BILL ANALYSIS Ó
AB 338
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2011-2012 Regular Session
BILL NO: AB 338
AUTHOR: Wagner
AMENDED: February 17, 2012
FISCAL: Yes HEARING DATE: March 19, 2012
URGENCY: No CONSULTANT: Randy Pestor
SUBJECT : ADMINISTRATIVE PROCEDURE ACT
SUMMARY :
Existing law :
1) Under the Administrative Procedure Act (APA) (Government
Code §11340 et seq.), establishes rulemaking procedures and
standards for state agencies. State regulations must also
be adopted in compliance with regulations adopted by the
Office of Administrative Law (OAL). The APA, among other
things:
a) Requires every agency to prepare and submit a
specified notice of the proposed action and make certain
information available to the public (e.g., draft
regulation in "plain English"; statement of reasons for
proposing the adoption, amendment, or repeal of a
regulation; the problem the agency intends to address;
benefits anticipated from the regulatory action;
evidence to support a determination that the action will
not have a significant adverse economic impact on
business). (§11346.2). The statement of reasons must
identify each technical, theoretical, and empirical
report upon which the agency relies in proposing the
regulation. (§11346.2(b)(3)). A standardized
regulatory impact analysis is required for a major
regulation proposed on or after January 1, 2013.
(§11346(b)(2)).
b) Requires state agencies in proposing to adopt, amend,
or repeal any regulation to assess the potential for
adverse economic impact on California business
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enterprises and individuals. In assessing the potential
for adverse economic impact, state agencies must meet
certain requirements (e.g., be based on adequate
information concerning the need for, and consequences
of, proposed action; consider industries affected
including the ability to compete with businesses in
other states). State agencies must also assess whether,
and to what extent, regulations will affect certain
matters (e.g., creation or elimination of jobs in the
state, creation of new businesses or elimination of
existing businesses in the state, expansion of
businesses currently doing business in the state;
benefits of the regulation). Additional requirements
are specified for major regulations adopted, amended, or
repealed after November 13, 2013, and for economic
impact analyses of regulations (§11346.3). OAL must
return any regulation to the adopting agency under
certain conditions, including failure to complete the
economic impact assessment or failure to include the
assessment in the rulemaking proceeding. (§11349.1).
c) Requires the notice of proposed adoption, amendment,
or repeal of a regulation to include certain matters
(e.g., policy statement overview explaining the broad
objectives of the regulation and specific anticipated
benefits; an evaluation of whether the proposed
regulation is inconsistent or incompatible with existing
state regulations; specified information if there may be
a significant, statewide adverse economic impact;
description of all cost impacts to be incurred by a
private person or business; statement of the results of
the economic impact assessment; a statement of the
results of the economic impact analysis). (§11346.5).
d) Requires OAL to either approve a submitted regulation
and transmit it to the Secretary of State for filing, or
disapprove it, within 30 working days. If OAL fails to
act within 30 days, the regulation is deemed approved
and OAL must transmit it to the Secretary of State.
(§11349.3).
e) Requires a regulation that is required to be filed
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with the Secretary of State to become effective 30 days
after the date of filing unless: a) otherwise
specifically provided by statute under which the
regulation was adopted, in which case it is effective on
that date; b) a later date is prescribed by the state
agency or is part of the regulation; or c) the agency
makes a written request to OAL demonstrating good cause
for an earlier effective date, in which case OAL may
prescribe an earlier date. (§11343.4).
2) Provides the California Air Resources Board (ARB) with
primary responsibility for control of mobile source air
pollution, including adoption of rules for reducing vehicle
emissions and the specification of vehicular fuel
composition. (Health and Safety Code §39000 et seq. and
§39500 et seq.). When making information available to the
public under the APA relating to studies and reports that
ARB relied upon, ARB must also make information public that
is related to, but not limited to, air emissions, public
health impacts, and economic impacts before the comment
period for any regulation proposed for adoption by the ARB.
(§39601.5).
3) Requires each board, department, and office within the
California Environmental Protection Agency, before adopting
any major regulation, to evaluate alternatives and consider
whether there is a less costly alternative or combination
of alternatives that would be equally effective in
achieving increments of environmental protection in a
manner that ensures full compliance with statutory mandates
within the same amount of time as the proposed regulatory
requirements. Under this provision, "major regulation"
means any regulation that will have an economic impact on
the state's business enterprises in an amount exceeding $10
million. (Public Resources Code §57005).
This bill , under the APA:
1) Requires OAL to submit a copy of any disapproved regulation
to the Legislature if OAL disapproved the regulation
because it found that the agency exceeded its statutory
authority in adopting the regulation. (Government Code
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§11349.3).
2) Requires a regulation that is required to be filed with the
Secretary of State to become effective 60 days, rather than
30 days, after the date of filing. (§11343.4).
COMMENTS :
1) Purpose of Bill . According to the author, "The system for
the approval of the adoption, amendment or repeal of a
regulation on a business excludes the legislature before
approval and does not allow enough time for the regulations
being acted upon to be addressÝed] before they are
enacted."
The author notes that "Assembly Bill 338 addresses these
issues very simply. First, it will require that the Office
of Administrative Law (OAL) submit a copy of any
disapproved regulation to the Legislature when OAL finds
that the agency exceeded its statutory authority in
adopting the regulation."
The author also notes that "Further, from the day a regulation
is submitted to the Secretary of State, it will be 60 days
before the regulation can go into effect. This resolves
the short time frame that currently exists which is only 30
days."
2) Regulatory costs . Economic analyses by certain interests
have also been reviewed by the Legislative Analyst's Office
(LAO). For example, Assemblymember DeLeon requested the
LAO to analyze the methodologies, data, and reliability of
the findings of two studies by Varshney and Associates -
"Cost of State Regulations on California Small Business
Study" (September 2009) which concluded that the state's
regulations of all types resulted in reduction in the gross
state product of $493 billion, and "Cost of AB 32 on
California Small Business" (June 2009) which concluded that
AB 32 will cost the state's small business $183 billion in
lost output each year. The LAO concluded that "Both of the
two studies you have asked us to review have major problems
involving both data, methodology, and analysis. As a
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result of these shortcomings, we believe that their
principal findings are unreliable."
Some legislators have raised concerns about economic analyses
of requirements under the California Global Warming
Solutions Act of 2006. ARB released an updated economic
analysis of the scoping plan March 24, 2010. According to
the ARB, the analysis shows fuel expenditures drop by 4.9%
in 2020 with a total cost savings of $3.8 billion in
reduced consumption of gasoline and diesel as a result of
increased investment in energy efficiency and cleaner
fuels, 2 million jobs will be created by 2020 which is
consistent with the business-as-usual case, the economy
will continue to grow at a rate of 2.4% per year, and
divergence from the AB 32 Scoping Plan (i.e., limiting
requirements for oil companies or utilities) increases
costs and shifts these costs to Californians and small
businesses.
According to a September 2010 Public Policy Institute of
California Report titled Business Relocation and Homegrown
Jobs, 1992-2006 by Jed Kolko, "Relying on the most recent
data, this analysis reconfirms that business relocation-the
movement of business establishments from one state to
another-accounts for a very small share of California's
employment fluctuations. In fact, relocation accounts for
a smaller share of job gains and losses in California than
in most other states, in part because most California
businesses lie far from the border of neighboring states.
This report expands on our earlier research with a closer
examination of births, deaths, expansions, and contractions
of businesses, assessing in particular how much of these
gains and losses occur among locally headquartered
businesses. Although regional economic development policies
often focus on encouraging businesses headquartered
elsewhere to relocate, open, or expand local operations,
the strong majority of job gains and losses are 'homegrown'
in that they take place in locally headquartered
businesses."
3) Costs of inaction . While some parties may disagree over
various economic studies, delays in acting on certain
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matters, such as climate change, can also result in costs.
A recent Climate Action Team (CAT) draft assessment on
climate change provides analyses on climate change impacts
relating to various matters, such as warming trends,
precipitation, sea-level rise, agriculture, forestry, water
resources, and public health.
For example, regarding sea-level rise, the report notes that
"Sea level measured over several decades at California tide
gage stations has risen at a rate of about 17 cm (7 inches)
per century. The sea-level rise projections in the 2008
Impacts Assessment indicate that the rate and total
sea-level rise in future decades may increase substantially
above the recent historical rates. The 2008 estimates
represent a significant departure from those in the 2006
CAT report." According to the report, "By 2050, sea-level
rise could range from 30 to 45 cm (11 to 18 inches) higher
than in 2000, and by 2100, sea-level rise could be 60 to
140 cm (23 to 55 inches) higher than in 2000. As sea level
rises, there will be an increased rate of extreme high
sea-level events, which can occur when high tides coincide
with winter storms and their associated high wind wave and
beach run-up conditions." The draft CAT report notes that
"analysis reveals that $100 billion of property and 475,000
people are located in Bay and open coast areas vulnerable
to inundation in 2099. However, risk is not evenly
distributed among the counties in the San Francisco Bay,
with San Mateo and Alameda counties having 40 percent of
assets at risk, the greatest amount in the Bay Area.
Marin, Santa Clara, and San Francisco counties are also
exposed to a high degree of risk; exposure to risk in these
counties is higher than in all other counties along the
Pacific coast, with the exception of Orange County.
Exposure to risk in Sonoma and Napa counties is relatively
modest. While all sectors are vulnerable to the impacts
from sea-level rise, 70 percent of all assets at risk are
residential, followed by the commercial sector with 20
percent. In addition to buildings and their contents, a
wide range of other critical infrastructure, such as roads,
hospitals, schools, emergency facilities, water and
wastewater treatment plants, and others will also be at
increased risk of flooding. Continued development in
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vulnerable areas would put additional assets and people at
risk."
4) What about health impacts and costs ? The author of AB 338
cites businesses concerns relating to certain regulations.
Others, however, note the effect on California residents
and their health from poor air quality and costs relating
to those effects. According to ARB regarding regulations
on heavy-duty diesel-fueled vehicles for particulate matter
(PM) emissions and nitrous oxides (NOx) emissions, for
example, "The regulation is projected to provide
significant diesel PM and NOx emissions reductions that
would have a substantial positive air quality impact
throughout California. PM emissions are projected to be
reduced by about 13 tons per day in 2014 and 3.5 tons per
day in 2023. NOx emissions are projected to be reduced by
about 124 tons per day and 98 tons per day, for 2014 and
2023, respectively. These reductions are critical towards
meeting federal clean air standards. The regulation would
also reduce diesel PM emissions by the maximum level
achievable from inuse on-road diesel vehicles. Staff
estimates that approximately 9,400 premature deaths
statewide would be avoided by the year 2025 from the
implementation of the regulation, and would provide
associated health benefits of $48 to $69 billion."
ARB also notes that "The cost impact of the regulation is not
expected to be significant. While it is expected that most
fleets will pass through these costs to their customers,
this is expected to result in a negligible impact on
consumers, equating to about a few cent increase for a pair
of shoes, less than one one hundredth of a cent increase
per pound of produce, or an increase of from $3 to $10 for
a new car."
According to a recent RAND Corporation report, "Meeting
federal clean air standards would have prevented an
estimated 29,808 hospital admissions and ER visits
throughout California over 2005-2007." The report notes
that Medicare spent $103,600,000 on air pollution-related
hospital care during 2005-2007, Medi-Cal spent $27,299,199,
and private health insurers spent about $55,879,780 on
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hospital care. According to the RAND report, "These
results suggest that the stakeholders of public programs
may benefit substantially from meeting federal clean air
standards. Private health insurers and employers (who
contribute to employee health insurance premiums) may also
have sizable stakes in improved air quality."
5) Support and opposition concerns . According to supporters
of AB 338, "State agencies have been granted broad
authority to promulgate regulations on a variety of matters
with potentially significant impacts on the regulated
community. It is vital that legislators learn how their
legislative mandates have been interpreted and carried out,
to provide feedback to regulators, hear concerns from
regulated parties, and to inspire new legislation, if
necessary."
According to opponents, "Proponents of this bill suggest that
regulations are to blame for the dismal economy. On the
contrary, it was deregulation - of the housing markets,
financial institutions, corporate accounting - that
directly caused the financial collapse and the national
recession. Reviving our economy means creating jobs, not
dismantling worker protections." Opponents also note the
APA is "designed to limit the impact of regulations on
business" and "provides for significant public input."
6) Outstanding issues . As noted above, the Administrative
Procedure Act, California Global Warming Solutions Act of
2006, other ARB requirements, and Department of Finance
procedures currently contain numerous requirements relating
to analysis of regulations.
Is it appropriate to delay the operative date of a regulation,
as provided under AB 338, to allow for review by the
Legislature, and thereby enable the Legislature to restrict
an agency's authority to enact a regulation that assists in
implementing legislation approved by the Legislature? Does
AB 338 allow those who participated in the regulatory
process another opportunity to restrict implementation of
legislation?
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7) Legislature addresses Administrative Procedure Act issues
in 2011 . SB 617 (Calderon and Pavley) Chapter 496,
Statutes of 2011, made several revisions to the
Administrative Procedure Act relating to reasonable
alternatives to regulations, economic impact assessments,
standardized regulatory impact analysis for a major
regulation which must be reviewed by the Department of
Finance, enumeration of anticipated benefits, determination
of more cost effective alternatives, and various other
matters.
8) Trying again . AB 338 failed passage in the Assembly June
1, 2011 (39-27), was granted reconsideration and passed by
the Assembly (41-21). AB 338 failed passage in the Senate
Environmental Quality Committee July 6, 2011, (3-4) after
the author offered an amendment in committee that the
effective date of regulations be extended from 30 days
after filing the regulation with the Secretary of State (as
required under current law) to 60 days, rather than being
extended from 30 days to 90 days. The author also wanted
to ensure that the extended effective date does not apply
to emergency regulations.
The author amended AB 338 February 17, 2012, to reflect the 60
day time limit that the author offered as an amendment
prior to the July 6, 2011, committee vote.
9) Clarification needed . If the committee believes that AB
338 is necessary, clarification is needed to ensure that
the effective date of a regulation does not apply to
emergency regulations by adding a subdivision (d) to
§11343.4 (page 2, between lines 13 and 14) to read: (d)
The regulation is an emergency regulation, in which case it
becomes effective pursuant to Section 11346.1.
SOURCE : Assemblymember Wagner
SUPPORT : American Council of Engineering Companies of
California, California Association of Bed &
Breakfast Inns, California Association of
Health Facilities, California Chapter of the
American Fence Association, California Fence
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Contractors' Association, California Grocers
Association, California Hotel & Lodging
Association, California League of Food
Processors, California Manufacturers &
Technology Association, California Retailers
Association, California Trucking Association,
Chemical Industry Council of California,
Consumer Specialty Products Association,
Engineering Contractors' Association,
Engineering and Utility Contractors
Association, Flasher Barricade Association,
Golden State Builders Exchanges, Industrial
Environmental Association, Marin Builders'
Association, National Federation of Independent
Business, United Contractors, USANA Health
Services, Inc.
OPPOSITION : California Labor Federation - AFL-CIO,
California Nurses Association, California
Professional Firefighters, National Nurses
Organizing Committee