Findings from a report studying the costs associated with implementing AB 32, California’s landmark greenhouse gas plan, indicate that the state’s small businesses would be facing additional fees of up to $50,000.

And it’s not like the state’s economy is currently in the best position to absorb this hit.

The analysis of the California Air Resources Board’s scoping plan, commissioned by the California Small Business Roundtable, was written by Sanjay Varshney, dean of the College of Business Administration, California State University, Sacramento and Dennis H. Tootelian, Ph.D., professor of marketing and director of the Center for Small Business, California State University, Sacramento. The report is being scrutinized by the press and other state entities to determine the scoping plan’s validity and credibility.

“No matter the outcome of the debate, there is no question that California is an uncompetitive place to do business in large part because of the regulatory impediments and costs,” says Gino DiCaro, vice president, communications for the California Manufacturers and Technology Association. “We know the regulatory environment is killing middle class jobs. It’s too bad we don’t have regular, consistent, and independent analysis of each state regulation so we know exactly what we are up against. Let’s face it, though, even if California’s regulatory costs are half what the study finds, the governor and legislature should take immediate action to reduce the cost of regulatory impediments.”

“It’s been almost a year since CARB released the AB 32 economic analysis, which was summarily dismissed by respected economists across the state and nation. We think CARB should own up to its very own flawed analysis on the impact of AB 32. Absolutely nothing has been done to develop a new, believable analysis and CARB continues to use its original study to justify new regulation that will impose unknown costs on all Californians.”

And in a state with a 12.2% unemployment rate and a budget near bankruptcy, we can ill afford another regulation without understanding completely how it will hamper our economic growth.

Varshney says the study focused on the costs to be incurred by consumers in five specific areas: housing, transportation, natural gas, electricity and food. “Using three different scenarios to measure the economic costs, we find that the potential loss of output, jobs, indirect business taxes and labor income is substantial and significant,” he says.

He adds that the report reveals that when the plan is fully implemented, California families will be facing increased annual costs of $3,857 and that in order to cope with the increased costs generated by the Greenhouse Program, consumers will be forced to cut their discretionary spending by 26.2%.

“We conclude that when California’s climate change program, AB 32, is fully implemented, the average annual loss in gross state output from small businesses alone would be $182.6 billion, approximately a 10% loss in total gross state output,” Varshney says. “This will translate into nearly 1.1 million lost jobs in California. Lost labor income is estimated to be $76.8 billion, with nearly $5.8 billion lost in indirect taxes. This decline in revenues will have a severe impact on future state budgets.”

As all of you readers know, small businesses drive the economic engine in California. They comprise 99.2% of all employer firms and 99.7% of all firms. They account for over half the employment, over 90% of net new job creation, and 75% of the creation of gross state output. The study’s cost analysis was based on the CARB’s own findings, which revealed significant cost increases.

The study’s findings are consistent with the peer review analysis commissioned by CARB, the Legislative Analyst’s Office review of the scoping plan and an analysis conducted by the Los Angeles Economic Development Corp.

“We support the state’s efforts to curb greenhouse gas emissions, but we are very concerned that these costs will apply disproportionally to California small business,” says Esteban Soriano, chairman of the California Small Business Association and a founding member of the California Small Business Roundtable. “Consumers will be hurt and the environmental goals will not be achieved.”

According to the authors, the study utilized IMPLAN, a widely used economic modeling program that has more than 1,500 active users in the U.S. and internationally. These include clients in federal and state government, universities and private sector consultants.

Twitter