Arizona Chamber of Commerce and Industry

Self-Disclosure Policies Can Help Make Arizona More Competitive

As Arizona’s economy begins to claw its way out of the Great Recession, policies and procedures that reduce unnecessary regulatory compliance costs can help businesses regain their footing. This past legislative session, Governor Brewer signed two important regulatory accountability measures into law –a bill to move Arizona to the Daubert standard, which will reduce the occurrence of frivolous lawsuits, and an important agency rulemaking reform package. 

As we look forward, there is more we can do at both the state and county level to make it easier and less costly for businesses to comply with the law. Any progress we make on this front will improve the business climate and make Arizona a more competitive location.  One such idea is to adopt self-disclosure policies at state and county regulatory agencies.

Self-disclosure policies allow companies to disclose violations to government regulators and correct the problem without being subject to fines and penalties. This approach provides an incentive for companies to conduct internal audits and work cooperatively with government agencies to find solutions to any violations. The result is greater compliance, lower mitigation costs, and less strain on government agency resources. It is a win-win scenario for both the business and the regulating entity.

The Arizona Department of Environmental Quality (ADEQ) currently has a self-disclosure policy in place, which represents a good start. Looking to other states, there are aspects of ADEQ’s policy that could be made more flexible.  In particular, Arizona’s policy is geared towards small businesses with less than 20 employees or less than two million dollars in gross income while the policies in most of the other states apply to all regulated entities.  ADEQ has also not adopted the federal Environmental Protection Agency’s (EPA) more flexible self-disclosure notice of 21 days and has kept the 10-day notice.  While ADEQ cannot adopt more flexible standards than the EPA, they should at least meet the criteria of EPA’s 2000 policy.  And, Arizona does not have an audit immunity law which would provide for immunity from prosecution for environmental violations discovered during an audit.

As important as ADEQ is in this process, it is equally imperative for the counties to adopt self-disclosure policies as they are closest to the regulated community.   The Maricopa Air Quality Division (MCAQD) ran a permit amnesty program from September 15, 2009 to December 15, 2009.  MCAQD received an increase in permit applications during this time period.  However, this program was only targeted to businesses that were operating without a permit rather than current permitees seeking to self-disclose and correct violations.  The MCAQD should look into adopting a self-disclosure policy similar to that allowed by the EPA.

Maricopa, Pima and Pinal counties each have their own air quality department. From an economic development perspective, a single self-disclosure policy for all county agencies would facilitate regulatory processes for businesses operating throughout the metropolitan areas of the state.  If the regulatory systems in these counties are too complicated and inflexible, businesses will set up shop elsewhere, and tax dollars and employment will follow them.  Arizona’s other counties use ADEQ for permits and, therefore, utilize the ADEQ self-disclosure policy.

Flexible self-disclosure policies are one relatively uncomplicated way to make a better place to do business. With some additional flexibility as allowed by the federal EPA and enhanced coordination, self-disclosure policies at ADEQ and the county air quality departments could become a more useful tool in enhancing compliance with existing regulations.

To learn more, read the Arizona Chamber Foundation policy brief on this topic by Mike Hull, former Regional Advocate for the U.S. Small Business Administration’s Office of Advocacy.