BILL ANALYSIS
-----------------------------------------------------------------------
|Hearing Date:June 28, 2010 |Bill No:AB |
| |2529 |
-----------------------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: AB 2529Author:Fuentes
As Amended:May 28, 2010 Fiscal: Yes
SUBJECT: State agencies: regulations: review.
SUMMARY: Establishes, until January 1, 2016, a process for peer
review of economic impacts analyses for a proposed regulation.
Requires the Office of Administrative Law (OAL) to send specified
regulations to the fiscal committees in both houses of the Legislature
if they meet certain criteria.
Existing law:
1)Establishes, through the Administrative Procedure Act (APA), the
requirements for the adoption, publication, review and
implementation of regulations promulgated by state agencies and does
the following:
a) Authorizes an agency considering the adoption of a new
regulation or amending or repealing an existing one to consult
with interested parties before initiating the regulatory action.
b) Requires an agency to involve parties who would be subject to
the regulation before publishing a notice of proposed action, if
the proposed regulations involve complex proposals or a large
number of proposals.
c) Requires state agencies subject to the APA to submit with a
notice of the proposed regulatory action an initial statement of
the reasons for the proposed adoption, amendment or repeal of a
regulation. The initial statement must also include a
description of reasonable alternatives that would mitigate any
adverse impacts on small business and the agency's reason for
rejecting those reasonable alternatives. The APA does not
AB 2529
Page 2
require the agency to artificially construct alternatives,
describe unreasonable alternatives or justify why it has not
described alternatives.
d) Requires state agencies to assess the potential of a proposal
to adopt, amend or repeal a regulation to adversely affect
business enterprises and individuals.
e) In the event an agency makes an initial determination that the
adoption, amendment, or repeal of a regulation will not have a
significant statewide adverse economic impact on business,
requires the agency to make a declaration of that determination
in the notice of proposed action.
f) Requires agencies to prepare and submit to the OAL the adopted
regulation along with a final statement of reasons that must
include, among other things, an explanation for rejecting any
proposed alternatives that would lessen any adverse economic
impact on small businesses.
g) Requires the notice of proposed adoption, amendment, or repeal
of a regulation to include certain matters including: 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, and statement of the results of
the economic impact assessment.
This bill:
1)Defines "Agency" as only the State Air Resources Board, the Energy
Commission, the Department of Fish and Game and the Department of
Housing and Community Development.
2)Defines "major proposed regulation" (Major Reg) as a proposed
adoption, amendment or repeal of a regulation that will have an
adverse economic impact on California business enterprises and
individuals in an amount exceeding ten million dollars
($10,000,000), as estimated by the agency.
3)Defines "related economic impact analysis" (Impacts Analysis) as an
analysis of the reasonably identifiable and significant impacts of a
major proposed regulation, that are premised upon, or derived from,
empirical data or other scientific or economic findings, conclusions
or assumptions, including but not limited to:
AB 2529
Page 3
a) Short-term and long-term jobs affected by the major proposed
regulation.
b) The revenues to the General Fund and special funds that result
from changes in economic activity attributable to the Major Reg.
1)Requires the Agency to complete an Impacts Analysis for a Major Reg
and include it within the notice of proposed action.
2)Requires an Agency to enter into an agreement with the National
Bureau of Research, University of California, California State
University or a group of economists of comparable stature and
qualifications to conduct an external peer review (Review) of the
Impacts Anlaysis for a Major Reg if each of the following conditions
occur:
a) Within 15 days of public disclosure of the notice of proposed
action, a person requests that the agency submit the Impacts
Analysis for Review.
b) The requester pays an administrative fee, determined by the
Agency but not to exceed five hundred dollars ($500), to the
Agency to cover costs of processing the request.
c) The requester and the Agency enter into a contract, within 30
days of the date that the request is submitted, that requires the
requester to fully reimburse the Agency for nonadministrative
costs incurred to obtain the completed Review.
1)Specifies that a person shall not serve as a Reviewer if he or she
participated in the development of the Impacts Analysis for the
Major Reg, or if he or she has a financial interest in an entity or
person that would be subject to the Major Reg, or if he or she has
any other conflict of interest.
2)Specifies that the person who requests the Review or a person
affiliated with that requester or personnel of the adopting Agency
shall not participate in the selection of Reviewers or contact or
communicate with the Reviewer during the Review.
3)Allows the Agency to contact or communicate with a Reviewer only for
purposes of entering into a contract with that person.
4)Ensures that the identity of Reviewers shall remain confidential
until the Reviewer submits a written report to the specific
Department or Commission.
AB 2529
Page 4
5)Specifies that the Agency shall not adopt the final version of a
Major Reg unless:
a) The agency submits the Impacts Analysis and other appropriate
material on which it is based to the Reviewer.
b) The Review entity prepares a written report that contains an
evaluation of the Impacts Analysis in a timeframe determined by
the Agency. Specifies that if the Review entity finds that the
Impacts Analysis prepared by the Agency is not based on sound
economic knowledge, methods or practices, the report shall
include those findings.
c) The Agency accepts the Review entity's findings and revises
the Major Reg accordingly or rejects the findings. Specifies
that if the Agency disagrees with any aspect of the findings it
shall explain and include the basis for disagreement as part of
the rulemaking record.
d) A public hearing is conducted to provide opportunity for
public comment on the Review report or Agency disagreement with
the report. Specifies that this hearing shall be in addition to
any public hearings related to adopting the final version of a
Major Reg. Specifies that the Agency shall not notice a public
hearing on adoption of the final version of the Major Reg until
this public hearing has concluded.
1)Specifies that if the Review entity fails to provide a report in the
timeframe determined by the Agency, an Agency shall not be required
to take further action as prescribed above and may proceed with the
adoption of the final version of the Major Reg.
2)Specifies that these requirements do not apply to an emergency
regulation.
3)Clarifies that once a Review of the Impacts Analysis has been
completed for a Major Reg, the Agency does not need to conduct
additional Reviews.
4)Requires OAL to notify the fiscal committees of each house of the
Legislature and the Joint Legislative Budget Committee of each
proposed Major Reg that is approved. Specifies that notification
must include the text of the regulation, the Impacts Analysis and
the Reviewer's written report.
AB 2529
Page 5
5)Makes this process inactive on January 1, 2016.
FISCAL EFFECT: Unknown. This bill is keyed "fiscal" by Legislative
Counsel but has not been considered by a fiscal committee in its
current version. A previous version of this bill that required the
Bureau of State Audits (BSA) to conduct an Impacts Analysis included
cost estimates by the Assembly Committee on Appropriations according
to the following:
Potential ongoing costs to the affected departments of an
unknown amount, but likely in the range of several hundred
thousand dollars, for the departments to contract with outside
entities for peer review of proposed major regulations. The
departments' actual costs will depend upon the number of peer
reviews they must contract for and the cost of each peer review.
In any case, the bill provides that the departments will be
reimbursed for these costs by the person requesting the peer
review.
Potential ongoing costs to the departments to process
applications for peer review, fully covered by the processing fee
authorized by this bill.
COMMENTS:
1. Purpose. The Author is the sponsor of this measure. According to
the Author's office, "While an assessment of the economic impact on
California business enterprises and individuals comprises part of
the rulemaking process, an agency's assessment is not reviewed by
an independent third party to ensure accuracy, and therefore could
result in regulations with significant adverse economic impacts on
Californians, impacts that may not have been the intent of the
legislature's original statute. This bill remedies this
deficiency."
2. Background. The APA governs the adoption of regulations by state
agencies for purposes of ensuring that they are clear, necessary,
legally valid, and available to the public. In seeking adoption of
a proposed regulation, state agencies must comply with procedural
requirements that include publishing the proposed regulation along
with supporting statement of reasons; mailing and publishing a
notice of the proposed action 45 days before a hearing or before
the close of the public comment period; and submitting a final
statement to OAL which summarizes and responds to all objections,
recommendations, and proposed alternatives that were raised during
the public comment period. The OAL is then required to approve or
AB 2529
Page 6
reject the proposed regulation within 30 days.
More specifically related to this bill, the APA requires an
evaluation of the negative impact a proposed regulation would have
on businesses and reasonable alternatives that would eliminate
undue burdens. The APA also requires state agencies to justify
their proposed regulations by evaluating the technical and
empirical evidence that supports the proposed regulation in
comparison to reasonable alternatives.
In 1993, President Clinton signed Executive Order 12866, which
dealt with regulatory planning and review. The Executive Order
gave the Office of Information and Regulatory Affairs, within the
Office of Management and Budget, the power to review and edit
agency regulations and made cost-benefit analyses a significant
factor in rulemaking. At the federal level, agencies must conduct
a cost-benefit analysis and select the least costly, most
cost-effective, or least burdensome alternative before promulgating
any proposed or final rule that may result in expenditures of $100
million or more in any one year or adversely affect the economy,
productivity, competition, jobs, the environment, public health or
safety or State, local, or tribal government or communities. This
bill seeks to achieve similar regulatory benefits within the state.
3. Related Legislation.
SB 356 (Wright), when heard in this Committee in April 2009,
required state agencies subject to the APA to make additional
findings and determinations regarding the impact their regulations
may have on small businesses, to consult with small businesses
during the regulatory process and provide additional information,
statements and justification for the adoption, amendment or repeal
of regulations which may have an impact on small businesses. That
bill was amended on June 22 of this year and is currently pending
in the Assembly Committee on Business, Professions and Consumer
Protection.
SB 960 (Dutton) and AB 2299 (Blakeslee) were almost identical to
this bill but only established requirements for the Air Resources
Board (ARB) to submit an Impacts Analysis for a Major Reg to
external peer review. SB 960 failed passage in the Senate
Committee on Environmental Quality and AB 2299 was held in the
Assembly Committee on Appropriations.
AB 2466 (Smyth) required OAL to submit all regulations packages to
the Legislature and requires that the appropriate legislative
AB 2529
Page 7
policy committees review those regulations. The bill was held in
the Assembly Committee on Appropriations.
AB 2603 (Gaines) required every state agency to reduce its total
number of regulations by 33% by December 31, 2012. This bill
failed passage in the Assembly Committee on Business, Professions
and Consumer Protection.
AB 2652 (Niello) required a standing committee with jurisdiction
over a state agency that proposes a regulation with costs exceeding
$10 million, to hold an informational hearing regarding the
proposed regulation. The bill was held in the Assembly Committee
on Appropriations.
AB 3511 (Jones; Chapter 1306, Statutes of 2002) requires state
agencies proposing to adopt or amend any administrative regulation
to assess the potential for adverse economic impact on California
business enterprises and individuals, and to avoid the imposition
of unnecessary or unreasonable regulations or reporting,
recordkeeping, or compliance requirements.
4. Arguments in Support. Supporters state, "This approach should be
adopted in California to provide more transparency on the true
costs and benefits of significant regulations. With valid
information agency officials and lawmakers can work to improve
regulations, provide mitigating support for impacted parties, or
otherwise address the issue within their discretion or authority.
As a result, the public will have more confidence that government
is working for their best interests and considering all relevant
factors in regulatory decision making."
5. Arguments in Opposition. Opponents believe that the requirements
set forth in this bill are unnecessary and mostly duplicative and
could substantially delay important environmental, public health,
energy efficiency and housing regulations. Opponents note that
"enactment of this bill would lead to unnecessary and perhaps
lengthy delays in the already-thorough and transparent rule-making
process for these selected agencies."
Note: This bill has been double referred to Rules Committee (second.)
SUPPORT AND OPPOSITION:
Support:
American Forest and Paper Association
AB 2529
Page 8
California Association of Hospitals and Health Systems
California Building Industry Association
California Business Properties Association
California Construction and Industrial Materials Association
California Forestry Association
California Framing Contractors Association
California Grocers Association
California Hospital Association
California Independent Oil Marketers Association
California League of Food Processors
California Manufacturers & Technology Association
California Restaurant Association
California Taxpayers Association
Chemical Industry Council of California
Consumer Electronics Association
Consumer Specialty Products Association
Howard Jarvis Taxpayers Association
Industrial Environmental Association
National Federation of Independent Business
Western Growers
Western States Petroleum Association
Wine Institute
Opposition:
American Lung Association in California
Audubon California
Breathe California
California Interfaith Power and Light
California League of Conservation Voters
California Rural Legal Assistance Foundation
Catholic Charities
Clean Air Now
Clean Water and Air Matter
Clean Water Action
Center for Biological Diversity
Coalition for Clean Air
Community Action to Fight Asthma/RAMP
Consumer Federation of California
Defenders of Wildlife
Environment California
Environmental Defense Fund
Ella Baker Center for Human Rights
Energy Independence Now
Forests Forever
Fresno Metro Ministry
AB 2529
Page 9
Friends of the Earth
Medical Advocates for Health Air
National Parks Conservation Association
Natural Resources Defense Council
Planning and Conservation League
Parents for a Safer Environment
Public Health Institute
Sierra Club California
TransForm
The TriCounty Watchdogs
The Greenlining Institute
Tri-Valley CARES
Union of Concerned Scientists
Consultant:Sarah Mason