Virginia Manufacturers Association: Environmental, Health, and Safety

Conference

Update of 2006 JLARC Study on Impact of Manufacturing Regulations

September 2015

JLARC

Agenda

About JLARC Summary of 2006 JLARC study Next steps / discussion

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JLARC3

A non-partisan, non-political evaluation and research agency of the Virginia General Assembly

Full-time, permanent staff Conducts objective research and

analysis and reports study findings and recommendations to the General Assembly and the Governor

Joint Legislative Audit and Review Commission

JLARC

Program evaluation and policy analysis of state agencies and programs

Legislative oversight of certain state programs and functions

Fiscal analysis Special investigations

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Areas of JLARC Research

JLARC5

JLARC Members

Sen. Charles Colgan

Del. David Albo Del. Kirk Cox Sen. Janet

Howell Del. Johnny

Joannou Del. Chris Jones Del. R. Steven

Landes

Del. Jimmie Massie Sen. Thomas

Norment Del. John O’Bannon Del. Lionell Spruill Sen. Walter Stosch Martha Mavredes,

Auditor of Public Accounts

Sen. John Watkins, ChairDel. Robert Orrock, Vice-Chair

JLARC

JLARC Meets Once a Month From May through December (except August)

Staff present study findings Members ask questions Members vote to “receive” report and

“authorize” printing

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JLARC

Agenda

About JLARC Summary of 2006 JLARC study Next steps / discussion

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JLARC

Prior to 2006 Study, Virginia’s Manufacturing Sector Had Declined, Leading to Study Request Employment down 27% between 1992

and 2005 (407,200 to 296,000)

Manufacturing still important to Virginia’s economy

Was third largest business sector with 12% of state’s employment (2005)

Nearly 6,000 manufacturing establishments (2005)

Sector value-added was about 15% of Virginia’s Gross State Product (2005)

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JLARC

SJR 360 (2005) Directed JLARC Staff to Study Impact of Virginia’s Manufacturing Regulations Cost of compliance with federal and

Virginia regulations Compare Virginia’s regulations to

other mid-Atlantic and southern states

Compare Virginia’s regulations for manufacturers to other business sectors

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JLARC

Key Findings from 2006 JLARC study

Despite job losses, manufacturing was still critical to Virginia’s economy

Virginia’s regulations were not the primary cause of job loss

Virginia manufacturers spent an estimated $923 million to $3.49 billion to comply with regulations in 2005

Virginia’s regulations generally followed federal regulations and were not substantially different from other selected states

Supporting manufacturing required considering other factors, including workforce issues and transportation infrastructure

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JLARC

2006 JLARC Study Grouped Federal and Virginia Regulations Into Four Categories

1. EnvironmentalProtect the environment and human health from harmful air emissions, water contamination, and hazardous waste pollutants.

2. EconomicRestrict a firm’s primary economic activities, such as its process, pricing, and output decisions.

3. WorkplaceGovern the relationships between employers and employees, such as wages, benefits, safety and health, and civil rights.

4. TaxIdentify the activities for which government will collect taxes and the rates at which those taxes will be collected.

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JLARC

Staff Used Different Sources to Help Estimate Compliance Costs

Existing estimates adjusted by JLARC staff

Case studies with five large Virginia manufacturers Two paper manufacturers

Transportation equipment manufacturer

Beverage and tobacco products manufacturer

Computer and electronics manufacturer

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JLARC

JLARC Staff Estimated Direct and Other / Indirect Costs

Direct Costs Other / Indirect Costs

Capital expenditures Disrupted productivity

Product reformulation or design

Altered decision-making due to regulatory requirements

Recordkeeping Settlement awards and legal costs

Staff time OSHA fines for non-compliance

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JLARC

Estimated Direct and Indirect / Other Costs (2006)

$0

$500 M

$1.0 B

$1.5 B

$2.0 B

$2.5 B

$3.0 B

$3.5 B

Environmental

Economic

Workplace

Tax

Environmental

Economic

Workplace

Tax

Approach #1:Direct Costs

Approach #2:Direct Costs + Other Costs

$1,155,182,038 $ 1,194,912,017

$ 3,486,689,611

$922,976,565

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JLARC

Overall Themes -- Case Study CompaniesCompanies could generally identify compliance costs

Had diffi culty determining what they would spend absent regulation

Generally could not separate costs to comply with federal regulations from costs for Virginia regulations

A company’s estimates for its facility are likely more precise than aggregate estimates for all companies

Compliance costs can vary widely

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JLARC

Less than 2%

2% to under 5%

5% to 10%

More than 10%

Machinery and Tools Tax Was the Most Widely Cited Regulatory Concern (2006)

% of Local Revenue from

M&T Tax

Few Localities Rely Heavily on Machinery and Tools Tax for Local Revenue

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JLARC

Virginia Regulations Were Not Primary Reason for Decline in Manufacturing Jobs (2006)

Globalization, increased productivity, and labor costs were major reasons Job loss occurred in other states, nationally, and in other

industrialized nations

Virginia’s regulations closely followed federal regulations and had remained relatively stable during job losses

More broadly, Virginia was consistently recognized as a “business-friendly” state

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JLARC

0 5 10 15 20 25 30 35 40 45

Other

Energy costs

Proximity to customers

Transportation infrastructure

State regulations

Taxes

Workforce: Costs

Workforce: Quality / Availability

Supporting Virginia’s Manufacturing Sector Also Required Considering Other Factors

*Manufacturer’s responses to JLARC survey on factors in business location decisions (2006).

# of companies

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JLARC

Agenda

About JLARC Summary of 2006 JLARC study Next steps / discussion

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JLARC

SJR 274 (2015) Directs JLARC to Update Its 2006 Study on Impact of Virginia’s Manufacturing Regulations

Cost of compliance with federal and Virginia regulations

Extent Virginia regulations expand on federal regulations

Summarize major state regulatory actions

Compare Virginia’s regulations for manufacturers to other business sectors

Compare Virginia’s regulations to other mid-Atlantic and southern states

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JLARC

Status and Next Steps

Analysts assigned during September and October

Begin background research and planning

Availability of regulatory impact estimates

Changes in regulatory framework

Changes in manufacturing sector and sub-sectors

Present findings in 2016 at summer or fall JLARC meeting

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JLARCJLARC http://jlarc.virginia.gov/(804) 786-1258

Discussion? Questions?

Justin Brown, Associate Director

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