BILL NUMBER: AB 2529 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 14, 2010
INTRODUCED BY Assembly Member Fuentes
FEBRUARY 19, 2010
An act to add Article 5.5 (commencing with Section
11348.5) to Chapter 3.5 of Part 1 of Division 3 of Title 2 of the
Government Code, An act to amend Sections 11343.4 and
11346.5 of, and to add Sections 11346.35 and 1 1349.35 to,
the Government Code, relating to regulations.
LEGISLATIVE COUNSEL'S DIGEST
AB 2529, as amended, Fuentes. State agencies: regulations: review.
Existing law, the Administrative Procedure Act, governs the
procedure for the adoption, amendment, or repeal of regulations by
state agencies and for the review of those regulatory actions by the
Office of Administrative Law. Under existing law, a regulation
that is approved, or deemed approved, by the office shall be filed
with the Secretary of State and shall take effect on the 30th day
after that filing, except as specified .
This bill would adopt the regulatory philosophy and the principles
of regulation, as outlined in Presidential Executive Order 12866, in
order to achieve the same regulatory benefits within the state. This
bill would require the Department of Finance to assist state
agencies with the review of new and existing regulations for
compliance and consistency with these requirements, and to review
analyses performed by agencies in promulgating new regulations or in
reviewing existing regulations.
This bill would require an agency to annually provide to the
department a list of its planned regulatory actions for that year, as
specified, and indicate the actions which the agency believes are
significant regulatory actions, as defined. This bill would require
an agency, for each significant regulatory action, to submit
prescribed information to the director at least 30 days prior to
issuing a notice of proposed action, as specified. The bill would
require the director to review the submitted information, as
specified. This bill would require the department, in order to
establish a baseline for the determination of the costs and benefits
of significant regulatory actions that it reviews, to complete a
review of all significant regulatory actions completed by state
agencies since January 1, 2004, and summarize the costs and benefits
of those actions in a report to be completed prior to July 1, 2011.
This bill would require the Governor to convene an interagency
group with specified duties for the purpose of formulating an
effective methodology for performance of the analysis and
cost-benefit studies by state agencies, as specified.
Existing law establishes the Bureau of State Audits, which is
headed by the State Auditor and has specified statutory duties.
Existing law establishes the State Audit Fund, which is continuously
appropriated for the expenses of the State Auditor.
This bill would require the State Auditor, using information
submitted by an agency proposing a regulation, to conduct a cost
benefit analysis of the regulation that includes certain
determinations, as specified. This bill would require the agency to
include this cost benefit analysis in its notice of proposed action
for the proposed regulation. To the extent that this bill imposes
additional duties on the State Auditor that are funded through a
continuously appropriated fund, this bill would make an
appropriation.
This bill would require the office, if a proposed regulation is
approved or deemed approved, to provide a prescribed notification to
specified committees in the Legislature if the State Auditor's cost
benefit analysis determines that the regulation has an annual
statewide economic cost of more than $10,000,000 or that the benefits
of the regulation do not equal or exceed the costs of the
regulation.
This bill would require the specified legislative committees to
conduct a public hearing to review each regulation for which it
receives a notification from the office and to issue a recommendation
as to whether the regulation should be invalidated by statute.
This bill would extend the effective date of a regulation that the
office has submitted to the Secretary of State until the 60th day
after the filing.
Vote: majority 2/3 . Appropriation:
no yes . Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 11343.4 of the
Government Code is amended to read:
11343.4. A regulation or an order of repeal required to be filed
with the Secretary of State shall become effective on the
30th 60th day after the date of filing unless:
(a) Otherwise specifically provided by the statute pursuant to
which the regulation or order of repeal was adopted, in which event
it becomes effective on the day prescribed by the statute.
(b) A later date is prescribed by the state agency in a written
instrument filed with, or as part of, the regulation or order of
repeal.
(c) The agency makes a written request to the office demonstrating
good cause for an earlier effective date, in which case the office
may prescribe an earlier date.
SEC. 2. Section 11346.35 is added to the
Government Code , to read:
11346.35. (a) The State Auditor shall, within a reasonable time,
conduct a cost benefit analysis of any proposed regulation before the
agency issues a notice of proposed action pursuant to Section
11346.4. Based on the results of the cost benefit analysis, the State
Auditor shall make a determination, to be included in the cost
benefit analysis, as to both of the following:
(1) Whether the proposed regulation will have an annual statewide
economic cost of at least ten million dollars ($10,000,000).
(2) Whether the proposed regulation, considered in its totality,
has regulatory benefits that equal or exceed the overall economic
costs.
(b) The agency proposing the regulation shall provide the State
Auditor with any information that the State Auditor deems necessary
to conduct the cost benefit analysis, including, but not limited to,
any information that the agency is required to include in the notice
of proposed action pursuant to Section 11346.5.
(c) The agency shall not issue the notice of proposed action
pursuant to Section 11346.4 until the State Auditor completes the
cost benefit analysis.
SEC. 3. Section 11346.5 of the
Government Code is amended to read:
11346.5. (a) The notice of proposed adoption, amendment, or
repeal of a regulation shall include the following:
(1) A statement of the time, place, and nature of proceedings for
adoption, amendment, or repeal of the regulation.
(2) Reference to the authority under which the regulation is
proposed and a reference to the particular code sections or other
provisions of law that are being implemented, interpreted, or made
specific.
(3) An informative digest drafted in plain English in a format
similar to the Legislative Counsel's digest on legislative bills. The
informative digest shall include the following:
(A) A concise and clear summary of existing laws and regulations,
if any, related directly to the proposed action and of the effect of
the proposed action.
(B) If the proposed action differs substantially from an existing
comparable federal regulation or statute, a brief description of the
significant differences and the full citation of the federal
regulations or statutes.
(C) A policy statement overview explaining the broad objectives of
the regulation and, if appropriate, the specific objectives.
(4) Any other matters as are prescribed by statute applicable to
the specific state agency or to any specific regulation or class of
regulations.
(5) A determination as to whether the regulation imposes a mandate
on local agencies or school districts and, if so, whether the
mandate requires state reimbursement pursuant to Part 7 (commencing
with Section 17500) of Division 4.
(6) An estimate, prepared in accordance with instructions adopted
by the Department of Finance, of the cost or savings to any state
agency, the cost to any local agency or school district that is
required to be reimbursed under Part 7 (commencing with Section
17500) of Division 4, other nondiscretionary cost or savings imposed
on local agencies, and the cost or savings in federal funding to the
state.
For purposes of this paragraph, "cost or savings" means additional
costs or savings, both direct and indirect, that a public agency
necessarily incurs in reasonable compliance with regulations.
(7) If a state agency, in proposing to adopt, amend, or repeal any
administrative regulation, makes an initial determination that the
action may have a significant, statewide adverse economic impact
directly affecting business, including the ability of California
businesses to compete with businesses in other states, it shall
include the following information in the notice of proposed action:
(A) Identification of the types of businesses that would be
affected.
(B) A description of the projected reporting, recordkeeping, and
other compliance requirements that would result from the proposed
action.
(C) The following statement: "The (name of agency) has made an
initial determination that the (adoption/amendment/repeal) of this
regulation may have a significant, statewide adverse economic impact
directly affecting business, including the ability of California
businesses to compete with businesses in other states. The (name of
agency) (has/has not) considered proposed alternatives that would
lessen any adverse economic impact on business and invites you to
submit proposals. Submissions may include the following
considerations:
(i) The establishment of differing compliance or reporting
requirements or timetables that take into account the resources
available to businesses.
(ii) Consolidation or simplification of compliance and reporting
requirements for businesses.
(iii) The use of performance standards rather than prescriptive
standards.
(iv) Exemption or partial exemption from the regulatory
requirements for businesses."
(8) If a state agency, in adopting, amending, or repealing any
administrative regulation, makes an initial determination that the
action will not have a significant, statewide adverse economic impact
directly affecting business, including the ability of California
businesses to compete with businesses in other states, it shall make
a declaration to that effect in the notice of proposed action. In
making this declaration, the agency shall provide in the record
facts, evidence, documents, testimony, or other evidence upon which
the agency relies to support its initial determination.
An agency's initial determination and declaration that a proposed
adoption, amendment, or repeal of a regulation may have or will not
have a significant, adverse impact on businesses, including the
ability of California businesses to compete with businesses in other
states, shall not be grounds for the office to refuse to publish the
notice of proposed action.
(9) A description of all cost impacts, known to the agency at the
time the notice of proposed action is submitted to the office, that a
representative private person or business would necessarily incur in
reasonable compliance with the proposed action.
If no cost impacts are known to the agency, it shall state the
following:
"The agency is not aware of any cost impacts that a representative
private person or business would necessarily incur in reasonable
compliance with the proposed action."
(10) A statement of the results of the assessment required by
subdivision (b) of Section 11346.3.
(11) The finding prescribed by subdivision (c) of Section 11346.3,
if required.
(12) A statement that the action would have a significant effect
on housing costs, if a state agency, in adopting, amending, or
repealing any administrative regulation, makes an initial
determination that the action would have that effect. In addition,
the agency officer designated in paragraph (14), shall make available
to the public, upon request, the agency's evaluation, if any, of the
effect of the proposed regulatory action on housing costs.
(13) A statement that the adopting agency must determine that no
reasonable alternative considered by the agency or that has otherwise
been identified and brought to the attention of the agency would be
more effective in carrying out the purpose for which the action is
proposed or would be as effective and less burdensome to affected
private persons than the proposed action.
(14) The name and telephone number of the agency representative
and designated backup contact person to whom inquiries concerning the
proposed administrative action may be directed.
(15) The date by which comments submitted in writing must be
received to present statements, arguments, or contentions in writing
relating to the proposed action in order for them to be considered by
the state agency before it adopts, amends, or repeals a regulation.
(16) Reference to the fact that the agency proposing the action
has prepared a statement of the reasons for the proposed action, has
available all the information upon which its proposal is based, and
has available the express terms of the proposed action, pursuant to
subdivision (b).
(17) A statement that if a public hearing is not scheduled, any
interested person or his or her duly authorized representative may
request, no later than 15 days prior to the close of the written
comment period, a public hearing pursuant to Section 11346.8.
(18) A statement indicating that the full text of a regulation
changed pursuant to Section 11346.8 will be available for at least 15
days prior to the date on which the agency adopts, amends, or
repeals the resulting regulation.
(19) A statement explaining how to obtain a copy of the final
statement of reasons once it has been prepared pursuant to
subdivision (a) of Section 11346.9.
(20) If the agency maintains an Internet Web site or other similar
forum for the electronic publication or distribution of written
material, a statement explaining how materials published or
distributed through that forum can be accessed.
(21) The results of the cost benefit analysis issued by the State
Auditor pursuant to Section 11346.35.
(b) The agency representative designated in paragraph (14) of
subdivision (a) shall make available to the public upon request the
express terms of the proposed action. The representative shall also
make available to the public upon request the location of public
records, including reports, documentation, and other materials,
related to the proposed action. If the representative receives an
inquiry regarding the proposed action that the representative cannot
answer, the representative shall refer the inquiry to another person
in the agency for a prompt response.
(c) This section shall not be construed in any manner that results
in the invalidation of a regulation because of the alleged
inadequacy of the notice content or the summary or cost estimates, or
the alleged inadequacy or inaccuracy of the housing cost estimates,
if there has been substantial compliance with those requirements.
SEC. 4. Section 11349.35 is added to the
Government Code , to read:
11349.35. (a) The office shall identify, for each proposed
regulation that is approved or deemed approved by the office pursuant
to Section 11349.3, the determinations made by the State Auditor in
the cost benefit analysis conducted pursuant to Section 11346.35. The
office shall notify the Committee on Appropriations of each house of
the Legislature of each regulation for which the State Auditor
determined that the regulation will have an annual statewide economic
cost of at least ten million dollars ($10,000,000) or that the
regulation's benefits do not equal or exceed the overall economic
costs. The notification shall include, but not be limited to, the
text of the regulation and the cost benefit analysis conducted by the
State Auditor.
(b) The Committee on Appropriations of each house of the
Legislature shall conduct a public hearing to review each regulation
for which it receives a notification from the office and shall issue
a recommendation as to whether the regulation should be invalidated
by statute.
SECTION 1. Article 5.5 (commencing with Section
11348.5) is added to Chapter 3.5 of Part 1 of Division 3 of Title 2
of the Government Code, to read:
Article 5.5. Regulatory Planning and Review
11348.5. For purposes of this article, the following terms shall
have the following meanings:
(a) "Department of Finance" or "department" shall have the same
meaning as Section 13000.
(b) "Director of Finance" or "director" shall have the same
meaning as Section 13001.
(c) "Significant regulatory action" means a regulatory action that
is likely to result in a regulation that may result in any one of
the following:
(1) Have an annual cost to the state's economy of ten million
dollars ($10,000,000) or more or have a material adverse effect on
the economy, productivity, competition, public health or safety,
local governments, or tribal communities.
(2) Create a serious inconsistency with, or otherwise interfere
with, an action taken or planned by another agency.
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs, or the rights and obligations of its
recipients.
(4) Raise novel legal or policy issues arising out of legal
mandates or involving the regulatory philosophies and principles
expressed in Section 11348.6.
11348.6. (a) The Legislature finds and declares all of the
following:
(1) An efficient regulatory planning and review process is vital
to ensure that the state's regulatory system best serves the people
of this state.
(2) There is a need for adequate information indicating the need
for and consequences of proposed regulatory actions, and that state
agencies should establish that potential benefits to the state
justify any potential costs of regulatory actions.
(3) In 1993, President Clinton reviewed and revised the federal
government's program for regulatory review and issued Executive Order
12866, titled "Regulatory Planning and Review," establishing the
general principle that the benefits of intended regulations should
justify the costs.
(4) Executive Order 12866 focused on the most significant rules,
established a 90-day period of review of proposed rules, and
increased the openness and accountability of the federal process for
reviewing regulations.
(5) The federal Office of Management and Budget monitored and
assessed the implementation of Executive Order 12866, concluding that
significant improvements were made in all of the following six broad
areas of federal regulation:
(A) Properly identifying problems and risks to be addressed, and
tailoring the regulatory approach narrowly to address them.
(B) Developing alternative approaches to traditional command and
control regulation, such as using performance standards that tell
people what goals to meet instead of how to meet them, relying on
market incentives, or issuing nonbinding guidance instead of rules
and regulations.
(C) Developing rules that, according to sound analysis, are
cost-effective and have benefits that justify their cost.
(D) Consulting with those affected by the regulation, particularly
state, local, and tribal governments.
(E) Ensuring that agency rules are well coordinated with rules and
policies of other agencies.
(b) In order to achieve the benefits associated with Executive
Order 12866, this state adopts the following regulatory philosophy,
as outlined in Section 1(a) of Executive Order 12866:
(1) Agencies should promulgate only those regulations as are
required by law, are necessary to interpret the law, or are made
necessary by compelling public need, such as material failures of
private markets to protect or improve the health and safety of the
public, the environment, or the well-being of Californians.
(2) In deciding whether and how to regulate, agencies should
assess all costs and benefits of available regulatory alternatives,
including the alternative of not regulating. Costs and benefits shall
be understood to include both quantifiable measures, to the fullest
extent that these can be usefully estimated, and qualitative measures
of costs and benefits that are difficult to quantify, but
nevertheless essential to consider. Further, in choosing among
alternative regulatory approaches, agencies should select those
approaches that maximize net benefits, including potential economic,
environmental, public health and safety, and other advantages,
distributive impacts, and equity, unless a statute requires another
regulatory approach.
(c) (1) In order to achieve the benefits associated with Executive
Order 12866, this state adopts the principles of regulation
contained in this subdivision, as outlined in Section 1(b) of
Executive Order 12866.
(2) To ensure that the agencies' regulatory programs are
consistent with the philosophy set forth above, agencies should
adhere to the following principles to the extent permitted by law and
where applicable:
(A) Each agency shall identify the problem that it intends to
address, including, where applicable, the failures of private markets
or public institutions that warrant new agency action, as well as
assess the significance of that problem.
(B) Each agency shall examine whether existing regulations, or
other law, have created, or contributed to, the problem that a new
regulation is intended to correct and whether those regulations, or
other law, should be modified to achieve the intended goal of
regulation more effectively.
(C) Each agency shall identify and assess available alternatives
to direct regulation, including providing economic incentives to
encourage the desired behavior, such as user fees or marketable
permits, or providing information upon which choices can be made by
the public.
(D) In setting regulatory priorities, each agency shall consider,
to the extent reasonable, the degree and nature of the risks posed by
various substances or activities within its jurisdiction.
(E) When an agency determines that a regulation is the best
available method of achieving the regulatory objective, it shall
design its regulations in the most cost-effective manner to achieve
the regulatory objective. In doing so, each agency shall consider
incentives for innovation, consistency, predictability, the costs of
enforcement and compliance, to the government, regulated entities,
and the public, flexibility, distributive impacts, and equity.
(F) Each agency shall assess both the costs and the benefits of
the intended regulation and, recognizing that some costs and benefits
are difficult to quantify, propose or adopt a regulation only upon a
reasoned determination that the benefits of the intended regulation
justify its costs.
(G) Each agency shall base its decisions on the best reasonably
obtainable scientific, technical, economic, and other information
concerning the need for, and consequences of, the intended
regulation.
(H) Each agency shall identify and assess alternative forms of
regulation and shall, to the extent feasible, specify performance
objectives, rather than specifying the behavior or manner of
compliance that regulated entities must adopt.
(I) Wherever feasible, agencies shall seek views of appropriate
state, local, and tribal officials before imposing regulatory
requirements that might significantly or uniquely affect those
governmental entities. Each agency shall assess the effects of
federal regulations on state, local, and tribal governments,
including specifically the availability of resources to carry out
those mandates, and seek to minimize those burdens that uniquely or
significantly affect those governmental entities, consistent with
achieving regulatory objectives. In addition, as appropriate,
agencies shall seek to harmonize federal regulatory actions with
related state, local, and tribal regulatory and other governmental
functions.
(J) Each agency shall avoid regulations that are inconsistent,
incompatible, or duplicative with its other regulations or those of
other federal agencies.
(K) Each agency shall tailor its regulations to impose the least
burden on society, including individuals, businesses of differing
sizes, and other entities, including small communities and
governmental entities, consistent with obtaining the regulatory
objectives, taking into account, among other things, and to the
extent practicable, the costs of cumulative regulations.
(L) Each agency shall draft its regulations to be simple and easy
to understand, with the goal of minimizing the potential for
uncertainty and litigation arising from such uncertainty.
11348.7. (a) The department shall assist state agencies to review
new and existing regulations for compliance and consistency with
this article, and shall review analyses performed by agencies in
promulgating new regulations or in reviewing existing regulations.
(b) Prior to January 1 of each year, a state agency shall provide
the department, at the time and in the manner specified by the
director, with a list of its planned regulatory actions for that year
and indicate the actions which the agency believes are significant
regulatory actions. A planned regulatory action that is not
designated as significant, absent a material change in the
development of that regulatory action, shall not be subject to review
under this section unless, within 10 days of receipt of the list,
the director notifies the agency that he or she has determined that a
planned regulation is a significant regulatory action.
(c) (1) For each significant regulatory action, the agency shall
submit to the director for review, at least 30 days prior to the
issuance of a notice of proposed action required pursuant to Section
11346.4, all of the following:
(A) The text of the draft regulatory language, together with a
reasonably detailed description of the need for the regulatory action
and an explanation of how the regulation will meet that need.
(B) An analysis of the potential costs and benefits of the
regulatory action, including an explanation of the manner in which
the regulatory action is consistent with the statutory mandate.
(2) For each significant regulatory action that satisfies the
criteria of paragraph (1) of subdivision (c) of Section 11348.5, the
agency shall also submit to the director for review, at least 30 days
prior to the issuance of a notice of proposed action required
pursuant to Section 11346.4, all of the following:
(A) An assessment, including the underlying analysis, of benefits
anticipated from the regulatory action, including, but not limited
to, the promotion of the efficient functioning of the economy and
private markets, the enhancement of health and safety, the protection
of the natural environment, and the elimination or reduction of
discrimination or bias, together with, to the extent feasible, a
quantification of those benefits.
(B) An assessment, including the underlying analysis, of costs
anticipated from the regulatory action, including, but not limited
to, the direct cost to both the government in administering the
regulation and to businesses and others in complying with the
regulation, and any adverse effects on the efficient functioning of
the economy, private markets, including productivity, employment, and
competitiveness, health, safety, and the natural environment,
together with, to the extent feasible, a quantification of those
costs.
(C) An assessment, including the underlying analysis, of costs and
benefits of potentially effective and reasonably feasible
alternatives to the planned regulation, identified by the agencies or
the public, including improving the current regulation and
reasonably viable nonregulatory actions, and an explanation why the
planned regulatory action is preferable to the identified potential
alternatives.
(d) No agency considering a significant regulatory action shall
issue a notice of proposed action pursuant to Section 11346.4 prior
to the department's completion of the review of the proposed
regulation and the agency's compliance with the requirements of this
article.
(e) The director shall review the agency's submitted analysis of
new, amended, or existing regulations for consistency with the
regulatory philosophy and principles of regulation enumerated in
Section 11348.6. If the director determines that a planned regulatory
action may be inconsistent with the regulatory philosophy and
principles of regulation enumerated in Section 11348.6, the director
shall notify the agency in writing.
(f) The agency shall include in its initial statement of reasons,
required pursuant to Section 11346.2, the
director's analysis of new, amended, or
existing regulations, and the agency's responses to any
determinations made by the director.
(g) The agency shall reimburse the department for the cost to the
department of the analysis, not to exceed 5 percent of the total cost
of developing the regulation. The agency shall build the cost of
reimbursement into the cost of developing the regulation.
(h) In order to establish a baseline for the determination of the
costs and benefits of significant regulatory actions reviewed
pursuant to this article, the department shall complete a review of
all significant regulatory actions completed by state agencies since
January 1, 2004, and summarize the costs and benefits of those
actions. This review shall be completed prior to July 1, 2011.
11348.8. (a) In order to formulate an effective methodology for
performance of the analysis and cost-benefit studies by state
agencies pursuant to this article, by January 31, 2011, the Governor
shall convene an interagency group, to be chaired by the director, to
review the state of the art for analysis of regulatory action in
California at the state, regional, and local levels.
(b) Prior to July 1, 2011, the director shall issue a "best
practices" report to the Legislature, detailing the findings of the
interagency group regarding the state of the art for regulatory
action analyses and proposing standard methods of regulatory analysis
for use by state agencies.
11348.9. Nothing in this article affects the current requirement
of state agencies to prepare an economic analysis of a proposed
regulation's potential for adverse economic impact on businesses and
individuals pursuant to Section 11346.3, or to make those economic
impact analyses available for public comment in the initial state of
reasons for the proposed regulation pursuant to Section 11346.2.