“Small Business Advocacy: Examining Declining Cost Savings and Solutions”

The Office of Advocacy of the Small Business Administration (SBA) has been instrumental in advocating for regulatory changes that benefit small businesses over the past decade. Their efforts have resulted in substantial cost savings of nearly $17 billion in initial costs and $10.7 billion in recurring costs for small businesses. However, the most recent fiscal year saw a significant decline in cost savings attributed to the Office of Advocacy, with reported savings amounting to only $73.5 million. This represents the lowest total in the past 10 years, despite a record level of regulatory activity and increased engagement with federal agencies. This raises concerns about the level of attention given to small businesses‘ regulatory challenges.

INTRODUCTION

Established in 1976, the Office of Advocacy of the SBA serves as the independent voice for small businesses in the federal government. Empowered by the Regulatory Flexibility Act (RFA) of 1980, the Office of Advocacy produces an annual report, known as the Advocacy RFA Report, which assesses federal agencies’ compliance with the RFA and provides updates on its efforts in the rulemaking process. Since 2013, the Office of Advocacy has played a vital role in saving small businesses billions of dollars through its interactions with agencies. However, the most recent report indicates a concerning trend of agencies not adequately addressing small business concerns in their regulations.

FY 2022 VERSUS RECENT TRENDS

In FY 2022, the Office of Advocacy claimed credit for $73.5 million in cost savings for small businesses, resulting from three rules and eight non-quantifiable “regulatory success stories.” While these savings are positive for the affected businesses, they represent the lowest amount in the past decade.

The most successful year for the Office of Advocacy was FY 2014, with approximately $4.8 billion in savings, primarily attributed to its involvement in repealing an Environmental Protection Agency rule. In contrast, the $73.5 million in savings for FY 2022 is significantly lower, accounting for only 4% of the average initial cost savings and 7% of the average annual cost savings over the past 10 years.

Additionally, FY 2022 witnessed the lowest number of “regulatory success stories” in the past decade, indicating a decreased impact on providing regulatory relief for small businesses compared to previous years.

Potential Explanations

Contrary to the assumption of a lack of regulatory activity, FY 2022 had the highest total estimated costs from published rules in the past decade. The Office of Advocacy’s efforts were also substantial, including comment letters, regulatory roundtables, and training sessions for federal agency staff, surpassing the 10-year averages for each metric.

IMPLICATIONS AND POTENTIAL SOLUTIONS

The FY 2022 Advocacy RFA Report suggests that federal agencies may not be adequately prioritizing the adjustment of their rulemakings to accommodate small businesses’ needs and interests. To address this issue, there are potential solutions at both the executive and legislative levels.

On the executive side, the administration’s “Modernizing Regulatory Reform” effort could incorporate a stronger commitment to considering small business issues. By emphasizing increased public engagement and expanding practices similar to the Small Business Regulatory Enforcement Fairness Act (SBREFA) across all executive agencies, the administration can ensure that small business concerns are adequately addressed in the regulatory process.

On the legislative side, the “Small Business Regulatory Flexibility Improvements Act” (SBRFI Act) could enhance the Office of Advocacy’s efforts in analyzing the impacts of regulations on small businesses. The bill requires agencies to notify the Office of Advocacy before publishing proposed rules and provide details on how those rules would affect small businesses. This proactive engagement could bridge the gap in considering.  small business implications, as highlighted in the FY 2022 Advocacy RFA Report.

CONCLUSION

The FY 2022 Advocacy RFA Report highlights the need for greater consideration of small business impacts in the federal rulemaking process. Despite the Office of Advocacy’s active involvement, the report reveals a decline in cost savings for small businesses. Policymakers should take this as an opportunity to strengthen procedural frameworks and ensure fair treatment for small businesses during the complex regulatory process.