BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
356 (Wright)
Hearing Date: 5/18/2009 Amended: 5/11/2009
Consultant: Bob Franzoia Policy Vote: B,P&ED 6-2
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BILL SUMMARY: SB 356 would require a state agency when proposing
regulations under the Administrative Procedure Act which have
small business impacts, to do the following:
- Require an agency to expand its consultation with involved
parties and delete the condition that the agency involves
parties only if the proposed regulation is large or complex.
- Delete provisions authorizing an agency to not justify
alternatives and instead require the description of reasonable
alternatives to include the establishment of consolidated or
simplified compliance or reporting requirements, the use of
performance standards, and exemptions from the regulation for
small businesses.
- Require an agency that rejects a reasonable alternative to
state its reasons for rejecting the alternative.
- Require an agency to submit an economic impact statement, as
specified.
- Require an agency to expand its initial determination to
include whether the regulation will have an adverse economic
impact directly affecting small businesses and to consider
specified factors when making this determination.
- Require an agency, which has initially determined a regulation
would have small business impacts, when preparing and submitting
a final statement of reasons to the Office of Administrative Law
(OAL), to include a final analysis containing specified
information.
Additionally, this bill would repeal the definition of small
business which excludes certain types of professional business
activities and replace it with the definition of small business
contained in the Small Business Procurement and Contract Act.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Additional small business Unknown annual costs, minor to
significant General/
regulation adoption require- depending on regulatory
requirements Special
ments
Increased regulation $100 to $150 ongoing General/
review requirements Special
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
This bill finds and declares that the practice of treating all
regulated businesses as equivalent may lead to inefficient use
of regulatory agency resources, that alternative regulatory
approaches that do not conflict with the stated objective of
applicable statues must be explored, and that the process by
which state regulations are developed and
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SB 356 (Wright)
adopted should be reformed to require agencies to solicit the
ideas and comments of small businesses, and to examine the
impact of proposed rules on those businesses.
This bill would make changes to statutes affecting small
business regulations, including:
(1) Repeal of an existing, narrower definition of small business
and replacement with the definition contained in Government Code
14837 to mean an independently owned and operated business that
is not dominant in its field of operation, the principal office
of which is located in California, the officers of which are
domiciled in California, and that, together with affiliates, has
100 or fewer employees and average annual gross receipts of
$10,000,000 or less over the previous three years or is a
manufacturer with 100 or fewer employees.
(2) Require a small business economic impact statement that
includes both of the following:
- An estimate of the number of small businesses subject to the
proposed regulation.
- The estimated annual average cost of compliance by a small
business subject to the proposed regulation.
(3) Revision of the description of reasonable alternatives to a
regulation that would lessen any adverse impact on small
business, including but not limited to, all of the following:
- The establishment of less burdensome compliance or reporting
requirements for small businesses.
- The establishment of less burdensome schedules or deadlines
for compliance or reporting requirements for small businesses.
- The consolidation or simplification of compliance or reporting
requirements for small businesses.
- The use of performance standards for small businesses, instead
of design or prescriptive standards.
- The exemption of some or all small businesses, if appropriate
to the cost burden imposed, from all or any part of the
requirements contained in the proposed regulations.
(4) Deletion of a provision which exempts a state agency from
being required to artificially construct alternatives, describe
unreasonable alternatives, or justify why it has not described
alternatives and instead requires that if a state agency rejects
a reasonable alternative pursuant to the provisions in the above
paragraph (#3) that is less burdensome to small businesses, the
state agency shall state its reasons for rejecting the
alternative.
(4) Deletion of a provision which provides that it is not the
intent to impose additional criteria on state agencies, above
that which exists in current law, in assessing adverse economic
impact on California business enterprises, but only to assure
that the assessment is made early in the process of initiation
and development of a proposed adoption, amendment, or repeal of
a regulation. In its place, this bill would add:
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SB 356 (Wright)
An agency, before submitting a proposal to adopt,
amend, or repeal a regulation to the office, shall consider the
proposal's impact on small business by preparing a small
business economic impact statement. An agency shall consider,
but not be limited to, information supplied by interested
parties. The small business economic impact statement shall
include all of the following:
- An estimate of the number of small business subject to the
proposed regulation.
- The estimated annual average cost of compliance by a small
business subject to the proposed regulation.
- A description of reasonable alternatives to the regulation
that would lessen any adverse impact on small business,
including, but not limited to:
- The establishment of less burdensome compliance or reporting
requirements for small businesses.
- The establishment of less burdensome schedules or deadlines
for compliance or reporting requirements for small businesses.
- The consolidation or simplification of compliance or reporting
requirements for small businesses.
- The use of performance standards for small businesses, instead
of design or prescriptive standards.
(5) Require that OAL shall ensure compliance with the provisions
of this section in all filings to adopt, amend, or repeal any
administrative regulations.
- If OAL determines that no economic impact statement has been
filed with the rulemaking package, or that the economic impact
statement is incomplete based on the criteria in this section,
OAL shall return the rulemaking package to the regulatory agency
with a statement identifying the incomplete provisions.
(6) Deletion of a provision which limits public participation to
when the proposed regulations involve complex proposals or a
large number of proposals that cannot easily be reviewed during
the comment period.
The Economic and Fiscal Impact Statement which is submitted to
the Department of Finance (department) with proposed regulations
contains an economic impact statement including estimates of
initial and annual ongoing costs for a small business. This
bill would increase the information beyond that now required by
the department by changing the assessment of the small business
impacts of regulations as a subset of the overall regulations to
a completely separate set of regulations. This will require
additional work that cannot be absorbed at the state agency
level or by the department whenever the regulations have other
than minor impacts.
It appears the number of files submitted to OAL for reviewing is
the same or declining.
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|Number |1998 |1999 |2000 |2001 |2002 |2003 |2004 |2005 |2006 |2007 |2008 |
|of | | | | | | | | | | | |
|files | | | | | | | | | | | |
|--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------|
|Approved|826 |729 |647 |672 |693 |651 |624 |543 |564 |633 |585 |
| | | | | | | | | | | | |
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SB 356 (Wright)
It is unknown how many of the approved files had small business
impacts though antidotal information indicates more regulations
impact small businesses than do not. The initial review of a
file averages approximately 20 hours with a small file requiring
4 to 5 hours. A file could be one section of regulation and one
page in length or 20 sections and one hundred pages in length.
A file review committee conducts a second review. This bill
will increase OAL workload to review small business economic
impact statements and to summarize and respond to additional
comments not currently considered.