(FORTUNE Small Business) – Scott George knows how to take apart and reassemble a fire hydrant--a talent not normally in high demand at Mid-America Dental & Hearing Center in Mount Vernon, Mo. But state regs forced CEO George and two of his employees to become "certified water operators" in 2002 after a few local businesses failed water-purity tests. He estimates that it cost his $4 million business about $12,000 to take the 30-hour class. If the incident happened today, George would probably be protected by Missouri's new regulatory flexibility law, which requires government agencies to get input from small businesses before they enact new regulations--and allows small businesses to sue if they don't. Seven states, including Virginia and Arkansas, passed similar laws in 2005, and this fall Congress is expected to pass a federal version. According to the National Federation of Independent Business, small businesses pay about $7,650 per employee annually to comply with federal regulations. "It all gets passed on to our patients," says George. "There's no one else to pay it."