairness 

Act (SBREFA) amendments were passed and signed into law. These amendments to 

the RFA may not be well-known to the average American, but they have positively 

impacted small business owners and their customers in every state across the country. 

In its 20-year history, SBREFA has been instrumental in tamping down the "one-sizefits-all" mentality that can be found throughout the regulatory state. When followed 

correctly, SBREFA can be a valuable tool for agencies to identify flexible and less 

burdensome regulatory alternatives. However, the last 20 years have also exposed 

loopholes and weaknesses in the law that allow federal agencies to act outside of the 

spirit of SBREFA when it comes to small business regulation. As I will discuss in my 

testimony, regulatory reform legislation that Congress is considering, like the Small 

Business Regulatory Flexibility Improvements Act, would go a long way in addressing 

four particular issues that continue to plague small business 20 years after SBREFA 

became law. 

Regulatory reform is needed to ensure that SBREFA protections are expanded to other 

agencies, indirect costs of regulation on small business are taken into account, and 

judicial review is available early enough in the process to make a difference. 

Additionally, much work still needs to be done to ensure agencies comply with existing 

law and do not view SBREFA as just another box to be checked in the regulatory 

process. 

The Cost of Federal Regulation to the U.S. Economy, Manufacturing and Smaf! Business, September 10,2014. chromeextens!on:l/oemmndcb!dboiebfn!addacbdfmadadm/http·ffwww.nam.org/Data~and-Reports/Cost-of-Federai-Regu!atiOnS/Federa!­

Regu!ation-Fu!!-Study.pdf 

3 
71 

NFIB Supports Expansion of SBREFA Protections to All Federal Agencies 

NFIB supports reforms that would expand SBREFA's reach into other agencies. 

SBREFA and its associated processes, such as the Small Business Advocacy Review 

(SBAR) panels, are important ways for agencies to understand how small businesses 

fundamentally operate, how the regulatory burden disproportionately impacts them, and 

how the agency can develop simple and concise guidance materials that are designed 

with the small business owner in mind. 

Department of Labor "Overtime" Rule 

The Department of Labor (DOL) "Overtime" Rule demonstrates the need for expanded 

SBAR panels. On May 18, 2016 DOL issued its "Overtime" rule that would increase the 

salary threshold from $23,660 a year to $47,476 for executive or "white collar" 

employees. The rule would also would automatically increase the salary threshold every 

three years. 7 

Currently, agencies are required to perform an Initial Regulatory Flexibility Analysis 

(IRFA) prior to proposing a rule that would have a significant economic impact on a 

substantial number of small entities. And DOL confirmed the overtime rule would have a 

significant impact on small firms. However, when analyzing the rule DOL simultaneously 

underestimated the compliance costs to small businesses and overestimated wage 

increases realized by employees. 

First, DOL's IRFA underestimated compliance costs because it did not take into account 

business size when it estimated the time it takes to read, comprehend and implement 

the proposed changes. As an example, DOL "estimates that each establishment will 

spend one hour of time for regulatory familiarization." This assumption erroneously 

disregarded a basic reality of regulatory compliance the smaller the business, the 

longer and more expensive it is to comply. As previously noted, numerous studies have 

identified that federal regulatory compliance disproportionately affects small businesses, 

as compared to larger ones. Primarily, this is because small companies typically lack 

specialized compliance personnel. Typically, the duty of compliance officer falls to the 

business owner or the primary manager. These individuals are generally not experts in 

wading through regulatory text, so familiarization time is greater than for large 

companies. Alternatively, a small business could hire an outside expert to devise a 

compliance plan, but this cost will also be significantly greater than what a firm with inhouse compliance staff would endure. 

Second, the IRFA overestimated the wage increases employees are likely to see under 

the rule. The story of NFIB member, Robert Mayfield, illustrates this point. 

Mr. Mayfield owns five Dairy Queens in and around Austin, Texas and is very 

concerned about the impact that the rule would have on his businesses and the 

individuals whom he employs. In his words, the rule would be "bad news" for both 

7

DOL's overtime rule was initially scheduled to take effect on December 1, 2016 until a federal district court in Texas issued a 

preliminary injunction enjoining the rule from being enforced while its legality is considered by the courts. NFIB is a plaintiff in one of 

the lawsuits challenging the rule. 

4 
72 

employers and employees. 

Currently, Mr. Mayfield employs exempt managers at all five locations. These 

individuals earn, on average, about $30,000 per year and work between 40-50 hours 

per week. The managers also receive bonuses, more flexible work arrangements, 

including paid vacation and sick time, training opportunities, and promotions that 

Mayfield's hourly employees do not Mayfield explained that, in his company, promotion 

to an exempt management position carries a great deal of status with employees who, 

(upon promotion to a manager position) boast about no longer having to punch time 

clocks. In Mayfield's opinion, it would be demeaning to force managers to punch a 

clock. He also noted that his managers have more flexibility for things like doctors' 

appointments and kids' activities. Since they aren't punching in and out on a time clock, 

they are paid a weekly salary even if they're out for personal activities. 

Under DOL's rule, Mayfield predicted that he'll need to move the managers back to 

hourly positions as there is simply no way he can afford to pay over 10 managers 

$47,000 each. As a result, he predicted the skill level of his managers will decrease. 

Moreover, Mayfield noted that rather than giving managers overtime, he would likely 

hire a few more part-time employees. What he would not do would be to pay managers 

overtime; instead he would continue to strictly enforce a no-overtime policy. Overtime 

costs, he said, could not be passed on to customers nor could the business afford to 

absorb added labor costs. 

Overall, Mayfield said the effect would be lower-skilled managers and higher turnover, 

which would impact the quality of service offered at his restaurants. 

The bottom line is that while IRFA analyses are helpful for agencies to realize the cost 

and impact a proposed rule would have on small business, they generally do not tell the 

full story. 

Agencies would benefit from convening a SBAR panel for rules of significant impact. 

SBAR panels allow an agency to walk through a potential proposal with small business 

owners, either in person or via telephone, and receive feedback and other input from 

those who will be directly impacted by the regulation. These panels are currently 

required for the Environmental Protection Agency (EPA), the Occupational Safety and 

Health Administration (OSHA), and the Consumer Financial Protection Bureau. NFIB 

believes all agencies would achieve better regulatory outcomes if required to go through 

such a procedure. 

Expansion of SBREFA and SBAR panels to all agencies- including independent 

agencies -would put agencies in a better position to understand how small businesses 

fundamentally operate, how the regulatory burden disproportionately impacts them, and 

how each agency can develop simple and concise guidance materials. Moreover, 

Congress and SBA Office of Advocacy should ensure agencies are following the spirit 

of SBREFA There are instances where EPA and OSHA have declined to conduct a 

SBAR panel for a significant rule and/or a rule that would greatly benefit from small 

business input. 

5 
73 

NFIB Supports Legislation That Would Account for the Indirect Cost of Regulation 

on Small Business 

Regulatory agencies often proclaim indirect benefits for regulatory proposals, but 

decline to analyze and make publicly available the indirect costs to consumers, such as 

higher energy costs, jobs lost, and higher prices. The indirect cost of environmental 

regulations is particularly problematic. It is hard to imagine a new environmental 

regulation that does not indirectly impact small business. Whether a regulation 

mandates a new manufacturing process, sets lower emission limits, or requires 

implementation of new technology, the rule will increase the cost of producing goods 

and services. Those costs will be passed onto the small business consumers that 

purchase them. Does that mean that all environmental regulation is bad? No. But it 

does mean that indirect costs must be included in the calculation when analyzing the 

costs and benefits of new regulatory proposals. 

Clean Power Plan 

The "Clean Power Plan" rule EPA issued on October 23, 2015 provides an excellent 

example of the indirect cost of regulation on small business. 8 The rule requires states to 

reduce carbon emissions by shutting down many coal-fired power plants. President 

Obama's administration has stated that EPA's rule will "aggressively transform ... the 

domestic energy industry" and sweeps virtually all aspects of electricity production in 

America under the agency's control. 

Under the rule, states are required to find a mix of alternative energy sources, like wind 

and solar, to make up for the shuttering of coal-fired power plants. Increased reliance on 

these alternative energy sources is expected to significantly raise the costs of electricity 

and also threatens its reliability. 

Even the Obama administration expects its Clean Power Plan to drive up the cost of 

electricity, the impact of which will fall hard on small businesses that depend heavily on 

affordable energy. NFIB research shows that the cost of electricity is already a top 

concern among small business owners across the country. Small businesses will be 

squeezed between higher direct expenses and lower consumer demand resulting from 

higher home electric bills. 

NFJB supports legislation that would require federal agencies to make public a 

reasonable estimate of a rule's indirect impact on small business. 

8 The day the rule was issued NFIB joined the U.S, Chamber of Commerce, the National Association of Manufacturers, and other 

industry groups in suing EPA. We argue that the rule is an unconstitutional infringement of state rights and outside of EPA's 

statutory authority under the Clean Air Act. On February 9, 2016, the Supreme Court stopped EPA and the states from 

implementing the rule until the courts can determine whether or not it is legal. On September 27, 2016 the D.C. Circuit Court of 

Appeals met en bane to hear oral argument in our case and we are awaiting a final decision from that court 

5 
74 

NFIB Supports Legislation that Would Allow for Judicial Review of RFA 

Compliance During the Proposed Rule Stage 

Under SBREFA agency decisions are reviewable once a rule is finalized and published 

in the Federal Register. However, waiting until the end of the regulatory process to 

challenge a rule creates uncertainty for the regulated community- which directly stifles 

economic growth. Under current law, an agency determination that a rule does not 

significantly impact a substantial number of small entities may occur years before the 

rule is finalized. Small businesses must wait until the rule is promulgated before legally 

challenging the agency's determination that the rule will not significantly impact a 

substantial number of small entities. Unless a court stays enforcement of the rule, small 

businesses must comply with it while the battle over its certification is fought in court. 

This system imposes unnecessary costs and regulatory burdens on small business and 

is inefficient. 

NFIB has experienced the inefficiency and needless costs of the current law first-hand. 

Over a decade ago, the U.S. Army Corps of Engineers (Army Corps) issued a rule 

defining what it considered a wetland under its Nationwide Permits program. The Army 

Corps failed to perform a regulatory flexibility analysis as required by SBREFA and 

instead promulgated the rule using a "streamlined process." NFIB sued the agency for 

noncompliance. After four years of legal battles, we emerged victorious- a federal court 

ruled that the agency had violated the RFA Yet, instead of sending the rule back to the 

agency to be fixed, the court only admonished the Army Corps not to use its 

"streamlined process" in the future. Small business owners affected by the NWP rule 

realized no relief. 

NFIB supports legislation that would afford small business advocates judicial review 

during the proposed rule stage of rulemaking. 

NFIB Supports Other Regulatory Reforms that Would Benefit Small Business 

NFIB also would support the following regulatory reforms: 

Waiver for First-Time Paperwork Violations 

Congress should pass legislation that would waive fines and penalties for small 

businesses the first time they commit a non-harmful error on regulatory paperwork. 

Because small businesses lack specialized staff, mistakes in paperwork will happen. If 

no harm is committed as a result of the error, the agencies should waive penalties for 

first-time offenses and instead help owners to understand the mistake they made. 

More Vigorous Cost-Benefit Analysis 

Congress should require every agency to determine, compare, and publish the costs 

and benefits of a proposed regulation. Congress should make clear that this 

requirement overrides any prior legislation or court decision that does not require such a 

cost/benefit analysis. Congress should not allow agencies to adopt regulations when 

7 
75 

costs exceed benefits or when costs are unreasonable. And Congress should make that 

prohibition enforceable in court. 

End Chevron Deference 

Congress should end the so-called Chevron Doctrine made up by the Supreme Court in 

the 1984 Chevron case. In Chevron, the Supreme Court decided that courts should 

defer to reasonable interpretations by agencies of statutes the agencies administer, 

when the statutes are ambiguous. Unfortunately many statutes are ambiguous. Courts 

now routinely let agencies decide what the law means. The Chevron Doctrine gives too 

much authority to bureaucrats to do the job of judges. As Chief Justice John Marshall 

said in 1803: "It is emphatically the province and duty of the judicial department to say 

what the law is." In short, we pay judges, not bureaucrats, to determine in a court case 

what the law means. 

Under the Administrative Procedure Act (APA), Congress has assigned to regulationreviewing courts the duty to "interpret . . statutory provisions." Congress should amend 

the APA provision to make clear that, in statutory interpretation, the court should give no 

deference to the agency's view beyond the power of the agency's arguments to 

persuade. That would end the Chevron Doctrine. 

All Americans, including small business owners, would benefit. Under the principle of 

separated powers that guards our liberties, no single part of the government should 

have power to both make law and enforce law. With Chevron overturned, federal 

agencies would no longer have the power to make up the law under the guise of 

interpreting ambiguous statutes and then enforce the law they made up, through agency 

proceedings and in courts. With Chevron gone, the courts once again would serve as a 

check on the power of federal agencies, helping to preserve our freedom. 

Third-Party Review of RFA Analyses 

Congress should demand that agencies perform regulatory flexibility analyses and 

require agencies to list all of the less-burdensome alternatives that were considered. 

Each agency should provide an evidence-based explanation for why it chose a moreburdensome versus less-burdensome option and explain how their rule may act as a 

barrier to entry for a new business. To this end, NFIB would support third-party review 

when the agency and the SBA Office of Advocacy disagree on small business impact. If 

the disagreement occurs then the analysis would be turned over to OIRA for review and 

a determination as to whether the agency must perform a better RFA analysis. 

Codification of Executive Order 13563 

NFIB supports legislation that would codify Executive Order 13563 and strengthen the 

cosllbenefit review of regulation. Among other things, this legislation would statutorily 

ensure that agencies are examining the true cost of regulations, tailoring regulatory 

solutions so that they are least burdensome and most beneficial to society, encourage 

public participation in the regulatory process, promote retrospective analysis of rules 

8 
76 

that may be outmoded, ineffective, insufficient, or excessively burdensome, and 

periodically review significant regulatory actions. 

Agency Focus on Compliance 

NFIB is concerned that over the last several years many agencies shifted from an 

emphasis on small business compliance assistance to an emphasis on enforcement. 

Small businesses lack the resources needed to employ specialized regulatory 

compliance staff. Congress can help by stressing to the agencies that they need to 

devote adequate resources to help small businesses comply with the complicated and 

vast regulatory burdens they face. 

Twenty Years later, Agency Compliance with SBREFA Is Not Assured 

Finally, work still needs to be done to ensure agencies comply with the letter and spirit 

of existing law. NFIB remains deeply troubled by the lack of attention the Army Corps 

and EPA paid to following SBREFA when the agencies promulgated the Waters of the 

U.S. rule. 9 

The rule, issued on June 29, 2015, would change the Clean Water Act's definition for 

"waters of the United States" to govern not just navigable waterways, as stated in the 

statute, but every place where water could possibly flow or pool. Under the rule, EPA 

and the Army Corps could require homebuilders, farmers, and other property owners to 

spend tens of thousands of dollars on a permit before they can build or even do simple 

landscaping around seasonal streams, ponds, ditches, and depressions. 

It was clear to the regulated community the moment the rule was proposed that EPA 

and the Army Corps had little interest in conducting a meaningful assessment of the 

proposed rule's impact on small business. Indeed, EPA and the Army Corps failed to 

analyze the small business impact of the rule as required by the RFA. In early 2015, 

SBA's Office of Advocacy formally urged EPA to withdraw the waters of the U.S. rule 

because of its potentially huge impact on small businesses. It cited the EPA's own 

estimate that the rule would cost the economy more than $100 million. 10 

Twenty years after it was signed into law, it is inexcusable that federal agencies view 

SBREFA as a law to work-around or ignore rather than embrace. NFIB hopes that the 

new administration will understand the important role SBREFA plays in reducing the 

regulatory burden on America's job creators and that Congress will hold federal 

agencies to account when they fail to follow the letter and spirit of SBREFA. 

9 NF!B, joined by the U<S. Chamber of Commerce, challenged the rule in a federal court in Oklahoma arguing, among other things, 

that EPA is acting outside of its authority under the Clean Water Act and the rule is an unconstitutional infringement of state rights to 

regulate intrastate lands and waters. On October 9, 2015, the 6th Circuit Court of Appeals stopped EPA and the Army Corps from 

moving forward in implementing the rule until the 6th Circuit can detennine whether or not it is !ega!. 

10 https:/1\\I'\/'IW .sba .gov/advocacy/1 012014~definltlon-waters-united-states-under -clean-water-act 

9 
77 

Conclusion 

Small businesses are the engine of our economy. Yet over the last several years the 

crushing weight of regulation has been a top reason preventing them from growing and 

creating jobs. NFIB looks forward to working with the 1151

h Congress to pass regulatory 

reforms that would improve current law and level the regulatory "playing field" for small 

business. 

Thank you for inviting me to testify today. I look forward to answering any questions you 

may have. 

10 
78 

Kari Warberg Block Statement for the Record 

RAFM Hearing, Jan. 19, 2017 

"Improving Small Business Input on Federal Regulations: Ideas for Congress and a New 

Administration" 

I'm Kari Warberg Block and my story, as a small business owner, is like many others. I 

found a solution to a problem and with little more than an idea and a lot of passion, I 

turned it into a thriving business. For many small business owners, the challenge of 

navigating the complex federal regulatory policies is daunting and sometimes 

impossible. As a pest control developer, I feel that the need for regulatory policy 

around the protection of human and environmental health is imperative. In fact 

there should be more, not less regulation, but I would strongly advocate for a more 

common sense approach. 

I started my company, EarthKind®, in Bismarck, ND ten years ago. As the wife of 

a farmer and daughter of an entomologist, I couldn't understand why, at the time, 98 

percent of pest control solutions sold were kill methods and poisons. I certainly 

didn't want to risk the safety of my kids, pets and the wildlife by using rodent poison. 

So I invented a bio based alternative called Fresh Cab®, and today, because of the 

success of that invention, the eight most toxic baits and bars have been removed 

from store shelves. And, as a result of consumer demand, retailers want more. 

Currently, over 90 percent of locally available DIY pesticides are hazardous, and 

unsafe, to use in the home. According to a recent report from Mintel, people want 

pest control options that are fast acting, non-toxic and safe, especially if there are 

children and pets in the household. In fact, 61 percent of pest control product users 

prefer to use natural, non-chemical alternatives in the home. Local access to safe, 

effective and affordable bio pesticides requires entrepreneurs willing to take on 

risks, and Federal policy that empowers our nation's innovators to make it happen. 

From the outset, we have worked to bring the same gold standard to 'natural' that's 

been expected from traditional pest control products by acquiring Federal EPA 

registrations. But, it has not been easy. In reality, only the largest of businesses can 

effectively navigate or afford the current Federal EPA requirements to meet the 

unmet consumer demand. Why we have succeeded where others have failed is 

because I refused to give up. It shouldn't have to be like that. As an entrepreneur 

who's seen the process full circle, risking everything I had to see it through, I can 

assure you that less regulation is NOT the right answer. It's smarter regulation that's 

needed. 
79 

Here's an example of what I mean. 

The first Botanical Rodent Repellent: 

The path to Fresh Cab's FIFRA registration as a minimal risk biopesticide took several 

years. New protocols were developed to access repellency rates absent the usual 

dead carcass counts. Lab and field testing was repeated three times, taking two 

years, at the request of the science review team 'just to be sure.' The independent 

Trials required animal welfare committees, live caught field mice, and protocol 

reviews. Product safety tests were done, as was the classic toxic 6 pack required of 

all toxic products. We persevered. At long last, our product entered interstate 

commerce in 2007. We happily paid our two federal annual fees, and 50 state 

licenses and were in business! Although, I question how many other small business 

owners would be willing to sell everything they owned to satisfy EPA's additional, 

burdensome, data requests. 

Once on the market, we were not allowed to use label language that represented 

what we'd just proven: that our product was effective, non-toxic, and safe when 

used as directed. Whereas several other (copy cat) botanical based rodent repellents 

have been allowed to use those claims on their label, and were NOT required to 

submit full data packages for federal review due to a 25b exemption. Consumers are 

confused. Are these products truly safe or effective? The label is all consumers have 

to go by. This inconsistency is particularly concerning to me in the case of public 

health risk pests like rodents or mosquitos. 

The first wearable botanical mosquito patch: 

I wanted to offer a natural alternative to repel mosquitos. I had a proven effective, 

already EPA registered, natural essential oils infused into a wearable patch ready to 

go. Perfect for people who don't like, or can't use, sprays, they can simply wear the 

treatment on their clothing. EPA required human trials, and initiated a human 

welfare committee as part of the team. This would prove not only cost 

prohibitive for my brand, but also I would be last to market and not first. Doing it the 

right way is not always rewarded. I can go to market without any federal review or 

mislabeling enforcement, but I want to give retailers and consumers the peace of 

mind of having the level of transparency that an EPA registration should 

create. There have to be ways to work with entrepreneurs who play by the 

rules, rather than work against them. 
80 

Smarter regulations begin with an understanding of small business and what the 

regulatory process looks like from their perspective. Small business means just that, 

maybe only one person wearing many hats and juggling innovation, manufacturing, 

sales and regulatory moving targets. The current process is very burdensome for 

small business owners, often requiring them to go over the same thing many times 

as the agencies are constantly coming back with more questions, or additional data 

requests that lack relevancy to risk, public need, or even costs for end of life 

cleanup. Even finding the right person in an agency to connect with is a major 

challenge. 

I have proven to myself and to retailers that working with Federal Policy, not against 

it, is the only way to ensure a "gold standard" for consumers. It's the smart thing to 

do. So, I urge the EPA to streamline some of the processes so more innovation can 

be brought to market. Thriving small business innovation is crucial to the fiscal wellbeing of the US economy. 
81 

U.S. CHAMBER OF COMMERCE 

SMALL BUSINESS COUNCIL 

MAXINE TURNER 

C!L\JR 

HLSI:" 

The Honorable Steve Chabot 

Chairman 

Committee on Small Business 

U.S. House of Representatives 

Washington, DC 20515 

The Honorable Jim Risch 

Chairman 

Committee on Small Business 

and Entreprenemship 

United States Senate 

Washington, DC 20510 

S.\l 

January 18,2017 

TOM SULLIVAN 

\"!CF. PRESJDE~·J 

Bl'Sl~ESS POLJC\ 

The Honorable Nydia Velazquez 

Ranking Member 

Committee on Small Business 

U.S. House of Representatives 

Washington, DC 20515 

The Honorable Jeanne Shaheen 

Ranking Member 

Committee on Small Business 

and Entrepreneurship 

United States Senate 

Washington, DC 20510 

Dear Chairmen Chabot and Risch and Ranking Members Velazquez and Shaheen: 

On behalf of the Small Business Council of the U.S. Chamber of Commerce, I 

compliment you on the House passage of H.R. 5, which compiles several regulatory refonn 

bills, including H.R. 55, the "Regulatory Accountability Act," and H.R. 33, "the Small 

Business Regulatory Flexibility Improvements Act of20 17, ., and urge the Senate to 

expeditiously consider regulatory reform legislation. 

The Chamber represents the interests of over 3 million businesses, the majority of 

which are small firms. Those small businesses are the economic engine of America and we 

pledge to work with you on policies that would allow the engine to rw1 at full speed. 

The 62 million people employed at small firms represent about half of America's 

private sector workforce. And, since 1995 small business is responsible for creating about 

two-thirds oft he net new jobs in our country. The power of small business to create growth, 

spm innovation, hire workers, and improve communities throughout the United States is 

undisputed. However, the nation has experienced a decline in stmt-ups over the past decade 

and that trend threatens a full economic recovery. 1 

1 Ryan Decker, john Haltiwanger, Ron jarmin and Javier Miranda, "The Secular Decline in Business 

Dynamism in the U.S," Working Paper, 2014, at http:((econweb.umd.edu/-haltiwan(DHJM_6_2_2014.pdf. 
82 

Undoubtedly, the growth of federal regulation over the past several years deserves part 

of the blame for anemic economic grov,th, In fact, complaints about the chokchold of federal 

mandates among small business owners has risen considerably and ranks as a top issue of 

concern for small businesses 2 

I would like to share how federal regulations have affected my company, Cuisine 

Unlimited. In February 2016, we were awarded a major catering contract for all food services 

at the new performing mts center in our homctovm of Salt Lake City. This contract mem1t a 

major investment in equipment, small wares, at1d hiring of more thm1 50 additional stati, 

among other investments. Red tape made what should have been a golden opportunity into an 

unbelievable headache. 

We immediately applied for an SBA loan, but soon lcm·ned that our 37-year-old, well 

established company did not quality, even though we have had numerous successfully 

managed SBA loans in the past. Three banks informed us that our rating, according to new 

bank regulations imposed by Dodd-Frm1k, disqualified us from loan consideration. 

Trying to navigate the complexities of the Affordable Care Act and anticipation of the 

new overtime mles forced us to hire part time staff instead of full-time, salaried positions with 

benefits. It should not be so hard for us to take advantage of a new contract. Why does it 

seem as though government is wind in my face instead of at my back? 

Unfortunately, my story is not tmique. As Chair of the Chamber's Small Business 

Council, 1 hear the story from small business owners across the country who arc struggling 

with the weight of over burdensome regulation on their businesses. 

One way to address the problems associated with unnecessary, duplicative, or 

excessive federal red tape is to guarantee that small business stakeholders like me have a 

place at the table when regulatory policy decisions are made. That is the concept embodied in 

the Regulatory Accotmtability Act and the Small Business Regulatory Flexibility 

Improvements Act included in l-l.R. 5 that passed the U.S. House of Representatives last 

week. 

The U.S. Chatnber of Commerce's Small Business Council is pleased that our new 

director, Tom Sullivan, has worked throughout his entire career to in11uence regulatory policy 

on behalf of small business. As Chief Counsel for Advocacy at the U.S. Small Business 

Administration from 2002-2008, Tom worked tirelessly to ease the weight of federal 

regulation on Main Street small business. He joins me, and the entire Council, in our desire to 

enact regulatory reform that would result in lasting red tape relief for America's small 

business community. 

2 Holly Wade, "Small Business Problems and Priorities," NFIB Research Foundation (August 2016], Page 

14, (finding that government regulations moved up in importance from ranking fifth in 2012 to its current 

second place ranking (behind cost of health insurance] at http:/ ;www.nfib.comjassets/N FIB-Problemsand-Priorities-20 16.pdf. 
83 

Thank you for considering this letter and thank you for your leadership on small 

business policies. Please do not hesitate to contact Tom Sullivan at the U.S. Chamber of 

Commerce at (202) 463-3192 for any additional information about the views expressed in this 

letter. 

Sincerely, 

Maxine Turner 

Founder, Cuisine Unlimited 

Salt Lake City, Utah 
84 

Owner-Operator Independent Drivers Association 

National Head(]Uarters: l NW OOlDA Drivej Grain Valley, MO 64029 

Tel: (816) 229-5791 Fax: (816) 427-4468 

Washington Oflice: 1100 !'lew Jersey Ave. SE, Washington, DC 20001 

Tel: (202) 347-2007 f'ax: (202) 347-2008 

To: U.S. Senate Subcommittee on Regulatory Affairs and Federal Management 

Chairman James Lankford and Ranking Member Heidi Heitkamp 

On behalf of more than 160,000 independent owne.r-operators and professional truck drivers, the 

Owner-Operator Independent Drivers Association (OOIDA) submits these brief comments for 

the record in connection with the January 19, 2017 hearing entitled, ·'Improving Small Business 

Input on Federal Regulations: Ideas for Congress and a New Administration." 

As you know, the trucking industry plays a vital role in the United States' economic wellbeing 

and is solely responsible for transporting 69% of the nation's goods and commerce. The vast 

majority of trucking companies based in the US are small businesses, as 96% of all motor 

carriers have Jess than 20 trucks in their fleet and 87% of motor carriers have fleets of just six or 

fewer trucks. In fact, owner-operator companies with just one truck represent roughly half of the 

motor carriers registered with the Federal Motor Carrier Safety Administration. In short, small 

business truckers are truly the backbone of our nation's economy. 

Small business truckers also represent the safest and most diverse operations on the road. Their 

activities impact all sectors of our economy. including agriculture, household goods movement, 

consumer products, oil and gas, the military, sports and entertainment, and construction. Day in 

and day out, small business truckers transport nearly everything we eat, drink, or rely upon in our 

society. When disasters strike, small businesses, because of their versatility and flexibility, are 

the tirst to anive with relief supplies and the materials needed to rebuild communities. The 

importance of small businesses in the trucking industry cannot be overstated and should not be 

ignored. 

Yet, for far too long government agencies have failed to appreciate the signilicance of small 

business truckers as well as their wide ranging types of operations. Federal agencies tend to 

apply a "one-size-tits-all" approach to their regulatory rulemakings that punishes small 

businesses, stifles competition, and overregulates a vital US industry. In the past, OO!DA has 

otTered suggestions on how to reform the Regulatory Flexibility Act (RFA), having provided 

testimony in 2007 at a hearing held by the U.S. House of Representatives Committee on Small 

Business on a similar topic. Since 2007, OO!DA has seen very little change as small businesses 

still struggle in a regulatory climate that gives large companies greater voice and consideration 

throughout the entire rulemaking process. While agencies have improved upon outreach and 

afforded greater opportunity for small businesses to comment, the resulting rules are continually 

applied to small businesses just as they would Jar large businesses without consideration of the 

practical impact, which generally is far greater on the smaller sized companies. 
85 

Who the Agencies Chose to Listen to in Advance of N.ulemakings? 

On January 1 I, 2017, the U.S. Department of Transportation announced the launch of a new 

federal advisory committee focused on vehicle automation. The committee will provide the 

Department insight and guidance on the development and deployment of automated vehicles, 

while identifying research, policy and regulatory opportunities to help advance the technology in 

a safe and responsible manner. The committee is comprised of more than 20 CEO's, elected 

officials, and academics, but does not feature a representative of small businesses. Automation 

technology is undoubtedly a game-changer for the future of the trucking industry, yet the 

Depmtment hasn't included small businesses on the panel. Will small businesses be able to 

afford the discussed technology? Will this technology eliminate small businesses from an 

industry reliant upon their services? How will owner-operators be impacted in an autonomous 

environment? Small business truckers arc naturally concerned large compm1ies and academics 

will lead the discussion about their fate. Unfortunately, agencies too often turn to these large 

companies when seeking advice. 

Small Businesses Are Culpable for Problems Caused by Larger Companies 

Nearly ten years ago, the Federal Motor Carrier Safety Administration and the National Highway 

Traffic Safety Administration were petitioned to pursue a rulemaking to require speed limiters on 

all heavy duty trucks, meaning that all trucks would be required to set a speed limiter at a 

determined speed of approximately 65 miles per hour. The agencies admit the rule has a dran1atic 

impact on small businesses noting " ... we expect that large trucking companies would absorb the 

additional cargo with their reserve of capacity of trucks but would need to hire additional 

drivers." Additionally, the agencies concludes, "Although the proposed rules would apply to all 

heavy vehicles, the agencies' analysis indicates that this joint rulemaking could put owneroperators and small tleet owners at a disadvantage ... " Smaller carriers working at the behest of 

the larger carriers is not ideal for safety, the consumers or the industry. While the NPRM is still 

pending, it is astonishing that FMC SA would propose a rule with this dramatic of an impact on 

90% of the industry. 

Fmther, this petition was filed by the American Trucking Association a trade group 

representing the interests of the largest corporations in trucking, who typically utilize speed 

limiters as a method of fleet management. Fleets with hundreds, if not thousands, of trucks 

realize an economic benefit from controlling speed, however large fleet owners find themselves 

at a competitive disadvantage with smaller companies who are capable of traveling at the speed 

limit and with the flow of traffic, which was in part the precipitating factor behind the petition. 

The agencies otTer no breathing room for small businesses and care little for the safety or 

economic consequences resulting tram this rulemaking as the proposal openly details. For 

instance, small compm1ies cannot as easily absorb the costs of speeding violations and would be 

forced to become slavish to compliance. 

Another exan1ple of the one-sized-fits all approach prototypical of the federal rule making can be 

found in one of the most expensive promulgated rules from the Obama Administration. In 2011, 

Electronic Logging Devices (ELDs) were identified by the administration, at the request of 

Congress, as one of the most expensive rulemakings proposed by any federal Department. By the 
86 

administration's own estimates, which are often notoriously below industry cost analyses, the 

implementation of ELDs would cost $2 billion. ELDs are theorized to improve compliance with 

hours of service (HOS) regulations. However, they are incapable of tracking the amount of time 

drivers expend during the loading and unloading process- a sizable portion of a driver's work 

week and where the vast majority ofHOS non-compliance occurs. Since ELDs are only capable 

of tracking when the wheels of the truck are moving and are vulnerable to failures, drivers are 

still required to keep paper log books. ELDs are admittedly no more reliable than these logs and 

are not proven to result in any safety benefits. Like speed limiters, large carriers use ELDs as 

f1eet management and productivity tools. whereas small businesses do not share these needs. 

Again, large carriers filed a petition seeking an across the board mandate of ELDs to eliminate a 

perceived competitive disadvantage and the agency engaged in an NPRM. The agency has 

chosen to punish small businesses. 

Furthermore, a recently released EPA regulation on heavy trucks has pushed the ten-year 

regulatory burden on America past $1 trillion this equates to an annual cost of$540 for every 

American. While attempting to reduce already declining emissions from trucks, the regulation 

will simultaneously increase the cost of equipment, making it more difficult for independent 

drivers to purchase new, more advanced vehicles. 

Providing Meaningful Assistance to Small Businesses Should be more than Rhetorical 

The vast majority of new job creation is from small business entrepreneurship, yet as noted 

above, small businesses are not rewarded for their important role in the marketplace. Small 

businesses, particularly small business trucking operations, are generally more versatile, and 

among the safest operators on the road. We should be encouraging the models they use, not 

stifling them under a regulatory framework that looks only toward the actions oflarge 

corporations for inspiration. The word ''f1exibility" in ''Regulatory Flexibility Act" implies that 

the government should find less burdensome alternatives to particularly onerous regulations 

and/or less burdensome alternatives to offer small businesses .. 

The Small Business Administration OiTice of Advocacy has stated that since 1998, RFA 

Implementation through 2007 had saved over $200 billion, of which $156 billion arc recurring 

savings each year. Under the Administrative Procedures Act, agencies are required to assess the 

impact of their regulations on small entities as a key part of the process for issuing regulations, 

and to use less burdensome alternatives whenever possible. A big part of the RFA is based on the 

f~1ct that the average cost of regulation was $2,979 per employee for large firms with 500 or more 

employees and $5,532 per employee for small firms with fewer than 20 employees. 96% of all 

trucking carriers are 20 trucks or less so the greatest burden is on the sma Her firms and especially 

disproportionate for the one truck operators. 

We appreciate the Committee's important attention to this matter and look forward to providing 

a voice for the small operators moving forward. 
87 

Credit Union Natlona! Assodation 

January 18. 2017 

The I Ionorablc James ! ,ankford 

Chairman 

Subcommittee on Regulatory Affairs 

and Federal t-.'lanagemcnt 

340 Dirksen Senate Office Building 

Washington, DC, 205 !0 ._ 

The Honorable Heidi Heitkamp 

Ranking Member 

Subcommittee on Regulatory Affairs 

and l:cdcral Management 

340 Dirksen Scnat~ Office Building 

Washin6~0n, DC, 20510 

Dear Chairman Lankford and Ranking Member I·leitkamp: 

On hehalf of Aml:rica's credit unions. I am 

Business Input on Federal rw;'"''""ms: 

Union National Association represents state and fCJerally chartered credit unions 

and their more than 100 members. Thank you for the opportunity to submit this letter f()r the 

record of the hearing. 

One-Size-Fits-Ail Regulations Have Harmed Credit Union lVIcmbers 

so 

OV<or-reQt.liat.<on of small institutions is hurting consumers, costing them time and money, and 

anticipated the possibility of such problems and enacted protections for credit unions and other 

financial service providers. As know, the Small Business Regulatory Enforcement Fairness 

Act of 1996 (SBREF A) amended the Flexibility Act of 1980, to require some fCdcra! 

agencies to hold a SBREF ;\ its proposed rule is likely to have a significant 

impact on a substantial entities. The Consumer Financial Protection Bureau (CFPB) is 

one of the agencies that must in the SBREFA process. and credit union representatives have 

served as Small Entity on several for its ru!emakings. \Vhile we 

appreciate that SBREFA a credit unions. we believe the CFPB should 

be taking the feedback it receives 

to this be needed to ensure 

of final rules. 
88 

There Are 1\tlany Small Credit Unions Serving Consumers, and They Arc Harmed Most by 

Overregulation 

Jn the United States, 2,708 out of approximately 6000 credit unions have less than five or fewer full time 

employees, 2,614 are under $20 million, and 3,754 arc under $50 million. Despite the large number of 

small credit unions and the indisputable difference in structure and resources between them and the 

largest banks, they have been subjected to more than 200 regulatory changes since the financial crisis 

that they did not cause. This has to several thousand pages of new or modified requirements 

despite already extremely high ratings from consumcrs 1 and despite that credit unions 

already deliver roughly $10 bl11ion in savings to 100 million members every year. 2 

Small credit unions have been particularly harmed by one~size~tits-a\l rules that do not account for their 

less. complex structure. A recent study fOund that in 2014 alone, the cost of regulatory burden on credit 

unions was $7.2 billion.3 The study also revealed that from 2010 to 2014, regulatory impact on credit 

unions increased by $2.8 billion. This represents a 40% increase since 20! 0, not even counting the effect 

of asset grmvth. 

One of the most disconcerting issues the study confi1mcd is that small credit unions bear the hnmt of 

regulatory burden and costs. For smaller credit unions-the three quarters of credit unions with assets 

below $100 million-regulatory costs rose from 0.78% of assets in 2010 to L 12% of assets in 2014, an 

increase of 43%. Regulatory costs now account fOr 30?1() of total operating expenses at smaller credit 

unions and almost !0% of total operating expenses at these credit unions in 2014 were nc\V regulatory 

expenses added since 2010. For credit unions with assets between $100 million and $1 billion, the 

increase in regulatory expenses was 40%, and was 28S·'O at credit unions with over $1 billion in assets. 

These increases come on top of the already regulation credit unions faced prior to 20! 0. Notably, 

these numbers do not even include the of other rules implemented after the study 

such as the Tmth in Lending Act and Settlement Procedures Act (TILA-RESPA) integrated 

disclosure and ne\v requirements, the flome Mortgage Disclosure Act new disclosure requirements, and 

the new Military Lending Act requirements. 

While these compliance costs stem f'rom regulations l'rom several diftCrent agencies, the thousands of 

pages of new wles from the CFPB over the past fev ... years are a top concern to credit unions. Going 

fOrward, more must be done to protect credit unions awJ members from the dispropo1iiona! burden one~ 

size fits a!l rules cause. 

"Choose the Best Bank for You.'' Consumer Reports available at 

2015). "Credit 

unions are among the highest-rated services they have ever evaluated, with 93 percent of their customers highly 

satisfied." 

4

Credit Union National Association, State-by-State Data on the Benefits of Credit Union Membership, available at 

2 
89 

Credit Unions Have Concerns with the CFPB's Approach toward SBREFA 

Credit union employees have taken time and resources away from their daily jobs serving members to 

provide feedback to the CFPB on extremely complex SBREFA outlines with ideas for proposed rules. 

During the SBREFA process, these representatives arc usual!y given less than a month to: read and 

digest complex outlines \vhich can require legal and economic analysis, work to determine how the 

CFPH's proposals could impact their credit union. and compile data and feedback that the agency itself 

may not have even collected on a wide scale basis or analyzed. In short, they arc often asked to do as 

much work as a federal government agency, and meanwhile continue to operate their credit union and 

serve the many members relying on them for financial services. ivioreover, they arc asked to travel across 

the country to Washington, D.C. to participate in an a!l-day-long panel on their own dime, as well as 

participate in several conference calls beforehand, 

While this process can clearly be extremely burdensome to the small credit unions that participate, they 

continue to seek to participate in the SBREFA process and believe the concept ofSBREFA is a very 

valuable one, This is because alternatively, rules that do not account for different institutions' size and 

structure can be catastrophic, lead to the diminution of products and services, and accelerate small credit 

union consolidation. Too often in past SBREFA CFPB officials have willti.Jlly ignored the 

feedback credit union representatives have to them about the harm rules, not properly tailored 

to their size and structure cause Cnmmunity Institutions, 

Frankly, there are some serious concerns that the CFPI3 view-s the SBREFA process more as a check-thebox exercise, and often has not included the suggestions and feedback small credit unions have provided 

to it in proposed or final rules, despite the many sacrifices they make to participate in the process. The 

condensed timcframc of SBREFA and the complexity of the outlines of rules under consideration have 

also made it difficult for credit unions to analyze and provide feedback on all asptxts of the multifaceted 

outlines before the 60 days ends. On several occasions, some of the major problems that the rule could 

cause for credit unions were identified after the SBREFA process, 

An example of this is the CfPB's payday and small dollar loan rule, which is more than 1300 pages. The 

CPPR made a number of public statements claiming that credit unions and the National Credit Union 

Administration (NCUA) Payday Altemativc Loan (PAL) were largely not impacted by this rule. 

However, a closer examination showed that not only were there many regulatory and compliance 

burdens this rule could cause for credit unions, but aspects of credit union lending, which are not even 

similar to payday and small dollar lending such as auto refinances, are impacted by this broad one-size 

tits all rule. For the CFPB process to be more effective, credit unions need more time to review potential 

rulemakings and transparency from the CFPB during the SI3REFA process. 
90 

The SEA Office of Advocacy Rc'-·ently Told the CFPB it did not Properly Consider the Impact on 

Small Credit Unions in its Payday and Small Dollar Proposed Rule 

In the SBREF!\ process. the CfPB must analyze the cost that those subject to the rule will incur and seek 

to minimize that impact"' The CFPB's analysis for smaller credit unions in its payday and small dollar 

rule ignored many potential impacts and cost burdens of the proposed rule on small credit unions. As 

CUNA outlined in a recent comment letter to the CFPB, its analysis is lacking. ignoring many new 

compliance burdens and '.:Osts credit unions could face if included in this \Vhich should instead be 

aimed at predatory !enders.5 

The adjustments necessary to comply with this rule could come at a significant cost to small credit 

unions, and the Small Business Administration (SBA) Office of Advocacy agreed with credit union 

concerns.6 In its comment letter, the SBA Office of Advocacy questioned whether the proposed rule 

would detrimentally impact the ability of consumers to be able to obtain credit, particularly noting that 

consumers in rural and underserved areas be disadvantaged. The SBA Office of Advocacy further 

expressed concerns that the proposed rule options consumers have from law-abiding lenders such 

as credit unions, as opposed to illegal online !enders, loan sharks or others operating in the shadows. 

Additionally, the SBA Office of Advocacy stated. "The CrPB's proposed rule may force legitimate 

husinesscs to cease operation, such a regulation will not alleviate a consumer's financial 

situation. The consumer \\ill to pay his/her bills and other expenses. lmposing these strict 

regulations may deprive consumers of a means of addressing their financial situation." 

Most notably the SBA Office of Advocacy urged the Cf'PB to exempt credit unions and defer to their 

prudential regulator stating: 

The National Credit Union Administration has addressed the issue of payday type loans for 

credit unions \Vith the PAL program. NCUA federal agency within the executive 

branch. It is the chartering authority for federal credit and provides federal account insurance to 

all federal credit unions. NCUA works to ensure saf~ty and soundness as we!! as compliance \Vith 

applicable federal regulations in the credit union system. It also \Vorks to protect consumer rights and 

member deposits. Advocacy encourages the CFPB to recognize the NCUA's expertise in the area of 

credit unions and exempt small credit unions from the proposed rule. 

In addition to the SBA Office uf Advocacy. the NCUA expressed that credit unions should he exempt 

from parts of the rule and changes .arc necessary. It is extremely concerning that the CFPB held a 

SBREFA panel for this rule and supposedly considered the fccdba\.~k of participants, yet in addition to 

4 Dodd-Frank Act§ 1100G(b). 

5 CUNA Comment letter CFPB Proposed Ru!e Payday, Vehicle Title, and other Covered Loans, available at 

Business Administration Office of Advocacy Letter to CFP!3 in response to the CFPB's proposed rule for 

Payday, Small Dollar, and High Cost Loans, 
91 

thousands ofcommenters, several other regulators have taken issue with the proposed rulc. 7 They have 

reiterated credit union concerns that the CFPD should be treating small financial institutions such as 

credit unions differently lhan others who may pose a greater risk to consumers. It seems like there is a 

clear problem with the consideration feedback from small financial institutions is being given by the 

CFPB if its te!lo\v regulators feel the need to intervene and express concerns ubout proposed rules. 

Congress Should EncoUI·age the CFPB to Provide More Consideration to Feedback from the SBA 

Office of Advocacy and Credit Unions 

We have received feedback from a number of credit unions that participated on SBREFA panels that they 

felt that final rules did not include enough changes and/or exemptions to limit impact on small credit 

unions. As a result, small credit unions have had the most difficulty complying with new mortgage rules 

even atler participating in SI3REFA. In August 2016, the Government Accountability Office released a 

report with observations fi·om some of the earlier CFPB SBREFA panels, which found that out of the 57 

SERs who particirated, seven stated they were satisfied with the CFPB final rules. 8 

We encourage Congress to continue to nnalyze whether CFPB final rules properly address credit union 

and other small financial institution concerns. As outlined in our letter, we believe more transparency, 

longer timeframes for SDREF A, and fewer burdens on small financial institutions participating could 

lead to an improved SBREFA process. Specific to the CFPB's proposed rule for payday and small dollar 

loans, \Ve encourage Congress to consider that not only did the SBA Office of Advocacy express 

concerns with how this rroposed rule will hann credit unions members) but so did the NCUA, credit 

unions' primary r~gulator that has overseen them for more than 40 years. Congress should encourage the 

CFPB to address these important concerns of other regulators. It should also urge the CFPB to more 

effectively consult with primary prudential financial regulators even before beginning the SBREF A 

process. 

CUNA strongly supports requiring the SBREFA process and the concept that the impact of rules on 

smaller financial institutions needs special consideration. Howev~r. we believe the CFPB needs more 

accountability to take this process seriously for the protection of small credit unions and credit union 

members. Thank you for your consideration of our comments. 

Sincerely, 

7 National Credit Union Administration Comment Letter to CFPG in response to the rule for 

Payday, small Dollar, and High Cost Loans, '.'iLRRYhfWY[.iCOfilll='Qq;_m_r·.msls&o~~·t[DL 
92 
93 

I FOREWORD 

Th8 Nat:onal Srnall Rus:ness Associat1on (NSBA) 1s the nation's f:rst small-business advocacy organ·zat1on, 

celebrating 80 years of small-busmess 'll Wash;ngton, D.C Focused on federal advocacy and 

operat1ng on a staunchly nonpart1san bas1s, NSBA 1S a recogn1zed leader Amenca's sma!l-bus1ness comrrtun:ty 

Throughout the year, we conduct of surveys, ~nclud1ng two Econorn1c Reports and a series of issue-based 

surveys_ Now, for the f1rst t1me, NS8A has conducted a comorehens:ve survey ort regulations and how they :mpact 

Amer;ca·s smal! bus1nesses. 

The 2017 NSBA Small 8USi'1ess Regu!at1ons Survey prov1des quant1tat1ve support for the need to greatly reduce 

regulatory comolex:ty, strearnlme the web of federal, state and local regulattons, and adhere to pla;n language 

Goth the need for regulatory well as road-map to achieve rt-are !a1d out 1n th1s survey packet 

Anwt~g the most compelkg data :n the survey, we found that the aver·age small-business owner soendtng at 

least $12,000 every year on regulations, and nearly one··rn-three spends more than 80 hours each year dealing 

w:th federal r·egu!at'on. We suspect these ·nd1cators would be rn0ch h:gher if· the survey spectfted the :nclus:on !f' 

calculatiOns of even long-standrng regulat:ons such 40-hour work week. It 1S hrghiy l:kely that most smal 

ftrms who took the survey s1mply cons:dered such long-stand1ng regu!at:ons general cost of do:ng bus,ness rathet 

than a regulatory burden, s:rnply because dealt wrth them for so lo:;g 

No when asked what areas of regulat1on arc most burdensome. the federal tax code and Affordable CarE 

top two. We also found the small-busrness owner :s the number one regulatory expert :n most 

bus'ness and handle::; the bulk of federal regulatory con>pl,ance. Astoundlflgly, 14 percent of smaH-bus1ness owner-~ 

reoort they sper:d more than hours nlonth on fG-deral regulat 1ons 

Most small bus1nesses say they really started worrytllQ about regulat~ons within the f·rst year of theq· bus1n2ss 

When coupied w1th the s,gn:f~cunt regulotmy costs assoc1ated \\11 th a bus:ness' f1rst rt's clear that regulatory 

bwden :s major hurdle l:kely keep:r.g many would-be ent~epre0eurs fror-r< start:ng the:r own bus:ness. 

The 1rnpact of regulatory burden cannot be overstated more than one-third have held off on bus1ness 1nves~men! 

due to urcortawty on " pend:ng regulat:on, and 

regulatory burdens 

The 2017 NSBA Small Bus;ness Regulat:ons Survey 

than half have held off on ~:r:ng a r~ew employee due 

conduc~ed on-kte Nov. 28, 2016 Jan. 10, 2017 among l,OOC 

small-bus1ness owners. We hope you f.nd survey nformat•ve and useful. Please contact NSBA's media off,cE 

for ·nqumes press@nsba 

Sincerely, 

Pedro Alfonso 

NSRA Cha'r 

Todd McCracken 

NSBA Presrdent CEO 
94 

I DEMOGRAPHICS 

$100,000 to 

$250,000 

less than :::::~ $250,000 to less than •••• $soo,ooo 1 

$500,000 to less than $1,000,000 

-

$1,000,000 $5,000,000 to less than ::::~~~~~~~ 27% 

$5,000,000 to less 

than $25,000,000 

t~~~~7~~go6,~~s~ 12% 

$;hs~~~~5~~ o~6~s~ 11% $150,000,000 or more 11% 

N/A 3% 
95 

~':>ijA :.MALL HU~1Nt::,~ Rb.GUL.A! tON;.. ~URVl:;Y 'lll'lll!lliill:mmll!m-~!lllWif!iiliilil!lilli!II-·IOm!i&£ _____________ ,,.._..., __ _ 

IOVERALLREGULATORYBURDENS 
96 

1-H::-b<JLAl!UN:O,SURVt:.Y ________________ ,_____ ,.. 

I ME SPENT ON REGULATIONS 

1 to 10 hours 11 to 20 hours 21 to 40 hours 41 to 80 hours 81 to 120 hours 120 hours+ 

~- =- - ---=- _-_=--_=_;::_:..._-~-=~~-==-~-==:::=::... --=-~--=-==--=-.:::-- - ----"""_ --- -- - ---- -~-

:1---~lil't;g --- = 3'm( _-if·~-- _-:-~tt~-~-~~~~m~mm~Jnil~ -- - - - - -- -~ --=- - -=-- - -_ ---=-- -

~~--·--- -~----~-=-~---=-~:~ _-= -_-- Bi!!~> =- ==--=-- _- - - - =- ~~~ -=----=-~-_:;:_-=-----==---=--=;:_~~_;:--:-~~~=-~-==-~=-:--=~-~ -_ _-=- - - - =- - ~ 
97 

~01/ N~tiA ~MALL tl.<,J~!Nl:.~:O. 1-ii:-.0ULA11UN~ !::.URV~Y ------llllllillllllilllllli _________ ,'lll ____ _ 

I MONEY SPENT ON REGULATIONS 
98 

/Ol/ N~l:1A ~MALL !::?U~!Nt~'::t J-.i!::GLILA! !ON~ ~Ul-<Vt::Y ------------------'""""""'""""'""'"'"'" 

I STAFF REGULATORY RESPONSIBILITIES 
99 

- £iW £WiiiJ - I REGULA TORY BURDEN BY AGENCY 
100 

Cdi\?\Ll thJ~INt.::':>':> k!::GULA 1lUN:O, ~Uf{Vi:Y ~'i!llffj_E_lli[i __________________ ill.,_ .... ___ .. 

I START-UP REGULATORY COSTS 
101 

NC>t:>A ~MALL uu;,!Nt:.S::. Hi:::bl.!LA! !UN:C, .SURVCY ~lm&--!11!---l!!iL!IIl-lllll ______ l!!iA!Iil!lill!!il!ll!.'lffll"'OI"O."''""" ____ ,. 

I KEEPING ABREAST OF NEW REGULATIONS 
102 

LUll N!:;.HA ~MAlL BU!'>lNI::!:l~ N\::l>VL4.! JON~ :::.UKV\::Y \O!$i!!lili ______ [i!!l! ___ ,.,.,§ m!ll_ . .,.,. ___ "'" ____ _ 

I COMMENTING ON REGULATIONS 

l!>espite the maioritM: of small firms sa;v:inl!! t'lley; tea!i pYOI(lDSe!i regulations, just lt2 percent 

tlave filed comments, !lkel!l'! !::lue to trieifa!);~ tllat it ta!{l:!s; t!'le ma!~rity; o~ small firms two hours 

or more to <:lo so. F\'urtnermore, 38 me~nti s:aM t!mS~: l!!on't suomit epmments because it is tPP 

time ePnsuming or too coJ'llililslng. 

Too time consuming Too confusing to read ! rely on trade 

through regulation associations like NSBA to 

comment on my behalf 
103 

N::,HA ::,MALL HU!:>!NI-:::..~ RtbU! A!!UN:O :;:.ui<!Vf:Y "R-RIO!I ___ Itli\Thl>_&_!l?ilii _________ , _____ ... 

I GUIDANCE DOCUMENTS, INTERPRETATIONS & MORE 

= _--- -=~~ 

-- ~ ~ 

-- - ---=-__:~ 

=-__ - ~~ - - - -

More burdensome 

than reulations 

About the same less burdensome than 

regulations 

=-_ _ltm ____ -~ 

- -

We don't worry about 

them at all 
104 

N:.d.O. ~MALL t>U::O!Nt::::.::, Ri::uULAl!ON;, !::iUI<Vt:l' -----------------------

I REGULATORY FINES 

Once 

2-5 Times 

Mor~ Than 51S% T1mes 0 
105 

I IMPACTS OF REGULATION 
106 

N~HA ~MAll ti:t:l>ULO..IJUN~ ~UH.Vt:Y 'l!w11Jl--~ fu.iiiiii-I!Jldl!l!JO!I!Jl--W----------·!00&!00'1•W ____ _ 

I REGULATORY POLICY 
107 

N.O.tJA C:>MALL 1:1-UC:JJNt:.':,.::, Rt:(O>UlAliUN!';. ~UNVt;Y .. U .. IO _______ dOii--011------"'-IOl.'"""""""""""""-

I REGULATORY RELIEF IS POSSIBLE 

To achieve meaningful relief and a 

rational regulatory regime, NSBA urges 

the adoption of a national regulatory 

budget, which would impose strict, 

enforceable constraints on the ability of 

federal agencies to impose regulatory 

costs on the public. Additionally, NSBA 

urges lawmakers to support policies that: 

Require that agencies consider indirect costs and 

detailed alternatives to minimize any significant 

adverse impact 

Require Regulatory Flexibility Analyses as 

prerequisite to a final rule being issued 

Require increased economic analyses and the Office 

of Information and Regulatory Affairs (OIRA) to 

enhance its oversight efforts 

Require that agencies use plain writing when 

revising or drafting new regulations 

Allow for increased enforcement flexibility and the 

ability to grant common-sense exemptions for firsttime offenders 

Streamline paperwork, consolidate forms and 

harmonize data and due dates 

Require a cost-benefit analysis on proposed 

regulations and paperwork 

Improve information collection by: 1) strengthening 

the Paperwork Reduction Act's requirement that 

agencies' chief information officers review and 

certify information collection requests; 2) requiring 

OIRA to develop stricter approval criteria; and 3) 

limiting the number of information requests an 

agency can issue per year 
108 
109 

Post-Hearing Questions for the Record 

Submitted to Mr. Rosario Palmieri 

From Chairman ,lames Lankford 

"Improving Small Business Input 011 Federal Regulations: 

Ideas for Congress and a New Administration" 

Thursday .January 19,2017 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

On !he rigor ofCFPB 's Regu/atmy Flexibilily Analysis 

Question: On October 7, 2016. the SBA Office of Advocacy sent the CFPB a letter during the 

comment period of the payday loans rule. The SBA Office of Advocacy raised concerns that the 

true economic impact of the Payday Loans rule "may be greater than what is indicated" in the 

agency's regulatory flexibility analysis. What feedback have you received from your members 

about the rigor ofCFPB's regulatory f1cxibility analysis'? 

Answer: 

The example you provide and how the SBA's Office of Advocacy responded clearly shows the 

impo11ant role that offices like Advocacy and the Oft1ce of!nformation and Regulatory A±Tairs 

(OlRA) play in ensuring agencies are employing principles of sound rulemaking. Moreover, 

these ot1ices ensure that all agencies are complying with the statutory requirements placed upon 

them by Congress and that executive branch agencies are complying with the executive orders 

and guidance that are designed to impro,·c the quality of the regulations issued. 

Whether its notice-and-comment, regulatory analysis or holding SBREFA panels, manufacturers 

are concemed that agencies simply "check the box" when it comes to complying with the 

Regulatory Flexibility Act (RFA), the Administrative Procedure Act (APA) and other process 

requirements. Congress must support SBA's Office of Advocacy <md OIRA and give these 

offices the resources they need to ensure that agencies arc not just complying with process 

requirements, but are also conducting thorough regulatory analysis, holding meaningful and 

timely small business panels, holding more than one panel when necessary, conducting 

additional stakeholder outreach and incorporating feedback into agency decisionmaking. 

Unfortunately, agencies are able to avoid many important RFA requirements by simply asserting 

that a rule will not impact small businesses significantly. A recent analysis in the Administrative 

Law Review shows that agencies avoided the requirement of the RF A for more than 92 percent of 

rules issued between the fall regulatory agendas of 1996 and 20 12_~ In January 20 I 7, Small 

Business Administration's Office of Advocacy, which monitors compliance with the RFA and 

1 See Connor Raso, Agency Avoidance ofRulemaking Procedures. 67 ADMIN.!. REV. 65, 69,99 (2015) (identifying 

only 1,926 rules out of24,787 as having completed RFA analyses). 
110 

assists agencies in meeting the law's requirements, issued its annual report indicating that it 

helped save small businesses $1.4 billion in regulatory costs, Moreover, Advocacy has saved 

businesses cumulatively $13 0 billion in regulatory costs since it began tracking regulatory cost 

savings in 1998, Imagine the positive impact on regulations if agencies were not able to avoid 

the RFA's requirements so easily, In addition, despite the success of the small business panel 

process, it only applies to three agencies, 

On CFPB 's use t~/SBREFA Panels 

Question: The CFPB is one of three agencies required to hold SBREF A panels for rules that 

have a significant economic impact on a substantial number of small entities, However, as an 

independent agency, CFP is not subject to OMB review, Does CFPB's status as an independent 

agency have an impact on the rigor of their SBREFA panels? Have you heard from your 

members that CFPB listens to their concerns? 

Answer: 

As you mention, independent regulatory agencies are not subject to OMB review. The rules 

issued by these agencies impose significant costs on manufacturers, These agencies are not 

required to comply with the same regulatory principles as executive branch agencies and often 

fail to conduct any analysis to determine expected benefits and costs, In 2009, President Obama 

created the bipartisan Council on Jobs and Competitiveness, The Council recommended in both 

its interim and final reports to encourage Congress to require independent regulatory agencies to 

conduct cost-benefit analyses of their significant rules and subject their analysis to third-party 

review through OIRA or some other office, Congress should confirm the President's authority 

over these agencies, If there is consensus that this process makes executive branch rules better, 

why would we not want to similarly improve the rules issued by independent regulatory 

agencies? Consistency across the government in regulatory procedures and analysis would only 

improve certainty and transparency of the process, The case for the inclusion of independent 

regulatory agencies in a centralized review of regulations is clear, and Congress should act to 

make it certain, 

Despite the documented benefit of the RF A's requirements, agencies still exploit the loopholes in 

the law, Significant rules issued by the Environmental Protection Agency (EPA) and the 

Occupational Safety and Health Administration (OSHA) are subject review by OIRA, Despite its 

critical function, even as the size and scope of the government has increased, OlRA has shrunk, 

In 1980, the office had 90 full-time equivalent employees; in 2015, there were only 4 7, If we are 

to ensure that agencies are conducting thorough and sound analysis and incorporating the 

concerns of manufacturers and other regulated entities into regulatory decisions, then Congress 

must expand OIRA' s and other institutions' abilities to provide objective analysis, to conduct 

thoughtful regulatory review and to work with regulating agencies so that regulations will meet 

health, safety and environmental objectives more effectively at a much lower cost to bnsinesses, 

2 Dudley, Susan and Melinda Wanen (2016). "Regulators' Budget from Eisenhower to Obama: An Analysis of the 

US Budget for Fiscal Years !960 through 2017:' 

https://regulatorystudics.columbian.gwu.cdulregulators /0E2%80~;i)99-budget-eisenhower-obama. 
111 

On the Usefulness ofSBREF/1 Panels 

Question: On paper, SBREFA Panels arc a great way to receive input from small businesses. In 

renlity, the agencies that are required to hold them have found ways around them or to minimize 

their impact. For example, when OSHA was dratling the Silica rule, they held a panel in 2003 

but did not tlnalize the rule until2016 13 years later. How could SBREFA Panels be improved 

so that agencies arc consistently receiving real input from small businesses? 

Answer: 

The fact that OSHA empaneled small business representatives more than a decade before it 

issued a tlnal regulation is simply one example of how agencies fail to comply with the spirit of 

the law. To ensure that agencies are consistently receiving input trom small businesses and to 

ensure compliance by agencies with all of the RFA · s requirements Congress should provide the 

Chief Counsel for Advocacy the authority to issue rules governing compliance with the RFA3 

By granting the Oftlce of Advocacy the rulemaking authority to define key tcrn1s, Congress can 

ensure consist application across agencies of the RFA's statutory requirements. It will also 

provide for mechanisms to better assess the elTectivencss of the RFA and SBREFA 

On the Indirect Impact of Regulations 

Question: Under the RFA, agencies, including independent agencies, must prepare a regulatory 

t1exibility analysis tor rules deemed to have a "signitlcant economic impact on a substantial 

number of small entities." However, the RFA docs not define "signitlcant economic impact" or 

"substantial number of small entities." The DC Court of Appeals has consistently held that 

"economic impact" means only direct costs, not indirect. Do agencies provide enough 

information for small businesses to understand the potential cumulative costs of regulations? 

What steps should Congress take to ensure that all potential consequences of proposed 

regulations arc public? 

Answer: 

To ensure that agencies are applying these sound regulatory principles to small entities, Congress 

should, as mentioned above, provide the Chief Counsel for Advocacy the authority to issue rules 

for ensuring compliance with the RFA. This is imperative if we arc to stop agencies from 

exploiting loopholes in the law to avoid the RFA's requirements. Moreover, Congress should 

require independent regulatory agencies to conduct cost-benetlt analyses oftl1eir signitlcant rules 

and subject their analysis to third-party review through OJRA or some other office. This will 

help ensure that all agencies are complying with the RF!\ as Congress intended. 

Federal regulators establish rules without considering the cumulative effects of existing 

regulations, hampering the ability of our regulatory system to cfl'ectively meet desired regulatory 

outcomes. The e!Tectivcncss (or inet1cctiveness) of existing regulations is not analyzed, and the 

1 See Section 5 of the Small Business Regulatory Flexibility Improvements Act of2017 (S. 584, H.R. 33). 
112 

~ontinued onslaught of new regulations simply adds to the ever-growing burden imposed by our 

inefficient and complex regulatory system. 

Congress should require agencies to consider the cumulative costs of regulatory requirements, a 

principle that is articulated in President Obama's Executive Orders 13563 and 13610 and OMB 

guidance for agencies. Despite the efforts of past administrations, regulatory burdens continue to 

increase. Manufacturers are hopeful that directives by President Trump, including Executive 

Orders 13771 and !3777 and the Presidential Memorandum on Streamlining Permitting and 

Reducing Regulatory Burdens for Domestic Manufacturing, will actually lead to a reduction in 

unnecessary regulatory burdens. 

Regulators often make their regulatory determinations (e.g., how and who to regulate) before 

issuing a notice of proposed rulemaking and before they receive valuable feedback from those 

entities that are directly impacted by the agency's action. They work behind closed doors and fail 

to provide information to the public. Agencies should begin their public outreach well before 

they detennine how and who to regulate. This simple change in how we regulate would enable 

regulators to better understand the impact-including the cumulative eHects---<Jf their actions. At 

a minimum, Congress should pass the Early Participation in Regulations Act (S. 579) and require 

an agency to publish an advance notice of proposed rulemaking when it considers a major rule. 

This would improve the regulatory process for small and large businesses alike. 

Agency adherence to sound regulatory principles is vital if we are to implement fundamental 

change to our regulatory system that improves the etfectivencss of rules in protecting health, 

safety and the environment while minimizing the unnecessary burdens imposed on regulated 

entities. 
113 

Post-Hearing Questions for the Record 

Submitted to Rosario Palmieri, National Association of Manufacturers 

:From Ranking Member Heidi Heitkamp 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

Improving Small Business Input on ·Federal Regulations: 

Ideas for Congress and a New Administration 

January 19,2017 

I. I hear from small businesses in my state about the need for Federal agencies to do a better job 

connecting with tmd understanding their challenges. 

• What steps need to be taken to improve the way agencies talk to small businesses to truly 

understand the challenges they face'l 

Answer: 

Principles of sound mlemaking dictate that agencies engage regulated entities, regardless of size, 

as they develop regulatory proposals. The Administrative Procedure Act requires federal 

agencies to publish in the Federal Register a general notice of proposed rulcmaking for 

substantive rules and provide the public an opportunity to participate in the rulemaking (5 U.S.C. 

553). Unfortunately, regulators ofkn make their regulatory determinations (e.g., how and who to 

regulate) before issuing a notice of proposed rulemaking and before receiving valuable feedback 

from those entities that are directly impacted by the agency's action. Congress should pass the 

Early Participation in Regulations Act (S. 579) and require an agency to publish an advance 

notice of proposed rulemaking when it considers a major rule. Such a requirement would force 

agencies to seek public input before they make regulatory decisions that would impose 

significant burdens on manufacturers and other businesses. This would improve the regulatory 

process for small and large businesses alike. 

When Congress amended the Regulatory Flexibility Act (RFA) in 1996, it required the 

Environmental Protection Agency and the Occupational Safety and Health Administration to 

empanel a group of small business representatives to help those agencies better consider a rule's 

impact before it is proposed. In recognizing the importance of this panel process, Congress 

expanded this requirement to include the Consumer Financia 1 Protection Bureau when it passed 

the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, agencies exploit 

loopholes in the law to avoid the RFA's requirements. The law does not explicitly define a 

"significant economic impact on a substantial number of small entities,'' so agencies have great 

discretion in deciding when the RFA would apply to a proposed or final rule. Furthermore, only 

a small number of regulations require small business-oriented analysis because "indirect effects" 

cannot be considered. Congress should reform and strengthen the requirements that agencies 

improve public participation throughout the rulemaking process. Congress should close those 

loopholes. 
114 

What types of compliance assistance do you believe are most effective? 

Answer: 

The NAM advocates for a collaborative approach by regulating agencies. Agencies should focus 

on outcomes-based solutions that yield a safety culture, productivity and economic growth. An 

adversarial relationship with employers does not foster the level of cooperation and collaboration 

necessary to lead to the highest standards of excellence in safe and competitive workplaces. 

Treating allegations as facts and publicly shaming employers who may be working to remedy a 

problem do not build relationships of trust between the regulator and the regulated. Recent data 

from the Bureau of Labor Statistics have shown injury rates in the private sector have been 

declining substantially. Rather than celebrate these improvements and reward a safety culture, 

regulatory agencies punish companies for innovative safety progran1s. Manufacturers instead 

welcome the opportunity to publicly highlight stories of true success with new workforce 

initiatives, tout innovative ideas that engage employees. solve emerging problems and share best 

practices. Manufacturers believe that collaborating on the best way to remedy issues would be a 

better approach than focusing on only negative actions. Manufacturers believe in strong 

enforcement of rules and regulations. Agencies should embrace opportunities to collaborate and 

spotlight best practices and im10vative ideas in the manut:~cturing sector to promote safety and 

compliance. 

2. Good usc of the SBREFA panels can help lead to better regulatory outcomes. However, all of 

these activities require agency resources, both time and personnel. 

• How should the tedcral government address the resource challenges that agencies will 

face with significantly expanded small entity analysis? 

Answer: 

Requirements that agencies conduct substantive outreach to regulated entities before determining 

when and how to regulate should be priorities within an agency. Regulatory proposals that are 

poorly designed, are inefficient and do not dtectivcly meet regulatory objectives already impose 

significant resource challenges for agencies and the regulated public. By engaging in thoughtful 

discussions with small entities and other stakeholders, agencies could use limited resources more 

effectively and better meet regulatory objectives. 
115 

3. One of my concerns is that introducing ne\v or additional opportunities for judicial review 

will create havoc in the regulatory environment, and reduce celtainty for businesses through 

regulatory delay. 

• How do we balance this challenge and docs NAM believe that more court challenges and 

greater unceltainty is good for your members? 

Answer: 

Though the APA dictates the process for promulgating rules, the law provides agencies vast 

discretion. Notice-and-comment is not required for interpretative rules and agency guidance, and 

this provides regulators considerable authority about how and when to regulate. The complexity 

of rulemaking and its reliance on highly technical scientific information has only increased since 

the passage of the APA. The process by which the government relics on complex, scientific 

information as the basis for rules should be improved and subject to judicial review. Our 

administrative process has not kept up with those changes, and agency accountability is lacking 

without meaningful judicial review. When judicial review provisions were added to the 

Regulatory Flexibility Act in 1996, it resulted in greater agency compliance and very little 

litigation. 

4. Too often, we ft)CUS on the mistakes that agencies make in the regulatory space. We should 

also look at the success stories and learn from those experiences. 

Are there any specitlc Federal regulations that you believe an agency fully incorporated 

the views and concerns of your members? What lessons are to be learned from that 

experience'? 

Answer: 

When Congress passed the Food Safety Modernization Act of2011 (FSMA), it mandated that 

the Food and Drug Administration (FDA) finalize a regulation that addresses the sanitary 

transportation of food. FDA stated in its proposed rule that the '·goal ofthe proposed rule is to 

ensure that transpoltation practices do not create food safety risks." 1 As FDA worked on both the 

proposed and linal rules, the agency proactively worked with industry stakeholders and the 

greater public to ensure that it was issuing a final rule that met the stated goal but did not impose 

signiticant new burdens. The agency recognized throughout the process that the transpoltation of 

food in the U.S. is conducted safely and efficiently, and it strove to establish requirements for the 

sanitary transportation of food that are in accordance with industry best practices. In addition to 

public meetings and webinars, FDA officials were very proactive in meeting with various 

stakeholder representatives. It was apparent that these oftlcials wanted to get it right 

The PDA otTicia.ls who drafted this regulation went above and beyond the requirements that were 

placed upon them. Their engagement with stakeholders was vital as they sought to minimize the 

unnecessary burdens that rule would impose. This was ret1cctcd in the changes that were made to 

1 79 Fed. Reg. 7006 
116 

the proposed rule. Other agencies should proceed with regulations in a similar manner. 

Importantly, regulators should work closely with stakeholders before they make their regulatory 

determinations. Over the years, Congress and the executive branch have established laws and 

guidelines designed to encourage public outreach and a thoughtful consideration of the feedback 

received. Unfortunately, meaningful public engagement by agencies is the exception and not the 

rule. Unless there are mechanisms in place to ensure that agencies actually incorporate 

stakeholder feedback, agencies will lack the motivation to incorporate this important regulatory 

principle into their operations. 

5. Research by the SBA and others has repeatedly demonstrated the inherent difi!culty of 

accurately assessing the direct and indirect costs of regulations on small businesses across 

sectors and industries. While NEPA is cited as a model, there is currently no single formula 

or methodology that makes such comparisons meaningful for purposes of assessing the 

effectiveness of the RFA and SBREFA. 

• How do you propose this overcoming this challenge? Who should be the ultimate arbiter 

of such detenninations? 

Answer: 

The Small Business Administration's OJTice of Advocacy is required by law to monitor agency 

compliance with the RFA. Congress should provide the Chief Counsel for Advocacy the 

authority to issue rules governing compliance with the RFA2 By granting the Otlicc of 

Advocacy the rulemaking authority to define key terms, Congress can ensure consistent 

application across agencies of the RFA's statutory requirements. It will also provide for 

mechanisms to better assess the effectiveness of the RFA and SBREFA. 

6. In my view, one of the most interesting subjects discussed at the hearing is the impact of 

State regulations on small businesses across geographic boundaries, and the need for greater 

harmonization. 

Can you embellish upon your excellent suggestions on incentivizing such coordination 

among states'? 

Answer: 

In order to understand the complexities associated with regulations across geographic 

boundaries. federal regulators must conduct-before making regulatory detenninationsoutreach to state and local entities to educate themselves on the regulatory requirements at the 

various levels of government Without this knowledge, agencies run the risk of imposing 

significant regulatory costs on the public because of poorly designed, inefficient and unnecessary 

duplicative and con11icting rules. Conducting this type of outreach before regulatory 

determinations are made should not be a novel approach to rulemaking at the federal leveL 

'See Section 5 of the Small Business Regulatory Flexibility Improvements Act of2017 (S. 584. ll.R. 33). 
117 

l mentioned in my testimony that one source of information for federal officials could be state 

economic development entities, but there are many other sources of information on which federal 

regulators should apply. Agencies can utilize small business panels, such as those required by 

SBREFA to assist them in coordinating \Vith state and local officials. Agencies should issue 

advance notices and requests for infonnation to better inform them on state and local regulations 

as they determine whether there is a need for federal action. Importantly. the SBA's Office of 

Advocacy and other offices within the federal government can ensure agencies are working with 

state and local officials. These are not new principles. Executive Order 12866 makes clear the 

importance of agency coordination with state and local officials. President Obama's Executive 

Order 13563 affirms this principle, stating that ''regulations shall be based, to the extent feasible 

and consistent with law, on the open exchange of infom1ation and perspectives among State, 

local, and tribal officials, experts in relevant disciplines, affected stakeholders in the private 

sector, and the public as a whole." 

• Does NAM believe State and local regulations impose more, less, or an equal number of 

burdens on small businesses than Federal regulations') Has NAM attempted to assess 

those impacts, and if so, what did you find? 

Answer: 

The NAM has not attempted to assess the impact of burdens imposed by state and local 

regulations. 
118 

Post-Hearing Questions for the Record 

Submitted to Mr. Rosario Palmieri 

From Senator Jon Tester 

"Improving Small Business Input on Federal Regulations: 

Ideas for Congress mui a New Administration" 

Thursday January 19,2017 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

The following questions are intended tor Rosario Palmieri, Vice President for Labor, Legal, and 

Regulatory Policy; National Association of Manufacturers 

Question: 

One of the things that I consistently bear from small businesses in Montana is the need for access 

to capitaL ! believe that our community banks and credit unions arc the lifeblood of capital in 

rural America. In the last several years we've placed too many regulatory burdens on them that 

were meant for Wall Street I'm not saying we should be loosening the reigns on everybody, but 

I do believe there is work to be done for our community banks and credit unions. 

I) I'd like your thoughts on any burdens you see with regards to aeeess to capital, 

especially in rural areas. 

Answer: 

Regardless of the agency or regulation, regulators should employ the principles of sound 

rulcmaking to ensure they are minimizing unnecessary burdens, especially on small businesses. 

The Regulatory Flexibility Act (RFA) requires agencies to thoughtfully consider the impact of 

their rules on small entities. The law requires agencies to consider less costly regulatory 

alternatives for small firms and, in some cases, communicate directly with small business 

representatives when drafting a proposed rule. Cmigress intended the law to ensure that agencies 

minimize the burdens on those who arc most vulnerable to a rule's negative impacts. To ensure 

that regulations are appropriate and tailored best meet policy objectives, agencies must conduct 

meaningful public outreach, conduct thorough regulatory analysis and de11ne ways to determine 

the future effectiveness of their rules. Agencies must also faithfully comply with the RFA to 

minimize the burdens imposed on small entities. 
119 

Question: 

2) Do you have any sugge.~tions with regards to making it easier to access cttpital in rural 

areas through easing regulatory burdens on small/ending institutions? 

Answer: 

Each agency interprets the RFA's important terms in widely divergent ways and thus is able to 

avoid the RFA's requirements as Congress intended. As a result, only a small number of 

regulations now include RFA analysis because agencies can determine when a regulatory 

11cxibility analysis is necessary and appropriate. Congress must pass the Small Business 

Regulatory Flexibility Improvements Act of2017 (S. 584, H.R. 33) to close loopholes that 

agencies use to avoid its requirements. It would provide the Small Business Administration's 

Office of Advocacy authority to establish standards for when RF A analysis is to be conducted. 

The bill would expand small business outreach requirements before rules are proposed and direct 

agencies to consider the indirect impact of their regulations on small businesses. The Act would 

ensure that regulations are designed in a way that meets policy objectives without placing 

unnecessary burdens on small businesses. Through careful analysis and an understanding of both 

intended and unintended impacts on stakeholders. agencies can improve their rules for small 

entities, leading to improved regulations. 

Question: 

A few years ago, Congress responded to foodborne illnesses issues by passing the Food Safety 

Modernization Act. The Act transformed the methods FDA uses to keep our food supply safe 

and our families healthy. Knowing that changing food safety regulations could be especially 

burdensome to the smallest food producers, I added an amendment that exempted small 

businesses that sell a majority of their food directly to consumers within a 275-mile radius. In 

this case, local and state food safety and health agencies are perfectly capable of overseeing these 

small businesses without the federal government interfering. The Food Safety Modernization 

Act, which went into effect late last year, is a good example of important policy that didn't need 

to be one size fits all. 

3) I believe this is a good example tif how Congress can work with industry to make sure 

small busines.~es are not overregulated. l belie•·e we ueetl to see more of this type of 

legislating whenever a bill comes to tlzefloor. Could you please talk about your efforts 

to work with Congress on small business exemptions as tmtfwrizing bills move through 

Congress? 

Answer: 

In August 2011, Congress passed I·l.R. 2715 (Pub. Law 112-28), which amended the Consumer 

Product Safety Improvement Act (CPSIA) to correct provisions that imposed significant burdens 

on small businesses. In addition to product-specific exclusions from some of the CPSIA's 

requirements, H.R. 2715 mandated the U.S. Consumer Product Safety Commission (CPSC) to 
120 

identify ways to reduce third party testing burdens and issue regulations by August 2012 if the 

agency determines that such regulations will reduce testing costs while assuring compliance. The 

locus of this provision was alleviating the unnecessary burdens--those that do not advance 

consumer protection--on small businesses. 

Despite this congressional mandate. the CPSC has tailed to move forward with regulations that 

would decrease the costs associated with third party testing. Stakeholders have provided the 

Commission proposals for reducing burdens and CPSC statThas made recommendations to the 

Commission; yet the Commission shows no desire to move forward. Other than clarifying that 

untreated \Vood would not contain certain harmful chemicals such as lead and phthalatcs, the 

Commission has not advanced any real burden reduction initiatives. 

Industry spends millions of dollars every year testing materials they know will never contain the 

bam1ed chemicals and heavy metals. This does not advance safety, and in fact, may hinder 

companies from expanding their businesses or product lines. This is especially detrimental to 

small businesses that are not able to absorb the extra testing costs. 

To encourage the Commission to move torward with burden reduction, Congress, through the 

FY 2015 omnibus spending measure (H.R. 83), provided the CPSC $1 million to be used 

exclusively for third party testing burden reduction and the bill's joint explanatory statement 

articulated that Congress desires the Commission to move forward. It is unclear as to whether the 

Commission plans to move forward. 
121 

Post-Hearing Questions for the Record 

Submitted to Gerald (,Jerry) Hietpas, Action Safety Supply Co. 

From Chairman James Lankford 

United States Senate, Subcommittee 011 Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

Improving Small Business Input on Federal Regulations: 

Ideas for Congress and a New Administration 

January 19,2017 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

On the Small Business Regulatory Burden 

Question: When the federal government issues one-size-fits-all rules, they place a 

disproportionately large burden on small businesses which lack the economies of scale to handle 

the costs of changing their operations for each new regulation. In 2012, Manufacturers spent an 

average of $19,564 per employee to comply with state and federal regulations double the 

amount per employee spent by total U.S. businesses. Every dollar spent on regulatory 

compliance is a missed opportunity for growth and investment. How does a company of Action 

Safety Supply's size balance complying with regulations while ensuring the success of your 

business? 

On the Indirect Impact ofRegulations 

Question: Under the Regulatory Flexibility Act, agencies must prepare a regulatory flexibility 

analysis for rules deemed to have a "significant economic impact on a substantial number of 

small entities." However, the RFA does not define "significant economic impact" or "substantial 

number of small entities." The DC Court of Appeals has consistently held that "economic 

impact'' means only direct costs, not indirect effects. As a business owner, do you make a 

distinction between direct costs and indirect costs when you review new regulations and consider 

their effects when planning for your business? 

Witness Responses to questions submitted for the record were not received by time of 

printing. 
122 

Post-Hearing Questions for the Record 

Submitted to Gerald (Jerry) Hietpas, Action Safety Supply Co. 

From Ranking Member Heidi Heitkamp 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

Improving Small Business Input on Federal Regulations: 

Ideas for Congress and a New Administration 

January 19,2017 

1. Every small business faces a different specific situation. 

• What steps do we need to take when instructing Federal agencies to craft regulatory 

analysis requirements that ensure consideration of the di.tierent operating environments 

that small businesses occupy? 

2. One thing l hear from small businesses in my state is the need for federal agencies to do a 

better job connecting with and understanding their challenges. 

What steps do you think need to be taken to improve the way agencies talk to small 

businesses so that they truly understand the challenges you face? 

3. Another topic I hear a lot about, both here in Washington and in North Dakota, is the idea 

that small businesses could use more assistance in figuring out how to comply with agency 

regulations. This topic is generally described as compliance assistance. 

What types of compliance assistance do you believe would be most eftective? 

4. Are SBA's existing NAICS size standards useful and fair? Do they promote or impede small 

business innovation and growth? 

5. At the hearing, there was some discussion about State and local regulations sometimes 

imposing even greater burdens on smail businesses than Federal regulations. 

Can you elaborate on your experiences in having to comply with different regulations 

across State boundaries? 

Do you have any ideas or suggestions on how Congress should think about those 

challenges? 

Witness Responses to questions submitted for the record were not received by time of printing. 
123 

Post-Hearing Questions for the Record 

Submitted to La.Juanna Russell, Business Management Associates, Inc. 

From Ranking Member Heidi Heitkamp 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

Improving Small Business Input on Federal Regulations: 

Ideas for Congress and a New Administration 

January 19,2017 

L Every small business faces a different specific situation. 

• What steps do we need to take when instructing Federal agencies to craft regulatory 

analysis requirements that ensure consideration of the different operating environments 

that small businesses occupy? 

• L Russell response: I would suggest that the regulatory analysis is structured for specific 

small business types or those focusing within a specified space vs being a broad 

stroke. For instance, the issues and concerns faced by retailers are much different than 

those faced by federal contractors. To take this a step further, the issues faced by product 

suppliers within the federal contracting space arc much different than those of a service 

provider. 

2. One thing I hear from small businesses in my state is the need for federal agencies to do a 

better job connecting with and understanding their challenges. 

• What steps need to be taken to improve the way agencies talk to truly understand the 

challenges they face? 

• L Russell response: It doesn't appear to us that federal agencies truly conduct an open 

level of outreach. What is currently considered "outreach" consists of an event where a 

specific agency brings in a group of small businesses to provide information on 'How to 

Do Business with X Agency'. This is not a two-way conversation. I have done training 

videos for federal procurement where we discuss the information exchange between 

agencies and small businesses. We understand the FAR requirements regarding 

restrictive contracting and how certain conversations can be construed to fall within that 

category. However, it is extremely clear when a solicitation is released that the agency is 

targeting one company to pursue and win the opportunity. That is again a one-sided 

conversation as other qualified bidders will simply not respond. 

3. Another topic I hear a lot about, both here in Washington and in North Dakota, is the idea 

that small businesses could use more assistance in figuring out how to comply with agency 

regulations. This topic is generally described as compliance assistance. 

What types of compliance assistance do you believe would be most effective? 

• L Russell response: It depends specifically on the compliance issue. A tax compliance 

issue is diticrent from a Depmtmcnt of Labor compliance issue. Most often, the 
124 

compliance factor is released without the small business owner even knowing that the 

factor exists. W c learn about it during an audit when it then becomes ptmitive. It is 

dif1icult to detcnmine, for every type of small business, what type of compliance 

assistance is needed up front. I believe what would be most helpful would be some level 

of a grace period or grace occurrence so that we are not penalized for the first offense of 

an issue of which we were truly unaware. 

4. Good regulatory analysis is important. Good outreach from agencies to small businesses is 

important. Good use of the SBREFA panels can help lead to better regulatory outcomes. 

However, all of these actions require agency resources, both time and personnel. 

• How should the federal government address the resource challenges that agencies will 

face with significantly more small entity analysis? 

• L Russell response: That's a very diftlcult question to answer with the current 

environment. Currently, agencies are undergoing R!Fs, hiring freezes, contracting 

freezes ... makes it ncar impossible to plan for mission. 

5. Are SBA's existing NAICS size standards useful and fair? Do they promote or impede small 

business innovation and growth? 

L Russell response: The NAICS codes size standards should be re-evaluated and raised. 

Once a small business is outside of its small business standard sometimes as low as $7 Mil 

up to $20 Mil or so that business is now competing with the $100 Mil or even $1 Bil finms 

who have significantly more resources and arc willing to reduce price and accept risks that 

small/mid-sized finns cannot. Having many opportunities set aside for small business helps, 

but once a business crosses the threshold, every element within that firm must change 

overnight which is not plausible. 

6. You testified that that State and local regulations sometimes impose even greater burdens on 

small businesses than Federal regulations. 

• Can you embellish upon this subject, including how to assess such impacts? 

• L Russell: 1 find this is a significant issue when it comes to employee pay laws, location 

tax laws and rules. For instance, we have employees in the State ofPA where PA 

requires that a certain locality tax be taken. Our payroll company is large and 

understands tax laws and liability, but missed this locality tax - the only one for all 15 

states where we have employees. Now we have a situation where not only the employee, 

but corporately, there is an unexpected tax liability. 
125 

Post-Hearing Questions for the Record 

Submitted to Ms. Karen Hamed 

From Chairman James Lankford 

"Improving Small Business Input on Federal Regulations: 

Ideas for Congress and a New Administration" 

Thursday January 19, 2017 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

On the rigor ofCFPB 's Regulatm:v Flexibility Analysis 

Question: On October 7, 2016, the SBA Office of Advocacy sent the CFPB a letter during the 

comment period of the payday loans rule. The SBA Otlice of Advocacy raised concerns that the 

true economic impact of the Payday Loans rule '"may he greater than what is indicated" in the 

agency's regulatory flexibility analysis. What feedback have you received from your members 

about the rigor ofCFPB's regulatory t1exibility analysis? 

Answer: To the hest of my knowledge NFIB has not heard from any members on the CFPB rule 

regarding Payday Loans. 

On CFPB 's use o(SBREFA Panels 

Question: The CFPB is one of three agencies required to hold SBREFA panels for rules that 

have a significant economic impact on a substantial number of small entities. However, as an 

independent agency, CFP is not subject to OMB review. Does CFPB's status as an independent 

agency have an impact on the rigor of their SBREF A panels'> Have you heard from your 

members that CFPB listens to their concerns? 

Answer: To the best of my knowledge NFIB has not heard from any members regarding CFPB 

and the SBREFA panel process at that agency. 

On the Usefulness o(SBREFA Panels 

Question: On paper, SBREFA Panels are a great way to receive input from small businesses. In 

reality, the agencies that are required to hold them have found ways around them or to minimize 

their impact. For example, when OSHA was drafting the Silica rule, they held a panel in 2003 

but did not finalize the rule until 2016 13 years later. How could SBREFA Panels be improved 

so that agencies are consistently receiving real input from small businesses? 

Answer:__ 

In the case of a situation like the Silica rule, Congress could rcfom1 the RF A to require agencies 

subject to SBAR panels to convene a new panel when it is re-proposing a rule that is more than 

three years from its initial proposaL To solve the broader issue, Congress could enact a similar 

requirement for all proposed rules covered by the panel process. Absent legislative action, 
126 

Congress could usc its oversight authority to call agencies out when they fail to act on 

information from a panel in a timely manner. 

On the Indirect Impact of Regulations 

Question: Under the RFA, agencies, including independent agencies, must prepare a regulatory 

f1exibility analysis for rules deemed to have a "significant economic impact on a substantial 

number of small entities." However, the RFA docs not define ·'significant economic impact" or 

"substantial number of small entities." The DC Court of Appeals has consistently held that 

"economic impact" means only direct costs, not indirect. Do agencies provide enough 

information for small businesses to understand the potential cumulative costs of regulations? 

What steps should Congress take to ensure that all potential consequences of proposed 

regulations are public? 

No. We believe that including costs on small businesses indirectly regulated by the proposed rule 

would be an effective step to resolve this issue. Congress should clarify the definition of costs 

under the RF A to include indirect costs. 
127 

Post-Hearing Questions for the Record 

Submitted to Karen Harned 

National Federation of Independent Business Small Business Legal Center 

From Ranking Member Heidi Heitkamp 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

Improving Small Business Input on Federal Regulations: 

Ideas for Congress and a New Administration 

January 19, 2017 

1. Good use of the SBREFA panels can help lead to better regulatory outcomes. However, 

expanding their use to all agencies requires agency resources, both time and personnel. 

• How should the federal government address the resource challenges that agencies will 

face with significantly expanded small entity analysis? 

Federal agencies need not face significant resource challenges by expanding small entity 

analysis. Such analysis does not need to be overly complicated. Small business outreach can be 

performed by telephone, e-mail or other cost and time-etlicient ways. 

2. One of my concerns is that introducing new or additional opportunities for judicial review 

will create havoc in the regulatory environment, and reduce certainty for businesses through 

regulatory delay. During your testimony, you stated support for eliminating Chevron 

deference. 

• Do you have any concerns that a likely increase in lawsuits will simply paralyze the 

regulatory process thereby possibly hmm yom members? 

We do not believe that the elimination of Chevron deference will necessarily result in additional 

litigation. Eliminating Chevron deference does not mean that the entity challenging a new rule 

will always win. The courts still will review regulations to determine whether or not the agency 

is acting within its statutory authority. Generally, if an agency stays within the statutory 

framework it is given by Congress, a legal challenge would likely fail and, therefore, not be 

worth the money or time for the regulated community to bring in the t!rst instance. 

3. Too often, we focus on the mistakes that agencies make in the regulatory space. We should 

also look at the success stories and learn from those experiences. 
128 

Are there any specific Federal regulations that you believe an agency fully incorporated 

the views and concerns of your members? What lessons are to be learned from that 

experience? 

Unfortunately we are unable to provide an example of specillc a specific Federal regulation 

where an agency fully incorporated the views and concerns ofNFIB members. However, the 

Aunual Report for the Chief Counsel of Advocacy on Implementation of the Regulatory 

Flexibility Act provides good examples of how the RFA benefits small business. 

https://www.sba.gov/advocacy/regulatory-flexibility-act-annual-reports 

3. Research by the SBA and others has repeatedly demonstrated the inherent difficulty of 

accurately assessing the direct and indirect costs of regulations on small businesses across 

sectors and industries. There is currently no single formula or methodology that makes such 

comparisons meaningful for purposes of assessing the effectiveness of the RFA and 

SBREFA. 

• How do you propose this overcoming this challenge? Who should be the ultimate arbiter 

of such determinations? 

NFIB supports legislation that would expand the definition of"economic impact" to include, "to 

the extent practicable and where possible, any indirect economic effect on small entities which is 

reasonably foreseeable and results from such rule." 

Are SBA's existing NAICS size standards useful and fair'! Do they promote or impede 

small business innovation Emd growth? 

NFIB has not taken a position on NAICS size standards. 

4. In my view, one of the most interesting subjects discussed at the hearing is the impact of 

State regulations on small businesses across geographic boundaries, and the need for greater 

harmonization. 

Does NFlB believe State and local regulations impose more, less, or an equal number of 

burdens on small businesses than Federal regulations? Has NFIB attempted to assess 

those impacts and if so, what did you find? 

The NFIB Research Foundation released its poll on small business on regulations just last month 

(February 20 17). Among other things, the majority of small business respondents said that the 
129 

federal government presents the most serious regulatory problems for their business. Wade, 

Holly, NFB National Small Business Poll, Regulations, Vol. 13, Iss. 3 (Feb. 2017) at 7. 

http://www.4llsbfacts.com/files/Regulations%2020l7.pdf 

5. In your testimony you mention expanding SBREFA and SBAR panels to independent 

agencies. However, doing so might conflict with other foundational statutes designed to 

ensure the autonomy of independent agencies. 

• Do you have any ideas on how Congress might reconcile these competing needs? 

NFIB does not see a conflict with expanding SBREF A and SBAR panels to independent 

agencies and protecting the autonomy of independent agencies, particularly because SBA' s 

Office of Advocacy, which helps enforce the RFA, is an independent office that does not speak 

for the administration. 
130 

Post-Hearing Questions for the Record 

Submitted to Ms. Karen Harned 

From Senator Jon Tester 

"Improving Small Business Input on Federal Regulations: 

Ideas for Congress and a New Administration" 

Thursday January 19,2017 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

The following question is intended for Karen Harned, Executive Director; National Federation of 

Independent Businesses 

One of the things that l consistently hear from small businesses in Montana is the need for access 

to capital. l believe that our community banks and credit unions are the lifeblood of capital in 

rural America. In the last several years we've placed too many regulatory burdens on them that 

were meant for Wall Street. I'm not saying we should be loosening the reigns on everybody, but 

I do believe there is work to be done for our community banks and credit unions. 

I) I'd like your thoughts on any burdens you see with regards to access to capital, 

especial(y in rural areas. 

2) Do you have any suggestions with regards to making it easier to access capital in rural 

areas through easing regulatory burdens 011 small/ending institutions? 

l!oY?ever NFIB is concerned about the reduction in community banks, which we understand has 

happened at an accelerated pace since the enactment of Dodd-Frank. 

A few years ago, Congress responded to food borne illnesses issues by passing the Food Safety 

Modernization Act. The Act transformed the methods FDA uses to keep our food supply safe 

and our families healthy. Knowing that changing food safety regulations could be especially 

burdensome to the smallest food producers. I added an amendment that exempted small 

businesses that sell a majority ofthcir food directly to consumers within a 275-mile radius. In 

this case, local and state food safety and health agencies arc perfectly capable of overseeing these 

small businesses without the federal government interfering. The Food Safety Modernization 
131 

Æ 

Act, which went into ctTect late last year, is a good example of important policy that didn't need 

to be one size tits alL 

3) I believe this is ll good example of how Congress Clln work with industry to mllke sure 

smllll businesses are not overregulated. I believe we need to see more of tlzis type of 

legislating whenever a bill comes to the floor. Could you please talk llbout your efforts 

to work with Congress 011 small business exemptions as authorizing bills move through 

Congress?