THE SENATE	S.B. NO.	2487
TWENTY-SEVENTH LEGISLATURE, 2014		S.D. 1
STATE OF HAWAII		H.D. 2

A BILL FOR AN ACT

RELATING TO THE SMALL BUSINESS REGULATORY FLEXIBILITY ACT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1.  The legislature finds that Act 168, Session Laws of Hawaii 1998, codified as chapter 201M, Hawaii Revised Statutes, established the Hawaii Small Business Regulatory Flexibility Act.  The Act provided for a petition process to an agency for regulatory review, periodic administrative review of rules with small business impacts, and an independent regulatory review board, known as the small business regulatory review board, to consider concerns of small businesses and make recommendations to adopt, amend, or repeal rules.

Unfortunately, the legislature also finds that the small business regulatory review board has not been functioning as originally envisioned.  The legislature further finds that the small business regulatory review board is actually slowing the review process down to the point that businesses are actually being hurt as these businesses wait in limbo for new rules to be slowly adopted.

Accordingly, the purpose of this Act is to better ensure that the originally-envisioned functions of the small business regulatory review board are carried out in an efficient manner that will ensure timely review and adoption or rejection of rules by:

(1) Creating the office of small business regulatory review and the position of director of small business regulatory review;

(2) Allowing the small business regulatory review board to, within ten days, approve or reject the actions of the director;

(3) Requiring the director of small business regulatory review and members of the small business regulatory review board to receive training by the appropriate division of the department of the attorney general to ensure that the director and board members have a clear understanding of the role of the office of small business regulatory review, the director of small business regulatory review, and members of the board of small business regulatory review and the parameters of the respective roles, including the hierarchy of the Hawaii Revised Statutes and the Hawaii Administrative Rules; and

(4) Clarifying the contents of the annual report that the director of small business regulatory review must submit to the legislature.

     SECTION 2.  Chapter 201M, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

     "§201M-A Director; powers and duties. (a)  The director shall have such powers delegated by the governor as are necessary to coordinate and, when requested by the governor, to advise pursuant to chapter 91 all state governmental agencies in matters concerning small business regulations. 

(b)  Upon receipt of an agency's proposed rules, the director shall analyze the proposed rules and deliver to the board a summary of the director's analysis and any recommendations or decisions.  The director may consult with the proposing agency, board members, and any affected party to help with the director's analysis before, during, and after the director's analysis, recommendations, or decisions have been received by the board.

(c)  After the director's analysis, recommendations, or decisions either been accepted by the board, rejected by the board and further amended, or rejected by the board and returned to the director or after the lapse of ten days without the board's decision, the director shall draft a small business impact statement based on the board's statement issued under section 201M-B(b), if applicable, detailing the impact that the proposed rules will have on small business and send the impact statement to the agency proposing the rules, the governor, the attorney general, and the members of the board.

(d)  The director shall make an annual report to the legislature no later than twenty days prior to the convening of each regular session detailing:

(1) Any requests from small business owners for review of any rule adopted by a state agency;

(2) The impact or effect any rule adopted by a state agency would have on small businesses;

(3) Any action taken by the director in response to any requests from small business owners for review of rules adopted by state agencies, including any recommendations made by the director to an agency or the legislature regarding the need for a rule change or legislation; and

(4) The outcome of any action taken pursuant to paragraph (3).

The report shall include a summary of the impact statement made by the director to agencies regarding the director's review of proposed new or amended rules.

All agencies shall cooperate with the director and assist in the preparation of the report by responding to requests for information made by the director.

§201M-B Board; power and duties. (a)  The board shall review the analyses, recommendations, and decisions of the director.  The board may make recommendations concerning small business regulations to the director and shall meet at the call of the board chairperson or upon the director's notice to the board chairperson.  The board may also meet at the call of any board member. 

(b)  Upon receipt of any analyses, recommendations, or decisions of the director, the board may accept or reject all or part of these analyses, recommendations, or decisions.  The board shall, within ten days of receipt of the analyses, recommendations, or decisions of the director, decide to accept, reject, or amend the analyses, recommendations, or decisions of the director.  Any failure of the board to achieve quorum or make a majority decision within the ten-day limit will result in an automatic acceptance of director's position.  If the board is able to achieve quorum and make the decision to accept, reject, or amend the director's position, the board shall prepare, with the director's assistance, a statement in writing of the board's support or dissent and the reasons for the board's dissent.  Any amendments shall be concluded within thirty days."

     SECTION 3.  Section 201M-1, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

     ""Director" means the director of small business regulatory review.

"Office" means the office of small business regulatory review."

     SECTION 4.  Section 201M-2, Hawaii Revised Statutes, is amended to read as follows:

"§201M-2  Determination of small business impact; small business impact statement.  (a)  Prior to submitting proposed rules for adoption, amendment, or repeal under section 91-3, the agency shall [determine] declare whether the proposed rules affect small business[, and if so, the availability and practicability of less restrictive alternatives that could be implemented].  This section shall not apply to emergency rulemaking.

(b)  If the proposed rules affect small business, the agency shall [consider creative, innovative, or flexible methods of compliance for small businesses and prepare a small business impact statement to be submitted with] submit the proposed rules to the departmental advisory committee on small business and the [board] office when the rules are essentially complete and before the rules are submitted to the governor for approval for public hearing.  [The statement shall provide a reasonable determination of the following:

(1) The businesses that will be directly affected by, bear the costs of, or directly benefit from the proposed rules;

(2) Description of the small businesses that will be required to comply with the proposed rules and how they may be adversely affected;

(3) In dollar amounts, the increase in the level of direct costs such as fees or fines, and indirect costs such as reporting, recordkeeping, equipment, construction, labor, professional services, revenue loss, or other costs associated with compliance;

(4) The probable monetary costs and benefits to the implementing agency and other agencies directly affected, including the estimated total amount the agency expects to collect from any additionally imposed fees and the manner in which the moneys will be used;

(5) The methods the agency considered or used to reduce the impact on small business such as consolidation, simplification, differing compliance or reporting requirements, less stringent deadlines, modification of the fines schedule, performance rather than design standards, exemption, or any other mitigating techniques;

(6) How the agency involved small business in the development of the proposed rules; and

(7) Whether the proposed rules include provisions that are more stringent than those mandated by any comparable or related federal, state, or county standards, with an explanation of the reason for imposing the more stringent standard.

(c)  When a proposed rule includes provisions that are more stringent than those mandated by any comparable or related federal, state, or county standards, the agency shall, in addition to the information required by subsection (b), include in the small business impact statement information comparing the costs and benefits of the standard set by the proposed rule to the costs and benefits of the standard under the comparable or related federal, state, or county law.  The agency shall also include an explanation of its decision to impose the higher standard.  The agency's comparison and justification shall include:

(1) A description of the public purposes to be served by  imposing the standard under the proposed rule;

(2) The text of the related federal, state, or county law, including information about the purposes and applicability of the law;

(3) A comparison between the proposed rule and the related federal, state, or county law, including a comparison of their purposes and of the standards and their application and administration;

(4) A comparison of the monetary costs and benefits to the implementing agency and other agencies directly affected, of imposing the proposed standard, with the costs and benefits of imposing or deferring to the related federal, state, or county standard, as well as a description of the manner in which any additional fees derived from imposition of the proposed standard are to be used; and

(5) A comparison of the adverse effects on small businesses of the standard imposed by the proposed rule, with the adverse effects on small business of the related federal, state, or county standard.

(d)] (c)  This chapter shall not apply to proposed rules adopted by an agency to implement a statute or ordinance that does not require an agency to interpret or describe the requirements of the statute or ordinance, such as federally-mandated regulations that afford the agency no discretion to consider less restrictive alternatives."

     SECTION 5.  Section 201M-3, Hawaii Revised Statutes, is amended to read as follows:

"§201M-3  Small business statement after public hearing.  (a)  For any proposed rule that affects small business, the agency shall also submit a small business statement to the director, the small business regulatory review board, and the departmental advisory committee on small business after the public hearing is held.  This section shall not apply to emergency rules.  The small business statement required by this section shall provide the following information:

(1) A description of how opinions or comments from affected small business were solicited, a summary of the public and small business comments, and a summary of the agency's response to those comments;

(2) The number of persons who:

         (A)  Attended the public hearing;

         (B)  Testified at the hearing; and

         (C)  Submitted written comments; and

(3) If there was a request to change the proposed rule at the hearing in a way that affected small business, a statement of the reasons for adopting the proposed rule, the reason why a requested change was not made, and the problems or negative result the change would provide if adopted.

(b)  If the [small business regulatory review board] director finds that a statement provided pursuant to subsection (a)(3)[:

(1) Indicates inconsistency with any of the agency's determinations under section 201M-2(b); or

(2) Does] does not address the concerns of public input,

the [board] director with good cause may request a written response from the agency explaining the rationale used to deny the public concerns within ten working days of receipt of the small business statement after public hearing.  The agency shall respond in writing to the [board's] director's concerns within ten working days.

(c)  The written response from an agency required in subsection (b), at a minimum, shall:

(1) Specifically address each issue and concern raised in the [board's] director's request for a written response; and

(2) Affirmatively state that the agency has considered all written and oral testimony received at the agency's public hearing and has addressed all issues or concerns raised in the written and oral testimony."

     SECTION 6.  Section 201M-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a)  There may be established within and administratively attached to every department of the State or county whose rules affect small business activities, an advisory committee on small business.  The advisory committee shall consist of three or more odd number of members appointed by the department and may advise more than one department.  The department shall have the authority to appoint members to the advisory committee and to fill any vacancies.  The members shall serve on a volunteer basis and have experience or knowledge of the effect of regulation by those departments on the formation, operation, or expansion of a small business.  No person shall serve [on] as the director or a member of the small business regulatory review board and an advisory committee on small business concurrently.  The advisory committees shall not be subject to the requirements of chapter 91."

SECTION 7.  Section 201M-5, Hawaii Revised Statutes, is amended to read as follows:

"§201M-5  [Small business regulatory review board; powers.] Office of small business regulatory review; director; small business regulatory review board.  [(a)  There shall be established within the department of business, economic development, and tourism, for administrative purposes, a small business regulatory review board to review any proposed new or amended rule or to consider any request from small business owners for review of any rule adopted by a state agency and to make recommendations to the agency or the legislature regarding the need for a rule change or legislation.  For requests regarding county ordinances, the board may make recommendations to the county council or the mayor for appropriate action.]  (a)  There is created an office of small business regulatory review that shall be headed by a single executive to be known as the director of small business regulatory review.  The office shall implement this chapter and shall be placed within the department of business, economic development, and tourism for administrative purposes.  The office shall serve the governor in an advisory capacity on all matters relating to small business regulations.

(b)  [The board shall consist of nine members, who] There is created a small business regulatory review board not to exceed nine members.  Members of the review board shall be appointed by the governor pursuant to section 26-34; provided that:

(1) Three members shall be appointed from a list of nominees submitted by the president of the senate;

(2) Three members shall be appointed from a list of nominees submitted by the speaker of the house of representatives;

(3)  [Two] Three members shall be appointed by the governor;

    [(4) The director of business, economic development, and tourism, or the director's designated representative, shall serve as an ex officio[[],[]] voting member of the board;

(5)] (4) The appointments shall reflect representation of a variety of businesses in the State;

    [(6)] (5) No more than two members shall be representatives from the same type of business; and

    [(7)] (6) There shall be at least one representative from each county.

For the purposes of paragraphs (1) and (2), nominations shall be solicited from small business organizations, state and county chambers of commerce, and other interested business organizations.

The board shall be attached to the department of business, economic development, and tourism for administrative purposes.  The term of each member shall be four years; provided that, of the members initially appointed, three members shall serve for four years, three members shall serve for three years, and the remaining three members shall serve for two years.  Vacancies shall be filled for the remainder of any unexpired term in the same manner as original appointments. 

     [(c)  Except for the ex officio member, all] All members of the board shall be either a current or former owner or officer of a business and shall not be an officer or employee of the federal, state, or county government.  A majority of the board shall elect the chairperson.  The chairperson shall serve a term of not more than one year, unless removed earlier by a two-thirds vote of all members to which the board is entitled.  The members of the board shall serve without compensation but shall be reimbursed for expenses, including travel expenses, incurred in the discharge of their duties.

     [(d)]  A majority of all the members to which the board is entitled shall constitute a quorum to do business, and the concurrence of a majority of all the members to which the board is entitled shall be necessary to make any action of the board valid.

(c)  The director and members of the board shall receive training by the division of the department of the attorney general that oversees the State's boards and commissions to ensure that the director and the members have a clear understanding of the role of the office, its director, and members of the board and the parameters of the director's and members' roles, including the hierarchy of the Hawaii Revised Statutes and the Hawaii Administrative Rules.

(d) The department of business, economic development, and tourism shall provide financial and administrative support reasonably necessary for the board and office to conduct small business regulatory review activities.

     [(e)  In addition to any other powers provided by this chapter, the board may:

(1) Adopt any rules necessary to implement this chapter;

(2) Organize and hold conferences on problems affecting small business; and

(3) Do any and all things necessary to effectuate the purposes of this chapter.

(f) The board shall submit an annual report to the legislature twenty days prior to each regular session detailing any requests from small business owners for review of any rule adopted by a state agency, and any recommendations made by the board to an agency or the legislature regarding the need for a rule change or legislation.  The report shall also contain a summary of the comments made by the board to agencies regarding its review of proposed new or amended rules.]"

     SECTION 8.  Section 201M-7, Hawaii Revised Statutes, is amended to read as follows:

"§201M-7  Periodic review; evaluation report.  (a)  Each agency having rules that affect small business shall submit by June 30 of each odd-numbered year, a list of those rules to the [small business regulatory review board;] director; provided that, by June 30 of each year, each agency shall submit to the [small business regulatory review board] director a list of any rules to be amended or repealed, based upon any new, amended, or repealed statute.  The agency shall also submit a report describing the specific public purpose or interest for adopting the respective rules that affect small business and any other reasons to justify their continued implementation.

(b)  The [small business regulatory review board] director shall provide to the head of each agency a list of any rules adopted by the agency that affect small business and have generated complaints or concerns, including any rules that the [board] director determines may duplicate, overlap, or conflict with other rules, or exceed statutory authority.  Within forty-five days after being notified by the [board] director of the list, the agency shall submit a written report to the [board] director in response to the complaints or concerns.  The agency shall also state whether the agency has considered the continued need for the rules and the degree to which technology, economic conditions, and other relevant factors may have diminished or eliminated the need for maintaining the rules.

(c)  The [board] director may solicit testimony from the public regarding any report submitted by the agency under this section at a public meeting held pursuant to chapter 92.  Upon consideration of any report submitted by an agency under this section and any public testimony, the [board] director shall submit an evaluation report to the next regular session of the legislature.  The evaluation report shall include an assessment as to whether the public interest significantly outweighs a rule's effect on small business and any legislative proposal to eliminate or reduce the effect on small business.  The legislature may take any action in response to the report as it finds appropriate."

     SECTION 9.  Section 201M-6, Hawaii Revised Statutes, is repealed.

["§201M-6  Petition for regulatory review.  (a)  In addition to the basis for filing a petition provided in section 91‑6, any affected small business may file a written petition with the agency that has adopted the rules objecting to all or part of any rule affecting small business on any of the following grounds:

(1) The actual effect on small business was not reflected in, or significantly exceeded, the small business impact statement submitted prior to the adoption of the rules;

(2) The small business impact statement did not consider new or significant economic information that reveals an undue impact on small business;

(3) These impacts were not previously considered at the public hearing on the rules;

(4) The rules create an undue barrier to the formation, operation, and expansion of small businesses in a manner that significantly outweighs its benefit to the public;

(5) The rules duplicate, overlap, or conflict with rules adopted by another agency or violate the substantive authority under which the rules were adopted; or

(6) The technology, economic conditions, or other relevant factors justifying the purpose for the rules have changed or no longer exist.

(b)  Upon submission of the petition, the agency shall forward a copy of the petition to the board, as notification of a petition filed under this chapter.  The agency shall promptly consider the petition and may seek advice and counsel regarding the petition from the appropriate departmental advisory committee on small business.  Within sixty days after the submission of the petition, the agency shall determine whether the impact statement or the public hearing addressed the actual and significant impact on small business.  The agency shall submit a written response of the agency's determination to the small business review board within sixty days after receipt of the petition.  If the agency determines that the petition merits the adoption, amendment, or repeal of a rule, it may initiate proceedings in accordance with section 91-3.

(c)  If the agency determines that the petition does not merit the adoption, amendment, or repeal of any rule, any affected small business may seek a review of the decision by the board.  The board shall promptly convene a meeting pursuant to chapter 92 for the purpose of soliciting testimony that will assist in its determination whether to recommend that the agency initiate proceedings in accordance with section 91-3.  The board may base its recommendation on any of the following reasons:

(1) The actual effect on small business was not reflected in, or significantly exceeded, the impact statement submitted prior to the adoption of the rules;

(2) The impact statement did not consider new or significant economic information that reveals an undue impact on small business;

(3) These impacts were not previously considered at the public hearing on the rules;

(4) The rules create an undue barrier to the formation, operation, and expansion of small businesses in the State in a manner that significantly outweighs its benefit to the public;

(5) The rules duplicate, overlap, or conflict with rules adopted by another agency or violate the substantive authority under which the rules were adopted; or

(6) The technology, economic conditions, or other relevant factors justifying the purpose for the rules have changed or no longer exist.

(d)  If the board recommends that an agency initiate rulemaking proceedings for any reason provided in subsection (c), it shall submit to the legislature an evaluation report and the agency's response as provided in subsection (b).  The legislature may subsequently take any action in response to the evaluation report and the agency's response as it finds appropriate.

(e)  If the board does not recommend that an agency initiate rulemaking proceedings, the board shall notify the small business of its decision and inform the small business that the small business may submit a complaint to the ombudsman pursuant to chapter 96 regarding the decision of the agency or board.

(f)  Nothing in this section shall entitle an affected small business to a contested case hearing under chapter 91."]

     SECTION 10.  The department of business, economic development, and tourism shall submit a report to the legislature no later than twenty days prior to the convening of the regular session of 2015.  The report shall include:

     (1)  All steps taken to prepare for the implementation of this Act; and

     (2)  A reasonable estimate of the costs to the department to implement this Act.

SECTION 11.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 12.  This Act shall take effect on July 1, 2015; provided that section 10 of this Act shall take effect upon its approval.

Report Title:

Small Business Regulatory Review Board; Office of Small Business Regulatory Review; Director; Annual Report

Description:

Establishes the Office of Small Business Regulatory Review.  Requires the Director to submit an annual report to the Legislature.  Requires the Department of Business, Economic Development, and Tourism to provide the Board adequate financial and administrative support.  (SB2487 HD2)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.