Smoke and mirrors: one bill’s path in the Capitol’s labyrinth

Conspiracy theorists can have a field day in the Capitol, and who can blame them?

In the inner world of politics and governance, someone benefits, someone loses, someone leaks, someone counter-leaks, someone’s career is on the line. Sometimes, even the public interest is considered.  Things are never quite what they seem.

So it was with the Schwarzenegger administration’s release last week of an 84-page study that showed California’s economy has suffered a $493 billion hit due to states’ regulations of businesses. Nearly all of California’s businesses – more than 99.2 percent – small businesses with 20 or fewer employees. Their price tag: $134,122 each annually due to government regulation. Not surprisingly, anti-regulation and anti-tax forces lauded the findings, saying it confirmed what they had been saying all along – that regulations exerted a stranglehold on businesses and crippled the economy.

“We’re over-regulating in this state, we’re water boarding business,” said Assemblyman Dan Logue, R-Chico, who is vice chair of the Assembly jobs committee.  “To my knowledge, no formal study has ever been commissioned by the State of California to examine the costs of regulatory burdens on small business. The findings of this study are historic and critically important in light of the current state of the economy,” he added.

Others weren’t so enthralled.

“Californians understand that there is a difference between unreasonable regulations and laws that protect kids from asthma, the elderly from abuse and workers from dangerous work conditions. We pass minimum-wage laws and laws to enable workers to take time off to care for elderly parents or sick children because these laws improve the lives of Californians,” said Senate Leader Darrell Steinberg, D-Sacramento.

Critics – as well as the study’s authors, Sacramento State University business school dean Sanjay B. Varshney and marketing professor Daniel Tootelian – noted that the review relied entirely on data developed by Forbes. The authors also noted that more work needs to be done to nail down the impacts of regulation.

But whatever the merits of the study, the way in which it came to the public attention is of interest.

The report was prompted by a 2006 bill, AB 2330 by Juan Arambula, a Fresno Independent and former Democrat. The bill was unanimously approved in the Assembly; in the Senate, there was some dissent from labor, but it passed there with 28 votes.

And that seemed to be that: Another study bill, this one to be done through the auspices of the governor’s Office of Planning and Research, gets approved and sinks without trace. Not quite.

A year later, when the $85,000 study was due, nothing happened. This is not unusual in the Capitol, where the term “study bill” is a euphemism for weakness and compromise, the end of the legislative trail for a bill that once contained substance. But Arambula’s bill was different – it started out as a study bill.

In part, that was because the creation of the office of the small business advocate at OPR was delayed, Capitol sources said, and because there was a lot more to worry about at the time than a business study.

Another year went by and the study was completed, in October 2008. But the administration declined to release the report, despite requests from Republicans, business advocates, even the author. A number of people who wanted the study made public said they were met with silence from the administration.

For its part, the administration said it wanted to make sure the study was accurate before making it public. “It was a very important report and we wanted to make sure it was ready for release,” said Schwarzenegger spokesman Aaron McLear.

But suspicions, never far from the surface in the Capitol, were aroused. A variety of theories ricocheted around the Capitol from both Democrats and Republicans.

One was that the numbers cited in the report – $492 billion – were so huge as to be laughable, and that the study would be pilloried when it was released and embarrass the governor. Another was that the document was simply a restatement, however complex, quantified and sophisticated, of Forbes’ own anti-regulatory position and should be buried. Another was that it was a combination of the above.

Yet another theory – and this one captured the most attention – drew a connection between the report and California’s law to curb greenhouse gas emissions, AB 32. That bill was signed in 2006, the same year that the little-known AB 2330 was approved. The plans for AB 32 were put together in 2007 and the “scoping plan,” the blueprint for regulations, was approved by the Air Resources Board, in December 2008.

But the economic core of AB 32, the creation of a market place where carbon emission credits would be sold and traded, has not yet been devised. The economic model for AB 32 used earlier by the ARB has come under fire from business interests, who said it would cripple the economy and cited an earlier report co-authored by Varshney that said AB 32 could cost small businesses $50,000 annually, despite research from AB 32 supporters that show “green” employment would skyrocket. But the administration’s fear was that the study would give ammunition to the opponents of AB 32, the centerpiece of the governor’s environmental legacy.

There is some evidence for this. The Air Resources Board, charged with the enforcement of AB 32, has hired a UCLA consultant to do another study.

“There were conspiracy theories all over the place, but it all comes back to the legacy.” said one Capitol staffer.  

Throughout August and September, as the administration continued to hold on to the report that by now had been completed for a year and was two years overdue, groups started pressing harder for its release.

Finally, a group seeking the study, the National Federation of Independent Businesses, a frequent critic of the state’s regulatory landscape, submitted a request under the Public Records Act to force the document’s release. Nothing happened.

Then, NFIB heard the report was going to be released within a few days, then over the weekend, then within a few more days. The study finally was abruptly released last week, and it caught virtually everyone – including those who had demanded its release – by surprise.

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