Golden State Today

A report by the California Chamber of Commerce has raised concerns about the economic impact of proposed regulations by the California Privacy Protection Agency (CPPA). The analysis, conducted by Capitol Matrix Consulting (CMC), suggests that the new rules could lead to net economic losses for businesses, consumers, and governments in California. These losses are expected to result in reduced employment and tax revenues.

The CPPA's Standardized Regulatory Impact Assessment (SRIA) on the proposed changes to the California Consumer Privacy Act (CCPA) indicates direct costs to businesses amounting to $3.5 billion in the first year. It also projects average annual costs over ten years at $1.08 billion, with employment losses potentially peaking at 126,000 jobs by 2030. Additionally, state revenue losses could reach $2.8 billion annually by 2028.

While the SRIA suggests that long-term benefits will outweigh these costs, CMC's report challenges this claim, citing an arithmetical error and speculative assumptions as flaws in the assessment.

The CMC report highlights several issues with the SRIA:

- It underestimates external auditor and employee compensation rates.

- It excludes out-of-state businesses selling into California from its economic analysis.

- It overlooks ongoing costs and productivity losses due to behavioral changes post-regulation adoption.

Furthermore, CMC argues that the SRIA overstates savings from proposed regulations by:

- Overestimating baseline cybercrime losses due to errors and flawed estimation methods.

- Overestimating savings from audits and risk assessments based on unsupported assumptions.

The CMC analysis warns of significant implications for jobs and state budget revenues if costs are underestimated and benefits overstated as suggested by the privacy agency's current assessment.

A full copy of this analysis is available for review.