Saturday, October 24, 2009




Ever since the state issued a "Small Business Regulatory Study" this fall, advocates of decreased regulations on businesses of all kinds have used its big numbers as evidence of vast over-regulation.

"This study validates…that small businesses face insurmountable costs and disincentives to grow in our state," moaned John Kabateck, executive director of the California branch of the National Federation of Independent Business (NFIB).

The figures in the study make him look right: The total cost of regulations in California is just short of $493 billion per year, it says, with the cost to each small business (100 employees or fewer) averaging $134,122.

There's only one problem with this study: It's worthless, a complete waste of the $85,000 in taxpayer money it cost. Even the author of the law that appropriated money for the study now deplores it.

"My intent was to find ways to minimize the impact of state regulations on small business," said Assemblyman Juan Arambula of Fresno, a former Democrat, now Independent. "This report is sketchy in terms of recommendations…it does not do what I had in mind."

Here's why this study is essentially junk, deserving of quick deposit into a landfill:

Its authors did not examine regulations one by one, assessing the cost of each and adding it all up. Rather, said Marty Keller of the state Office of Planning and Research, "This was a macro study." Whatever that means.

Nor did the study's authors, led by Sanjay Varshney, dean of business administration at Sacramento State University, even attempt to determine how much money regulations actually save business, consumers and the state. Without that balance, the cost figure means little or nothing.

Take safe food regulations as one example. It costs butchers and supermarkets plenty to throw out old, rotten meat. But allow them to somehow stanch the odors of such cuts and try to fool consumers into believing the stuff is fresh, and disease would surely follow, with lawsuits the inevitable result.

Which means that while regulations forcing disposal of old meat have costs, the same rules save taxpayers and consumers many millions in medical bills, and also most likely have a net benefit to small businesses by sparing them legal costs and court judgments.

It's the same in weights and measures. Regulations force gasoline stations, for one example, to calibrate pumps so a gallon registers as a gallon, rather than letting a half-gallon register as a full one. This involves a cost to any service station owner who wants to cheat, but it's a benefit to consumers and even to station owners who would surely be sued by customers once they learned they'd been deceived.

And what about clean water rules that force factories and cities to stop dumping effluents and other pollution into rivers, streams and oceans? Those laws not only spare the public from illness, they assure that existing water supplies won't become unusable.

Then there's the study's implication that California has more regulations than other states. The only problem with this is, as Keller admits, that there was no effort to determine which regulations are unique to California and which are virtually universal. So who knows whether California has more restrictive rules than other states, or which fields those rules might affect? You can't tell from this study, no matter what anyone says.

Besides all this, the study raises another question: Why should it have cost the taxpayers $85,000? Varshney, after all, is already on the state payroll. He and his students could easily have completed this study as an academic exercise with no additional cost to the state.

Varshney did not respond to repeated efforts to obtain answers to these questions. He did tell another reporter his study is "a first step…I am hoping we opened the door and more groups will try to improve on it."

The larger question, of course, is why any research laced with so many holes would ever be purveyed by the state. The answer most likely is that Gov. Arnold Schwarzenegger has consistently opposed most new regulations other than those aimed at cutting greenhouse gases, and he insisted on watering down even those. So it's completely predictable his appointees would publish a study that implies California has too many, too onerous regulations.

Some have said the $85,000 this report cost is mere peanuts in the universe of California's government spending. But that sum might have prevented dropping at least one class from the curriculum at either the University of California or a California State University campus.

It's a classic example of government commissioning a worthless, meaningless study suited only to be used by special interest groups like the NFIB and the Howard Jarvis Taxpayers Association. And it raises the question of how many other completely wasteful projects also consume tax dollars.

Email Thomas Elias at His book, "The Burzynski Breakthrough," is now available in a soft cover fourth edition. For more Elias columns, visit

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