BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
942 (Dutton)
Hearing Date: 5/27/2010 Amended: 5/24/2010
Consultant: Bob Franzoia Policy Vote: GO 7-1
_________________________________________________________________
____
BILL SUMMARY: SB 942 would establish an Economic Analysis Unit
(EAU) within the Office of Administrative Law (OAL). This bill
would require agencies to make publicly available and submit to
the unit specified cost estimates related to a proposed
regulation and specified information used to develop the cost
estimates. This bill would require the unit to review final
revised cost estimates for regulations that the agency
determines to have a cost estimate of $50 million or more and
the unit may review cost estimates for regulations having a
similar cost estimate. This bill also authorizes a stakeholder
to petition OAL to direct the unit to review a regulation that
does not meet the $50 million cost estimate threshold. The
director of OAL shall have the sole discretion to approve or
deny the petition. This bill also requires the unit to approve
or reject the cost estimates of regulations that it reviews, as
specified. This bill would require each agency to review each
regulation adopted prior to January 1, 1990, and to develop a
report to the Legislature by January 1, 2013. This bill would
also require each agency, by January 1, 2018, and at least every
five years thereafter, to conduct additional reviews of
regulations that have been in effect for at least 20 years, as
specified, and to submit a specified report.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
OAL Economic Analysis Unit Unknown, minor to major costs
annually General/
Special
_________________________________________________________________
____
STAFF COMMENTS: SUSPENSE FILE.
Given the unpredictable nature of regulations and associated
cost estimates, it is unclear how OAL would staff the EAU.
Staffing an EAU, in anticipation of a regulation with a cost
estimate of $50 million, on an ongoing basis would be costly,
and with an uncertain source of funding, as such regulations are
rare. More likely, OAL would contract for review of such
economic analysis data on an as needed basis. However, for all
other new regulations, and potential for numerous petitions for
review, OAL will likely need significant capability to perform
economic analyses on an ongoing basis.
This bill also authorizes a stakeholder to petition OAL to
direct the unit to review a regulation that does not meet the
$50 million cost estimate threshold. The director of OAL would
be authorized, at his or her sole discretion, to approve or deny
the petition.
Beginning with the effective date of the bill, each agency shall
review each regulation adopted prior to January 1, 1990 for the
purposes of developing (and reporting to the Legislature by
January 1, 2013) information identifying duplicative or
conflicting regulations between departments. This process would
continue on a five year period.
Page 2
SB 942 (Dutton)
Preliminary information has identified a wide range of fiscal
impacts. To provide some reference, this analysis estimates
agencies adopt an average of five regulations annually and that
the review of each regulation will require the workload of one
half personnel year (PY) with the greatest initial workload
resulting from conferring with representatives of impacted
sectors, identifying costs and review the historical record.
Depending on when the agency was created, the number of
regulations reviewed will change. For example, the Air
Resources Board (ARB) and the State Water Resources Control
Board (SWRCB) were created in 1967. The California Energy
Commission (CEC) was created in 1974. Thus, the ARB and the
SWRCB would each have 115 (23 years times 5 regulations per
year) regulations to review and the CEC would have 80 (16 years
time 5 regulations per year) regulations to review. Using
$130,000 per PY, reviewing 115 regulations would require
approximately 58 PY at a cost of $7,410,000 (57 times $130,000).
Whether some funds have sufficient revenues, or even exist, to
pay for the review of the regulation is unclear. To the extent
there are insufficient special funds, or for long standing
entities, these reviews will create major General Fund costs or
cost pressures.
In 2018, this analysis estimates review costs would decline to
one quarter PY per regulation. For the ARB and the SWRCB, each
would be required to review 40 regulations (8 years -1990 to
1998 - times 5 regulations per year). Reviewing 40 regulations
would require approximately ten PY at a cost of $1,300,000 (10
times $130,000).
In 2023, agencies would still be in the ten year window and have
25 regulations to review (5 years - 1999 to 2003 - times 5
regulations per year). Reviewing 25 regulations would require
approximately 6.25 PY at a cost of $812,500 (6.25 times
$130,000). In 2028, agencies would be required to again review
all pre 1990 regulations as 20 years will have passed since the
last review. This regulation review would still require one
quarter PY for a cost of $3,705,000.
This bill also requires each agency to submit an annual report
that identifies the regulations reviewed during the previous
year and the associated findings. Staff notes it is unclear
what regulations would be reviewed and for what purpose. In
addition, many departments are likely to have new costs ongoing
to coordinate with the EAU. Also, how updates of prior
regulations would be considered is unclear. For example, the
CEC adopted building standards in 1978, 1981, 1984, 1987, and
1992 but were mostly updates of prior standards. Would each
update require a full review or just the initial regulation?
Finally, an estimate of five regulations annually could be
significantly low. For example, preliminary information
indicates the State Board of Education adopted 65 regulations
during a five year period from 2005 to 2009.
The proposed amendments are:
(1) 11348.5 (b) A stakeholder may petition the office
to direct the unit to review final revised cost estimates for a
proposed regulation that has an estimated cost that is less than
fifty million dollars ($50,000,000) the stakeholder believes to
have an
Page 3
SB 942 (Dutton)
actual cost of fifty million ($50,000,000) or more. The
director of the office shall be authorized, in his or her sole
discretion, to approve or deny the petition.
(c) The unit shall develop an appropriate methodology for
reviewing the cost estimates submitted by an agency.
(c)
(d) 1
(2) Strike Government Code Sections 11349.10 and 11349.11, as
added by the bill (review of pre 1990 regulations).