Ohio Chamber of Commerce - Ohio Small Business Council

Small Business Legislative Testimony

Testimony delivered to the House Committee on Economic Development & Small Business
Feb. 9, 1999
by BJ Wiberg

Mr. Chairman and Members of the Committee:

My name is BJ Wiberg, director of the Ohio Small Business Council (OSBC), a division of the Ohio Chamber of Commerce. The OSBC is governed by a 21-member board of small business owners and operators from throughout Ohio. Our membership includes approximately 4,300 Ohio-based small businesses, each employing 250 or fewer people. These small businesses, and more than 250,000 others like them, represent over 97 percent of all private-sector enterprises in Ohio. They employ nearly 60 percent of our state's private-sector workforce with an annual payroll of more than $45 billion. These are the businesses in which 70 percent of those entering the workforce get their first jobs. And these are the businesses that are creating the majority of new jobs.

I come before you today to testify in support of HB 13, which, among other things, will help determine the impact that proposed rules, regulations or resolutions may have on: (a) The ability of a small business to become established and grow during the first three years of its operation, and (b) Ohio's ability to retain and attract businesses in its high-stakes jobs and revenue competition with other states.

Before going further, I would like to put into perspective the current regulatory costs that our small business face. According to figures released by the U.S. Small Business Administration, the average annual regulatory cost to a business employing 500-plus people is $3,404 per employee, compared to just more than $5,000 for the average small business - a 47 percent greater compliance cost for smaller businesses. Looking at this from another view: For every dollar in sales, the regulatory cost for the larger business is 2.1 cents; for the average small business it is 3.9 cent - an almost 86 percent greater cost for the small business.

One of the most discouraging things facing small business owners is that in Ohio no one seems to have a good handle on monitoring these costs. Nor do we have an effective mechanism in place to determine such costs bill by bill, regulation by regulation. We do have statutes in place requiring that an economic impact, or fiscal, analysis be conducted to determine the government's cost to implement proposed new rules, but nothing requiring that the same be done to determine the financial impact on those who must pay the bill, our small businesses and, ultimately, Ohio's consumers.

Please permit me to illustrate this point very clearly. Eighteen months ago, SB 16, as it was introduced, would have required all businesses in Ohio to display their street address numbers in such a way as to be visible in daylight, at dark and during "inclement" weather from a car on the fronting road or highway, presumably moving at or near the speed limit. The accompanying fiscal note and local impact statement indicated that the Board of Building Standards' cost associated with the requirements of this legislation would be minimal.

When I testified in opposition to that bill, I was told by one legislator that "for $10 at the local hardware store" a business could get the necessary materials to comply, while another legislator suggested that "$100 would do the trick". While polling small businesses all over the state on different aspects of this bill, a business in Hamilton County, located a mere 75 feet from the road, informed me that, based on an actual estimate it had received, it would have cost in excess of $5,000 to meet the standards called for in that bill.

This example illustrates very clearly that there is a great gap between perception and reality. We believe it is vitally important for you, our legislators, and for those who propose new rules and mandates, to know the price tag they carry. As one of our small business members commented about you, our legislators, in a recent survey: "The more informed they are, the better decisions they should be able to make."

In the past some legislators have expressed the concern that enactment of bills similar to HB 13 would increase the cost to state and/or local governments due to the additional work required in conducting these fiscal analyses. Although this is a legitimate concern for all of us, what follows will help put this concern into perspective.

Last year the Ohio Legislative Budget Office presented a fiscal analysis on HB 267, which today we know as HB 13. The LBO estimated that analyzing 100 additional bills per year would increase their cost by almost $308,000 for additional staff, consultants and maintenance. In our analysis of the SB 161, we calculated that its compliance would impact approximately 63 percent of Ohio's small businesses (some 150,000 of them) at a conservatively estimated total cost of $60 million. In this one instance the collective cost passed on to Ohio's small businesses would have been at least 20,000 times greater than the LBO's estimate on the cost to analyze that bill. We believe that would be a small price to pay for information that should be an important part of legislative decision making because it directly impacts your constituents.

Ohio's entrepreneurs and small business people must deal with a sea of red tape which currently includes approximately 45,000 rules and regulations on Ohio's books, administered by some fifty different state agencies. According to calculations by our own state government, the cost of complying with these regulations and associated fees is now around $35,000 per year for the average Ohio small business. This makes Ohio the fifth most expensive state in terms of government costs imposed on small businesses according to the recently released Small Business Survival Index 1998: Ranking The Environment For Entrepreneurship Across The Nation. And this is why Ohio's small business owners say that neither competition, nor cash flow nor financing are among their greatest concerns, but rather the need to not only control but reduce the regulatory burden of government.

The Ohio Small Business Council believes HB 13 is long overdue, and so does 81 percent of the small business community, according to a poll we conducted last year. (The majority of the remaining 19 percent questioned if this bill was strong enough) We believe HB 13 is a prudent and practical approach to informed decision making about the cost of proposed legislation and rules that may impact the 250,000-plus small businesses in Ohio.

Mr. Chairman and Members of the Committee, I appreciate this opportunity to present our testimony today and look forward to your support for passage of HB 13.