Democratic View

May 3, 2002

ADDITIONAL VIEWS
H.R. 4231 - Office of Advocacy Improvement Act

Democrats strongly support the goal of providing the Office of Advocacy with a stronger voice in the formation of public policy across the federal government. At the same time, it is important to ensure the Office of Advocacy stays true to its core mission of providing support to small businesses and entrepreneurs. Other legislation that has been considered significantly expanded the authority and duties of the Office of Advocacy. The provisions in this legislation do not force Advocacy into a much greater role - which could lead to a decline in its effectiveness as an office.

Congress established the Office of Advocacy to be an independent voice for small business in the formation of public policy across the federal government. Advocacy focuses on researching small business trends, characteristics, and contributions to the economy. It also monitors Executive Branch compliance with the Regulatory Flexibility Act.

The Office of Advocacy's responsibilities regarding agency compliance with the Regulatory Flexibility Act are crucial to fulfilling the intent of the statute. Small Business Committee Democrats believe that the heart of the Regulatory Flexibility Act lies in its own inherent flexibility. The flexibility of the law is due to the fact that the Regulatory Flexibility Act statutory terms are necessarily vague. This allows agencies to tailor their regulatory alternatives and relief to their own rules or policies. Agency interpretations vary widely - some select a few regulations with obvious small business impacts for Regulatory Flexibility Act analyses, while others analyze the majority of their regulations but the analysis is usually very limited. The Office of Advocacy exists to patrol these interpretations and educate agencies about the implications their actions have on small businesses.

Agency interpretations of the Regulatory Flexibility Act should be developed and enforced with serious consideration. The Regulatory Flexibility Act (RFA) as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) is intended to give small businesses, small governments and small non-profit enterprises a special opportunity to participate in the development of regulations that significantly affect them. Agencies need to focus their efforts and resources on the select number of regulations that will have a truly significant impact on a substantial number of small businesses. If too many regulations are subject to the RFA's requirements, agencies will be less likely (and less able) to devote substantial resources to this task. Any RFA statutory clarifications should be clear and targeted. Democrats believe that granting an agency authority to define RFA/SBREFA terms or regulate certain provisions of the act will likely work against the interests of small businesses.

The Chief Counsel has a dual responsibility. First, he/she must act as an independent watchdog for small business. Second, he/she is also part of the President's Administration. These two roles can be difficult to perform together without the risk of undue influence from the Small Business Administration (SBA), the Office of Management and Budget (OMB), or other federal agencies. The influences from these offices may compromise Advocacy's independence and freedom to take positions that support small business, but may be contrary to the Administration's policies or regulatory actions.

Given the nature of Advocacy's job, it could be called upon to criticize federal government actions that are not in the best interest of small businesses. This could create a natural tension between the Office of Advocacy and OMB as well as other federal agencies. For this reason, we believe that the Office of Advocacy should have fiscal independence from the Administration. The Office of Advocacy Improvement Act of 2002 stipulates that the budget request of the Chief Counsel will be included in the President's budget without change. Creation of a line item budget for the Office of Advocacy would have still required Advocacy to negotiate with OMB for resources through the budget pass-back process. This legislation allows the Administration (i.e., OMB) and the Office of Advocacy to be relieved from discussions regarding budget allocations.

Earlier draft legislation granted the Office of Advocacy the authority to issue regulations governing federal agency compliance with the Regulatory Flexibility Act and promulgate federal regulations to carry out the functions and duties of the office. This would have been a significant expansion of the current reach of Advocacy's authority. Democrats do not support this effort because we believe it would dilute the mission of the Office of Advocacy.

Previous legislative proposals have attempted to combine the functions of the National Ombudsman and the Office of Advocacy into a single, independent office. The Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act have provisions relating to SBA's participation in the rulemaking activities of the federal government at two distinct phases: 1) during rule development and 2) after final rule promulgation (final passage).

Congress directed the Office of Advocacy to participate in the development of regulations that are likely to significantly affect small businesses. This is accomplished through the Small Business Advocacy Review Panel process (prior to rule proposal) and through comments on proposed regulations during the public notice and comment period.

To compliment the Office of Advocacy's efforts in the pre-proposal phase of rulemaking, Congress created the Regulatory Ombudsman to report on the enforcement activities of federal agencies as they relate to small businesses after a regulation is finalized. The Regulatory Flexibility Act, as amended by the Small Business Regulatory Enforcement Fairness Act, directs the Ombudsman to work with each agency to ensure that small businesses are provided with a means to comment on the enforcement activity of that agency, keep the identity of the small business confidential, and rate agency responsiveness to small business concerns.

Democrats recognize that working with federal agencies at different stages of rulemaking necessitates a different type of relationship with the agency and different types of skills and resources. These functions need to be specialized in order to be effective and they are best kept to different parts of the Small Business Administration so they each can be guaranteed adequate attention. In addition, the combination of pre- and post- rule functions could create a conflict of interest within a single office - if enforcement problems arise regarding a particular regulation, it could be said that the pre-rule advocates should have corrected this problem at the pre-rule stage.

The funding levels provided in this legislation will enable the Office of Advocacy to move forward in its efforts to improve and strengthen Advocacy's position and voice among the federal agencies. Committee Democrats believe these funds are necessary to support the Office of Advocacy's research functions to report small business trends, characteristics, and contributions to the economy.

In summary, Democrats support these targeted provisions to make the SBA Office of Advocacy more independent from the Administration and OMB. Having an independent Office of Advocacy is more important than ever with an Administration that places such emphasis on big businesses.