BILL ANALYSIS
Bill No: AB
846
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 846 Author: Torrico
As Amended: June 14, 2010
Hearing Date: June 22, 2010
Consultant: Art Terzakis
SUBJECT
State Agencies: civil and administrative penalties.
DESCRIPTION
AB 846 enacts the "California Civil Penalties Inflation
Supplement and Enforcement Act of 2010" which requires
certain state entities that administer environmental,
health, and workplace safety violations to update minimum
and maximum civil and administrative penalties to account
for annual inflation, and to ensure that the penalties
imposed deprive violators of any economic benefit that may
have been derived from the violation. Specifically, this
measure:
1)Modifies practices for the assessment of civil and
administrative penalties for five state entities, namely
the Department of Pesticide Regulation (DPR), the
Department of Toxic Substances Control (DTSC), the State
Air Resources Board (ARB), the Department of Industrial
Relations (DIR), and the State Water Resources Control
Board (SWRCB).
2)Requires each of these entities to update and adjust the
minimum and maximum amounts of specified civil and
administrative penalties for inflation or deflation using
the Consumer Price Index (CPI) and specifies a method for
rounding the penalties to the nearest multiple of 10;
100; 1,000; 5,000; 10,000; or 25,000. Provides that the
inflation updates shall be exempt from the Administrative
Procedures Act (APA).
AB 846 (Torrico) continued
Page 2
3)Requires each aforementioned state entity, in cases where
it seeks to impose a penalty below these maximum amounts,
to calculate and make express findings concerning the
"non-deminimis" "economic benefits" derived by the
violator from the acts that constitute the violation.
Further requires the entity to, at a minimum, assess
liability at a level that recovers those economic
benefits from the violator, unless the state entity makes
express findings that document that: a) good faith
efforts to comply or inability to pay justify a
reduction; and, b) the liability assessed will maintain
the deterrent effect of the penalty.
4)Stipulates that the amount of economic benefits shall be
calculated using the BEN model developed by the U.S.
Environmental Protection Agency. Allows for use of
another equally reliable means of determining the amount
of economic benefits if use of the BEN model is
determined not to be practical.
5)Requires each state entity to report to the Legislature
on the implementation of these provisions.
6)Defines "de minimis," "economic benefit," "avoided
costs," and "delayed costs" for purposes of this measure.
EXISTING LAW
Existing law, the Administrative Procedures Act, contains
provisions governing the conduct of administrative
adjudication for state agencies. Various chapters of
California law also create civil and administrative
penalties for specified statutory violations, and typically
authorize appropriate state departments and agencies to
assess and collect these penalties as provided.
BACKGROUND
Purpose of AB 846: This measure requires specified
entities that regulate environmental, health, and workplace
safety violations to adjust the minimum and maximum
penalties for inflation and to ensure that the penalties
imposed deprive violators of any economic benefit they may
have derived from the violation.
AB 846 (Torrico) continued
Page 3
The sponsor of this measure, the National Resources Defense
Council (NRDC), believes AB 846 is needed to "level the
playing field for law-abiding businesses," which otherwise
face a competitive disadvantage from complying with the
state's environmental, health, and workplace safety laws.
The NRDC writes in support:
A 2008 NRDC report showed widespread
noncompliance with environmental, health, and
workplace safety laws suggesting that current
penalty assessments are inadequate to deter
unlawful conduct. Many state penalty caps are
significantly lower than the parallel federal
penalty caps for the same kinds of violations,
and unlike federal penalties, are not updated
for inflation.
Even when environmental laws have penalty caps
that are high enough, enforcement agencies are
not consistently using their authority to
impose penalties sufficient to strip violators
of the economic benefits of their misconduct.
Polluters do not have an incentive to comply
with the law if the penalties for noncompliance
are less than the economic benefits the
polluter derives from the violation of the law
or if the penalties do not reflect current
economic values.
According to the sponsor, this measure addresses these
shortcomings and helps improve enforcement of California'
exemplary environmental, health, and workplace safety laws.
It also ensures that penalties are applied consistently
across the state to eliminate any economic benefit of
unlawful conduct.
Proponents contend that in order to effectively deter
businesses from violating workers' rights and environmental
protections, penalties for wrongdoing must be sufficient to
create an economic disincentive. Proponents argue that
when penalty caps are artificially low, businesses are more
likely to try to cut costs by breaking the law. Proponents
emphasize that at a time of budget cutbacks and shrinking
enforcement, it is especially important that serious
wrongdoing can result in serious penalties; otherwise, the
benefits outweigh the risks.
AB 846 (Torrico) continued
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Arguments in Opposition: The business community is opposed
to this measure on the basis that it would significantly
increase the cost of doing business in California by
automatically adjusting maximum and minimum fines and
penalties upwards according to inflation. The business
community argues that California is already amongst the
most costly states in which to conduct business in a
complex regulatory environment - this measure would simply
compound matters, drive up costs and force businesses to
leave the state.
Also writing in opposition, the Bay Area Air Quality
Management District (BAAQMD) applauds the provisions of AB
846 that would allow the penalty ceilings to rise with
inflation however the air district is opposed to those
provisions in AB 846 that require an analysis of the
violator's economic benefit from a violation whenever they
seek to impose anything below the maximum penalty. The
BAAQMD states, "The theory is that violators achieve
economic benefits from violations, and penalties should at
a minimum recover this benefit. This may sound plausible
as theory to those who do not enforce air quality laws.
However, it is a gross oversimplification of the real world
that it is not workable and actually counterproductive to
the BAAQMD's goal of reducing violations and improving air
quality."
The BAAQMD also believes that the economic benefit concept
and the "BEN" model that AB 846 would require to be used,
have "limited utility" in California's modern air pollution
regulatory program because the economic benefit concept:
(1) Generally does not apply to big facilities that produce
most stationary source air pollution because such
facilities employ environmental managers and staff whose
focus is compliance and violations from such facilities
are typically the result of human error or equipment
failure;
(2) Typically involves small businesses and for these
violations AB 846 is unlikely to result in higher
penalties given other factors in existing law that
require consideration of harm and financial burden;
AB 846 (Torrico) continued
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(3) Will harm existing enforcement efforts by removing
staff from the field and pushing them into the office
generating model input data; and,
(4) Could result in some air districts deciding to avoid
citing minor violations altogether to avoid the time and
costs associated with conducting the required analysis.
Staff Comments: Exemptions from the Administrative
Procedures Act (APA)
The policy behind the requirements established by the APA
(and review by the Office of Administrative Law (OAL) is:
Meaningful public participation in state agency
rulemaking (which is why an agency has to provide
"necessity"- i.e. state the rationale for picking that
particular path, not "what" the regulation does, but
rather "why" the agency is doing it in that particular
way as opposed to some other way);
Complete records of rulemaking (including a summary
and response to all public comments to make sure the
agency read the comments and made some effort to
assess what the commenters were saying);
Legally valid (i.e. consistent with all applicable
statutes), understandable regulations, based in
reason; and,
Public access to all regulations issued/used by
state agencies.
When legislation is enacted to exempt the requirements in a
bill from the APA, it is bypassing those protections. In
some instances, an agency or interest group may want a
policy change to go into effect as soon as possible and
seeks an exemption from the formal rulemaking process
because the process takes time and effort. In other
instances, arguably, as in the case of AB 846, an exemption
makes sense.
AB 846 is designed to specify a method by which specified
state entities are obligated to update its civil and
administrative penalties on an annual basis. If a statute
requires a state entity to update penalties according to a
specific formula, and the statute establishes that formula
AB 846 (Torrico) continued
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in such a way that there is no discretion being exercised
by the state entity when making the annual calculation,
then the change to the regulation would be a change without
regulatory effect.
Suggested Amendment: Updated Penalties should be
filed with the Secretary of State and published in the
California Code of Regulations.
Other bills authorizing exemptions from the APA
typically require the respective department or agency
to make the information available to the public by
publishing it in the code or some other specified
manner. The author may wish to consider language that
would require the updated penalties to be filed with
the Secretary of State and published in the California
Code of Regulations.
PRIOR/RELATED LEGISLATION
SB 1433 (Leno) 2009-10 Session. Would require the State
Air Resources Board, on March 1, 2011, and annually
thereafter, to adjust the maximum civil and criminal
penalties for inflation, based on the California Consumer
Price Index released in January of that year by the
Department of Industrial Relations and to publish the
inflation-adjusted maximum penalties on its Internet Web
site. (Pending in Assembly policy committee)
SB 1865 (Perata) Chapter 805, Statutes of 2000. Increased
several existing civil and criminal penalties for air
quality violations to make them similar to penalties for
water quality and hazardous waste law violations and
reorganized air quality provisions so that like
violations appear in the same sections.
SUPPORT : As of June 18, 2010:
National Resources Defense Council (sponsor)
Breathe California
California Association of Environmental Health
Administrators
California Conference Board of the Amalgamated Transit
Union
California Labor Federation
California League of Conservation Voters
AB 846 (Torrico) continued
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California Nurses Association
California Rural Legal Assistance Foundation
California Teamsters Public Affairs Council
Center on Race, Poverty & the Environment
Central Valley Air Quality Coalition
Clean Water Action
Communities for a Better Environment
Community Water Center
Engineers and Scientists of California
Green California
Heal the Bay
International Longshore & Warehouse Union
National Lawyers Guild Labor & Employment Committee
Planning and Conservation League
Professional & Technical Engineers, Local 21
San Francisco Baykeeper
Service Employees International Union - California State
Council
Sierra Club California
State Building and Construction Trades Council of
California
UNITE-HERE
United Food and Commercial Workers Union, Western States
Council
OPPOSE : As of June 18, 2010:
American Council of Engineering Companies of California
Apartment Association of Greater Los Angeles
Associated General Contractors of California
Bay Area Air Quality Management District
California Association of Joint Powers Authorities
California Apartment Association
California Association of Sanitation Agencies
California Business Properties Association
California Building Industry Association
California Chamber of Commerce
California Chapter of the American Fence Contractors'
Association
California Construction and Industrial Materials
Association
California Council for Environmental and Economic Balance
California Dry Bean Shippers Association
OPPOSE: (continued)
California Farm Bureau Federation
AB 846 (Torrico) continued
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California Fence Contractors' Association
California Film Extruders and Converters Association
California Grain and Feed Association
California Grocers Association
California Hotel and Lodging Association
California Independent Grocers Association
California Independent Oil Marketers Association
California League of Food Processors
California Manufacturers and Technology Association
California Pear Growers Association
California Professional Association of Specialty
Contractors
California Restaurant Association
California Retailers Association
California Seed Association
Engineering Contractors' Association
Flasher/Barricade Association
Independent Waste Oil Collectors and Transporters
Marin Builders' Association
Pacific Egg and Poultry Association
Santa Barbara Rental Property Association
Santa Barbara Technology and Industry Association
Western Electrical Contractors Association
Western Growers
Western States Petroleum Association
FISCAL COMMITTEE : Senate Appropriations Committee
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