1. Virginia Manufacturers Association: Environmental, Health, and Safety Conference Update of 2006 JLARC Study on Impact of Manufacturing Regulations September 2015

2. JLARC Agenda  About JLARC  Summary of 2006 JLARC study  Next steps / discussion 2

3. JLARC 3  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

4. JLARC  Program evaluation and policy analysis of state agencies and programs  Legislative oversight of certain state programs and functions  Fiscal analysis  Special investigations 4 Areas of JLARC Research

5. JLARC 5 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, Chair Del. Robert Orrock, Vice-Chair

6. 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 6

7. JLARC Agenda  About JLARC  Summary of 2006 JLARC study  Next steps / discussion 7

8. 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) 8

9. 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 9

10. 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 10

11. JLARC 2006 JLARC Study Grouped Federal and Virginia Regulations Into Four Categories 1. Environmental Protect the environment and human health from harmful air emissions, water contamination, and hazardous waste pollutants. 2. Economic Restrict a firm’s primary economic activities, such as its process, pricing, and output decisions. 3. Workplace Govern the relationships between employers and employees, such as wages, benefits, safety and health, and civil rights. 4. Tax Identify the activities for which government will collect taxes and the rates at which those taxes will be collected. 11

12. 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 12

13. JLARC JLARC Staff Estimated Direct and Other / Indirect Costs Direct CostsOther / Indirect Costs Capital expendituresDisrupted 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 13

14. JLARC Estimated Direct and Indirect / Other Costs (2006) 14

15. JLARC Overall Themes -- Case Study Companies  Companies could generally identify compliance costs  Had difficulty 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 15

16. JLARC 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 16

17. 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 17

18. JLARC 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 18

19. JLARC Agenda  About JLARC  Summary of 2006 JLARC study  Next steps / discussion 19

20. 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 20

21. 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 21

22. JLARC http://jlarc.virginia.gov/ (804) 786-1258 Discussion? Questions? Justin Brown, Associate Director 22