A new law that’s intended to foster a climate for Kansas entrepreneurs to test novel business ideas hasn’t got up and running yet because of a lack of funding.
Deputy Attorney General Robert Hutchison told the special committee on commerce Thursday that a director and a part-time staffer for the regulatory sandbox program haven’t been hired because the positions haven’t been financed by the Legislature.
Hutchison did not say how much money is needed to fill those positions.
Enacted by the Legislature earlier this year, the regulatory sandbox creates a setting where state rules and regulations are temporarily or permanently waived to create an environment for business innovation.
Hutchison said the attorney general’s chief of staff is in talks with legislative leadership about how to get those positions funded in the upcoming legislative session.
He also said the attorney general’s office is now looking at the application process and the criteria that is used in other states with similar programs.
He said the agency is looking at some limited regulations for guiding the program but added that it would be counterintuitive to add rules to a program that’s intended to ease regulatory burdens.
He said it’s more an issue of clarifying definitions rather than adding new processes.
“The idea of innovation or innovative offering is important in the sandbox bill but is undefined,” Hutchison said.
“I think it would be important to provide some parameters there,” he said.
“But we would not be looking to add state regulations to a law that is designed to reduce the impact on new businesses,” he said.
He said the only legislative action needed is to fund the 1.5 positions to allow the program to start operating.
“We need to fund it if we need to fund it,” said Republican state Rep. Sean Tarwater, chair of the special commerce committee.
Hutchison said a person with a business background would be ideal for the director’s position, someone who has an established relationship with the private sector but also is familiar with the regulatory environment.
The goal of regulatory sandboxes is to move innovative products and services to market faster by providing a trial period while keeping in place consumer and other safeguards.
There are believed to be four states with universal sandboxes and 11 states with industry-specific sandboxes, not counting Hawaii and Nevada.
Supporters say the sandbox enables businesses to work with regulators in trialing new products, services and business models, while rules and regulations that may be inapplicable or dated are temporarily waived.
The sandbox program is set up within the attorney general’s office, which is to establish a regulatory relief division staffed by a director and a part-time employee. The attorney general would appoint the director.
An applicant becomes a sandbox participant if the regulatory relief office approves the application and enters into an agreement spelling out the rules and regulations that are waived or suspended.
The relief office director may deny any application if they determine that suspending or waiving enforcement of a rule and regulation would cause “significant risk of harm” to consumers or residents of the state.
If the director denies an application, the regulatory relief office shall detail in writing the reasons for the denial. The decision is not subject to administrative or judicial review.
The director must deny applications for anyone convicted of a crime “involving significant theft, fraud or dishonesty if the crime bears a significant relationship” to the applicant’s ability to safely and competently participate in the sandbox program.
The regulatory relief division would review state laws and rules and regulations that may
hinder the creation or success of new and existing companies.
It also would make recommendations to the governor and the Legislature on rewriting or repealing laws and rules that are impeding innovation and job creation.
The division also would create a framework for analyzing the risk level to the health, safety and financial well-being of consumers related to repealing state laws and waiving the requirements of rules and regulations that stymie innovation.
A state agency would get the chance to review the sandbox application and recommend whether it should be approved.
If the agency rejects the application, a special 11-person committee that would advise the regulatory relief division could overturn the ruling with a two-thirds vote.
The director of the regulatory relief division would get to appoint seven members of the committee, including those representing business interests and state agencies.
