California Legislature—2013–14 Regular Session

Assembly Bill No. 866

Introduced by Assembly Member Linder

February 21, 2013

An act to amend Sections 11342.548, 11346.3, 11346.45, and 11349.1 of the Government Code, relating to regulations.

LEGISLATIVE COUNSEL’S DIGEST

AB 866, as introduced, Linder. Regulations.

(1) The Administrative Procedure Act generally sets forth the requirements for the adoption, publication, review, and implementation of regulations by state agencies, and for review of those regulatory actions by the Office of Administrative Law. The act requires an agency, prior to submitting a proposal to adopt, amend, or repeal an administrative regulation, to determine the economic impact of the regulation by preparing an economic impact analysis. The act defines a major regulation as a regulation that the agency determines has an expected economic impact on California business enterprises and individuals in an amount exceeding $50,000,000. Existing law requires an agency proposing to adopt, amend, or repeal a major regulation to also prepare a standardized regulatory impact analysis.

This bill would instead define a major regulation as a regulation that the agency determines has an expected economic impact on California business enterprises and individuals in an amount exceeding $15,000,000.

This bill would modify the requirements that an adopting agency must meet when preparing the economic impact analysis and the standardized regulatory impact analysis.

(2) The act requires that state agencies proposing to adopt regulations, prior to publication of the notice of proposed action, involve parties that would be subject to the proposed regulations in public discussions regarding those proposed regulations, when the proposed regulations involve complex proposals or a large number of proposals that cannot easily be reviewed during the comment period. The act also provides that these requirements are not subject to judicial review or a specified review by the office.

This bill would instead make that requirement applicable to all proposed regulations. The bill would repeal the provisions that exempt these requirements from judicial review and review by the office. The bill would require the office to return the regulation to the agency if the agency does not comply with these requirements.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) Robust jobs and economic growth are the key to repairing
California’s chronic budget problems and generating adequate
revenues to fund vital programs like education, infrastructure, and
public safety.

(b) California’s jobs, business, and economic climate have been
in dire straits for several years, resulting in higher unemployment,
and a reduction in the number of businesses, small businesses in
particular, operating in the state and concomitant decline in state
revenues.

(c) California’s regulatory burdens are often cited as one of the
main causes of stagnant job and economic growth and why many
businesses decide to expand in other states instead of California.
In fact, in 2011 CEO magazine ranked California last among states
where companies prefer to do business for the seventh straight
year.

(d) A large part of the problem is that too much authority over
the California economy and jobs climate has been ceded to the
unelected state bureaucracy. Regulations adopted by state agencies
often impose unnecessary burdens on California’s economic and
jobs climate at a time when California can least afford to
discourage economic and job growth.

(e) Today, instead of using due diligence in analyzing the
economic impacts of proposed regulations, state agencies often
merely fill out a four-page economic questionnaire that provides
little more than one-word answers and checked-off boxes and is
devoid of supporting data. On top of that, this information is not
currently required to be made available to the public.

(f) More sunshine and public input is needed in the regulatory
rulemaking process. Those subject to regulations are often in the
best position to determine the actual costs of regulations, and also
to identify equally effective but less burdensome alternatives.

(g) Additionally, the connection between those that adopt laws
and those that implement them has been eroded. Stronger and more
direct oversight of the regulatory rulemaking process by the
Legislature, as the body conferring authority to adopt regulations,
will improve the regulatory rulemaking process.

(h) It is not the intent of this act to unduly impede the regulatory
rulemaking process. It is rather to provide greater sunshine and
public participation in the fastest-growing area of government and
to develop the most thoughtful, economically efficient, and least
burdensome regulations on jobs and businesses when carrying out
the intent of authorizing statutes.

(i) Under this act, if a state agency has sufficiently involved the
public in the rulemaking process and conducted a thorough analysis
of a regulation’s economic impacts, this act should have no adverse
effect on the regulatory rulemaking process.

(j) Further, the purpose of this act is not to prevent or postpone
the adoption of any particular type of regulation or regulations but
simply to ensure that accurate and honest information about a
proposed regulation’s true economic impact is prepared and made
available to the public and the legislative and executive branches
of government.

SEC. 2.  

Section 11342.548 of the Government Code is amended
to read:

11342.548.  

“Major regulation” means any proposed adoption,
amendment, or repeal of a regulation subject to review by the
Office of Administrative Law pursuant to Article 6 (commencing
with Section 11349) that will have an economic impact on
California business enterprises and individuals in an amount
exceeding begin delete fifty end delete begin insert fifteen end insert million dollars begin delete ($50,000,000), end delete begin insert ($15,000,000), end insert
as estimated by the begin delete agency. end delete begin insert agency in the economic impact analysis
prepared pursuant to Section 11346.3. end insert

SEC. 3.  

Section 11346.3 of the Government Code is amended
to read:

11346.3.  

(a) State agencies proposing to adopt, amend, or
repeal any administrative regulation shall assess the potential for
adverse economic impact on California business enterprises and
individuals, avoiding the imposition of unnecessary or unreasonable
regulations or reporting, recordkeeping, or compliance
requirements. For purposes of this subdivision, assessing the
potential for adverse economic impact shall require agencies, when
proposing to adopt, amend, or repeal a regulation, to adhere to the
following requirements, to the extent that these requirements do
not conflict with other state or federal laws:

(1) The proposed adoption, amendment, or repeal of a regulation
shall be based on adequate information concerning the need for,
and consequences of, proposed governmental action.

(2) The state agency, begin delete prior to end delete begin insert before end insert submitting a proposal to
adopt, amend, or repeal a regulation to the office, shall consider
the proposal’s impact on business, with consideration of industries
affected including the ability of California businesses to compete
with businesses in other states. For purposes of evaluating the
impact on the ability of California businesses to compete with
businesses in other states, an agency shall consider, but not be
limited to, information supplied by interested parties.

(3) An economic begin delete assessment end delete begin insert analysis end insert prepared pursuant to this
subdivision for a proposed regulation that is not a major regulation
or that is a major regulation proposed begin delete prior to end delete begin insert before end insert November
1, begin delete 2013 end delete begin insert 2014 end insert , shall be prepared begin delete in accordance with end delete begin insert pursuant to end insert
subdivision (b). An economic begin delete assessment end delete begin insert analysis end insert prepared
pursuant to this subdivision for a major regulation proposed on or
after November 1, begin delete 2013 end delete begin insert 2014 end insert , shall be prepared begin delete in accordance
with end delete begin insert pursuant to end insert subdivision (c), and shall be included in the initial
statement of reasons as required by Section 11346.2.

(b) (1) All state agencies proposing to adopt, amend, or repeal
a regulation that is not a major regulation or that is a major
regulation proposed begin delete prior to end delete begin insert before end insert November 1, begin delete 2013 end delete begin insert 2014 end insert , shall
prepare an economic impact begin delete assessment end delete begin insert analysis end insert that begin delete assesses
whether and to what extent it will affect end delete begin insert meets all of end insert the begin delete following: end delete
begin insert following requirements: end insert

(A)  begin insert Estimates the total actual costs of compliance for affected
small businesses, large businesses, and other parties subject to
the regulation or group of regulations. end insert The begin delete creation or elimination end delete
begin insert economic impact analysis shall, at a minimum, estimate the costs end insert
of begin delete jobs within end delete begin insert individual compliance for a representative small
business, large business, and other party subject to end insert the begin delete state. end delete
begin insert regulation as well as the cumulative statewide cost of compliance. end insert

(B)  begin delete The creation end delete begin insert If an agency declares that it is not aware end insert of
begin delete new businesses end delete begin insert any cost impact that a representative small
business, large business, end insert or begin insert other party subject to end insert the begin delete elimination end delete
begin insert regulation would incur in compliance with the regulation, or group end insert
of begin delete existing businesses within end delete begin insert regulations authorized by end insert the begin delete state. end delete
begin insert same statute, the economic impact analysis shall include an express
statement to that effect as well as a detailed statement describing
how a small business, large business, or other party subject to the
regulation could comply with the regulation or group of regulations
without incurring cost. end insert

(C)  begin delete The expansion end delete begin insert If an economic impact analysis prepared
pursuant to this section finds that the cumulative statewide cost end insert
of begin delete businesses currently doing business within end delete begin insert compliance of any
regulation, or group of regulations authorized by end insert the begin delete state. end delete begin insert same
statute, exceeds fifteen million dollars ($15,000,000) then the
regulation or group of regulations shall be deemed to be a major
regulation. If reasonable doubt exists as to whether the cumulative
statewide cost of compliance of any regulation or group of
regulations authorized by the same statute exceeds fifteen million
dollars ($15,000,000), the doubt shall be resolved in favor of
finding that the regulation or group of regulations authorized by
the same statute qualifies as a major regulation. end insert

begin insert

(D) Each economic impact analysis that an agency prepares
shall be maintained in the agency’s records and shall be made
available to the office and the Governor’s Office of Planning and
Research, the Director of Finance, the Legislative Analyst, the
State Auditor, the Controller, the President pro Tempore of the
Senate, the Minority Floor Leader of the Senate, the Speaker of
the Assembly, the Minority Floor Leader of the Assembly, and the
chair and ranking minority party member of the appropriate fiscal
and policy committees of the Senate and the Assembly, upon
request.

end insert begin insert

(E) An adopting agency shall prepare a standardized regulatory
impact analysis for any regulation that the agency determines is
a major regulation.

end insert begin delete

(D) The

end delete

begin insert (F) end insert begin insert   end insert begin insert Each economic impact analysis shall assess the end insert benefits of
the regulation to the health and welfare of California residents,
worker safety, and the state’s environment.

(2) This subdivision begin delete does end delete begin insert shall end insert not apply to the University of
California, the Hastings College of the Law, or the Fair Political
Practices Commission.

(3) Information required from state agencies for the purpose of
completing the assessment may come from existing state
publications.

(c) (1) Each state agency proposing to adopt, amend, or repeal
a major regulation on or after November 1, begin delete 2013 end delete begin insert 2014 end insert , shall
prepare a standardized regulatory impact begin delete analysis end delete begin insert assessment end insert in
the manner prescribed by the Department of Finance pursuant to
Section 11346.36. The standardized regulatory impact analysis
shall begin delete address end delete begin insert contain end insert all of the following:

begin insert

(A) A detailed estimate, in both the short term and long term,
of the average individual cost of compliance for small businesses,
large businesses, and other parties subject to the major regulation.

end insert begin insert

(B) A detailed estimate, in both the short term and long term,
of the cumulative statewide cost of compliance with the major
regulation for small businesses, large businesses, and other parties.

end insert begin insert

(C) A detailed distributional assessment that evaluates, in both
the short term and long term, how certain industries, income
groups, and geographic regions are likely to experience benefits
or costs as a consequence of the major regulation.

end insert begin delete

(A) The

end delete

begin insert (D) end insert begin insert   end insert begin insert A detailed estimate of the short-term and long-term end insert creation
or elimination of jobs begin delete within end delete begin insert in individual sectors as a result of end insert
the begin delete state. end delete begin insert major regulation. end insert

begin insert

(E) A detailed estimate, in both the short term and long term,
of the potential for economic leakage as a result of the major
regulation in which economic activity is relocated from California
to another state or country.

end insert begin delete

(B) The creation

end delete

begin insert (F) end insert begin insert   end insert begin insert A detailed estimate, in both the short term and long term, end insert
of begin delete new end delete begin insert the impact on the ability of California end insert businesses begin delete or end delete begin insert to
compete with businesses in other states and California’s ability
to attract businesses to locate in end insert the begin delete elimination of existing
businesses within end delete begin insert state as a result of end insert the begin delete state. end delete begin insert major regulation. end insert

begin insert

(G) A detailed estimate, in both the short term and long term,
of the effects on excise tax, sales and use tax, income tax,
corporation tax, and other tax revenue to the General Fund, and
fee revenues to special funds, as a result of the major regulation
and changes in economic activity as a result of the major
regulation.

end insert begin delete

(C)  The competitive advantages

end delete

begin insert (H) end insert begin insert   end insert begin insert A precise statement enumerating the benefits, in both the
short term and long term, anticipated from the major regulation,
including the benefits end insert or begin delete disadvantages for businesses currently
doing business within the state. end delete begin insert goals provided in the authorizing
statutes. Where applicable, the statement shall include the failures
in private markets or public institutions that warrant the proposed
major regulation, in a manner consistent with the guidelines
published by the federal Office of Management and Budget in
OMB Circular No. A-94, Revised. end insert

begin delete

(D) The increase

end delete

begin insert (I) end insert begin insert   end insert begin insert An identification of each technical, theoretical, and empirical
study, report, end insert or begin delete decrease of investment end delete begin insert similar document, if any,
upon which the agency relies end insert in begin insert proposing end insert the begin delete state. end delete begin insert major
regulation. end insert

begin delete

(E) The incentives for innovation in products, materials, or
processes.

end delete begin insert

(J) A copy of the economic impact analysis prepared pursuant
to subdivision (b).

end insert begin delete

(F) The

end delete

begin insert (K) end insert begin insert   end insert begin insert A description of the end insert benefits of the begin delete regulations, end delete begin insert regulation, end insert
including, but not limited to, benefits to the health, safety, and
welfare of California residents, worker safety, and the state’s
environment and quality of life, among any other benefits identified
by the agency.

(2) This subdivision shall not apply to the University of
California, the Hastings College of the Law, or the Fair Political
Practices Commission.

(3) Information required from state agencies for the purpose of
completing the begin delete analysis end delete begin insert assessment end insert may be derived from existing
state, federal, or academic publications.

(d) Any administrative regulation adopted on or after January
1, 1993, that requires a report shall not apply to businesses, unless
the state agency adopting the regulation makes a finding that it is
necessary for the health, safety, or welfare of the people of the
state that the regulation apply to businesses.

(e) Analyses conducted pursuant to this section are intended to
provide agencies and the public with tools to determine whether
the regulatory proposal is an efficient and effective means of
implementing the policy decisions enacted in statute or by other
provisions of law in the least burdensome manner. Regulatory
impact analyses shall inform the agencies and the public of the
economic consequences of regulatory choices, not reassess
statutory policy. The baseline for the regulatory analysis shall be
the most cost-effective set of regulatory measures that are equally
effective in achieving the purpose of the regulation in a manner
that ensures full compliance with the authorizing statute or other
law being implemented or made specific by the proposed
regulation.

(f) Each state agency proposing to adopt, amend, or repeal a
major regulation on or after November 1, begin delete 2013 end delete begin insert 2014 end insert , and that has
prepared a standardized regulatory impact begin delete analysis end delete begin insert assessment end insert
pursuant to subdivision (c), shall submit that begin delete analysis end delete begin insert assessment end insert
to the Department of Finance upon completion. The department
shall comment, within 30 days of receiving begin delete that analysis, end delete begin insert the
assessment, end insert on the extent to which the begin delete analysis end delete begin insert assessment end insert adheres
to the regulations adopted pursuant to Section 11346.36. Upon
receiving the comments from the department, the agency may
update its analysis to reflect any comments received from the
department and shall summarize the comments and the response
of the agency along with a statement of the results of the updated
analysis for the statement required by paragraph (10) of subdivision
(a) of Section 11346.5.

SEC. 4.  

Section 11346.45 of the Government Code is amended
to read:

11346.45.  

(a) In order to increase public participation and
improve the quality of regulations, state agencies proposing to
adopt regulations shall, begin delete prior to end delete begin insert before end insert publication of the notice
required by Section 11346.5, involve parties who would be subject
to the proposed regulations in public discussions regarding those
proposed begin delete regulations, when the proposed regulations involve
complex proposals or a large number of proposals that cannot
easily be reviewed during the comment period. end delete begin insert regulations. end insert

(b) This section begin delete does end delete begin insert shall end insert not apply to a state agency in any
instance where that state agency is required to implement federal
law and regulations for which there is little or no discretion on the
part of the state to vary.

(c) If the agency does not or cannot comply with begin delete the end delete begin delete provisions
of end delete subdivision (a), it shall state the reasons for noncompliance with
reasonable specificity in the rulemaking record.

begin delete end delete begin delete

(d) The provisions of this section shall not be subject to judicial
review or to the provisions of Section 11349.1.

end delete begin delete end delete

SEC. 5.  

Section 11349.1 of the Government Code is amended
to read:

11349.1.  

(a) The office shall review all regulations adopted,
amended, or repealed pursuant to the procedure specified in Article
5 (commencing with Section 11346) and submitted to it for
publication in the California Code of Regulations Supplement and
for transmittal to the Secretary of State and make determinations
using all of the following standards:

(1) Necessity.

(2) Authority.

(3) Clarity.

(4) Consistency.

(5) Reference.

(6) Nonduplication.

In reviewing regulations pursuant to this section, the office shall
restrict its review to the regulation and the record of the rulemaking
proceeding. The office shall approve the regulation or order of
repeal if it complies with the standards set forth in this section and
with this chapter.

(b) In reviewing proposed regulations for the criteria in
subdivision (a), the office may consider the clarity of the proposed
regulation in the context of related regulations already in existence.

(c) The office shall adopt regulations governing the procedures
it uses in reviewing regulations submitted to it. The regulations
shall provide for an orderly review and shall specify the methods,
standards, presumptions, and principles the office uses, and the
limitations it observes, in reviewing regulations to establish
compliance with the standards specified in subdivision (a). The
regulations adopted by the office shall ensure that it does not
substitute its judgment for that of the rulemaking agency as
expressed in the substantive content of adopted regulations.

(d) The office shall return any regulation subject to this chapter
to the adopting agency if any of the following occur:

(1) The adopting agency has not prepared the estimate required
by paragraph (6) of subdivision (a) of Section 11346.5 and has not
included the data used and calculations made and the summary
report of the estimate in the file of the rulemaking.

(2) The begin insert adopting end insert agency has not complied with Section 11346.3.
“Noncompliance” means that the agency failed to complete the
economic impact assessment or standardized regulatory impact
analysis required by Section 11346.3 or failed to include the
assessment or analysis in the file of the rulemaking proceeding as
required by Section 11347.3.

(3) The adopting agency has prepared the estimate required by
paragraph (6) of subdivision (a) of Section 11346.5, the estimate
indicates that the regulation will result in a cost to local agencies
or school districts that is required to be reimbursed under Part 7
(commencing with Section 17500) of Division 4, and the adopting
agency fails to do any of the following:

(A) Cite an item in the Budget Act for the fiscal year in which
the regulation will go into effect as the source from which the
Controller may pay the claims of local agencies or school districts.

(B) Cite an accompanying bill appropriating funds as the source
from which the Controller may pay the claims of local agencies
or school districts.

(C) Attach a letter or other documentation from the Department
of Finance which states that the Department of Finance has
approved a request by the agency that funds be included in the
Budget Bill for the next following fiscal year to reimburse local
agencies or school districts for the costs mandated by the
regulation.

(D) Attach a letter or other documentation from the Department
of Finance which states that the Department of Finance has
authorized the augmentation of the amount available for
expenditure under the agency’s appropriation in the Budget Act
which is for reimbursement pursuant to Part 7 (commencing with
Section 17500) of Division 4 to local agencies or school districts
from the unencumbered balances of other appropriations in the
Budget Act and that this augmentation is sufficient to reimburse
local agencies or school districts for their costs mandated by the
regulation.

(4) The proposed regulation conflicts with an existing state
regulation and the agency has not identified the manner in which
the conflict may be resolved.

(5) The begin insert adopting end insert agency did not make the alternatives
determination as required by paragraph (4) of subdivision (a) of
Section 11346.9.

begin insert

(6) The adopting agency did not comply with Section 11346.10.

end insert

(e) The office shall notify the Department of Finance of all
regulations returned pursuant to subdivision (d).

(f) The office shall return a rulemaking file to the submitting
agency if the file does not comply with subdivisions (a) and (b)
of Section 11347.3. Within three state working days of the receipt
of a rulemaking file, the office shall notify the submitting agency
of any deficiency identified. If no notice of deficiency is mailed
to the adopting agency within that time, a rulemaking file shall be
deemed submitted as of the date of its original receipt by the office.
A rulemaking file shall not be deemed submitted until each
deficiency identified under this subdivision has been corrected.

(g) Notwithstanding any other law, return of the regulation to
the adopting agency by the office pursuant to this section is the
exclusive remedy for a failure to comply with subdivision (c) of
Section 11346.3 or paragraph (10) of subdivision (a) of Section
11346.5.