March 20, 2017
Focus: Government

CT lawmakers eye small business regulatory relief

PHOTO | Contributed
PHOTO | Contributed
Republican State Sen. Scott Frantz speaks at a state Capitol news conference.
State Sen. L. Scott Frantz (R-Greenwich)
Eric Brown, a CBIA lobbyist

Some state legislators are attempting to improve Connecticut's regulatory environment with several bills that would make it easier — and potentially less costly — to operate a business in the state, particularly startups.

One proposal (Senate Bill 128) would exempt new businesses from certain state regulations for two years, giving companies a better chance of getting established.

Another would suspend civil penalties against businesses for a first violation of state regulations, if the company acts to remedy the issue within 30 days.

While both bills face an uphill battle this legislative session — environmentalists and labor leaders have expressed opposition — they aim to open discussions on ways to make the state more business friendly, proponents say.

"We went from the top five to the bottom five [in many business-friendly rankings] in a generation and a half, in terms of all those important criteria having to do with running a business or starting a business," Republican State Sen. L. Scott Frantz, sponsor of S.B. 128 and co-chair of the Commerce Committee, said of various Connecticut rankings by magazines, think tanks and others.

Those rankings, including ones put out by Forbes, CNBC and Chief Executive Magazine, often focus on taxes, fees and regulations, which some call onerous in Connecticut.

Frantz said his proposal doesn't aim to exempt businesses from regulations that protect the life or safety of workers, or labor rules, but to figure out how more technically oriented rules could be handled to give new businesses time to transition into compliance over a couple years.

While the bill doesn't propose specific regulations to freeze or alter, Frantz said he'd like businesses and state agencies to offer suggestions for lawmakers to take up.

The bill's supporters include the National Federation of Independent Business (NFIB), Yankee Institute for Public Policy and Home Builders & Remodelers Association of Connecticut Inc., the latter offering qualified support.

Opponents include the state Department of Labor commissioner, state Insurance Department, Commission on Human Rights and Opportunities and Connecticut Fund for the Environment.

Democratic Commerce Committee co-Chair Joan Hartley could not be reached for comment.

Scott Jackson, commissioner of the Department of Labor, testified that there are too many regulations protecting the state's workers that cannot be circumvented, including paying appropriate wages and following safety rules.

"There are too many others to list, but we cannot support a bill that would put our workers' livelihoods in jeopardy," he told the committee.

The Connecticut Fund for the Environment, in written testimony by staff attorney John Looney, said the bill could have enormous impacts on citizens and the environment and natural resources of Connecticut.

"In an attempt to create a 'business friendly' atmosphere in Connecticut, the proposed bill does so to the detriment of the public health and safety," Looney wrote.

Andy Markowski, National Federation of Independent Business state director, offered a different take.

"This is exactly the type of legislation that NFIB and small business owners are encouraged to see the General Assembly considering," Markowski said. "Far too often we are dealing with bills that send the wrong message, that create a first in the nation kind of mandate."

The top complaints of NFIB's Connecticut members, the majority being businesses with 15 or fewer employees, typically center around taxes and fees, Markowski said. Rolling back taxes and fees on new businesses, when they're most vulnerable to failure, is attractive, as is curtailing regulation.

"Small business owners will tell you that their most valuable asset often is their time," of which they spend an inordinate amount trying to navigate often vague, confusing regulations, he said.

According to a 2016 Connecticut Business and Industry Association (CBIA) small business survey, more than a third of the 331 respondents said state regulations are hampering their businesses and 60 percent characterized those rules as complex and vague.

Meantime, the cost associated with complying with state regulations was the No. 1 challenge for 79 percent of businesses surveyed, CBIA said.

Which regulations are most onerous depends on the industry, Markowski said.

But among those he cited are the $250 business entity tax assessed every other year "just for the privilege of being in business in Connecticut — and you pay that fee whether you are profitable or not," he said. He also hears complaints about unemployment assessments and regulations, particularly among new and small businesses whose unemployment insurance costs increase, for example, as a result of an employee who may have to be fired for cause but ends up receiving unemployment benefits.

Penalty relief

The CBIA is supporting Senate Bill 818, which suspends civil penalties against businesses for a first violation of state regulations if the business acts to remedy the violation within 30 days. It would not apply to "willful or grossly negligent" violations, violations injuring people, or violations of federal rules.

In testimony on the bill, Eric Brown, a CBIA lobbyist, said the proposal "would send a loud and important message to the marketplace that Connecticut is serious about helping small businesses not only survive but thrive in our state by giving them a chance to correct first-time, minor regulatory violations such as paperwork and record-keeping requirements, without incurring a financial penalty."

The bill would also free state resources to focus on significant or repetitive violators, he added.

CBIA is backing a number of bills in different committees, including Senate Bill 963, which seeks to get Connecticut's antiquated hazardous waste generator regulations consistent with the latest federal rules, which are considered easier to understand and follow, Brown said.

Brown said exempting companies from regulations early on could make Connecticut more attractive to startups, which is important to a healthy economic climate.

Frantz said he hopes his bill leads to specific recommendations in agencies where legislative action could improve the business climate.

Opening a food franchise, for example, "we have to agree that regulations, to a certain degree, are really important — you don't want there to be any food illness epidemics or anything like that," he said.

"But it's not the most friendly of states in which to get permission from the Department of Public Health to start operating," he said.

Perhaps two or three health staff, instead of focusing only on regulatory enforcement, could help startups comply with regulations over a period of time to allow the businesses to get established, Frantz said.

It's not about exempting businesses from regulations, but being flexible where pertinent and creating a positive business environment, he said.

It's a "common-sense approach to making it easier for companies to start up so that people would have a great experience and tell their colleagues about it so we might have a lot more startups in the state," Frantz said.

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