Two CSUS Professors Release Scathing Report on the Costs of AB 32

July 14, 2009

On July 13, a study which will not doubt be controversial concerning AB 32’s cost affects, just on small California businesses was released. Apparently when the program is fully implemented, California families will be facing increased annual costs of $3,857. The analysis of the scoping plan was led by two professors from California State University Sacramento – Sanjay Varshney, Dean of the College of Business Administration, and Dennis Tootelian, Ph.D. Professors of Marketing Director, Center for Small Business. Below is an overview of the studies findings

The Purpose of the Report

The objective of this research is to describe the impact and cost of AB 32 on California small businesses. Previous studies document the cost of federal regulations on small businesses. The purpose of this study is to identify and establish the various impacts and cost of the AB 32 burden on small business in California and to assess the extent to which this disadvantages small business. This cost is in addition to the cost of federal regulation or state regulation that is widely documented by previously published studies.

You have to love this quote out of the report concerning CARB’s hollow credibility:
“According to the ARB, the annualized cost of implementing AB 32 is $24.878 billion. As previously indicated, various analysts believe that there are considerably more costs associated with AB 32 that either were deliberately not taken into account in the ARB analysis or are “hidden costs” that were not acknowledged by ARB. The economic analysis completed by ARB fails to address several key economic issues and variables or the uncertainty surrounding their costs”.

The Findings of the New Report Concluded

The direct AB 32 cost of $24.878 billion results in a total loss of output of more than $71.464 billion annually for the State of California after including indirect and induced costs. The direct cost of $52.194 billion cost to consumers results in total lost output of more than $149.2 billion annually. The direct cost of $63.895 million to “small businesses” results in a total loss of output of nearly $182.649 billion annually. 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 distribution of the output loss is the highest for the professional services sector, manufacturing, arts, entertainment, and recreation sectors.

  • In terms of employment, this output loss is equivalent to the loss of nearly 431,500 jobs in the state due to minimum ARB cost, more than 900,800 jobs loss due to costs to consumers, and more than 1.1 million jobs loss due to costs to small businesses. A loss of 1.1 million jobs represents over 3% of the total population of California.

  • In terms of labor income, the total loss to the state from the minimum ARB cost is more than $30.0 billion, from costs to consumers is more than $63.7 billion, and from costs to small businesses is nearly $76.8 billion.

  • Finally, the indirect business taxes that would have been generated due to the output lost arising from the ARB cost is nearly $2.3 billion, from the costs o consumers is more than $4.7 billion, and from costs to small businesses is nearly $5.8 billion.

The total AB 32 cost of $182.649 billion in lost output is one and a half times the total budget for the state of California. Further, given the total gross state output of $1.8 trillion for California in 2008, the total lost output from AB 32 costs to (just) small businesses is almost 10%. Accordingly, the total cost of AB 32 is $49,691 per small business in California.

 

To view the report Click Here