BILL ANALYSIS Ó
AB 1098
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: AB 1098
AUTHOR: Quirk-Silva
AMENDED: May 1, 2013
FISCAL: Yes HEARING DATE: July 3, 2013
URGENCY: No CONSULTANT: Joanne Roy
SUBJECT : OFFICE OF SMALL BUSINESS ADVOCATE: REGULATIONS:
REPORT
SUMMARY :
Existing law :
1) Under the Administrative Procedure Act (APA) (Government
Code (GO) §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). (GO §11346.2).
i) The statement of reasons must specify the
benefits anticipated from the regulatory action
such as the protection of health and safety or the
environment.
ii) The statement of reasons must identify each
technical, theoretical, and empirical report upon
which the agency relies in proposing the
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regulation.
b) Requires state agencies proposing to adopt, amend, or
repeal an administrative regulation to assess the
potential for adverse economic impact on California
businesses and individuals. (GO §11346.3).
i) In assessing the potential for adverse
economic impacts, 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).
ii) In assessing the potential adverse economic
impacts, the state agency must assess the benefits
of the regulation to public health and welfare,
worker safety, and the state's environment.
iii) 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).
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). (GO §11346.5).
d) For the review of proposed regulations, requires
state agencies in proposing to adopt, amend, or repeal
any regulation to assess the potential for adverse
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economic impact on California business 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 (GO §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. (GO §11349.1).
2) Establishes the Office of the Small Business Advocate
(OSBA) in the Governor's Office of Business and Economic
Development for the purpose of advocating for small
businesses, and includes various duties and functions of
OSBA, such as advisory participation in the consideration
of legislation and regulations that affect small
businesses. (GO §12098 et seq.).
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).
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4) 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 (HSC) §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. (HSC §39601.5).
This bill :
1) Requires OSBA to do the following:
a) Commission a study, to be conducted quinquennially,
of the economic impacts of state regulations on small
businesses, as specified.
b) Convene at least one stakeholder meeting to provide
advice on the study.
c) No later than January 1, 2015, and quinquennially
thereafter, requires OSBA to post the completed study on
the OSBA website.
2) Makes several findings and declarations.
COMMENTS :
1) Purpose of Bill . According to the author, "As small
businesses continue to be the backbone of the state's
economy, the regulatory burdens and costs continue to be
one of the major complaints of small businesses. Although
state agencies are required to consider the effects of
adopted regulations on the California economy, in general,
and on small business specifically, state agencies are not
required to consider the cumulative cost impact of
regulations.
The cost of California regulations for small businesses is
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unknown. The state does not have a current analysis on
state regulatory costs similar to that created for federal
regulatory costs. Understanding the financial effect of
state regulations would help policymakers reduce, or
design, more cost-effective regulatory approaches that
achieve desired policy objectives while placing less burden
on the regulated industries.
AB 1098 will require [OSBA] within the Governor's Office of
Business and Economic Development to commission a study, to
be conducted every five years, of the costs of state
regulations on small businesses, and to convene small
business stakeholder meetings representing a cross section
of the small business community, to provide advice on the
study."
2) Costs of inaction . Although regulations may result in
costs to small businesses, delays in regulating/acting or
not acting at all on certain matters, such as climate
change, can result in costs as well. 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, "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,
"analysis reveals that $100 billion of property and 475,000
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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
vulnerable areas would put additional assets and people at
risk."
Although it is important to be cognizant of costs to small
businesses when promulgating regulations, it is also
imperative to ensure that the goals of long-term
environmental and public health benefits to the State and
its citizens are not forfeited in the process.
3) What about environmental and public health benefits and
costs ? This bill concerns regulations adopted by state
agencies and assessing potential costs on small businesses.
However, regulations may also have public health and
environmental implications with associated costs as well,
e.g. not improving poor air quality has costs relating to
an increased number of premature deaths and the cost of
medical care to the state as well as individuals.
For example, regarding regulations on heavy-duty diesel-fueled
vehicles for particulate matter (PM) emissions and nitrous
oxides (NOx) emissions, ARB states, "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
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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, "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
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."
4) Recent APA reform . SB 617 (Calderon, Pavley), Chapter 496,
Statutes of 2011, revises various provisions of APA and
requires each state agency to prepare a standardized
regulatory impact analysis with respect to the adoption,
amendment, or repeal of a major regulation. The economic
impact analysis must include the benefits of the regulation
to the health and welfare of California residents, worker
safety, and the state's environment.
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When deliberating the cost of regulation, it is important to
look at the reason the regulation was passed in the first
place. It is often to address a public health or
environmental protection need. For example, the Clean
Water Act ensures drinking water quality. While
regulations are adopted to implement the act, which may
have a cost to small businesses, they also have crucial
societal benefits and purpose. To ensure consideration of
these issues, and provide a more balanced approach when
studying the costs of regulations on small businesses, it
would be prudent to require the study to identify, for
example: a) benefits to the regulation (including
environmental and health benefits); and, b) reduced
environmental impacts and reduced costs to the public from
the regulation.
5) Technical amendment . This bill requires OSBA to provide
notice to various Legislative entities about the
availability of the study on costs of regulations to small
business, including the Senate Committee on Government
Modernization, Efficiency and Accountability. However,
this committee no longer exists. An amendment is needed to
require OSBA to provide notice of the report instead to the
Senate Committee on Business, Professions and Economic
Development, which is the standing committee with
jurisdiction for small business issues.
6) Double Referral to Business, Professions and Economic
Development Committee . This measure is double-referred to
the Senate Committees on Business, Professions and Economic
Development and Environmental Quality. AB 1098 was heard
on June 24, 2013, in Senate Business, Professions and
Economic Committee and passed out with a vote of 9-0.
SOURCE : California Small Business Association
SUPPORT : California Metals Coalition
Small Business California
OPPOSITION : None on file
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